What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-02-13 compared with 2022-02-16 · 763 added, 801 removed, 1371 unchanged (53% of the section changed)

2 unchanged sentences

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of FirstEnergy Corp.

To the Board of Directors and Stockholders of FirstEnergy Corp.

Opinions on the Financial Statements and Internal Control over Financial Reporting

25 unchanged sentences

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

36 unchanged sentences

OTHER INCOME (EXPENSE):

Debt redemption costs (Note 10)

( 171 ) ( 2 ) —

Equity method investment earnings (Note 1) 168 31 2

Miscellaneous income, net 415 486 430

3 unchanged sentences

Total other expense ( 471 ) ( 167 ) ( 1,033 )

INCOME BEFORE INCOME TAXES

1,559 1,129 1,117

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 1,439 1,559 1,129

INCOME TAXES 1,000 320 126

2 unchanged sentences

NET INCOME $ 439 $ 1,283 $ 1,079

INCOME ALLOCATED TO PREFERRED STOCKHOLDERS (Note 1) — — 4

NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS $ 1,283 $ 1,079 $ 908

EARNINGS PER SHARE OF COMMON STOCK:

Income attributable to noncontrolling interest (continuing operations) 33 — —

EARNINGS ATTRIBUTABLE TO FIRSTENERGY CORP.

$ 406 $ 1,283 $ 1,079

EARNINGS PER SHARE ATTRIBUTABLE TO FIRSTENERGY CORP.

Basic - Continuing Operations $ 0.71 $ 2.27 $ 1.85

Basic - Discontinued Operations — 0.08 0.14

Basic - Net Income Attributable to Common Stockholders $ 2.35 $ 1.99 $ 1.70

Basic - Earnings Per Share Attributable to FirstEnergy Corp.

$ 0.71 $ 2.35 $ 1.99

Diluted - Continuing Operations $ 0.71 $ 2.27 $ 1.85

Diluted - Discontinued Operations — 0.08 0.14

Diluted - Net Income Attributable to Common Stockholders $ 2.35 $ 1.99 $ 1.68

Diluted - Earnings Per Share Attributable to FirstEnergy Corp.

$ 0.71 $ 2.35 $ 1.99

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:

2 unchanged sentences

(1) Includes excise and gross receipts tax collections of $ 406 million, $ 374 million and $ 362 million in 2022, 2021 and 2020, respectively.

(2) Net of income tax benefit of $ 48 million, $ 59 million, and $ 5 million in 2021, 2020 and 2019, respectively.

(2) Net of income tax benefit of $ 48 million and $ 59 million in 2021 and 2020, respectively.

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

10 unchanged sentences

( 1 ) ( 3 ) ( 8 )

Other comprehensive loss, net of tax ( 10 ) ( 25 ) ( 21 )

Other comprehensive income (loss), net of tax 1 ( 10 ) ( 25 )

COMPREHENSIVE INCOME $ 440 $ 1,273 $ 1,054

Comprehensive income attributable to noncontrolling interest 33 — —

COMPREHENSIVE INCOME ATTRIBUTABLE TO FIRSTENERGY CORP.

$ 407 $ 1,273 $ 1,054

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

17 unchanged sentences

36,285 34,744

PROPERTY, PLANT AND EQUIPMENT, NET - HELD FOR SALE (NOTE 13) — 45

INVESTMENTS AND OTHER NONCURRENT ASSETS

13 unchanged sentences

Dividends payable (Note 10)

Customer deposits 223 214

Other 364 188

5 unchanged sentences

Accumulated deficit ( 1,199 ) ( 1,605 )

Total stockholders' equity 8,675 7,237

Total common stockholders' equity 10,166 8,675

Noncontrolling interest 477 —

Total equity 10,643 8,675

Long-term debt and other long-term obligations 21,203 22,248

11 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Series A Convertible Preferred Stock Common Stock OPIC AOCI Accumulated Deficit Total Stockholders' Equity

(In millions) Shares Amount Shares Amount

Common Stock OPIC AOCI Accumulated Deficit Total Common Stockholders' Equity

(In millions) Shares Amount NCI Total Equity

Balance, January 1, 2020 541 $ 54 $ 10,868 $ 20 $ ( 3,967 ) $ 6,975 $ — $ 6,975

1 unchanged sentence

Other comprehensive loss, net of tax ( 25 ) ( 25 ) ( 25 )

Stock-based compensation 41 41

Cash dividends declared on common stock (1)

Cash dividends declared on preferred stock ( 3 ) ( 3 )

Stock Investment Plan and certain share-based benefit plans 3 — 56 56

Conversion of Series A Convertible Stock ( 0.7 ) ( 71 ) 26 3 68 —

( 846 ) ( 846 ) ( 846 )

Stock Investment Plan and share-based benefit plans 2 — 54 54 54

Balance, December 31, 2020 543 54 10,076 ( 5 ) ( 2,888 ) 7,237 — 7,237

1 unchanged sentence

Other comprehensive loss, net of tax ( 10 ) ( 10 ) ( 10 )

Stock-based compensation 26 26

Cash dividends declared on common stock (1)

Stock Investment Plan and certain share-based benefit plans 2 — 28 28

( 859 ) ( 859 ) ( 859 )

Common stock issuance (Note 10)

26 3 971 974 974

Stock Investment Plan and share-based benefit plans 1 50 50 50

Balance, December 31, 2021 570 57 10,238 ( 15 ) ( 1,605 ) 8,675 — 8,675

Net income 406 406 33 439

Other comprehensive loss, net of tax ( 10 ) ( 10 )

Stock-based compensation 26 26

Other comprehensive income, net of tax 1 1 1

Cash dividends declared on common stock (1)

Common Stock issuance (Note 9) 26 3 971 974

Share-based benefit plans 1 24 24

( 892 ) ( 892 ) ( 892 )

Stock Investment Plan and share-based benefit plans 2 — 98 98 98

FET minority interest sale, net of transaction costs (Note 1) 1,887 1,887 451 2,338

Distribution to FET minority interest — ( 21 ) ( 21 )

Capital contribution from FET minority interest — 9 9

Consolidated tax benefit allocation ( 5 ) ( 5 ) 5 —

Other ( 4 ) ( 4 ) ( 4 )

Balance, December 31, 2022 572 $ 57 $ 11,322 $ ( 14 ) $ ( 1,199 ) $ 10,166 $ 477 $ 10,643

Dividends declared for each share of common stock and as-converted share of preferred stock (applicable to 2019) were $ 1.56 during 2021 and 2020, as well as $ 1.53 during 2019.

(1) Dividends declared for each share of common stock were $ 1.56 during 2022, 2021 and 2020.

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

6 unchanged sentences

Adjustments to reconcile net income to net cash from operating activities-

Depreciation and amortization 1,601 1,199 1,217

Depreciation, amortization, and impairments 1,317 1,664 1,199

Retirement benefits, net of payments ( 378 ) ( 417 ) ( 301 )

Pension and OPEB mark-to-market adjustment ( 382 ) 477 676

Pension and OPEB mark-to-market adjustments ( 72 ) ( 382 ) 477

Deferred income taxes and investment tax credits, net 989 297 113

Asset removal costs charged to income — 36 28

Transmission revenue collections, net 79 182 ( 32 )

Gain on sale of Yards Creek — ( 109 ) —

Pension trust contributions — — ( 500 )

Settlement agreement and tax sharing payments to the FES Debtors — — ( 978 )

Gain on disposal, net of tax (Note 15)

— ( 47 ) ( 76 )

Changes in current assets and liabilities-

1 unchanged sentence

Materials and supplies ( 161 ) 57 ( 32 )

Prepaid taxes and other 18 6 10

Prepaid taxes and other current assets ( 28 ) 18 6

Accounts payable 560 117 ( 138 )

1 unchanged sentence

Accrued interest ( 29 ) — 33

Accrued compensation and benefits ( 36 ) 97 ( 60 )

Other current liabilities 21 ( 52 ) 81

10 unchanged sentences

Short-term borrowings, net — ( 2,200 ) —

Preferred stock dividend payments — — ( 6 )

Discounts (premiums) on debt issuances and redemptions, net ( 151 ) 27 ( 4 )

Proceeds from FET minority interest sale, net of transaction costs 2,348 — —

Distributions to FET minority interest ( 21 ) — —

Capital contributions from FET minority interest 9 — —

Common stock dividend payments ( 891 ) ( 849 ) ( 845 )

21 unchanged sentences

Organization and Basis of Presentation

3 Earnings Per Share 89

4 Accumulated Other Comprehensive Income 91

4 unchanged sentences

11 Short-Term Borrowings and Bank Lines of Credit 105

11 Asset Retirement Obligations 105

12 Regulatory Matters 107

13 Commitments, Guarantees and Contingencies 115

14 Discontinued Operations 120

14 Segment Information 120

15 Discontinued Operations 123

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4 unchanged sentences

OE, CEI, TE, Penn (a wholly owned subsidiary of OE), JCP&L, ME, PN, FESC, MP, AGC (a wholly owned subsidiary of MP), PE, WP, and FET and its principal subsidiaries (ATSI, MAIT and TrAIL).

In addition, FE holds all of the outstanding equity of other direct subsidiaries including:

AE Supply, FirstEnergy Properties, Inc., FEV, FirstEnergy License Holding Company, GPUN, Allegheny Ventures, Inc., and Suvon, LLC, doing business as both FirstEnergy Home and FirstEnergy Advisors.

In addition, FE holds all of the outstanding equity of other direct subsidiaries including FEV which currently holds a 33-1/3% equity ownership in Global Holding, the holding company for a joint venture in the Signal Peak mining and coal transportation operations.

FE does not bill directly or allocate any of its costs to any subsidiary company.

8 unchanged sentences

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, which are ongoing, but is expected to have an immaterial impact to FirstEnergy's financial statements.

PN and Tri-County Rural Electric Cooperative have jointly decided not to move forward with the transfer.

As a result, on September 30, 2022 both parties notified the NYPSC that the transaction would not occur.

The accompanying consolidated financial statements have been prepared in accordance with GAAP and the rules and regulations of the SEC.

FE and its subsidiaries follow GAAP and comply with the related regulations, orders, policies and practices prescribed by the SEC, FERC, and, as applicable, the PUCO, the PPUC, the MDPSC, the NYPSC, the WVPSC, the VSCC and the NJBPU.

9 unchanged sentences

Certain prior year amounts have been reclassified to conform to the current year presentation.

FirstEnergy is continuously evaluating the global COVID-19 pandemic and taking steps to mitigate known risks.

FirstEnergy is actively monitoring the continued impact COVID-19 is having on its customers’ receivable balances, which include increasing arrears balances since the pandemic began.

FirstEnergy has incurred, and it is expected to incur for the foreseeable future, COVID-19 pandemic related expenses.

COVID-19 related expenses consist of additional costs that FirstEnergy is incurring to protect its employees, contractors and customers, and to support social distancing requirements.

These costs include, but are not limited to, new or added benefits provided to employees, the purchase of additional personal protection equipment and disinfecting supplies, additional facility cleaning services, COVID-19 test kits, initiated programs and communications to customers on utility response, and increased technology expenses to support remote working, where possible.

The full impact on FirstEnergy’s business from the COVID-19 pandemic, including the governmental and regulatory responses, is unknown at this time and difficult to predict.

FirstEnergy provides a critical and essential service to its customers and the health and safety of its employees, contractors and customers is its first priority.

FirstEnergy is continuously monitoring its supply chain and is working closely with essential vendors to understand the continued impact the COVID-19 pandemic is having on its business;

however, FirstEnergy does not currently expect disruptions in its ability to deliver service to customers or any material impact on its capital investment spending plan.

FirstEnergy continues to effectively manage operations during the pandemic in order to provide critical service to customers and believes it is well positioned to manage through the economic slowdown.

FirstEnergy Distribution and Transmission revenues benefit from geographic and economic diversity across a five-state service territory, which also allows for flexibility with capital investments and measures to maintain sufficient liquidity over the next twelve months.

However, the situation remains fluid and future impacts to FirstEnergy that are presently unknown or unanticipated may occur.

Furthermore, the likelihood of an impact to FirstEnergy, and the severity of any impact that does occur, could increase the longer the global pandemic persists.

Sale of Minority Interest in FirstEnergy Transmission, LLC

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.

KATCo, which is currently a subsidiary of FET, will become a wholly owned subsidiary of FE prior to the closing of the transaction and will remain in the Regulated Transmission segment.

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

On January 5, 2022, the parties to this transaction submitted to FERC an application requesting approval of the transaction no later than April 30, 2022, and on February 10, 2022, the parties filed answers in the FERC docket to certain protests that were filed on January 26, 2022.

Pursuant to the terms of the FET P&SA, in connection with the closing, Brookfield, FET and FirstEnergy Corp will enter into the FET LLC Agreement.

The FET LLC Agreement, among other things, provides for the governance, exit, capital and distribution, and other arrangements for FET from and following the closing.

Under the FET LLC Agreement, Brookfield will be entitled to appoint a number of directors to the FET Board, in approximate proportion to Brookfield’s ownership percentage in FET (rounded to the next whole number).

Upon the closing, the FET Board will consist of five directors, one appointed by Brookfield and four appointed by FE.

The FET LLC Agreement contains certain investor protections, including, among other things, requiring Brookfield's approval for FET and its subsidiaries to take certain major actions.

Under the terms of the FET LLC Agreement, for so long as Brookfield holds a 9.9% interest in FET, Brookfield’s consent is required for FET or any of its subsidiaries to incur indebtedness (other than the refinancing of existing indebtedness on commercially reasonable terms reflecting then-current credit market conditions) that would reasonably be expected to result in the FET’s consolidated Debt-to-Capital Ratio (as defined in the FET LLC Agreement) equaling or exceeding (i) prior to the fifth anniversary of the effective date, 65%, and (ii) thereafter, 70%.

Economic Conditions

Economic conditions following the global pandemic, have increased lead times across numerous material categories, with some as much as doubling from pre-pandemic lead times.

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

FirstEnergy has taken steps to mitigate these risks and does not currently expect service disruptions or any material impact on its capital spending plan.

However, the situation remains fluid and a prolonged continuation or further increase in supply chain disruptions could have an adverse effect on FirstEnergy’s results of operations, cash flow and financial condition.

Sale of Minority Equity Interest in FirstEnergy Transmission, LLC

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.

Pursuant to the terms of the FET P&SA II, in connection with the closing, Brookfield, FET and FE will enter into the A&R FET LLC Agreement, which will amend and restate in its entirety the current limited liability company agreement of FET.

The A&R FET LLC Agreement, among other things, provides for the governance, exit, capital and distribution, and other arrangements for FET from and following the closing.

Under the A&R FET LLC Agreement, at the closing, the FET Board will consist of five directors, two appointed by Brookfield and three appointed by FE.

Each of Brookfield’s and FE’s respective appointment rights are subject to such party maintaining certain minimum ownership percentages.

The A&R FET LLC Agreement contains certain investor protections, including, among other things, requiring Brookfield's approval for FET and its subsidiaries to take certain major actions.

Under the terms of the A&R FET LLC Agreement, for so long as Brookfield holds at least a 30.0% interest in FET, Brookfield’s consent is required for FET or any of its subsidiaries to, among other things, undertake certain acquisitions or dispositions in excess of certain dollar thresholds, establish or amend the annual budget, incur cost overruns on certain capital expenditures projects during any fiscal year in excess of a certain percentage overage of the budgeted amounts or incur cost overruns on the aggregate capital expenditure budget of FET’s subsidiaries during any fiscal year in excess of a certain percentage overage of the aggregated budgeted amount, make material decisions relating to litigation where either the potential liability exposure is in excess of a certain threshold dollar amount or such proceeding would reasonably be expected to have an adverse effect on Brookfield or FET, make certain material regulatory filings, incur or refinance indebtedness by FET or its subsidiaries, which, in the case of its subsidiaries, would reasonably be expected to cause such subsidiary to deviate from its targeted capital structure, enter into joint ventures, appoint or replace any member of its transmission leadership team, amend the accounting policies of FET or its subsidiaries (but only if FirstEnergy Corp is no longer the majority owner of FET), take any action that would reasonably be expected to cause a default or breach of any material contract of FET or any of its subsidiaries, create certain material liens (excluding certain permitted liens), or cause any reorganization of FET or any of its subsidiaries.

The A&R FET LLC Agreement also includes provisions relating to the resolution of disputes and to address deadlocks.

Consolidation of Pennsylvania Companies

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.

ACCOUNTING FOR THE EFFECTS OF REGULATION

18 unchanged sentences

Deferred distribution costs 164 49 115

Contract valuations 7 41 ( 34 )

Storm-related costs 683 660 23

Uncollectible and COVID-19 related costs 56 97 ( 41 )

Uncollectible and pandemic-related costs 63 56 7

Energy efficiency program costs 94 47 47

New Jersey societal benefit costs 94 109 ( 15 )

Regulatory transition costs ( 18 ) ( 20 ) 2

Vegetation management 63 33 30

7 unchanged sentences

Deferred generation costs 262 63 199

Deferred distribution costs 27 2 25

Storm-related costs 568 549 19

COVID-19 related costs 65 66 ( 1 )

Regulatory transition costs 13 16 ( 3 )

Pandemic-related costs 70 65 5

Vegetation management 52 31 21

Regulatory Assets Not Earning a Current Return $ 997 $ 732 $ 265

FirstEnergy is exposed to financial risks resulting from fluctuating interest rates and commodity prices, including prices for electricity, coal and energy transmission.

FirstEnergy is exposed to limited financial risks resulting from fluctuating interest rates and commodity prices, including prices for electricity, coal and energy transmission.

To manage the volatility related to these exposures, FirstEnergy’s Risk Policy Committee, comprised of senior management, provides general management oversight for risk management activities throughout FirstEnergy.

3 unchanged sentences

Derivative instruments meeting the normal purchases and normal sales criteria are accounted for under the accrual method of accounting with their effects included in earnings at the time of contract performance.

EARNINGS PER SHARE OF COMMON STOCK

Basic EPS available to common stockholders is computed using the weighted average number of common shares outstanding during the relevant period as the denominator.

The denominator for diluted EPS of common stock reflects the weighted average

of common shares outstanding plus the potential additional common shares that could result if dilutive securities and other agreements to issue common stock were exercised.

During 2019, EPS was computed using the two-class method required for participating securities.

The convertible preferred stock issued in January 2018 were considered participating securities since the shares participated in dividends on common stock on an “as-converted” basis.

All convertible preferred stock outstanding was converted to common stock during 2019.

The two-class method uses an earnings allocation formula that treats participating securities as having rights to earnings that otherwise would have been available only to common stockholders.

Under the two-class method, net income attributable to common stockholders is derived by subtracting the following from income from continuing operations:

• preferred stock dividends;

• deemed dividends for the amortization of the beneficial conversion feature recognized at issuance of the preferred stock (if any);

• an allocation of undistributed earnings between the common stock and the participating securities (convertible preferred stock) based on their respective rights to receive dividends.

Net losses were not allocated to the convertible preferred stock as they did not have a contractual obligation to share in the losses of FirstEnergy.

FirstEnergy allocated undistributed earnings based upon income from continuing operations.

Diluted EPS reflects the dilutive effect of potential common shares from share-based awards and convertible shares of preferred stock.

The dilutive effect of outstanding share-based awards was computed using the treasury stock method, which assumes any proceeds that could be obtained upon the exercise of the award would be used to purchase common stock at the average market price for the period.

The dilutive effect of the convertible preferred stock in 2019 was computed using the if-converted method, which assumes conversion of the convertible preferred stock at the beginning of the period, giving income recognition for the add-back of the preferred stock dividends and undistributed earnings allocated to preferred stockholders.

For the Years Ended December 31,

Reconciliation of Basic and Diluted EPS of Common Stock 2021 2020 2019

(In millions, except per share amounts)

EPS of Common Stock

Income from continuing operations $ 1,239 $ 1,003 $ 904

Preferred dividends N/A N/A ( 3 )

Undistributed earnings allocated to preferred stockholders N/A N/A ( 1 )

Income from continuing operations available to common stockholders 1,239 1,003 900

Discontinued operations, net of tax 44 76 8

Undistributed earnings allocated to preferred stockholders N/A N/A —

Income from discontinued operations available to common stockholders 44 76 8

Income attributable to common stockholders, basic $ 1,283 $ 1,079 $ 908

Income allocated to preferred stockholders, preferred dilutive N/A N/A 4

Income attributable to common stockholders, dilutive $ 1,283 $ 1,079 $ 912

Share Count information:

Weighted average number of basic shares outstanding 545 542 535

Assumed exercise of dilutive share based awards 1 1 3

Assumed conversion of preferred stock N/A N/A 4

Weighted average number of diluted shares outstanding 546 543 542

Income attributable to common stockholders, per common share:

Income from continuing operations, basic $ 2.27 $ 1.85 $ 1.69

Discontinued operations, basic 0.08 0.14 0.01

Income attributable to common stockholders, basic $ 2.35 $ 1.99 $ 1.70

Income from continuing operations, diluted $ 2.27 $ 1.85 $ 1.67

Discontinued operations, diluted 0.08 0.14 0.01

Income attributable to common stockholders, diluted

$ 2.35 $ 1.99 $ 1.68

For the years ended December 31, 2021, 2020 and 2019 there were no material amount of shares excluded from the calculation of diluted shares outstanding, as their inclusion would be antidilutive.

EQUITY METHOD INVESTMENTS

Investments in affiliates over which FE and its subsidiaries have the ability to exercise significant influence, but do not have a controlling financial interest, follow the equity method of accounting.

Under the equity method, the interest in the entity is reported as an investment in the Consolidated Balance Sheets and reflected in "Investments".

The percentage of FE's ownership share of the entity’s earnings is reported in the Consolidated Statements of Income and Comprehensive Income and reflected in “Miscellaneous Income, net”.

Equity method investments are assessed for impairment annually or whenever events and changes

in circumstances indicate that the carrying amount of the investment may not be recoverable.

If the decline in value is considered to be other than temporary, the investment is written down to its estimated fair value, which establishes a new cost basis in the investment.

Equity method investments included within "Investments" on the Consolidated Balance Sheets were $ 90 million and $ 88 million as of December 31, 2022 and 2021, respectively.

Global Holdings - FEV currently holds a 33-1/3% equity ownership in Global Holding, the holding company for a joint venture in the Signal Peak mining and coal transportation operations with coal sales primarily focused on international markets.

FEV is not the primary beneficiary of the joint venture, as it does not have control over the significant activities affecting the joint ventures economic performance.

FEV's ownership interest is subject to the equity method of accounting.

For the years ended December 31, 2022, 2021 and 2020, pre-tax income related to FEV’s ownership in Global Holding was $ 168 million, $ 29 million and $ 2 million, respectively.

FEV’s pre-tax equity earnings and investment in Global Holding are included in Corporate/Other for segment reporting.

As of December 31, 2022 and 2021, the carrying value of the equity method investment was $ 57 million and $ 59 million, respectively.

During 2022, FEV received cash dividends from Global Holding totaling $ 170 million, which were classified with “Cash from Operating Activities” on FirstEnergy’s Consolidated Statements of Cash Flow.

PATH WV - PATH, a proposed transmission line from West Virginia through Virginia into Maryland which PJM cancelled in 2012, is a series limited liability company that is comprised of multiple series, each of which has separate rights, powers and duties regarding specified property and the series profits and losses associated with such property.

A subsidiary of FE owns 100 % of the Allegheny Series (PATH-Allegheny) and 50 % of the West Virginia Series (PATH-WV), which is a joint venture with a subsidiary of AEP.

FirstEnergy is not the primary beneficiary of PATH-WV, as it does not have control over the significant activities affecting the economics of PATH-WV.

FirstEnergy's ownership interest in PATH-WV is subject to the equity method of accounting.

As of December 31, 2022 and 2021, the carrying value of the equity method investment was $ 18 million.

FirstEnergy's pre-tax equity earnings in PATH-WV were immaterial for the years ended December 31, 2022, 2021 and 2020

VARIABLE INTEREST ENTITIES

FirstEnergy performs qualitative analyses based on control and economics to determine whether a variable interest classifies FirstEnergy as the primary beneficiary (a controlling financial interest) of a VIE.

An enterprise has a controlling financial interest if it has both power and economic control, such that an entity has:

(i) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance;

and (ii) the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE.

FirstEnergy consolidates a VIE when it is determined that it is the primary beneficiary.

In order to evaluate contracts for consolidation treatment and entities for which FirstEnergy has an interest, FirstEnergy aggregates variable interests into categories based on similar risk characteristics and significance.

Consolidated VIEs

VIEs in which FirstEnergy is the primary beneficiary consist of the following (included in FirstEnergy’s consolidated financial statements):

• Ohio Securitization - In June 2013, SPEs formed by the Ohio Companies issued approximately $ 445 million of pass-through trust certificates supported by phase-in recovery bonds to securitize the recovery of certain all electric customer heating discounts, fuel and purchased power regulatory assets.

• MP and PE Environmental Funding Companies - Bankruptcy remote, special purpose limited liability companies that are indirect subsidiaries of MP and PE which issued environmental control bonds.

See Note 10, “Capitalization,” for additional information on securitized bonds.

Unconsolidated VIEs

FirstEnergy is not the primary beneficiary of its equity method investments in Global Holding and PATH WV, as further discussed above, or its PPAs.

FirstEnergy evaluated its PPAs and determined that certain NUG entities at its Regulated Distribution segment may be VIEs to the extent that they own a plant that sells substantially all of its output to the applicable utilities and the contract price for power is correlated with the plant’s variable costs of production.

FirstEnergy maintains six long-term PPAs with NUG entities that were entered into pursuant to the Public Utility Regulatory Policies Act of 1978.

FirstEnergy was not involved in the creation of, and has no equity or debt invested in, any of these entities.

FirstEnergy has determined that for all but one of these NUG entities, it does not have a variable interest, or the entities do not meet the criteria to be considered a VIE.

FirstEnergy may hold a variable interest in the remaining one entity;

however, it applied the scope exception that exempts enterprises unable to obtain the necessary information to evaluate entities.

Because FirstEnergy has no equity or debt interests in the NUG entities, its maximum exposure to loss relates primarily to the above-market costs incurred for power.

FirstEnergy expects any above-market costs incurred at its Regulated Distribution segment to be recovered from customers.

Purchased power costs related to the contract that may contain a variable interest were $ 119 million, $ 111 million and $ 113 million, respectively, during the years ended December 31, 2022, 2021 and 2020 .

In a business combination, the excess of the purchase price over the estimated fair value of the assets acquired and liabilities assumed is recognized as goodwill.

11 unchanged sentences

Goodwill $ 5,004 $ 614 $ 5,618

Materials and supplies inventory includes fuel inventory and the distribution, transmission and generation plant materials, net of reserve for excess and obsolete inventory.

Materials and supplies inventory primarily includes emission allowances, fuel inventory and the distribution, transmission and generation plant materials, net of reserve for excess and obsolete inventory.

Materials charged to inventory are at weighted average cost when purchased and expensed or capitalized, as appropriate, when used or installed.

Fuel inventory is accounted for at weighted average cost when purchased and recorded to fuel expense when consumed.

Emission allowances are accounted for at cost when purchased and charged to expense monthly based on each month’s emissions.

NONCONTROLLING INTEREST

FirstEnergy maintains a controlling financial interest in certain less than wholly owned subsidiaries.

As a result, FirstEnergy presents the third-party investors’ ownership portion of FirstEnergy's net income, net assets and comprehensive income as noncontrolling interest.

Noncontrolling interest is included as a component of equity on the Consolidated Balance Sheets.

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 difference between the cash consideration received, net of transaction costs of approximately $ 37 million, and the carrying value of the noncontrolling interest of $ 451 million was recorded as an increase to OPIC.

KATCo, which was a subsidiary of FET, became a wholly owned subsidiary of FE prior to the closing of the transaction and remains in the Regulated Transmission segment.

Pursuant to the terms of the FET P&SA I, on May 31, 2022, Brookfield, FET and FE entered into the FET LLC Agreement.

The FET LLC Agreement, among other things, provides for the governance, exit, capital and distribution, and other arrangements for FET from and following the closing.

Under the FET LLC Agreement, Brookfield is entitled to appoint a number of directors to the FET Board, in approximate proportion to Brookfield’s ownership percentage in FET (rounded to the next whole number).

The FET Board now consists of five directors, one appointed by Brookfield and four appointed by FE.

The FET LLC Agreement contains certain investor protections, including, among other things, requiring Brookfield's approval for FET and its subsidiaries to take certain major actions.

Under the terms of the FET LLC Agreement, for so long as Brookfield holds a 9.9 % interest in FET, Brookfield’s consent is required for FET or any of its subsidiaries to incur indebtedness (other than the refinancing of existing indebtedness on commercially reasonable terms reflecting then-current credit market conditions) that would reasonably be expected to result in FET’s consolidated Debt-to-Capital Ratio (as defined in the FET LLC Agreement) equaling or exceeding (i) prior to the fifth anniversary of the effective date, 65 %, and (ii) thereafter, 70 %.

As discussed above in Sale of Minority Equity Interest in FirstEnergy Transmission, LLC within Note 1, "Organization and Basis of Presentation," pursuant to the terms of the

FET P&SA II and in connection with the closing thereof, Brookfield, FET and FE will enter into the A&R FET LLC Agreement, which will amend and restate in its entirety the FET LLC Agreement.

PROPERTY, PLANT AND EQUIPMENT

21 unchanged sentences

Regulated Distribution has approximately $ 2.2 billion of total regulated generation property, plant and equipment as of December 31, 2022.

Included within the Regulated Distribution segment is $ 45 million of assets classified as held for sale as of December 31, 2020 associated with the asset purchase agreement with Yards Creek;

see Note 12, "Regulatory Matters," for additional information.

FirstEnergy provides for depreciation on a straight-line basis at various rates over the estimated lives of property included in plant in service.

1 unchanged sentence

For the years ended December 31, 2022, 2021 and 2020, capitalized financing costs on FirstEnergy's Consolidated Statements of Income include $ 56 million, $ 48 million and $ 49 million, respectively, of allowance for equity funds used during construction and $ 28 million, $ 27 million and $ 28 million, respectively, of capitalized interest.

Jointly Owned Plants

FE, through its subsidiary, AGC, owns an undivided 16.25 % interest ( 487 MWs) in the 3,003 MW Bath County pumped-storage, hydroelectric station in Virginia, operated by the 60 % owner, VEPCO, a non-affiliated utility.

Total property, plant and equipment includes $ 153 million representing AGC's share in this facility as of December 31, 2021.

AGC is obligated to pay its share of the costs of this jointly owned facility in the same proportion as its ownership interests using its own financing.

AGC's share of direct expenses of the joint plant is included in operating expenses on FirstEnergy's Consolidated Statements of Income.

AGC provides the generation capacity from this facility to its owner, MP.

Asset Impairments

FirstEnergy evaluates long-lived assets classified as held and used for impairment when events or changes in circumstances indicate the carrying value of the long-lived assets may not be recoverable.

First, the estimated undiscounted future cash flows attributable to the assets is compared with the carrying value of the assets.

If the carrying value is greater than the undiscounted future cash flows, an impairment charge is recognized equal to the amount the carrying value of the assets exceeds its estimated fair value.

Asset Retirement Obligations

6 unchanged sentences

In certain circumstances, FirstEnergy has recovery of asset retirement costs and, as such, certain accretion and depreciation is offset against regulatory assets.

Conditional retirement obligations associated with tangible long-lived assets are recognized at fair value in the period in which they are incurred if a reasonable estimate can be made, even though there may be uncertainty about timing or method of settlement.

When settlement is conditional on a future event occurring, it is reflected in the measurement of the liability, not the timing of the liability recognition.

AROs as of December 31, 2021, are described further in Note 11, "Asset Retirement Obligations."

Asset Impairments

FirstEnergy evaluates long-lived assets classified as held and used for impairment when events or changes in circumstances indicate the carrying value of the long-lived assets may not be recoverable.

First, the estimated undiscounted future cash flows attributable to the assets is compared with the carrying value of the assets.

If the carrying value is greater than the undiscounted future cash flows, an impairment charge is recognized equal to the amount the carrying value of the assets exceeds its estimated fair value.

Receivables from customers include retail electric sales and distribution deliveries to residential, commercial and industrial customers of the Utilities.

There was no material concentration of receivables as of December 31, 2021 and 2020, with respect to any particular segment of FirstEnergy’s customers.

Billed and unbilled customer receivables as of December 31, 2021 and 2020, are included below.

As of December 31,

Customer Receivables 2021 2020

(In millions)

Unbilled 576 567

Uncollectible Reserve 159 164

Total Customer Receivables $ 1,033 $ 1,203

(1) Includes approximately $ 318 million and $ 349 million as of December 31, 2021, 2020, respectively, that are past due by greater than 30 days.

Activity in the allowance for uncollectible accounts on receivables for the years ended December 31, 2021, 2020 and 2019 are as follows:

(In millions) 2021 2020 2019

Customer Receivables

Beginning of year balance $ 164 $ 46 $ 50

Charged to income (1)

Charged to other accounts (2)

Write-offs ( 101 ) ( 102 ) ( 132 )

End of year balance $ 159 $ 164 $ 46

Other Receivables

Beginning of year balance $ 26 $ 21 $ 2

Charged to income 3 7 27

Charged to other accounts (2)

Write-offs ( 22 ) ( 12 ) ( 9 )

End of year balance $ 10 $ 26 $ 21

Affiliated Companies Receivables (3)

Beginning of year balance $ — $ 1,063 $ 920

Charged to income — — 143

Charged to other accounts (2)

Write-offs — ( 1,063 ) —

End of year balance $ — $ — $ 1,063

(1) Customer receivable amounts charged to income for the years ended December 31, 2021, 2020 and 2019 include approximately $ 12 million, $ 103 million, and $ 25 million respectively, deferred for future recovery.

(2) Represents recoveries and reinstatements of accounts previously written off for uncollectible accounts.

(3) Amounts relate to the FES Debtors and are included in discontinued operations.

Write-off of $ 1.1 billion in 2020 was recognized upon their emergence in February 2020.

The allowance for uncollectible customer receivables is based on historical loss information comprised of a rolling 36-month average net write-off percentage of revenues, in conjunction with a qualitative assessment of elements that impact the collectability of receivables to determine if allowances for uncollectible accounts should be further adjusted in accordance with the accounting guidance for credit losses.

Management contemplates available current information such as changes in economic factors, regulatory matters, industry trends, customer credit factors, amount of receivable balances that are past-due, payment options and programs available to customers, and the methods that the Utilities are able to utilize to ensure payment.

FirstEnergy reviews its allowance for uncollectible customer receivables utilizing a quantitative and qualitative assessment, which includes consideration of the outbreak of COVID-19 and the impact on customer receivable balances outstanding and write-offs since the pandemic began.

Beginning March 13, 2020, FirstEnergy temporarily suspended customer disconnections for nonpayment and ceased collection activities as a result of the ongoing COVID-19 pandemic and in accordance with state regulatory requirements.

The temporary suspension of disconnections for nonpayment and ceasing of collection activities extended into the fourth quarter of 2020 but resumed for many customers before the end of 2020, except in New Jersey where the moratorium was extended until the end of 2021.

Customers are subject to each state's applicable regulations on winter moratoriums.

See Note 12, “Regulatory Matters,” for further discussion on applicable regulations that may alter customer disconnections and collection activity as well as regulatory recovery.

During 2020, FirstEnergy analyzed the likelihood of loss based on increases in customer accounts in arrears since the pandemic began in mid-March 2020 as well as what collection methods at the time were suspended, and historically been utilized to ensure payment.

Based on this assessment, and consideration of other qualitative factors described above, FirstEnergy recognized incremental uncollectible expense of $ 121 million in the year 2020, of which approximately $ 90 million was not being collected through rates and as a result was deferred for future recovery under regulatory mechanisms.

During 2021, arrears levels continue to be elevated above 2019 pre-pandemic levels.

Various regulatory actions have impacted the growth and recovery of past due balances including extensions on moratoriums, significant restrictions regarding disconnections, and extended installment plans.

FirstEnergy has experienced a reduction in the amount of receivables that are past due by greater than 30 days since the end of 2020.

While total customer arrears balances continue to decrease in 2021, balances that are over 120 days past due continue to be elevated.

FirstEnergy considered other factors as part of its qualitative assessment, such as certain federal stimulus and state funding being made available to assist with past due utility bills.

As a result of this qualitative analysis, FirstEnergy did not recognize any incremental uncollectible expense for the twelve months ended December 31, 2021.

Additionally, as a result of the pandemic-related moratoriums and certain customer installment or extended payment plans offered, the allowance for uncollectible accounts on receivables in 2021 and 2020 are elevated due to the extension of when certain write-offs would have otherwise occurred.

Other receivables include PJM receivables resulting from transmission and wholesale sales.

FirstEnergy’s uncollectible risk on PJM receivables is minimal due to the nature of PJM’s settlement process whereby members of PJM legally agree to share the cost of defaults and as a result there is no allowance for doubtful accounts.

VARIABLE INTEREST ENTITIES

An enterprise has a controlling financial interest if it has both power and economic control, such that an entity has:

(i) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance;

FirstEnergy consolidates a VIE when it is determined that it is the primary beneficiary.

Consolidated VIEs

VIEs in which FirstEnergy is the primary beneficiary consist of the following (included in FirstEnergy’s consolidated financial statements):

• MP and PE Environmental Funding Companies - Bankruptcy remote, special purpose limited liability companies that are indirect subsidiaries of MP and PE which issued environmental control bonds.

See Note 9, “Capitalization,” for additional information on securitized bonds.

Unconsolidated VIEs

FirstEnergy is not the primary beneficiary of the following VIEs:

• Global Holding - FEV holds a 33-1/3% equity ownership in Global Holding, the holding company for a joint venture in the Signal Peak mining and coal transportation operations with coal sales in U.S.

and international markets.

FEV is not the primary beneficiary of the joint venture, as it does not have control over the significant activities affecting the joint ventures economic performance.

FEV's ownership interest is subject to the equity method of accounting.

As of December 31, 2021, the carrying value of the equity method investment was $ 59 million.

• PATH WV - PATH, a proposed transmission line from West Virginia through Virginia into Maryland which PJM cancelled in 2012, is a series limited liability company that is comprised of multiple series, each of which has separate rights, powers and duties regarding specified property and the series profits and losses associated with such property.

A subsidiary of FE owns 100 % of the Allegheny Series (PATH-Allegheny) and 50 % of the West Virginia Series (PATH-WV), which is a joint venture with a subsidiary of AEP.

FirstEnergy is not the primary beneficiary of PATH-WV, as it does not have control over the significant activities affecting the economics of PATH-WV.

FirstEnergy's ownership interest in

PATH-WV is subject to the equity method of accounting.

As of December 31, 2021, the carrying value of the equity method investment was $ 18 million.

• Purchase Power Agreements - FirstEnergy evaluated its PPAs and determined that certain NUG entities at its Regulated Distribution segment may be VIEs to the extent that they own a plant that sells substantially all of its output to the applicable utilities and the contract price for power is correlated with the plant’s variable costs of production.

FirstEnergy maintains six long-term PPAs with NUG entities that were entered into pursuant to PURPA.

FirstEnergy was not involved in the creation of, and has no equity or debt invested in, any of these entities.

FirstEnergy has determined that for all but one of these NUG entities, it does not have a variable interest, or the entities do not meet the criteria to be considered a VIE.

FirstEnergy may hold a variable interest in the remaining one entity;

however, it applied the scope exception that exempts enterprises unable to obtain the necessary information to evaluate entities.

Because FirstEnergy has no equity or debt interests in the NUG entities, its maximum exposure to loss relates primarily to the above-market costs incurred for power.

FirstEnergy expects any above-market costs incurred at its Regulated Distribution segment to be recovered from customers.

Purchased power costs related to the contract that may contain a variable interest were $ 111 million and $ 113 million, respectively, during the years ended December 31, 2021 and 2020.

FirstEnergy has recognized applicable legal obligations for AROs and their associated cost, including reclamation of sludge disposal ponds, closure of coal ash disposal sites, underground and above-ground storage tanks and wastewater treatment lagoons.

In addition, FirstEnergy has recognized conditional retirement obligations, primarily for asbestos remediation.

The following table summarizes the changes to the ARO balances during 2022 and 2021:

ARO Reconciliation (In millions)

Balance, January 1, 2021 $ 159

Changes in timing and amount of estimated cash flows 8

Liabilities settled ( 1 )

Balance, December 31, 2021 $ 179

Changes in timing and amount of estimated cash flows ( 2 )

Liabilities settled ( 6 )

Balance, December 31, 2022 $ 185

Jointly Owned Plants

Total property, plant and equipment includes $ 153 million representing AGC's share in this facility as of December 31, 2022.

AGC is obligated to pay its share of the costs of this jointly owned facility in the same proportion as its ownership interests using its own financing.

AGC's share of direct expenses of the joint plant is included in operating expenses on FirstEnergy's Consolidated Statements of Income.

AGC provides the generation capacity from this facility to its owner, MP.

NEW ACCOUNTING PRONOUNCEMENTS

Recently Adopted Pronouncements

ASU 2019-12, " Simplifying the Accounting for Income Taxes" (Issued in December 2019):

ASU 2019-12 enhances and simplifies various aspects of the income tax accounting guidance, including the elimination of certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

FirstEnergy adopted the guidance as of January 1, 2021, with no material impact to the financial statements.

Recently Issued Pronouncements - FirstEnergy has assessed new authoritative accounting guidance issued by the FASB that has not yet been adopted and none are currently expected to have a material impact to the financial statements.

Recently Issued Pronouncements - The following new authoritative accounting guidance issued by the FASB has not yet been adopted.

Unless otherwise indicated, FirstEnergy is currently assessing the impact such guidance may have on its financial statements and disclosures, as well as the potential to early adopt where applicable.

FirstEnergy has assessed other FASB issuances of new standards not described below based upon the current expectation that such new standards will not significantly impact FirstEnergy's financial reporting.

ASU 2022-03, " Fair Value Measurements of Equity Securities Subject to Contractual Sale Restrictions " (Issued in June 2022):

ASU 2022-03 clarifies current guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, and introduces new disclosure requirements for those equity securities subject to contractual restrictions.

For FirstEnergy, the guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023, with early adoption permitted.

FirstEnergy accounts for revenues from contracts with customers under ASC 606, “ Revenue from Contracts with Customers.

5 unchanged sentences

FirstEnergy’s revenues are primarily derived from electric service provided by the Utilities and Transmission Companies.

The following represents a disaggregation of revenue from contracts with customers for the year ended December 31, 2021:

Revenues by Type of Service Regulated Distribution Regulated Transmission Corporate/Other and Reconciling Adjustments (1)

(In millions)

Distribution services (2)(4)

$ 5,433 $ — $ ( 104 ) $ 5,329

Retail generation 3,730 — ( 50 ) 3,680

Wholesale sales 362 — 14 376

Transmission (2)

— 1,608 — 1,608

Other 119 — — 119

Total revenues from contracts with customers $ 9,644 $ 1,608 $ ( 140 ) $ 11,112

( 27 ) — — ( 27 )

Other revenue unrelated to contracts with customers

94 10 ( 57 ) 47

Total revenues $ 9,711 $ 1,618 $ ( 197 ) $ 11,132

(1) Includes eliminations and reconciling adjustments of inter-segment revenues.

(2) Includes reductions to revenue related to amounts subject to refund resulting from the Tax Act ($ 3 million at Regulated Distribution and $( 2 ) million at Regulated Transmission).

(3) Reflects amounts the Ohio Companies refunded to customers that was previously collected under decoupling mechanisms, with interest.

See Note 12, “Regulatory Matters,” for further discussion on Ohio decoupling rates.

(4) Includes $ 38 million of customer refunds associated with the Ohio Stipulation that became effective in December 2021.

See Note 12, “Regulatory Matters,” for additional information.

The following represents a disaggregation of revenue from contracts with customers for the year ended December 31, 2020:

Revenues by Type of Service Regulated Distribution Regulated Transmission Corporate/Other and Reconciling Adjustments (1)

(In millions)

Distribution services (2)

$ 5,259 $ — $ ( 88 ) $ 5,171

Retail generation 3,577 — ( 60 ) 3,517

Wholesale sales 251 — 9 260

Transmission (2)

— 1,613 — 1,613

Other 140 — — 140

Total revenues from contracts with customers $ 9,227 $ 1,613 $ ( 139 ) $ 10,701

Other revenue unrelated to contracts with customers

93 17 ( 64 ) 46

Total revenues $ 9,363 $ 1,630 $ ( 203 ) $ 10,790

(1) Includes eliminations and reconciling adjustments of inter-segment revenues.

(2) Includes reductions to revenue related to amounts subject to refund resulting from the Tax Act ($ 2 million at Regulated Distribution and $ 7 million at Regulated Transmission).

(3) ARP revenue for the year ended December 31, 2020, is primarily related to shared savings revenue in Ohio.

The following represents a disaggregation of revenue from contracts with customers for the year ended December 31, 2019:

Revenues by Type of Service Regulated Distribution Regulated Transmission Corporate/Other and Reconciling Adjustments (1)

(In millions)

Distribution services (2)

$ 5,133 $ — $ ( 83 ) $ 5,050

Retail generation 3,727 — ( 57 ) 3,670

Wholesale sales (2)

Transmission (2)

— 1,510 — 1,510

Other 150 — 2 152

Total revenues from contracts with customers $ 9,421 $ 1,510 $ ( 126 ) $ 10,805

Other revenue unrelated to contracts with customers

96 16 ( 63 ) 49

Total revenues $ 9,698 $ 1,526 $ ( 189 ) $ 11,035

(1) Includes eliminations and reconciling adjustments of inter-segment revenues.

(2) Includes reductions to revenue related to amounts subject to refund resulting from the Tax Act ($ 16 million at Regulated Distribution and $ 19 million at Regulated Transmission).

(3) ARP revenue for the year ended December 31, 2019, includes DMR revenue, lost distribution and shared savings revenue in Ohio.

Other revenue unrelated to contracts with customer s includes revenue from late payment charges of $ 36 million, $ 31 million and $ 37 million, respectively, for the years ended December 31, 2021, 2020 and 2019.

Other revenue unrelated to contracts with customer s also includes revenue from derivatives of $ 11 million, $ 14 million and $ 8 million, respectively, for the years ended December 31, 2021, 2020 and 2019.

Regulated Distribution

10 unchanged sentences

Retail generation revenues are recognized over time as electricity is delivered and consumed immediately by the customer.

The following table represents a disaggregation of the Regulated Distribution segment revenue from contracts with distribution service and retail generation customers for the years ended December 31, 2021, 2020 and 2019 by class:

For the Years Ended December 31,

Revenues by Customer Class 2021 2020 2019

(In millions)

Residential $ 5,713 $ 5,539 $ 5,412

Commercial 2,284 2,140 2,252

Industrial 1,091 1,076 1,106

Other 75 81 90

Total $ 9,163 $ 8,836 $ 8,860

Wholesale sales primarily consist of generation and capacity sales into the PJM market from FirstEnergy’s regulated electric generation capacity and NUGs.

Certain of the Utilities may also purchase power in the PJM markets to supply power to their customers.

Generally, these power sales from generation and purchases to serve load are netted hourly and reported as either revenues or purchased power on the Consolidated Statements of Income based on whether the entity was a net seller or buyer

Capacity revenues are recognized ratably over the PJM planning year at prices cleared in the annual PJM Reliability Pricing Model Base Residual Auction and Incremental Auctions.

9 unchanged sentences

FirstEnergy had ARPs in Ohio primarily for shared savings in 2020, and has reflected refunds of decoupling revenue owed to customers as reductions to ARPs in 2021.

See Note 12, “Regulatory Matters,” for further discussion on decoupling revenues in Ohio.

Regulated Transmission

3 unchanged sentences

Forward-looking formula rates recover costs that the regulatory agencies determine are permitted to be recovered and provide a return on transmission capital investment.

Under forward-looking formula rates, the revenue requirement is updated annually based on a projected rate base and projected costs, which is subject to an annual true-up based on actual costs.

Under forward-looking formula rates, the revenue requirement is updated annually based on a projected rate base and projected costs, which is subject to an annual true-up based on rate base and actual costs.

Revenues and cash receipts for the stand-ready obligation of providing transmission service are recognized ratably over time.

The following table represents a disaggregation of revenue from contracts with regulated transmission customers for the years ended December 31, 2021, 2020 and 2019:

The following represents a disaggregation of revenue from contracts with customers for the years ended December 31, 2022, 2021 and 2020:

For the Years Ended December 31,

Transmission Owner 2021 2020 2019

(In millions) 2022 2021 2020

Regulated Distribution

Retail generation and distribution services (1)

Residential $ 6,180 $ 5,713 $ 5,539

Commercial 2,499 2,284 2,140

Industrial 1,338 1,091 1,076

Other 85 75 81

Wholesale 494 362 251

Other revenue from contracts with customers 104 119 140

Total revenues from contracts with customers 10,700 9,644 9,227

Other revenue unrelated to contracts with customers 101 94 93

Total Regulated Distribution $ 10,801 $ 9,711 $ 9,363

Regulated Transmission

ATSI $ 912 $ 799 $ 804

3 unchanged sentences

MP, PE and WP 138 124 134

Total Revenues $ 1,608 $ 1,613 $ 1,510

Total revenues from contracts with customers 1,863 1,608 1,613

Other revenue unrelated to contracts with customers 5 10 17

Total Regulated Transmission $ 1,868 $ 1,618 $ 1,630

Corporate/Other and Reconciling Adjustments (3)

Wholesale $ 27 $ 14 $ 9

Retail generation and distribution services (3)

( 186 ) ( 154 ) ( 148 )

Other revenue unrelated to contracts with customers (3)

( 51 ) ( 57 ) ( 64 )

Total Corporate/Other and Reconciling $ ( 210 ) $ ( 197 ) $ ( 203 )

FirstEnergy Total Revenues $ 12,459 $ 11,132 $ 10,790

(1) Includes approximately $ 58 million and $ 38 million as of December 31, 2022 and 2021, respectively, of customer refunds associated with the Ohio Stipulation that became effective in December 2021.

See Note 12, “Regulatory Matters,” for further discussion.

(2) Reflects amount the Ohio Companies refunded to customers that was previously collected under decoupling mechanisms, with interest.

(3) Includes eliminations and reconciling adjustments of inter-segment revenues.

Other revenue unrelated to contracts with customers includes revenue from late payment charges of $ 38 million, $ 36 million and $ 31 million, respectively, for the years ended December 31, 2022, 2021 and 2020.

Other revenue unrelated to contracts with customers also includes revenue from derivatives of $ 15 million, $ 11 million and $ 14 million, respectively, for the years ended December 31, 2022, 2021 and 2020.

Receivables from contracts from customers include retail electric sales and distribution deliveries to residential, commercial and industrial customers of the Utilities.

There was no material concentration of receivables as of December 31, 2022 and 2021, with respect to any particular segment of FirstEnergy’s customers.

Billed and unbilled customer receivables as of December 31, 2022 and 2021, are included below.

As of December 31,

Customer Receivables 2022 2021

(In millions)

Unbilled 781 576

Uncollectible Reserve 137 159

Total Customer Receivables $ 1,318 $ 1,033

(1) Includes approximately $ 290 million and $ 318 million as of December 31, 2022 and 2021, respectively, that are past due by greater than 30 days.

FirstEnergy reviews its allowance for uncollectible customer receivables utilizing a quantitative and qualitative assessment.

This analysis includes consideration of the outbreak of the pandemic and the impact on customer receivable balances outstanding and write-offs since the pandemic began and subsequent economic slowdown.

FirstEnergy’s uncollectible risk on PJM receivables, resulting from transmission and wholesale sales, is minimal due to the nature of PJM’s settlement process whereby members of PJM legally agree to share the cost of defaults and as a result there is no allowance for doubtful accounts.

During 2021, arrears levels continued to be elevated above 2019 pre-pandemic levels.

Various regulatory actions impacted the growth and recovery of past due balances including extensions on moratoriums, significant restrictions regarding disconnections, and extended installment plans.

FirstEnergy experienced a reduction in the amount of receivables that are past due by greater than 30 days since the end of 2020.

While total customer arrears balances continued to decrease in 2021, balances over 120 days past due continued to be elevated.

FirstEnergy considered other factors as part of its qualitative assessment, such as certain federal stimulus and state funding being made available to assist with past due utility bills.

As a result of this qualitative analysis, FirstEnergy did not recognize any incremental uncollectible expense during 2021.

During 2022, various regulatory actions including extensions on moratoriums, certain restrictions on disconnections and extended installment plan offerings continue to impact the level of past due balances in certain states.

However, certain states have resumed normal collections activity and arrears levels have declined towards pre-pandemic levels.

As a result, FirstEnergy recognized a $ 25 million decrease in its allowance for uncollectible customer receivables during the first quarter of 2022, of which $ 15 million was applied to existing deferred regulatory assets.

As a result of certain customer installment or extended payment plans, inflationary pressures on customers and the economic slowdown, there were no material changes to the allowance for uncollectible customer receivables during the remainder of 2022.

Additionally, as a result of the pandemic-related moratoriums and certain customer installment or extended payment plans offered, which caused the extension of when certain write offs would have otherwise occurred, the allowance for uncollectible accounts on receivables remains elevated above 2019 pre-pandemic levels.

Activity in the allowance for uncollectible accounts on receivables for the years ended December 31, 2022, 2021 and 2020 are as follows:

(In millions) 2022 2021 2020 (3)

Customer Receivables

Beginning of year balance $ 159 $ 164 $ 46

Charged to income (1)

Charged to other accounts (2)

Write-offs ( 143 ) ( 101 ) ( 102 )

End of year balance $ 137 $ 159 $ 164

Other Receivables

Beginning of year balance $ 10 $ 26 $ 21

Charged to income 4 3 7

Charged to other accounts (2)

Write-offs ( 7 ) ( 22 ) ( 12 )

End of year balance $ 11 $ 10 $ 26

(1) Customer receivable amounts charged to income for the years ended December 31, 2022, 2021, and 2020 include approximately $ 11 million, $ 12 million, and $ 103 million respectively, deferred for future recovery.

2020 amounts charged to income includes $ 121 million of incremental expense due to pandemic conditions.

(2) Represents recoveries and reinstatements of accounts previously written off for uncollectible accounts.

(3) As a result of the FES Debtors’ emergence from bankruptcy in February 2020, FirstEnergy wrote off $ 1.1 billion in affiliated companies receivables in 2020, which were included in discontinued operations.

There was no affiliated companies receivables at the end of 2022, 2021 or 2020 .

EARNINGS PER SHARE OF COMMON STOCK

EPS is calculated by dividing earnings attributable to FE by the weighted average number of common shares outstanding.

Basic EPS is computed using the weighted average number of common shares outstanding during the relevant period as the denominator.

The denominator for diluted EPS of common stock reflects the weighted average of common shares outstanding plus the potential additional common shares that could result if dilutive securities and other agreements to issue common stock were exercised.

Diluted EPS reflects the dilutive effect of potential common shares from share-based awards.

The following table reconciles basic and diluted EPS attributable to FE:

For the Years Ended December 31,

Reconciliation of Basic and Diluted EPS of Common Stock 2022 2021 2020

(In millions, except per share amounts)

Earnings Attributable to FE - continuing operations $ 406 $ 1,239 $ 1,003

Earnings Attributable to FE - discontinued operations, net of tax — 44 76

Earnings Attributable to FE $ 406 $ 1,283 $ 1,079

Share Count information:

Weighted average number of basic shares outstanding 571 545 542

Assumed exercise of dilutive share based awards 1 1 1

Weighted average number of diluted shares outstanding 572 546 543

EPS Attributable to FE:

Income from continuing operations, basic $ 0.71 $ 2.27 $ 1.85

Discontinued operations, basic — 0.08 0.14

Basic EPS $ 0.71 $ 2.35 $ 1.99

Income from continuing operations, diluted $ 0.71 $ 2.27 $ 1.85

Discontinued operations, diluted — 0.08 0.14

Diluted EPS $ 0.71 $ 2.35 $ 1.99

For the years ended December 31, 2022, 2021 and 2020, there were no material amount of shares excluded from the calculation of diluted shares outstanding, as their inclusion would be antidilutive.

ACCUMULATED OTHER COMPREHENSIVE INCOME

1 unchanged sentence

Gains & Losses on Cash Flow Hedges (1)

Defined Benefit Pension & OPEB Plans Total

Defined Benefit Pension & OPEB Plans (2)(3)

(In millions)

AOCI Balance, January 1, 2020 $ ( 9 ) $ 29 $ 20

Other comprehensive income before reclassifications — ( 2 ) ( 2 )

Amounts reclassified from AOCI 1 ( 34 ) ( 33 )

14 unchanged sentences

(1) Relates to previous cash flow hedges used to hedge fixed rate long-term debt securities prior to their issuance.

The following amounts were reclassified from AOCI for FirstEnergy in the years ended December 31, 2021, 2020 and 2019:

For the Years Ended December 31, Affected Line Item in Consolidated Statements of Income

Reclassifications from AOCI (1)

2021 2020 2019

(In millions)

Gains & losses on cash flow hedges

Long-term debt $ 1 $ 1 $ 2 Interest expense

$ 1 $ 1 $ 2 Net of tax

Defined benefit pension and OPEB plans

Prior-service costs $ ( 14 ) $ ( 34 ) $ ( 29 ) (2)

3 8 8 Income taxes

$ ( 11 ) $ ( 26 ) $ ( 21 ) Net of tax

(1) Amounts in parenthesis represent credits to the Consolidated Statements of Income (Loss) from AOCI.

Amounts reclassified from AOCI affects Interest expense line item in Consolidated Statements of Income.

(2) Prior-service costs are reported within Miscellaneous income, net within Other Income (Expense) on FirstEnergy’s Consolidated Statements of Income.

Components are included in the computation of net periodic cost (credits), see Note 4, "Pension and Other Postemployment Benefits," for additional details.

Components are included in the computation of net periodic cost (credits), see Note 5, "Pension and Other Post-Employment Benefits," for additional details.

(3) Income tax (benefits) on other comprehensive income (loss) affects Income taxes line item in Consolidated Statements of Income.

PENSION AND OTHER POST-EMPLOYMENT BENEFITS

2 unchanged sentences

Under the cash-balance portion of the pension plan (for employees hired on or after January 1, 2014), FirstEnergy makes contributions to eligible employee retirement accounts based on a pay credit and an interest credit.

addition, FirstEnergy provides a minimum amount of noncontributory life insurance to retired employees in addition to optional contributory insurance.

In addition, FirstEnergy provides a minimum amount of noncontributory life insurance to retired employees in addition to optional contributory insurance.

Health care benefits, which include certain employee contributions, deductibles and co-payments, are also available upon retirement to certain employees, their dependents and, under certain circumstances, their survivors.

3 unchanged sentences

On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021, which, among other things, extended shortfall amortization periods and modification of the interest rate stabilization rules for single-employer plans thereby impacting funding requirements.

As a result, FirstEnergy does not currently expect to have a required contribution to the pension plan based on various assumptions including annual expected rate of returns for assets of 7.50 %.

As a result, FirstEnergy does not currently expect to have a required contribution to the pension plan until 2025, which, based on various assumptions, including annual expected rate of return on assets of 8.0 % in 2023, is expected to be approximately $ 250 million.

However, FirstEnergy may elect to contribute to the pension plan voluntarily.

3 unchanged sentences

The fair value of the plan assets represents the actual market value as of the measurement date.

Discount Rate - In selecting an assumed discount rate, FirstEnergy considers currently available rates of return on high-quality fixed income investments expected to be available during the period to maturity of the pension and OPEB obligations.

The assumed rates of return on plan assets consider historical market returns and economic forecasts for the types of investments held by FirstEnergy’s pension trusts.

The long-term rate of return is developed considering the portfolio’s asset allocation strategy.

FirstEnergy utilizes a spot rate approach in the estimation of the components of benefit cost by applying specific spot rates along the full yield curve to the relevant projected cash flows.

Expected Return on Plan Assets - FirstEnergy’s assumed rate of return on pension plan assets considers historical market returns and economic forecasts for the types of investments held by the pension trusts.

In 2021, FirstEnergy’s qualified pension and OPEB plan assets experienced gains of $ 689 million or 7.9 %, compared to gains of $ 1,225 million, or 14.7 % in 2020, and losses of $ 1,492 million, or 20.2 % in 2019 and assumed a 7.50 % rate of return on plan assets in 2021, 2020 and 2019, which generated $ 688 million, $ 651 million and $ 569 million of expected returns on plan assets, respectively.

The expected return on pension and OPEB assets is based on input from investment consultants, including the trusts’ asset allocation targets and the historical performance of risk-based and fixed income securities.

The gains or losses generated as a result of the difference between expected and actual returns on plan assets is recognized as a pension and OPEB mark-to-market adjustment in the fourth quarter of each fiscal year and whenever a plan is determined to qualify for remeasurement.

Mortality Rates - During 2021, the Society of Actuaries published new mortality tables that include more current data than the RP-2014 tables as well as new improvement scales.

An analysis of plan mortality data indicated the use of the Pri-2012 mortality table with projection scale MP-2021, actuarially adjusted to reflect increased mortality rates due to COVID-19 based on mortality experience reported by the Center for Disease and Control Prevention in 2020 and 2021, was most appropriate and such was utilized to determine the 2021 benefit cost and obligation as of December 31, 2021, for the FirstEnergy pension and OPEB plans.

The impact of using the Pri-2012 mortality table with projection scale MP-2021 (adjusted by FirstEnergy's actuary for COVID-19 impacts) resulted in a decrease to the projected benefit obligation of approximately $ 32 million and $ 2 million for the pension and OPEB plans, respectively, and was included in the 2021 pension and OPEB mark-to-market adjustment.

Net Periodic Benefit Costs - In addition to service costs, interest on obligations, expected return on plan assets, and prior service costs, FirstEnergy recognizes in net periodic benefit costs a pension and OPEB mark-to-market adjustment for the change in the fair value of plan assets and net actuarial gains and losses annually in the fourth quarter of each fiscal year and whenever a plan is determined to qualify for a remeasurement.

Service costs, net of capitalization, are reported within Other operating expenses on FirstEnergy’s Consolidated Statements of Income.

Non-service costs, other than the pension and OPEB mark-to-market adjustment, which is separately shown, are reported within Miscellaneous income, net, within Other Income (Expense) on FirstEnergy’s Consolidated Statements of Income.

Assumptions Used to Determine Net Periodic Benefit Cost for the Years Ended December (1)

Actuarial Assumptions Pension OPEB

2022 2021 2020 (2)

Service cost weighted-average discount rate (2)

2022 2021 2020 (2)

Assumptions Related to Benefit Obligations:

Discount rate 5.23 % 3.02 % 2.67 % 5.16 % 2.84 % 2.45 %

Rate of compensation increase 4.30 % 4.10 % 4.10 % N/A N/A N/A

Cash balance weighted average interest crediting rate 4.04 % 2.57 % 2.57 % N/A N/A N/A

Assumptions Related to Benefit Costs:

Effective rate for interest on benefit obligations 2.44 % 1.94 % 2.89 %/ 2.48 %

2.18 % 1.66 % 2.71 %/ 2.30 %

Interest cost weighted-average discount rate (3)

Effective rate for service costs 3.28 % 3.10 % 3.60 %/ 3.24 %

3.41 % 3.03 % 3.63 %/ 3.29 %

Effective rate for interest on service costs 2.96 % 2.58 % 3.27 %/ 2.90 %

3.24 % 2.83 % 3.43 %/ 3.06 %

1 unchanged sentence

Rate of compensation increase 4.10 % 4.10 % 4.10 % N/A N/A N/A

Assumed Health Care Cost Trend Rates:

Health care cost trend rate assumed (pre/post-Medicare) N/A N/A N/A 6.00 %-

Rate to which the cost trend rate is assumed to decline (ultimate trend rate) N/A N/A N/A 4.50 % 4.50 % 4.50 %

Year that the rate reaches the ultimate trend rate N/A N/A N/A 2029 2028 2028

(1) Excludes impact of pension and OPEB mark-to-market adjustment.

(2) Weighted-average discount rates effect from January 1, 2020, through February 26, 2020, were 3.60 % and 3.63 % for pension and OPEB service cost, respectively.

Discount rates were 3.24 % and 3.29 % for pension and OPEB service cost, respectively, for the period February 27, 2020 through December 31, 2020.

(3) Weighted-average discount rates in effect from January 1, 2020, through February 26, 2020, were 3.27 % and 2.71 % for pension and OPEB interest cost, respectively.

Discount rates were 2.90 % and 2.30 % for pension and OPEB interest cost, respectively, for the period February 27, 2020, through December 31, 2020.

(2) As a result of the interim plan remeasurement during 2020 there were different rates in effect from January 1, 2020, through February 26, 2020 compared to February 27, 2020 through December 31, 2020.

The assumed rates of return on plan assets consider historical market returns and economic forecasts for the types of investments held by FirstEnergy’s pension trusts.

The long-term rate of return is developed considering the portfolio’s asset allocation strategy.

FirstEnergy utilizes a spot rate approach in the estimation of the components of benefit cost by applying specific spot rates along the full yield curve to the relevant projected cash flows.

In 2022, FirstEnergy’s qualified pension and OPEB plan assets experienced losses of $ 1,830 million or ( 19.1 )%, compared to gains of $ 689 million, or 7.9 % in 2021, and gains of $ 1,225 million, or 14.7 % in 2020 and assumed a 7.50 % rate of return on plan assets in 2022, 2021 and 2020, which generated $ 696 million, $ 688 million and $ 651 million of expected returns on plan assets, respectively.

The expected return on pension and OPEB assets is based on input from investment consultants, including the trusts’ asset allocation targets, the historical performance of risk-based and fixed income securities and other factors.

Mortality Rates - During 2022, the Society of Actuaries elected not to release a new mortality improvement scale due to data available being severely impacted by COVID-19.

It was determined that the Pri-2012 mortality table with projection scale MP-2021, actuarially adjusted to reflect increased mortality due to the ongoing impact of COVID-19 was most appropriate and such was utilized to determine the obligation as of December 31, 2022, for the FirstEnergy pension and OPEB plans.

This adjustment acknowledges COVID-19 cannot be eradicated and assumes reductions in other causes will not offset future COVID-19 deaths enough to produce a normal level of improvements.

The impact of using the Pri-2012 mortality table with projection scale MP-2021 (adjusted by FirstEnergy's actuary for COVID-19 impacts) resulted in a decrease to the projected benefit obligation of approximately $ 23 million for the pension plans and was included in the 2022 pension and OPEB mark-to-market adjustment.

Net Periodic Benefit Costs (Credits) - In addition to service costs, interest on obligations, expected return on plan assets, and prior service costs, FirstEnergy recognizes in net periodic benefit costs a pension and OPEB mark-to-market adjustment for the change in the fair value of plan assets and net actuarial gains and losses annually in the fourth quarter of each fiscal year and whenever a plan is determined to qualify for a remeasurement.

Service costs, net of capitalization, are reported within Other operating expenses on FirstEnergy’s Consolidated Statements of Income.

Components of Net Periodic Benefit Costs (Credits) for the Years Ended December 31, Pension OPEB

2 unchanged sentences

Service cost (1)

$ 184 $ 195 $ 194 $ 3 $ 4 $ 4

Interest cost 273 226 287 11 11 15

2 unchanged sentences

2 3 12 ( 11 ) ( 17 ) ( 46 )

Special termination costs (2)

One-time termination benefits (3)

Pension & OPEB mark-to-market ( 98 ) ( 253 ) 463 26 ( 129 ) 14

( 253 ) 463 656 ( 129 ) 14 20

Net periodic benefit costs (credits) $ ( 296 ) $ ( 481 ) $ 346 $ ( 10 ) $ ( 167 ) $ ( 46 )

(1) Includes amounts capitalized.

(2) 2020 includes the acceleration of approximately $ 18 million in net credits as a result of the FES Debtors’ emergence during the first quarter of 2020 and is a component of discontinued operations in FirstEnergy’s Consolidated Statements of Income.

(2) Subject to a cap, FirstEnergy agreed to fund a pension enhancement through its pension plan, for voluntary enhanced retirement packages offered to certain FES employees, as well as offer certain other employee benefits.

The costs are a component of discontinued operations in FirstEnergy’s Consolidated Statements of Income.

(3) Costs represent additional benefits provided to FES and FENOC employees under the approved settlement agreement and are a component of discontinued operations.

(4) Of the total Pension and OPEB mark-to-market adjustment for 2019, approximately $ 2 million is included in discontinued operations.

The annual pension and OPEB mark-to-market adjustments, (gains) or losses, for the years ended December 31, 2021, 2020, and 2019 were $( 382 ) million, $ 477 million (including $ 423 million in the first quarter of 2020), and $ 676 million, respectively.

Of these annual pension and OPEB mark-to-market amounts, approximately $( 31 ) million, $ 40 million and $ 47 million were allocated to the Transmission Companies and certain of FirstEnergy's utilities under forward-looking formula rates, and expected to be refunded or recovered through formula transmission rates, respectively.

The 2021 pension and OPEB mark-to-market adjustment primarily reflects an approximate 35 bps increase in the discount rate used to measure pension benefit obligations.

Under the approved bankruptcy settlement agreement, upon emergence, FES and FENOC employees ceased earning years of service under the FirstEnergy pension and OPEB plans.

The emergence on February 27, 2020, triggered a remeasurement of the affected pension and OPEB plans and as a result, FirstEnergy recognized a non-cash, pre-tax pension and OPEB mark-to-market adjustment of approximately $ 423 million in the first quarter of 2020.

In the fourth quarter 2020, FirstEnergy recognized a $ 54 million pension and OPEB mark-to-market adjustment.

Obligations and Funded Status - Qualified and Non-Qualified Plans 2021 2020 2021 2020

Approximately $ 15 million, $( 31 ) million and $ 40 million of the annual pension and OPEB mark-to-market charges (credits) were allocated to the Regulated Transmission companies under forward-looking formula rates, and expected to be refunded or recovered through formula transmission rates, respectively.

The 2022 pension and OPEB mark-to-market adjustment primarily reflects a 221 bps increase in the discount rate used to measure pension benefit obligations partially offset by lower than expected asset returns.

Obligations/Funded Status - Qualified and Non-Qualified Plans 2022 2021 2022 2021

(In millions)

4 unchanged sentences

Plan participants’ contributions — — 3 4

Plan amendments — 9 — —

Medicare retiree drug subsidy — — 1 1

16 unchanged sentences

Prior service cost (credit) $ 6 $ 9 $ ( 10 ) $ ( 21 )

Assumptions Used to Determine Benefit Obligations

(as of December 31)

Discount rate 3.02 % 2.67 % 2.84 % 2.45 %

Rate of compensation increase 4.10 % 4.10 % N/A N/A

Cash balance weighted average interest crediting rate 2.57 % 2.57 % N/A N/A

Assumed Health Care Cost Trend Rates

(as of December 31)

Health care cost trend rate assumed (pre/post-Medicare) N/A N/A 5.75 %- 5.25 %

Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) N/A N/A 4.5 % 4.5 %

Year that the rate reaches the ultimate trend rate N/A N/A 2028 2028

The following tables set forth pension financial assets that are accounted for at fair value by level within the fair value hierarchy.

14 unchanged sentences

Total Investments $ 6,343 100 %

(1) Excludes $( 47 ) million as of December 31, 2021, of receivables, payables, taxes and accrued income associated with financial instruments reflected within the fair value table.

(1) Excludes $ 350 million as of December 31, 2022, of receivables, payables, taxes, cash collateral for derivatives and accrued income associated with financial instruments reflected within the fair value table.

(2) Net Asset Value used as a practical expedient to approximate fair value.

21 unchanged sentences

Fixed income — 157 — 157 34 %

Total $ 278 $ 270 $ — $ 548 100 %

$ 217 $ 244 $ — $ 461 100 %

(1) Excludes $( 1 ) million as of December 31, 2022, of receivables, payables, taxes and accrued income associated with financial instruments reflected within the fair value table.

December 31, 2021 Asset Allocation

5 unchanged sentences

— 175 — 175 32 %

$ 283 $ 229 $ — $ 512 100 %

(1) Excludes $( 10 ) million as of December 31, 2020, of receivables, payables, taxes and accrued income associated with financial instruments reflected within the fair value table.

Total $ 278 $ 270 $ — $ 548 100 %

FirstEnergy’s target asset allocations for its pension and OPEB trust portfolios for 2022 were as follows:

Target Asset Allocations

Equities 36 % 50 %

Fixed income 22.5 % 50 %

Alternative investments 5 % — %

Real estate 10 % — %

Private - equity and debt funds 20 % — %

Cash and derivatives 6.5 % — %

FirstEnergy follows a total return investment approach using a mix of equities, fixed income and other available investments while taking into account the pension plan liabilities to optimize the long-term return on plan assets for a prudent level of risk.

7 unchanged sentences

Investment risk is measured and monitored on a continuing basis through periodic investment portfolio reviews, annual liability measurements and periodic asset/liability studies.

FirstEnergy’s target asset allocations for its pension and OPEB trust portfolios for 2021 and 2020 are shown in the following table:

Target Asset Allocations

Equities 38 % 38 %

Fixed income 30 % 30 %

Hedge funds 8 % 8 %

Real estate 10 % 10 %

Alternative investments 8 % 8 %

Cash and short-term securities 6 % 6 %

Taking into account estimated employee future service, FirstEnergy expects to make the following benefit payments from plan assets and other payments, net of participant contributions:

15 unchanged sentences

Shares granted under the ICP 2020 and ICP 2015 are issued from authorized but unissued common stock.

Vesting periods for stock-based awards range from two to ten years, with the majority of awards having a vesting period of three years .

Vesting periods for stock-based awards range from less than a year to ten years, with the majority of awards having a vesting period of three years .

FirstEnergy also issues stock through its 401(k) savings plan, EDCP, and DCPD.

Currently, FirstEnergy records the compensation costs for stock-based compensation awards that will be paid in stock over the vesting period based on the fair value on the grant date.

Currently, FirstEnergy records the compensation costs for stock-based compensation

awards that will be paid in stock over the vesting period based on the fair value on the grant date.

FirstEnergy accounts for forfeitures as they occur.

12 unchanged sentences

Total $ 101 $ 90 $ 51

Stock-based compensation costs capitalized $ 47 $ 26 $ 54

Stock-based compensation costs, net of amounts capitalized $ 54 $ 43 $ 25

Income tax benefits associated with stock-based compensation plan expense were $ 8 million, $ 5 million and $ 3 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Restricted Stock Units

Beginning with the performance-based restricted stock units granted in 2015, two-thirds of each award will be paid in stock and one-third will be paid in cash.

Two-thirds of each performance-based restricted stock unit award will be paid in stock and one-third will be paid in cash.

Restricted stock units payable in stock provide the participant the right to receive, at the end of the period of restriction, a number of shares of common stock equal to the number of stock units set forth in the agreement, subject to adjustment based on FirstEnergy's performance relative to financial and operational performance targets applicable to each award.

The grant date fair value of the stock portion of the restricted stock unit award is measured based on the average of the high and low prices of FE common stock on the date of grant.

The grant date fair market value of the stock portion of the restricted stock unit award is measured based on the average of the high and low prices of FE common stock on the date of grant.

Beginning with awards granted in 2018, restricted stock units include a performance metric consisting of a relative total shareholder return modifier utilizing the S&P 500 Utility Index as a comparator group.

The estimated grant date fair value for these awards is calculated using the Monte Carlo simulation method.

Beginning with awards granted in 2022, restricted stock units include a relative total shareholder return as a performance metric, utilizing the S&P 500 Utility Index as a comparator group.

The estimated grant date fair value for these awards is also calculated using the Monte Carlo simulation method.

In addition, outstanding awards are subject to an absolute total shareholder return, if FirstEnergy's is negative for the three -year cumulative performance period, restricted stock unit awards will be capped at a of payout 100 %.

Restricted stock units payable in cash provide the participant the right to receive cash based on the number of stock units set forth in the agreement and value of the equivalent number of shares of FE common stock as of the vesting date.

15 unchanged sentences

(1) Excludes dividend equivalents of approximately 80 thousand shares earned during vesting period .

The weighted-average fair value of awards granted in 2021, 2020 and 2019 was $ 35.50 , $ 44.42 and $ 41.23 per share, respectively.

The weighted-average fair value per share of awards granted in 2022, 2021 and 2020 was $ 41.19 , $ 35.50 and $ 44.42 per share, respectively.

For the years ended December 31, 2022, 2021, and 2020, the fair value of restricted stock units vested was $ 26 million, $ 34 million, and $ 80 million, respectively.

4 unchanged sentences

Dividends are received on the restricted stock and are reinvested in additional shares of restricted stock, subject to the vesting conditions of the underlying award.

Restricted stock activity for the year ended December 31, 2021, was not material.

Restricted stock activity for the year ended 2022, was not material.

401(k) Savings Plan

In 2021 and 2020, approximately 1 million shares of FE common stock, respectively, were issued and contributed to participants' accounts.

In 2022 and 2021, approximately 1 million shares of FE common stock, respectively, were issued and contributed to employee participants' accounts.

Under the EDCP, certain employees can defer a portion of their compensation, including base salary, annual incentive awards and/or long-term incentive awards, into unfunded accounts.

2 unchanged sentences

Dividends are calculated quarterly on stock units outstanding and are credited in the form of additional stock units.

The form of payout as stock or cash vary depending upon the form of the award, the duration of the deferral and other factors.

Awards deferred into a retirement stock account will pay out in cash upon separation from service, death or disability.

Awards deferred into a retirement stock account will pay out in cash upon separation, including retirement, death or disability.

Interest accrues on the cash allocated to the retirement cash account and the balance will pay out in cash over a time period as elected by the participant.

The liability recognized for EDCP of approximately $ 193 million and $ 201 million as of December 31, 2022 and 2021, respectively, is included in “Retirement benefits,” on the Consolidated Balance Sheets.

Under the DCPD, members of the FE Board can elect to defer all or a portion of their equity retainers to a deferred stock account and their cash retainers to deferred stock or deferred cash accounts.

6 unchanged sentences

FE and its subsidiaries are party to an intercompany income tax allocation agreement that provides for the allocation of consolidated tax liabilities.

Net tax benefits attributable to FE, excluding any tax benefits derived from certain interest expense, are generally reallocated to the subsidiaries of FE that have taxable income.

That allocation is accounted for as a capital contribution to the company receiving the tax benefit.

On April 9, 2021, West Virginia enacted legislation changing the state’s corporate income tax apportionment rules, including adopting a single sales factor formula and market-based sourcing for sales of services and intangibles, effective for taxable years beginning on or after January 1, 2022.

Enactment of this law triggered a remeasurement of state deferred income taxes for entities included in FirstEnergy’s West Virginia combined unitary return, resulting in a net impact of approximately $ 9 million in additional tax expense in 2021.

Prior to 2022, net tax benefits attributable to FE, excluding any tax benefits derived from certain interest expense, were generally reallocated to the subsidiaries of FE that have taxable income.

Effective January 1, 2022, the intercompany income tax allocation agreement was amended and revised whereas FE no longer reallocates such tax benefits to the FE subsidiaries.

On August 16, 2022, President Biden signed into law the IRA of 2022, which, among other things, imposes a new 15% corporate AMT based on AFSI applicable to corporations with a three-year average AFSI over $1 billion.

The AMT is effective for the 2023 tax year and, if applicable, corporations must pay the greater of the regular corporate income tax or the AMT.

Although NOL carryforwards created through the regular corporate income tax system cannot be used to reduce the AMT, financial statement net operating losses can be used to reduce AFSI and the amount of AMT owed.

The IRA of 2022 as enacted requires the U.S.

Treasury to provide regulations and other guidance necessary to administer the AMT, including further defining allowable adjustments to determine AFSI, which directly impacts the amount of AMT to be paid.

Based on interim guidance issued by the U.S.

Treasury in late December 2022, FirstEnergy continues to believe that it is more likely than not it will be subject to the AMT beginning 2023.

Until final U.S.

Treasury guidance is issued, the amount of AMT FirstEnergy would pay could be significantly different than current estimates or it may not be a payer at all.

The regulatory treatment of the impacts of this legislation will also be subject to the discretion of the FERC and state public utility commissions.

Any adverse development in this legislation,

including guidance from the U.S.

Treasury and/ or the IRS or unfavorable regulatory treatment, could reduce future cash flows and impact financial condition.

As discussed above, FirstEnergy expects to close on the sale of an additional 30 % interest in FET in 2024, at which time FirstEnergy expects to realize an approximate $ 7.1 billion tax gain from the combined sale of 49.9 % of the membership interests of FET, approximately $ 3.5 billion of which is attributable to the sale of 30 % and the remainder being gain deferred from the sale of 19.9 % in 2022, including consideration received and recapture of negative tax basis in FET.

Upon closing in 2024, FET will be deconsolidated from FirstEnergy’s consolidated federal income tax group, however, FET will continue to be consolidated in FirstEnergy’s GAAP financial statements.

As of December 31, 2022, FirstEnergy had approximately $ 7.1 billion of federal NOL carryforwards, all of which it expects to utilize by the end of 2024 to mostly offset taxable income and the tax gains associated with the combined 49.9 % sales in FET.

As a result of the expected additional sale in FET, FirstEnergy recognized a charge to income tax expense in the fourth quarter of 2022 of approximately $ 752 million, representing the deferred tax liability associated with the deferred tax gain on the 19.9 % sale closed in May 2022.

Additionally, FirstEnergy recognized a $ 54 million benefit to income tax expense in the fourth quarter of 2022 associated with reversal of certain valuation allowances on state income tax NOL carryforwards that are now expected to be utilized as a result of the tax gain associated with the transaction.

See Note 1, "Organization, Basis of Presentation and Significant Accounting Policies", for further discussion of the additional minority interest sale in FET.

On July 8, 2022, Pennsylvania’s Governor signed into law Pennsylvania House Bill 1342, which reduces Pennsylvania’s corporate net income tax rate from 9.99% to 8.99% beginning January 1, 2023, and an additional 0.5% annually through 2031, when it reaches 4.99%.

As of December 31, 2022, FirstEnergy recorded a $ 230 million net decrease to FirstEnergy’s ADIT liabilities, with a corresponding increase in regulatory liabilities of $ 236 million, which are expected to be settled through future customer rates, and a $ 6 million increase in income tax expense.

The decrease in the Pennsylvania income tax rate is not expected to have a material impact to FirstEnergy’s future financial statements.

During 2022, FirstEnergy recognized an income statement benefit of approximately $ 38 million from remeasurement of a valuation allowance previously recorded on business interest expense carryforwards from the 2018 and 2019 tax years.

The business interest expense could not be deducted previously due to certain limitations imposed on interest expense from non-utility operations under section 163(j) of the Tax Act.

As provided by the Tax Act, the nondeductible interest expense can be carried forward, indefinitely, and deducted against income from non-utility operations.

Due primarily to the realized and expected future earnings from FEV’s equity ownership in Global Holding, FirstEnergy expects to utilize a portion of the interest expense carryforward on its consolidated federal income tax return.

For the Years Ended December 31,

10 unchanged sentences

(1) Income Taxes on Income from Continuing Operations.

(2) Excludes $ 2 million of federal tax benefit and $ 6 million of federal tax expense associated with discontinued operations for the years ended December 31, 2021 and 2020 respectively.

(3) Excludes $ 46 million, $ 66 million and $ 9 million of federal tax benefits associated with discontinued operations for the years ended December 31, 2021, 2020 and 2019, respectively.

(4) Excludes $ 1 million and $ 4 million of state tax expense associated with discontinued operations for the years ended December 31, 2020 and 2019, respectively.

(2) Excludes $ 2 million of federal tax benefit associated with discontinued operations for the years ended December 31, 2021.

(3) Excludes $ 46 million and $ 66 million of federal tax benefits associated with discontinued operations for the years ended December 31, 2021 and 2020, respectively.

(4) Excludes $ 1 million of state tax expense associated with discontinued operations for the year ended December 31, 2020.

FirstEnergy tax rates are affected by permanent items, such as AFUDC equity and other flow-through items, as well as discrete items that may occur in any given period but are not consistent from period to period.

6 unchanged sentences

Increases (reductions) in taxes resulting from-

State income taxes, net of federal tax benefit 122 75 96

State and municipal income taxes, net of federal tax benefit 56 122 75

AFUDC equity and other flow-through ( 26 ) ( 29 ) ( 38 )

Amortization of investment tax credits ( 4 ) ( 4 ) ( 14 )

Deferred gain on 19.9 % FET minority interest sale

Federal tax credits claimed ( 3 ) ( 34 ) —

7 unchanged sentences

Effective income tax rate 69.5 % 20.5 % 11.2 %

FirstEnergy's effective tax rate on continuing operations for 2021 and 2020 was 20.5 % and 11.2 %, respectively.

The increase in effective tax rate was primarily due to:

• The non-deductibility of the DPA monetary penalty;

• The absence of a $ 52 million benefit for reduction in valuation allowances in 2020 from the recognition of deferred gains on prior intercompany generation asset transfers triggered by the FES Debtors’ emergence from bankruptcy and deconsolidation from FirstEnergy’s consolidated federal income tax group;

• Lower amortization of investment tax credits due to the absence of a $ 10 million benefit from accelerated amortization of certain investment credits in 2020;

• The absence of a $ 40 million benefit related to reversals of certain tax regulatory liabilities resulting from the transfer of TMI-2 in 2020;

• Additional tax expense of $ 9 million as a result of the West Virginia legislation that changed income tax apportionment rules discussed above;

• Partially offset by a net $ 81 million increase in uncertain tax position benefits primarily related to reserves on the worthless stock deduction, nondeductible interest under Section 163(j), and certain federal tax credits, discussed below;

• A $ 34 million benefit in federal tax credits claimed on FirstEnergy’s federal income tax return in 2021.

Accumulated deferred income taxes as of December 31, 2021 and 2020, are as follows:

A ccumulated deferred income taxes as of December 31, 2022 and 2021, are as follows:

As of December 31,

5 unchanged sentences

Deferred compensation ( 149 ) ( 155 )

Deferred gain on 19.9 % FET minority interest sale

Loss carryforwards and tax credits ( 2,073 ) ( 2,040 )

3 unchanged sentences

FirstEnergy has recorded as deferred income tax assets the effect of federal NOLs and tax credits that will more likely than not be realized through future operations and through the reversal of existing temporary differences.

As of December 31, 2021, FirstEnergy's loss carryforwards primarily consisted of $ 6.9 billion ($ 1.5 billion, net of tax) of Federal NOL carryforwards that will begin to expire in 2031.

As of December 31, 2022, FirstEnergy's loss carryforwards primarily consisted of $ 7.1 billion ($ 1.5 billion, net of tax) of federal NOL carryforwards, $ 5 billion ($ 1 billion, net of tax) which have no expiration and the remainder that will begin to expire in 2031, and federal general business tax credits of $ 51 million that begin to expire in 2030.

As discussed above, FirstEnergy expects to utilize all the federal NOL carryforwards by the end of 2024 to mostly offset taxable income and the tax gain recognized from the combined sale of the 49.9 % equity interest in FET.

The table below summarizes pre-tax NOL carryforwards and their respective anticipated expirations for state and local income tax purposes of approximately $ 12.6 billion ($ 568 million, net of tax) for FirstEnergy, of which approximately $ 3.9 billion ($ 199 million, net of tax) is expected to be utilized based on current estimates and assumptions.

17 unchanged sentences

A recognition threshold and measurement attribute are utilized for financial statement recognition and measurement of tax positions taken or expected to be taken on the tax return.

As of December 31, 2021 and 2020, FirstEnergy's total unrecognized income tax benefits were approximately $ 47 million and $ 139 million, respectively.

The $ 92 million net decrease in unrecognized income tax benefits is primarily due to:

• Decreases of $ 68 million for reserves related to the worthless stock deduction (see Note 14, "Discontinued Operations," for further discussion) and $ 29 million for reserves attributable to nondeductible interest under Section 163(j), both of which were effectively settled with federal taxing authorities;

• Decrease of $ 7 million to the reserve due to the remeasurement of certain positions for the change in West Virginia deferred taxes resulting from a state law change discussed above and $ 1 million due to other state tax rate changes;

• Decrease of $ 2 million due to the lapse in statue in certain state taxing jurisdictions;

• Partially offset by an increase of $ 15 million for reserves related to certain federal tax credits claimed on FirstEnergy's federal income tax return in 2021.

If ultimately recognized in future years, approximately $ 41 million of unrecognized income tax benefits would impact the effective tax rate.

5 unchanged sentences

Prior year decreases ( 28 )

Effectively settled with taxing authorities

Decrease for lapse in statute

2 unchanged sentences

Prior year decreases ( 8 )

Decrease for lapse in statute ( 2 )

Effectively settled with taxing authorities

Decrease for lapse in statute

Balance, December 31, 2021 $ 47

Current year increases 15

Prior years decreases ( 8 )

Effectively settled with taxing authorities

Prior years increases 2

Decrease for lapse in statute

129 unchanged sentences

Significant increases or decreases in inputs in isolation may have resulted in a higher or lower fair value measurement.

NUG contracts represent PPAs with third-party non-utility generators that are transacted to satisfy certain obligations under PURPA.

NUG contract carrying values are recorded at fair value and adjusted periodically using a mark-to-model methodology, which approximates market.

The primary unobservable inputs into the model are regional power prices and generation MWH.

Pricing for the NUG contracts is a combination of market prices for the current year and next two years based on observable data and internal models using historical trends and market data for the remaining years under contract.

The internal models use forecasted energy purchase prices as an input when prices are not defined by the contract.

Forecasted market prices are based on Intercontinental Exchange, Inc.

quotes and management assumptions.

Generation MWH reflects data provided by contractual arrangements and historical trends.

The model calculates the fair value by multiplying the prices by the generation MWH.

Significant increases or decreases in inputs in isolation may have resulted in a higher or lower fair value measurement.

For investments reported at NAV where there is no readily determinable fair value, a practical expedient is available that allows the NAV to approximate fair value.

Investments that use NAV as a practical expedient are excluded from the requirement to be categorized within the fair value hierarchy tables.

Instead, these investments are reported outside of the fair value hierarchy tables to assist in the reconciliation of investment balances reported in the tables to the balance sheet.

FirstEnergy has elected the NAV practical expedient for investments in private equity funds, insurance-linked securities, hedge funds (absolute return) and real estate funds held within the pension plan.

See Note 4, "Pension And Other Post-Employment Benefits" for the pension financial assets accounted for at fair value by level within the fair value hierarchy.

FirstEnergy primarily applies the market approach for recurring fair value measurements using the best information available.

19 unchanged sentences

Net assets (liabilities) $ 208 $ 306 $ 9 $ 523 $ 1,513 $ 315 $ 8 $ 1,836

$ 1,513 $ 315 $ 8 $ 1,836 $ 1,803 $ 317 $ 3 $ 2,123

(1) Contracts are subject to regulatory accounting treatment and changes in market values do not impact earnings.

(2) Restricted cash of $ 46 million and $ 49 million as of December 31, 2022 and 2021 respectively, primarily relates to cash collected from JCP&L, MP, PE and the Ohio Companies' customers that is specifically used to service debt of their respective funding companies.

See Note 10, Capitalization for additional information.

(3) Primarily consists of short-term investments.

(4) Excludes $ 1 million as of December 31, 2020, of receivables, payables, taxes and accrued income associated with financial instruments reflected within the fair value table.

Rollforward of Level 3 Measurements

The following table provides a reconciliation of changes in the fair value of NUG contracts and FTRs that are classified as Level 3 in the fair value hierarchy for the years ended December 31, 2021 and 2020:

NUG Contracts (1)

Derivative Assets Derivative Liabilities Net Derivative Assets Derivative Liabilities Net

(In millions)

January 1, 2020 Balance $ — $ ( 16 ) $ ( 16 ) $ 4 $ ( 1 ) $ 3

Unrealized gain (loss) — ( 3 ) ( 3 ) ( 3 ) — ( 3 )

Purchases — — — 7 ( 2 ) 5

Settlements — 19 19 ( 5 ) 3 ( 2 )

December 31, 2020 Balance $ — $ — $ — $ 3 $ — $ 3

Unrealized gain (loss) — — — 7 — 7

Purchases — — — 5 ( 2 ) 3

Settlements — — — ( 6 ) 1 ( 5 )

December 31, 2021 Balance $ — $ — $ — $ 9 $ ( 1 ) $ 8

(1) Contracts are subject to regulatory accounting treatment and changes in market values do not impact earnings.

Level 3 Quantitative Information

The following table provides quantitative information for FTRs contracts that are classified as Level 3 in the fair value hierarchy for the year ended December 31, 2021:

Fair Value, Net (In millions) Valuation

Technique Significant Input Range Weighted Average Units

FTRs $ 8 Model RTO auction clearing prices $ 1.10 to $ 4.60 $ 1.80 Dollars/MWH

All temporary cash investments purchased with an initial maturity of three months or less are reported as cash equivalents on the Consolidated Balance Sheets at cost, which approximates their fair market value.

3 unchanged sentences

However, the JCP&L spent nuclear fuel disposal trusts are subject to regulatory accounting with all gains and losses on equity and AFS debt securities offset against regulatory assets.

On October 15, 2019, JCP&L, ME, PN and GPUN executed an asset purchase and sale agreement with TMI-2 Solutions, LLC, a subsidiary of EnergySolutions, LLC, concerning the transfer and dismantlement of TMI-2.

With the receipt of all required regulatory approvals, the transaction was consummated, including the transfer of external trusts for the decommissioning and environmental remediation of TMI-2, on December 18, 2020.

Spent Nuclear Fuel Disposal Trusts

JCP&L holds debt securities within the spent nuclear fuel disposal trust, which are classified as AFS securities, recognized at fair market value.

The trust is intended for funding spent nuclear fuel disposal fees to the DOE associated with the previously owned Oyster Creek and TMI-1 nuclear power plants.

The trust is intended for funding spent nuclear fuel disposal fees to the United States Department of Energy associated with the previously owned Oyster Creek and TMI-1 nuclear power plants.

The following table summarizes the amortized cost basis, unrealized gains, unrealized losses and fair values of investments held in nuclear fuel disposal trusts as of December 31, 2022 and 2021:

14 unchanged sentences

Interest and Dividend Income 11 11 22

(1) Includes amounts associated with NDTs that were previously held by JCP&L, ME, and PN.

(1) Includes amounts associated with Nuclear Decommissioning Trusts that were previously held by JCP&L, ME, and PN.

See above for additional information.

1 unchanged sentence

Other investments include employee benefit trusts, which are primarily invested in corporate-owned life insurance policies and equity method investments.

Earnings and losses associated with corporate-owned life insurance policies and equity method investments are reflected in the “Miscellaneous Income, net” line of FirstEnergy’s Consolidated Statements of Income.

Other investments were $ 351 million and $ 371 million as of December 31, 2022 and 2021, respectively, and are excluded from the amounts reported above.

See Note 1, "Organization and Basis of Presentation," for additional information on FirstEnergy's equity method investments.

For the years ended December 31, 2022, 2021 and 2020, pre-tax income (expense) related to corporate-owned life insurance policies were $( 20 ) million, $ 13 million and $ 20 million, respectively.

Corporate-owned life insurance policies are valued using the cash surrender value and any changes in value during the period are recognized as income or expense.

LONG-TERM DEBT AND OTHER LONG-TERM OBLIGATIONS

9 unchanged sentences

FirstEnergy classified short-term borrowings, long-term debt and other long-term obligations as Level 2 in the fair value hierarchy as of December 31, 2022 and 2021.

See Note 9, "Capitalization," for further information on long-term debt issued during the twelve months ended December 31, 2021.

See Note 10, "Capitalization," for further information on long-term debt issued and redeemed during the twelve months ended December 31, 2022.

CAPITALIZATION

7 unchanged sentences

In addition, AGC has authorization from FERC to pay cash dividends to its parent, MP, from paid-in capital accounts, as long as its FERC-defined equity-to-total-capitalization ratio remains above 45 %.

The articles of incorporation, indentures, regulatory limitations, FET P&SA, and various other agreements, including those relating to the long-term debt of certain FirstEnergy subsidiaries contain provisions that could further restrict the payment of dividends on their common stock.

The articles of incorporation, indentures, regulatory limitations, FET P&SA I and FET P&SA II, and various other agreements, including those relating to the long-term debt of certain FirstEnergy subsidiaries contain provisions that could further restrict the payment of dividends on their common stock.

None of these provisions materially restricted FirstEnergy subsidiaries’ abilities to pay cash dividends to FE as of December 31, 2022.

22 unchanged sentences

As of December 31, 2022 and 2021, there were no preferred stock or preference stock outstanding.

Preferred Stock Issuance

In January of 2018, FE entered into a Preferred Stock Purchase Agreement for the private placement of 1,616,000 shares of mandatorily convertible preferred stock, designated as the Series A Convertible Preferred Stock, par value $ 100 per share, representing an investment of nearly $ 1.62 billion ($ 162 million of mandatorily convertible preferred stock and $ 1.46 billion of OPIC).

During 2018, 911,411 shares of preferred stock were converted into 33,238,910 shares of common stock at the option of the preferred stockholders.

During 2019, the remaining 704,589 shares of preferred stock were converted into 25,696,168 shares of common stock at the option of the preferred stockholders.

LONG-TERM DEBT AND OTHER LONG-TERM OBLIGATIONS

13 unchanged sentences

See Note 8, "Leases," for additional information related to finance leases.

During the twelve months ended December 31, 2021, the following long-term debt was issued:

Company Issuance Date Interest Rate Maturity Amount Issuance Type Use of Proceeds

FET 3/19/2021 2.87 % 2028 $ 500 million Unsecured Notes Repay short-term borrowings under the former FET Revolving Facility.

MP 4/9/2021 3.55 % (1)

2027 $ 200 million FMB Fund MP’s ongoing capital expenditures, for working capital needs and for other general corporate purposes.

TE 5/6/2021 2.65 % 2028 $ 150 million Senior Secured Notes Repay short-term borrowings, fund TE’s ongoing capital expenditures and for other general corporate purposes.

MAIT 5/24/2021 4.10 % (2)

2028 $ 150 million Unsecured Notes Repay borrowings outstanding under FirstEnergy’s regulated company money pool, fund MAIT’s ongoing capital expenditures, to fund working capital and for other general corporate purposes.

JCP&L 6/10/2021 2.75 % 2032 $ 500 million Unsecured Notes Repay $ 450 million of short-term debt under the former FE Revolving Facility, storm recovery and restoration costs and expenses, to fund JCP&L’s ongoing capital expenditures, working capital requirements and for other general corporate purposes.

ATSI 12/1/2021 2.65 % 2032 $ 600 million Unsecured Notes Repay outstanding notes and short-term borrowings, to fund ATSI's ongoing capital expenditures, working capital requirements and for other general corporate purposes.

(1) New debt was issued at a premium under a previously issued bond series, resulting in an effective interest rate of 2.06 %.

(2) New debt was issued at a premium under a previously issued note series, resulting in an effective interest rate of 2.55 %.

In December 2021, notice of redemption was provided for all remaining $850 million of FE's 4.25% Notes, Series B, due 2023, which was completed on January 20, 2022, and with a make-whole premium of approximately $38 million.

Due to the redemption, the $850 million in notes is included within currently payable long-term debt on the Consolidated Balance Sheets as of December 31, 2021.

On January 27, 2022, CEI instructed its indenture trustee to provide notice of redemption for all remaining $150 million of CEI's 2.77% Senior Notes, Series A, due 2034, for redemption to occur on March 14, 2022.

Also on January 27, 2022, TE instructed its indenture trustee to provide notice of partial redemption for $25 million of TE's 2.65% Senior Secured Notes, due 2028, for partial redemption which occurred on February 11, 2022.

FirstEnergy had the following redemptions and issuances during the twelve months ended December 31, 2022:

Company Type Redemption/Issuance Date Interest Rate Maturity Amount

(in Millions) Description

FE Unsecured Notes January, 2022 4.25 % 2023 $ 850 In December 2021, FE provided notice of redemption with a make-whole premium of approximately $ 38 million ($ 30 million after-tax).

TE Senior Secured Notes February, 2022 2.65 % 2028 $ 25 On January 27, 2022, TE instructed its indenture trustee to provide notice of partial redemption.

CEI Senior Notes, Series A March, 2022 2.77 % 2034 $ 150 On February 11, 2022, CEI instructed its indenture trustee to provide notice of full redemption.

WP FMBs April, 2022 3.34 % 2022 $ 100 WP redeemed FMBs that became due.

FE Unsecured Notes June, 2022 2.85 % 2022 $ 500 On May 23, 2022 FE provided notice of redemption.

FE Unsecured Notes June, 2022 7.375 % 2031 $ 715 On May 25, 2022, FE commenced an offer to purchase for cash a portion of its 2031 Notes and 2047 Notes, which had $ 1.5 billion and $ 1 billion principal amounts outstanding, respectively.

A portion of these notes were redeemed for approximately $ 1.1 billion, including a tender premium of approximately $ 101 million ($ 80 million after-tax).

In addition, FE recognized approximately $ 7 million ($ 5 million after-tax) of deferred cash flow hedge losses and $ 10 million ($ 8 million after-tax) in other unamortized debt costs and fees associated with the FE debt redemptions.

FE Unsecured Notes June, 2022 4.85 % 2047 $ 284

Penn FMBs June, 2022 6.09 % 2022 $ 100 Penn redeemed FMBs that became due.

FE Unsecured Notes August-November 2022 7.375 % 2031 $ 128 Beginning in the third quarter of 2022, FE repurchased a portion of the principal amount of its 2031 Notes and 2047 Notes through the open market for approximately $ 249 million including a premium of approximately $ 11 million ($ 9 million after tax).

In addition, FE recognized approximately $ 3 million ($ 2 million after-tax) in other unamortized debt costs related to the FE open market repurchases.

FE Unsecured Notes August-September 2022 4.85 % 2047 $ 110

OE Senior Unsecured Notes September, 2022 5.50 % 2033 $ 300 Proceeds were used to repay borrowings outstanding under the regulated money pool, to finance capital expenditures, to fund working capital needs and for other general corporate purposes.

Penn FMBs November, 2022 3.79 % 2032 $ 150 Proceeds were used to repay short-term borrowings.

WP FMBs November, 2022 5.29 % 2033 $ 250 Proceeds were used to repay short-term borrowings.

On November 29, 2022, WP issued $300 million of 5.29% FMBs due 2033.

$250 million was funded on December 13, 2022, and the remaining $50 million was funded on January 10, 2023.

Proceeds of the issuance of the FMBs were used to repay short term borrowings.

The following table presents scheduled debt repayments or debt that has been noticed for redemption for outstanding long-term debt, excluding finance leases, fair value purchase accounting adjustments and unamortized debt discounts and premiums, for the next five years as of December 31, 2022.

(In millions) 2023 2024 2025 2026 2027

Scheduled debt repayments $ 344 $ 1,246 $ 2,023 $ 1,076 $ 2,003

Securitized Bonds

10 unchanged sentences

Each of the Ohio Companies, as servicer of its respective SPE, manages and administers the phase in recovery property including the billing, collection and remittance of usage-based charges payable by retail electric customers.

In the aggregate, the Ohio Companies are entitled to annual servicing fees of $ 445 thousand that are recoverable through the usage-based charges.

The SPEs are considered VIEs and each one is consolidated into its applicable utility.

12 unchanged sentences

SHORT-TERM BORROWINGS AND BANK LINES OF CREDIT

FirstEnergy had no outstanding short-term borrowings as of December 31, 2021 and $ 2.2 billion of outstanding short-term borrowings as of December 31, 2020.

On November 23, 2020, JCP&L, ME, Penn, TE and WP, borrowed $ 950 million in the aggregate under the former FE Revolving Facility, bringing the outstanding principal balance to $ 1.2 billion, with $ 1.3 billion of remaining availability.

On November 23, 2020, FET and ATSI borrowed $ 1 billion in the aggregate under the former FET Revolving Facility, bringing the outstanding principal balance to $ 1 billion, with no remaining availability.

FE, FET and certain of their respective subsidiaries increased their borrowings under the former Revolving Facilities as a proactive measure to increase their respective cash positions and preserve financial flexibility.

These borrowings were repaid in full during 2021.

FirstEnergy had $100 million of short-term borrowings as of December 31, 2022.

As of December 31, 2021, FirstEnergy had no outstanding short-term borrowings.

On October 18, 2021, FE, FET, the Utilities, and the Transmission Companies entered into the 2021 Credit Facilities, which were six separate senior unsecured five-year syndicated revolving credit facilities with JPMorgan Chase Bank, N.A., Mizuho Bank, Ltd.

14 unchanged sentences

FE is required under its 2021 Credit Facility to maintain a consolidated interest coverage ratio of not less than 2.50 times, measured at the end of each fiscal quarter for the last four fiscal quarters beginning with the quarter ending December 31, 2021.

Subject to each borrower's sublimit, the amounts noted below are available for the issuance of LOCs (subject to borrowings drawn under the 2021 Credit Facilities) expiring up to one year from the date of issuance.

Subject to each borrower’s sublimit, certain amounts are available for the issuance of LOCs (subject to borrowings drawn under the 2021 Credit Facilities) expiring up to one year from the date of issuance.

The stated amount of outstanding LOCs will count against total commitments available under each of the 2021 Credit Facilities and against the applicable borrower’s borrowing sublimit.

3 unchanged sentences

Additionally, borrowings under each of the 2021 Credit Facilities are subject to the usual and customary provisions for acceleration upon the occurrence of events of default, including a cross-default for other indebtedness in excess of $ 100 million.

As of December 31, 2021, the borrowers were in compliance with the applicable interest coverage and debt-to-total-capitalization ratio covenants in each case as defined under the respective 2021 Credit Facilities.

As of December 31, 2022, the borrowers were in compliance with the applicable interest coverage and debt-to-total-capitalization ratio covenants in each case as defined under the 2021 Credit Facilities.

FirstEnergy Money Pools

4 unchanged sentences

The rate of interest is the same for each company receiving a loan from their respective pool and is based on the average cost of funds available through the pool.

The average interest rate for borrowings in 2021 was 1.01% per annum for the regulated companies’ money pool and 0.60% per annum for the unregulated companies’ money pool.

During 2022, interest rates have increased significantly, which has caused the rate and interest on borrowings and lending under the money pools to be significantly higher.

The average interest rate for borrowings in 2022 was 2.27% per annum for the regulated companies’ money pool, as compared to 1.01% in 2021, and 2.14% per annum for the unregulated companies’ money pool, as compared to 0.60% in 2021.

Weighted Average Interest Rates

The annual weighted average interest rates on short-term borrowings outstanding as of December 31, 2022 and 2021, were 3.93 % and 2.42 %, respectively.

ASSET RETIREMENT OBLIGATIONS

In addition, FirstEnergy has recognized conditional retirement obligations, primarily for asbestos remediation.

The following table summarizes the changes to the ARO balances during 2021 and 2020:

ARO Reconciliation (In millions)

Balance, January 1, 2020 $ 856

Liabilities settled (1)

Balance, December 31, 2020 $ 159

Changes in timing and amount of estimated cash flows 8

Liabilities settled ( 1 )

Balance, December 31, 2021 $ 179

(1) Includes $ 726 million related to the closing of the asset purchase and sale agreement with TMI-2 Solutions, LLC, a subsidiary of Energy Solutions , LLC, concerning the transfer and dismantlement of TMI-2.

REGULATORY MATTERS

20 unchanged sentences

(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% and a 48.6% debt / 51.4% equity capital structure.

Rates are effective for customers on November 1, 2021, but beginning January 1, 2021, JCP&L offset the impact to customers' bills by amortizing an $86 million regulatory liability.

(3) Rates were effective for customers on November 1, 2021, but beginning January 1, 2021, JCP&L offset the impact to customers' bills by amortizing an $86 million regulatory liability.

PE operates under MDPSC approved base rates that were effective as of March 23, 2019.

6 unchanged sentences

PE recovers program investments with a return through an annually reconciled surcharge, with most costs subject to recovery over a five-year period with a return on the unamortized balance.

On August 16, 2022, the MDPSC ordered each utility to file, by October 28, 2022, a set of plans for paying down all amortization balances by the scheduled expiration of the EmPOWER program on December 31, 2029.

PE submitted its required plan on October 28, 2022, and, at the direction of the MDPSC, filed a revised plan on January 11, 2023.

Maryland law only allows for the utility to recover lost distribution revenue attributable to energy efficiency or demand reduction programs through a base rate case proceeding, and to date, such recovery has not been sought or obtained by PE.

In 2019, MDPSC issued an order approving PE’s 2018 base rate case filing, which among other things, approved an annual rate increase of $6.2 million, approved three of the four EDIS programs for four years to fund enhanced service reliability programs, directed PE to file a new depreciation study within 18 months, and ordered the filing of a new base rate case in four years to correspond to the ending of the approved EDIS programs.

Following the filing of PE’s depreciation study and subsequent filings by the Maryland Office of the People’s Counsel and the staff of the MDPSC, the public utility law judge issued a proposed order reducing PE’s base rates by $2.1 million.

The MDPSC denied PE’s appeal of the proposed order on October 26, 2021, and the proposed order was affirmed.

On April 9, 2020, the MDPSC issued an order allowing utilities to track and create a regulatory asset for future recovery of all prudently incurred incremental costs arising from the COVID-19 pandemic, including incremental uncollectible expense, incurred from the date of the Governor’s order (or earlier if the utility could show that the expenses related to suspension of service terminations).

On June 16, 2021, the MDPSC provided PE with approximately $4 million of COVID-19 relief funds that was

allocated by the Maryland General Assembly to be used to reduce certain residential customer utility account receivable arrearages.

J CP&L operates under NJBPU approved rates that were effective for customers as of November 1, 2021.

JCP&L operates under NJBPU approved rates that took effect as of January 1, 2021, and were effective for customers as of November 1, 2021.

JCP&L provides BGS for retail customers who do not choose a third-party EGS and for customers of third- party EGSs that fail to provide the contracted service.

All New Jersey EDCs participate in this competitive BGS procurement process and recover BGS costs directly from customers as a charge separate from base rates.

JCP&L has instituted energy efficiency and peak demand reduction programs in accordance with the New Jersey Clean Energy Act as approved by the NJBPU in April 2021.

The NJBPU approved plans include recovery of lost revenues resulting from the programs and a three-year plan including total program costs of $203 million, of which $158 million of investment is recovered

over a ten-year amortization period with a return as well as operations and maintenance expenses and financing costs of $45 million recovered on an annual basis.

In December 2017, the NJBPU issued proposed rules to modify its current CTA policy in base rate cases to:

5 unchanged sentences

Specifically, the Court’s ruling requires 100% of the CTA savings to be credited to customers in lieu of the NJBPU’s current policy requiring 25%.

On December 6, 2021, the NJBPU issued proposed amended rules modifying its current CTA policy in base rate cases consistent with the Superior Court’s June 7, 2021 order.

Once the proposed rules are final, they will be applied on a prospective basis in a future base rate case, however, it is not expected to have a material adverse effect on FirstEnergy’s results or financial condition.

On February 18, 2020, JCP&L submitted a filing with the NJBPU requesting a distribution base rate increase.

On October 28, 2020, the NJBPU approved a stipulated settlement between JCP&L and various parties, providing for, among other things, a $94 million annual base distribution revenues increase for JCP&L based on an ROE of 9.6%, which became effective for customers on November 1, 2021.

Between January 1, 2021 and October 31, 2021, JCP&L amortized an existing regulatory liability totaling approximately $86 million to offset the base rate increase that otherwise would have occurred in this period.

The parties also agreed that the actual net gain from the sale of JCP&L’s interest in the Yards Creek pumped-storage hydro generation facility in New Jersey (210 MWs), as further discussed below, be applied to reduce JCP&L’s existing regulatory asset for previously deferred storm costs.

Lastly, the parties agreed that approximately $95 million of Reliability Plus capital investment for projects through December 31, 2020, is included in rate base effective December 31, 2020.

Included in the NJBPU approved-settlement in JCP&L’s distribution rate case on October 28, 2020, was that JCP&L will be subject to a management audit.

The management audit began at the end of May 2021 and is currently ongoing.

On April 6, 2020, JCP&L signed an asset purchase agreement with Yards Creek Energy, LLC, a subsidiary of LS Power to sell its 50% interest in the Yards Creek pumped-storage hydro generation facility.

Subject to terms and conditions of the agreement, the base purchase price is $155 million.

As of December 31, 2020, assets held for sale on FirstEnergy’s Consolidated Balance Sheets associated with the transaction consist of property, plant and equipment of $45 million, which is included in the regulated distribution segment.

On July 31, 2020, FERC approved the transfer of JCP&L’s interest in the hydroelectric operating license.

On October 8, 2020, FERC issued an order authorizing the transfer of JCP&L’s ownership interest in the hydroelectric facilities.

On October 28, 2020, the NJBPU approved the sale of Yards Creek.

With the receipt of all required regulatory approvals, the transaction was consummated on March 5, 2021 and resulted in a $109 million gain within the regulated distribution segment.

As further discussed above, the gain from the transaction was applied against and reduced JCP&L’s existing regulatory asset for previously deferred storm costs and, as a result, was offset by expense in the “Amortization of regulatory assets, net”, line on the Consolidated Statements of Income, resulting in no earnings impact to FirstEnergy or JCP&L.

On August 27, 2020, JCP&L filed an AMI Program with the NJBPU, which proposed the deployment of approximately 1.2 million advanced meters over a three-year period beginning on January 1, 2023, at a total cost of approximately $418 million, including the pre-deployment phase.

The then proposed 3-year deployment was part of the 20-year AMI Program that was projected to cost approximately $732 million and proposed a cost recovery mechanism through a separate AMI tariff rider.

On September 14, 2021, JCP&L submitted a supplemental filing, which reflected increases in the AMI Program’s costs.

Under the revised AMI Program, during the first six years of the AMI Program from 2022 through 2027, JCP&L estimates costs of $494 million, consisting of capital expenditures of approximately $390 million, incremental operations and maintenance expenses of approximately $73 million and cost of removal of $31 million.

On September 19, 2022, the NJBPU issued a notice to re-adopt its rules of practice, including proposed changes to the rules regarding CTA policy in base rate cases consistent with the Superior Court’s June 7, 2021 order.

Once the proposed rules of practice are final, they will be applied on a prospective basis in a future base rate case, however, it is not expected to have a material adverse effect on FirstEnergy’s results or financial condition.

On October 28, 2020, the NJBPU approved a stipulated settlement between JCP&L and various parties, resolving JCP&L’s request for distribution base rate increase.

The settlement provided for a $94 million annual base distribution revenues increase for JCP&L based on an ROE of 9.6%, which became effective for customers on November 1, 2021.

The settlement additionally provided that JCP&L would be subject to a management audit, which began in May 2021 and is currently ongoing.

JCP&L is currently waiting for issuance of the final report.

On September 14, 2021, JCP&L submitted a supplemental filing with the NJBPU to revise a previously filed AMI Program, which proposed the deployment of approximately 1.2 million advanced meters.

Under the revised AMI Program, during the first six years of the AMI Program from 2022 through 2027, JCP&L estimates costs of $494 million, consisting of capital investments of approximately $390 million, incremental operations and maintenance expenses of approximately $73 million and cost of removal of $31 million.

On February 8, 2022, JCP&L filed with the NJBPU a stipulation entered into with the NJBPU staff, NJ Rate Counsel and others, that, pending NJBPU approval, would affirm the terms of the revised AMI Program.

JCP&L expects a NJBPU order by the end of the first quarter of 2022.

The Stipulation also provided that the revised AMI Program-related capital costs, the legacy meter stranded costs, and the operations and maintenance expense will be deferred and placed in regulatory assets, with such amounts sought to be recovered in the JCP&L’s subsequent base rate cases.

On June 10, 2020, the NJBPU issued an order establishing a framework for the filing of utility-run energy efficiency and peak demand reduction programs in accordance with the New Jersey Clean Energy Act.

Under the established framework, JCP&L will recover its program investments with a return over a ten-year amortization period and its operations and maintenance expenses on an annual basis, be eligible to receive lost revenues on energy savings that resulted from its programs and be eligible for incentives or subject to penalties based on its annual program performance, beginning in the fifth year of its program offerings.

On September 25, 2020, JCP&L filed its energy efficiency and peak demand reduction program, which consists of 11 energy

efficiency and peak demand reduction programs and subprograms to be run from July 1, 2021, through June 30, 2024.

On April 23, 2021, JCP&L filed a Stipulation of Settlement with the NJBPU for approval of recovery of lost revenues resulting from the programs and a three-year plan including total program costs of $203 million, of which $158 million of investment is recovered over a ten-year amortization period with a return as well as operations and maintenance expenses and financing costs of $45 million recovered on an annual basis.

On April 27, 2021, the NJBPU issued an Order approving the Stipulation of Settlement.

The Stipulation, which was approved by NJBPU order on February 23, 2022, also provides that the revised AMI Program-related capital costs, the legacy meter stranded costs, and the operations and maintenance expense will be deferred and placed in regulatory assets, with such amounts sought to be recovered in the JCP&L’s subsequent base rate cases.

On July 2, 2020, the NJBPU issued an order allowing New Jersey utilities to track and create a regulatory asset for future recovery of all prudently incurred incremental costs arising from the COVID-19 pandemic beginning March 9, 2020 and continuing until the New Jersey Governor issues an order stating that the COVID-19 pandemic is no longer in effect.

1 unchanged sentence

On October 28, 2020, the NJBPU issued an order expanding the scope of the proceeding to examine all pandemic issues, including recovery of the COVID-19 regulatory assets, by way of a generic proceeding.

Through various executive orders issued by the New Jersey Governor, the moratorium period was extended to December 31, 2021.

On December 21, 2021, the moratorium on residential disconnections for certain entities providing utility service was extended until March 15, 2022.

The moratorium on residential disconnections was not extended for investor-owned electric utilities such as JCP&L, but does require that investor-owned electric public utilities offer qualifying residential customers deferred payment arrangements meeting certain minimum criteria prior to disconnecting service.

Credit rating actions taken by S&P and Fitch on October 28, 2020 triggered a requirement from various NJBPU orders that JCP&L file a mitigation plan, which was filed on November 5, 2020, to demonstrate that JCP&L has sufficient liquidity to meet its BGS obligations.

On December 11, 2020, the NJBPU held a public hearing on the mitigation plan.

Written comments on JCP&L’s mitigation plan were submitted on January 8, 2021.

No moratorium on residential disconnections remains in effect for investor-owned electric utilities such as JCP&L, but investor-owned electric public utilities are required to offer qualifying residential customers deferred payment arrangements meeting certain minimum criteria prior to disconnecting service.

Additionally, new legislation was enacted on March 25, 2022, prohibiting utilities from disconnecting electric service to customers that have applied for utility bill assistance before June 15, 2022 until such time as the state agency administering the assistance program makes a decision on the application and further requiring that all utilities offer a deferred payment arrangement meeting certain minimum criteria after the state agency’s decision on the application has been made.

Pursuant to an NJBPU order requiring all New Jersey electric distribution companies to file electric vehicle programs, JCP&L filed its program on March 1, 2021.

JCP&L’s proposed electric vehicle program consisted of six sub-programs, including a consumer education and outreach initiative that would begin on January 1, 2022, and continue over a four-year period.

The total proposed budget for the electric vehicle program is approximately $50 million, of which $16 million is capital expenditures and $34 million is for operations and maintenance expenses.

JCP&L is proposing to recover the electric vehicle program costs via a non-bypassable rate clause applicable to all distribution customer rate classes, which became effective on January 1, 2022.

On May 26, 2021, a procedural schedule was set to include evidentiary hearings the week of October 18, 2021.

On July 16, 2021, the procedural schedule was extended by thirty days as requested by JCP&L to continue settlement discussions.

On August 19, 2021, the presiding commissioner issued an order modifying the procedural schedule by extending the procedural schedule by ninety days as requested by JCP&L to continue settlement discussions.

On November 12, 2021, JCP&L filed a letter with the presiding commissioner requesting a suspension of the procedural schedule in order to allow the parties to continue settlement discussion.

On November 23, 2021, the presiding commissioner entered an order suspending the procedural schedule.

JCP&L expects an order from the NJBPU by the end of the first quarter of 2022.

On May 2, 2022, JCP&L filed with the NJBPU a stipulation entered into with the NJBPU staff, NJ Rate Counsel and others that provided a total budget of approximately $40 million for JCP&L’s electric vehicle program, including investments of approximately $29 million and operations and maintenance expenses of approximately $11 million.

Electric vehicle related capital and operations and maintenance costs shall be deferred and placed in separate regulatory assets for recovery in JCP&L’s next base rate case.

The stipulation was approved without modification by the NJBPU on June 8, 2022.

On September 17, 2022, in connection with Mid-Atlantic Offshore Development, LLC, a transmission company jointly owned by Shell New Energies US and EDF Renewables North America, JCP&L submitted a proposal to the NJBPU and PJM to build transmission infrastructure connecting offshore wind-generated electricity to the New Jersey power grid.

On October 26, 2022, the JCP&L proposal was accepted in an order issued by NJBPU.

The proposal included approximately $723 million in investments to both build new and upgrade existing transmission infrastructure.

JCP&L’s proposal projects an investment ROE of 10.2% and includes the option for JCP&L to acquire up to a 20% equity stake in Mid-Atlantic Offshore Development, LLC.

The resulting rates associated with the project are expected to be shared among the ratepayers of all New Jersey electric utilities.

Construction is expected to begin in 2025.

The Ohio Companies operate under PUCO-approved base distribution rates that became effective in 2009.

The Ohio Companies currently operate under ESP IV, effective June 1, 2016 and continuing through May 31, 2024, that continues the supply of power to non-shopping customers at a market-based price set through an auction process.

The Ohio Companies

currently operate under ESP IV, effective June 1, 2016 and continuing through May 31, 2024, that continues the supply of power to non-shopping customers at a market-based price set through an auction process.

ESP IV also continues the Rider DCR, which supports continued investment related to the distribution system for the benefit of customers, with increased revenue caps of $20 million per year from June 1, 2019 through May 31, 2022;

7 unchanged sentences

and (c) establish a Customer Advisory Council to ensure preservation and growth of the competitive market in Ohio.

ESP IV further provided for the Ohio Companies to collect DMR revenues, but the SCOH reversed the PUCO’s decision to include DMR in ESP IV.

Subsequently, the PUCO entered an order directing the Ohio Companies to cease further collection through the DMR and credit back to customers a refund of the DMR funds collected since July 2, 2019.

On December 1, 2020, the SCOH reversed the PUCO’s exclusion of the DMR revenues from the determination of the existence of significantly excessive earnings under ESP IV for OE for calendar year 2017, and remanded the case to the PUCO with instructions to conduct new proceedings which include the DMR revenues in the analysis, determine the threshold against which the earned return is measured, and make other necessary determinations.

As further described below, the Ohio Stipulation resolves the Ohio Companies’ 2017 SEET proceeding.

On July 23, 2019, Ohio enacted HB 6, which included provisions supporting nuclear energy, authorizing a decoupling mechanism for Ohio electric utilities and ending current energy efficiency program mandates.

Under HB 6, the energy efficiency program mandates, as well as Ohio electric utilities’ energy efficiency and peak demand reduction cost recovery riders, ended on December 31, 2020, subject to final reconciliation.

Third-parties have challenged the Ohio Companies’ authorization to recover all lost distribution revenue under energy efficiency and peak demand reduction cost recovery riders.

The Ohio Stipulation resolves the issues related to lost distribution revenue with no financial impact to the Ohio Companies.

On March 31, 2021, the Ohio Governor signed HB 128, which, among other things, repealed parts of HB 6, the legislation that established support for nuclear energy supply in Ohio, provided for a decoupling mechanism for Ohio electric utilities, and provided for the ending of current energy efficiency program mandates.

HB 128 was effective June 30, 2021.

As FirstEnergy would not have financially benefited from the mechanism to provide support to nuclear energy in Ohio, there is no expected additional impact to FirstEnergy due to the repeal of that provision in HB 6.

As further discussed below, in connection with a partial settlement with the OAG and other parties, the Ohio Companies filed an application with the PUCO on February 1, 2021, to set the respective decoupling riders (CSR) to zero.

On February 2, 2021, the PUCO approved the application.

While the partial settlement with the OAG focused specifically on decoupling, the Ohio Companies elected to forego recovery of lost distribution revenue.

FirstEnergy also committed to pursuing an open dialogue with stakeholders in an appropriate manner with respect to the numerous regulatory proceedings then underway as further discussed herein.

As a result of the partial settlement, and the decision to not seek lost distribution revenue, FirstEnergy recognized a $108 million pre-tax charge ($84 million after-tax) in the fourth quarter of 2020, and $77 million (pre-tax) of which is associated with forgoing collection of lost distribution revenue.

The Ohio Stipulation affirms the Ohio Companies’ commitment to not seek recovery of lost distribution revenue through the end of its ESP IV in May 2024.

On March 31, 2021, FirstEnergy announced that the Ohio Companies would refund to customers amounts previously collected under decoupling, with interest, totaling approximately $27 million.

On July 7, 2021, the PUCO issued an order approving the Ohio Companies’ modified application to refund such amounts to customers and directed that all funds collected through CSR be refunded to customers over a single billing cycle beginning August 1, 2021.

In connection with the audit of the Ohio Companies’ Rider DCR for 2017, the PUCO issued an order on June 16, 2021, directing the Ohio Companies to prospectively discontinue capitalizing certain vegetation management costs and reduce the 2017 Rider DCR revenue requirement by $3.7 million associated with these costs.

On May 16, 2022, the Ohio Companies filed their application for determination of the existence of SEET under ESP IV for calendar year 2021, which demonstrated that each of the individual Ohio Companies did not have significantly excessive earnings.

On July 15, 2022, the Ohio Companies filed an application with the PUCO for approval of phase two of their distribution grid modernization plan that would, among other things, provide for the installation of an additional 700,000 smart meters, distribution automation equipment on approximately 240 distribution circuits, voltage regulating equipment on approximately 220 distribution circuits, and other investments and pilot programs in related technologies designed to provide enhanced customer benefits.

The Ohio Companies propose that phase two will be implemented over a four-year budget period with estimated capital investments of approximately $626 million and operations and maintenance expenses of approximately $144 million over the deployment period.

Under the proposal, costs of phase two of the grid modernization plan would be recovered through the Ohio Companies’ AMI rider, pursuant to the terms and conditions approved in ESP IV.

On December 27, 2022, the Ohio Companies filed a motion with the PUCO requesting a procedural schedule that would facilitate the issuance of an order by year-end 2023.

On November 1, 2021, the Ohio Companies, together with the OCC, PUCO Staff, and several other signatories, entered into an Ohio Stipulation with the intent of resolving the ongoing energy efficiency rider audits, various SEET proceedings, including the Ohio Companies’ 2017 SEET proceeding, and the Ohio Companies’ quadrennial ESP review, each of which was pending before the PUCO.

Specifically, the Ohio Stipulation provides that the Ohio Companies’ current ESP IV passes the required statutory test for their prospective SEET review as part of the Quadrennial Review of ESP IV, and except for limited circumstances, the signatory parties have agreed not to challenge the Ohio Companies’ SEET return on equity calculation methodology for their 2021-2024 SEET proceedings.

The Ohio Stipulation additionally affirms that:

(i) the Ohio Companies’ ESP IV shall continue through its previously authorized term of May 31, 2024;

and (ii) the Ohio Companies will file their next base rate case in May 2024, and further, no signatory party will seek to adjust the Ohio Companies’ base distribution rates before that time, except in limited circumstances.

The Ohio Companies further agreed to refund $96 million to customers in connection with the 2017-2019 SEET cases, and to provide $210 million in future rate reductions for all customers, including $80 million in 2022, $60 million in 2023, $45 million in 2024, and $25 million in 2025.

The PUCO approved the 2017-2019 SEET refunds and 2022 rate reductions on December 1, 2021, and refunds began in December 2021.

Current and future rate reductions are recognized as a reduction to regulated distribution segment’s revenue in the Consolidated Statements of Income as they are provided to the Ohio Companies’ customers.

On September 8, 2020, the OCC filed motions in the Ohio Companies’ corporate separation audit and DMR audit dockets, requesting the PUCO to open an investigation and management audit, hire an independent auditor, and require FirstEnergy to show it did not improperly use money collected from consumers or violate any utility regulatory laws, rules or orders in its activities regarding HB 6.

On December 30, 2020, in response to the OCC's motion, the PUCO reopened the DMR audit docket, and directed PUCO staff to solicit a third-party auditor and conduct a full review of the DMR to ensure funds collected from customers through the DMR were only used for the purposes established in ESP IV.

On June 2, 2021, the PUCO selected an auditor.

The auditor filed the final audit report on January 14, 2022, which made findings and recommendations.

The report found that spending of DMR revenues was not required to be tracked, and that DMR revenues, like all rider revenues, are placed into the regulated money pool as a matter of routine, where the funds lose their identify.

On June 2, 2021, the PUCO selected an auditor and the auditor filed the final audit report on January 14, 2022, which made certain findings and recommendations.

Therefore, the report could not suggest that DMR funds were used definitively for direct or indirect support for grid modernization.

1 unchanged sentence

The report further recommended that the regulated companies' money pool be audited more frequently and the Ohio Companies adopt formal dividend policies.

Final comments and responses were filed by parties during the second quarter of 2022.

On September 15, 2020, the PUCO opened a new proceeding to review the political and charitable spending by the Ohio Companies in support of HB 6 and the subsequent referendum effort, and directing the Ohio Companies to show cause, demonstrating that the costs of any political or charitable spending in support of HB 6, or the subsequent referendum effort, were not included, directly or indirectly, in any rates or charges paid by customers.

The Ohio Companies initially filed a response stating that the costs of any political or charitable spending in support of HB 6, or the subsequent referendum effort, were not included, directly or indirectly, in any rates or charges paid by customers, but on August 6, 2021, filed a supplemental response explaining that, in light of the facts set forth in the DPA and the findings of the Rider DCR audit report further discussed below, political or charitable spending in support of HB 6, or the subsequent referendum effort, affected pole attachment rates paid by approximately $15 thousand.

On October 26, 2021, the OCC filed a motion requesting the PUCO to order an independent external audit to investigate FE’s political and charitable spending related to HB 6, and to appoint an independent review panel to retain and oversee the auditor.

retain and oversee the auditor.

In November and December 2021, parties filed comments and reply comments regarding the Ohio Companies’ original and supplemental responses to the PUCO’s September 15, 2020, show cause directive.

On May 4, 2022, the PUCO selected a third-party auditor to determine whether the show cause demonstration submitted by the Ohio Companies is sufficient to ensure that the cost of any political or charitable spending in support of HB 6 or the subsequent referendum effort was not included, directly or indirectly, in any rates or charges paid by ratepayers.

In connection with an ongoing audit of the Ohio Companies’ policies and procedures relating to the code of conduct rules between affiliates, on November 4, 2020, the PUCO initiated an additional corporate separation audit as a result of the FirstEnergy leadership transition announcement made on October 29, 2020, as further discussed below.

3 unchanged sentences

The audit report makes no findings of major non-compliance with Ohio corporate separation requirements, minor non-compliance with eight requirements, and findings of compliance with 23 requirements.

Parties filed comments and reply comments on the audit report, and a PUCO attorney examiner has issued a procedural schedule setting an evidentiary hearing on May 9, 2022.

In the fourth quarter of 2020, motions were filed with the PUCO requesting that the PUCO amend the Ohio Companies’ riders for collecting the OVEC related charges required by HB 6, which the Ohio Companies are further required to remit to other Ohio

electric distribution utilities or to the State Treasurer, to provide for refunds in the event such provisions of HB 6 are repealed.

The Ohio Companies contested the motions, which are pending before the PUCO.

On December 7, 2020, the Citizens’ Utility Board of Ohio filed a complaint with the PUCO against the Ohio Companies.

The complaint alleges that the Ohio Companies’ new charges resulting from HB 6, and any increased rates resulting from proceedings over which the former PUCO Chairman presided, are unjust and unreasonable, and that the Ohio Companies violated Ohio corporate separation laws by failing to operate separately from unregulated affiliates.

The complaint requests, among other things, that any rates authorized by HB 6 or authorized by the PUCO in a proceeding over which the former Chairman presided be made refundable;

that the Ohio Companies be required to file a new distribution rate case at the earliest possible date;

and that the Ohio Companies’ corporate separation plans be modified to introduce institutional controls.

The Ohio Companies are contesting the complaint.

On December 21, 2021, the Citizens’ Utility Board of Ohio filed a notice of voluntary dismissal of its complaint without prejudice.

The PUCO dismissed the complaint without prejudice on January 12, 2022.

On November 1, 2021, the Ohio Companies, together with the OCC, PUCO Staff, and several other signatories, entered into an Ohio Stipulation with the intent of resolving the ongoing energy efficiency rider audits, various SEET, proceedings, including the Ohio Companies’ 2017 SEET proceeding, and the Ohio Companies’ quadrennial ESP review, each of which was pending before the PUCO.

The Ohio Stipulation additionally affirms that:

(i) the Ohio Companies’ ESP IV shall continue through its previously authorized term of May 31, 2024;

The PUCO approved the 2017-2019 SEET refunds and 2022 rate reductions December 1, 2021, and refunds began in January 2022.

As a result of the PUCO approval, FirstEnergy recognized a $96 million pre-tax charge in the fourth quarter of 2021 at the regulated distribution segment within Amortization (deferral) of Regulatory Assets, net, on the Consolidated Statements of Income associated with the refund.

The future rate reductions will be recognized as a reduction to regulated distribution segment’s revenue in the Consolidated Statements of Income as they are provided to the Ohio Companies’ customers.

Parties filed comments and reply comments on the audit report.

In connection with an ongoing annual audit of the Ohio Companies’ Rider DCR for 2020, and as a result of disclosures in FirstEnergy’s Form 10-K for the year ended December 31, 2020 (filed on February 18, 2021), the PUCO expanded the scope of the audit on March 10, 2021, to include a review of certain transactions that were either improperly classified, misallocated, or lacked supporting documentation, and to determine whether funds collected from customers were used to pay the vendors, and if so, whether or not the funds associated with those payments should be returned to customers through Rider DCR or through an alternative proceeding.

3 unchanged sentences

On December 15, 2021, the PUCO further expanded the scope of the audit to include an investigation into an apparent nondisclosure of a side agreement in the Ohio Companies’ ESP IV settlement proceedings, but stayed its expansion of the audit until otherwise ordered by the PUCO.

On August 16, 2022, the U.S.

Attorney for the Southern District of Ohio requested that the PUCO stay the above pending HB 6- related matters for a period of six months, which request was granted by the PUCO on August 24, 2022.

Unless otherwise ordered by the PUCO, the four cases are stayed in their entirety, including discovery and motions, and all related procedural schedules are vacated.

In the fourth quarter of 2020, motions were filed with the PUCO requesting that the PUCO amend the Ohio Companies’ riders for collecting the OVEC-related charges required by HB 6 to provide for refunds in the event such provisions of HB 6 are repealed.

Neither the Ohio Companies nor FE benefit from the OVEC-related charges the Ohio Companies collect.

Instead, the Ohio Companies are further required by HB 6 to remit all the OVEC-related charges they collect to non-FE Ohio electric distribution utilities.

The Ohio Companies contested the motions, which are pending before the PUCO.

See Note 13, "Commitments, Guarantees and Contingencies" below for additional details on the government investigations and subsequent litigation surrounding the investigation of HB 6.

3 unchanged sentences

On December 14, 2021, the Pennsylvania Companies filed proposed DSPs for provision of generation for the June 1, 2023 through May 31, 2027 delivery period, to be sourced through competitive procurements for customers who do not receive service from an alternative EGS.

An evidentiary hearing was held on April 13, 2022, and on April 20, 2022, the parties filed a partial settlement with the PPUC resolving certain of the issues in the proceeding and setting aside the remainder of the issues to be resolved through briefing.

PPUC approved the partial settlement, without modification, on August 4, 2022.

Under the 2023-2027 DSPs, supply is proposed to be provided through a mix of 12 and 24-month energy contracts, as well as long-term solar PPAs.

2 unchanged sentences

The amounts recorded as savings for the total period of January 1 through June 30, 2018, were tracked and were to be addressed for treatment in a future proceeding.

On May 17, 2021, the Pennsylvania Companies filed petitions with

the PPUC proposing to refund the net savings for the January through June 2018 period to customers beginning January 1, 2022.

On November 18, 2021, the PPUC approved the Pennsylvania Companies' proposed refunds, but also revised a previous methodology for calculating the net tax savings, which resulted in additional tax savings attributable to the Tax Act to be refunded to customers and directed the Pennsylvania Companies to file new petitions to propose the timing and methodology to provide these additional refunds to customers.

On May 17, 2021, the Pennsylvania Companies filed petitions with the PPUC proposing to refund the net savings for the January through June 2018 period to customers beginning January 1, 2022.

to customers and directed the Pennsylvania Companies to file new petitions to propose the timing and methodology to provide these additional refunds to customers.

The Pennsylvania Companies recalculated the net impact for 2018 through 2021 under the revised PPUC methodology in comparison to amounts already refunded to customers under the existing riders, which resulted in an additional $61 million in savings, with interest, to be provided to customers.

As a result, FirstEnergy recognized a pre-tax charge of $61 million in the fourth quarter of 2021 at the regulated distribution segment within Amortization (deferral) of Regulatory Assets, net, on the Consolidated Statement of Income associated with the additional refund associated with the November 2021 PPUC order and methodology.

The Pennsylvania Companies are required to file petitions to propose the timing and methodology of the refund of these amounts by March 3, 2022.

Pursuant to Pennsylvania Act 129 of 2008 and PPUC orders, Pennsylvania EDCs implement energy efficiency and peak demand reduction programs.

The Pennsylvania Companies’ Phase III EE&C plans for the June 2016 through May 2021 period, which were approved in March 2016, with expected costs up to $390 million, are designed to achieve the targets established in the PPUC’s Phase III Final Implementation Order with full recovery through the reconcilable EE&C riders.

On June 18, 2020, the PPUC entered a Final Implementation Order for a Phase IV EE&C Plan, operating from June 2021 through May 2026.

The Final Implementation Order set demand reduction targets, relative to 2007 to 2008 peak demands, at 2.9% MW for ME, 3.3% MW for PN, 2.0% MW for Penn, and 2.5% MW for WP;

As a result, FirstEnergy recognized a pre-tax charge of $61 million in the fourth quarter of 2021, associated with the additional refund and based on the November 2021 PPUC order and methodology.

The Pennsylvania Companies filed petitions to propose the timing and methodology of the refund of these amounts on February 17, 2022.

The Pennsylvania Companies’ petitions and the proposed refunds addressed within were approved by the PPUC on June 16, 2022, without modification, effective July 1, 2022, and which refunds were fully completed by December 31, 2022.

Pursuant to Pennsylvania Act 129 of 2008 and PPUC orders, the Pennsylvania Companies implemented energy efficiency and peak demand reduction programs with demand reduction targets, relative to 2007 to 2008 peak demands, at 2.9% MW for ME, 3.3% MW for PN, 2.0% MW for Penn, and 2.5% MW for WP;

and energy consumption reduction targets, as a percentage of the Pennsylvania Companies’ historic 2009 to 2010 reference load at 3.1% MWH for ME, 3.0% MWH for PN, 2.7% MWH for Penn, and 2.4% MWH for WP.

The Pennsylvania Companies’ Phase IV plans were filed November 30, 2020 and subsequently approved by PPUC without modification on March 25, 2021.

Pennsylvania EDCs are permitted to seek PPUC approval of an LTIIP for infrastructure improvements and costs related to highway relocation projects, after which a DSIC may be approved to recover LTIIP costs.

On January 16, 2020, the PPUC approved the Pennsylvania Companies’ LTIIPs for the five-year period beginning January 1, 2020 and ending December 31, 2024 for a total capital investment of approximately $572 million for certain infrastructure improvement initiatives.

On June 25, 2021, the Pennsylvania OCA filed a complaint against Penn’s quarterly DSIC rate, disputing the recoverability of the Companies’ automated distribution management system investment under the DSIC mechanism.

On January 26, 2022, the parties filed a joint petition for settlement that resolves all issues in this matter pending PPUC approval.

On June 25, 2021, the Pennsylvania Office of Consumer Advocate filed a complaint against Penn’s quarterly DSIC rate, disputing the recoverability of the Companies’ automated distribution management system investment under the DSIC mechanism.

On January 26, 2022, the parties filed a joint petition for settlement that resolves all issues in this matter, which was approved by the PPUC without modification on April 14, 2022.

Following the Pennsylvania Companies’ 2016 base rate proceedings, the PPUC ruled in a separate proceeding related to the DSIC mechanisms that the Pennsylvania Companies were not required to reflect federal and state income tax deductions related to DSIC-eligible property in DSIC rates.

The decision was appealed to the Pennsylvania Supreme Court and in July 2021 the court upheld the Pennsylvania Commonwealth Court’s reversal of the PPUC’s decision and remanded the matter back to the PPUC for determination as to how DSIC calculations shall account for ADIT and state taxes.

The matter awaits further action by the PPUC.

The adverse ruling by the Pennsylvania Supreme Court is not expected to result in a material impact to FirstEnergy.

The PPUC issued an order on March 13, 2020, forbidding utilities from terminating service for non-payment for the duration of the COVID-19 pandemic.

On May 13, 2020, the PPUC issued a Secretarial letter directing utilities to track all prudently incurred incremental costs arising from the COVID-19 pandemic, and to create a regulatory asset for future recovery of incremental uncollectibles incurred as a result of the COVID-19 pandemic and termination moratorium.

On October 13, 2020, the PPUC entered an order lifting the service termination moratorium effective November 9, 2020, subject to certain additional notification, payment procedures and exceptions, and permits the Pennsylvania Companies to create a regulatory asset for all incremental expenses associated with their compliance with the order.

On March 19, 2021, the PPUC entered an order lifting the moratorium in total effective March 31, 2021, subject to certain additional guidelines regarding the duration of payment arrangements and reporting obligations.

The PPUC issued the order as directed, which was challenged by an intervening party.

All parties have briefed the issue and await a ruling from the PPUC.

Neither the PPUC’s determination or the underlying order are expected to result in a material impact to FirstEnergy.

WEST VIRGINIA

2 unchanged sentences

MP’s and PE’s ENEC rate is updated annually.

On December 30, 2020, MP and PE filed with the WVPSC a determination of the rate impact of the Tax Act with respect to ADIT.

The filing proposed an annual revenue reduction of $2.6 million, effective January 1, 2022, with reconciliation and any resulting adjustments incorporated into annual ENEC proceedings.

On August 12, 2021, a unanimous settlement was reached with all the parties agreeing to a $7.7 million rate reduction beginning January 1, 2022, with a true-up in the ENEC proceeding each year.

On November 30, 2021, the WVPSC approved the settlement on all terms, except for the proposed effective date of the rate reduction, which was held in abeyance until further notice.

On August 27, 2021, MP and PE filed with the WVPSC their annual ENEC case requesting an increase in ENEC rates of $19.6 million beginning January 1, 2022, which represented a 1.5% increase to the rates currently in effect.

WVPSC issued an order on December 29, 2021, granting the requested $19.6 million increase in ENEC rates.

Among other things, the order requires MP

and PE to refund to its large industrial customers their respective portion of the $7.7 million rate reduction discussed above and also requires MP and PE to negotiate a PPA for its capacity shortfall and a reasonable reserve margin if certain conditions are met.

On December 29, 2021, the WVPSC issued an order granting MP and PE’s requested $19.6 million increase in ENEC rates, requiring, among other things, that MP and PE refund to its large industrial customers their respective portion of the $7.7 million rate reduction discussed above and also requires MP and PE to negotiate a PPA for its capacity shortfall and a reasonable reserve margin if certain conditions are met.

By order dated March 2, 2022, the WVPSC reopened the case to determine whether rates should be increased to recover growing ENEC under-recoveries.

On May 17, 2022, the WVPSC issued an order approving an interim rate increase of $94 million, effective for customer rates on May 18, 2022, subject to a prudence review during MP and PE’s 2022 ENEC case.

On August 25, 2022, MP and PE filed with the WVPSC their annual ENEC case requesting an increase in ENEC rates of $183.8 million beginning January 1, 2023, which represents a 12.2% increase to the rates then in effect.

The increase was driven by an underrecovery during the review period (July 1, 2021 to June 30, 2022) of $144.9 million due to higher coal, reagent, and allowance expenses.

This filing additionally addresses, among other things, the WVPSC’s May 2022 request for a prudence review of current rates.

At a hearing on December 8, 2022, the parties in the case presented a unanimous settlement to increase rates by approximately $92 million, effective January 1, 2023, and carry over to MP and PE’s 2023 ENEC case, approximately $92 million at a carrying charge of 4%.

In an order dated December 30, 2022, the WVPSC approved the settlement with respect to the proposed rate increase, but MP and PE rates remain subject to a prudence review in their 2023 ENEC case.

The order also instructs MP to evaluate the feasibility of purchasing the Pleasants Power Station and file a summary of the evaluation by March 31, 2023.

On December 27, 2021, the WVPSC approved a settlement granting MP and PE a $16 million increase in rates effective January 1, 2022, and permitting the continuation of the vegetation management program and surcharge for another two years.

WVPSC additionally ordered MP and PE to perform equipment inspections within a reasonable time after vegetation management occurs on a circuit.

On November 22, 2021, MP and PE filed with the WVPSC their plan to construct 50 MWs of solar generation at five sites in West Virginia.

The plan includes a tariff to offer solar power to West Virginia customers and cost recovery for MP and PE from other customers through a surcharge for any solar investment not fully subscribed by their customers.

A hearing has been set for March 16, 2022.

The solar generation project is expected to cost approximately $100 million and begin being in-service by the end of 2023 and finalized no later than the end of 2025.

On August 27, 2021, MP and PE filed with the WVPSC a biennial review of the vegetation management surcharge seeking a $16 million annual revenue increase.

A settlement among the parties was reached on December 3, 2021 and on December 27, 2021, the WVPSC approved the settlement, which granted a $16 million increase in rates, and continued the vegetation management program and surcharge for another two years.

Additionally, the WVPSC order added a provision requiring equipment inspections be performed within a reasonable time after vegetation management occurs on a circuit.

A hearing was held in mid-March 2022 and on April 21, 2022, the WVPSC issued an order approving, effective May 1, 2022, the requested tariff and requiring MP and PE to subscribe at least 85% of the planned 50 MWs before seeking final tariff approval.

MP and PE must seek separate approval from the WVPSC to recover any solar generation costs in excess of the approved tariff.

The first solar generation site is expected to be in-service by the end of 2023 and all construction completed at the other sites no later than the end of 2025 at a total investment cost of approximately $110 million.

On December 17, 2021, MP and PE filed with the WVPSC for approval of environmental compliance projects at the Ft.

1 unchanged sentence

The request includes a surcharge to recover the expected $142 million capital investment and $3 million in annual operation and maintenance expense.

A ruling from the WVPSC is expected in mid-summer 2022, and if approved, construction would be expected to be completed by the end of 2025.

See "Environmental Matters - Clean Water Act" below, for additional details on the EPA's ELG.

MP and PE reached a settlement agreement with WVPSC staff and all intervenors, recommending:

(i) approval of the ELG compliance plan submitted by MP and PE and (ii) recovery of costs through a surcharge.

A ruling approving the settlement without modification was issued by the WVPSC on September 12, 2022, and construction is expected to be completed by the end of 2025.

See Note 13, “Commitments, Guarantees and Contingencies - Environmental Matters - Clean Water Act" below, for additional details on the EPA's ELG.

On January 13, 2023, MP and PE filed a request with the WVPSC seeking approval of new depreciation rates for existing and future capital assets.

Specifically, MP and PE are seeking to increase depreciation expense of $75.5 million per year, primarily for regulated generation-related assets.

Any depreciation rates approved by the WVPSC would not become effective until new base rates were established.

FERC REGULATORY MATTERS

Under the FPA, FERC regulates rates for interstate wholesale sales, transmission of electric power, accounting and other matters, including construction and operation of hydroelectric projects.

Under the FPA, FERC regulates rates for interstate wholesale sales and transmission of electric power, regulatory accounting and reporting under the Uniform System of Accounts, and other matters, including construction and operation of hydroelectric projects.

With respect to their wholesale services and rates, the Utilities, AE Supply and the Transmission Companies are subject to regulation by FERC.

15 unchanged sentences

(1) Effective on January 1, 2021, MP, PE, and WP have implemented a forward-looking formula rate, which has been accepted by FERC, subject to refund, pending further hearing and settlement procedures.

(2) See FERC Action on Tax Act below.

On January 18, 2023, MP, PE, and WP submitted an uncontested settlement to FERC, which is subject to FERC approval, which includes an allowed ROE of 10.45% and a capital structure of the lower of actual (13-month average) or 56%.

FERC regulates the sale of power for resale in interstate commerce in part by granting authority to public utilities to sell wholesale power at market-based rates upon showing that the seller cannot exert market power in generation or transmission or erect barriers to entry into markets.

1 unchanged sentence

Federally enforceable mandatory reliability standards apply to the bulk electric system and impose certain operating, record-keeping and reporting requirements on the Utilities, AE Supply, and the Transmission Companies.

NERC is the ERO designated by FERC to establish and enforce these reliability standards, although NERC has delegated day-to-day implementation and enforcement of these reliability standards to six regional entities, including RFC.

All of the facilities that FirstEnergy operates are located within RFC.

NERC is the Electric Reliability Organization designated by FERC to establish and enforce these reliability standards, although NERC has delegated day-to-day implementation and enforcement of these reliability standards to six regional entities, including RFC.

All of the facilities that FirstEnergy operates are located within the RFC region.

FirstEnergy actively participates in the NERC and RFC stakeholder processes, and otherwise monitors and manages its companies in response to the ongoing development, implementation and enforcement of the reliability standards implemented and enforced by RFC.

6 unchanged sentences

Among other matters, the audit is evaluating FirstEnergy’s compliance with certain accounting and reporting requirements under various FERC regulations.

On February 4, 2022, FERC filed the final audit report for the period of January 1, 2015 through September 30, 2021, which included several findings and recommendations.

One of the audit report findings and related recommendations state that FirstEnergy may have used an inappropriate methodology for allocation of certain costs to regulatory capital accounts under certain FERC regulations and reporting.

Based on the finding and related recommendations, FirstEnergy is currently performing an analysis of these costs and how it impacted certain wholesale transmission customer rates.

FirstEnergy is unable to predict or estimate the final outcome of this analysis and audit, however, it could result in refunds, with interest, to certain wholesale transmission customers and/or write-offs of previously capitalized costs if they are determined to be nonrecoverable.

On February 4, 2022, FERC filed the final audit report for the period of January 1, 2015 through September 30, 2021, which included several findings and recommendations that FirstEnergy has accepted.

The audit report included a finding and related recommendation on FirstEnergy’s methodology for allocation of certain corporate support costs to regulatory capital accounts under certain FERC regulations and reporting.

Effective in the first quarter of 2022 and in response to the finding, FirstEnergy had implemented a new methodology for the allocation of these corporate support costs to regulatory capital accounts for its regulated distribution and transmission companies on a prospective basis.

With the assistance of an independent outside firm, FirstEnergy completed an analysis during the third quarter of 2022 of these costs and how it impacted certain FERC-jurisdictional wholesale transmission customer rates for the audit period of 2015 through 2021.

As a result of this analysis, FirstEnergy recorded in the third quarter of 2022 approximately $45 million ($34 million after-tax) in expected customer refunds, plus interest, due to its wholesale transmission customers and reclassified approximately $195 million of certain transmission capital assets to operating expenses for the audit period, of which $90 million ($67 million after-tax) are not expected to be recoverable and impacted FirstEnergy’s earnings since they relate to costs capitalized during stated transmission rate time periods.

These reclassifications also resulted in a reduction to the Regulated Transmission segment’s rate base by approximately $160 million, which is not expected to materially impact FirstEnergy or the segment’s future earnings.

The expected wholesale transmission customer refunds were recognized as a reduction to revenue, and the amount of reclassified transmission capital assets that are not expected to be recoverable were recognized within “Other operating expenses” at the Regulated Transmission segment and on FirstEnergy’s Consolidated Statements of Income.

ATSI Transmission Formula Rate

4 unchanged sentences

ATSI and the parties to the FERC proceeding subsequently were able to reach settlement, and on October 14, 2021, filed the settlement with FERC.

As a result of the filed settlement, FirstEnergy recognized a $21 million pre-tax charge during the third quarter of 2021, which was recognized in Other Operating Expenses on the FirstEnergy Consolidated Statements of Income.

This $21 million charge reflects the difference between amounts originally recorded as regulatory assets and amounts which will ultimately be recovered as a result of the pending settlement.

As a result of the filed settlement, FirstEnergy recognized a $21 million pre-tax charge during the third quarter of 2021, which reflects the difference between amounts originally recorded as regulatory assets and amounts which will ultimately be recovered as a result of the pending settlement.

From a segment perspective, during the third quarter of 2021, the Regulated Transmission segment recorded a pre-tax charge of $48 million and the Regulated Distribution segment recognized a $27 million reduction to a reserve previously recorded in 2010.

In addition, the settlement provides for partial recovery of future incurred costs allocated to ATSI by MISO for the above-referenced transmission projects that were constructed by other MISO transmission owners, which is not expected to have a material impact on FirstEnergy or ATSI.

The uncontested settlement is pending before FERC for approval.

The uncontested settlement was approved by FERC on March 24, 2022 without modification.

ATSI’s compliance filing to implement the terms of the settlement was accepted by FERC without modification on June 23, 2022.

FERC Actions on Tax Act

4 unchanged sentences

(i) deduct any excess ADIT from or add any deficient ADIT to their rate base;

(ii) raise or lower their income tax allowances by any amortized excess or deficient ADIT;

to maintain rate base neutrality (ii) raise or lower their income tax allowances by any amortized excess or deficient ADIT;

and (iii) incorporate a new permanent worksheet into their rates that will annually track information related to excess or deficient ADIT.

2 unchanged sentences

On November 18, 2021, FERC issued an order that:

(i) accepted ATSI proposed tariff amendments to its rate base adjustment mechanism, effective January 27, 2020;

(i) accepted ATSI’s proposed tariff amendments to its rate base adjustment mechanism, effective January 27, 2020;

(ii) directed ATSI to make a further compliance filing by January 17, 2022;

and (iii) set the amount of ATSI’s recorded ADIT balances as of December 31, 2017, for hearing and settlement procedures.

ATSI submitted the compliance filing, and is participating in settlement negotiations.

ATSI submitted the compliance filing, and following settlement negotiations, filed an uncontested

settlement agreement with FERC on October 18, 2022.

There is no timetable for FERC to rule on the settlement agreement.

On December 3, 2021, FERC issued an order that (i) accepted MAIT’s proposed tariff amendments to its rate base adjustment mechanism, effective January 27, 2020;

1 unchanged sentence

and (iii) set the amount of MAIT’s recorded ADIT balances as of December 31, 2017 for hearing and settlement procedures.

MAIT submitted the compliance filing, and is participating in settlement negotiations.

MAIT submitted the compliance filing, and following settlement negotiations, filed an uncontested settlement agreement with FERC on October 18, 2022.

There is no timetable for FERC to rule on the settlement agreement.

On May 15, 2020, TrAIL submitted its compliance filing and on June 1, 2020, PATH submitted its required compliance filing.

2 unchanged sentences

TrAIL filed its response on August 6, 2021.

The PATH and TrAIL compliance filings each remain pending before FERC.

On March 31, 2022, FERC issued an order, ruling that TrAIL’s compliance filing partially complied with the requirements of Order No.

864 and directing TrAIL to submit a further compliance filing to address certain additional items that according to FERC will further enhance transparency.

TrAIL submitted the compliance filing on May 31, 2022, and FERC accepted the compliance filing by letter order dated August 30, 2022.

On April 27, 2022, FERC issued an order on PATH’s compliance filing, ruling that it partially complied with the requirements of Order No.

864 and directing PATH to submit a further compliance filing to address certain additional items.

PATH submitted the compliance filing on June 27, 2022, and FERC accepted the compliance filing by letter order dated November 14, 2022.

MP, WP and PE - as holders of a “stated” transmission rate when Order No.

864 issued) are addressing these requirements in the transmission formula rates amendments that were filed on October 29, 2020, and which have been accepted by FERC effective January 1, 2021, subject to refund, pending further hearing and settlement procedures, MP, WP and PE are engaged in settlement negotiations with other parties to

this proceeding.

JCP&L addressed these requirements as part of its transmission formula rate case, which was resolved by a settlement approved by FERC on April 15, 2021.

Transmission ROE Methodology

On May 20, 2021, in a case not involving FirstEnergy, FERC issued Opinion No.

575 in which it reiterated the nationwide ROE methodology set forth in 2020 in Opinion Nos.

569-A and 569-B.

Under this methodology, FERC employs three financial models – discounted cash flow, capital-asset pricing, and risk premium – to calculate a composite zone of reasonableness.

As it has done in other recent ROE cases, FERC rejected the use of the expected earnings methodology in calculating the authorized ROE.

A request for clarification or, alternatively, rehearing of Opinion No.

575 was filed on June 21, 2021, and on September 9, 2021, FERC issued an order clarifying aspects of its prior opinion, but affirming the result.

On July 15, 2021, FERC issued another order, addressing ROE for a generation company in New England, which applied a standard consistent with Opinion Nos.

569-A and 569-B.

FERC’s Opinion Nos.

569-A and 569-B, upon which Opinion No.

575 is based, have been appealed to the D.C.

FirstEnergy is not participating in the appeal.

Any changes to FERC’s transmission rate ROE and incentive policies for transmission rates would be applied on a prospective basis.

864 issued – addressed these requirements as part of the transmission rates amendments that were filed with FERC on October 29, 2020.

An uncontested settlement of all issues in that case was filed for FERC approval on January 18, 2023.

ATSI ROE – Ohio Consumers Counsel v.

On February 24, 2022, the OCC filed a complaint with FERC against ATSI, AEP’s Ohio affiliates and AEPSC, and Duke Energy Ohio, LLC asserting that FERC should reduce the ROE utilized in the utilities’ transmission formula rates by eliminating the 50 basis point adder associated with RTO membership, effective February 24, 2022.

The OCC contends that this result is required because Ohio law mandates that transmission owning utilities join an RTO and that the 50 basis point adder is applicable only where RTO membership is voluntary.

ATSI disagrees with the OCC’s characterization and set forth its reasons for such disagreement in a combined motion to dismiss and answer that was filed with FERC on March 31, 2022.

On that same date, AEP and Duke filed separate motions to dismiss and answers to the OCC complaint, and several other parties filed comments.

ATSI filed a response to certain intervenors’ filings on April 28, 2022.

On December 15, 2022, FERC denied the complaint as to ATSI and Duke, but granted it as to AEP.

On January 17, 2023, AEP and the OCC filed requests for rehearing and on February 1, 2023, FirstEnergy filed an answer to the OCC’s rehearing request.

FirstEnergy is unable to predict the outcome of this proceeding, but it is not expected to have a material impact.

Transmission ROE Incentive

On March 20, 2020, FERC initiated a rulemaking proceeding on the transmission rate incentives provisions of Section 219 of the 2005 Energy Policy Act.

4 unchanged sentences

FirstEnergy is a member of PJM and its transmission subsidiaries could be affected by the supplemental proposed rule.

FirstEnergy participated in comments that were submitted by a group of PJM transmission owners and by various industry trade groups.

If there were to be any changes to FirstEnergy transmission incentive ROE, such changes will be applied on a prospective basis.

JCP&L Transmission Formula Rate

On October 30, 2019, JCP&L filed tariff amendments with FERC to convert JCP&L’s existing stated transmission rate to a forward-looking formula transmission rate.

JCP&L requested that the tariff amendments become effective January 1, 2020.

On December 19, 2019, FERC issued its initial order in the case, allowing JCP&L to transition to a forward-looking formula rate as of January 1, 2020 as requested, subject to refund, pending further hearing and settlement proceedings.

JCP&L and the parties to the FERC proceeding subsequently were able to reach settlement, and on February 2, 2021, JCP&L filed an offer of settlement with FERC.

On April 15, 2021, FERC approved the settlement agreement as filed, with no changes, effective January 1, 2021.

FirstEnergy participated in comments on the supplemental rulemaking that were submitted by a group of PJM transmission owners and by various industry trade groups.

If there were to be any changes to FirstEnergy's transmission incentive ROE, such changes will be applied on a prospective basis.

Allegheny Power Zone Transmission Formula Rate Filings

3 unchanged sentences

These transmission rate filings were accepted for filing by FERC on December 31, 2020, effective January 1, 2021, subject to refund, pending further hearing and settlement procedures and were consolidated into a single proceeding.

MP, PE and WP, and KATCo are engaged in settlement negotiations with the other parties to the formula rate proceedings.

KATCo will be included in the Regulated Transmission reportable segment.

MP, PE and WP, and KATCo filed uncontested settlement agreements with FERC on January 18, 2023.

There is no timetable for FERC to rule on the settlement agreements.

Also on January 25, 2023, the FERC Chief Administrative Law Judge granted a motion of MP, PE, and WP for interim rates to implement certain aspects of the settled rate retroactive to January 1, 2023.

As a result of the filed settlement, FirstEnergy recognized a $25 million pre-tax charge during the fourth quarter of 2022, which reflects the difference between amounts originally recorded as assets and amounts which will ultimately be recovered from customers as a result of the pending settlement.

COMMITMENTS, GUARANTEES AND CONTINGENCIES

1 unchanged sentence

FirstEnergy has various financial and performance guarantees and indemnifications which are issued in the normal course of business.

These contracts include performance guarantees, stand-by letters of credit, debt guarantees, surety bonds and indemnifications.

These contracts include performance guarantees, stand-by LOCs, debt guarantees, surety bonds and indemnifications.

FirstEnergy enters into these arrangements to facilitate commercial transactions with third parties by enhancing the value of the transaction to the third party.

As of December 31, 2021, outstanding guarantees and other assurances aggregated approximately $ 1.1 billion, consisting of parental guarantees on behalf of its consolidated subsidiaries ($ 0.6 billion) and other assurances ($ 0.5 billion).

As of December 31, 2022, outstanding guarantees and other assurances aggregated approximately $ 1.0 billion, consisting of parental guarantees on behalf of its consolidated subsidiaries ($ 528 million) and other assurances ($ 449 million).

COLLATERAL AND CONTINGENT-RELATED FEATURES

1 unchanged sentence

Certain agreements contain provisions that require FE or its subsidiaries to post collateral.

This collateral may be posted in the form of cash or credit support with thresholds contingent upon

FE's or its subsidiaries' credit rating from each of the major credit rating agencies.

This collateral may be posted in the form of cash or credit support with thresholds contingent upon FE's or its subsidiaries' credit rating from each of the major credit rating agencies.

The collateral and credit support requirements vary by contract and by counterparty.

As of December 31, 2021, $ 55 million of collateral has been posted by FE or its subsidiaries and is included in Prepaid taxes and other current assets on FirstEnergy's Consolidated Balance Sheets.

As of December 31, 2022, $ 50 million of net cash collateral has been posted by FE or its subsidiaries and is included in "Prepaid taxes and other current assets" on FirstEnergy's Consolidated Balance Sheets.

FE or its subsidiaries are holding $ 206 million of net cash collateral as of December 31, 2022, from certain generation suppliers, primarily due to the rise in power prices, and such amount is included in "Other current liabilities" on FirstEnergy's Consolidated Balance Sheets.

These credit-risk-related contingent features stipulate that if the subsidiary were to be downgraded or lose its investment grade credit rating (based on its senior unsecured debt rating), it would be required to provide additional collateral.

The following table discloses the potential additional credit rating contingent contractual collateral obligations as of December 31, 2022:

Potential Collateral Obligations Utilities

and FET FE Total

Potential Collateral Obligations Utilities and Transmission Companies FE Total

(In millions)

5 unchanged sentences

Surety Bonds' impact assumes maximum contractual obligations, which is ordinarily 100% of the face amount of the surety bond except with respect to $39 million of surety obligations for which the collateral obligation is capped at 60% of the face amount, and typical obligations require 30 days to cure.

OTHER COMMITMENTS AND CONTINGENCIES

FE was previously a guarantor under a $ 120 million syndicated senior secured term loan facility due November 12, 2024, which Global Holding repaid during the fourth quarter of 2021, and as a result, FirstEnergy’s guarantee is no longer in effect.

ENVIRONMENTAL MATTERS

3 unchanged sentences

Clean Air Act

FirstEnergy complies with SO 2 and NOx emission reduction requirements under the CAA and SIP(s) by burning lower-sulfur fuel, utilizing combustion controls and post-combustion controls and/or using emission allowances.

FirstEnergy complies with SO 2 and NOx emission reduction requirements under the CAA and SIP by burning lower-sulfur fuel, utilizing combustion controls and post-combustion controls and/or using emission allowances.

CSAPR requires reductions of NOx and SO 2 emissions in two phases (2015 and 2017), ultimately capping SO 2 emissions in affected states to 2.4 million tons annually and NOx emissions to 1.2 million tons annually.

6 unchanged sentences

Various states and other stakeholders appealed the CSAPR Update to the D.C.

Circuit in November and December 2016.

Circuit in November

and December 2016.

On September 13, 2019, the D.C.

Circuit remanded the CSAPR Update to the EPA citing that the rule did not eliminate upwind states’ significant contributions to downwind states’ air quality attainment requirements within applicable attainment deadlines.

Also, during this time, in March 2018, the State of New York filed a CAA Section 126 petition with the EPA alleging that NOx emissions from nine states (including West Virginia) significantly contribute to New York’s inability to attain the ozone NAAQS.

Also in March 2018, the State of New York filed a CAA Section 126 petition with the EPA alleging that NOx emissions from nine states (including West Virginia) significantly contribute to New York’s inability to attain the ozone National Ambient Air Quality Standards.

The petition sought suitable emission rate limits for large stationary sources that are allegedly affecting New York’s air quality within the three years allowed by CAA Section 126.

3 unchanged sentences

Circuit reversed and remanded the New York petition to the EPA for further consideration.

On March 15, 2021, the EPA issued a revised CSAPR Update that addresses, among other things, the remands of the CSAPR Update and the New York Section 126 Petition.

On March 15, 2021, the EPA issued a revised CSAPR Update that addresses, among other things, the remands of the prior CSAPR Update and the New York Section 126 petition.

In December 2021, MP purchased NOx emissions allowances to comply with 2021 ozone season requirements.

On April 6, 2022, the EPA published proposed rules seeking to impose further significant reductions in EGU NO x emissions in 25 states, including West Virginia.

The EPA held a virtual public hearing regarding the proposed rules on April 21, 2022, and MP submitted written comments on June 21, 2022.

Depending on the outcome of any appeals and how the EPA and the states ultimately implement the revised CSAPR Update, the future cost of compliance may materially impact FirstEnergy’s operations, cash flows and financial condition.

In February 2019, the EPA announced its final decision to retain without changes the NAAQS for SO 2 , specifically retaining the 2010 primary (health-based) 1-hour standard of 75 PPB.

As of March 31, 2020, FirstEnergy has no power plants operating in areas designated as non-attainment by the EPA.

Climate Change

26 unchanged sentences

Circuit vacated and remanded the ACE rule declaring that the EPA was “arbitrary and capricious” in its rule making and, as such, the ACE rule is no longer in effect and all actions thus far taken by states to implement the federally mandated rule are now null and void.

Circuit decision is subject to legal challenge.

Depending on the outcomes of further appeals and how any final rules are ultimately implemented, the future cost of compliance may be material.

Vacating the ACE Rule had the unintended effect of reinstating the CPP because the repeal of the CPP was a provision within the ACE Rule.

Circuit decision was appealed by several states and interested parties, including West Virginia, arguing that the EPA did not have the authorization under Section 111(d) of the Clean Air Act to require “generation shifting” as a way to limit GHGs.

On June 30, 2022, the U.S.

Supreme Court held that the EPA’s regulation of GHGs under Section 111(d) of the Clean Air Act was not authorized by Congress and remanded the Rule to the EPA for further reconsideration.

Clean Water Act

6 unchanged sentences

In addition, the EPA allows for less stringent limits for sub-categories of generating units based on capacity utilization, flow volume from the scrubber system, and unit retirement date.

The EPA is reconsidering the ELG rule with a publicly announced target of issuing a proposed revised rule in the Fall of 2022 and a final rule by the Spring of 2023.

The EPA is reconsidering the ELG rule with a publicly announced target of issuing a proposed revised rule in the Spring of 2023 and a final rule later in 2023.

In the interim, the rule issued on August 31, 2020, remains in effect.

Depending on the outcome of appeals and how final rules are ultimately implemented, the compliance with these standards, could require additional capital expenditures or changes in operations at Ft.

Martin and Harrison power stations from what was filed with the WVPSC in December 2021 that seeks approval of environmental compliance projects to comply with the EPA’s ELG.

After the completion of a negotiated settlement, a complaint was filed by the EPA and PA DEP on January 10, 2022 in Federal District Court for the Western District of Pennsylvania, alleging, among other things, that WP violated the CWA in connection with past boron exceedances at WP’s Springdale and Mingo landfills.

On January 11, 2022, WP entered into a consent decree with the EPA and PA DEP resolving the matters addressed in the complaint, which, among other things, requires a civil penalty of $610 thousand.

The consent decree is subject to final approval by the District Court pending public comment.

Depending on the outcome of appeals and how final rules are ultimately implemented, the compliance with these standards, could require additional capital expenditures or changes in operation at the Ft.

Martin and Harrison power stations from what was approved by the WVPSC in September 2022 to comply with the ELG rule.

Regulation of Waste Disposal

Federal and state hazardous waste regulations have been promulgated as a result of the RCRA, as amended, and the Toxic Substances Control Act.

Federal and state hazardous waste regulations have been promulgated as a result of the Resource Conservation and Recovery Act, as amended, and the Toxic Substances Control Act.

Certain CCRs, such as coal ash, were exempted from hazardous waste disposal requirements pending the EPA’s evaluation of the need for future regulation.

3 unchanged sentences

The final rule also allows for an extension of the closure deadline based on meeting proscribed site-specific criteria.

On November 30, 2020, AE Supply submitted a closure deadline extension request to the EPA seeking to extend the closure date of McElroy's Run CCR impoundment facility until 2024, which request is pending technical review by the EPA.

On November 30, 2020, AE Supply submitted a closure deadline extension request to the EPA seeking to extend the cease accepting waste date for the McElroy's Run CCR impoundment facility until 2024, which request is pending technical review by the EPA.

AE Supply continues to operate McElroy’s Run as a disposal facility for FG’s Pleasants Power Station.

10 unchanged sentences

Also, on July 21, 2020, and in connection with the investigation, FirstEnergy received subpoenas for records from the U.S.

Attorney’s Office for the S.D.

Attorney’s Office for the Southern District Ohio.

FirstEnergy was not aware of the criminal allegations, affidavit or subpoenas before July 21, 2020.

6 unchanged sentences

(ii) pay a criminal monetary penalty totaling $230 million within sixty days, which shall consist of (x) $115 million paid by FE to the United States Treasury and (y) $115 million paid by FE to the ODSA to fund certain assistance programs, as determined by the ODSA, for the benefit of low-income Ohio electric utility customers;

(iii) publish a list of all payments made in 2021 to either 501(c)(4) entities or to entities known by FirstEnergy to be operating for the benefit of a public official, either directly or indirectly, and update the same on a quarterly basis during the term of the DPA;

(iii) publish a list of all

payments made in 2021 to either 501(c)(4) entities or to entities known by FirstEnergy to be operating for the benefit of a public official, either directly or indirectly, and update the same on a quarterly basis during the term of the DPA;

(iv) issue a public statement, as dictated in the DPA, regarding FE’s use of 501(c)(4) entities;

7 unchanged sentences

On August 10, 2020, the SEC, through its Division of Enforcement, issued an order directing an investigation of possible securities laws violations by FE, and on September 1, 2020, issued subpoenas to FE and certain FE officers.

On April 28, 2021, the SEC issued an additional subpoena to FE.

On April 28, 2021, and July 11, 2022, the SEC issued additional subpoenas to FE, with which FE has complied.

While no contingency has been reflected in its consolidated financial statements, FE believes that it is probable that it will incur a loss in connection with the resolution of the SEC investigation.

Given the ongoing

nature and complexity of the review, inquiries and investigations, FE cannot yet reasonably estimate a loss or range of loss that may arise from the resolution of the SEC investigation.

Given the ongoing nature and complexity of the review, inquiries and investigations, FE cannot yet reasonably estimate a loss or range of loss that may arise from the resolution of the SEC investigation.

In addition to the subpoenas referenced above under “—United States v.

4 unchanged sentences

• In re FirstEnergy Corp.

Securities Litigation (Federal District Court, S.D.

Securities Litigation (S.D.

on July 28, 2020 and August 21, 2020, purported stockholders of FE filed putative class action lawsuits alleging violations of the federal securities laws.

3 unchanged sentences

The consolidated complaint also alleges that FE, certain current or former FE officers and directors, and a group of underwriters violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 as a result of alleged misrepresentations or omissions in connection with offerings of senior notes by FE in February and June 2020.

The class certification hearing is scheduled to take place on March 17, 2023.

FE believes that it is probable that it will incur a loss in connection with the resolution of this lawsuit.

2 unchanged sentences

FirstEnergy Corp., et al.

(Federal District Court, S.D.

Ohio) on December 17, 2021, purported stockholders of FE filed a complaint against FE, certain current and former officers, and certain current and former officers of EH.

The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Exchange Act by issuing alleged misrepresentations or omissions regarding FE’s business and its results of operations, and seeks the same relief as the In re FirstEnergy Corp.

and Brighthouse Funds II – MFS Value Portfolio, et al.

FirstEnergy Corp., et al.

Ohio) on December 17, 2021 and February 21, 2022, purported stockholders of FE filed complaints against FE, certain current and former officers, and certain current and former officers of EH.

The complaints allege that the defendants violated Sections 10(b) and 20(a) of the Exchange Act by issuing alleged misrepresentations or omissions regarding FE’s business and its results of operations, and seek the same relief as the In re FirstEnergy Corp.

Securities Litigation described above.

FE believes that it is probable that it will incur a loss in connection with the resolution of this lawsuit.

FE believes that it is probable that it will incur losses in connection with the resolution of these lawsuits.

Given the ongoing nature and complexity of such litigation, FE cannot yet reasonably estimate a loss or range of loss.

8 unchanged sentences

On January 31, 2021, FE reached a partial settlement with the OAG and the cities of Cincinnati and Columbus with respect to the temporary restraining order and preliminary injunction request and related issues.

In connection with the partial settlement, the Ohio Companies filed an application on February 1, 2021, with the PUCO to set their respective decoupling riders (CSR) to zero.

In connection with the partial settlement, the Ohio Companies filed an application on February 1, 2021, with the PUCO to set their respective decoupling riders (Conservation Support Rider) to zero.

On February 2, 2021, the PUCO approved the application of the Ohio Companies setting the rider to zero and no additional customer bills will include new decoupling rider charges after February 8, 2021.

10 unchanged sentences

FirstEnergy Corp.

(Federal District Court, S.D.

Ohio, all actions have been consolidated);

on July 27, 2020, July 31, 2020, and August 5, 2020, respectively, purported customers of FE filed putative class action lawsuits against FE and FESC, as well as certain current and former FE officers, alleging civil Racketeer Influenced and Corrupt Organizations Act violations and related state law claims.

The court denied FE’s motions to dismiss and stay discovery on February 10 and 11, 2021, respectively, and the defendants submitted answers to the complaint on March 10, 2021.

The plaintiffs moved to certify the case as a class action on June 28, 2021, and moved for leave to amend the complaint to add FES as a defendant on September 27, 2021.

The court granted the motion to amend on November 10, 2021.

On November 9, 2021, the court issued an order granting Plaintiffs' motion for class certification, but vacated that order on November 19, 2021, to allow defendants to take the named plaintiffs’ depositions and to file an opposition to the motion, which they filed on December 14, 2021.

On November 19, 2021, FE and FESC moved for judgment on the pleadings.

One of the individual defendants moved to dismiss the amended complaint on November 24, 2021.

On December 28, 2021, the parties jointly moved the court to stay consideration of the pending motions for class certification, to dismiss, and for judgment on the pleadings for 45 days.

The court granted the motion on December 29, 2021, and the cases are currently stayed.

FE is engaged with the parties in settlement discussions, and believes that it is probable that it will incur a loss in connection with the resolution of these lawsuits.

As a result, FirstEnergy recognized in the fourth quarter of 2021 a pre-tax reserve of $37.5 million in the aggregate with respect to these lawsuits and the Emmons lawsuit below.

FE agreed to a class settlement to resolve these claims on April 11, 2022.

In the fourth quarter of 2021, FirstEnergy recognized a pre-tax reserve of $37.5 million in the aggregate with respect to these lawsuits and the Emmons lawsuit below.

On June 22, 2022, the court preliminarily approved the class settlement and the final fairness hearing was held on November 9, 2022.

On December 5, 2022, the court issued an order memorializing its final approval of the class settlement.

The settlement amount was satisfied on December 7, 2022.

FirstEnergy Corp.

1 unchanged sentence

on August 4, 2020, a purported customer of FirstEnergy filed a putative class action lawsuit against FE, FESC, the Ohio Companies, along with FES, alleging several causes of action, including negligence and/or gross negligence, breach of contract, unjust enrichment, and unfair or deceptive consumer acts or practices.

On October 1, 2020, plaintiffs filed a First Amended Complaint, adding as a plaintiff a purported customer of FirstEnergy and alleging a civil violation of the Ohio Corrupt Activity Act and civil conspiracy against FE, FESC and FES.

On May 4, 2021, the court granted the defendants’ motion to dismiss plaintiffs’ breach of contract claims and denied the remainder of the motions to dismiss.

The defendants submitted answers to the complaint on June 1, 2021.

Discovery is proceeding.

On December 30, 2021, the plaintiff filed a Second Amended Complaint removing one of the named plaintiffs and updating the class definition.

FE is engaged with the parties in settlement discussions, and believes that it is probable that it will incur a loss in connection with the resolution of these lawsuits.

As a result, FirstEnergy recognized in the fourth quarter of 2021 a pre-tax reserve of $37.5 million in the aggregate with respect to this lawsuit and the lawsuits above consolidated with Smith in the S.D.

FE agreed to a class settlement to resolve these claims on April 11, 2022.

In the fourth quarter of 2021, FirstEnergy recognized a pre-tax reserve of $37.5 million in the aggregate with respect to this lawsuit and the lawsuits above consolidated with Smith in the S.D.

Ohio alleging, among other things, civil violations of the Racketeer Influenced and Corrupt Organizations Act.

On June 22, 2022, the court preliminarily approved the class settlement and the final fairness hearing was held on November 9, 2022.

Ohio issued a final written order approving the settlement on December 5, 2022.

The settlement amount was satisfied on December 7, 2022.

On February 9, 2022, FE, acting through the SLC, agreed to a settlement term sheet to resolve the following shareholder derivative lawsuits relating to HB 6 and the now former Ohio House Speaker Larry Householder and other individuals and entities allegedly affiliated with Mr.

8 unchanged sentences

Anderson, et al.

(Federal District Court, N.D.

Bloom, et al.

10 unchanged sentences

Anderson, et al.

(Federal District Court, S.D.

Ohio, all actions have been consolidated);

beginning on August 7, 2020, purported stockholders of FE filed shareholder derivative actions alleging the FE Board and officers breached their fiduciary duties and committed violations of Section 14(a) of the Exchange Act.

The proposed settlement, which is subject to court approval, will fully resolve the shareholder derivative lawsuits above and stipulates a series of corporate governance enhancements, that is expected to result in the following:

• Six members of the FE Board, Messrs.

Anderson, Donald T.

Misheff, Thomas N.

Mitchell, Christopher D.

Pappas and Luis A.

Reyes, and Ms.

Johnson will not stand for re-election at FE’s 2022 annual shareholder meeting;

• A special FE Board committee of at least three recently appointed independent directors will be formed to initiate a review process of the current senior executive team, to begin within 30 days of the 2022 annual shareholder meeting;

On March 11, 2022, the parties executed a stipulation and agreement of settlement, and filed a motion the same day requesting preliminary settlement approval in the S.D.

Ohio, which the S.D Ohio granted on May 9, 2022.

Subsequently, following a hearing on August 4, 2022, the S.D.

Ohio granted final approval of the settlement on August 24, 2022.

The settlement agreement is expected to resolve fully these shareholder derivative lawsuits and includes a series of corporate governance enhancements, that have resulted in the following:

• Six then-members of the FE Board did not stand for re-election at FE’s 2022 annual shareholder meeting;

• A special FE Board committee of at least three recently appointed independent directors was formed to initiate a review process of the then current senior executive team.

The review of the senior executive team by the special FE Board committee and the FE Board was completed in September 2022;

• The FE Board will oversee FE’s lobbying and political activities, including periodically reviewing and approving political and lobbying action plans prepared by management;

• The FE Board will form another committee of recently appointed independent directors to oversee the implementation and third-party audits of the FE Board-approved action plans with respect to political and lobbying activities;

• An FE Board committee of recently appointed independent directors will oversee the implementation and third-party audits of the FE Board-approved action plans with respect to political and lobbying activities;

• FE will implement enhanced disclosure to shareholders of political and lobbying activities, including enhanced disclosure in its annual proxy statement;

• FE will further align financial incentives of senior executives to proactive compliance with legal and ethical obligations.

The settlement also includes a payment to FirstEnergy of $180 million, to be paid by insurance after court approval, less any court-ordered attorney’s fees awarded to plaintiffs.

The settlement also includes a payment to FE of $180 million, to be paid by insurance after the judgment has become final, less $36 million in court-ordered attorney’s fees awarded to plaintiffs.

On September 20, 2022, a purported FE stockholder filed a motion for reconsideration of the S.D.

Ohio’s final settlement approval.

The parties filed oppositions to that motion on October 11, 2022 and the motion is under consideration by the S.D.

Ohio matter remains pending.

On June 2, 2022, the N.D.

Ohio entered an order to show cause why the court should not appoint new plaintiffs’ counsel, and thereafter, on June 10, 2022, the parties filed a joint motion to dismiss the matter without prejudice, which the N.D.

Ohio denied on July 5, 2022.

On August 15, 2022, the N.D.

Ohio issued an order stating its intention to appoint one group of applicants as new plaintiffs’ counsel, and on August 22, 2022, the N.D.

Ohio ordered that any objections to the appointment be submitted by August 26, 2022.

The parties filed their objections by that deadline, and on September 2, 2022, the applicants responded to those objections.

In the meantime, on August 25, 2022, a purported FE stockholder represented by the applicants filed a motion to intervene, attaching a proposed complaint-in-intervention purporting to assert claims that the FE Board and officers breached their fiduciary duties and committed

violations of Section 14(a) of the Exchange Act as well as a claim against a third party for professional negligence and malpractice.

The parties filed oppositions to that motion to intervene on September 8, 2022, and the proposed intervenor's reply in support of his motion to intervene was filed on September 22, 2022.

On August 24, 2022, the parties filed a joint motion to dismiss the action pending in the N.D.

Ohio based upon and in light of the approval of the settlement by the S.D.

On August 30, 2022, the parties filed a joint motion to dismiss the state court action, which the court granted on September 2, 2022.

In letters dated January 26, and February 22, 2021, staff of FERC's Division of Investigations notified FirstEnergy that the Division is conducting an investigation of FirstEnergy’s lobbying and governmental affairs activities concerning HB 6, and staff directed FirstEnergy to preserve and maintain all documents and information related to the same as such have been developed as part of an ongoing non-public audit being conducted by FERC's Division of Audits and Accounting.

While no contingency has been reflected in the consolidated financial statements, FirstEnergy believes that it is probable that it will incur a loss in connection with the resolution of the FERC investigation.

Given the ongoing nature and complexity of the review, inquiries and investigations, FirstEnergy cannot yet reasonably estimate a loss or range of loss that may arise from the resolution of the FERC investigation.

On December 30, 2022, FERC approved a Stipulation and Consent Agreement that resolves the investigation.

The agreement includes a FirstEnergy admission of violating FERC’s “duty of candor” rule and related laws, and obligates FirstEnergy to pay a civil penalty of $3.86 million, and to submit two annual compliance monitoring reports to FERC’s Office of Enforcement regarding improvements to FirstEnergy’s compliance programs.

FE terminated Charles E.

Jones as its chief executive officer effective October 29, 2020.

As a result of Mr.

Jones’ termination, and due to the determination of a committee of independent members of the FE Board that Mr.

Jones violated certain FirstEnergy policies and its code of conduct, all grants, awards and compensation under FirstEnergy’s short-term incentive compensation program and long-term incentive compensation program with respect to Mr.

Jones that were outstanding on the date of termination were forfeited.

In November 2021, after a determination by the Compensation Committee of the FE Board that a demand for recoupment was warranted pursuant to the Recoupment Policy, FE made a recoupment demand to Mr.

Jones of compensation previously paid to him totaling approximately $56 million, the maximum amount permissible under the Recoupment Policy.

As such, any amounts payable to Mr.

Jones under the EDCP will be set off against FE’s recoupment demand.

There can be no assurance that the efforts to seek recoupment from Mr.

Jones will be successful.

The outcome of any of these lawsuits, governmental investigations and audit is uncertain and could have a material adverse effect on FE’s or its subsidiaries’ reputation, business, financial condition, results of operations, liquidity, and cash flows.

6 unchanged sentences

If it were ultimately determined that FE or its subsidiaries have legal liability or are otherwise made subject to liability based on any of the matters referenced above, it could have a material adverse effect on FE’s or its subsidiaries’ financial condition, results of operations, and cash flows.

SEGMENT INFORMATION

FE and its subsidiaries are principally involved in the transmission, distribution and generation of electricity through its reportable segments, Regulated Distribution and Regulated Transmission.

FirstEnergy evaluates segment performance based on Earnings attributable to FE.

The Regulated Distribution segment distributes electricity through FirstEnergy’s ten utility operating companies, serving approximately six million customers within 65,000 square miles of Ohio, Pennsylvania, West Virginia, Maryland, New Jersey and New York, and purchases power for its POLR, SOS, SSO and default service requirements in Ohio, Pennsylvania, New Jersey, and Maryland.

This segment also controls 3,580 MWs of regulated electric generation capacity located primarily in West Virginia and Virginia.

The segment's results reflect the costs of securing and delivering electric generation from transmission facilities to customers, including the deferral and amortization of certain related costs.

The transaction to transfer TMI-2 to TMI-2 Solutions , LLC was consummated on December 18, 2020, and as a result, during the fourth quarter of 2020 FirstEnergy recognized an after-tax gain of approximately $ 33 million, primarily associated with the write-off of a tax related regulatory liability.

On April 6, 2020, JCP&L signed an asset purchase agreement with Yards Creek Energy, LLC, a subsidiary of LS Power to sell its 50 % interest in the Yards Creek pumped-storage hydro generation facility.

With the receipt of all required regulatory approvals, the transaction was consummated on March 5, 2021 and resulted in a $ 109 million gain within the Regulated Distribution segment in the first quarter of 2021.

The gain from the transaction was applied against and reduced JCP&L’s existing regulatory

asset for previously deferred storm costs and, as a result, was offset by expense in the “Amortization (deferral) of regulatory assets, net”, line on the Consolidated Statements of Income, resulting in no earnings impact to FirstEnergy or JCP&L.

The Regulated Transmission segment provides transmission infrastructure owned and operated by the Transmission Companies and certain of FirstEnergy's utilities (JCP&L, MP, PE and WP) to transmit electricity from generation sources to distribution facilities.

The segment's revenues are primarily derived from forward-looking formula rates.

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 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.

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.

KATCo, which was a subsidiary of FET, became a wholly owned subsidiary of FE prior to the closing of the FET P&SA I and remains in the Regulated Transmission segment.

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.

Reconciling adjustments for the elimination of inter-segment transactions are shown separately in the following table of Segment Financial Information.

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.

Financial information for FirstEnergy’s business segments and reconciliations to consolidated amounts is presented below:

For the Years Ended December 31,

(In millions) 2022 2021 2020

External revenues

Regulated Distribution $ 10,569 $ 9,510 $ 9,168

Regulated Transmission 1,863 1,608 1,613

Corporate/Other 27 14 9

Reconciling Adjustments — — —

Total external revenues $ 12,459 $ 11,132 $ 10,790

Internal revenues

Regulated Distribution $ 232 $ 201 $ 195

Regulated Transmission 5 10 17

Corporate/Other — — —

Reconciling Adjustments ( 237 ) ( 211 ) ( 212 )

Total internal revenues $ — $ — $ —

Total revenues $ 12,459 $ 11,132 $ 10,790

Regulated Distribution $ 967 $ 911 $ 896

Regulated Transmission 335 325 313

Corporate/Other 7 3 4

Reconciling Adjustments 66 63 61

Total depreciation $ 1,375 $ 1,302 $ 1,274

Amortization (deferral) of regulatory assets, net

Regulated Distribution $ ( 362 ) $ 260 $ ( 64 )

Regulated Transmission ( 3 ) 9 11

Corporate/Other — — —

Reconciling Adjustments — — —

Total amortization (deferral) of regulatory assets, net $ ( 365 ) $ 269 $ ( 53 )

Corporate/Other $ — $ 230 $ —

Total DPA penalty $ — $ 230 $ —

Miscellaneous income (expense), net

Regulated Distribution $ 361 $ 399 $ 332

Regulated Transmission 36 41 30

Corporate/Other 85 58 81

Reconciling Adjustments ( 67 ) ( 12 ) ( 13 )

Total miscellaneous income (expense), net $ 415 $ 486 $ 430

Interest expense

Regulated Distribution $ 526 $ 522 $ 501

Regulated Transmission 230 247 219

Corporate/Other 350 382 358

Reconciling Adjustments ( 67 ) ( 12 ) ( 13 )

Total interest expense $ 1,039 $ 1,139 $ 1,065

Income taxes (benefits)

Regulated Distribution $ 251 $ 364 $ 113

Regulated Transmission 110 127 138

Corporate/Other 639 ( 171 ) ( 125 )

Reconciling Adjustments — — —

Total income taxes (benefits) $ 1,000 $ 320 $ 126

For the Years Ended December 31,

(In millions) 2022 2021 2020

Net income (loss)

Regulated Distribution $ 957 $ 1,288 $ 959

Regulated Transmission 394 408 464

Corporate/Other ( 912 ) ( 413 ) ( 344 )

Reconciling Adjustments — — —

Total net income (loss) $ 439 $ 1,283 $ 1,079

Income attributable to noncontrolling interest

Regulated Transmission $ 33 $ — $ —

Total income attributable to noncontrolling interest $ 33 $ — $ —

Earnings attributable to FE

Regulated Distribution $ 957 $ 1,288 $ 959

Regulated Transmission 361 408 464

Corporate/Other ( 912 ) ( 413 ) ( 344 )

Reconciling Adjustments — — —

Total earnings attributable to FE $ 406 $ 1,283 $ 1,079

Property additions

Regulated Distribution $ 1,513 $ 1,395 $ 1,514

Regulated Transmission 1,192 958 1,067

Corporate/Other 51 92 76

Reconciling Adjustments — — —

Total property additions $ 2,756 $ 2,445 $ 2,657

As of December 31,

(In millions) 2022 2021

Regulated Distribution $ 31,749 $ 30,812

Regulated Transmission 13,835 13,237

Corporate/Other 524 1,383

Reconciling Adjustments — —

Total assets $ 46,108 $ 45,432

Regulated Distribution $ 5,004 $ 5,004

Regulated Transmission 614 614

Corporate/Other — —

Reconciling Adjustments — —

Total goodwill $ 5,618 $ 5,618

DISCONTINUED OPERATIONS

5 unchanged sentences

AE Supply will continue to provide access to the McElroy's Run CCR impoundment facility, which was not transferred, and FE will provide guarantees for certain retained environmental liabilities of AE Supply, including the McElroy’s Run CCR impoundment facility.

During the first quarter of 2020, FG paid AE Supply approximately $ 65 million of cash for related materials and supplies (at book value) and the settlement of FG’s economic interest in Pleasants.

During the first quarter of 2020, FG

paid AE Supply approximately $ 65 million of cash for related materials and supplies (at book value) and the settlement of FG’s economic interest in Pleasants.

By eliminating a significant portion of its competitive generation fleet with the deconsolidation of the FES Debtors, FirstEnergy has concluded the FES Debtors meet the criteria for discontinued operations, as this represents a significant event in management’s strategic review to exit commodity-exposed generation and transition to a fully regulated company.

10 unchanged sentences

Other operating expenses — — ( 6 )

General taxes — — ( 14 )

Pleasants economic interest (1)

9 unchanged sentences

Income from discontinued operations (2)

$ — $ 44 $ 76

(1) Reflects the estimated amounts owed from FG for its economic interests in Pleasants effective January 1, 2019.

As discussed above, settlement of the economic interests occurred during the first quarter of 2020.

(2) Income from discontinued operations are included in Corporate/Other for segment reporting.

FirstEnergy's Consolidated Statements of Cash Flows combines cash flows from discontinued operations with cash flows from continuing operations within each cash flow category.

5 unchanged sentences

Gain on disposal, net of tax — ( 47 ) ( 76 )

Deferred income taxes and investment tax credits, net — — 47

SEGMENT INFORMATION

FE and its subsidiaries are principally involved in the transmission, distribution and generation of electricity through its reportable segments, Regulated Distribution and Regulated Transmission.

This segment also controls 3,580 MWs of regulated electric generation capacity located primarily in West Virginia and Virginia.

The segment's results reflect the costs of securing and delivering electric generation from transmission facilities to customers, including the deferral and amortization of certain related costs.

The transaction to transfer TMI-2 to TMI-2 Solutions, LLC was consummated on December 18, 2020, and as a result, during the fourth quarter of 2020 FirstEnergy recognized an after-tax gain of approximately $ 33 million, primarily associated with the write-off of a tax related regulatory liability.

Included within the segment is $ 45 million of assets classified as held for sale as of December 31, 2020 associated with the asset purchase agreement with Yards Creek;

see Note 12, "Regulatory Matters," for additional information.

The segment's revenues are primarily derived from forward-looking formula rates.

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.

KATCo, which is currently a subsidiary of FET, will become a wholly owned subsidiary of FE prior to the closing of the transaction and will remain in the Regulated Transmission segment.

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.

Reconciling adjustments for the elimination of inter-segment transaction are shown separately in the following table of Segment Financial Information.

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, 2021, Corporate/Other had approximately $ 7.9 billion of FE holding company debt.

Financial information for each of FirstEnergy’s business segments and reconciliations to consolidated amounts is presented in the tables below.

FirstEnergy evaluates segment performance based on Income (loss) from continuing operations.

Segment Financial Information

For the Years Ended Regulated Distribution Regulated Transmission Corporate/ Other Reconciling Adjustments FirstEnergy Consolidated

(In millions)

December 31, 2021

External revenues $ 9,510 $ 1,608 $ 14 $ — $ 11,132

Internal revenues 201 10 — ( 211 ) —

Total revenues 9,711 1,618 14 ( 211 ) 11,132

Provision for depreciation 911 325 3 63 1,302

Amortization of regulatory assets, net 260 9 — — 269

DPA penalty — — 230 — 230

Miscellaneous income (expense), net 399 41 89 ( 12 ) 517

Interest expense 523 248 382 ( 12 ) 1,141

Income taxes (benefits) 364 127 ( 171 ) — 320

Income (loss) from continuing operations 1,288 408 ( 457 ) — 1,239

Property additions $ 1,395 $ 958 $ 92 $ — $ 2,445

December 31, 2020

External revenues $ 9,168 $ 1,613 $ 9 $ — $ 10,790

Internal revenues 195 17 — ( 212 ) —

Total revenues 9,363 1,630 9 ( 212 ) 10,790

Provision for depreciation 896 313 4 61 1,274

Amortization (deferral) of regulatory assets, net ( 64 ) 11 — — ( 53 )

Miscellaneous income (expense), net 332 30 83 ( 13 ) 432

Interest expense 501 219 358 ( 13 ) 1,065

Income taxes (benefits) 113 138 ( 125 ) — 126

Income (loss) from continuing operations 959 464 ( 420 ) — 1,003

Property additions $ 1,514 $ 1,067 $ 76 $ — $ 2,657

December 31, 2019

External revenues $ 9,511 $ 1,510 $ 14 $ — $ 11,035

Internal revenues 187 16 — ( 203 ) —

Total revenues 9,698 1,526 14 ( 203 ) 11,035

Provision for depreciation 863 284 5 68 1,220

Amortization (deferral) of regulatory assets, net ( 89 ) 10 — — ( 79 )

Miscellaneous income (expense), net 174 15 80 ( 26 ) 243

Interest expense 495 192 372 ( 26 ) 1,033

Income taxes 271 113 ( 171 ) — 213

Income (loss) from continuing operations 1,076 447 ( 619 ) — 904

Property additions $ 1,473 $ 1,090 $ 102 $ — $ 2,665

As of December 31, 2021

Total assets $ 30,812 $ 13,237 $ 1,383 $ — $ 45,432

Total goodwill $ 5,004 $ 614 $ — $ — $ 5,618

As of December 31, 2020

Total assets $ 30,855 $ 12,592 $ 1,017 $ — $ 44,464

Total goodwill $ 5,004 $ 614 $ — $ — $ 5,618

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data