What changed in this filing

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Item 9A. Controls and Procedures

2023-02-13 compared with 2022-02-16 · 50 added, 65 removed, 187 unchanged (38% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

FirstEnergy has established disclosure controls and procedures to ensure that information is accumulated and communicated to management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure, and ensure that information required to be disclosed in the reports FirstEnergy files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

The management of FirstEnergy, with the participation of the chief executive officer and chief financial officer, have evaluated the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, 2021.

Based on that evaluation, the chief executive officer and chief financial officer of FirstEnergy have concluded that its disclosure controls and procedures were effective as of December 31, 2021.

FirstEnergy has established disclosure controls and procedures to ensure that information is accumulated and communicated to management, including the interim chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure, and ensure that information required to be disclosed in the reports FirstEnergy files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

The management of FirstEnergy, with the participation of the interim chief executive officer and chief financial officer, have evaluated the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, 2022.

Based on that evaluation, the interim chief executive officer and chief financial officer of FirstEnergy have concluded that its disclosure controls and procedures were effective as of December 31, 2022.

Management’s Report on Internal Control over Financial Reporting

Management of the FirstEnergy is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

Management of FirstEnergy is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

FirstEnergy’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

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The effectiveness of FirstEnergy’s internal control over financial reporting as of December 31, 2022 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included herein.

Remediation of Previous Material Weakness in Internal Control over Financial Reporting

As disclosed in FirstEnergy's Form 10-K for the fiscal year ended December 31, 2020, management previously identified a material weakness in FirstEnergy's internal control over financial reporting related to its senior management failing to set an appropriate tone at the top.

Management and the FE Board take FirstEnergy’s internal control over financial reporting and the integrity of its financial statements seriously.

FirstEnergy completed the documentation and testing of the remedial actions and management concluded that as a result of the corrective activities implemented, the previously disclosed material weakness had been remediated as of September 30, 2021.

Management, the FE Board, along with the Audit Committee, and its subcommittee, remediated the material weakness by focusing on people, training, and communication as detailed in the following remedial activities:

• the appointment of a new Chief Executive Officer to improve the tone at the top;

• the termination of certain members of senior management, including FirstEnergy’s former Chief Executive Officer, for violations of certain FirstEnergy policies and its code of conduct;

• the separation of two senior members of the legal department, due to inaction and conduct that the FE Board determined was influenced by the improper tone at the top;

• the establishment of a subcommittee of FirstEnergy’s Audit Committee, who, with the FE Board, assessed the compliance program, provided recommendations, and has overseen and will continue to oversee the implementation of changes (as appropriate) in FirstEnergy’s compliance program;

• the appointment of a new Chief Legal Officer;

• the appointment of a new Vice Chair of the FE Board and Executive Director to help lead efforts to enhance FirstEnergy’s reputation with external stakeholders;

• the appointment of new independent directors to the FE Board;

• the appointment of a new Chief Ethics & Compliance Officer who is overseeing the ethics and compliance program and implementation of enhancements to the existing compliance structure and role;

• the FE Board's reinforcement of and executive team’s recommitment to the importance of setting appropriate tone at the top and the expectation to demonstrate FirstEnergy’s core values and behaviors which support an ethical and compliant culture, as well as adherence to internal control over financial reporting;

• increased communication and training of employees with respect to:

• FirstEnergy’s commitment to ethical standards and integrity of its business procedures,

• compliance requirements,

• FirstEnergy’s code of conduct and other FirstEnergy policies, and

• availability of and the process for reporting suspected violations of law or code of conduct.

Management and the FE Board are committed to maintaining a strong internal control environment and believe the above efforts, which have been tested and are operating effectively, have remediated the material weakness.

Changes in Internal Control over Financial Reporting

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OTHER INFORMATION

On February 9, 2023, the FE Board approved a new service-based restricted shares award in the amount of $2 million for Mr.

Jon Taylor that will be granted on March 1, 2023.

The number of shares subject to the award will be determined as of March 1, 2023, based on the FE’s average high and low stock price as of that date.

The shares will generally vest over a four-year period from March 1, 2023, with 25% of the award vesting after two years, another 25% vesting after a third year, and the remaining amount of the award vesting after the fourth year, generally subject to Mr.

Taylor’s continued employment with the FirstEnergy.

The award will have other terms and conditions based on FE’s 2020 Incentive Compensation Plan and will be consistent with the form of Restricted Stock Agreement attached to this Annual Report on Form 10-K as Exhibit 10-53.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

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Equity compensation plans approved by security holders 3,297,942 (1) $ — (2) 11,912,070 (3)

3,098,266 (1) $ — (2) 12,687,546 (3)

Equity compensation plans not approved by security holders (4)

Total 3,297,942 $ — 11,912,070

(1) This number includes 1,373,989 shares subject to outstanding awards of stock based RSUs granted under the ICP 2007, ICP 2015 and ICP 2020 if paid at target for the three outstanding cycles, as well as 1,373,989 additional shares assuming maximum performance metrics are achieved for the 2019-2021, 2020-2022, and 2021-2023 cycles of stock based RSUs, 1,381 outstanding EDCP related shares to be paid in stock and 348,907 shares related to the DCPD that will be paid in stock.

Not reflected in the table are 23,232 shares related to the AYE Director's Plan that will be paid in stock per the election of the recipient.

(1) This number includes 1,427,058 shares subject to outstanding awards of stock based RSUs granted under the ICP 2015 and ICP 2020 if paid at target for the three outstanding cycles, as well as 1,427,058 additional shares assuming maximum performance metrics are achieved for the 2020-2022, 2021-2023, and 2022-2024 cycles of stock based RSUs, and 443,826 shares related to the DCPD that will be paid in stock.

(2) There are no outstanding options, therefore, no consideration is required from participants for the exercise or vesting of any outstanding equity compensation awards.

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Additional shares may become available under the ICP 2015 or ICP 2020 due to cancellations, forfeitures, cash settlements or other similar circumstances with respect to outstanding awards.

In addition, nominal amounts of shares may be issued in the future under the AYE Director's Plan to cover future dividends that may accrue on amounts previously deferred and payable in stock, but new awards are no longer being granted under the Allegheny plan or the ICP 2007.

(4) All equity compensation plans have been approved by security holders.

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PRINCIPAL ACCOUNTING FEES AND SERVICES

A summary of the audit and all other fees for services rendered by PricewaterhouseCoopers LLP for the years ended December 31, 2021 and 2020, are as follows:

A summary of the audit and all other fees for services rendered by PricewaterhouseCoopers LLP are as follows:

For the Years Ended December 31,

(in thousands)

Audit Fees (1)

All Other Fees (2)

$ 7,523 $ 7,902

(In thousands)

FirstEnergy $ 7,902 $ 7,882 $ 287 $ 225

Audit-Related Fees (2)

Tax-Related Fees (3)

All Other Fees (4)

Total Fees $ 8,653 $ 8,189

(1) Professional services rendered for the audits of FirstEnergy's annual financial statements and reviews of unaudited financial statements included in FirstEnergy's Quarterly Reports on Form 10-Q and for services in connection with statutory and regulatory filings or engagements, including comfort letters, agreed upon procedures and consents for financings and filings made with the SEC.

(2) All other fees primarily reflect certain costs incurred as a result of the ongoing SEC investigation, software subscription fees, and accounting research license costs in 2021 and 2020.

2021 also includes fees for ESG metric and reporting assessment, and 2020 also includes fees for system implementation quality assurance services.

Tax Fees and Audit-Related Fees

There were no tax-related or other audit-related fees paid to PricewaterhouseCoopers LLP in 2021 or 2020.

(2) Audit-related fees in 2022 and 2021 were related to services rendered for EESG reporting assessments.

(3) Tax-related fees in 2022 were primarily related to the performance of tax services in conjunction with the FET P&SA I.

(4) All other fees in 2022 primarily reflect certain costs incurred as a result of system implementation quality assurance services, the ongoing SEC investigation and software subscription fees.

All other fees in 2021 primarily reflect the ongoing SEC investigation, software subscription fees and accounting research license costs.

Additional information required by this item is incorporated herein by reference to FirstEnergy’s 2023 Proxy Statement to be filed with the SEC pursuant to Regulation 14A under the Exchange Act.

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(incorporated by reference to FE’s Form 10-Q filed July 23, 2019, Exhibit 3-1, File No.

3-2 Second Amended and Restated Code of Regulations of FirstEnergy Corp., effective May 18, 2021 (incorporated by reference to FE’s Form 8-K on May 19, 2021, Exhibit 3, File No.

3-2 Third Amended and Restated Code of Regulations of FirstEnergy Corp., effective May 17, 2022 (incorporated by reference to FE’s Form 8-K on May 23, 2022, Exhibit 3.1, File No.

4-1 Indenture, dated November 15, 2001, between FirstEnergy Corp.

1 unchanged sentence

4-2 Officer’s Certificate relating to FirstEnergy Corp.'s 2.85% Notes, Series A, due 2022, 3.90% Notes, Series B, due 2027 and 4.85% Notes, Series C, due 2047 (incorporated by reference to FE’s Form 8-K filed June 21, 2017, Exhibit 4.1, File No.

4-3 Form of 2.85% Note, Series A, due 2022 (incorporated by reference to FE’s Form 8-K filed June 21, 2017, Exhibit 4.1, File No.

4-3 Form of 3.90% Note, Series B, due 2027 (incorporated by reference to FE’s Form 8-K filed June 21, 2017, Exhibit 4.1, File No.

17 unchanged sentences

10-9 Deferred Prosecution Agreement, dated as of July 21, 2021 (incorporated by reference to FE’s Form 8-K filed July 22, 2021, Exhibit 10.1, File No.

10-10 (A) Purchase and Sale Agreement, dated as of November 6, 2021, among the FirstEnergy Corp.

10-10 Purchase and Sale Agreement, dated as of November 6, 2021, among the FirstEnergy Corp.

and North American Transmission Company II LLC, and Brookfield Super-Core Infrastructure Partners L.P., Brookfield Super-Core Infrastructure Partners (NUS) L.P.

and Brookfield Super-Core Infrastructure Partners (ER) SCSp, as guarantors.

(incorporated by reference to FE’s Form 10 -K filed Febru ary 16 , 202 2 , Exhibit 10 -10 , File No.

10-11 (B) Amended and Restated Limited Liability Company Operating Agreement of FirstEnergy Transmission, LLC (incorporated by reference to FE’s Form 8-K filed May 31, 2022, Exhibit 10.1, File No.

10-12 Common Stock Purchase Agreement, dated as of November 6, 2021, among the FirstEnergy Corp.

82 unchanged sentences

Somerhalder II (incorporated by reference to FE’s Form 10-Q filed July 22, 2021, Exhibit 10.5, File No.

10-56 (B) Form of 2022-2024 Cash-Based Performance-Adjusted Restricted Stock Unit Award Agreement (incorporated by reference to FE’s Form 10-Q filed April 21, 2022, Exhibit 10.1, File No.

10-57 (B) Form of 2022-2024 Stock-Based Performance-Adjusted Restricted Stock Unit Award Agreement (incorporated by reference to FE’s Form 10-Q filed April 21, 2022, Exhibit 10.2, File No.

10-58 (B) Stock-Based Performance-Adjusted Restricted Stock Unit Award Agreement to John W.

Somerhalder II (incorporated by reference to FE’s Form 10-Q filed July 26, 2022, Exhibit 10.2, File No.

10-59 (A)(B) 2022 Interim Chief Executive Officer Restricted Stock Units Award Agreement to John W.

Somerhalder II.

10-60 (A)(B) 2023 Interim Chief Executive Officer Restricted Stock Units Award Agreement to John W.

Somerhalder II.

14 Code of Business Conduct and Ethics (incorporated by reference to FE’s Form 10-Q filed July 22, 2021, Exhibit 14.1, File No.

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23 (A) Consent of Independent Registered Public Accounting Firm.

(A) 31-1 Certification of chief executive officer, pursuant to Rule 13a-14(a).

31-1 (A) Certification of interim chief executive officer, pursuant to Rule 13a-14(a).

31-2 (A) Certification of chief financial officer, pursuant to Rule 13a-14(a).

(A) 32 Certification of chief executive officer and chief financial officer, pursuant to 18 U.S.C.

32 (A) Certification of interim chief executive officer and chief financial officer, pursuant to 18 U.S.C.

101 The following materials from the Annual Report on Form 10-K for FirstEnergy Corp.

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FIRSTENERGY CORP.

/s/ Steven E.

President and Chief Executive Officer

Somerhalder II

Interim President and Chief Executive Officer and Chair of the FE Board

February 13, 2023

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated:

/s/ Steven E.

President and Chief Executive Officer and Director

(Principal Executive Officer)

/s/ Donald T.

Misheff /s/ John W.

Somerhalder II

Misheff John W.

Somerhalder II

Director Director

(Non-Executive Chairman of Board) (Vice Chair and Executive Director)

Interim President and Chief Executive Officer and Chair of the FE Board

(Principal Executive Officer)

/s/ Lisa Winston Hicks

Lisa Winston Hicks

Lead Independent Director

Jon Taylor /s/ Jason J.

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(Principal Financial Officer) (Principal Accounting Officer)

/s/ Michael J.

Anderson /s/ James F.

Anderson James F.

Croom /s/ James F.

Croom James F.

Director Director

/s/ Steven J.

Demetriou /s/ Christopher D.

Demetriou Christopher D.

Director Director

/s/ Lisa Winston Hicks /s/ Luis A.

Lisa Winston Hicks Luis A.

Director Director

Johnson /s/ Andrew Teno

Johnson Andrew Teno

Demetriou /s/ Andrew Teno

Demetriou Andrew Teno

Director Director

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Director Director

Lynn /s/ Melvin D.

Lynn Melvin D.

Klimczak /s/ Melvin D.

Klimczak Melvin D.

Director Director

/s/ Thomas N.

February 13, 2023

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 9A. Controls and Procedures