Exhibit 99.2
Consolidated Report to the Financial Community
Fourth Quarter 2009
(Released February 11, 2010)
HIGHLIGHTS | After-Tax EPS Variance Analysis | 4th Qtr. | ||||
4Q 2008 Basic EPS – GAAP Basis | $1.09 | |||||
Special Items – 2008 | 0.12 | |||||
■ | Normalized non-GAAP* earnings, excluding special items, were $0.77 per share for | 4Q 2008 Normalized Earnings – Non-GAAP Basis* | $1.21 | |||
the fourth quarter of 2009, compared with $1.21 per share for the fourth quarter of 2008. | Distribution Deliveries | (0.06) | ||||
GAAP earnings for the fourth quarter of 2009 were $0.78 per share compared with $1.09 | Ohio Utilities Distribution Rate Increase | 0.04 | ||||
per share for the fourth quarter of 2008. | Ohio Delivery Service Improvement Rider | 0.05 | ||||
Ohio Transition Cost Recovery Margin | (0.16) | |||||
■ | Normalized non-GAAP* earnings for 2009, excluding special items, were $3.77 per | Generation Gross Margin | (0.40) | |||
share, near the top end of our earnings guidance of $3.70 to $3.80 per share. | Nuclear O&M | (0.07) | ||||
Normalized non-GAAP earnings for 2008, excluding special items, were $4.57 per share. | O&M Reductions | 0.21 | ||||
GAAP earnings for 2009 were $3.31 per share, compared with $4.41 per share in 2008. | Deferred Distribution Costs - OH (2008) | (0.05) | ||||
Pension Costs | (0.11) | |||||
4Q 2009 Results vs. 4Q 2008 | Depreciation | (0.02) | ||||
General Taxes | 0.03 | |||||
■ | Lower distribution delivery revenues (excluding the impact of the Ohio distribution rate | Investment Income - NDT and COLI | 0.01 | |||
changes noted below) reduced earnings by $0.06 per share. Electric distribution | Financing Costs | (0.01) | ||||
deliveries declined 797,000 megawatt-hours (MWH), or 3%, due to the economic downturn | Effective Income Tax Rate | 0.11 | ||||
and mild weather in the FirstEnergy companies' service territories. Heating-degree days | Other | (0.01) | ||||
were 7% lower than the same period last year and 3% below normal. Industrial deliveries | 4Q 2009 Normalized Earnings - Non-GAAP Basis* | $0.77 | ||||
decreased 278,000 MWH, or 3%, primarily related to reduced usage by steel and | Special Items - 2009 | 0.01 | ||||
automotive customers. Commercial deliveries declined 295,000 MWH, or 3%, while | 4Q 2009 Basic EPS - GAAP Basis | $0.78 | ||||
residential deliveries decreased 220,000 MWH, or 2%. |
■ | The distribution rate increase implemented in 2009 for the three Ohio utilities increased earnings by $0.04 per share in the fourth quarter and the Ohio delivery service improvement rider, effective in April 2009, increased earnings by $0.05 per share. |
■ | In accordance with the Ohio Rate Certainty Plan (RCP), recovery of transition revenues for Ohio Edison Company (OE) and The Toledo Edison Company (TE) ended in December 2008, while recovery for The Cleveland Electric Illuminating Company (CEI) will extend through December 2010. Lower transition revenues in the fourth quarter of 2009 reduced earnings by $0.29 per share. This was partially offset by lower transition cost amortization in the fourth quarter of 2009, which increased earnings by $0.13 per share. |
■ | Generation gross margin reduced earnings by $0.40 per share, as the result of several factors. |
Consolidated electric generation sales decreased 3.8 million MWH, or 12%. Retail generation sales decreased 2.1 million MWH, or 8%, while wholesale sales were down 1.7 million MWH, or 27%, compared to the same period last year. (A Summary of Generation Sales and Power Purchases can be found on page 15.)
FirstEnergy Solutions Corp. (FES)-supplied retail generation and wholesale sales decreased 3.9 million MWH, or 18%. FES retail sales declined 2.2 million MWH, or 13%, primarily due to FES supplying less of the Ohio retail load in the fourth quarter of 2009 compared to nearly 100% of the Ohio load in the same period last year. As of December 31, 2009, FES supplied 77% of the Ohio retail load. FES-supplied wholesale electricity sales decreased 1.7 million MWH, or 41%, primarily due to lower available economic generation during the fourth quarter of 2009.
Lower generation margins at the Ohio utilities, Metropolitan Edison Company (Met-Ed) and Pennsylvania Electric Company (Penelec) in the fourth quarter of 2009 reduced earnings by $0.05 per share due to the expiration in 2008 of favorably-priced power supply agreements. FES-supplied retail generation sales reduced earnings by $0.19 per share as lower volumes, primarily in the Ohio franchise territory, more than offset higher unit prices. The combination of the above items reduced retail generation revenues by $0.24 per share.
Wholesale revenues were slightly lower than the same period last year. Lower FES wholesale sales ($61 million), were substantially offset by higher PJM Reliability Pricing Model (RPM) capacity revenues at Met-Ed & Penelec ($44 million) and FES ($16 million).
Lower fuel expenses, primarily due to reduced generation output, increased earnings by $0.16 per share. Generation output in the fourth quarter of 2009 was 15.7 million MWH, a reduction of 5.2 million MWH, or 25%, compared to the same period last year, primarily due to economic factors in the fourth quarter of 2009.
Higher purchased power costs reduced earnings by $0.32 per share. Higher FES energy purchases ($53 million) reduced earnings by $0.11 per share. The increase in energy purchases, primarily in PJM, was attributable to wind contracts and the Beaver Valley Unit 2 refueling outage in the fourth quarter of 2009. Higher PJM RPM capacity expenses at FES ($52 million) and Met-Ed & Penelec ($50 million) reduced earnings by $0.21 per share.
Generation Gross Margin EPS Summary
EPS | Revenues | Expenses | Total | |||||||
FES Generation Sales | Utilities Retail | Wholesale Sales | Fuel | Purchased Power | ||||||
POLR | Retail | Energy | Capacity | Energy | Capacity | |||||
Rate Volume | $0.01 | $0.04 | ($0.05) | ($0.01) | $0.12 | ($0.04) | $0.01 | ($0.21) | ($0.13) | |
($0.69) | $0.45 | ($0.11) | $0.20 | ($0.12) | ($0.27) | |||||
Total | ($0.68) | $0.49 | ($0.05) | ($0.12) | $0.12 | $0.16 | ($0.11) | ($0.21) | ($0.40) |
Consolidated Report to the Financial Community - 4th Quarter 2009 | 2 |
■ | The refueling outage at Beaver Valley Unit 2 in the fourth quarter of 2009 reduced earnings by $0.07 per share. There was no comparable nuclear refueling outage in the same period last year. |
■ | Continued O&M cost reductions increased earnings by $0.21 per share ($102 million) in the fourth quarter of 2009. The majority of the O&M reductions were realized from lower labor costs; reduced non-pension employee benefits; use of fewer contractors; and general company-wide cost control measures. O&M reductions at the distribution and generation subsidiaries (including allocated savings from Corporate Shared Services) were approximately $0.15 per share ($70 million) and $0.06 per share ($32 million), respectively. For 2009, O&M reductions totaled approximately $0.69 per share ($344 million). Distribution subsidiaries accounted for approximately $0.42 per share ($206 million) while the generation subsidiaries accounted for approximately $0.27 per share ($138 million). |
■ | Under the RCP, the Ohio utilities were permitted to defer up to $150 million per year in distribution reliability expenses through December 2008. The absence of these deferrals in the fourth quarter of 2009 reduced earnings by $0.05 per share compared to the same period last year. |
■ | Higher pension expense in the fourth quarter of 2009 reduced earnings by $0.11 per share. Reduced pension plan asset value, due to market performance during 2008, resulted in a decrease in the plan’s funded status, leading to increased expense in 2009. |
■ | Incremental property additions increased depreciation expense by $0.02 per share. |
■ | Lower general taxes increased earnings by $0.03 per share, primarily due to lower kilowatt-hour taxes in Ohio. |
■ | Higher investment income from corporate-owned life insurance (COLI) increased earnings by $0.05 per share, while lower nuclear decommissioning trust income reduced earnings by $0.04 per share. |
■ | Net financing costs reduced earnings by $0.01 per share. Higher interest expense reduced earnings by $0.05 per share, primarily due to interest associated with the issuance of first mortgage bonds (FMBs) and senior notes by the regulated companies and FES in 2009. Higher capitalized interest related to the construction program increased earnings by $0.04 per share. |
■ | A lower effective income tax rate increased earnings by $0.11 per share. This reduction reflects the reversal of after-tax interest related to several tax positions that were settled during the fourth quarter of 2009. The after-tax interest that was reversed was charged to earnings in prior years and was not normalized as a special item in any period. Excluding tax adjustments, this year's fourth quarter effective income tax rate was 37.0% compared with 38.0% in last year's fourth quarter. |
Consolidated Report to the Financial Community - 4th Quarter 2009 | 3 |
■ | Several special items were recognized during the fourth quarter of 2009: |
o | $0.49 per share increase in earnings from favorable settlements of uncertain tax positions |
o | $0.42 per share decrease in earnings due to the mark-to-market adjustment of a legacy purchased power contract |
o | $0.05 per share reduction in earnings from the impairment of securities held in trust for future nuclear decommissioning activities, and |
o | $0.01 per share reduction in earnings from early redemption of debt |
2010 Earnings Guidance
Normalized non-GAAP* earnings guidance for 2010, excluding special items, is $3.50 to $3.70 per share. At this time, the company cannot estimate the potential impact of any
special items that may create a difference between earnings on a non-GAAP and GAAP basis.
* The 2009 GAAP to non-GAAP reconciliation statements can be found on page 17 of this report and all GAAP to non-GAAP reconciliation statements are available on the Investor Information section of FirstEnergy Corp.'s Web site at www.firstenergycorp.com/ir.
For additional information, please contact:
Ronald E. Seeholzer | Irene M. Prezelj | Rey Y. Jimenez |
Vice President, Investor Relations | Director, Investor Relations | Manager, Investor Relations |
(330) 384-5415 | (330) 384-3859 | (330) 761-4239 |
Consolidated Report to the Financial Community - 4th Quarter 2009 | 4 |
FirstEnergy Corp.
Consolidated Statements of Income
(In millions, except for per share amounts)
Three Months Ended Dec. 31 | Twelve Months Ended Dec. 31 | ||||||||||||||||||||||||
2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||||
Revenues | |||||||||||||||||||||||||
(1 | ) | Electric utilities | $ | 2,388 | $ | 2,814 | $ | (426 | ) | $ | 11,139 | $ | 12,061 | $ | (922 | ) | |||||||||
(2 | ) | Unregulated businesses | 566 | 387 | 179 | 1,828 | 1,566 | 262 | |||||||||||||||||
(3 | ) | Total Revenues | 2,954 | 3,201 | (247 | ) | 12,967 | 13,627 | (660 | ) | |||||||||||||||
Expenses | |||||||||||||||||||||||||
(4 | ) | Fuel | 263 | 340 | (77 | ) | 1,153 | 1,340 | (187 | ) | |||||||||||||||
(5 | ) | Purchased power | 1,250 | 915 | 335 | 4,730 | 4,291 | 439 | |||||||||||||||||
(6 | ) | Other operating expenses | 594 | 671 | (77 | ) | 2,697 | 3,045 | (348 | ) | |||||||||||||||
(7 | ) | Provision for depreciation | 186 | 177 | 9 | 736 | 677 | 59 | |||||||||||||||||
(8 | ) | Amortization of regulatory assets | 252 | 258 | (6 | ) | 1,155 | 1,053 | 102 | ||||||||||||||||
(9 | ) | Deferral of new regulatory assets | - | (55 | ) | 55 | (136 | ) | (316 | ) | 180 | ||||||||||||||
(10 | ) | General taxes | 166 | 182 | (16 | ) | 753 | 778 | (25 | ) | |||||||||||||||
(11 | ) | Total Expenses | 2,711 | 2,488 | 223 | 11,088 | 10,868 | 220 | |||||||||||||||||
(12 | ) | Operating Income | 243 | 713 | (470 | ) | 1,879 | 2,759 | (880 | ) | |||||||||||||||
Other Income (Expense) | |||||||||||||||||||||||||
(13 | ) | Investment income (loss) | (3 | ) | (14 | ) | 11 | 204 | 59 | 145 | |||||||||||||||
(14 | ) | Interest expense | (223 | ) | (195 | ) | (28 | ) | (978 | ) | (754 | ) | (224 | ) | |||||||||||
(15 | ) | Capitalized interest | 34 | 16 | 18 | 130 | 52 | 78 | |||||||||||||||||
(16 | ) | Total Other Expense | (192 | ) | (193 | ) | 1 | (644 | ) | (643 | ) | (1 | ) | ||||||||||||
(17 | ) | Income Before Income Taxes | 51 | 520 | (469 | ) | 1,235 | 2,116 | (881 | ) | |||||||||||||||
(18 | ) | Income taxes (benefits) | (185 | ) | 192 | (377 | ) | 245 | 777 | (532 | ) | ||||||||||||||
(19 | ) | Net Income | 236 | 328 | (92 | ) | 990 | 1,339 | (349 | ) | |||||||||||||||
(20 | ) | Less: Noncontrolling interest loss | (2 | ) | (4 | ) | 2 | (16 | ) | (3 | ) | (13 | ) | ||||||||||||
(21 | ) | Earnings Available to FirstEnergy Corp. | $ | 238 | $ | 332 | $ | (94 | ) | $ | 1,006 | $ | 1,342 | $ | (336 | ) | |||||||||
(22 | ) | Earnings Per Share of Common Stock | |||||||||||||||||||||||
(23 | ) | Basic | $ | 0.78 | $ | 1.09 | $ | (0.31 | ) | $ | 3.31 | $ | 4.41 | $ | (1.10 | ) | |||||||||
(24 | ) | Diluted | $ | 0.78 | $ | 1.09 | $ | (0.31 | ) | $ | 3.29 | $ | 4.38 | $ | (1.09 | ) | |||||||||
(25 | ) | Weighted Average Number of | |||||||||||||||||||||||
Common Shares Outstanding | |||||||||||||||||||||||||
(26 | ) | Basic | 304 | 304 | - | 304 | 304 | - | |||||||||||||||||
(27 | ) | Diluted | 306 | 306 | - | 306 | 307 | (1 | ) | ||||||||||||||||
Consolidated Report to the Financial Community - 4th Quarter 2009 | 5 |
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Three Months Ended December 31, 2009 | |||||||||||||||||||
Energy | Competitive | Other & | |||||||||||||||||
Delivery | Energy | Reconciling | |||||||||||||||||
Services (a) | Services (b) | Adjustments (c) | Consolidated | ||||||||||||||||
Revenues | |||||||||||||||||||
(1 | ) | Electric sales | $ | 2,263 | $ | 518 | $ | - | $ | 2,781 | |||||||||
(2 | ) | Other | 126 | 41 | (11 | ) | 156 | ||||||||||||
(3 | ) | Internal revenues* | - | 494 | (477 | ) | 17 | ||||||||||||
(4 | ) | Total Revenues | 2,389 | 1,053 | (488 | ) | 2,954 | ||||||||||||
Expenses | |||||||||||||||||||
(5 | ) | Fuel | - | 263 | - | 263 | |||||||||||||
(6 | ) | Purchased power | 1,282 | 445 | (477 | ) | 1,250 | ||||||||||||
(7 | ) | Other operating expenses | 235 | 356 | 3 | 594 | |||||||||||||
(8 | ) | Provision for depreciation | 114 | 69 | 3 | 186 | |||||||||||||
(9 | ) | Amortization of regulatory assets | 252 | - | - | 252 | |||||||||||||
(10 | ) | Deferral of new regulatory assets | - | - | - | - | |||||||||||||
(11 | ) | General taxes | 155 | 24 | (13 | ) | 166 | ||||||||||||
(12 | ) | Total Expenses | 2,038 | 1,157 | (484 | ) | 2,711 | ||||||||||||
(13 | ) | Operating Income (Loss) | 351 | (104 | ) | (4 | ) | 243 | |||||||||||
Other Income (Expense) | |||||||||||||||||||
(14 | ) | Investment income (loss) | 28 | (15 | ) | (16 | ) | (3 | ) | ||||||||||
(15 | ) | Interest expense | (129 | ) | (60 | ) | (34 | ) | (223 | ) | |||||||||
(16 | ) | Capitalized interest | - | 18 | 16 | 34 | |||||||||||||
(17 | ) | Total Other Expense | (101 | ) | (57 | ) | (34 | ) | (192 | ) | |||||||||
(18 | ) | Income Before Income Taxes | 250 | (161 | ) | (38 | ) | 51 | |||||||||||
(19 | ) | Income taxes (benefits) | 100 | (64 | ) | (221 | ) | (185 | ) | ||||||||||
(20 | ) | Net Income | 150 | (97 | ) | 183 | 236 | ||||||||||||
(21 | ) | Less: Noncontrolling interest loss | - | - | (2 | ) | (2 | ) | |||||||||||
(22 | ) | Earnings Available to FirstEnergy Corp. | $ | 150 | $ | (97 | ) | $ | 185 | $ | 238 | ||||||||
* | Consistent with the accounting for the effects of certain types of regulation, internal revenues, representing sales of | ||||||||||||||||||
Renewable Energy Credits by FES to the Ohio Companies, are not fully eliminated. | |||||||||||||||||||
(a) | Consists of regulated transmission and distribution operations, including transition cost recovery, and provider of last resort | ||||||||||||||||||
generation service for FirstEnergy's electric utility subsidiaries. | |||||||||||||||||||
(b) | Consists of unregulated generation and commodity operations, including competitive electric sales, and generation sales to | ||||||||||||||||||
affiliated electric utilities. | |||||||||||||||||||
(c) | Consists primarily of interest expense related to holding company debt, corporate support services revenues and expenses | ||||||||||||||||||
and elimination of intersegment transactions. | |||||||||||||||||||
Consolidated Report to the Financial Community - 4th Quarter 2009 | 6 |
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Three Months Ended December 31, 2008 | |||||||||||||||||||
Energy | Competitive | Other & | |||||||||||||||||
Delivery | Energy | Reconciling | |||||||||||||||||
Services (a) | Services (b) | Adjustments (c) | Consolidated | ||||||||||||||||
Revenues | |||||||||||||||||||
(1 | ) | Electric sales | $ | 2,651 | $ | 339 | $ | - | $ | 2,990 | |||||||||
(2 | ) | Other | 163 | 68 | (20 | ) | 211 | ||||||||||||
(3 | ) | Internal revenues | - | 702 | (702 | ) | - | ||||||||||||
(4 | ) | Total Revenues | 2,814 | 1,109 | (722 | ) | 3,201 | ||||||||||||
Expenses | |||||||||||||||||||
(5 | ) | Fuel | 1 | 339 | - | 340 | |||||||||||||
(6 | ) | Purchased power | 1,486 | 131 | (702 | ) | 915 | ||||||||||||
(7 | ) | Other operating expenses | 466 | 236 | (31 | ) | 671 | ||||||||||||
(8 | ) | Provision for depreciation | 108 | 64 | 5 | 177 | |||||||||||||
(9 | ) | Amortization of regulatory assets | 258 | - | - | 258 | |||||||||||||
(10 | ) | Deferral of new regulatory assets | (55 | ) | - | - | (55 | ) | |||||||||||
(11 | ) | General taxes | 151 | 27 | 4 | 182 | |||||||||||||
(12 | ) | Total Expenses | 2,415 | 797 | (724 | ) | 2,488 | ||||||||||||
(13 | ) | Operating Income | 399 | 312 | 2 | 713 | |||||||||||||
Other Income (Expense) | |||||||||||||||||||
(14 | ) | Investment income (loss) | 37 | (33 | ) | (18 | ) | (14 | ) | ||||||||||
(15 | ) | Interest expense | (105 | ) | (36 | ) | (54 | ) | (195 | ) | |||||||||
(16 | ) | Capitalized interest | 1 | 14 | 1 | 16 | |||||||||||||
(17 | ) | Total Other Expense | (67 | ) | (55 | ) | (71 | ) | (193 | ) | |||||||||
(18 | ) | Income Before Income Taxes | 332 | 257 | (69 | ) | 520 | ||||||||||||
(19 | ) | Income taxes (benefits) | 133 | 102 | (43 | ) | 192 | ||||||||||||
(20 | ) | Net Income | 199 | 155 | (26 | ) | 328 | ||||||||||||
(21 | ) | Less: Noncontrolling interest loss | - | - | (4 | ) | (4 | ) | |||||||||||
(22 | ) | Earnings Available to FirstEnergy Corp. | $ | 199 | $ | 155 | $ | (22 | ) | $ | 332 | ||||||||
(a) | Consists of regulated transmission and distribution operations, including transition cost recovery, and provider of last resort | ||||||||||||||||||
generation service for FirstEnergy's electric utility subsidiaries. | |||||||||||||||||||
(b) | Consists of unregulated generation and commodity operations, including competitive electric sales, and generation sales to | ||||||||||||||||||
affiliated electric utilities. | |||||||||||||||||||
(c) | Consists primarily of interest expense related to holding company debt, corporate support services revenues and expenses | ||||||||||||||||||
and elimination of intersegment transactions. | |||||||||||||||||||
Consolidated Report to the Financial Community - 4th Quarter 2009 | 7 |
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Three Months Ended Dec. 31, 2009 vs. Three Months Ended Dec. 31, 2008 | |||||||||||||||||||
Energy | Competitive | Other & | |||||||||||||||||
Delivery | Energy | Reconciling | |||||||||||||||||
Services (a) | Services (b) | Adjustments (c) | Consolidated | ||||||||||||||||
Revenues | |||||||||||||||||||
(1 | ) | Electric sales | $ | (388 | ) | $ | 179 | $ | - | $ | (209 | ) | |||||||
(2 | ) | Other | (37 | ) | (27 | ) | 9 | (55 | ) | ||||||||||
(3 | ) | Internal revenues* | - | (208 | ) | 225 | 17 | ||||||||||||
(4 | ) | Total Revenues | (425 | ) | (56 | ) | 234 | (247 | ) | ||||||||||
Expenses | |||||||||||||||||||
(5 | ) | Fuel | (1 | ) | (76 | ) | - | (77 | ) | ||||||||||
(6 | ) | Purchased power | (204 | ) | 314 | 225 | 335 | ||||||||||||
(7 | ) | Other operating expenses | (231 | ) | 120 | 34 | (77 | ) | |||||||||||
(8 | ) | Provision for depreciation | 6 | 5 | (2 | ) | 9 | ||||||||||||
(9 | ) | Amortization of regulatory assets | (6 | ) | - | - | (6 | ) | |||||||||||
(10 | ) | Deferral of new regulatory assets | 55 | - | - | 55 | |||||||||||||
(11 | ) | General taxes | 4 | (3 | ) | (17 | ) | (16 | ) | ||||||||||
(12 | ) | Total Expenses | (377 | ) | 360 | 240 | 223 | ||||||||||||
(13 | ) | Operating Income | (48 | ) | (416 | ) | (6 | ) | (470 | ) | |||||||||
Other Income (Expense) | |||||||||||||||||||
(14 | ) | Investment income (loss) | (9 | ) | 18 | 2 | 11 | ||||||||||||
(15 | ) | Interest expense | (24 | ) | (24 | ) | 20 | (28 | ) | ||||||||||
(16 | ) | Capitalized interest | (1 | ) | 4 | 15 | 18 | ||||||||||||
(17 | ) | Total Other Expense | (34 | ) | (2 | ) | 37 | 1 | |||||||||||
(18 | ) | Income Before Income Taxes | (82 | ) | (418 | ) | 31 | (469 | ) | ||||||||||
(19 | ) | Income tax benefits | (33 | ) | (166 | ) | (178 | ) | (377 | ) | |||||||||
(20 | ) | Net Income | (49 | ) | (252 | ) | 209 | (92 | ) | ||||||||||
(21 | ) | Less: Noncontrolling interest income | - | - | 2 | 2 | |||||||||||||
(22 | ) | Earnings Available to FirstEnergy Corp. | $ | (49 | ) | $ | (252 | ) | $ | 207 | $ | (94 | ) | ||||||
* | Consistent with the accounting for the effects of certain types of regulation, internal revenues, representing sales of | ||||||||||||||||||
Renewable Energy Credits by FES to the Ohio Companies, are not fully eliminated. | |||||||||||||||||||
(a) | Consists of regulated transmission and distribution operations, including transition cost recovery, and provider of last resort | ||||||||||||||||||
generation service for FirstEnergy's electric utility subsidiaries. | |||||||||||||||||||
(b) | Consists of unregulated generation and commodity operations, including competitive electric sales, and generation sales to | ||||||||||||||||||
affiliated electric utilities. | |||||||||||||||||||
(c) | Consists primarily of interest expense related to holding company debt, corporate support services revenues and expenses | ||||||||||||||||||
and elimination of intersegment transactions. | |||||||||||||||||||
Consolidated Report to the Financial Community - 4th Quarter 2009 | 8 |
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Twelve Months Ended December 31, 2009 | |||||||||||||||||||
Energy | Competitive | Other & | |||||||||||||||||
Delivery | Energy | Reconciling | |||||||||||||||||
Services (a) | Services (b) | Adjustments (c) | Consolidated | ||||||||||||||||
Revenues | |||||||||||||||||||
(1 | ) | Electric sales | $ | 10,585 | $ | 1,447 | $ | - | $ | 12,032 | |||||||||
(2 | ) | Other | 559 | 441 | (82 | ) | 918 | ||||||||||||
(3 | ) | Internal revenues* | - | 2,843 | (2,826 | ) | 17 | ||||||||||||
(4 | ) | Total Revenues | 11,144 | 4,731 | (2,908 | ) | 12,967 | ||||||||||||
Expenses | |||||||||||||||||||
(5 | ) | Fuel | - | 1,153 | - | 1,153 | |||||||||||||
(6 | ) | Purchased power | 6,560 | 996 | (2,826 | ) | 4,730 | ||||||||||||
(7 | ) | Other operating expenses | 1,424 | 1,357 | (84 | ) | 2,697 | ||||||||||||
(8 | ) | Provision for depreciation | 445 | 270 | 21 | 736 | |||||||||||||
(9 | ) | Amortization of regulatory assets | 1,155 | - | - | 1,155 | |||||||||||||
(10 | ) | Deferral of new regulatory assets | (136 | ) | - | - | (136 | ) | |||||||||||
(11 | ) | General taxes | 641 | 108 | 4 | 753 | |||||||||||||
(12 | ) | Total Expenses | 10,089 | 3,884 | (2,885 | ) | 11,088 | ||||||||||||
(13 | ) | Operating Income | 1,055 | 847 | (23 | ) | 1,879 | ||||||||||||
Other Income (Expense) | |||||||||||||||||||
(14 | ) | Investment income (loss) | 139 | 121 | (56 | ) | 204 | ||||||||||||
(15 | ) | Interest expense | (472 | ) | (166 | ) | (340 | ) | (978 | ) | |||||||||
(16 | ) | Capitalized interest | 3 | 60 | 67 | 130 | |||||||||||||
(17 | ) | Total Other Expense | (330 | ) | 15 | (329 | ) | (644 | ) | ||||||||||
(18 | ) | Income Before Income Taxes | 725 | 862 | (352 | ) | 1,235 | ||||||||||||
(19 | ) | Income taxes (benefits) | 290 | 345 | (390 | ) | 245 | ||||||||||||
(20 | ) | Net Income | 435 | 517 | 38 | 990 | |||||||||||||
(21 | ) | Less: Noncontrolling interest loss | - | - | (16 | ) | (16 | ) | |||||||||||
(22 | ) | Earnings Available to FirstEnergy Corp. | $ | 435 | $ | 517 | $ | 54 | $ | 1,006 | |||||||||
* | Consistent with the accounting for the effects of certain types of regulation, internal revenues, representing sales of | ||||||||||||||||||
Renewable Energy Credits by FES to the Ohio Companies, are not fully eliminated. | |||||||||||||||||||
(a) | Consists of regulated transmission and distribution operations, including transition cost recovery, and provider of last resort | ||||||||||||||||||
generation service for FirstEnergy's electric utility subsidiaries. | |||||||||||||||||||
(b) | Consists of unregulated generation and commodity operations, including competitive electric sales, and generation sales to | ||||||||||||||||||
affiliated electric utilities. | |||||||||||||||||||
(c) | Consists primarily of interest expense related to holding company debt, corporate support services revenues and expenses | ||||||||||||||||||
and elimination of intersegment transactions. | |||||||||||||||||||
Consolidated Report to the Financial Community - 4th Quarter 2009 | 9 |
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Twelve Months Ended December 31, 2008 | |||||||||||||||||||
Energy | Competitive | Other & | |||||||||||||||||
Delivery | Energy | Reconciling | |||||||||||||||||
Services (a) | Services (b) | Adjustments (c) | Consolidated | ||||||||||||||||
Revenues | |||||||||||||||||||
(1 | ) | Electric sales | $ | 11,360 | $ | 1,333 | $ | - | $ | 12,693 | |||||||||
(2 | ) | Other | 708 | 238 | (12 | ) | 934 | ||||||||||||
(3 | ) | Internal revenues | - | 2,968 | (2,968 | ) | - | ||||||||||||
(4 | ) | Total Revenues | 12,068 | 4,539 | (2,980 | ) | 13,627 | ||||||||||||
Expenses | |||||||||||||||||||
(5 | ) | Fuel | 2 | 1,338 | - | 1,340 | |||||||||||||
(6 | ) | Purchased power | 6,480 | 779 | (2,968 | ) | 4,291 | ||||||||||||
(7 | ) | Other operating expenses | 2,022 | 1,142 | (119 | ) | 3,045 | ||||||||||||
(8 | ) | Provision for depreciation | 417 | 243 | 17 | 677 | |||||||||||||
(9 | ) | Amortization of regulatory assets | 1,053 | - | - | 1,053 | |||||||||||||
(10 | ) | Deferral of new regulatory assets | (316 | ) | - | - | (316 | ) | |||||||||||
(11 | ) | General taxes | 646 | 109 | 23 | 778 | |||||||||||||
(12 | ) | Total Expenses | 10,304 | 3,611 | (3,047 | ) | 10,868 | ||||||||||||
(13 | ) | Operating Income | 1,764 | 928 | 67 | 2,759 | |||||||||||||
Other Income (Expense) | |||||||||||||||||||
(14 | ) | Investment income (loss) | 171 | (34 | ) | (78 | ) | 59 | |||||||||||
(15 | ) | Interest expense | (411 | ) | (152 | ) | (191 | ) | (754 | ) | |||||||||
(16 | ) | Capitalized interest | 3 | 44 | 5 | 52 | |||||||||||||
(17 | ) | Total Other Expense | (237 | ) | (142 | ) | (264 | ) | (643 | ) | |||||||||
(18 | ) | Income Before Income Taxes | 1,527 | 786 | (197 | ) | 2,116 | ||||||||||||
(19 | ) | Income taxes (benefits) | 611 | 314 | (148 | ) | 777 | ||||||||||||
(20 | ) | Net Income | 916 | 472 | (49 | ) | 1,339 | ||||||||||||
(21 | ) | Less: Noncontrolling interest loss | - | - | (3 | ) | (3 | ) | |||||||||||
(22 | ) | Earnings Available to FirstEnergy Corp. | $ | 916 | $ | 472 | $ | (46 | ) | $ | 1,342 | ||||||||
(a) | Consists of regulated transmission and distribution operations, including transition cost recovery, and provider of last resort | ||||||||||||||||||
generation service for FirstEnergy's electric utility subsidiaries. | |||||||||||||||||||
(b) | Consists of unregulated generation and commodity operations, including competitive electric sales, and generation sales to | ||||||||||||||||||
affiliated electric utilities. | |||||||||||||||||||
(c) | Consists primarily of interest expense related to holding company debt, corporate support services revenues and expenses | ||||||||||||||||||
and elimination of intersegment transactions. | |||||||||||||||||||
Consolidated Report to the Financial Community - 4th Quarter 2009 | 10 |
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Twelve Months Ended Dec. 31, 2009 vs. Twelve Months Ended Dec. 31, 2008 | |||||||||||||||||||
Energy | Competitive | Other & | |||||||||||||||||
Delivery | Energy | Reconciling | |||||||||||||||||
Services (a) | Services (b) | Adjustments (c) | Consolidated | ||||||||||||||||
Revenues | |||||||||||||||||||
(1 | ) | Electric sales | $ | (775 | ) | $ | 114 | $ | - | $ | (661 | ) | |||||||
(2 | ) | Other | (149 | ) | 203 | (70 | ) | (16 | ) | ||||||||||
(3 | ) | Internal revenues* | - | (125 | ) | 142 | 17 | ||||||||||||
(4 | ) | Total Revenues | (924 | ) | 192 | 72 | (660 | ) | |||||||||||
Expenses | |||||||||||||||||||
(5 | ) | Fuel | (2 | ) | (185 | ) | - | (187 | ) | ||||||||||
(6 | ) | Purchased power | 80 | 217 | 142 | 439 | |||||||||||||
(7 | ) | Other operating expenses | (598 | ) | 215 | 35 | (348 | ) | |||||||||||
(8 | ) | Provision for depreciation | 28 | 27 | 4 | 59 | |||||||||||||
(9 | ) | Amortization of regulatory assets | 102 | - | - | 102 | |||||||||||||
(10 | ) | Deferral of new regulatory assets | 180 | - | - | 180 | |||||||||||||
(11 | ) | General taxes | (5 | ) | (1 | ) | (19 | ) | (25 | ) | |||||||||
(12 | ) | Total Expenses | (215 | ) | 273 | 162 | 220 | ||||||||||||
(13 | ) | Operating Income | (709 | ) | (81 | ) | (90 | ) | (880 | ) | |||||||||
Other Income (Expense) | |||||||||||||||||||
(14 | ) | Investment income (loss) | (32 | ) | 155 | 22 | 145 | ||||||||||||
(15 | ) | Interest expense | (61 | ) | (14 | ) | (149 | ) | (224 | ) | |||||||||
(16 | ) | Capitalized interest | - | 16 | 62 | 78 | |||||||||||||
(17 | ) | Total Other Expense | (93 | ) | 157 | (65 | ) | (1 | ) | ||||||||||
(18 | ) | Income Before Income Taxes | (802 | ) | 76 | (155 | ) | (881 | ) | ||||||||||
(19 | ) | Income taxes (benefits) | (321 | ) | 31 | (242 | ) | (532 | ) | ||||||||||
(20 | ) | Net Income | (481 | ) | 45 | 87 | (349 | ) | |||||||||||
(21 | ) | Less: Noncontrolling interest loss | - | - | (13 | ) | (13 | ) | |||||||||||
(22 | ) | Earnings Available to FirstEnergy Corp. | $ | (481 | ) | $ | 45 | $ | 100 | $ | (336 | ) | |||||||
* | Consistent with the accounting for the effects of certain types of regulation, internal revenues, representing sales of | ||||||||||||||||||
Renewable Energy Credits by FES to the Ohio Companies, are not fully eliminated. | |||||||||||||||||||
(a) | Consists of regulated transmission and distribution operations, including transition cost recovery, and provider of last resort | ||||||||||||||||||
generation service for FirstEnergy's electric utility subsidiaries. | |||||||||||||||||||
(b) | Consists of unregulated generation and commodity operations, including competitive electric sales, and generation sales to | ||||||||||||||||||
affiliated electric utilities. | |||||||||||||||||||
(c) | Consists primarily of interest expense related to holding company debt, corporate support services revenues and expenses | ||||||||||||||||||
and elimination of intersegment transactions. | |||||||||||||||||||
Consolidated Report to the Financial Community - 4th Quarter 2009 | 11 |
FirstEnergy Corp.
Financial Statements
(In millions)
Condensed Consolidated Balance Sheets | |||||||
As of | As of | ||||||
Assets | Dec. 31, 2009 | Dec. 31, 2008 | |||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 874 | $ | 545 | |||
Receivables | 1,397 | 1,471 | |||||
Other | 1,049 | 1,037 | |||||
Total Current Assets | 3,320 | 3,053 | |||||
Property, Plant and Equipment | 19,164 | 17,723 | |||||
Investments | 3,023 | 3,017 | |||||
Deferred Charges and Other Assets | 8,797 | 9,728 | |||||
Total Assets | $ | 34,304 | $ | 33,521 | |||
Liabilities and Capitalization | |||||||
Current Liabilities: | |||||||
Currently payable long-term debt | $ | 1,834 | $ | 2,476 | |||
Short-term borrowings | 1,181 | 2,397 | |||||
Accounts payable | 829 | 794 | |||||
Other | 1,444 | 1,431 | |||||
Total Current Liabilities | 5,288 | 7,098 | |||||
Capitalization: | |||||||
Total equity | 8,557 | 8,315 | |||||
Long-term debt and other long-term obligations | 11,908 | 9,100 | |||||
Total Capitalization | 20,465 | 17,415 | |||||
Noncurrent Liabilities | 8,551 | 9,008 | |||||
Total Liabilities and Capitalization | $ | 34,304 | $ | 33,521 | |||
General Information | |||||||||||||||||
Three Months Ended Dec. 31 | Twelve Months Ended Dec. 31 | ||||||||||||||||
2009 | 2008 | 2009 | 2008 | ||||||||||||||
Debt redemptions | $ | (397 | ) | $ | (301 | ) | $ | (2,610 | ) | $ | (1,034 | ) | |||||
New long-term debt issues | $ | 481 | $ | 736 | $ | 4,632 | $ | 1,367 | |||||||||
Short-term borrowings increase (decrease) | $ | (482 | ) | $ | 5 | $ | (1,246 | ) | $ | 1,494 | |||||||
Property additions (a) | $ | (628 | ) | $ | (711 | ) | $ | (2,203 | ) | $ | (2,888 | ) | |||||
(a) Includes purchase of lessor equity interests in Beaver Valley Unit 2 and Perry in the twelve months ended | |||||||||||||||||
December 31, 2008. | |||||||||||||||||
Adjusted Capitalization | ||||||||||||||
As of December 31 | ||||||||||||||
2009 | % Total | 2008 | % Total | |||||||||||
Total equity* | $ | 8,557 | 36 | % | $ | 8,315 | 36 | % | ||||||
Long-term debt and other long-term obligations | 11,908 | 50 | % | 9,100 | 40 | % | ||||||||
Currently payable long-term debt | 1,834 | 8 | % | 2,476 | 11 | % | ||||||||
Short-term borrowings | 1,181 | 5 | % | 2,397 | 11 | % | ||||||||
Adjustments: | ||||||||||||||
Sale-leaseback net debt equivalents | 1,391 | 6 | % | 1,428 | 6 | % | ||||||||
JCP&L securitization debt and cash | (1,189 | ) | -5 | % | (842 | ) | -4 | % | ||||||
Total | $ | 23,682 | 100 | % | $ | 22,874 | 100 | % | ||||||
*Includes $(1,415) million and $(1,380) million, respectively, of Accumulated Other Comprehensive Loss | ||||||||||||||
Consolidated Report to the Financial Community - 4th Quarter 2009 | 12 |
FirstEnergy Corp.
Financial Statements
(In millions)
Condensed Consolidated Statements of Cash Flows | |||||||||||||||
Three Months Ended Dec. 31 | Twelve Months Ended Dec. 31 | ||||||||||||||
2009 | 2008 | 2009 | 2008 | ||||||||||||
Cash flows from operating activities | |||||||||||||||
Net income | $ | 236 | $ | 328 | $ | 990 | $ | 1,339 | |||||||
Adjustments to reconcile net income to net cash from operating activities: | |||||||||||||||
Depreciation, amortization, and deferral of regulatory assets | 438 | 380 | 1,755 | 1,414 | |||||||||||
Deferred purchased power and other costs | (103 | ) | (88 | ) | (338 | ) | (226 | ) | |||||||
Deferred income taxes and investment tax credits | (37 | ) | 88 | 384 | 366 | ||||||||||
Deferred rents and lease market valuation liability | (32 | ) | (33 | ) | (52 | ) | (95 | ) | |||||||
Pension trust contribution | - | - | (500 | ) | - | ||||||||||
Cash collateral, net | 115 | (52 | ) | 30 | (31 | ) | |||||||||
Electric service prepayment programs | - | (19 | ) | (10 | ) | (77 | ) | ||||||||
Commodity derivative transactions, net | 203 | 1 | 229 | 5 | |||||||||||
Loss on debt redemption | 4 | - | 146 | - | |||||||||||
Gain on investment securities held in trusts | (4 | ) | (20 | ) | (176 | ) | (63 | ) | |||||||
Change in working capital and other | 181 | 208 | 7 | (408 | ) | ||||||||||
Cash flows provided from operating activities | 1,001 | 793 | 2,465 | 2,224 | |||||||||||
Cash flows provided from (used for) financing activities | (568 | ) | 264 | 49 | 1,175 | ||||||||||
Cash flows used for investing activities | (397 | ) | (693 | ) | (2,185 | ) | (2,983 | ) | |||||||
Net increase in cash and cash equivalents | $ | 36 | $ | 364 | $ | 329 | $ | 416 | |||||||
Deferrals and Amortizations | |||||||||||||||||||||||
Three Months Ended Dec. 31 | Twelve Months Ended Dec. 31 | ||||||||||||||||||||||
2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Ohio Rate Certainty Plan Amortizations (Deferrals) | |||||||||||||||||||||||
Ohio transition costs | $ | - | $ | 71 | $ | (71 | ) | $ | 70 | $ | 302 | $ | (232 | ) | |||||||||
Shopping incentives & interest | 37 | 28 | 9 | 265 | 97 | 168 | |||||||||||||||||
RCP distribution reliability costs and interest | - | (24 | ) | 24 | (14 | ) | (154 | ) | 140 | ||||||||||||||
RCP fuel & interest | (5 | ) | - | (5 | ) | (14 | ) | 7 | (21 | ) | |||||||||||||
Ohio Amended ESP Amortizations (Deferrals) | |||||||||||||||||||||||
Uncollectible customer accounts | $ | 7 | $ | - | $ | 7 | $ | 5 | $ | - | $ | 5 | |||||||||||
Economic development costs & interest | 1 | - | 1 | 26 | - | 26 | |||||||||||||||||
Generation cost rider true-up & interest | (3 | ) | - | (3 | ) | (16 | ) | - | (16 | ) | |||||||||||||
CEI fuel & interest | - | - | - | (141 | ) | - | (141 | ) | |||||||||||||||
Distribution reliability costs | 39 | - | 39 | 51 | - | 51 | |||||||||||||||||
Ohio Transmission Amortization | |||||||||||||||||||||||
MISO transmission costs | $ | 9 | $ | - | $ | 9 | $ | 105 | $ | 43 | $ | 62 | |||||||||||
Pennsylvania Amortizations (Deferrals) | |||||||||||||||||||||||
PJM transmission costs | $ | 49 | $ | 12 | $ | 37 | $ | 141 | $ | (71 | ) | $ | 212 | ||||||||||
NUG costs | 20 | 13 | 7 | 84 | 45 | 39 | |||||||||||||||||
New Jersey Amortization | |||||||||||||||||||||||
NUG costs | $ | 57 | $ | 60 | $ | (3 | ) | $ | 255 | $ | 268 | $ | (13 | ) | |||||||||
Consolidated Report to the Financial Community - 4th Quarter 2009 | 13 |
FirstEnergy Corp.
Statistical Summary
Electric Sales Statistics (kWh in millions) | ||||||||||||||||
Three Months Ended Dec. 31 | Twelve Months Ended Dec. 31 | |||||||||||||||
Electric Distribution Deliveries | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||
Ohio | - Residential | 4,208 | 4,266 | -1.4% | 16,807 | 17,380 | -3.3% | |||||||||
- Commercial | 3,347 | 3,452 | -3.0% | 14,042 | 14,834 | -5.3% | ||||||||||
- Industrial | 4,892 | 5,038 | -2.9% | 18,742 | 22,232 | -15.7% | ||||||||||
- Other | 90 | 93 | -3.2% | 351 | 370 | -5.1% | ||||||||||
Total Ohio | 12,537 | 12,849 | -2.4% | 49,942 | 54,816 | -8.9% | ||||||||||
Pennsylvania | - Residential | 2,917 | 3,025 | -3.6% | 11,553 | 11,822 | -2.3% | |||||||||
- Commercial | 2,688 | 2,778 | -3.2% | 10,954 | 11,366 | -3.6% | ||||||||||
- Industrial | 2,232 | 2,317 | -3.7% | 8,712 | 10,039 | -13.2% | ||||||||||
- Other | 20 | 21 | -4.8% | 81 | 82 | -1.2% | ||||||||||
Total Pennsylvania | 7,857 | 8,141 | -3.5% | 31,300 | 33,309 | -6.0% | ||||||||||
New Jersey | - Residential | 2,090 | 2,144 | -2.5% | 9,214 | 9,667 | -4.7% | |||||||||
- Commercial | 2,263 | 2,363 | -4.2% | 9,323 | 9,707 | -4.0% | ||||||||||
- Industrial | 593 | 640 | -7.3% | 2,447 | 2,773 | -11.8% | ||||||||||
- Other | 22 | 22 | - | 87 | 88 | -1.1% | ||||||||||
Total New Jersey | 4,968 | 5,169 | -3.9% | 21,071 | 22,235 | -5.2% | ||||||||||
Total Residential | 9,215 | 9,435 | -2.3% | 37,574 | 38,869 | -3.3% | ||||||||||
Total Commercial | 8,298 | 8,593 | -3.4% | 34,319 | 35,907 | -4.4% | ||||||||||
Total Industrial | 7,717 | 7,995 | -3.5% | 29,901 | 35,044 | -14.7% | ||||||||||
Total Other | 132 | 136 | -2.9% | 519 | 540 | -3.9% | ||||||||||
Total Distribution Deliveries | 25,362 | 26,159 | -3.0% | 102,313 | 110,360 | -7.3% | ||||||||||
Electric Sales Shopped | ||||||||||||||||
Ohio | - Residential | 1,677 | 391 | 328.9% | 2,315 | 2,007 | 15.3% | |||||||||
- Commercial | 1,857 | 602 | 208.5% | 2,581 | 3,147 | -18.0% | ||||||||||
- Industrial | 2,546 | 491 | 418.5% | 3,793 | 2,468 | 53.7% | ||||||||||
Total Ohio | 6,080 | 1,484 | 309.7% | 8,689 | 7,622 | 14.0% | ||||||||||
Pennsylvania | - Residential | 51 | 37 | 37.8% | 176 | 129 | 36.4% | |||||||||
- Commercial | 196 | 193 | 1.6% | 801 | 761 | 5.3% | ||||||||||
- Industrial | 469 | 459 | 2.2% | 1,688 | 2,058 | -18.0% | ||||||||||
Total Pennsylvania | 716 | 689 | 3.9% | 2,665 | 2,948 | -9.6% | ||||||||||
New Jersey | - Commercial | 1,168 | 614 | 90.2% | 3,814 | 2,464 | 54.8% | |||||||||
- Industrial | 477 | 488 | -2.3% | 1,908 | 2,132 | -10.5% | ||||||||||
Total New Jersey | 1,645 | 1,102 | 49.3% | 5,722 | 4,596 | 24.5% | ||||||||||
Total Electric Sales Shopped | 8,441 | 3,275 | 157.7% | 17,076 | 15,166 | 12.6% | ||||||||||
Electric Generation Sales | ||||||||||||||||
Retail - Regulated | 16,921 | 22,884 | -26.1% | 85,237 | 95,194 | -10.5% | ||||||||||
Retail - Competitive | 6,209 | 2,315 | 168.2% | 12,097 | 10,938 | 10.6% | ||||||||||
Total Retail | 23,130 | 25,199 | -8.2% | 97,334 | 106,132 | -8.3% | ||||||||||
Wholesale | 4,588 | 6,318 | -27.4% | 21,126 | 24,655 | -14.3% | ||||||||||
Total Electric Generation Sales | 27,718 | 31,517 | -12.1% | 118,460 | 130,787 | -9.4% | ||||||||||
Operating Statistics | |||||||||||||||||
Three Months Ended Dec. 31 | Twelve Months Ended Dec. 31 | ||||||||||||||||
2009 | 2008 | 2009 | 2008 | ||||||||||||||
Capacity Factors: | |||||||||||||||||
Nuclear | 81% | 99% | 84% | 93% | |||||||||||||
Fossil - Baseload | 65% | 83% | 72% | 84% | |||||||||||||
Fossil - Load Following | 30% | 60% | 31% | 64% | |||||||||||||
Generation Output: | |||||||||||||||||
Nuclear | 46% | 41% | 45% | 39% | |||||||||||||
Fossil - Baseload | 41% | 39% | 43% | 40% | |||||||||||||
Fossil - Load Following | 13% | 19% | 12% | 20% | |||||||||||||
Peaking | - | 1% | - | 1% | |||||||||||||
Three Months Ended Dec. 31 | Twelve Months Ended Dec. 31 | ||||||||||||||||
Weather | 2009 | 2008 | Normal | 2009 | 2008 | Normal | |||||||||||
Composite Heating-Degree-Days | 1,903 | 2,053 | 1,960 | 5,533 | 5,579 | 5,587 | |||||||||||
Composite Cooling-Degree-Days | 2 | 5 | 13 | 736 | 887 | 900 | |||||||||||
Consolidated Report to the Financial Community - 4th Quarter 2009 | 14 |
FirstEnergy Corp.
Statistical Summary
Summary of Generation Sales and Power Purchases
Generation Sales | 4Q 2009 | 4Q 2008 | Change | ||||||||
(In thousands of MWH) | FES | 3rd Party | Total | FES | 3rd Party | Total | FES | 3rd Party | Total | ||
Retail Sales | |||||||||||
FES non-affiliated retail sales - | |||||||||||
OH Franchise (shopping) | 4,363 | 4,363 | 1,431 | 1,431 | 2,932 | 2,932 | |||||
Penn Power (shopping) | 449 | 449 | 383 | 383 | 66 | 66 | |||||
Non-Franchise | 1,397 | 1,397 | 501 | 501 | 896 | 896 | |||||
Total FES retail sales | 6,209 | 6,209 | 2,315 | 2,315 | 3,894 | 3,894 | |||||
FES sales to affiliates - | |||||||||||
Ohio Edison | 2,218 | 872 | 3,090 | 5,106 | 2 | 5,108 | (2,888) | 870 | (2,018) | ||
CEI | 1,620 | 598 | 2,218 | 4,098 | 1 | 4,099 | (2,478) | 597 | (1,881) | ||
Toledo Edison | 843 | 306 | 1,149 | 2,161 | - | 2,161 | (1,318) | 306 | (1,012) | ||
Subtotal - OH | 4,681 | 1,776 | 6,457 | 11,365 | 3 | 11,368 | (6,684) | 1,773 | (4,911) | ||
Penn Power | - | 507 | 507 | 125 | 405 | 530 | (125) | 102 | (23) | ||
Penelec | 1,961 | 1,373 | 3,334 | 1,567 | 1,899 | 3,466 | 394 | (526) | (132) | ||
Met-Ed | 1,922 | 1,378 | 3,300 | 1,558 | 1,897 | 3,455 | 364 | (519) | (155) | ||
Subtotal - PA | 3,883 | 3,258 | 7,141 | 3,250 | 4,201 | 7,451 | 633 | (943) | (310) | ||
JCPL | - | 3,323 | 3,323 | - | 4,065 | 4,065 | - | (742) | (742) | ||
Total affiliated sales | 8,564 | 8,357 | 16,921 | 14,615 | 8,269 | 22,884 | (6,051) | 88 | (5,963) | ||
Total Retail Sales | 14,773 | 8,357 | 23,130 | 16,930 | 8,269 | 25,199 | (2,157) | 88 | (2,069) | ||
Wholesale Sales | |||||||||||
FES - | |||||||||||
MISO | 2,019 | 2,019 | 2,746 | 2,746 | (727) | (727) | |||||
PJM | 411 | 411 | 1,340 | 1,340 | (929) | (929) | |||||
Total FES | 2,430 | 2,430 | 4,086 | 4,086 | (1,656) | (1,656) | |||||
Met-Ed | 668 | 668 | 534 | 534 | 134 | 134 | |||||
Penelec | 870 | 870 | 765 | 765 | 105 | 105 | |||||
JCPL | 620 | 620 | 859 | 859 | (239) | (239) | |||||
Other | - | - | - | 74 | - | 74 | (74) | - | (74) | ||
Total Wholesale Sales | 2,430 | 2,159 | 4,588 | 4,160 | 2,158 | 6,318 | (1,730) | - | (1,730) | ||
Total Generation Sales | 17,203 | 10,516 | 27,718 | 21,090 | 10,427 | 31,517 | (3,887) | 88 | (3,799) |
Power Purchases | 4Q 2009 | 4Q 2008 | Change | |||||||
(In thousands of MWH) | FES | 3rd Party | Total | FES | 3rd Party | Total | FES | 3rd Party | Total | |
FES - | ||||||||||
MISO | 104 | 104 | 349 | 349 | (245) | (245) | ||||
PJM | 2,652 | 2,652 | 1,236 | 1,236 | 1,416 | 1,416 | ||||
Total FES | 2,756 | 2,756 | 1,585 | 1,585 | 1,171 | 1,171 | ||||
Ohio Edison | 916 | 916 | 2 | 2 | 914 | 914 | ||||
CEI | 628 | 628 | 1 | 1 | 627 | 627 | ||||
Toledo Edison | 321 | 321 | - | - | 321 | 321 | ||||
Subtotal - OH | 1,865 | 1,865 | 3 | 3 | 1,862 | 1,862 | ||||
Penn Power | 545 | 545 | 426 | 426 | 119 | 119 | ||||
Penelec | 2,221 | 2,221 | 2,758 | 2,758 | (537) | (537) | ||||
Met-Ed | 2,018 | 2,018 | 2,526 | 2,526 | (508) | (508) | ||||
Subtotal - PA | 4,784 | 4,784 | 5,710 | 5,710 | (926) | (926) | ||||
JCPL | 4,215 | 4,215 | 5,227 | 5,227 | (1,012) | (1,012) | ||||
Total Power Purchases | 2,756 | 10,864 | 13,620 | 1,585 | 10,940 | 12,525 | 1,171 | (76) | 1,095 |
Consolidated Report to the Financial Community - 4th Quarter 2009 | 15 |
FirstEnergy Corp.
Statistical Summary
Summary of Generation Sales and Power Purchases
Generation Sales | Dec YTD 2009 | Dec YTD 2008 | Change | |||||||
(In thousands of MWH) | FES | 3rd Party | Total | FES | 3rd Party | Total | FES | 3rd Party | Total | |
Retail Sales | ||||||||||
FES non-affiliated retail sales - | ||||||||||
OH Franchise (shopping) | 6,290 | 6,290 | 6,894 | 6,894 | (604) | (604) | ||||
Penn Power (shopping) | 1,650 | 1,650 | 1,769 | 1,769 | (119) | (119) | ||||
Non-Franchise | 4,157 | 4,157 | 2,275 | 2,275 | 1,882 | 1,882 | ||||
Total FES retail sales | 12,097 | 12,097 | 10,938 | 10,938 | 1,159 | 1,159 | ||||
FES sales to affiliates - | ||||||||||
Ohio Edison | 13,883 | 5,138 | 19,021 | 21,016 | 10 | 21,026 | (7,133) | 5,128 | (2,005) | |
CEI | 10,579 | 3,853 | 14,432 | 17,155 | 3 | 17,158 | (6,576) | 3,850 | (2,726) | |
Toledo Edison | 5,742 | 2,058 | 7,800 | 9,001 | 6 | 9,007 | (3,259) | 2,052 | (1,207) | |
Subtotal - OH | 30,204 | 11,049 | 41,253 | 47,172 | 19 | 47,191 | (16,968) | 11,030 | (5,938) | |
Penn Power | 225 | 1,838 | 2,063 | 821 | 1,394 | 2,215 | (596) | 444 | (152) | |
Penelec | 7,601 | 5,489 | 13,090 | 6,353 | 7,555 | 13,908 | 1,248 | (2,066) | (818) | |
Met-Ed | 8,014 | 5,467 | 13,481 | 6,697 | 7,543 | 14,240 | 1,317 | (2,076) | (759) | |
Subtotal - PA | 15,840 | 12,794 | 28,634 | 13,871 | 16,492 | 30,363 | 1,969 | (3,698) | (1,729) | |
JCPL | - | 15,350 | 15,350 | - | 17,640 | 17,640 | - | (2,290) | (2,290) | |
Total affiliated sales | 46,044 | 39,193 | 85,237 | 61,043 | 34,151 | 95,194 | (14,999) | 5,042 | (9,957) | |
Total Retail Sales | 58,141 | 39,193 | 97,334 | 71,981 | 34,151 | 106,132 | (13,840) | 5,042 | (8,798) | |
Wholesale Sales | ||||||||||
FES - | ||||||||||
MISO | 10,622 | 10,622 | 9,793 | 9,793 | 829 | 829 | ||||
PJM | 1,955 | 1,955 | 4,814 | 4,814 | (2,859) | (2,859) | ||||
Total FES | 12,577 | 12,577 | 14,607 | 14,607 | (2,030) | (2,030) | ||||
Met-Ed | 2,291 | 2,291 | 2,290 | 2,290 | 1 | 1 | ||||
Penelec | 3,174 | 3,174 | 3,026 | 3,026 | 148 | 148 | ||||
JCPL | 3,083 | 3,083 | 4,287 | 4,287 | (1,204) | (1,204) | ||||
Other | 1 | - | 1 | 445 | - | 445 | (444) | - | (444) | |
Total Wholesale Sales | 12,578 | 8,549 | 21,126 | 15,052 | 9,603 | 24,655 | (2,474) | (1,055) | (3,529) | |
Total Generation Sales | 70,719 | 47,742 | 118,460 | 87,033 | 43,754 | 130,787 | (16,314) | 3,987 | (12,327) |
Power Purchases | Dec YTD 2009 | Dec YTD 2008 | Change | |||||||
(In thousands of MWH) | FES | 3rd Party | Total | FES | 3rd Party | Total | FES | 3rd Party | Total | |
FES - | ||||||||||
MISO | 1,511 | 1,511 | 4,347 | 4,347 | (2,836) | (2,836) | ||||
PJM | 7,432 | 7,432 | 5,624 | 5,624 | 1,808 | 1,808 | ||||
Total FES | 8,943 | 8,943 | 9,971 | 9,971 | (1,028) | (1,028) | ||||
Ohio Edison | 5,396 | 5,396 | 11 | 11 | 5,385 | 5,385 | ||||
CEI | 4,046 | 4,046 | 3 | 3 | 4,043 | 4,043 | ||||
Toledo Edison | 2,161 | 2,161 | 6 | 6 | 2,155 | 2,155 | ||||
Subtotal - OH | 11,603 | 11,603 | 20 | 20 | 11,583 | 11,583 | ||||
Penn Power | 1,943 | 1,943 | 1,464 | 1,464 | 479 | 479 | ||||
Penelec | 8,792 | 8,792 | 10,960 | 10,960 | (2,168) | (2,168) | ||||
Met-Ed | 7,906 | 7,906 | 10,211 | 10,211 | (2,305) | (2,305) | ||||
Subtotal - PA | 18,641 | 18,641 | 22,635 | 22,635 | (3,994) | (3,994) | ||||
JCPL | 19,572 | 19,572 | 23,315 | 23,315 | (3,743) | (3,743) | ||||
Total Power Purchases | 8,943 | 49,816 | 58,759 | 9,971 | 45,970 | 55,941 | (1,028) | 3,846 | 2,818 |
Consolidated Report to the Financial Community - 4th Quarter 2009 | 16 |
FirstEnergy Corp.
Special Items, EPS Reconciliations and Liquidity
(In millions, except for per share amounts)
Special Items | |||||||||||||||||||||
Three Months Ended Dec. 31 | Twelve Months Ended Dec. 31 | ||||||||||||||||||||
2009 | 2008 | 2009 | 2008 | ||||||||||||||||||
Pre-tax Items - Income Increase (Decrease) | |||||||||||||||||||||
Regulatory charges (a) | $ | - | $ | - | $ | (263 | ) | $ | - | ||||||||||||
Trust securities impairment (b) | (23 | ) | (60 | ) | (45 | ) | (123 | ) | |||||||||||||
Organizational restructuring/strike costs (c) | 1 | - | (67 | ) | - | ||||||||||||||||
Non-core assets sales/impairments (d) | 1 | - | 255 | 32 | |||||||||||||||||
Litigation settlement (d) | - | - | - | 15 | |||||||||||||||||
Debt call premium/hedge write-off (e) | (4 | ) | - | (146 | ) | - | |||||||||||||||
Derivative mark-to-market adjustment (f) | (205 | ) | - | (205 | ) | - | |||||||||||||||
Total-Pretax Items | $ | (230 | ) | $ | (60 | ) | $ | (471 | ) | $ | (76 | ) | |||||||||
Income tax resolution | $ | 148 | $ | - | $ | 161 | $ | - | |||||||||||||
EPS Effect | $ | 0.01 | $ | (0.12 | ) | $ | (0.46 | ) | $ | (0.16 | ) | ||||||||||
(a) | For the year, $216 million included in "Amortization | (d) | Included in "Revenues-Other" | ||||||||||||||||||
of regulatory assets"; $10 million included in | (e) | Included in "Interest expense" | |||||||||||||||||||
"Purchased power"; $37 million included in "Other | (f) | Included in "Purchased power" | |||||||||||||||||||
operating expenses" | |||||||||||||||||||||
(b) | Included in "Investment income" | ||||||||||||||||||||
(c) | For the year, $65 million included in "Other operating | ||||||||||||||||||||
expenses"; $2 million included in "General taxes" |
2009 Earnings Per Share (EPS) | |||||||||
(Reconciliation of GAAP to Non-GAAP) | |||||||||
ACTUAL Three Months Ended Dec. 31 | ACTUAL Twelve Months Ended Dec. 31 | ||||||||
Basic EPS (GAAP basis) | $ | 0.78 | $ | 3.31 | |||||
Excluding Special Items: | |||||||||
Regulatory charges | - | 0.55 | |||||||
Trust securities impairment | 0.05 | 0.09 | |||||||
Organizational restructuring/strike costs | - | 0.14 | |||||||
Debt redemption premiums | 0.01 | 0.31 | |||||||
Income tax resolution | (0.49 | ) | (0.53 | ) | |||||
Non-core assets sales/impairments | - | (0.52 | ) | ||||||
Derivative mark-to-market adjustment | 0.42 | 0.42 | |||||||
Basic EPS (Non-GAAP basis) | $ | 0.77 | $ | 3.77 | |||||
Liquidity position as of January 31, 2010 | ||||||
Company | Type | Maturity | Amount (M) | Available (M) | ||
FirstEnergy(1) | Revolving | Aug. 2012 | $2,750 | $1,387 | ||
FirstEnergy Solutions | Bank Line | Mar. 2011 | 100 | - | ||
OH & PA Utilities | Receivables Financing | Various(2) | 515 | 308 | ||
(1) FirstEnergy Corp. and subsidiary borrowers | Subtotal: | $3,365 | $1,695 | |||
(2) $370M matures February 22, 2010; $145M matures December 17, 2010 | Cash: | - | 764 | |||
Total: | $3,365 | $2,459 | ||||
Consolidated Report to the Financial Community - 4th Quarter 2009 | 17 |
Recent Developments
Financial Matters
Financing Activities
On November 30, 2009, Penelec redeemed $35 million of 7.77% medium term notes, Series E, due August 1, 2010.
On December 1, 2009, FirstEnergy Generation Corp. (FGCO) extended a $98.9 million pollution control revenue bond (PCRB) letter of credit (LOC) while FirstEnergy Nuclear Generation Corp. (NGC) replaced a $28.5 million PCRB LOC, both with a termination date of 2012.
On December 15, 2009, American Transmission Systems, Incorporated (ATSI) issued $400 million of unsecured senior notes at 5.25% maturing in 2022. Proceeds were used to repay outstanding associated company notes of approximately $231 million and for construction expenditures.
On December 23, 2009, Bay Shore Power Company defeased $114.7 million of tax-exempt bonds series A and B, due September 1, 2020, through an early redemption.
Regulatory Matters
Ohio Regulatory Update
Energy Efficiency
On December 10, 2009, rules went into effect setting out the manner in which electric utilities, including the Ohio Companies (OE, CEI and TE) will be required to comply with benchmarks contained in Senate Bill 221 (SB221) related to the employment of alternative energy resources, energy efficiency/peak demand reduction programs, as well as, greenhouse gas reporting and carbon dioxide control planning requirements and changes to long term forecast reporting requirements. The rules severely restrict the types of renewable energy resources, energy efficiency and peak reduction programs that may be included toward meeting the statutory goals, which is expected to significantly increase the cost of compliance for the Ohio Companies' customers. As a result of the rules going into effect in December 2009, and the Public Utilities Commission of Ohio’s (PUCO) failure to address certain energy efficiency applications submitted by the Ohio Companies throughout the year and the PUCO’s directive to postpone the launch of a Commission-approved energy efficiency program, the Ohio Companies, on October 27, 2009, submitted an application to reset their 2009 statutory energy efficiency benchmarks to zero. A waiver for the energy efficiency requirements was granted on January 7, 2010.
On December 15, 2009, the Ohio Companies filed three-year plans with the PUCO to offer energy efficiency programs to their customers. The filing outlined specific programs intended to help homeowners and businesses achieve greater energy efficiency and reduce peak energy use. The programs include: appliance turn-in, comprehensive home energy audits, compact fluorescent light bulbs, energy efficient products, direct load control thermostats, an efficient new homes program, and commercial and industrial efficiency improvements.
Renewable Energy Credits
In August and October 2009, the Ohio Companies conducted requests for proposals (RFPs) to secure Renewable Energy Credits (RECs). The RFPs included solar and other RECs, including those generated in Ohio. The RECs, which were successfully secured from these RFPs, will be used to help meet the renewable energy requirements established under SB221 for 2009, 2010 and 2011. On December 7, 2009, the Ohio Companies filed an application with the PUCO seeking a force majeure determination regarding the Ohio Companies’ compliance
Consolidated Report to the Financial Community - 4th Quarter 2009 | 18 |
with the 2009 solar energy resources benchmark, and seeking a reduction in the benchmark. The PUCO has not yet ruled on that application.
Market Rate Offer
On October 20, 2009, the Ohio Companies filed a market rate offer (MRO) to procure electric generation service for the period beginning June 1, 2011. The proposed MRO would establish a competitive bid process (CBP) to secure generation supply for customers who do not shop with an alternative supplier and would be similar, in all material respects, to the CBP conducted in May 2009 in that it would procure energy, capacity and certain transmission services on a slice of system basis. Enhancements to the May 2009 CBP include multiple bidding sessions and multiple products with different delivery periods for generation supply, features which are designed to reduce potential price volatility, reduce supplier risk and encourage bidder participation. A technical conference was held on October 29, 2009, and the PUCO conducted hearings in the case on December 15-18 and 21-23. Hearing briefs were filed on January 8, 2010 and reply briefs were filed on January 15, 2010.
Pennsylvania Regulatory Update
Smart Meter Plan
On August 14, 2009, Pennsylvania Power Company (Penn), Met-Ed and Penelec (the Pennsylvania Companies) filed a Smart Meter Technology Procurement and Installation Plan with the Pennsylvania Public Utility Commission (PPUC) as required by Act 129. The plan included proposed tariff riders to recover the costs of implementation of the plan and an assessment period of twenty-four months to evaluate needs, select technology, secure vendors, train personnel, install and support test equipment and establish a detailed meter deployment schedule consistent with the requirements of Act 129. At the end of the assessment period, the Pennsylvania Companies proposed to submit to the PPUC a supplement to the plan to set forth in detail their proposal for the full scale deployment of smart meters. The Pennsylvania Companies requested that the PPUC approve, as part of the plan, both the proposed recovery mechanism and the recovery of costs expected during the assessment period, currently estimated to be $29.5 million, through such mechanism. On November 9 and November 16, 2009, rebuttal and surrebuttal testimony was filed at the PPUC. In addition, main briefs were filed on December 11, 2009, and reply briefs were filed on December 31, 2009. The Administrative Law Judge’s (ALJ) initial decision was issued on January 28, 2010. The Pennsylvania Companies expect the PPUC to act on the plan in early 2010.
Energy Efficiency
On October 28, 2009, the PPUC issued an order approving the Pennsylvania Companies’ energy efficiency and conservation plans with modifications. On December 2, 2009, the modified plans along with tariff revisions were filed with the PPUC, and corrections to that filing were submitted on December 23, 2009, and January 15, 2010. The PPUC issued an order approving the modified plans with further revisions on January 28, 2010. The Pennsylvania Companies filed final plans and tariff revisions on February 5, 2010, consistent with the minor revisions required by the PPUC. The Commission is required to approve or reject the plans within 60 days.
Met-Ed and Penelec Transmission Service Charge (TSC)
On May 22, 2008, the PPUC approved the Met-Ed and Penelec annual updates to the TSC rider for the period June 1, 2008, through May 31, 2009. The TSCs included a component for under-recovery of actual transmission costs incurred during the prior period (Met-Ed - $144 million and Penelec - $4 million) and transmission cost projections for June 2008 through May 2009 (Met-Ed - $258 million and Penelec - $92 million). Met-Ed received PPUC approval for a transition approach that would recover past under-recovered costs plus carrying charges through the new TSC over thirty-one months and defer a portion of the projected costs ($92 million) plus carrying charges for recovery through future TSCs by December 31, 2010. Various intervenors filed complaints against those filings. In addition, the PPUC ordered an investigation to review the reasonableness of Met-Ed’s TSC, while at the same time allowing Met-Ed to implement the rider on June 1, 2008, subject to refund. On July 15, 2008, the PPUC directed the ALJ to consolidate the complaints against Met-Ed with its investigation and a litigation schedule was adopted. Hearings and briefing for both Met-Ed and Penelec have concluded. On August 11, 2009, the ALJ issued a Recommended Decision to the PPUC approving Met-Ed’s and Penelec’s TSCs as filed and dismissing all complaints. Exceptions by various interveners were filed and reply exceptions were filed by Met-Ed and Penelec. On January 28, 2010, the PPUC adopted a motion which denies the recovery of marginal
Consolidated Report to the Financial Community - 4th Quarter 2009 | 19 |
transmission losses through the TSC for the period of June 1, 2007 through March 31, 2008, and instructs Met-Ed and Penelec to work with the parties and file a petition to retain any over-collection, with interest, until 2011 for the purpose of providing mitigation of future rate increases starting in 2011 for their customers. The Companies are now awaiting an order, which is expected to be consistent with the motion. If so, the Companies plan to appeal such a decision to the Commonwealth Court of Pennsylvania and believe that the Companies should prevail. The Pennsylvania Companies are expecting to recover approximately $170.5 million ($138.7 million for Met-Ed and $31.8 million for Penelec) in marginal transmission losses for the period prior to January 1, 2011.
Met-Ed and Penelec Default Service Plan
On November 6, 2009, the PPUC issued a final order approving a unanimous settlement and adopting the position of Met-Ed and Penelec on the two reserved issues regarding their default service plan. The order was consistent with the ALJ’s recommended decision. The first procurement for Met-Ed and Penelec default service for power flow beginning January 2011 was conducted on January 19, 2010.
Pennsylvania Power Default Service Plan
On February 8, 2010, Penn filed a plan with the PPUC for securing the power supply for default service customers beginning June 2011 for a two-year period. A PPUC order is expected in the fourth quarter of 2010.
New Jersey Regulatory Update
Solar Renewable Energy Credits
The New Jersey Board of Public Utilities (NJBPU) approved Jersey Central Power & Light Company’s (JCP&L) proposal to help increase the pace of solar energy project development in the state by establishing long-term agreements to purchase and sell Solar Renewable Energy Credits (SREC). The SREC provide a stable basis for financing solar generation projects. A total of 42 megawatts (MW) of solar generating capacity will be solicited for JCP&L to help meet New Jersey Renewable Portfolio Standards. The first solicitation was conducted in August 2009 and subsequent solicitations will occur over the next three years. The costs of this program are expected to be fully recoverable through a per KWH rate approved by the NJBPU and applied to all customers. Bidder sessions were held on December 18, 2009 and January 13, 2009. An RFP is expected to be issued in the first quarter of 2010.
Operational Matters
Nuclear Outage
On November 27, 2009, Beaver Valley Unit 2 returned to service following a scheduled refueling and maintenance outage that began on October 12, 2009. Beaver Valley Unit 2 had operated safely and reliably for 350 consecutive days before shutting down for the refueling and achieved a 99.8 percent capability factor in 2009. During the outage, 60 of the 157 fuel assemblies were exchanged and safety inspections were conducted.
Beaver Valley Power Station License Renewal
On November 5, 2009, FirstEnergy Nuclear Operating Company (FENOC) announced that the Nuclear Regulatory Commission (NRC) approved a 20-year license extension for the Beaver Valley Power Station Unit 1 and Unit 2 until 2036 and 2047, respectively. The Beaver Valley Power Station is located in Shippingport, Pennsylvania and is capable of generating 1,815 MW.
Norton Energy Storage Project
On November 23, 2009, FGCO announced that it purchased the rights to develop a compressed-air electric generating plant on a 92-acre site in Norton, Ohio, from CAES Development Company, LLC. The transaction includes rights to a 600-acre underground cavern, formerly operated as a limestone mine, which the company believes is also suitable for energy storage technology. With 9.6 million cubic meters of storage, the Norton Energy Storage Project has the potential to be expanded to up to 2,700 MW of capacity. The Norton Energy
Consolidated Report to the Financial Community - 4th Quarter 2009 | 20 |
Storage Project, when developed, will be part of FirstEnergy's overall environmental strategy, which includes continued investment in renewable and low-emitting energy resources.
Sumpter Plant Sale
On December 17, 2009, FirstEnergy announced that its FGCO subsidiary reached an agreement in principle to sell its 340 MW Sumpter Plant in Sumpter, Michigan, to Wolverine Power Supply Cooperative, Inc., for an undisclosed amount. The plant, built in 2002 by FGCO, consists of four 85 MW natural gas combustion turbines. The sale is expected to close in the first quarter of 2010.
Labor Agreements
On December 7, 2009, FirstEnergy announced that employees of its FGCO subsidiary represented by the International Brotherhood of Electrical Workers (IBEW) Local 272 voted to ratify a thirty-nine month labor agreement that runs through February of 2013. IBEW Local 272 represents 374 of 513 employees at the Bruce Mansfield Plant in Shippingport, Pennsylvania.
PJM Regional Transmission Organization (RTO) Integration
In August 2009, FirstEnergy filed an application with the Federal Energy Regulatory Commission (FERC) to consolidate its transmission assets and operations into PJM Interconnection L.L.C. (PJM). Currently the company's transmission assets and operations are divided between PJM and the Midwest Independent Transmission System Operator, Inc. (MISO). The consolidation would move the transmission assets that are part of ATSI and the generation assets of FES, which are located within the footprint of the Ohio Companies and Penn, into PJM. On December 17, 2009, a FERC order approving the integration and outlining the terms required for the move was issued, and on December 18, 2009, ATSI announced that it signed an agreement to join PJM. Consolidation provides customers with the benefits of a more fully developed retail choice market, and FirstEnergy and its Utilities with the operating efficiencies of a single RTO, with one set of rules, procedures and protocols. FirstEnergy expects to complete the integration of its operations into PJM by June 1, 2011.
FirstEnergy Solutions Offers Economic Support Program
In September 2009, FES introduced Powering Our Communities, an innovative program that offers economic support to communities in the Ohio Companies’ service areas. The program provides up-front economic support to Ohio residents and businesses that agree to purchase discounted electric generation supply from FES through governmental aggregation programs. The discounts are based on the generation price customers would be charged if they purchased electric generation service from their local electric utility. Eligible residential customers receive a six percent discount and small businesses receive up to a four percent discount for an additional six years. As of December 31, 2009, FES signed agreements with more than 180 area communities.
On December 2, 2009, FES and the Northeast Ohio Public Energy Council (NOPEC) entered into an agreement making FES the generation supplier for customers in the 126 Northeast Ohio communities served by NOPEC. The agreement extends from January 1, 2011, through December 31, 2019. In addition, FES and Gexa Energy, NOPEC's former generation supplier, have entered into an agreement making FES the supplier for NOPEC communities in 2010.
Legacy Contracts
During 2008, FES entered into purchased power contracts representing approximately 4.4 million MWH per year for MISO delivery in 2010 and 2011. These contracts were intended to cover potential short positions that would have resulted if an Electric Security Plan (ESP) was established in Ohio in 2009 that would have obligated FES to serve 100% of the Ohio utilities’ load. That obligation did not materialize, making the contracts unnecessary. On December 31, 2009, these contracts were marked to market, reducing 2009 GAAP earnings by $129 million. This represents $68 million attributable to 2010 power deliveries and $61 million for 2011 deliveries. These contracts were the last of the restructuring obligations in FirstEnergy’s transition to competitive generation markets.
Consolidated Report to the Financial Community - 4th Quarter 2009 | 21 |
Met-Ed and Penelec Partial Requirements Agreement with FES
On November 3, 2009, FES, Met-Ed, Penelec and Waverly (Buyers) restated their partial requirements power purchase agreement for 2010. The Fourth Restated Partial Requirements Agreement continues to limit the amount of capacity resources required to be supplied by FES to 3,544 MW, but requires FES to supply essentially all of the energy requirements (estimated 29 million MWH) for the Buyers in 2010. Under the new agreement, the Buyers assigned 1,300 MW of existing energy purchases to FES to assist it in supplying the Buyers’ power supply requirements and managing congestion expenses. Prices for the power sold by FES were increased to $42.77 and $44.42 respectively for Met-Ed and Penelec. In addition, FES agreed to reimburse Met-Ed and Penelec for congestion expenses and marginal losses in excess of $208 million and $79 million, respectively, as billed by PJM in 2010 and associated with delivery of power by FES under the Fourth Restated Partial Requirements Agreement. The Fourth Restated Partial Requirements Agreement terminates at the end of 2010.
Consolidated Report to the Financial Community - 4th Quarter 2009 | 22 |
Forward-looking Statements: This Consolidated Report to the Financial Community includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements include declarations regarding management’s intents, beliefs and current expectations. These statements typically contain, but are not limited to, the terms “anticipate,” “potential,” “expect,” “believe,” “estimate” and similar words. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Actual results may differ materially due to the speed and nature of increased competition in the electric utility industry and legislative and regulatory changes affecting how generation rates will be determined following the expiration of existing rate plans in Pennsylvania, the impact of the Public Utilities Commission of Ohio’s regulatory process on the Ohio utility subsidiaries associated with the distribution rate case, business and regulatory impacts from American Transmission System, Incorporated’s realignment into PJM Interconnection L.L.C., economic or weather conditions affecting future sales and margins, changes in markets for energy services, changing energy and commodity market prices and availability, replacement power costs being higher than anticipated or inadequately hedged, the continued ability of FirstEnergy’s regulated utilities to collect transition and other charges or to recover increased transmission costs, operating and maintenance costs being higher than anticipated, other legislative and regulatory changes, revised environmental requirements, including possible greenhouse gas emission regulations, the potential impacts of the U.S. Court of Appeals’ July 11, 2008 decision requiring revisions to the Clean Air Interstate Rules and the scope of any laws, rules or regulations that may ultimately take their place, the uncertainty of the timing and amounts of the capital expenditures needed to, among other things, implement FirstEnergy’s Air Quality Compliance Plan (including that such amounts could be higher than anticipated or that certain generating units may need to be shut down) or levels of emission reductions related to the Consent Decree resolving the New Source Review litigation or other similar potential regulatory initiatives or actions, adverse regulatory or legal decisions and outcomes (including, but not limited to, the revocation of necessary licenses or operating permits and oversight) by the Nuclear Regulatory Commission, Met-Ed’s and Penelec’s transmission service charge filings with the PaPUC, the continuing availability of generating units and their ability to operate at or near full capacity, the ability to comply with applicable state and federal reliability standards, the ability to accomplish or realize anticipated benefits from strategic goals (including employee workforce initiatives), the ability to improve electric commodity margins and to experience growth in the distribution business, the changing market conditions that could affect the value of assets held in FirstEnergy’s nuclear decommissioning trusts, pension trusts and other trust funds, and cause it to make additional contributions sooner, or in an amount that is larger than currently anticipated, the ability to access the public securities and other capital and credit markets in accordance with FirstEnergy’s financing plan and the cost of such capital, changes in general economic conditions affecting the company, the state of the capital and credit markets affecting the company, interest rates and any actions taken by credit rating agencies that could negatively affect FirstEnergy’s access to financing or its costs or increase its requirements to post additional collateral to support outstanding commodity positions, letters of credit and other financial guarantees, the continuing decline of the national and regional economy and its impact on the company’s major industrial and commercial customers, issues concerning the soundness of financial institutions and counterparties with which FirstEnergy does business, and the risks and other factors discussed from time to time in its SEC filings, and other similar factors. The foregoing review of factors should not be construed as exhaustive. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor assess the impact of any such factor on FirstEnergy’s business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements. FirstEnergy expressly disclaims any current intention to update any forward-looking statements contained herein as a result of new information, future events, or otherwise.
Consolidated Report to the Financial Community - 4th Quarter 2009 | 23 |