EXHIBIT 99.2
Consolidated Report to the Financial Community
Third Quarter 2010
(Released October 26, 2010) (Unaudited)
HIGHLIGHTS | After-Tax EPS Variance Analysis | 3rd.Qtr. | |||
3Q 2009 Basic EPS – GAAP Basis | $0.77 | ||||
Special Items – 2009 | (0.34) | ||||
● | Normalized non-GAAP* earnings, excluding special items, were $1.28 per | 3Q 2009 Normalized Earnings – Non-GAAP Basis* | $1.11 | ||
share for the third quarter of 2010, compared with $1.11 per share for the third | Distribution Deliveries | 0.17 | |||
quarter of 2009. GAAP earnings for the third quarter of 2010 were $0.59 per | Commodity Margin | 0.19 | |||
share, compared with $0.77 per share for the third quarter of 2009. | O&M Expenses | 0.12 | |||
General Taxes | (0.03) | ||||
3Q 2010 Results vs. 3Q 2009 | Investment Income - NDT | (0.25) | |||
Financing Costs | 0.03 | ||||
● | Electric distribution deliveries increased 3.1 million MWH, or 12%, due to an | Effective Income Tax Rate | (0.06) | ||
improvement in the economy and warmer weather. Cooling-degree-days were | 3Q 2010 Normalized Earnings – Non-GAAP Basis* | $1.28 | |||
60% higher than the same period last year and 33% above normal. Residential | Special Items – 2010 | (0.69) | |||
deliveries increased 1.8 million MWH, or 19%, while commercial deliveries | 3Q 2010 Basic EPS – GAAP Basis | $0.59 | |||
increased by 476,000 MWH, or 5%. Industrial deliveries increased 843,000 | |||||
MWH, or 11%, primarily related to increased usage by steel, refining and | |||||
automotive customers. Higher distribution delivery revenues increased earnings by $0.17 per share. | |||||
● | Commodity margin increased earnings by $0.19 per share, as the result of the factors described below. |
FirstEnergy Solutions Corp.’s (FES) generation sales increased 6.3 million MWH, or 45%, and increased earnings by $0.77 per share. FES continues to successfully execute its retail strategy by gaining customers in Ohio through direct and governmental aggregation sales channels. FES retail sales also grew significantly in all other markets it serves, with expansion into multiple new territories, including southern Ohio areas and new markets in Pennsylvania. |
FES Generation Sales - 3Q10 vs. 3Q09 | |||||||||||
(thousand MWH) | POLR | Direct | Aggregation | Total | |||||||
MISO | (2,566) | 4,241 | 3,330 | 5,005 | |||||||
PJM | 738 | 537 | 1,275 | ||||||||
Total Increase/ (Decrease) | (1,828) | 4,778 | 3,330 | 6,280 | |||||||
FES wholesale electricity sales decreased 1 million MWH, or 26%, reducing earnings by $0.12 per share. |
FES - Wholesale Sales - 3Q10 vs. 3Q09 | ||||||||
(thousand MWH) | MISO | PJM | Total | |||||
Wholesale Sales Increase / (Decrease) | (1,628) | 636 | (992) | |||||
Generation output for the quarter increased 3.4 million MWH, or 19%, due to higher utilization of the FES fossil units. Approximately 30% of the increase in generation output was generated by the baseload fossil units. Nuclear generation output was flat. |
Generation Output - 3Q10 vs. 3Q09 | ||||||||
(thousand MWH) | Fossil | Nuclear | Total | |||||
Generation Output Increase / (Decrease) | 3,388 | (29) | 3,359 | |||||
Higher fuel expenses reduced earnings by $0.20 per share primarily due to increased coal consumption, higher coal transportation costs and fuel surcharges. Approximately 65% of the increase in fossil generation output came from the load-following units, resulting in a higher proportion of western Powder River Basin and Signal Peak coal in the fuel mix in the third quarter of 2010 versus the same period a year ago. The increased consumption of western coal in the fuel mix increased coal transportation expenses, partially offset by lower unit prices. |
Increased purchased power costs reduced earnings by $0.27 per share. The increase in energy purchases was primarily attributable to increased spot market purchases in PJM. The increase in PJM energy purchases resulted from higher POLR and retail load requirements. |
FES - Purchased Power - 3Q10 vs. 3Q09 | ||||||||
(thousand MWH) | MISO | PJM | Total | |||||
Purchased Power Increase | 281 | 1,869 | 2,150 | |||||
Net PJM Reliability Pricing Model (RPM) capacity revenues and expenses increased earnings by $0.01 per share. Lower capacity expenses for FES, Metropolitan Edison Company (Met-Ed) and Pennsylvania Electric Company (Penelec) increased earnings by $0.05 per share, while lower capacity revenues reduced earnings by $0.04 per share. |
Consolidated Report to the Financial Community - 3rd Quarter 2010 | 2 |
Commodity Margin EPS Summary
Revenues - 3Q10 vs. 3Q09 | ||||||||||||||
FES Generation Sales | Wholesale | PJM RPM | ||||||||||||
EPS | POLR | Direct | Aggregation | Sales | Capacity | Total Rev | ||||||||
Rate | $0.03 | ($0.15) | $0.06 | ($0.04) | ($0.04) | ($0.14) | ||||||||
Volume | ($0.25) | $0.66 | $0.42 | ($0.08) | $0.75 | |||||||||
Total | ($0.22) | $0.51 | $0.48 | ($0.12) | ($0.04) | $0.61 | ||||||||
Expenses - 3Q10 vs. 3Q09 | ||||||||||
Purchased | PJM RPM | |||||||||
EPS | Fuel | Power | Capacity | Total Exp | ||||||
Rate | $0.02 | $0.05 | $0.07 | |||||||
Volume | ($0.20) | ($0.29) | ($0.49) | |||||||
Total | ($0.20) | ($0.27) | $0.05 | ($0.42) | ||||||
· | Lower O&M expenses increased earnings by $0.12 per share. |
- | Lower Other Post-Employment Benefits (OPEB) expense in the third quarter of 2010 increased earnings by $0.03 per share. In June 2009, FirstEnergy amended its health care benefits plan to reduce future subsidies it will be required to pay. |
- | Lower non-OPEB employee benefits in the third quarter of 2010 increased earnings by $0.07 per share. The third quarter of 2009 included additional costs for incentive compensation and salary restoration. |
- | Lower operating expenses, primarily from the Energy Delivery segment, increased earnings by $0.02 per share. |
· | Higher general taxes decreased earnings by $0.03 per share, primarily due to higher KWH tax in Ohio and gross receipts tax in Pennsylvania. |
· | Lower investment income from the nuclear decommissioning trusts reduced earnings by $0.25 per share. In the third quarter of 2009, the company realized gains from the sales of securities held in trust. The sales were designed to strategically reposition the assets to limit volatility risks and capture the strong market performance during the first nine months in 2009. |
· | Net financing costs increased earnings by $0.03 per share. Lower interest expense increased earnings by $0.02 per share, partially due to the impact of interest rate swap agreements implemented in the second quarter of 2010. Higher capitalized interest related to construction programs increased earnings by $0.01 per share. |
Consolidated Report to the Financial Community - 3rd Quarter 2010 | 3 |
· | A higher effective income tax rate decreased earnings by $0.06 per share. Excluding the effect of special items in both years, the effective income tax rate increased to 38.5% in the third quarter of 2010 compared to 35.6% in the third quarter of 2009. The increase principally reflects final tax adjustments upon filing the 2009 federal income tax return in September 2010. The effective income tax rate for the nine months ended September 30, 2010, was unchanged from 36.9% in the same period of 2009. |
· | Several special items were recognized during the third quarter of 2010. |
Special Items | EPS | |||
Regulatory Charges | $0.02 | |||
Merger Transaction Costs | $0.04 | |||
Lake Plant Charges | $0.60 | |||
Derivative Mark-to-Market Adjustment | $0.03 | |||
Total | $0.69 | |||
2010 Earnings Guidance
Normalized non-GAAP* earnings guidance for 2010, excluding special items, remains at $3.60 to $3.70 per share. Year-to-date normalized non-GAAP earnings now stand at $2.92 per share.
* The 2010 GAAP to non-GAAP reconciliation statements can be found on page 16 of this report and all GAAP to non-GAAP reconciliation statements are available on the Investor Information section of FirstEnergy Corp.'s website 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 - 3rd Quarter 2010 | 4 |
FirstEnergy Corp.
Consolidated Statements of Income
(In millions, except for per share amounts)
Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||||
2010 | 2009 | Change | 2010 | 2009 | Change | ||||||||||||||||||||
Revenues | |||||||||||||||||||||||||
(1 | ) | Electric utilities | $ | 2,817 | $ | 2,942 | $ | (125 | ) | $ | 7,752 | $ | 8,755 | $ | (1,003 | ) | |||||||||
(2 | ) | Unregulated businesses | 1,567 | 1,113 | 454 | 4,286 | 3,696 | 590 | |||||||||||||||||
(3 | ) | Intersegment revenues | (691 | ) | (647 | ) | (44 | ) | (1,916 | ) | (2,438 | ) | 522 | ||||||||||||
(4 | ) Total Revenues | 3,693 | 3,408 | 285 | 10,122 | 10,013 | 109 | ||||||||||||||||||
Expenses | |||||||||||||||||||||||||
(5 | ) | Fuel | 400 | 302 | 98 | 1,084 | 890 | 194 | |||||||||||||||||
(6 | ) | Purchased power | 1,284 | 1,313 | (29 | ) | 3,574 | 3,480 | 94 | ||||||||||||||||
(7 | ) | Other operating expenses | 738 | 665 | 73 | 2,112 | 2,103 | 9 | |||||||||||||||||
(8 | ) | Provision for depreciation | 182 | 188 | (6 | ) | 565 | 550 | 15 | ||||||||||||||||
(9 | ) | Amortization of regulatory assets | 176 | 261 | (85 | ) | 549 | 903 | (354 | ) | |||||||||||||||
(10 | ) | Deferral of new regulatory assets | - | - | - | - | (136 | ) | 136 | ||||||||||||||||
(11 | ) | General taxes | 206 | 192 | 14 | 587 | 587 | - | |||||||||||||||||
(12 | ) | Impairment of long-lived assets | 292 | - | 292 | 294 | - | 294 | |||||||||||||||||
(13 | ) Total Expenses | 3,278 | 2,921 | 357 | 8,765 | 8,377 | 388 | ||||||||||||||||||
(14 | ) Operating Income | 415 | 487 | (72 | ) | 1,357 | 1,636 | (279 | ) | ||||||||||||||||
Other Income (Expense) | |||||||||||||||||||||||||
(15 | ) | Investment income | 46 | 191 | (145 | ) | 93 | 207 | (114 | ) | |||||||||||||||
(16 | ) | Interest expense | (208 | ) | (355 | ) | 147 | (628 | ) | (755 | ) | 127 | |||||||||||||
(17 | ) | Capitalized interest | 41 | 35 | 6 | 122 | 96 | 26 | |||||||||||||||||
(18 | ) Total Other Expense | (121 | ) | (129 | ) | 8 | (413 | ) | (452 | ) | 39 | ||||||||||||||
(19 | ) Income Before Income Taxes | 294 | 358 | (64 | ) | 944 | 1,184 | (240 | ) | ||||||||||||||||
(20 | ) | Income taxes | 119 | 128 | (9 | ) | 364 | 430 | (66 | ) | |||||||||||||||
(21 | ) Net Income | 175 | 230 | (55 | ) | 580 | 754 | (174 | ) | ||||||||||||||||
(22 | ) Loss attributable to noncontrolling interest | (4 | ) | (4 | ) | - | (19 | ) | (14 | ) | (5 | ) | |||||||||||||
(23 | ) Earnings Available to FirstEnergy Corp. | $ | 179 | $ | 234 | $ | (55 | ) | $ | 599 | $ | 768 | $ | (169 | ) | ||||||||||
(24 | ) Earnings Per Share of Common Stock | ||||||||||||||||||||||||
(25 | ) | Basic | $ | 0.59 | $ | 0.77 | $ | (0.18 | ) | $ | 1.97 | $ | 2.52 | $ | (0.55 | ) | |||||||||
(26 | ) | Diluted | $ | 0.59 | $ | 0.77 | $ | (0.18 | ) | $ | 1.96 | $ | 2.51 | $ | (0.55 | ) | |||||||||
(27 | ) Weighted Average Number of | ||||||||||||||||||||||||
Common Shares Outstanding | |||||||||||||||||||||||||
(28 | ) | Basic | 304 | 304 | - | 304 | 304 | - | |||||||||||||||||
(29 | ) | Diluted | 305 | 306 | (1 | ) | 305 | 306 | (1 | ) | |||||||||||||||
Consolidated Report to the Financial Community - 3rd Quarter 2010 | 5 |
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Three Months Ended September 30, 2010 | |||||||||||||||||
Energy | Competitive | Other & | |||||||||||||||
Delivery | Energy | Reconciling | |||||||||||||||
Services (a) | Services (b) | Adjustments (c) | Consolidated | ||||||||||||||
Revenues | |||||||||||||||||
(1 | ) | Electric sales | $ | 2,609 | $ | 905 | $ | - | $ | 3,514 | |||||||
(2 | ) | Other | 148 | 52 | (21 | ) | 179 | ||||||||||
(3 | ) | Internal revenues | 60 | 599 | (659 | ) | - | ||||||||||
(4 | ) | Total Revenues | 2,817 | 1,556 | (680 | ) | 3,693 | ||||||||||
Expenses | |||||||||||||||||
(5 | ) | Fuel | - | 401 | (1 | ) | 400 | ||||||||||
(6 | ) | Purchased power | 1,473 | 470 | (659 | ) | 1,284 | ||||||||||
(7 | ) | Other operating expenses | 422 | 347 | (31 | ) | 738 | ||||||||||
(8 | ) | Provision for depreciation | 111 | 62 | 9 | 182 | |||||||||||
(9 | ) | Amortization of regulatory assets | 176 | - | - | 176 | |||||||||||
(10 | ) | General taxes | 174 | 26 | 6 | 206 | |||||||||||
(11 | ) | Impairment of long-lived assets | - | 292 | - | 292 | |||||||||||
(12 | ) | Total Expenses | 2,356 | 1,598 | (676 | ) | 3,278 | ||||||||||
(13 | ) | Operating Income (Loss) | 461 | (42 | ) | (4 | ) | 415 | |||||||||
Other Income (Expense) | |||||||||||||||||
(14 | ) | Investment income (loss) | 23 | 28 | (5 | ) | 46 | ||||||||||
(15 | ) | Interest expense | (125 | ) | (53 | ) | (30 | ) | (208 | ) | |||||||
(16 | ) | Capitalized interest | 2 | 23 | 16 | 41 | |||||||||||
(17 | ) | Total Other Expense | (100 | ) | (2 | ) | (19 | ) | (121 | ) | |||||||
(18 | ) | Income (Loss) Before Income Taxes | 361 | (44 | ) | (23 | ) | 294 | |||||||||
(19 | ) | Income taxes (benefits) | 137 | (17 | ) | (1 | ) | 119 | |||||||||
(20 | ) | Net Income (Loss) | 224 | (27 | ) | (22 | ) | 175 | |||||||||
(21 | ) | Loss attributable to noncontrolling interest | - | - | (4 | ) | (4 | ) | |||||||||
(22 | ) | Earnings Available to FirstEnergy Corp. | $ | 224 | $ | (27 | ) | $ | (18 | ) | $ | 179 | |||||
(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 - 3rd Quarter 2010 | 6 |
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Three Months Ended September 30, 2009 | |||||||||||||||||
Energy | Competitive | Other & | |||||||||||||||
Delivery | Energy | Reconciling | |||||||||||||||
Services (a) | Services (b) | Adjustments (c) | Consolidated | ||||||||||||||
Revenues | |||||||||||||||||
(1 | ) | Electric sales | $ | 2,804 | $ | 444 | $ | - | $ | 3,248 | |||||||
(2 | ) | Other | 138 | 46 | (24 | ) | 160 | ||||||||||
(3 | ) | Internal revenues | - | 617 | (617 | ) | - | ||||||||||
(4 | ) | Total Revenues | 2,942 | 1,107 | (641 | ) | 3,408 | ||||||||||
Expenses | |||||||||||||||||
(5 | ) | Fuel | - | 302 | - | 302 | |||||||||||
(6 | ) | Purchased power | 1,725 | 205 | (617 | ) | 1,313 | ||||||||||
(7 | ) | Other operating expenses | 366 | 331 | (32 | ) | 665 | ||||||||||
(8 | ) | Provision for depreciation | 112 | 69 | 7 | 188 | |||||||||||
(9 | ) | Amortization of regulatory assets | 261 | - | - | 261 | |||||||||||
(10 | ) | General taxes | 162 | 27 | 3 | 192 | |||||||||||
(11 | ) | Total Expenses | 2,626 | 934 | (639 | ) | 2,921 | ||||||||||
(12 | ) | Operating Income | 316 | 173 | (2 | ) | 487 | ||||||||||
Other Income (Expense) | |||||||||||||||||
(13 | ) | Investment income (loss) | 46 | 159 | (14 | ) | 191 | ||||||||||
(14 | ) | Interest expense | (116 | ) | (46 | ) | (193 | ) | (355 | ) | |||||||
(15 | ) | Capitalized interest | 1 | 18 | 16 | 35 | |||||||||||
(16 | ) | Total Other Income (Expense) | (69 | ) | 131 | (191 | ) | (129 | ) | ||||||||
(17 | ) | Income Before Income Taxes | 247 | 304 | (193 | ) | 358 | ||||||||||
(18 | ) | Income taxes | 99 | 121 | (92 | ) | 128 | ||||||||||
(19 | ) | Net Income | 148 | 183 | (101 | ) | 230 | ||||||||||
(20 | ) | Loss attributable to noncontrolling interest | - | - | (4 | ) | (4 | ) | |||||||||
(21 | ) | Earnings Available to FirstEnergy Corp. | $ | 148 | $ | 183 | $ | (97 | ) | $ | 234 | ||||||
(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 - 3rd Quarter 2010 | 7 |
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Three Months Ended Sep. 30, 2010 vs. Three Months Ended Sep. 30, 2009 | |||||||||||||||||
Energy | Competitive | Other & | |||||||||||||||
Delivery | Energy | Reconciling | |||||||||||||||
Services (a) | Services (b) | Adjustments (c) | Consolidated | ||||||||||||||
Revenues | |||||||||||||||||
(1 | ) | Electric sales | $ | (195 | ) | $ | 461 | $ | - | $ | 266 | ||||||
(2 | ) | Other | 10 | 6 | 3 | 19 | |||||||||||
(3 | ) | Internal revenues | 60 | (18 | ) | (42 | ) | - | |||||||||
(4 | ) | Total Revenues | (125 | ) | 449 | (39 | ) | 285 | |||||||||
Expenses | |||||||||||||||||
(5 | ) | Fuel | - | 99 | (1 | ) | 98 | ||||||||||
(6 | ) | Purchased power | (252 | ) | 265 | (42 | ) | (29 | ) | ||||||||
(7 | ) | Other operating expenses | 56 | 16 | 1 | 73 | |||||||||||
(8 | ) | Provision for depreciation | (1 | ) | (7 | ) | 2 | (6 | ) | ||||||||
(9 | ) | Amortization of regulatory assets | (85 | ) | - | - | (85 | ) | |||||||||
(10 | ) | General taxes | 12 | (1 | ) | 3 | 14 | ||||||||||
(11 | ) | Impairment of long-lived assets | - | 292 | - | 292 | |||||||||||
(12 | ) | Total Expenses | (270 | ) | 664 | (37 | ) | 357 | |||||||||
(13 | ) | Operating Income (Loss) | 145 | (215 | ) | (2 | ) | (72 | ) | ||||||||
Other Income (Expense) | |||||||||||||||||
(14 | ) | Investment income (loss) | (23 | ) | (131 | ) | 9 | (145 | ) | ||||||||
(15 | ) | Interest expense | (9 | ) | (7 | ) | 163 | 147 | |||||||||
(16 | ) | Capitalized interest | 1 | 5 | - | 6 | |||||||||||
(17 | ) | Total Other Expense | (31 | ) | (133 | ) | 172 | 8 | |||||||||
(18 | ) | Income (Loss) Before Income Taxes | 114 | (348 | ) | 170 | (64 | ) | |||||||||
(19 | ) | Income taxes (benefits) | 38 | (138 | ) | 91 | (9 | ) | |||||||||
(20 | ) | Net Income (Loss) | 76 | (210 | ) | 79 | (55 | ) | |||||||||
(21 | ) | Loss attributable to noncontrolling interest | - | - | - | - | |||||||||||
(22 | ) | Earnings Available to FirstEnergy Corp. | $ | 76 | $ | (210 | ) | $ | 79 | $ | (55 | ) | |||||
(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 - 3rd Quarter 2010 | 8 |
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Nine Months Ended September 30, 2010 | |||||||||||||||||
Energy | Competitive | Other & | |||||||||||||||
Delivery | Energy | Reconciling | |||||||||||||||
Services (a) | Services (b) | Adjustments (c) | Consolidated | ||||||||||||||
Revenues | |||||||||||||||||
(1 | ) | Electric sales | $ | 7,250 | $ | 2,302 | $ | - | $ | 9,552 | |||||||
(2 | ) | Other | 423 | 151 | (71 | ) | 503 | ||||||||||
(3 | ) | Internal revenues* | 79 | 1,812 | (1,824 | ) | 67 | ||||||||||
(4 | ) | Total Revenues | 7,752 | 4,265 | (1,895 | ) | 10,122 | ||||||||||
Expenses | |||||||||||||||||
(5 | ) | Fuel | - | 1,089 | (5 | ) | 1,084 | ||||||||||
(6 | ) | Purchased power | 4,159 | 1,239 | (1,824 | ) | 3,574 | ||||||||||
(7 | ) | Other operating expenses | 1,154 | 1,031 | (73 | ) | 2,112 | ||||||||||
(8 | ) | Provision for depreciation | 339 | 194 | 32 | 565 | |||||||||||
(9 | ) | Amortization of regulatory assets | 549 | - | - | 549 | |||||||||||
(10 | ) | General taxes | 481 | 86 | 20 | 587 | |||||||||||
(11 | ) | Impairment of long-lived assets | - | 294 | - | 294 | |||||||||||
(12 | ) | Total Expenses | 6,682 | 3,933 | (1,850 | ) | 8,765 | ||||||||||
(13 | ) | Operating Income | 1,070 | 332 | (45 | ) | 1,357 | ||||||||||
Other Income (Expense) | |||||||||||||||||
(14 | ) | Investment income (loss) | 75 | 42 | (24 | ) | 93 | ||||||||||
(15 | ) | Interest expense | (373 | ) | (161 | ) | (94 | ) | (628 | ) | |||||||
(16 | ) | Capitalized interest | 4 | 67 | 51 | 122 | |||||||||||
(17 | ) | Total Other Expense | (294 | ) | (52 | ) | (67 | ) | (413 | ) | |||||||
(18 | ) | Income Before Income Taxes | 776 | 280 | (112 | ) | 944 | ||||||||||
(19 | ) | Income taxes | 295 | 106 | (37 | ) | 364 | ||||||||||
(20 | ) | Net Income | 481 | 174 | (75 | ) | 580 | ||||||||||
(21 | ) | Loss attributable to noncontrolling interest | - | - | (19 | ) | (19 | ) | |||||||||
(22 | ) | Earnings Available to FirstEnergy Corp. | $ | 481 | $ | 174 | $ | (56 | ) | $ | 599 | ||||||
* | Under the accounting standard for the effects of certain types of regulation, internal revenues are not fully offset for sale of | ||||||||||||||||
Renewable Energy Credits by FES to the Ohio Companies that are retained in inventory. | |||||||||||||||||
(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 - 3rd Quarter 2010 | 9 |
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Nine Months Ended September 30, 2009 | |||||||||||||||||
Energy | Competitive | Other & | |||||||||||||||
Delivery | Energy | Reconciling | |||||||||||||||
Services (a) | Services (b) | Adjustments (c) | Consolidated | ||||||||||||||
Revenues | |||||||||||||||||
(1 | ) | Electric sales | $ | 8,322 | $ | 929 | $ | - | $ | 9,251 | |||||||
(2 | ) | Other | 433 | 400 | (71 | ) | 762 | ||||||||||
(3 | ) | Internal revenues | - | 2,349 | (2,349 | ) | - | ||||||||||
(4 | ) | Total Revenues | 8,755 | 3,678 | (2,420 | ) | �� | 10,013 | |||||||||
Expenses | |||||||||||||||||
(5 | ) | Fuel | - | 890 | - | 890 | |||||||||||
(6 | ) | Purchased power | 5,278 | 551 | (2,349 | ) | 3,480 | ||||||||||
(7 | ) | Other operating expenses | 1,191 | 1,001 | (89 | ) | 2,103 | ||||||||||
(8 | ) | Provision for depreciation | 331 | 201 | 18 | 550 | |||||||||||
(9 | ) | Amortization of regulatory assets | 903 | - | - | 903 | |||||||||||
(10 | ) | Deferral of new regulatory assets | (136 | ) | - | - | (136 | ) | |||||||||
(11 | ) | General taxes | 486 | 84 | 17 | 587 | |||||||||||
(12 | ) | Total Expenses | 8,053 | 2,727 | (2,403 | ) | 8,377 | ||||||||||
(13 | ) | Operating Income | 702 | 951 | (17 | ) | 1,636 | ||||||||||
Other Income (Expense) | |||||||||||||||||
(14 | ) | Investment income | 111 | 136 | (40 | ) | 207 | ||||||||||
(15 | ) | Interest expense | (341 | ) | (106 | ) | (308 | ) | (755 | ) | |||||||
(16 | ) | Capitalized interest | 3 | 42 | 51 | 96 | |||||||||||
(17 | ) | Total Other Income (Expense) | (227 | ) | 72 | (297 | ) | (452 | ) | ||||||||
(18 | ) | Income Before Income Taxes | 475 | 1,023 | (314 | ) | 1,184 | ||||||||||
(19 | ) | Income taxes | 190 | 409 | (169 | ) | 430 | ||||||||||
(20 | ) | Net Income | 285 | 614 | (145 | ) | 754 | ||||||||||
(21 | ) | Loss attributable to noncontrolling interest | - | - | (14 | ) | (14 | ) | |||||||||
(22 | ) | Earnings Available to FirstEnergy Corp. | $ | 285 | $ | 614 | $ | (131 | ) | $ | 768 | ||||||
(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 - 3rd Quarter 2010 | 10 |
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Nine Months Ended Sep. 30, 2010 vs. Nine Months Ended Sep. 30, 2009 | |||||||||||||||||
Energy | Competitive | Other & | |||||||||||||||
Delivery | Energy | Reconciling | |||||||||||||||
Services (a) | Services (b) | Adjustments (c) | Consolidated | ||||||||||||||
Revenues | |||||||||||||||||
(1 | ) | Electric sales | $ | (1,072 | ) | $ | 1,373 | $ | - | $ | 301 | ||||||
(2 | ) | Other | (10 | ) | (249 | ) | - | (259 | ) | ||||||||
(3 | ) | Internal revenues* | 79 | (537 | ) | 525 | 67 | ||||||||||
(4 | ) | Total Revenues | (1,003 | ) | 587 | 525 | 109 | ||||||||||
Expenses | |||||||||||||||||
(5 | ) | Fuel | - | 199 | (5 | ) | 194 | ||||||||||
(6 | ) | Purchased power | (1,119 | ) | 688 | 525 | 94 | ||||||||||
(7 | ) | Other operating expenses | (37 | ) | 30 | 16 | 9 | ||||||||||
(8 | ) | Provision for depreciation | 8 | (7 | ) | 14 | 15 | ||||||||||
(9 | ) | Amortization of regulatory assets | (354 | ) | - | - | (354 | ) | |||||||||
(10 | ) | Deferral of new regulatory assets | 136 | - | - | 136 | |||||||||||
(11 | ) | General taxes | (5 | ) | 2 | 3 | - | ||||||||||
(12 | ) | Impairment of long-lived assets | - | 294 | - | 294 | |||||||||||
(13 | ) | Total Expenses | (1,371 | ) | 1,206 | 553 | 388 | ||||||||||
(14 | ) | Operating Income (Loss) | 368 | (619 | ) | (28 | ) | (279 | ) | ||||||||
Other Income (Expense) | |||||||||||||||||
(15 | ) | Investment loss | (36 | ) | (94 | ) | 16 | (114 | ) | ||||||||
(16 | ) | Interest expense | (32 | ) | (55 | ) | 214 | 127 | |||||||||
(17 | ) | Capitalized interest | 1 | 25 | - | 26 | |||||||||||
(18 | ) | Total Other Expense | (67 | ) | (124 | ) | 230 | 39 | |||||||||
(19 | ) | Income (Loss) Before Income Taxes | 301 | (743 | ) | 202 | (240 | ) | |||||||||
(20 | ) | Income taxes (benefits) | 105 | (303 | ) | 132 | (66 | ) | |||||||||
(21 | ) | Net Income (Loss) | 196 | (440 | ) | 70 | (174 | ) | |||||||||
(22 | ) | Loss attributable to noncontrolling interest | - | - | (5 | ) | (5 | ) | |||||||||
(23 | ) | Earnings Available to FirstEnergy Corp. | $ | 196 | $ | (440 | ) | $ | 75 | $ | (169 | ) | |||||
* | Under the accounting standard for the effects of certain types of regulation, internal revenues are not fully offset for sale of | ||||||||||||||||
Renewable Energy Credits by FES to the Ohio Companies that are retained in inventory. | |||||||||||||||||
(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 - 3rd Quarter 2010 | 11 |
FirstEnergy Corp.
Financial Statements
(In millions)
Condensed Consolidated Balance Sheets | |||||||
As of | As of | ||||||
Assets | Sep. 30, 2010 | Dec. 31, 2009 | |||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 632 | $ | 874 | |||
Receivables | 1,564 | 1,397 | |||||
Other | 1,195 | 1,049 | |||||
Total Current Assets | 3,391 | 3,320 | |||||
Property, Plant and Equipment | 19,538 | 19,164 | |||||
Investments | 3,015 | 3,023 | |||||
Deferred Charges and Other Assets | 8,763 | 8,797 | |||||
Total Assets | $ | 34,707 | $ | 34,304 | |||
Liabilities and Capitalization | |||||||
Current Liabilities: | |||||||
Currently payable long-term debt | $ | 1,590 | $ | 1,834 | |||
Short-term borrowings | 1,000 | 1,181 | |||||
Accounts payable | 813 | 829 | |||||
Other | 1,569 | 1,444 | |||||
Total Current Liabilities | 4,972 | 5,288 | |||||
Capitalization: | |||||||
Total equity | 8,691 | 8,557 | |||||
Long-term debt and other long-term obligations | 12,104 | 11,908 | |||||
Total Capitalization | 20,795 | 20,465 | |||||
Noncurrent Liabilities | 8,940 | 8,551 | |||||
Total Liabilities and Capitalization | $ | 34,707 | $ | 34,304 | |||
General Information | |||||||||||||||
Three Months Ended Sep. 30 | Nine Months Ended Sep. 30 | ||||||||||||||
2010 | 2009 | 2010 | 2009 | ||||||||||||
Debt redemptions | $ | (15 | ) | $ | (1,332 | ) | $ | (422 | ) | $ | (2,213 | ) | |||
New long-term debt issues | $ | 251 | $ | 2,472 | $ | 251 | $ | 4,151 | |||||||
Short-term borrowings decrease | $ | (452 | ) | $ | (764 | ) | $ | (171 | ) | $ | (764 | ) | |||
Property additions | $ | (470 | ) | $ | (432 | ) | $ | (1,467 | ) | $ | (1,575 | ) | |||
Adjusted Capitalization | |||||||||||||||
As of September 30 | As of December 31 | ||||||||||||||
2010 | % Total | 2009 | % Total | ||||||||||||
Total equity* | $ | 8,691 | 36 | % | $ | 8,557 | 36 | % | |||||||
Long-term debt and other long-term obligations | 12,104 | 51 | % | 11,908 | 50 | % | |||||||||
Currently payable long-term debt | 1,590 | 7 | % | 1,834 | 8 | % | |||||||||
Short-term borrowings | 1,000 | 4 | % | 1,181 | 5 | % | |||||||||
Adjustments: | |||||||||||||||
Sale-leaseback net debt equivalents | 1,395 | 6 | % | 1,391 | 6 | % | |||||||||
JCP&L securitization debt and cash | (924 | ) | -4 | % | (1,189 | ) | -5 | % | |||||||
Total | $ | 23,856 | 100 | % | $ | 23,682 | 100 | % | |||||||
*Includes $(1,350) million and $(1,415) million, respectively, of Accumulated Other Comprehensive Loss | |||||||||||||||
Consolidated Report to the Financial Community - 3rd Quarter 2010 | 12 |
FirstEnergy Corp.
Financial Statements
(In millions)
Condensed Consolidated Statements of Cash Flows | |||||||||||||||
Three Months Ended Sep. 30 | Nine Months Ended Sep. 30 | ||||||||||||||
2010 | 2009 | 2010 | 2009 | ||||||||||||
Cash flows from operating activities | |||||||||||||||
Net income | $ | 175 | $ | 230 | $ | 580 | $ | 754 | |||||||
Adjustments to reconcile net income to net cash from operating activities: | |||||||||||||||
Depreciation, amortization, and deferral of regulatory assets | 358 | 449 | 1,114 | 1,317 | |||||||||||
Deferred purchased power and other costs | (46 | ) | (100 | ) | (192 | ) | (235 | ) | |||||||
Deferred income taxes and investment tax credits | 100 | 352 | 259 | 421 | |||||||||||
Deferred rents and lease market valuation liability | 41 | 39 | (21 | ) | (20 | ) | |||||||||
Cash collateral received (paid), net | 9 | (133 | ) | (54 | ) | (85 | ) | ||||||||
Commodity derivative transactions, net | (11 | ) | 8 | (40 | ) | 26 | |||||||||
Interest rate swap transactions | 86 | - | 129 | - | |||||||||||
Impairment of long-lived assets | 292 | - | 294 | - | |||||||||||
Pension trust contribution | - | (500 | ) | - | (500 | ) | |||||||||
Change in working capital and other | 211 | 17 | 4 | (214 | ) | ||||||||||
Cash flows provided from operating activities | 1,215 | 362 | 2,073 | 1,464 | |||||||||||
Cash flows provided from (used for) financing activities | (386 | ) | 191 | (870 | ) | 617 | |||||||||
Cash flows used for investing activities | (478 | ) | (615 | ) | (1,445 | ) | (1,788 | ) | |||||||
Net change in cash and cash equivalents | $ | 351 | $ | (62 | ) | $ | (242 | ) | $ | 293 | |||||
Deferrals and Amortization | Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
2010 | 2009 | Change | 2010 | 2009 | Change | |||||||||||||||||||
Ohio Rate Certainty Plan Amortization (Deferrals) | ||||||||||||||||||||||||
Ohio Transition costs | $ | - | $ | 5 | $ | (5 | ) | $ | - | $ | 70 | $ | (70 | ) | ||||||||||
Shopping incentives & interest | 47 | 26 | 21 | 128 | 228 | (100 | ) | |||||||||||||||||
RCP distribution reliability costs and interest | - | (3 | ) | 3 | - | (14 | ) | 14 | ||||||||||||||||
RCP fuel & interest | (5 | ) | (5 | ) | - | (15 | ) | (19 | ) | 4 | ||||||||||||||
Ohio Amended ESP Amortization (Deferrals) | ||||||||||||||||||||||||
Uncollectible customer accounts | $ | (1 | ) | $ | 5 | $ | (6 | ) | $ | (6 | ) | $ | (2 | ) | $ | (4 | ) | |||||||
Economic development costs & interest | 1 | 19 | (18 | ) | 10 | 25 | (15 | ) | ||||||||||||||||
Generation cost rider true-up & interest | (6 | ) | (21 | ) | 15 | 1 | (12 | ) | 13 | |||||||||||||||
CEI fuel & interest | - | - | - | - | (141 | ) | 141 | |||||||||||||||||
Distribution reliability costs (RDD/NDD) | 14 | 12 | 2 | 84 | 12 | 72 | ||||||||||||||||||
Ohio Transmission Amortization (Deferrals) | ||||||||||||||||||||||||
MISO transmission costs | $ | (16 | ) | $ | 10 | $ | (26 | ) | $ | (37 | ) | $ | 96 | $ | (133 | ) | ||||||||
Ohio Other Amortization (Deferrals) | ||||||||||||||||||||||||
Generation Related Deferrals | $ | 17 | $ | 3 | $ | 14 | $ | (33 | ) | $ | 7 | $ | (40 | ) | ||||||||||
Distribution Related Deferrals | 6 | 7 | (1 | ) | 18 | 25 | (7 | ) | ||||||||||||||||
All Other | 2 | 4 | (2 | ) | 47 | 5 | 42 | |||||||||||||||||
Pennsylvania Amortization (Deferrals) | ||||||||||||||||||||||||
PJM transmission costs | $ | (20 | ) | $ | 61 | $ | (81 | ) | $ | (4 | ) | $ | 92 | $ | (96 | ) | ||||||||
NUG costs | 15 | 23 | (8 | ) | 38 | 64 | (26 | ) | ||||||||||||||||
All Other | 22 | 20 | 2 | 67 | 67 | - | ||||||||||||||||||
New Jersey Amortization (Deferrals) | ||||||||||||||||||||||||
NUG costs | $ | 81 | $ | 72 | $ | 9 | $ | 207 | $ | 198 | $ | 9 | ||||||||||||
All Other | 19 | 23 | (4 | ) | 44 | 66 | (22 | ) | ||||||||||||||||
Total Amortization, net | $ | 176 | $ | 261 | $ | (85 | ) | $ | 549 | $ | 767 | $ | (218 | ) | ||||||||||
Consolidated Report to the Financial Community - 3rd Quarter 2010 | 13 |
FirstEnergy Corp.
Statistical Summary
Electric Sales Statistics (kWh in millions) | ||||||||||||||||||||||||
Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||
Electric Distribution Deliveries | 2010 | 2009 | Change | 2010 | 2009 | Change | ||||||||||||||||||
Ohio | - Residential | 4,991 | 4,083 | 22.2 | % | 13,521 | 12,599 | 7.3 | % | |||||||||||||||
- Commercial | 3,841 | 3,647 | 5.3 | % | 10,927 | 10,695 | 2.2 | % | ||||||||||||||||
- Industrial | 5,476 | 4,813 | 13.8 | % | 15,647 | 13,849 | 13.0 | % | ||||||||||||||||
- Other | 87 | 82 | 6.1 | % | 261 | 262 | -0.4 | % | ||||||||||||||||
Total Ohio | 14,395 | 12,625 | 14.0 | % | 40,356 | 37,405 | 7.9 | % | ||||||||||||||||
Pennsylvania | - Residential | 3,088 | 2,702 | 14.3 | % | 9,046 | 8,637 | 4.7 | % | |||||||||||||||
- Commercial | 2,983 | 2,833 | 5.3 | % | 8,620 | 8,266 | 4.3 | % | ||||||||||||||||
- Industrial | 2,337 | 2,201 | 6.2 | % | 6,906 | 6,480 | 6.6 | % | ||||||||||||||||
- Other | 20 | 20 | 0.0 | % | 62 | 60 | 3.3 | % | ||||||||||||||||
Total Pennsylvania | 8,428 | 7,756 | 8.7 | % | 24,634 | 23,443 | 5.1 | % | ||||||||||||||||
New Jersey | - Residential | 3,254 | 2,727 | 19.3 | % | 7,875 | 7,123 | 10.6 | % | |||||||||||||||
- Commercial | 2,700 | 2,568 | 5.1 | % | 7,268 | 7,060 | 2.9 | % | ||||||||||||||||
- Industrial | 660 | 616 | 7.1 | % | 1,911 | 1,855 | 3.0 | % | ||||||||||||||||
- Other | 23 | 22 | 4.5 | % | 67 | 65 | 3.1 | % | ||||||||||||||||
Total New Jersey | 6,637 | 5,933 | 11.9 | % | 17,121 | 16,103 | 6.3 | % | ||||||||||||||||
Total Residential | 11,333 | 9,512 | 19.1 | % | 30,442 | 28,359 | 7.3 | % | ||||||||||||||||
Total Commercial | 9,524 | 9,048 | 5.3 | % | 26,815 | 26,021 | 3.1 | % | ||||||||||||||||
Total Industrial | 8,473 | 7,630 | 11.0 | % | 24,464 | 22,184 | 10.3 | % | ||||||||||||||||
Total Other | 130 | 124 | 4.8 | % | 390 | 387 | 0.8 | % | ||||||||||||||||
Total Distribution Deliveries | 29,460 | 26,314 | 12.0 | % | 82,111 | 76,951 | 6.7 | % | ||||||||||||||||
Generation Sales - Franchise (kWh in millions) | ||||||||||||||||||||||||||
Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||||
2010 | 2009 | Change | 2010 | 2009 | Change | |||||||||||||||||||||
Ohio | ||||||||||||||||||||||||||
FES | - POLR | 3,665 | 6,231 | -41.2 | % | 11,624 | 25,523 | -54.5 | % | |||||||||||||||||
- Direct | 4,243 | 1,507 | 181.6 | % | 11,485 | 1,507 | 662.1 | % | ||||||||||||||||||
- Aggregation | 3,714 | 435 | 753.8 | % | 9,097 | 435 | 1991.3 | % | ||||||||||||||||||
Subtotal | 11,622 | 8,173 | 42.2 | % | 32,206 | 27,465 | 17.3 | % | ||||||||||||||||||
3rd Party | - POLR | 1,456 | 3,797 | -61.7 | % | 4,638 | 9,273 | -50.0 | % | |||||||||||||||||
- Shopping | 1,317 | 655 | 101.1 | % | 3,512 | 667 | 426.5 | % | ||||||||||||||||||
Subtotal | 2,773 | 4,452 | -37.7 | % | 8,150 | 9,940 | -18.0 | % | ||||||||||||||||||
Total - OH | 14,395 | 12,625 | 14.0 | % | 40,356 | 37,405 | 7.9 | % | ||||||||||||||||||
Pennsylvania | ||||||||||||||||||||||||||
FES | - POLR | 4,366 | 3,811 | 14.6 | % | 12,455 | 11,958 | 4.2 | % | |||||||||||||||||
- Direct | 487 | 420 | 16.0 | % | 1,449 | 1,206 | 20.1 | % | ||||||||||||||||||
Subtotal | 4,853 | 4,231 | 14.7 | % | 13,904 | 13,164 | 5.6 | % | ||||||||||||||||||
3rd Party | - POLR | 3,213 | 3,284 | -2.2 | % | 9,857 | 9,535 | 3.4 | % | |||||||||||||||||
- Shopping | 362 | 241 | 50.2 | % | 873 | 744 | 17.3 | % | ||||||||||||||||||
Subtotal | 3,575 | 3,525 | 1.4 | % | 10,730 | 10,279 | 4.4 | % | ||||||||||||||||||
Total - PA | 8,428 | 7,756 | 8.7 | % | 24,634 | 23,443 | 5.1 | % | ||||||||||||||||||
New Jersey | ||||||||||||||||||||||||||
FES | - Direct | 131 | 77 | 70.1 | % | 335 | 133 | 151.9 | % | |||||||||||||||||
Subtotal | 131 | 77 | 70.1 | % | 335 | 133 | 151.9 | % | ||||||||||||||||||
3rd Party | - POLR | 4,469 | 4,283 | 4.3 | % | 11,426 | 12,026 | -5.0 | % | |||||||||||||||||
- Shopping | 2,037 | 1,573 | 29.5 | % | 5,360 | 3,944 | 35.9 | % | ||||||||||||||||||
Subtotal | 6,506 | 5,856 | 11.1 | % | 16,786 | 15,970 | 5.1 | % | ||||||||||||||||||
Total - NJ | 6,637 | 5,933 | 11.9 | % | 17,121 | 16,103 | 6.3 | % | ||||||||||||||||||
Summary | ||||||||||||||||||||||||||
FES - POLR | 8,031 | 10,042 | -20.0 | % | 24,079 | 37,481 | -35.8 | % | ||||||||||||||||||
FES - Direct | 4,861 | 2,004 | 142.6 | % | 13,269 | 2,846 | 366.2 | % | ||||||||||||||||||
FES - Aggregation | 3,714 | 435 | 753.8 | % | 9,097 | 435 | 1991.3 | % | ||||||||||||||||||
Subtotal | 16,606 | 12,481 | 33.1 | % | 46,445 | 40,762 | 13.9 | % | ||||||||||||||||||
3rd Party Suppliers - POLR | 9,138 | 11,364 | -19.6 | % | 25,921 | 30,834 | -15.9 | % | ||||||||||||||||||
3rd Party Suppliers - Shopping | 3,716 | 2,469 | 50.5 | % | 9,745 | 5,355 | 82.0 | % | ||||||||||||||||||
Subtotal | 12,854 | 13,833 | -7.1 | % | 35,666 | 36,189 | -1.4 | % | ||||||||||||||||||
Total Franchise | 29,460 | 26,314 | 12.0 | % | 82,111 | 76,951 | 6.7 | % | ||||||||||||||||||
Consolidated Report to the Financial Community - 3rd Quarter 2010 | 14 |
FirstEnergy Corp.
Statistical Summary
Summary of Sales, Power Purchases and Generation Output (kWh in millions) | ||||||||||||||||||||
Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||
FES Sales | 2010 | 2009 | Change | 2010 | 2009 | Change | ||||||||||||||
POLR | ||||||||||||||||||||
- OH | 3,665 | 6,231 | (2,566 | ) | 11,624 | 25,523 | (13,899 | ) | ||||||||||||
- PA | 7,707 | 4,206 | 3,501 | 22,665 | 12,353 | 10,312 | ||||||||||||||
- PA (ME/PN 3rd Party Contract) | (2,763 | ) | - | (2,763 | ) | (8,309 | ) | - | (8,309 | ) | ||||||||||
Total POLR | 8,609 | 10,437 | (1,828 | ) | 25,980 | 37,876 | (11,896 | ) | ||||||||||||
Direct | ||||||||||||||||||||
- OH | 5,174 | 1,535 | 3,639 | 13,549 | 1,541 | 12,008 | ||||||||||||||
- PA | 1,157 | 940 | 217 | 3,265 | 2,657 | 608 | ||||||||||||||
- NJ | 382 | 236 | 146 | 1,016 | 361 | 655 | ||||||||||||||
- MI | 438 | 2 | 436 | 1,126 | 11 | 1,115 | ||||||||||||||
- IL | 611 | 290 | 321 | 1,601 | 537 | 1,064 | ||||||||||||||
- MD | 81 | 62 | 19 | 208 | 123 | 85 | ||||||||||||||
Total Direct | 7,843 | 3,065 | 4,778 | 20,765 | 5,230 | 15,535 | ||||||||||||||
Aggregation | ||||||||||||||||||||
- OH | 3,765 | 435 | 3,330 | 9,150 | 435 | 8,715 | ||||||||||||||
Total Aggregation | 3,765 | 435 | 3,330 | 9,150 | 435 | 8,715 | ||||||||||||||
Total FES Sales | 20,217 | 13,937 | 6,280 | 55,895 | 43,541 | 12,354 | ||||||||||||||
Wholesale Sales | ||||||||||||||||||||
MISO | 1,992 | 3,620 | (1,628 | ) | 3,949 | 8,604 | (4,655 | ) | ||||||||||||
PJM | 843 | 207 | 636 | 1,451 | 1,149 | 302 | ||||||||||||||
Total Wholesale Sales | 2,835 | 3,827 | (992 | ) | 5,400 | 9,753 | (4,353 | ) | ||||||||||||
Purchased Power | ||||||||||||||||||||
MISO | 281 | - | 281 | 1,142 | 1,407 | (265 | ) | |||||||||||||
PJM | 3,376 | 1,507 | 1,869 | 7,907 | 4,781 | 3,126 | ||||||||||||||
Total Purchased Power | 3,657 | 1,507 | 2,150 | 9,049 | 6,188 | 2,861 | ||||||||||||||
Generation Output | ||||||||||||||||||||
Fossil | 12,181 | 8,793 | 3,388 | 33,005 | 28,156 | 4,849 | ||||||||||||||
Nuclear | 8,670 | 8,699 | (29 | ) | 22,876 | 22,055 | 821 | |||||||||||||
Total Generation Output | 20,851 | 17,492 | 3,359 | 55,881 | 50,211 | 5,670 | ||||||||||||||
Operating Statistics | Three Months Ended Sep. 30 | Nine Months Ended Sept. 30 | ||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Capacity Factors: | ||||||||||||||||
Nuclear | 98% | 99% | 87% | 84% | ||||||||||||
Fossil - Baseload | 83% | 72% | 72% | 74% | ||||||||||||
Fossil - Load Following | 55% | 23% | 57% | 31% | ||||||||||||
Generation Output: | ||||||||||||||||
Nuclear | 42% | 51% | 42% | 45% | ||||||||||||
Fossil - Baseload | 39% | 41% | 38% | 43% | ||||||||||||
Fossil - Load Following | 18% | 9% | 21% | 12% | ||||||||||||
Peaking | 1% | 0% | 0% | 0% | ||||||||||||
Three Months Ended Sep. 30 | Nine Months Ended Sep. 30 | |||||||||||||||
2010 | 2009 | Normal | 2010 | 2009 | Normal | |||||||||||
Composite Heating-Degree-Days | 51 | 70 | 90 | 3,240 | 3,630 | 3,614 | ||||||||||
Composite Cooling-Degree-Days | 862 | 538 | 649 | 1,242 | 734 | 885 | ||||||||||
Consolidated Report to the Financial Community - 3rd Quarter 2010 | 15 |
FirstEnergy Corp.
Special Items, EPS Reconciliations and Liquidity
(In millions, except for per share amounts)
Special Items | ||||||||||||||||||||
Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||||||
Pre-tax Items - Income Increase (Decrease) | ||||||||||||||||||||
Regulatory charges (a) | $ | (12 | ) | $ | (2 | ) | $ | (52 | ) | $ | (263 | ) | ||||||||
Trust securities impairment (b) | (2 | ) | 17 | (21 | ) | (22 | ) | |||||||||||||
Organizational restructuring/strike costs (c) | - | (37 | ) | - | (67 | ) | ||||||||||||||
Lake plant charges (d) | (292 | ) | - | (292 | ) | - | ||||||||||||||
Non-core asset sales/impairments (d) | - | - | (9 | ) | 254 | |||||||||||||||
Merger transaction costs (c) | (15 | ) | - | (36 | ) | - | ||||||||||||||
Litigation settlement (c) | - | - | 7 | - | ||||||||||||||||
Derivative mark-to-market adjustment (e) | (13 | ) | - | (30 | ) | - | ||||||||||||||
Debt redemption premium/hedge write-off (f) | - | (139 | ) | - | (142 | ) | ||||||||||||||
Total-Pretax Items | $ | (334 | ) | $ | (161 | ) | $ | (433 | ) | $ | (240 | ) | ||||||||
Income tax charge/Income tax resolution | $ | - | $ | - | $ | (13 | ) | $ | 13 | |||||||||||
EPS Effect | $ | (0.69 | ) | $ | (0.34 | ) | $ | (0.95 | ) | $ | (0.48 | ) | ||||||||
(a) | For YTD 2010, $35 million included in "Amortization of regulatory assets"; $17 million included in "Other operating expenses". For YTD 2009, $216 million included in "Amortization of regulatory assets"; $37 million included in "Other operating expenses"; $10 million included in "Purchased Power" | (d) | For YTD 2010, $294 million included in "Impairment of long-lived assets"; $7 million included in "Depreciation". For YTD 2009, included in "Revenues - Unregulated businesses" | |||||||||||||||||
(b) | Included in "Investment income" | (e) | For YTD 2010 $43 million included in "Purchased power"; $(13) million included in "Revenues - Unregulated businesses". | |||||||||||||||||
(c) | For YTD 2010 included in "Other operating expenses". For YTD 2009, $65 million included in "Other operating expenses"; $2 million included in "General taxes". | (f) | Included in "Interest expense" | |||||||||||||||||
2010 Earnings Per Share (EPS) | |||||||||||||||||||||
(Reconciliation of GAAP to Non-GAAP) | |||||||||||||||||||||
Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2010 Guidance | |||||||||||||||||
Basic EPS (GAAP basis) | $ | 0.59 | $ | 0.77 | $ | 1.97 | $ | 2.52 | $ | 2.62 - $2.72 | |||||||||||
Excluding Special Items: | |||||||||||||||||||||
Regulatory charges | 0.02 | - | 0.11 | 0.56 | 0.11 | ||||||||||||||||
Trust securities impairment | - | (0.03 | ) | 0.04 | 0.04 | 0.04 | |||||||||||||||
Organizational restructuring/strike costs | - | 0.07 | - | 0.14 | - | ||||||||||||||||
Debt redemption premiums | - | 0.30 | - | 0.30 | - | ||||||||||||||||
Income tax resolution | - | - | - | (0.04 | ) | - | |||||||||||||||
Income tax charge - retiree drug change | - | - | 0.04 | - | 0.04 | ||||||||||||||||
Merger transaction costs | 0.04 | - | 0.09 | - | 0.12 | ||||||||||||||||
Litigation settlement | - | - | (0.01 | ) | - | (0.01) | |||||||||||||||
Non-core asset sales/impairments | - | - | 0.02 | (0.52 | ) | 0.02 | |||||||||||||||
Lake plant charges | 0.60 | - | 0.60 | - | 0.60 | ||||||||||||||||
Derivative mark-to-market adjustment | 0.03 | - | 0.06 | - | 0.06 | ||||||||||||||||
Basic EPS (Non-GAAP basis) | $ | 1.28 | $ | 1.11 | $ | 2.92 | $ | 3.00 | $ | 3.60 - $3.70 | |||||||||||
Liquidity position as of October 22, 2010 | ||||||
Company | Type | Maturity | Amount (M) | Available (M) | ||
FirstEnergy(1) | Revolving | Aug. 2012 | $2,750 | $1,650 | ||
FirstEnergy Solutions | Term Loan | Mar. 2011 | 100 | - | ||
OH & PA Utilities | Receivables Financing | Various(2) | 395 | 245 | ||
(1) FirstEnergy Corp. and subsidiary borrowers | Subtotal: | $3,245 | $1,895 | |||
(2) OH - $250M matures March 30, 2011; PA $145M matures December 17, 2010 | Cash: | - | 911 | |||
Total: | $3,245 | $2,806 | ||||
Consolidated Report to the Financial Community - 3rd Quarter 2010 | 16 |
2011 Earnings Drivers
These items represent a high-level summary of selected items that are expected to impact FirstEnergy earnings in 2011. These estimates are presented on a pre-tax basis. These items are not intended to provide earnings guidance, are not all-inclusive of potential 2011 earnings drivers, and are subject to change.
Estimated Impact | ||
($ millions) positive variance = favorable, negative variance = unfavorable | ||
Competitive Operations | ||
Retail Sales | ||
2010 ME/PN Partial Requirements Agreement revenues (28.8M MWH) less third party purchases in PJM (20.3M MWH) | ($370 - $380) | |
All other retail sales revenues (Direct Sales, Governmental Aggregation and POLR) | $600 - $660 | |
Fuel and Purchased Power Increase in other purchased power expenses offset by reduced fuel expenses, primarily related to reduced generation output and Signal Peak margin | $170 - $135 | |
Net RTO Related Items Net ancillary, congestion, capacity revenues and expenses | ($185 - $200) | |
Retail Related Expenses Expenses associated with execution of our retail strategy | ($15 - $20) | |
Planned Outages | ||
Includes additional planned nuclear outage in 2011 due to acceleration of Davis-Besse reactor head replacement | ($35 – $40) | |
Depreciation AQC assets placed in service increase depreciation, partially offset by Lake Plants' impairment effect | ($30 – $35) | |
Regulated Operations | ||
Distribution Deliveries Distribution deliveries are expected to be 107.4 M MWH in 2011 | ($15) - $15 | |
Corporate/Finance | ||
O&M Non-fuel, non-outage O&M expenses including employee benefits expected to be flat in 2011 compared to 2010 | Flat | |
Capitalized Interest Completion of AQC project | ($80 – $90) | |
Consolidated Report to the Financial Community - 3rd Quarter 2010 | 17 |
2011 Capital Expenditures
($ millions) | 2010F* | 2011F** |
Base Capital: | ||
FE Utilities | $722 | $620 |
FE Generation | 907 | 550 |
Corporate | 58 | 50 |
Subtotal | $1,687 | $1,220 |
Mandatory Projects: | ||
Transmission - RTEP | $63 | $100 |
Energy Efficiency | 5 | 10 |
Subtotal | $68 | $110 |
Accelerated Timeline: | ||
Davis-Besse Reactor Head Replacement | $23 | $90 |
Subtotal | $23 | $90 |
$1,778 | $1,420 |
*As of September 30, 2010
**Capital Expenditures are estimated and subject to review and approval by FirstEnergy Board of Directors
2011 Cash Flow
($ millions) | Consolidated |
Cash Flow Forecast | 2011F* |
Operating Cash Flow (GAAP) | $2,760 - $2,860 |
Less: Capital Expenditures | (1,420) |
Less: Nuclear Fuel | (170) |
Less: Common Dividends** | (670) |
Free Cash Flow (Non- GAAP) | $500 - $600 |
*As of September 30, 2010
** Dividends declared from time to time on FirstEnergy’s common stock during any annual period may in aggregate vary from the indicated amount due to circumstances considered by FirstEnergy’s Board of Directors at the time of the actual declarations
2010 and 2011 Retail Sales
($ millions) | |
2011 Retail Sales | 2010 Retail Sales |
Contracted Sales | Contracted Sales |
Direct -- 27.2 M MWH | Direct -- 27.7 M MWH |
Gov Agg. -- 9.5 M MWH | Gov Agg. -- 12.4 M MWH |
POLR -- 16.9 M MWH | POLR -- 18.3 M MWH |
Total of 53.6 M MWH contracted @ $60.54 | PRA -- 28.8 M MWH |
Sales Not Contracted | Total of 87.2 M MWH contracted @ $55.72 |
Direct -- 7.5 M MWH | |
Gov Agg. -- 5.5 M MWH | |
POLR -- 4.6 M MWH | |
Total of 17.6 M MWH not contracted at estimated | |
fixed prices ranging from $52 to $65/MWH | |
Consolidated Report to the Financial Community - 3rd Quarter 2010 | 18 |
FirstEnergy Solutions
2010 Sources & Uses of Power
2010F Uses | Retail – Franchise | Retail – Non Franchise | Wholesale & | |||
(M MWH) | MISO | PJM | MISO | PJM | Balancing | Total |
Direct | 17.0 | 0.1 | 5.9 | 4.8 | 27.8 | |
Aggregation | 12.7 | 0.1 | 12.8 | |||
POLR / PRA | 15.8 | 28.8 | 2.5 | 47.1 | ||
Wholesale | 9.5 (1) | 9.5 | ||||
Total Uses | 45.5 | 28.9 | 6.0 | 7.3 | 9.5 | 97.2 |
2010F Sources | Retail – Franchise | Retail – Non Franchise | Wholesale & | |||
MISO | PJM | MISO | PJM | Balancing | Total | |
Generation | 45.5 | 15.9 | 6.0 | - | 7.2 (1)(2) | 74.6 |
Purchases | 13.0 | 7.3 | 4.7 | 25.0 | ||
Total Sources | 45.5 | 28.9 | 6.0 | 7.3 | 11.9 | 99.6 |
(1) | Portfolio balancing sales and purchases; excludes MTM contracts in MISO |
(2) | Supply of distribution line losses and Seneca pumping |
As of October 20, 2010
2011 Sources & Uses of Power
2011F Uses | Retail – Franchise | Retail – Non Franchise | Wholesale & | |||
(M MWH) | MISO | PJM | MISO | PJM | Balancing | Total |
Direct | 7.9 | 14.3 | 6.3 | 6.2 | 34.7 | |
Aggregation | 5.6 | 8.4 | 0.4 | 0.6 | 15.0 | |
POLR / PRA | 5.4 | 9.2 | - | 6.9 | 21.5 | |
Wholesale | 7.5 (1) | 9.7 | ||||
Total Uses | 18.9 | 31.9 | 6.7 | 13.7 | 7.5 | 78.7 |
2011F Sources | Retail – Franchise | Retail – Non Franchise | Wholesale & | |||
MISO | PJM | MISO | PJM | Balancing | Total | |
Generation | 18.9 | 31.9 | 3.3 | 13.7 | 2.4 (1)(2) | 70.2 |
Purchases | 3.4 | 8.7 | 12.1 | |||
Total Sources | 18.9 | 31.9 | 6.7 | 13.7 | 11.1 | 82.3 |
(1) | Portfolio balancing sales and purchases; excludes MTM contracts in MISO |
(2) | Supply of distribution line losses and Seneca pumping |
As of October 20, 2010
Consolidated Report to the Financial Community - 3rd Quarter 2010 | 19 |
Recent Developments
Merger Matters
Federal Energy Regulatory Commission (FERC)
On May 11, 2010, FirstEnergy (FE) and Allegheny Energy (AYE) filed an application with FERC for approval of their proposed merger. Under the Federal Power Act, FERC has 180 days to rule on a completed merger application. FE and AYE submitted additional information regarding the merger application on June 21, 2010 in response to a request by FERC. Interventions and protests were filed with FERC on July 12, 2010. On July 27, 2010, FE filed additional information with FERC in response to the interventions. FERC is expected to complete its review in sufficient time to meet the anticipated merger closing schedule in the first half of 2011.
Hart-Scott-Rodino (HSR) Act Filings
On May 25, 2010, FE and AYE made HSR filings with the Department of Justice (DOJ) and Federal Trade Commission. On June 24, 2010, FE and AYE each received a request for additional information from the DOJ. FE and AYE continue to cooperate with the DOJ and expect the DOJ to complete its review in sufficient time to meet the anticipated merger closing schedule.
State Regulatory Filings
On September 9, 2010, the Virginia State Corporation Commission (SCC) approved a petition for the FirstEnergy-Allegheny Energy merger. FE and AYE filed their initial merger applications with the SCC on June 4, 2010.
Shareholder Vote
Both FE’s and AYE’s special shareholder meetings were held on September 14, 2010. FE shareholders approved the issuance of shares of FE common stock in the merger and the other transactions contemplated by the merger agreement and approved the amendment of the articles of incorporation to increase the authorized number of shares of common stock. The total votes cast at the FE special meeting represented approximately 80% of FE’s outstanding shares of common stock, of which 97% voted in favor of the proposals. AYE shareholders approved the merger at their special shareholder meeting. The total votes represented 80% of AYE’s outstanding shares, of which 99% voted in favor of the merger.
Pennsylvania Settlement
On October 25, 2010, FE and AYE filed a comprehensive settlement with the Pennsylvania Public Utility Commission (PPUC) that addresses issues raised by 18 of the parties to the merger. The filing includes additional commitments related to employment levels, including a five-year commitment to maintain at least 800 jobs in Greensburg and Westmoreland County for the first year after the merger close, 675 jobs for the following 12 months, 650 jobs for the next year and 600 jobs for each of the next two years. The settlement also provides nearly $11 million in distribution rate credits for West Penn Power customers, a distribution rate freeze for FE's current Pennsylvania utility customers and support for renewable and sustainable energy and customer choice. The settlement is subject to approval by the PPUC, and does not resolve issues raised by parties who did not join in the settlement.
Financial Matters
Dividend
On July 20, 2010, the Board of Directors (BOD) of FE declared an unchanged quarterly dividend of 55 cents per share of outstanding common stock. The dividend was paid September 1, 2010, to shareholders of record as of August 6, 2010.
On September 21, 2010, the FE BOD declared an unchanged quarterly dividend of 55 cents per share of outstanding common stock. The dividend is payable December 1, 2010, to shareholders of record as of November 5, 2010.
Consolidated Report to the Financial Community - 3rd Quarter 2010 | 20 |
Financing Activities
On August 20, 2010, FES completed the remarketing of $250 million of Pollution Control Revenue Bonds (PCRBs). Of the $250 million, $235 million of PCRBs were successfully converted from a variable interest rate to a fixed interest rate. The interest rate conversion minimizes financial risk by converting the long-term debt into a fixed rate and, as a result, reducing exposure to variable interest rates over the short-term. The remaining $15 million of PCRBs continue at a fixed interest rate mode. The $235 million series now bear a per-annum rate of 2.25% and are subject to mandatory purchase on June 3, 2013. The $15 million now bear a per-annum rate of 1.5% and are subject to mandatory purchase on June 1, 2011.
On October 1, 2010, FES completed the refinancing and remarketing of six series of PCRBs totaling $313 million. These series were converted from a variable interest rate to a fixed interest rate of 3.375% per-annum and are subject to mandatory purchase on July 1, 2015.
On October 22, 2010, Signal Peak Energy and Global Rail Group completed a $350 million Senior Secured Term Loan Facility. The two-year loan is guaranteed by FE and affiliates of the Boich companies. The proceeds from the loan were used to repay bank borrowings and debt owed to FE with the balance to be used for other general purposes.
Regulatory Matters
Ohio Electric Security Plan (ESP)
On August 25, 2010, the Public Utilities Commission of Ohio (PUCO) adopted a Combined Stipulation in the second ESP for Ohio Edison Company, Cleveland Electric Illuminating Company and The Toledo Edison Company (Ohio Utilities) effective June 1, 2011 through May 31, 2014. Under the ESP, among other provisions, the Ohio Utilities will have no overall increase to base distribution rates during the plan period. Generation rates for the annual delivery periods during the plan will be determined through a competitive bid process (CBP) which will be conducted every October and January for generation service through May 31, 2014. The ESP also establishes a Delivery Capital Recovery Rider effective January 1, 2012, through May 31, 2014, provides for recovery of Midwest ISO (MISO) transmission expansion planning charges, and a commitment that c ustomers will not pay certain costs related to transmission projects approved by PJM for the longer of a five-year period from June 1, 2011 through May 31, 2016 or when the amount of cost avoided by customers for certain types of products total $360 million (dependent on the outcome of certain PJM proceedings) for projects approved prior to June 2011.
Ohio Generation Auction
On October 20, 2010, the Ohio Utilities conducted the first in a series of auctions to procure generation for customers who choose not to shop with an alternative supplier for delivery beginning June 1, 2011 through May 31, 2014. The auction consisted of one, two and three-year products. Fifty tranches in total were acquired through this auction. Seventeen tranches of the one-year product were acquired at a clearing price of $54.55 per MWh; seventeen tranches of the two-year product were acquired at a clearing price of $54.10 per MWh; and sixteen tranches of the three-year product were acquired at a clearing price of $56.58 per MWh. There were ten registered bidders that participated in the auction, with four bidders winning tranches in the auction. FES participated and was the winning bidder for ten tranches of the one-year product; seven tranches of the two-year product; and three tranches of the three-year product. The auction consisted of twelve rounds. On October 22, 2010, the PUCO accepted the results of the auction. The next auction is scheduled for January 2011.
Significantly Excessive Earnings Test (SEET)
As required by the PUCO for all electric utilities in the state, the Ohio Utilities filed a SEET application on September 1, 2010. The application requested that the PUCO determine that there were no significantly excessive earnings in 2009. On September 22, 2010 the PUCO issued the procedural schedule with the hearing set to commence on November 3, 2010.
Consolidated Report to the Financial Community - 3rd Quarter 2010 | 21 |
Met-Ed and Penelec Default Service Plan
On October 20, 2010, the PPUC approved the results of the final of four auctions held to procure the default service requirements for Met-Ed and Penelec customers who choose not to shop with an alternative supplier. For the five-month period of January 1, 2011 to May 31, 2011, the tranche-weighted average prices ($/MWh) for Met-Ed’s residential and commercial classes were $67.10 and $68.28, respectively; Penelec’s tranche-weighted average prices were $55.76 and $58.24 for its residential and commercial classes, respectively. The October 2010 auction is the second of four auctions to procure commercial default service requirements for the 12-month period of June 1, 2011 to May 31, 2012 and residential requirements for the 24-month period of June 1, 2011 to May 31, 2013. For Met-Ed and Penelec comm ercial customers the tranche-weighted average price ($/MWh) was $63.97 and $54.33, respectively, and for residential customers the tranche-weighted average price was $66.66 and $55.74, respectively. In addition, the October 2010 auction procured supply for Met-Ed and Penelec industrial customers opting in to Fixed Price Service. For Met-Ed and Penelec, the average 12-month price ($/MWh) was $95.00 and $83.73, respectively. The remaining two auctions for these products will be conducted in January 2011 and March 2011.
On October 20, 2010, the PPUC also approved the default service Request For Proposal for the Residential Fixed Block On-Peak and Off-Peak energy products. For Penelec, the average price ($/MWh) for On-Peak and Off-Peak was $47.25 and $38.62, respectively. For Met-Ed, the average price ($/MWh) for On-Peak and Off-Peak was $55.07 and $40.81, respectively.
Department of Energy (DOE) Smart Grid Grants
On June 3, 2010, FE and the DOE signed grants totaling $57.4 million that were awarded as part of the American Recovery and Reinvestment Act to introduce smart grid technologies in targeted areas in Pennsylvania, Ohio, and New Jersey. The DOE grants represent 50% of the funding for approximately $115 million FE plans to invest in smart grid technologies. The PPUC and the State of New Jersey Board of Public Utilities previously approved recovery for the remaining portion of smart grid costs, and FE has begun implementing smart grid programs in Pennsylvania and New Jersey. The PUCO issued an order on June 30, 2010, approving FE’s smart grid program, but FE delayed implementation of the Ohio Smart Grid pilot program until there was more certainty regarding cost recovery for the portion of the costs not covered by the gran t. On August 25, 2010 the PUCO approved cost recovery for the Ohio program as part of the ESP.
Pennsylvania Power Company (Penn Power) Default Service Plan
On July 23, 2010, Penn Power filed a settlement for approval of its Default Service Plan for the period of June 1, 2011 through May 31, 2013. The application was initially filed with the PPUC in February of 2010. On October 21, 2010, the PPUC adopted a motion to approve the settlement.
Operational Matters
Plant Operational Changes
On August 12, 2010, FirstEnergy Generation Corp. (FGCO) announced that it would be making operational changes to some of its smaller coal-fired units in response to the continued slow economy, the lower demand for electricity and uncertainty related to proposed new federal environmental regulations. The units affected are Bay Shore units 2-4, Eastlake units 1-4, the Lake Shore Plant, and the Ashtabula Plant, which total 1,620 MW of capacity; in 2009 they produced approximately 6.8% of FGCO’s total generation output. From September 2010 through August 2011, the affected units will operate with minimum three-day notice and in response to consumer demand. Beginning in September 2011, the Bay Shore and Eastlake units (1,131 MW) will only be available during summer and winter months, and Ashtabula and Lake Shore will be temporarily idled (489 MW). The proposed changes are subject to review by MISO, PJM and the independent market monitor. FGCO recognized an impairment of $292 million related to these assets in the third quarter of 2010.
Davis-Besse License Renewal
On August 30, 2010, FirstEnergy Nuclear Operating Company (FENOC) submitted an application to the Nuclear Regulatory Commission (NRC) for renewal of the Davis-Besse Nuclear Power Station (908 MW) operating license. By a letter dated October 18, 2010, the NRC determined that the Davis-Besse license renewal application
Consolidated Report to the Financial Community - 3rd Quarter 2010 | 22 |
was complete and acceptable for docketing and further review. Davis-Besse currently is licensed until 2017; if approved the renewal would extend operations for an additional 20 years, until 2037.
Beaver Valley Refueling
On October 2, 2010, Beaver Valley Nuclear Power Station Unit 1 (911 MW) began its scheduled refueling and maintenance outage. During the outage FENOC plans to exchange 60 of the 157 fuel assemblies, conduct safety inspections, replace one of three reactor cooling pump motors, and perform routine maintenance work. The outage is expected to be completed in late October.
Fremont Plant
During the third quarter, FGCO re-evaluated the schedule for completing the Fremont Plant (707 MW) due to current market conditions and the extension of the tax incentives included in the federal legislation through 2011. As a result, FGCO is extending the plant’s completion beyond 2010 to reduce overtime labor cost and outside contractor spend for the remainder of the project. We expect the extension of the completion schedule to add $33 million to the 2011 capital budget.
Consolidated Report to the Financial Community - 3rd Quarter 2010 | 23 |
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. Ac tual 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 regulatory process on the pending matters in Ohio, Pennsylvania and New Jersey, business and regulatory impacts from American Transmission Systems, 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, financial derivative reforms that could increase our liquidity needs and collateral costs, 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 hi gher than anticipated, other legislative and regulatory changes, revised environmental requirements, including possible greenhouse gas emission and coal combustion 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 the 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, Metro politan Edison Company's and Pennsylvania Electric Company's transmission service charge filings with the Pennsylvania Public Utility Commission, 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 condit ions 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, the expected timing and likelihood of completion of the proposed merger with Allegheny Energy, Inc., including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the proposed merger that could reduce anticipated benefits or cause the parties to abandon the merger, the diversion of management's time and attention from our ongoing busi ness during this time period, the ability to maintain relationships with customers, employees or suppliers as well as the ability to successfully integrate the businesses and realize cost savings and any other synergies and the risk that the credit ratings of the combined company or its subsidiaries may be different from what the companies expect and the risks and other factors discussed from time to time in its Securities and Exchange Commission 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 infor mation, future events, or otherwise.
Consolidated Report to the Financial Community - 3rd Quarter 2010 | 24 |