What changed in this filing

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Item 1. Business

2023-02-13 compared with 2022-02-16 · 90 added, 73 removed, 196 unchanged (45% of the section changed)

9 unchanged sentences

OE owns property and does business as an electric public utility in Ohio.

OE engages in the distribution and sale of electric energy to communities in a 7,000 square mile area of central and northeastern Ohio.

OE engages in the distribution and sale of electric energy to communities in central and northeastern Ohio.

The area it serves has a population of approximately 2.4 million.

OE owns all of Penn’s outstanding common stock.

Penn owns property and does business as an electric public utility in Pennsylvania.

Penn furnishes electric service to communities in 1,100 square miles of western Pennsylvania.

Penn furnishes electric service to communities in western Pennsylvania.

The area it serves has a population of approximately 0.4 million.

CEI does business as an electric public utility in Ohio.

CEI engages in the distribution and sale of electric energy in an area of 1,600 square miles in northeastern Ohio.

CEI engages in the distribution and sale of electric energy in northeastern Ohio.

The area it serves has a population of approximately 1.7 million.

TE does business as an electric public utility in Ohio.

TE engages in the distribution and sale of electric energy in an area of 2,300 square miles in northwestern Ohio.

TE engages in the distribution and sale of electric energy in northwestern Ohio.

The area it serves has a population of approximately 0.7 million.

JCP&L owns property and does business as an electric public utility in New Jersey.

JCP&L provides transmission and distribution services in 3,200 square miles of northern, western, and east central New Jersey.

JCP&L provides transmission and distribution services in northern, western, and east central New Jersey.

The area it serves has a population of approximately 2.9 million.

ME owns property and does business as an electric public utility in Pennsylvania.

ME provides distribution services in 3,300 square miles of eastern and south central Pennsylvania.

ME provides distribution services in eastern and south central Pennsylvania.

The area it serves has a population of approximately 1.3 million.

PN owns property and does business as an electric public utility in Pennsylvania.

PN provides distribution services in 17,600 square miles of western, northern, and south central Pennsylvania.

PN provides distribution services in western, northern, and south central Pennsylvania.

The area PN serves has a population of approximately 1.2 million.

Also, PN, as lessee of the property of its subsidiary, the Waverly Electric Light & Power Company, serves approximately 4,000 customers in the Waverly, New York vicinity.

On February 10, 2021, PN entered into an agreement to transfer its customers and the related assets in Waverly, New York to Tri-County Rural Electric Cooperative;

the completion of such transfer is subject to several closing conditions including regulatory approval, but is expected to have an immaterial impact to FirstEnergy's financial statements.

PE owns property and does business as an electric public utility in Maryland, Virginia, and West Virginia.

PE provides transmission and distribution services in portions of Maryland and West Virginia and provides transmission services in Virginia in an area totaling approximately 5,500 square miles.

PE provides transmission and distribution services in portions of Maryland and West Virginia and provides transmission services in Virginia.

The area it serves has a population of approximately 1.0 million.

MP owns property and does business as an electric public utility in West Virginia.

MP provides generation, transmission, and distribution services in 13,000 square miles of northern West Virginia.

MP provides generation, transmission, and distribution services in northern West Virginia.

The area it serves has a population of approximately 0.8 million.

2 unchanged sentences

WP owns property and does business as an electric public utility in Pennsylvania.

WP provides transmission and distribution services in 10,400 square miles of southwestern, south-central, and northern Pennsylvania.

WP provides transmission and distribution services in southwestern, south-central, and northern Pennsylvania.

The area it serves has a population of approximately 1.6 million.

FirstEnergy is proceeding with the consolidation of the Pennsylvania Companies into a new, single operating entity.

The PA Consolidation will require, among other steps:

(a) the transfer of certain Pennsylvania-based transmission assets owned by WP to KATCo, (b) the transfer of Class B equity interests of MAIT currently held by PN and ME to FE (and ultimately transferred to FET as part of the FET Minority Equity Interest Sale), (c) the formation of PA NewCo and (d) the merger of each of the Pennsylvania Companies with and into PA NewCo, with PA NewCo surviving such mergers as the successor-in-interest to all assets and liabilities of the Pennsylvania Companies.

Following completion of the PA Consolidation, PA NewCo will be FE’s only regulated utility in Pennsylvania encompassing the operations previously conducted individually by the Pennsylvania Companies.

Consummation of the PA Consolidation is contingent upon numerous conditions, including the approval of NYPSC, PPUC and FERC.

Subject to receipt of such regulatory approvals, FirstEnergy expects that the PA Consolidation will close by early 2024.

Regulated Transmission Operating Subsidiaries

FET, the parent of ATSI, MAIT, PATH, and TrAIL, is a subsidiary of FE which holds 80.1% of its issued and outstanding membership interests.

Brookfield owns the remaining 19.9% of the issued and outstanding membership interests of FET.

Through its subsidiaries, FET owns and operates high-voltage transmission facilities in the PJM Region.

FET's subsidiaries are subject to regulation by FERC and applicable state regulatory authorities.

On February 2, 2023, FE, along with FET, entered into the FET P&SA II with Brookfield and the Brookfield Guarantors, pursuant to which FE agreed to sell to Brookfield at the closing, and Brookfield agreed to purchase from FE, an incremental 30% equity interest in FET for a purchase price of $3.5 billion.

The purchase price will be payable in part by the issuance of a promissory note expected to be in the principal amount of $1.75 billion.

The remaining $1.75 billion of the purchase price will be payable in cash at the closing.

As a result of the consummation of the transaction, Brookfield’s interest in FET will increase from 19.9% to 49.9%, while FE will retain the remaining 50.1% ownership interests of FET.

The transaction is subject to customary closing conditions, including approval from the FERC and certain state utility commissions, and completion of review by the CFIUS.

In addition, pursuant to the FET P&SA II, FirstEnergy has agreed to make the necessary filings with the applicable regulatory authorities for the PA Consolidation.

The FET Minority Equity Interest Sale is expected to close by early 2024.

Upon closing, FET will continue to be consolidated in FirstEnergy’s GAAP financial statements.

ATSI owns high-voltage transmission facilities in PJM, which consist of approximately 7,900 circuit miles of transmission lines with nominal voltages of 345 kV, 138 kV and 69 kV in Ohio and Pennsylvania.

13 unchanged sentences

The segment's results also reflect the net transmission expenses related to the delivery of electricity on FirstEnergy's transmission facilities.

On November 6, 2021, FirstEnergy, along with FET, entered into the FET P&SA, with Brookfield and Brookfield Guarantors pursuant to which FET agreed to issue and sell to Brookfield at the closing, and Brookfield agreed to purchase from FET, certain newly issued membership interests of FET, such that Brookfield will own 19.9% of the issued and outstanding membership interests of FET, for a purchase price of $2.375 billion.

The transaction is subject to customary closing conditions, including approval from the FERC and review by the CFIUS.

Corporate/Other reflects corporate support and other costs not charged or attributable to the Utilities or Transmission Companies, including FE's retained Pension and OPEB assets and liabilities of the FES Debtors, interest expense on FE’s holding company debt and other businesses that do not constitute an operating segment.

On November 6, 2021, FirstEnergy, along with FET, entered into the FET P&SA I, with Brookfield and the Brookfield Guarantors pursuant to which FET agreed to issue and sell to Brookfield at the closing, and Brookfield agreed to purchase from FET, certain newly issued membership interests of FET, such that Brookfield would own 19.9% of the issued and outstanding membership interests of FET, for a purchase price of $2.375 billion.

The transaction closed on May 31, 2022.

The purchase price will be payable in part by the issuance of a promissory note expected to be in the principal amount of $1.75 billion.

The remaining $1.75 billion of the purchase price will be payable in cash at the closing.

As a result of the consummation of the transaction, Brookfield’s interest in FET will increase from 19.9% to 49.9%, while FE will retain the remaining 50.1% ownership interests of FET.

The transaction is subject to customary closing conditions, including approval from the FERC and certain state utility commissions, and completion of review by the CFIUS.

In addition, pursuant to the FET P&SA II, FirstEnergy has agreed to make

the necessary filings with the applicable regulatory authorities for the PA Consolidation.

The FET Minority Equity Interest Sale is expected to close by early 2024.

Upon closing, FET will continue to be consolidated in FirstEnergy’s GAAP financial statements.

Corporate/Other reflects corporate support and other costs not charged or attributable to the Utilities or Transmission Companies, including FE's retained Pension and OPEB assets and liabilities of the FES Debtors, interest expense on FE’s holding company debt and other investments or businesses that do not constitute an operating segment.

Additionally, reconciling adjustments for the elimination of inter-segment transactions are included in Corporate/Other.

As of December 31, 2021, 67 MWs of electric generating capacity, representing AE Supply's OVEC capacity entitlement, is included in Corporate/Other.

As of December 31, 2022, 67 MWs of electric generating capacity, representing AE Supply's OVEC capacity entitlement, was also included in Corporate/Other for segment reporting.

As of December 31, 2022, Corporate/Other had approximately $5.4 billion of FE holding company debt.

10 unchanged sentences

State Regulation

The following table summarizes the allowed ROE and the aggregate actual ROE of the Utilities by state for the year ended December 31, 2021, as determined for regulatory purposes:

The following table summarizes the allowed ROE and the aggregate actual ROE of the Regulated Distribution Utilities by state for the year ended December 31, 2022, as determined for regulatory purposes:

State Allowed ROE Actual ROE (1)

4 unchanged sentences

(1) Actual ROE is based on methodology used in last distribution rate case and/or quarterly earnings reports, as applicable.

Rate base is for distribution assets only (except West Virginia) and reflects the actual capital structure for Pennsylvania, West Virginia and Maryland, and the allowed capital structure for Ohio.

Rate base is for distribution assets only (except West Virginia, which includes generation and transmission assets) and reflects the actual capital structure for Pennsylvania, West Virginia and Maryland, and the allowed capital structure for Ohio.

Actual ROEs reflect actual revenue (not weather normalized) and historical results should not be relied upon to estimate the outcome of future rate cases as regulatory assumptions may vary.

ROEs may not tie to upcoming rate filings due to items such as updated allocators, taxes, and adjustments.

(2) Commission-approved settlement agreements did not disclose ROE rates.

(3) On October 28, 2020, the NJBPU approved JCP&L's distribution rate case settlement with an allowed ROE of 9.6%.

Rates were effective for customers on November 1, 2021.

See "Outlook - State Regulation" in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information and discussion.

6 unchanged sentences

See "Capital Resources and Liquidity" in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information and discussion.

FirstEnergy has experienced supply chain challenges during the COVID-19 pandemic.

Lead times have increased across numerous material categories, with some as much as doubling from previous times.

Some key suppliers have struggled with labor shortages and raw material availability, which along with inflationary pressure, have increased the costs of certain materials, equipment and contractors.

FirstEnergy has continued to experience supply chain challenges due to economic conditions following the global pandemic.

Lead times continue to increase across numerous material categories, with some as much as doubling from pre-pandemic lead times.

Suppliers continue to struggle with labor shortages and raw material availability, which, along with inflationary pressure, have increased the costs and decreased the availability of certain materials, equipment and contractors.

FirstEnergy continues to monitor supply chain risk as it anticipates these challenges continuing into 2023 and is mitigating these risks by:

• Establishing a cross-functional team to forecast potential impacts to operations and programs;

• Utilizing a cross-functional team to forecast potential impacts to operations and programs;

• Expanding supply base to increase resiliency;

7 unchanged sentences

Default service for the Ohio Companies, Pennsylvania Companies and PE's Maryland jurisdiction are provided through a competitive procurement process approved by the PUCO (under ESP IV), PPUC (under the DSP) and MDPSC (under the SOS), respectively.

If any supplier fails to deliver

power to any one of those Utilities’ service areas, the Utility serving that area may need to procure the required power in the market in their role as the default LSE.

If any supplier fails to deliver power to any one of those Utilities’ service areas, the Utility serving that area may need to procure the required power in the market in their role as the default Load Serving Entity.

West Virginia electric generation continues to be regulated by the WVPSC.

MP currently has coal contracts with various terms to purchase approximately 7.9 million tons of coal for the year 2022, which fulfills its forecasted 2022 coal requirements.

This contracted coal is produced primarily from mines located in Pennsylvania, Illinois and West Virginia.

MP currently has coal contracts with various terms to purchase approximately 7.4 million tons of coal for the year 2023, which, along with its 2022 year-end inventory levels, accounts for nearly all of its forecasted 2023 coal requirements.

MP has the ability to acquire additional tonnage through options available in its current contracts, as well as purchases through the spot market.

The contracts expire at various times through 2026.

See "Outlook - Environmental Matters" in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information pertaining to the impact of increased environmental regulations on coal supply.

This contracted coal is produced primarily from mines located in Pennsylvania, Illinois and West Virginia.

In order to meet emission requirements, MP holds contracts for a variety of reagents expiring at various times through 2026, as well as the ability to purchase additional reagents through the spot market.

Additionally, MP is granted emission allowances by the EPA and purchases additional allowances as needed to meet emission requirements.

System Demand

22 unchanged sentences

Accordingly, FirstEnergy’s annual results of operations and liquidity position may depend disproportionately on its operating performance during the summer and winter.

Mild weather conditions may result in lower power sales and consequently lower earnings.

Mild weather conditions may result in lower power sales and consequently lower revenue and earnings.

Human Capital

FirstEnergy focuses on a number of human capital resources, measures and objectives in managing its business, including:

safety, diversity, equity and inclusion, employee development, and compensation and benefits.

integrity, safety, diversity, equity and inclusion, workplace flexibility, employee development and compensation and benefits.

During 2022, the company continued to enhance its dedicated focus on employees by providing employees with additional opportunities to improve belonging, inclusion and engagement within our workforce.

Collectively, these focus areas may be material to understanding its business under certain circumstances.

6 unchanged sentences

As of December 31, 2022, the IBEW, the UWUA and the OPEIU unions collectively represented approximately half of FirstEnergy’s employees.

There are 15 CBAs between FirstEnergy’s subsidiaries and its unions, which have three, four or five- year terms.

In 2021, FirstEnergy’s subsidiaries reached new agreements with 4 IBEW locals, covering 1,960 employees, and 1 UWA local, covering 660 employees.

There are 15 collective bargaining agreements between FirstEnergy’s subsidiaries and its unions, which have three, four or five- year terms.

In 2022, FirstEnergy’s subsidiaries reached new agreements with 3 IBEW locals, covering 620 employees, and 3 UWUA locals, covering 945 employees.

Safety is a core value of FirstEnergy.

1 unchanged sentence

Safety metrics, such as injuries that result in days away or restricted time and life-changing events, are regularly monitored, internally reported, and are included in our annual incentive compensation program to reinforce that a safe work environment is crucial to FirstEnergy’s success.

FirstEnergy continues to shift its focus from achieving low OSHA rates to proactively identifying and mitigating life-changing event exposure.

FirstEnergy has shifted its focus from achieving low OSHA rates to proactively identifying and mitigating life-changing event exposure.

This shift in focus strengthens FirstEnergy’s safety-first culture by aligning our leadership around the same goal and driving safer decisions from an engaged workforce who puts safety first.

To support that shift, FirstEnergy continues to embed its "Leading with Safety" learnings and experiences obtained during its 2020 and 2021 Safety Transformation.

FirstEnergy continues to enhance and reinforce leader and employee safety training and exposure control concepts to improve job site exposure identification, communication and mitigation to prevent life changing events.

FirstEnergy continues to embed its "Leading with Safety" learnings and experiences and continues to enhance and reinforce leader and employee safety training and exposure control concepts to improve job site exposure identification, communication and mitigation to prevent life changing events.

Further, FirstEnergy continues to expand its “Leading with Safety” experiences with its employees to achieve excellence in personal, contractor and public safety.

Additionally, FirstEnergy’s employees’ well-being is essential to its core value of safety.

FirstEnergy is taking a well-informed, decisive and measured response to the COVID-19 pandemic, as recommended by medical experts, to protect the health and safety of our employees and the public, while also continuing to serve our customers.

FirstEnergy continues to provide flexibility for approximately 7,000 of its 12,400 employees to work from home.

Pandemic safety and cleaning protocols were implemented for those workers who have continued to report to a FirstEnergy work location during this public health emergency, ensuring FirstEnergy employees can report directly to job sites and work with the same small group of employees every day.

FirstEnergy developed a COVID-19 medical screening process under which a medical staff consisting of nurses, doctors and non-medical intake teams were assembled to manage COVID-19 related exposures, illnesses and quarantines;

perform contact tracing;

and ultimately safely return employees to work.

FirstEnergy continues to comply with Federal laws and state health directives as they emerge and adjusts its procedures as needed to continue to keep its employees safe.

Diversity, Equity and Inclusion

Diversity, equity and inclusion is a core value, as well as a corporate objective because a diverse, equitable and inclusive work environment delivers better service to customers, strong operational performance, innovation, and a safe, rewarding work experience for employees.

DEI is a core value, as well as a corporate objective because a diverse, equitable and inclusive work environment delivers better service to customers, strong operational performance, innovation, and a safe, rewarding work experience for employees.

FirstEnergy is focused on building a diverse workforce for the future, advancing a culture of equity, inclusion and belonging, and enhancing our diversity focus with our customers, in our communities and with our suppliers.

1 unchanged sentence

• FirstEnergy sponsors an executive diversity, equity and inclusion council consisting of senior management and other leaders across the company;

• Holding an annual “Diversity, Equity & Inclusion Employee Survey” to capture employees’ perspectives on FirstEnergy’s efforts in this area, and where the results are discussed with employees in order to drive initiatives and action plans for improvement.

• Recently developed FirstEnergy Utilities Operations DEI Council focused on DEI related strategy and initiatives specific to operations employees including a large represented physical work group;

• Holding an annual “Employee Engagement Survey” to capture employees’ perspectives on their work experience and progress toward embracing a more inclusive culture.

The survey results are discussed with employees in order to drive initiatives and action plans for improvement.

This includes establishing:

10 unchanged sentences

• Increase leadership accountability by including diversity, equity and inclusion metrics in FirstEnergy’s annual incentive compensation program.

Workplace Flexibility

FirstEnergy is committed to supporting employees’ work/life balance by providing flexible work arrangements for many of its employees, and encouraging career growth as well as personal balance.

In Fall 2022, FirstEnergy formally adopted guidelines to facilitate flexible work arrangements for eligible full-time and part-time non-bargaining employees.

Flexible work arrangements, like permitting certain employees to work from alternate locations or to begin and end work at variable times, offer a variety of approaches to the way employees work.

These approaches can help employees achieve their priorities and meet customer and business needs while promoting enhanced convenience and balance between work and personal commitments.

Employee Development

5 unchanged sentences

• a mentoring program;

• "Discover FE," which is designed to broaden and deepen knowledge of FirstEnergy and the electric utility industry generally;

• new supervisor and manager program;

1 unchanged sentence

• aspiring leader program;

• external partnership with the Center for Creative Leadership for senior and executive leadership development,

• "Educate to Elevate," which provides access to post-secondary education and a path to an Associate’s and Bachelor’s degrees for employees;

• external partnership with the Center for Creative Leadership ® and BeingFirst ® for senior and executive leadership development,

• "Educate to Elevate," which provides access to post-secondary education and a path to both Associate’s and Bachelor’s degrees for employees;

• Power Systems Institute, an award-winning program for recruiting and developing the next generation of highly trained, dedicated and motivated line and substation workers;

• A pilot apprentice line worker program in Ohio and Pennsylvania that was launched in 2022 and designed to address labor shortages in areas where we have had difficulty attracting talent or have experienced higher-than-average attrition rates.

Compensation and Benefits

1 unchanged sentence

The base pay program is designed to provide individual base pay levels that balance an employee’s value to FirstEnergy with comparable jobs at peer companies.

FirstEnergy is committed to ensuring that our internal policies and processes support pay equity, which was confirmed in a third-party review of our practices in 2019.

FirstEnergy is committed to ensuring that our internal policies and processes support pay equity, which was confirmed in a third-party review of our practices in 2019 and continues to be part of our normal ongoing process.

Our internal processes ensure pay equity considerations are part of our normal ongoing process.

The annual incentive compensation program is designed to reward the achievement of near-term corporate and business unit objectives.

3 unchanged sentences

Name Age Positions Held During Past Five Years Dates

Somerhalder II 66 Vice Chair and Executive Director (A) 2021-Present

Somerhalder II 67 Interim Chief Executive Officer (A) 2022-Present

(H) Interim President (B) 2022-Present

Vice Chair and Executive Director (A) 2021-2022

CenterPoint Energy Inc, Interim President & Chief Executive Officer 2020

Colonial Pipeline Co, Interim President & Chief Executive Officer 2017

Strah 58 President and Chief Executive Officer (A) (B) 2021-Present

President and Acting Chief Executive Officer (A) (B) 2020-2021

Senior Vice President and Chief Financial Officer (A) (B) (C) (E) 2018-2020

President (D) 2017-2018

President (C) (E) *-2018

Senior Vice President & President, FirstEnergy Utilities (B) *-2018

Belcher 54 Senior Vice President, Operations (B) 2021-Present

President (C) (E) 2018-Present

(I) President (C) (E) 2018-Present

Senior Vice President and President, FirstEnergy Utilities (B) 2018-2021

President and Chief Nuclear Officer (G) *-2018

President, FirstEnergy Nuclear Operating Company (B) *-2017

Park 60 Senior Vice President and Chief Legal Officer (A) 2021-Present

Senior Vice President and General Counsel (C) (D) (E) 2021-Present

Hyun Park 61 Senior Vice President and Chief Legal Officer (A) (B) 2021-Present

Senior Vice President and General Counsel (C) (D) (E) 2021-2022

LimNexus, Partner and General Counsel 2019-2021

Latham & Watkins, Of Counsel *-2019

PG&E Corporation, Senior Vice President and Special Counsel to Chairman

PG&E Corporation, Senior Vice President and General Counsel

Jon Taylor 49 Senior Vice President, Chief Financial Officer and Strategy (A) (B) 2021-Present

7 unchanged sentences

Vice President, Controller and Chief Accounting Officer (A) (B) *-2018

Vice President and Controller (D) (G) *-2017

Lisowski 41 Vice President, Controller and Chief Accounting Officer (A) (B) 2018-Present

Vice President and Controller (C) (E) 2018-Present

Controller and Treasurer (G) 2017-2018

Controller and Treasurer (F) *-2018

Assistant Controller (B) (C) (D) (E) (G) *-2017

Walker 56 Senior Vice President and Chief Human Resources Officer (B) 2019-Present

Controller and Treasurer (F) (G) *-2018

Walker 57 Senior Vice President, Chief Human Resources Officer and Corporate Services (B) 2021-Present

Senior Vice President and Chief Human Resources Officer (B) 2019-2021

Vice President, Human Resources (B) 2018-2019

8 unchanged sentences

(G) Denotes position held at FENOC

(H) Also served as Chair of the FE Board from May 2022 - Present

(I) On January 17, 2023, Samuel L.

Belcher notified FirstEnergy of his intent to retire effective May 1, 2023

FirstEnergy Website and Other Social Media Sites and Applications

3 unchanged sentences

Additionally, FirstEnergy routinely posts additional important information, including press releases, investor presentations, investor factbooks and notices of upcoming events under the "Investors" section of FirstEnergy’s website and recognizes FirstEnergy’s website as a channel of distribution to reach public investors and as a means of disclosing material non-public information for complying with disclosure obligations under Regulation FD.

Investors may be notified of postings to the website by signing up for email alerts and RSS feeds on the "Investors" page of FirstEnergy's website.

FirstEnergy also uses Twitter® and Facebook® as additional channels of distribution to reach public investors and as a supplemental means of

disclosing material non-public information for complying with its disclosure obligations under Regulation FD.

Investors may be notified of postings to the website by signing up for email alerts and Rich Site Summary feeds on the "Investors" page of FirstEnergy's website.

FirstEnergy also uses Twitter® and Facebook® as additional channels of distribution to reach public investors and as a supplemental means of disclosing material non-public information for complying with its disclosure obligations under Regulation FD.

Information contained on FirstEnergy’s website, Twitter® handle or Facebook® page, and any corresponding applications of those sites, shall not be deemed incorporated into, or to be part of, this report.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business