Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K FILED BY FIRSTENERGY CORP., DATED AUGUST 7, 2012 - FIRSTENERGY CORP | fe-6302012x8kdatedaugust72.htm |
| EX-99.1 - PRESS RELEASE ISSUED BY FIRSTENERGY CORP., DATED AUGUST 7, 2012 - FIRSTENERGY CORP | ex991fe-6302012.htm |
Exhibit 99.2
Consolidated Report to the Financial Community
Second Quarter 2012
(Released August 7, 2012) (Unaudited)
HIGHLIGHTS | After-Tax EPS Variance Analysis | 2nd Qtr. | |||
2Q 2011 Basic EPS - GAAP | $0.48 | ||||
● | Normalized non-GAAP* earnings, excluding special items, were $0.60 per basic share for the second quarter of 2012, compared with second quarter 2011 earnings of $0.70 per basic share. GAAP earnings for the second quarter of 2012 were $0.45 per basic share, compared with second quarter 2011 earnings of $0.48 per basic share. Results for the second quarter of 2011 have been revised to reflect the previously reported change in accounting for pensions and other post-employment benefits. | Special Items - 2011 | 0.22 | ||
2Q 2011 Normalized Basic EPS - Non-GAAP* | $0.70 | ||||
Commodity Margin | (0.09) | ||||
O&M Expenses | 0.02 | ||||
Depreciation | (0.02) | ||||
Interest Expense | 0.01 | ||||
General Taxes | 0.02 | ||||
Other Income | (0.04) | ||||
2Q 2012 Normalized Basic EPS - Non-GAAP* | $0.60 | ||||
Special Items - 2012 | (0.15) | ||||
2Q 2012 Basic EPS - GAAP | $0.45 | ||||
2Q 2012 Results vs 2Q 2011
• | Distribution Deliveries - Electric distribution deliveries increased 331,000 megawatt-hours (MWH), or 1%. Industrial deliveries increased 351,000 MWH, or 3%, while commercial deliveries increased 104,000 MWH, or 1%. Residential deliveries decreased 126,000 MWH, or 1%, primarily due to declining average customer consumption and a slight reduction in the number of residential accounts. Since the increase in total deliveries was predominantly attributed to the industrial class, whose base distribution revenues are derived principally on a peak demand basis as opposed to energy consumption, there was no material impact to earnings compared to the same period last year. |
*The 2012 GAAP to non-GAAP reconciliation statements can be found on page 20 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.
• | Commodity Margin EPS Summary |
Commodity Margin EPS - 2Q12 vs 2Q11 | Rate | Volume | Total | |||||||||||
Contract Sales | ||||||||||||||
- Direct Sales | $ | (0.06 | ) | $ | 0.16 | $ | 0.10 | |||||||
- Governmental Aggregation Sales | (0.02 | ) | — | (0.02 | ) | |||||||||
- Mass Market Sales | — | 0.08 | 0.08 | |||||||||||
- POLR Sales | (0.04 | ) | (0.14 | ) | (0.18 | ) | ||||||||
- Structured Sales | (0.01 | ) | — | (0.01 | ) | |||||||||
Subtotal - Contract Sales | $ | (0.13 | ) | $ | 0.10 | $ | (0.03 | ) | ||||||
Wholesale Sales | (0.06 | ) | (0.02 | ) | (0.08 | ) | ||||||||
PJM Capacity, FRR Auction | (0.09 | ) | 0.06 | (0.03 | ) | |||||||||
REC Activity, Net | — | (0.02 | ) | (0.02 | ) | |||||||||
Fuel Expense | (0.01 | ) | 0.08 | 0.07 | ||||||||||
Purchased Power | 0.17 | (0.24 | ) | (0.07 | ) | |||||||||
Capacity Expense | 0.08 | (0.09 | ) | (0.01 | ) | |||||||||
Net MISO - PJM Transmission | 0.12 | (0.04 | ) | 0.08 | ||||||||||
Net Increase / (Decrease) | $ | 0.08 | $ | (0.17 | ) | $ | (0.09 | ) | ||||||
(a) | Contract Sales - Competitive Energy Services' (CES) contract sales increased by 1.4 million MWH, or 6%. Lower average prices in the second quarter of 2012 more than offset the increased volume, thereby reducing earnings by $0.03 per share. |
FirstEnergy Solutions continues to successfully expand in other markets, including Illinois, Michigan, New Jersey, and Maryland. Direct sales increased by 2.0 million MWH, or 16%, and mass market sales increased by 794,000 MWH, or 254%.
Provider of Last Resort (POLR) generation sales decreased by 1.4 million MWH, or 25%, from a reduced number of tranches served and decreased MWHs per tranche. The decreased volume per tranche reflects the impact of a decline in residential customer usage and increased migration of customers away from the utilities' default service. The reduction in POLR sales is consistent with CES' strategy to realign its sales portfolio.
CES Contract Sales - 2Q12 vs. 2Q11 | ||||||||||||||
(thousand MWH) | Retail | Non-Retail | ||||||||||||
Direct | Aggr. | Mass Market | POLR | Structured | Total | |||||||||
Contract Sales Increase / (Decrease) | 1,965 | (20) | 794 | (1,407) | 53 | 1,385 | ||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2012 2
(b) Wholesale Sales - Wholesale electricity sales decreased 160,000 MWH, or 3%. Adjusting for sales associated with coal plants to be deactivated, wholesale revenues decreased earnings by $0.08 per share, primarily due to lower prices and volumes.**
(c) PJM Capacity - Base Residual (BRA) and Fixed Resource Requirement (FRR) Auctions - Lower capacity revenues decreased earnings by $0.03 per share, primarily as a result of lower capacity prices.
Planning Period | RTO | ATSI | |||||
Price Per Megawatt-Day | BRA | FRR | |||||
June 2010 - May 2011 | $174.29 | N/A | |||||
June 2011 - May 2012 | $110.00 | $108.89 | |||||
June 2012 - May 2013 | $16.46 | $20.46 | |||||
(d) Renewable Energy Credit (REC) Sales - Reduced REC sales decreased earnings by $0.02 per share.
(e) | Fuel Expenses - Generation output increased 1.2 million MWH, of 5%. Fossil supercritical and subcritical generation output increased by 955,000 MWH and 53,000 MWH, respectively. The net impact of the refueling outages at Beaver Valley Unit 1 (911 megawatts (MW) - 32 days) and Davis-Besse (908 MW - 38 days) in the second quarter of 2012, compared to Perry (1,268 MW - 50 days) and Beaver Valley Unit 2 (904 MW - 10 days) refueling outages in the second quarter of 2011, increased nuclear output by 239,000 MWH. Ongoing fuel expenses increased earnings by $0.07 per share.** |
(f) Purchased Power - Economic power purchases increased by 806,000 MWH, or 19%. Purchased power, adjusted for coal plants to be deactivated, decreased earnings by $0.07 per share.**
(g) Capacity Expenses - Higher capacity expenses associated with CES' increased retail sales obligations, decreased earnings by $0.01 per share.
(h) Net MISO-PJM Transmission Expenses - The CES segment's net MISO-PJM transmission costs increased earnings by $0.08 per share due primarily to lower congestion, network, and transmission line loss expense.
• | O&M Expenses - Lower O&M expenses increased earnings by $0.02 per share. |
(a) Lower O&M expenses associated with ongoing fossil operations increased earnings by $0.02 per share, primarily due to fewer plant outages in the second quarter of 2012 compared to the same period last year.**
**The following revenues and expenses associated with the coal plants to be deactivated have been removed from each category above
and are included as Special Items (see page 4): wholesale revenues, fuel expenses, wholesale revenues that are netted on an hourly basis
against purchased power, and O&M expenses.
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2012 3
(b) Higher nuclear O&M expenses, primarily due to increased refueling outage costs in the second quarter of 2012 compared to the same period last year, reduced earnings by $0.03 per share.
(c) Lower energy delivery expenses increased earnings by $0.03 per share, primarily due to merger synergies capture and lower storm costs in the second quarter of 2012 compared to the same period last year.
• | Depreciation - Higher depreciation expense decreased earnings by $0.02 per share. |
• | Interest Expense - Lower interest expense increased earnings by $0.01 per share. |
• | General Taxes - Lower general taxes increased earnings by $0.02 per share, primarily due to lower gross receipts tax. |
• | Other Income - Other income reduced earnings by $0.04 per share, due to lower investment income from the nuclear decommissioning trusts and the absence of revenue in the second quarter of 2012 from the sale of pole attachment lease rights in June 2011. |
• | Special Items - The following special items were recognized during the second quarter of 2012: |
Special Items | EPS | ||||
Regulatory charges | $0.01 | ||||
Trust securities impairment | 0.01 | ||||
Income tax charge - retiree prescription drug subsidy | 0.02 | ||||
Impact of non-core asset sales/impairments | (0.01) | ||||
Mark-to-market adjustments | 0.02 | ||||
Plant closing costs | 0.07 | ||||
Merger accounting - commodity contracts | 0.03 | ||||
Total | $0.15 | ||||
Earnings Guidance
Normalized non-GAAP* earnings guidance for 2012, excluding special items, remains at $3.30 - $3.60 per basic share. On a GAAP basis, 2012 earnings are estimated to be $2.80 - $3.10 per basic share. Our estimates for the quarterly pattern of second half 2012 earnings guidance are 50 - 52% in the third quarter and 48 - 50% in the fourth quarter.
*The 2012 GAAP to non-GAAP reconciliation statements can be found on page 20 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:
Irene M. Prezelj | Meghan G. Beringer Rey Y. Jimenez |
Vice President, Investor Relations | Director, Investor Relations Manager, Investor Relations |
(330) 384-3859 | (330) 384-5832 (330) 761-4239 |
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2012 4
FirstEnergy Corp.
Consolidated Statements of Income
(In millions, except for per share amounts)
Three Months Ended June 30 | Six Months Ended June 30 | ||||||||||||||||||||||||||||
2012 | 2011 | Change | 2012 | 2011 | Change | ||||||||||||||||||||||||
Revenues | |||||||||||||||||||||||||||||
(1 | ) | Regulated distribution | $ | 2,095 | $ | 2,409 | $ | (314 | ) | $ | 4,420 | $ | 4,632 | $ | (212 | ) | |||||||||||||
(2 | ) | Regulated transmission | 184 | 182 | 2 | 370 | 295 | 75 | |||||||||||||||||||||
(3 | ) | Competitive energy services | 1,825 | 1,813 | 12 | 3,699 | 3,397 | 302 | |||||||||||||||||||||
(4 | ) | Other and reconciling adjustments | (235 | ) | (344 | ) | 109 | (542 | ) | (688 | ) | 146 | |||||||||||||||||
(5 | ) | Total Revenues | 3,869 | 4,060 | (191 | ) | 7,947 | 7,636 | 311 | ||||||||||||||||||||
Expenses | |||||||||||||||||||||||||||||
(6 | ) | Fuel | 656 | 635 | 21 | 1,197 | 1,088 | 109 | |||||||||||||||||||||
(7 | ) | Purchased power | 1,156 | 1,220 | (64 | ) | 2,503 | 2,406 | 97 | ||||||||||||||||||||
(8 | ) | Other operating expenses | 914 | 1,065 | (151 | ) | 1,726 | 2,058 | (332 | ) | |||||||||||||||||||
(9 | ) | Provision for depreciation | 292 | 287 | 5 | 577 | 512 | 65 | |||||||||||||||||||||
(10 | ) | Amortization of regulatory assets, net | 62 | 90 | (28 | ) | 137 | 222 | (85 | ) | |||||||||||||||||||
(11 | ) | General taxes | 232 | 242 | (10 | ) | 504 | 479 | 25 | ||||||||||||||||||||
(12 | ) | Total Expenses | 3,312 | 3,539 | (227 | ) | 6,644 | 6,765 | (121 | ) | |||||||||||||||||||
(13 | ) | Operating Income | 557 | 521 | 36 | 1,303 | 871 | 432 | |||||||||||||||||||||
Other Income (Expense) | |||||||||||||||||||||||||||||
(14 | ) | Investment income | 13 | 31 | (18 | ) | 24 | 52 | (28 | ) | |||||||||||||||||||
(15 | ) | Interest expense | (274 | ) | (265 | ) | (9 | ) | (520 | ) | (496 | ) | (24 | ) | |||||||||||||||
(16 | ) | Capitalized interest | 19 | 20 | (1 | ) | 36 | 38 | (2 | ) | |||||||||||||||||||
(17 | ) | Total Other Expense | (242 | ) | (214 | ) | (28 | ) | (460 | ) | (406 | ) | (54 | ) | |||||||||||||||
(18 | ) | Income Before Income Taxes | 315 | 307 | 8 | 843 | 465 | 378 | |||||||||||||||||||||
(19 | ) | Income taxes | 127 | 114 | 13 | 349 | 225 | 124 | |||||||||||||||||||||
(20 | ) | Net Income | 188 | 193 | (5 | ) | 494 | 240 | 254 | ||||||||||||||||||||
(21 | ) | Income (loss) attributable to noncontrolling interest | 1 | (10 | ) | 11 | 1 | (15 | ) | 16 | |||||||||||||||||||
(22 | ) | Earnings Available to FirstEnergy Corp. | $ | 187 | $ | 203 | $ | (16 | ) | $ | 493 | $ | 255 | $ | 238 | ||||||||||||||
(23 | ) | Earnings Per Share of Common Stock | |||||||||||||||||||||||||||
(24 | ) | Basic | $ | 0.45 | $ | 0.48 | $ | (0.03 | ) | $ | 1.18 | $ | 0.67 | $ | 0.51 | ||||||||||||||
(25 | ) | Diluted | $ | 0.45 | $ | 0.48 | $ | (0.03 | ) | $ | 1.18 | $ | 0.67 | $ | 0.51 | ||||||||||||||
(26 | ) | Weighted Average Number of | |||||||||||||||||||||||||||
Common Shares Outstanding | |||||||||||||||||||||||||||||
(27 | ) | Basic | 417 | 418 | (1 | ) | 418 | 380 | 38 | ||||||||||||||||||||
(28 | ) | Diluted | 419 | 420 | (1 | ) | 419 | 382 | 37 | ||||||||||||||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2012 5
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Three Months Ended June 30, 2012 | |||||||||||||||||||||||
Competitive | Other & | ||||||||||||||||||||||
Regulated | Regulated | Energy | Reconciling | FirstEnergy | |||||||||||||||||||
Distribution (a) | Transmission (b) | Services (c) | Adjustments (d) | Consolidated | |||||||||||||||||||
Revenues | |||||||||||||||||||||||
(1 | ) | Electric sales | $ | 2,059 | $ | — | 1,527 | 1 | $ | 3,587 | |||||||||||||
(2 | ) | Other | 36 | 184 | 89 | (27 | ) | 282 | |||||||||||||||
(3 | ) | Internal | — | — | 209 | (209 | ) | — | |||||||||||||||
(4 | ) | Total Revenues | 2,095 | 184 | 1,825 | (235 | ) | 3,869 | |||||||||||||||
Expenses | |||||||||||||||||||||||
(5 | ) | Fuel | 57 | — | 598 | 1 | 656 | ||||||||||||||||
(6 | ) | Purchased power | 895 | — | 470 | (209 | ) | 1,156 | |||||||||||||||
(7 | ) | Other operating expenses | 393 | 41 | 513 | (33 | ) | 914 | |||||||||||||||
(8 | ) | Provision for depreciation | 151 | 31 | 103 | 7 | 292 | ||||||||||||||||
(9 | ) | Amortization (deferral) of regulatory assets, net | 64 | (2 | ) | — | — | 62 | |||||||||||||||
(10 | ) | General taxes | 167 | 9 | 49 | 7 | 232 | ||||||||||||||||
(11 | ) | Total Expenses | 1,727 | 79 | 1,733 | (227 | ) | 3,312 | |||||||||||||||
(12 | ) | Operating Income | 368 | 105 | 92 | (8 | ) | 557 | |||||||||||||||
Other Income (Expense) | |||||||||||||||||||||||
(13 | ) | Investment income | 19 | — | 6 | (12 | ) | 13 | |||||||||||||||
(14 | ) | Interest expense | (135 | ) | (23 | ) | (71 | ) | (45 | ) | (274 | ) | |||||||||||
(15 | ) | Capitalized interest | 3 | 1 | 12 | 3 | 19 | ||||||||||||||||
(16 | ) | Total Other Expense | (113 | ) | (22 | ) | (53 | ) | (54 | ) | (242 | ) | |||||||||||
(17 | ) | Income Before Income Taxes | 255 | 83 | 39 | (62 | ) | 315 | |||||||||||||||
(18 | ) | Income taxes | 94 | 31 | 14 | (12 | ) | 127 | |||||||||||||||
(19 | ) | Net Income | 161 | 52 | 25 | (50 | ) | 188 | |||||||||||||||
(20 | ) | Income attributable to noncontrolling interest | — | — | — | 1 | 1 | ||||||||||||||||
(21 | ) | Earnings Available to FirstEnergy Corp. | $ | 161 | $ | 52 | $ | 25 | $ | (51 | ) | $ | 187 | ||||||||||
(a) | Revenues are primarily derived from the delivery of electricity within FirstEnergy Corp.'s (FirstEnergy) service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from FirstEnergy Solutions Corp. (FES) and Allegheny Energy Supply Company, LLC (AE Supply) and from non-affiliated power suppliers and the deferral and amortization of certain fuel costs. | ||||||||||||||||||||||
(b) | Revenues are primarily derived from rates that recover costs and provide a return on transmission capital investment owned and operated by certain of FirstEnergy's utilities and independent transmission companies. Revenues are also derived from providing transmission services to electric energy providers, power marketers and receiving transmission-related revenues from operation of a portion of the FirstEnergy transmission system. Its results reflect the net transmission expenses related to the delivery of the respective generation loads. | ||||||||||||||||||||||
(c) | Supplies electric power to end-use customers through retail and wholesale arrangements, including competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey, and the provision of partial POLR and default service for affiliated and non-affiliated utilities in Ohio, Pennsylvania and Maryland. | ||||||||||||||||||||||
(d) | 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 - 2nd Quarter 2012 6
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Three Months Ended June 30, 2011 | ||||||||||||||||||||||||
Competitive | Other & | |||||||||||||||||||||||
Regulated | Regulated | Energy | Reconciling | FirstEnergy | ||||||||||||||||||||
Distribution (a) | Transmission (b) | Services (c) | Adjustments (d) | Consolidated | ||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
(1 | ) | Electric sales | $ | 2,352 | $ | — | 1,394 | — | $ | 3,746 | ||||||||||||||
(2 | ) | Other | 57 | 182 | 101 | (38 | ) | 302 | ||||||||||||||||
(3 | ) | Internal | — | — | 318 | (306 | ) | 12 | ||||||||||||||||
(4 | ) | Total Revenues | 2,409 | 182 | 1,813 | (344 | ) | 4,060 | ||||||||||||||||
Expenses | ||||||||||||||||||||||||
(5 | ) | Fuel | 73 | — | 561 | 1 | 635 | |||||||||||||||||
(6 | ) | Purchased power | 1,145 | — | 381 | (306 | ) | 1,220 | ||||||||||||||||
(7 | ) | Other operating expenses | 402 | 30 | 625 | 8 | 1,065 | |||||||||||||||||
(8 | ) | Provision for depreciation | 145 | 26 | 109 | 7 | 287 | |||||||||||||||||
(9 | ) | Amortization of regulatory assets, net | 87 | 2 | — | 1 | 90 | |||||||||||||||||
(10 | ) | General taxes | 177 | 10 | 51 | 4 | 242 | |||||||||||||||||
(11 | ) | Total Expenses | 2,029 | 68 | 1,727 | (285 | ) | 3,539 | ||||||||||||||||
(12 | ) | Operating Income | 380 | 114 | 86 | (59 | ) | 521 | ||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||
(13 | ) | Investment income | 25 | — | 16 | (10 | ) | 31 | ||||||||||||||||
(14 | ) | Interest expense | (136 | ) | (25 | ) | (80 | ) | (24 | ) | (265 | ) | ||||||||||||
(15 | ) | Capitalized interest | 2 | 1 | 11 | 6 | 20 | |||||||||||||||||
(16 | ) | Total Other Expense | (109 | ) | (24 | ) | (53 | ) | (28 | ) | (214 | ) | ||||||||||||
(17 | ) | Income Before Income Taxes | 271 | 90 | 33 | (87 | ) | 307 | ||||||||||||||||
(18 | ) | Income taxes | 100 | 33 | 12 | (31 | ) | 114 | ||||||||||||||||
(19 | ) | Net Income | 171 | 57 | 21 | (56 | ) | 193 | ||||||||||||||||
(20 | ) | Loss attributable to noncontrolling interest | — | — | — | (10 | ) | (10 | ) | |||||||||||||||
(21 | ) | Earnings Available to FirstEnergy Corp. | $ | 171 | $ | 57 | $ | 21 | $ | (46 | ) | $ | 203 | |||||||||||
(a) | Revenues are primarily derived from the delivery of electricity within FirstEnergy’s service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from FES and AE Supply and from non-affiliated power suppliers and the deferral and amortization of certain fuel costs. | |||||||||||||||||||||||
(b) | Revenues are primarily derived from rates that recover costs and provide a return on transmission capital investment owned and operated by certain of FirstEnergy's utilities and independent transmission companies. Revenues are also derived from providing transmission services to electric energy providers, power marketers and receiving transmission-related revenues from operation of a portion of the FirstEnergy transmission system. Its results reflect the net transmission expenses related to the delivery of the respective generation loads. | |||||||||||||||||||||||
(c) | Supplies electric power to end-use customers through retail and wholesale arrangements, including competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey, and the provision of partial POLR and default service for affiliated and non-affiliated utilities in Ohio, Pennsylvania and Maryland. | |||||||||||||||||||||||
(d) | 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 - 2nd Quarter 2012 7
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Three Months Ended June 30, 2012 vs. Three Months Ended June 30, 2011 | ||||||||||||||||||||||||
Competitive | Other & | |||||||||||||||||||||||
Regulated | Regulated | Energy | Reconciling | FirstEnergy | ||||||||||||||||||||
Distribution (a) | Transmission (b) | Services (c) | Adjustments (d) | Consolidated | ||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
(1 | ) | Electric sales | $ | (293 | ) | $ | — | 133 | 1 | $ | (159 | ) | ||||||||||||
(2 | ) | Other | (21 | ) | 2 | (12 | ) | 11 | (20 | ) | ||||||||||||||
(3 | ) | Internal revenues | — | — | (109 | ) | 97 | (12 | ) | |||||||||||||||
(4 | ) | Total Revenues | (314 | ) | 2 | 12 | 109 | (191 | ) | |||||||||||||||
Expenses | ||||||||||||||||||||||||
(5 | ) | Fuel | (16 | ) | — | 37 | — | 21 | ||||||||||||||||
(6 | ) | Purchased power | (250 | ) | — | 89 | 97 | (64 | ) | |||||||||||||||
(7 | ) | Other operating expenses | (9 | ) | 11 | (112 | ) | (41 | ) | (151 | ) | |||||||||||||
(8 | ) | Provision for depreciation | 6 | 5 | (6 | ) | — | 5 | ||||||||||||||||
(9 | ) | Amortization (deferral) of regulatory assets | (23 | ) | (4 | ) | — | (1 | ) | (28 | ) | |||||||||||||
(10 | ) | General taxes | (10 | ) | (1 | ) | (2 | ) | 3 | (10 | ) | |||||||||||||
(11 | ) | Total Expenses | (302 | ) | 11 | 6 | 58 | (227 | ) | |||||||||||||||
(12 | ) | Operating Income | (12 | ) | (9 | ) | 6 | 51 | 36 | |||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||
(13 | ) | Investment income | (6 | ) | — | (10 | ) | (2 | ) | (18 | ) | |||||||||||||
(14 | ) | Interest expense | 1 | 2 | 9 | (21 | ) | (9 | ) | |||||||||||||||
(15 | ) | Capitalized interest | 1 | — | 1 | (3 | ) | (1 | ) | |||||||||||||||
(16 | ) | Total Other Expense | (4 | ) | 2 | — | (26 | ) | (28 | ) | ||||||||||||||
(17 | ) | Income Before Income Taxes | (16 | ) | (7 | ) | 6 | 25 | 8 | |||||||||||||||
(18 | ) | Income taxes | (6 | ) | (2 | ) | 2 | 19 | 13 | |||||||||||||||
(19 | ) | Net Income | (10 | ) | (5 | ) | 4 | 6 | (5 | ) | ||||||||||||||
(20 | ) | Income (loss) attributable to noncontrolling interest | — | — | — | 11 | 11 | |||||||||||||||||
(21 | ) | Earnings Available to FirstEnergy Corp. | $ | (10 | ) | $ | (5 | ) | $ | 4 | $ | (5 | ) | $ | (16 | ) | ||||||||
(a) | Revenues are primarily derived from the delivery of electricity within FirstEnergy’s service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from FES and AE Supply and from non-affiliated power suppliers and the deferral and amortization of certain fuel costs. | |||||||||||||||||||||||
(b) | Revenues are primarily derived from rates that recover costs and provide a return on transmission capital investment owned and operated by certain of FirstEnergy's utilities and independent transmission companies. Revenues are also derived from providing transmission services to electric energy providers, power marketers and receiving transmission-related revenues from operation of a portion of the FirstEnergy transmission system. Its results reflect the net transmission expenses related to the delivery of the respective generation loads. | |||||||||||||||||||||||
(c) | Supplies electric power to end-use customers through retail and wholesale arrangements, including competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey, and the provision of partial POLR and default service for affiliated and non-affiliated utilities in Ohio, Pennsylvania and Maryland. | |||||||||||||||||||||||
(d) | 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 - 2nd Quarter 2012 8
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Six Months Ended June 30, 2012 | ||||||||||||||||||||||||
Competitive | Other & | |||||||||||||||||||||||
Regulated | Regulated | Energy | Reconciling | FirstEnergy | ||||||||||||||||||||
Distribution (a) | Transmission (b) | Services (c) | Adjustments (d) | Consolidated | ||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
(1 | ) | Electric sales | $ | 4,329 | $ | — | 3,058 | 1 | $ | 7,388 | ||||||||||||||
(2 | ) | Other | 91 | 370 | 164 | (68 | ) | 557 | ||||||||||||||||
(3 | ) | Internal | — | — | 477 | (475 | ) | 2 | ||||||||||||||||
(4 | ) | Total Revenues | 4,420 | 370 | 3,699 | (542 | ) | 7,947 | ||||||||||||||||
Expenses | ||||||||||||||||||||||||
(5 | ) | Fuel | 97 | — | 1,100 | — | 1,197 | |||||||||||||||||
(6 | ) | Purchased power | 1,977 | — | 1,000 | (474 | ) | 2,503 | ||||||||||||||||
(7 | ) | Other operating expenses | 828 | 66 | 922 | (90 | ) | 1,726 | ||||||||||||||||
(8 | ) | Provision for depreciation | 297 | 61 | 203 | 16 | 577 | |||||||||||||||||
(9 | ) | Amortization of regulatory assets, net | 138 | — | — | (1 | ) | 137 | ||||||||||||||||
(10 | ) | General taxes | 356 | 21 | 110 | 17 | 504 | |||||||||||||||||
(11 | ) | Total Expenses | 3,693 | 148 | 3,335 | (532 | ) | 6,644 | ||||||||||||||||
(12 | ) | Operating Income | 727 | 222 | 364 | (10 | ) | 1,303 | ||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||
(13 | ) | Investment income | 42 | 1 | 12 | (31 | ) | 24 | ||||||||||||||||
(14 | ) | Interest expense | (269 | ) | (46 | ) | (136 | ) | (69 | ) | (520 | ) | ||||||||||||
(15 | ) | Capitalized interest | 5 | 1 | 23 | 7 | 36 | |||||||||||||||||
(16 | ) | Total Other Expense | (222 | ) | (44 | ) | (101 | ) | (93 | ) | (460 | ) | ||||||||||||
(17 | ) | Income Before Income Taxes | 505 | 178 | 263 | (103 | ) | 843 | ||||||||||||||||
(18 | ) | Income taxes | 187 | 66 | 97 | (1 | ) | 349 | ||||||||||||||||
(19 | ) | Net Income | 318 | 112 | 166 | (102 | ) | 494 | ||||||||||||||||
(20 | ) | Income attributable to noncontrolling interest | — | — | — | 1 | 1 | |||||||||||||||||
(21 | ) | Earnings Available to FirstEnergy Corp. | $ | 318 | $ | 112 | $ | 166 | $ | (103 | ) | $ | 493 | |||||||||||
(a) | Revenues are primarily derived from the delivery of electricity within FirstEnergy’s service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from FES and AE Supply and from non-affiliated power suppliers and the deferral and amortization of certain fuel costs. | |||||||||||||||||||||||
(b) | Revenues are primarily derived from rates that recover costs and provide a return on transmission capital investment owned and operated by certain of FirstEnergy's utilities and independent transmission companies. Revenues are also derived from providing transmission services to electric energy providers, power marketers and receiving transmission-related revenues from operation of a portion of the FirstEnergy transmission system. Its results reflect the net transmission expenses related to the delivery of the respective generation loads. | |||||||||||||||||||||||
(c) | Supplies electric power to end-use customers through retail and wholesale arrangements, including competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey, and the provision of partial POLR and default service for affiliated and non-affiliated utilities in Ohio, Pennsylvania and Maryland. | |||||||||||||||||||||||
(d) | 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 - 2nd Quarter 2012 9
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Six Months Ended June 30, 2011 | ||||||||||||||||||||||||
Competitive | Other & | |||||||||||||||||||||||
Regulated | Regulated | Energy | Reconciling | FirstEnergy | ||||||||||||||||||||
Distribution (a) | Transmission (b) | Services (c) | Adjustments (d) | Consolidated | ||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
(1 | ) | Electric sales | $ | 4,527 | $ | — | 2,556 | — | $ | 7,083 | ||||||||||||||
(2 | ) | Other | 105 | 295 | 180 | (71 | ) | 509 | ||||||||||||||||
(3 | ) | Internal | — | — | 661 | (617 | ) | 44 | ||||||||||||||||
(4 | ) | Total Revenues | 4,632 | 295 | 3,397 | (688 | ) | 7,636 | ||||||||||||||||
Expenses | ||||||||||||||||||||||||
(5 | ) | Fuel | 97 | — | 991 | — | 1,088 | |||||||||||||||||
(6 | ) | Purchased power | 2,323 | — | 700 | (617 | ) | 2,406 | ||||||||||||||||
(7 | ) | Other operating expenses | 753 | 58 | 1,256 | (9 | ) | 2,058 | ||||||||||||||||
(8 | ) | Provision for depreciation | 258 | 45 | 197 | 12 | 512 | |||||||||||||||||
(9 | ) | Amortization of regulatory assets, net | 215 | 5 | — | 2 | 222 | |||||||||||||||||
(10 | ) | General taxes | 353 | 19 | 95 | 12 | 479 | |||||||||||||||||
(11 | ) | Total Expenses | 3,999 | 127 | 3,239 | (600 | ) | 6,765 | ||||||||||||||||
(12 | ) | Operating Income | 633 | 168 | 158 | (88 | ) | 871 | ||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||
(13 | ) | Investment income | 48 | — | 21 | (17 | ) | 52 | ||||||||||||||||
(14 | ) | Interest expense | (259 | ) | (42 | ) | (144 | ) | (51 | ) | (496 | ) | ||||||||||||
(15 | ) | Capitalized interest | 3 | 1 | 22 | 12 | 38 | |||||||||||||||||
(16 | ) | Total Other Expense | (208 | ) | (41 | ) | (101 | ) | (56 | ) | (406 | ) | ||||||||||||
(17 | ) | Income Before Income Taxes | 425 | 127 | 57 | (144 | ) | 465 | ||||||||||||||||
(18 | ) | Income taxes | 158 | 47 | 21 | (1 | ) | 225 | ||||||||||||||||
(19 | ) | Net Income | 267 | 80 | 36 | (143 | ) | 240 | ||||||||||||||||
(20 | ) | Loss attributable to noncontrolling interest | — | — | — | (15 | ) | (15 | ) | |||||||||||||||
(21 | ) | Earnings Available to FirstEnergy Corp. | $ | 267 | $ | 80 | $ | 36 | $ | (128 | ) | $ | 255 | |||||||||||
(a) | Revenues are primarily derived from the delivery of electricity within FirstEnergy’s service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from FES and AE Supply and from non-affiliated power suppliers and the deferral and amortization of certain fuel costs. | |||||||||||||||||||||||
(b) | Revenues are primarily derived from rates that recover costs and provide a return on transmission capital investment owned and operated by certain of FirstEnergy's utilities and independent transmission companies. Revenues are also derived from providing transmission services to electric energy providers, power marketers and receiving transmission-related revenues from operation of a portion of the FirstEnergy transmission system. Its results reflect the net transmission expenses related to the delivery of the respective generation loads. | |||||||||||||||||||||||
(c) | Supplies electric power to end-use customers through retail and wholesale arrangements, including competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey, and the provision of partial POLR and default service for affiliated and non-affiliated utilities in Ohio, Pennsylvania and Maryland. | |||||||||||||||||||||||
(d) | 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 - 2nd Quarter 2012 10
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Six Months Ended June 30, 2012 vs. Six Months Ended June 30, 2011 | ||||||||||||||||||||||||
Competitive | Other & | |||||||||||||||||||||||
Regulated | Regulated | Energy | Reconciling | FirstEnergy | ||||||||||||||||||||
Distribution (a) | Transmission (b) | Services (c) | Adjustments (d) | Consolidated | ||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
(1 | ) | Electric sales | $ | (198 | ) | $ | — | 502 | 1 | $ | 305 | |||||||||||||
(2 | ) | Other | (14 | ) | 75 | (16 | ) | 3 | 48 | |||||||||||||||
(3 | ) | Internal revenues | — | — | (184 | ) | 142 | (42 | ) | |||||||||||||||
(4 | ) | Total Revenues | (212 | ) | 75 | 302 | 146 | 311 | ||||||||||||||||
Expenses | ||||||||||||||||||||||||
(5 | ) | Fuel | — | — | 109 | — | 109 | |||||||||||||||||
(6 | ) | Purchased power | (346 | ) | — | 300 | 143 | 97 | ||||||||||||||||
(7 | ) | Other operating expenses | 75 | 8 | (334 | ) | (81 | ) | (332 | ) | ||||||||||||||
(8 | ) | Provision for depreciation | 39 | 16 | 6 | 4 | 65 | |||||||||||||||||
(9 | ) | Amortization of regulatory assets | (77 | ) | (5 | ) | — | (3 | ) | (85 | ) | |||||||||||||
(10 | ) | General taxes | 3 | 2 | 15 | 5 | 25 | |||||||||||||||||
(11 | ) | Total Expenses | (306 | ) | 21 | 96 | 68 | (121 | ) | |||||||||||||||
(12 | ) | Operating Income | 94 | 54 | 206 | 78 | 432 | |||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||
(13 | ) | Investment income | (6 | ) | 1 | (9 | ) | (14 | ) | (28 | ) | |||||||||||||
(14 | ) | Interest expense | (10 | ) | (4 | ) | 8 | (18 | ) | (24 | ) | |||||||||||||
(15 | ) | Capitalized interest | 2 | — | 1 | (5 | ) | (2 | ) | |||||||||||||||
(16 | ) | Total Other Expense | (14 | ) | (3 | ) | — | (37 | ) | (54 | ) | |||||||||||||
(17 | ) | Income Before Income Taxes | 80 | 51 | 206 | 41 | 378 | |||||||||||||||||
(18 | ) | Income taxes | 29 | 19 | 76 | — | 124 | |||||||||||||||||
(19 | ) | Net Income | 51 | 32 | 130 | 41 | 254 | |||||||||||||||||
(20 | ) | Income (loss) attributable to noncontrolling interest | — | — | — | 16 | 16 | |||||||||||||||||
(21 | ) | Earnings Available to FirstEnergy Corp. | $ | 51 | $ | 32 | $ | 130 | $ | 25 | $ | 238 | ||||||||||||
(a) | Revenues are primarily derived from the delivery of electricity within FirstEnergy’s service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from FES and AE Supply and from non-affiliated power suppliers and the deferral and amortization of certain fuel costs. | |||||||||||||||||||||||
(b) | Revenues are primarily derived from rates that recover costs and provide a return on transmission capital investment owned and operated by certain of FirstEnergy's utilities and independent transmission companies. Revenues are also derived from providing transmission services to electric energy providers, power marketers and receiving transmission-related revenues from operation of a portion of the FirstEnergy transmission system. Its results reflect the net transmission expenses related to the delivery of the respective generation loads. | |||||||||||||||||||||||
(c) | Supplies electric power to end-use customers through retail and wholesale arrangements, including competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey, and the provision of partial POLR and default service for affiliated and non-affiliated utilities in Ohio, Pennsylvania and Maryland. | |||||||||||||||||||||||
(d) | 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 - 2nd Quarter 2012 11
FirstEnergy Corp.
Financial Statements
(In millions)
Condensed Consolidated Balance Sheets | |||||||||||
As of | As of | ||||||||||
Assets | Jun. 30, 2012 | Dec. 31, 2011 | |||||||||
Current Assets: | |||||||||||
Cash and cash equivalents | $ | 94 | $ | 202 | |||||||
Receivables | 1,898 | 1,794 | |||||||||
Other | 1,616 | 1,359 | |||||||||
Total Current Assets | 3,608 | 3,355 | |||||||||
Property, Plant and Equipment | 30,768 | 30,337 | |||||||||
Investments | 3,518 | 3,522 | |||||||||
Deferred Charges and Other Assets | 10,154 | 10,112 | |||||||||
Total Assets | $ | 48,048 | $ | 47,326 | |||||||
Liabilities and Capitalization | |||||||||||
Current Liabilities: | |||||||||||
Currently payable long-term debt | $ | 1,577 | $ | 1,621 | |||||||
Short-term borrowings | 1,890 | — | |||||||||
Accounts payable | 1,052 | 1,174 | |||||||||
Other | 1,563 | 2,060 | |||||||||
Total Current Liabilities | 6,082 | 4,855 | |||||||||
Capitalization: | |||||||||||
Total equity | 13,512 | 13,299 | |||||||||
Long-term debt and other long-term obligations | 15,159 | 15,716 | |||||||||
Total Capitalization | 28,671 | 29,015 | |||||||||
Noncurrent Liabilities | 13,295 | 13,456 | |||||||||
Total Liabilities and Capitalization | $ | 48,048 | $ | 47,326 | |||||||
General Information | ||||||||||||||||||
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||||
Debt redemptions | $ | (730 | ) | $ | (643 | ) | $ | (746 | ) | $ | (1,002 | ) | ||||||
New long-term debt issues | $ | 182 | $ | 286 | $ | 182 | $ | 503 | ||||||||||
Short-term borrowings increase (decrease) | $ | 815 | $ | 170 | $ | 1,890 | $ | (44 | ) | |||||||||
Property additions | $ | 412 | $ | 569 | $ | 1,001 | $ | 1,018 | ||||||||||
Adjusted Capitalization | ||||||||||||||||
As of June 30 | As of December 31 | |||||||||||||||
2012 | % Total | 2011 | % Total | |||||||||||||
Total equity (GAAP) | $ | 13,512 | 42 | % | $ | 13,299 | 43 | % | ||||||||
Long-term debt and other long-term obligations | 15,159 | 46 | % | 15,716 | 51 | % | ||||||||||
Currently payable long-term debt | 1,577 | 5 | % | 1,621 | 5 | % | ||||||||||
Short-term borrowings | 1,890 | 6 | % | — | — | % | ||||||||||
Adjustments: | ||||||||||||||||
Sale-leaseback net debt equivalents | 1,219 | 4 | % | 1,278 | 4 | % | ||||||||||
Securitization debt and cash | (827 | ) | -3 | % | (971 | ) | -3 | % | ||||||||
Adjusted capitalization (Non-GAAP) | $ | 32,530 | 100 | % | $ | 30,943 | 100 | % | ||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2012 12
FirstEnergy Corp.
Statements of Cash Flows and Liquidity
(In millions)
Condensed Consolidated Statements of Cash Flows | ||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||
June 30 | June 30 | |||||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||||
Cash flows from operating activities | ||||||||||||||||||
Net income | $ | 188 | $ | 193 | $ | 494 | $ | 240 | ||||||||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||||||||||||
Depreciation and amortization of regulatory assets, net | 354 | 377 | 714 | 734 | ||||||||||||||
Nuclear fuel and lease amortization | 48 | 45 | 106 | 92 | ||||||||||||||
Deferred purchased power and other costs | (42 | ) | (110 | ) | (149 | ) | (168 | ) | ||||||||||
Deferred income taxes and investment tax credits | 158 | 394 | 423 | 598 | ||||||||||||||
Deferred rents and lease market valuation liability | (83 | ) | (46 | ) | (106 | ) | (61 | ) | ||||||||||
Accrued compensation and retirement benefits | 2 | 22 | (160 | ) | (31 | ) | ||||||||||||
Commodity derivative transactions, net | (22 | ) | 4 | (86 | ) | (21 | ) | |||||||||||
Pension trust contribution | — | (105 | ) | (600 | ) | (262 | ) | |||||||||||
Asset impairments | 3 | 10 | 7 | 41 | ||||||||||||||
Cash collateral paid, net | 50 | (3 | ) | 22 | (31 | ) | ||||||||||||
Change in working capital and other | (181 | ) | (241 | ) | (603 | ) | (100 | ) | ||||||||||
Cash flows provided from operating activities | 475 | 540 | 62 | 1,031 | ||||||||||||||
Cash flows provided from (used for) financing activities | 12 | (489 | ) | 831 | (1,039 | ) | ||||||||||||
Cash flows used for investing activities | (467 | ) | (676 | ) | (1,001 | ) | (535 | ) | ||||||||||
Net change in cash and cash equivalents | $ | 20 | $ | (625 | ) | $ | (108 | ) | $ | (543 | ) | |||||||
Liquidity position as of June 30, 2012 | ||||||||||
Company | Type | Maturity | Amount | Available | ||||||
FirstEnergy(1) | Revolving | May 2017 | $2,000 | $1,080 | ||||||
FES / AE Supply | Revolving | May 2017 | 2,500 | 2,498 | ||||||
FirstEnergy Transmission, LLC (FET)(2) | Revolving | May 2017 | 1,000 | — | ||||||
Allegheny Generating Company (AGC) | Revolving | Dec 2013 | 50 | — | ||||||
(1) FirstEnergy Corp. and subsidiary borrowers | Subtotal: | $5,550 | $3,578 | |||||||
(2) Includes FET, American Transmission Systems, Incorporated (ATSI), and Trans-Allegheny Interstate Line Company, (TrAIL) | Cash: | — | 63 | |||||||
Total: | $5,550 | $3,641 | ||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2012 13
FirstEnergy Corp.
Statistical Summary
Electric Sales Statistics (thousand MWH) | |||||||||||||||||||||
Electric Distribution Deliveries | Three Months Ended June 30 | Six Months Ended June 30* | |||||||||||||||||||
2012 | 2011 | Change | 2012 | 2011 | Change | ||||||||||||||||
Ohio | - Residential | 3,897 | 3,920 | -0.6 | % | 8,396 | 8,793 | -4.5 | % | ||||||||||||
- Commercial | 3,829 | 3,768 | 1.6 | % | 7,575 | 7,632 | -0.7 | % | |||||||||||||
- Industrial | 5,361 | 4,947 | 8.4 | % | 10,429 | 9,876 | 5.6 | % | |||||||||||||
- Other | 84 | 85 | -1.2 | % | 167 | 173 | -3.5 | % | |||||||||||||
Total Ohio | 13,171 | 12,720 | 3.5 | % | 26,567 | 26,474 | 0.4 | % | |||||||||||||
Pennsylvania | - Residential | 4,036 | 4,127 | -2.2 | % | 9,086 | 8,227 | 10.4 | % | ||||||||||||
- Commercial | 3,143 | 3,070 | 2.4 | % | 6,230 | 5,408 | 15.2 | % | |||||||||||||
- Industrial | 5,173 | 5,207 | -0.7 | % | 10,358 | 9,198 | 12.6 | % | |||||||||||||
- Other | 34 | 31 | 9.7 | % | 65 | 56 | 16.1 | % | |||||||||||||
Total Pennsylvania | 12,386 | 12,435 | -0.4 | % | 25,739 | 22,889 | 12.5 | % | |||||||||||||
New Jersey | - Residential | 2,141 | 2,154 | -0.6 | % | 4,288 | 4,507 | -4.9 | % | ||||||||||||
- Commercial | 2,232 | 2,263 | -1.4 | % | 4,383 | 4,419 | -0.8 | % | |||||||||||||
- Industrial | 653 | 620 | 5.3 | % | 1,256 | 1,229 | 2.2 | % | |||||||||||||
- Other | 22 | 22 | 0.0 | % | 44 | 44 | 0.0 | % | |||||||||||||
Total New Jersey | 5,048 | 5,059 | -0.2 | % | 9,971 | 10,199 | -2.2 | % | |||||||||||||
Maryland | - Residential | 673 | 669 | 0.6 | % | 1,552 | 977 | 58.9 | % | ||||||||||||
- Commercial | 487 | 506 | -3.8 | % | 998 | 676 | 47.6 | % | |||||||||||||
- Industrial | 344 | 410 | -16.1 | % | 802 | 518 | 54.8 | % | |||||||||||||
- Other | 4 | 4 | 0.0 | % | 9 | 6 | 50.0 | % | |||||||||||||
Total Maryland | 1,508 | 1,589 | -5.1 | % | 3,361 | 2,177 | 54.4 | % | |||||||||||||
West Virginia | - Residential | 1,085 | 1,088 | -0.3 | % | 2,604 | 1,589 | 63.9 | % | ||||||||||||
- Commercial | 873 | 853 | 2.3 | % | 1,762 | 1,119 | 57.5 | % | |||||||||||||
- Industrial | 1,253 | 1,249 | 0.3 | % | 2,509 | 1,678 | 49.5 | % | |||||||||||||
- Other | 7 | 7 | 0.0 | % | 14 | 9 | 55.6 | % | |||||||||||||
Total West Virginia | 3,218 | 3,197 | 0.7 | % | 6,889 | 4,395 | 56.7 | % | |||||||||||||
Total Residential | 11,832 | 11,958 | -1.1 | % | 25,926 | 24,093 | 7.6 | % | |||||||||||||
Total Commercial | 10,564 | 10,460 | 1.0 | % | 20,948 | 19,254 | 8.8 | % | |||||||||||||
Total Industrial | 12,784 | 12,433 | 2.8 | % | 25,354 | 22,499 | 12.7 | % | |||||||||||||
Total Other | 151 | 149 | 1.3 | % | 299 | 288 | 3.8 | % | |||||||||||||
Total Companies Distribution Deliveries | 35,331 | 35,000 | 0.9 | % | 72,527 | 66,134 | 9.7 | % | |||||||||||||
* Includes the Allegheny Energy, Inc. (AE) companies for 6 months in 2012 and 4 months in 2011 | |||||||||||||||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2012 14
FirstEnergy Corp.
Statistical Summary
Weather | Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||
2012 | 2011 | Normal | 2012 | 2011 | Normal | ||||||||||
Composite Heating-Degree-Days | 502 | 509 | 622 | 2,691 | 3,419 | 3,454 | |||||||||
Composite Cooling-Degree-Days | 332 | 316 | 250 | 344 | 316 | 251 | |||||||||
Shopping Statistics(1) | Three Months Ended June 30 | Six Months Ended June 30 | ||||||||
2012 | 2011 | 2012 | 2011 | |||||||
OE | 77% | 74% | 75% | 72% | ||||||
PP | 67% | 60% | 64% | 56% | ||||||
CEI | 85% | 83% | 84% | 81% | ||||||
TE | 76% | 73% | 75% | 72% | ||||||
JCP&L | 51% | 45% | 50% | 43% | ||||||
Met-Ed | 65% | 51% | 60% | 44% | ||||||
Penelec | 69% | 58% | 66% | 50% | ||||||
MP | N/A | N/A | N/A | N/A | ||||||
PE(2) | 49% | 46% | 46% | 44% | ||||||
WP | 61% | 50% | 58% | 49% | ||||||
(1) Based upon average quarterly MWH. | ||||||||||
(2) Represents Maryland only. | ||||||||||
Competitive Operating Statistics* | Three Months Ended June 30 | Six Months Ended June 30 | |||||||||
2012 | 2011 | 2012 | 2011 | ||||||||
Ongoing Generation Capacity Factors: | |||||||||||
Nuclear | 78% | 75% | 88% | 83% | |||||||
Fossil - Baseload | 67% | 64% | 64% | 65% | |||||||
Fossil - Load Following | 54% | 46% | 33% | 53% | |||||||
Ongoing Generation Fuel Rate: | |||||||||||
Nuclear | $7.78 | $7.74 | $7.58 | $7.20 | |||||||
Fossil | $28 | $29 | $28 | $28 | |||||||
Total Fleet | $22 | $23 | $21 | $21 | |||||||
Ongoing Generation Output: | |||||||||||
Nuclear | 30% | 28% | 34% | 32% | |||||||
Fossil - Baseload | 58% | 55% | 55% | 49% | |||||||
Fossil - Load Following | 7% | 15% | 6% | 17% | |||||||
Peaking/Hydro | 5% | 2% | 5% | 2% | |||||||
* All competitive units excluding plants to be deactivated; includes data for AE's unregulated generating plants for 6 months in 2012 and 4 months in 2011 | |||||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2012 15
FirstEnergy Corp.
Statistical Summary
Summary of Sales, Power Purchases and Generation Output (MWH in thousands) | ||||||||||||||||||||||
Three Months Ended June 30 | Six Months Ended June 30* | |||||||||||||||||||||
Contract Sales | 2012 | 2011 | Change | 2012 | 2011 | Change | ||||||||||||||||
POLR | ||||||||||||||||||||||
- OH | 1,539 | 1,846 | (307 | ) | 3,395 | 4,712 | (1,317 | ) | ||||||||||||||
- PA | 2,081 | 3,245 | (1,164 | ) | 4,865 | 6,654 | (1,789 | ) | ||||||||||||||
- MD | 706 | 642 | 64 | 1,481 | 894 | 587 | ||||||||||||||||
Total POLR | 4,326 | 5,733 | (1,407 | ) | 9,741 | 12,260 | (2,519 | ) | ||||||||||||||
Structured Sales | ||||||||||||||||||||||
- Bilaterals | 619 | 215 | 404 | 1,403 | 362 | 1,041 | ||||||||||||||||
- Muni/Co-op | 434 | 785 | (351 | ) | 878 | 1,069 | (191 | ) | ||||||||||||||
Total Structured Sales | 1,053 | 1,000 | 53 | 2,281 | 1,431 | 850 | ||||||||||||||||
Direct - LCI | ||||||||||||||||||||||
- OH | 7,254 | 5,654 | 1,600 | 13,501 | 10,479 | 3,022 | ||||||||||||||||
- PA | 4,025 | 3,794 | 231 | 7,970 | 6,805 | 1,165 | ||||||||||||||||
- NJ | 319 | 427 | (108 | ) | 657 | 801 | (144 | ) | ||||||||||||||
- MI | 577 | 485 | 92 | 1,130 | 902 | 228 | ||||||||||||||||
- IL | 767 | 820 | (53 | ) | 1,493 | 1,422 | 71 | |||||||||||||||
- MD | 165 | 164 | 1 | 316 | 297 | 19 | ||||||||||||||||
Total Direct - LCI | 13,107 | 11,344 | 1,763 | 25,067 | 20,706 | 4,361 | ||||||||||||||||
Direct - MCI | ||||||||||||||||||||||
- OH | 586 | 428 | 158 | 1,154 | 771 | 383 | ||||||||||||||||
- PA | 242 | 200 | 42 | 493 | 312 | 181 | ||||||||||||||||
- IL | 1 | — | 1 | 1 | — | 1 | ||||||||||||||||
- MD | 1 | — | 1 | 1 | — | 1 | ||||||||||||||||
Total Direct - MCI | 830 | 628 | 202 | 1,649 | 1,083 | 566 | ||||||||||||||||
Aggregation | ||||||||||||||||||||||
- OH | 3,612 | 3,658 | (46 | ) | 7,548 | 7,779 | (231 | ) | ||||||||||||||
- IL | 26 | — | 26 | 56 | — | 56 | ||||||||||||||||
Total Aggregation | 3,638 | 3,658 | (20 | ) | 7,604 | 7,779 | (175 | ) | ||||||||||||||
Mass Market | ||||||||||||||||||||||
- OH | 303 | 160 | 143 | 647 | 305 | 342 | ||||||||||||||||
- PA | 787 | 152 | 635 | 1,659 | 195 | 1,464 | ||||||||||||||||
- IL | 5 | — | 5 | 9 | — | 9 | ||||||||||||||||
- MD | 11 | — | 11 | 11 | — | 11 | ||||||||||||||||
Total Mass Market | 1,106 | 312 | 794 | 2,326 | 500 | 1,826 | ||||||||||||||||
Total Contract Sales | 24,060 | 22,675 | 1,385 | 48,668 | 43,759 | 4,909 | ||||||||||||||||
Wholesale Sales** | ||||||||||||||||||||||
- Spot | 4,846 | 5,006 | (160 | ) | 8,353 | 7,367 | 986 | |||||||||||||||
Total Wholesale Sales | 4,846 | 5,006 | (160 | ) | 8,353 | 7,367 | 986 | |||||||||||||||
Purchased Power** | ||||||||||||||||||||||
- Bilaterals | 400 | 801 | (401 | ) | 928 | 1,633 | (705 | ) | ||||||||||||||
- Spot | 4,686 | 3,479 | 1,207 | 9,911 | 6,180 | 3,731 | ||||||||||||||||
Total Purchased Power | 5,086 | 4,280 | 806 | 10,839 | 7,813 | 3,026 | ||||||||||||||||
Generation Output** | ||||||||||||||||||||||
- Fossil | 18,081 | 17,073 | 1,008 | 32,920 | 30,299 | 2,621 | ||||||||||||||||
- Nuclear | 6,768 | 6,529 | 239 | 15,367 | 14,378 | 989 | ||||||||||||||||
Total Generation Output | 24,849 | 23,602 | 1,247 | 48,287 | 44,677 | 3,610 | ||||||||||||||||
*Includes AE Supply for 6 months in 2012 and 4 months in 2011 | ||||||||||||||||||||||
**Actual MWH - includes coal plants to be deactivated | ||||||||||||||||||||||
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Consolidated Report to the Financial Community - 2nd Quarter 2012 16
FirstEnergy Corp.
Special Items - By Segment
(In millions)
Competitive | |||||||||||||||||||||||
Regulated | Regulated | Energy | |||||||||||||||||||||
Special Items - Three Months Ended June 30, 2012 | Distribution | Transmission | Services | Other | Consolidated | ||||||||||||||||||
Pre-Tax Items: | |||||||||||||||||||||||
Regulatory charges | $ | (9 | ) | $ | — | $ | — | $ | — | $ | (9 | ) | |||||||||||
Trust securities impairment | — | — | (3 | ) | — | (3 | ) | ||||||||||||||||
Merger transaction/integration costs | (2 | ) | — | (1 | ) | — | (3 | ) | |||||||||||||||
Non-core asset sales/impairments | — | — | 12 | — | 12 | ||||||||||||||||||
Mark-to-market adjustments | — | — | 9 | (20 | ) | (11 | ) | ||||||||||||||||
Merger accounting - commodity contracts | (2 | ) | — | (21 | ) | — | (23 | ) | |||||||||||||||
Plant closing costs | (6 | ) | — | (42 | ) | — | (48 | ) | |||||||||||||||
Subtotal | (19 | ) | — | (46 | ) | (20 | ) | (85 | ) | ||||||||||||||
Income tax charge - retiree prescription drug subsidy | (6 | ) | — | (1 | ) | (1 | ) | (8 | ) | ||||||||||||||
Income taxes | 7 | — | 17 | 7 | 31 | ||||||||||||||||||
After-Tax Effect | $ | (18 | ) | $ | — | $ | (30 | ) | $ | (14 | ) | $ | (62 | ) | |||||||||
Competitive | |||||||||||||||||||||||
Regulated | Regulated | Energy | |||||||||||||||||||||
Special Items - Three Months Ended June 30, 2011 | Distribution | Transmission | Services | Other | Consolidated | ||||||||||||||||||
Pre-Tax Items: | |||||||||||||||||||||||
Regulatory charges | $ | — | $ | — | $ | — | $ | (7 | ) | $ | (7 | ) | |||||||||||
Trust securities impairment | — | — | (3 | ) | — | (3 | ) | ||||||||||||||||
Merger transaction/integration costs | (8 | ) | (1 | ) | (8 | ) | — | (17 | ) | ||||||||||||||
Non-core asset sales/impairments | — | — | (7 | ) | — | (7 | ) | ||||||||||||||||
Mark-to-market adjustments | — | — | (20 | ) | — | (20 | ) | ||||||||||||||||
Merger accounting - commodity contracts | (2 | ) | — | (49 | ) | — | (51 | ) | |||||||||||||||
Litigation resolution | 1 | — | (5 | ) | (29 | ) | (33 | ) | |||||||||||||||
Debt redemption costs | — | — | (1 | ) | (2 | ) | (3 | ) | |||||||||||||||
Subtotal | (9 | ) | (1 | ) | (93 | ) | (38 | ) | (141 | ) | |||||||||||||
Income taxes | 3 | — | 36 | 14 | 53 | ||||||||||||||||||
After-Tax Effect | $ | (6 | ) | $ | (1 | ) | $ | (57 | ) | $ | (24 | ) | $ | (88 | ) | ||||||||
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Consolidated Report to the Financial Community - 2nd Quarter 2012 17
FirstEnergy Corp.
Special Items - By Segment
(In millions)
Competitive | |||||||||||||||||||||||
Regulated | Regulated | Energy | |||||||||||||||||||||
Special Items - Six Months Ended June 30, 2012 | Distribution | Transmission | Services | Other | Consolidated | ||||||||||||||||||
Pre-Tax Items: | |||||||||||||||||||||||
Regulatory charges | $ | (17 | ) | $ | — | $ | — | $ | — | $ | (17 | ) | |||||||||||
Trust securities impairment | — | — | (6 | ) | — | (6 | ) | ||||||||||||||||
Merger transaction/integration costs | (3 | ) | — | (2 | ) | — | (5 | ) | |||||||||||||||
Non-core asset sales/impairments | — | — | 7 | (1 | ) | 6 | |||||||||||||||||
Mark-to-market adjustments | — | — | 48 | (20 | ) | 28 | |||||||||||||||||
Merger accounting - commodity contracts | (4 | ) | — | (47 | ) | — | (51 | ) | |||||||||||||||
Plant closing costs | (12 | ) | — | (72 | ) | (84 | ) | ||||||||||||||||
Subtotal | (36 | ) | — | (72 | ) | (21 | ) | (129 | ) | ||||||||||||||
Income tax charge - retiree prescription drug subsidy | (12 | ) | — | (2 | ) | (2 | ) | (16 | ) | ||||||||||||||
Income taxes | 13 | — | 27 | 5 | 45 | ||||||||||||||||||
After-Tax Effect | $ | (35 | ) | $ | — | $ | (47 | ) | $ | (18 | ) | $ | (100 | ) | |||||||||
Competitive | |||||||||||||||||||||||
Regulated | Regulated | Energy | |||||||||||||||||||||
Special Items - Six Months Ended June 30, 2011 | Distribution | Transmission | Services | Other | Consolidated | ||||||||||||||||||
Pre-Tax Items: | |||||||||||||||||||||||
Regulatory charges | $ | (21 | ) | $ | — | $ | — | $ | (10 | ) | $ | (31 | ) | ||||||||||
Trust securities impairment | (1 | ) | — | (8 | ) | — | (9 | ) | |||||||||||||||
Merger transaction/integration costs | (80 | ) | (4 | ) | (85 | ) | (5 | ) | (174 | ) | |||||||||||||
Non-core asset sales/impairments | — | — | (21 | ) | (11 | ) | (32 | ) | |||||||||||||||
Mark-to-market adjustments | — | — | (32 | ) | — | (32 | ) | ||||||||||||||||
Merger accounting - commodity contracts | (2 | ) | — | (73 | ) | — | (75 | ) | |||||||||||||||
Litigation resolution | 1 | — | (5 | ) | (29 | ) | (33 | ) | |||||||||||||||
Debt redemption costs | — | — | (1 | ) | (2 | ) | (3 | ) | |||||||||||||||
Subtotal | (103 | ) | (4 | ) | (225 | ) | (57 | ) | (389 | ) | |||||||||||||
Income tax charge/income tax resolution | — | — | (1 | ) | (36 | ) | (37 | ) | |||||||||||||||
Income taxes | 35 | 1 | 75 | 21 | 132 | ||||||||||||||||||
After-Tax Effect | $ | (68 | ) | $ | (3 | ) | $ | (151 | ) | $ | (72 | ) | $ | (294 | ) | ||||||||
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Consolidated Report to the Financial Community - 2nd Quarter 2012 18
FirstEnergy Corp.
Special Items - Consolidated
(In millions, except for per share amounts)
Special Items | |||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||
June 30 | June 30 | ||||||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||||||
Pre-tax Items - Income Increase (Decrease) | |||||||||||||||||||
Regulatory charges (a) | $ | (9 | ) | $ | (7 | ) | $ | (17 | ) | $ | (31 | ) | |||||||
Trust securities impairment (b) | (3 | ) | (3 | ) | (6 | ) | (9 | ) | |||||||||||
Merger transaction/integration costs (c) | (3 | ) | (17 | ) | (5 | ) | (174 | ) | |||||||||||
Non-core asset sales/impairments (d) | 12 | (7 | ) | 6 | (32 | ) | |||||||||||||
Mark-to-market adjustments (e) | (11 | ) | (20 | ) | 28 | (32 | ) | ||||||||||||
Merger accounting - commodity contracts (f) | (23 | ) | (51 | ) | (51 | ) | (75 | ) | |||||||||||
Plant closing costs (g) | (48 | ) | — | (84 | ) | — | |||||||||||||
Litigation resolution (h) | — | (33 | ) | — | (33 | ) | |||||||||||||
Debt redemption (i) | — | (3 | ) | — | (3 | ) | |||||||||||||
Total-Pretax Items | $ | (85 | ) | $ | (141 | ) | $ | (129 | ) | $ | (389 | ) | |||||||
Income tax charge/Income tax resolution | (8 | ) | — | (16 | ) | (37 | ) | ||||||||||||
EPS Effect | $ | (0.15 | ) | $ | (0.22 | ) | $ | (0.24 | ) | $ | (0.77 | ) | |||||||
(a) | For YTD 2012, $15 million included in "Other operating expenses" and $2 million included in "Amortization of regulatory assets, net". For YTD 2011, $13 million included in "Amortization of regulatory assets"; $12 million included in "Other operating expenses"; $6 million included in "Revenues". | ||||||||||||||||||
(b) | Included in "Investment income" | ||||||||||||||||||
(c) | For YTD 2012, included in "Other operating expenses". For YTD 2011, $168 million included in "Other operating expenses"; $6 million included in "Fuel". | ||||||||||||||||||
(d) | For YTD 2012, ($17) million included in "Revenues"; $11 million included in "Investment income". For YTD 2011 included in "Other operating expenses". | ||||||||||||||||||
(e) | For YTD 2012, $20 million included in "Interest expense"; ($48) million in "Other operating expenses". For YTD 2011 included in "Other operating expenses". | ||||||||||||||||||
(f) | For YTD 2012, $20 million included in "Fuel"; $27 million included in "Revenues"; $4 million included in "Purchased Power". For YTD 2011 $31 million included in "Fuel"; $30 million included in "Revenues"; $14 million included in "Other operating expenses". | ||||||||||||||||||
(g) | For YTD 2012, ($1) million included in "Revenues", $136 million included in "Fuel", ($98) million included in Purchased Power, $40 million included in "Other operating expenses"; and $7 million included in General Taxes. | ||||||||||||||||||
(h) | For YTD 2011, $29 million included in "Other operating expenses"; $13 million included in "Revenues"; ($9) million included in "Amortization of regulatory assets". | ||||||||||||||||||
(i) | Included in "Interest expense" | ||||||||||||||||||
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Consolidated Report to the Financial Community - 2nd Quarter 2012 19
FirstEnergy Corp.
EPS Reconciliations
Earnings Per Share (EPS) | ||||||||||||||||||||||
(Reconciliation of GAAP to Non-GAAP) | ||||||||||||||||||||||
Three Months Ended | Six Months Ended | Estimate | ||||||||||||||||||||
June 30 | June 30 | for Year | ||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | ||||||||||||||||||
Basic EPS (GAAP basis) | $ | 0.45 | $ | 0.48 | $ | 1.18 | $ | 0.67 | $2.80 - $3.10 | |||||||||||||
Excluding Special Items: | ||||||||||||||||||||||
Regulatory charges | 0.01 | 0.01 | 0.03 | 0.05 | 0.07 | |||||||||||||||||
Trust securities impairment | 0.01 | 0.01 | 0.01 | 0.02 | 0.01 | |||||||||||||||||
Income tax charge - retiree prescription drug subsidy | 0.02 | — | 0.04 | — | 0.08 | |||||||||||||||||
Merger transaction/integration costs | — | 0.03 | 0.01 | 0.41 | 0.02 | |||||||||||||||||
Impact of non-core asset sales/impairments | (0.01 | ) | 0.01 | (0.01 | ) | 0.06 | — | |||||||||||||||
Mark-to-market adjustments | 0.02 | 0.03 | (0.04 | ) | 0.05 | (0.02 | ) | |||||||||||||||
Plant closing costs | 0.07 | — | 0.13 | — | 0.20 | |||||||||||||||||
Merger accounting - commodity contracts | 0.03 | 0.08 | 0.07 | 0.12 | 0.14 | |||||||||||||||||
Litigation resolution | — | 0.05 | — | 0.06 | — | |||||||||||||||||
Basic EPS (Non-GAAP basis) | $ | 0.60 | $ | 0.70 | $ | 1.42 | 1.44 | $3.30 - $3.60 | ||||||||||||||
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Consolidated Report to the Financial Community - 2nd Quarter 2012 20
Recent Developments
Financial Matters
Dividend
On July 17, 2012, the Board of Directors of FirstEnergy Corp. (FirstEnergy or FE) declared an unchanged quarterly dividend of $0.55 per share of outstanding FE common stock. The dividend will be payable September 1, 2012, to shareholders of record as of August 7, 2012.
Financing Activities
In May 2012, FirstEnergy executed a total of $1.6 billion forward starting swaps expiring December 31, 2013, in order to manage interest rate risk associated with anticipated future long-term debt issuances, which includes refinancings.
On May 8, 2012, FET entered into a new $1 billion revolving credit facility. In conjunction with this action, an existing $450 million TrAIL revolving credit facility was terminated. Additionally, FirstEnergy and FirstEnergy Solutions/AE Supply amended their existing $2.0 billion and $2.5 billion revolving credit facilities, respectively. The termination date on both facilities was extended from June 2016 to May 2017 and pricing was reduced to reflect current market conditions.
On August 1, 2012, FirstEnergy Generation Corp. (FGCO) mandatorily repurchased approximately $106.5 million of 4.75% pollution control revenue bonds, which it is holding for future remarketing or refinancing subject to market and other conditions.
Operational Matters
Enhancing Transmission System Reliability
On May 29, 2012, FirstEnergy announced plans to construct a series of transmission projects to enhance service reliability across its service area. The projects have been approved by PJM and will include specialized voltage regulating equipment in northern Ohio. In addition to the work in Ohio, approved transmission projects will also be undertaken in Pennsylvania, West Virginia, New Jersey and Maryland as part of FirstEnergy's ongoing commitment to enhance its transmission system reliability. FirstEnergy estimates spending between $700 - $900 million through 2016 on these projects.
On June 14, 2012, Jersey Central Power & Light Company (JCP&L) announced that it plans to begin work on 17 transmission construction projects over the next six months in its northern and central New Jersey service areas. These projects are part of the multi-year, $200 million Local Infrastructure and Transmission Enhancement (LITE) program, which began in 2011, to address New Jersey's growing demand for electricity and provide key enhancements to the transmission system designed to improve service reliability for JCP&L's 1.1 million customers. All of the LITE projects are being designed and built specifically to serve only JCP&L customers.
Beaver Valley Unit 1 Returns to Service after Refueling Outage
On May 11, 2012, Beaver Valley Power Station Unit 1 returned to service following an April 9, 2012, shutdown for refueling and maintenance. During the outage, 65 of the 157 fuel assemblies were exchanged and safety inspections were successfully conducted. In addition, maintenance and improvement projects were completed which are designed to ensure continued safe and reliable operations. Prior to the outage, Beaver Valley Unit 1 operated safely and reliably for 359 consecutive days during which time it generated more than 9.3 million megawatt hours of electricity. The plant also posted
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Consolidated Report to the Financial Community - 2nd Quarter 2012 21
an industry top-decile forced-loss rate of 0.01 percent during the 18 months of operation prior to the outage.
Davis-Besse Returns to Service after Refueling Outage
On June 13, 2012, Davis-Besse Nuclear Power Station returned to service following a May 6, 2012, shutdown for refueling and maintenance. During the outage, 68 of the 177 fuel assemblies were exchanged and safety inspections, including inspections of the station's steam generators, were conducted. Preventive maintenance and improvement projects also were completed that are designed to promote continued safe and reliable operations.
Impact of Recent Storm Costs
During the last weekend of June 2012, Monongahela Power Company (MP), The Potomac Edison Company (PE), West Penn Power Company and Ohio Edison Company (OE) experienced significant customer outages due to a rare “derecho” wind storm. While projections for restoration costs are not finalized, estimated costs related to this storm are expected to exceed $130 million. Approximately 70 percent of these expenditures are anticipated to be capital-related. Most of the remaining maintenance costs are expected to be deferred for future recovery. MP and PE do not currently have regulatory authority to defer storm costs, but expect to make a filing in the third quarter of 2012 with the Public Service Commission of West Virginia requesting deferral of these costs.
Regulatory Matters
Ohio Electric Security Plan Update
On July 18, 2012, the Public Utilities Commission of Ohio (PUCO) approved the FirstEnergy Ohio utilities' Electric Security Plan (ESP) allowing OE, The Cleveland Electric Illuminating Company and The Toledo Edison Company (the Ohio Utilities) to essentially extend the current ESP for two additional years and establish electricity prices for their customers through May 31, 2016.
The approved ESP will maintain the substantial benefits from the current ESP, including:
• | Freezing current base distribution rates through May 31, 2016 |
• | Continuing to provide economic development and assistance to low-income customers for the two- year extension period at the levels established in the existing ESP |
• | Providing Percentage of Income Payment Plan customers with a 6 percent generation rate discount |
• | Continuing to provide power to shopping and non-shopping customers at a market-based price set through an auction process, and |
• | Continuing Rider DCR that allows continued investment in the distribution system for the benefit of customers. |
The approved ESP provides significant additional benefits including:
• | Securing generation supply for a longer period of time to mitigate any potential price spikes for FirstEnergy Ohio utility customers who do not switch to a competitive generation supplier; and |
• | Extending the recovery period for costs associated with purchasing renewable energy credits mandated by Senate Bill 221 through the end of the new ESP period. This will reduce the monthly renewable energy charge for all FirstEnergy Ohio non-shopping utility customers by spreading out the costs over the entire ESP period. |
The approved plan reflects the diverse interests and concerns of 19 signatories, including parties that represent residential, low-income, commercial and industrial customers, as well as competitive retail electric suppliers, schools and hospitals.
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Consolidated Report to the Financial Community - 2nd Quarter 2012 22
New Jersey Board of Public Utilities Update
In its written Order issued July 31, 2012, affirming the determination made at its July 18, 2012 agenda meeting, the NJBPU ordered JCP&L to file a base rate case using a historical 2011 test year on or before November 1, 2012.
Ohio Utilities Solar Renewable Energy
On April 26, 2012, FirstEnergy announced that its Ohio Utilities have met the 2012 benchmarks for in- state solar renewable energy that were established under Ohio's energy law. The benchmarks were met through two successful requests for proposal (RFP) to secure 10-year solar renewable energy credits (SRECs).
Consent Decree Regarding Little Blue Run
On July 27, 2012, FGCO signed a proposed Consent Decree with the Pennsylvania Department of Environmental Protection (PA DEP) regarding the closure process for its Little Blue Run (LBR) impoundment, a residual waste disposal facility located in Greene Township, Pennsylvania, that serves FGCO's Bruce Mansfield Plant, to resolve a complaint against FGCO filed in the U.S. District Court for the Western District of Pennsylvania. The Consent Decree will not be finalized until it is entered by the court and requires FGCO to conduct monitoring, studies and submit a closure plan to the PA DEP, no later than March 31, 2013, and to discontinue disposal to LBR as currently permitted by December 31, 2016. The Consent Decree also requires payment of civil penalties of $800,000 to resolve claims under the Pennsylvania Solid Waste Management Act.
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Consolidated Report to the Financial Community - 2nd Quarter 2012 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. Actual results may differ materially due to: the speed and nature of increased competition in the electric utility industry, the impact of the regulatory process on the pending matters before FERC and in the various states in which we do business including, but not limited to, matters related to rates, the status of the PATH project in light of the PJM Interconnection, L.L.C., (PJM) direction to suspend work on the project pending review of its planning process, its re-evaluation of the need for the project and the uncertainty of the timing and amounts of any related capital expenditures, the uncertainties of various cost recovery and cost allocation issues resulting from ATSI's realignment into PJM, 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, the continued ability of FirstEnergy's regulated utilities to collect transition and other costs, operation and maintenance costs being higher than anticipated, other legislative and regulatory changes, and revised environmental requirements, including possible GHG emission, water intake and coal combustion residual regulations, the potential impacts of any laws, rules or regulations that ultimately replace CAIR, including CSAPR which was stayed by the courts on December 30, 2011, and the effects of the EPA's MATS rules, the uncertainty of the timing and amounts of the capital expenditures that may arise in connection with any litigation including NSR litigation or potential regulatory initiatives or rulemakings (including that such expenditures could result in our decision to shut down or idle certain generating units), the uncertainties associated with the company's plan to retire its older unscrubbed regulated and competitive fossil units, including the impact on vendor commitments the timing of, those deactivations as they relate to, among other things, the Reliability Must Run arrangements and the reliability of the transmission grid, adverse regulatory or legal decisions and outcomes with respect to our nuclear operations (including, but not limited to the revocation or non-renewal of necessary licenses, approvals or operating permits by the NRC including as a result of the incident at Japan's Fukushima Daiichi Nuclear Plant), issues that could result from the NRC's review of the indications of cracking in the Davis-Besse plant shield building, adverse legal decisions and outcomes related to Met-Ed's and Penelec's ability to recover certain transmission costs through their transmission service charge riders, the continuing availability of generating units, changes in their operational status and any related impacts on vendor commitments, replacement power costs being higher than anticipated or inadequately hedged, the ability to comply with applicable state and federal reliability standards and energy efficiency mandates, changes in customers' demand for power, including but not limited to, changes resulting from the implementation of state and federal energy efficiency mandates, the ability to accomplish or realize anticipated benefits from strategic goals, FirstEnergy's ability to improve electric commodity margins and the impact of, among other factors, the increased cost of fuel and fuel transportation on such margins, the ability to experience growth in the distribution business, the changing market conditions that could affect the measurement of liabilities and the value of assets held in FirstEnergy's NDTs, pension trusts and other trust funds, and cause FirstEnergy and its subsidiaries to make additional contributions sooner, or in amounts that are larger than currently anticipated, the impact of changes to material accounting policies, the ability to access the public securities and other capital and credit markets in accordance with FirstEnergy's financing plan, the cost of such capital and overall condition of the capital and credit markets affecting FirstEnergy and its subsidiaries, changes in general economic conditions affecting FirstEnergy and its subsidiaries, interest rates and any actions taken by credit rating agencies that could negatively affect FirstEnergy's and its subsidiaries' access to financing or their costs and increase requirements to post additional collateral to support outstanding commodity positions, LOCs and other financial guarantees, the state of the national and regional economy and its impact on major industrial and commercial customers of FirstEnergy and its subsidiaries, issues concerning the soundness of domestic and foreign financial institutions and counterparties with which FirstEnergy and its subsidiaries do business, the risks and other factors discussed from time to time in FirstEnergy's and its applicable subsidiaries' SEC filings, and other similar factors. 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. 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, except as required by law, any forward-looking statements contained herein as a result of new information, future events or otherwise.
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Consolidated Report to the Financial Community - 2nd Quarter 2012 24