What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-13 compared with 2023-02-13 · 787 added, 614 removed, 1520 unchanged (48% of the section changed)

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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.

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.

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These procedures included testing the effectiveness of controls relating to the accounting for regulatory matters, including controls over the evaluation of the recoverability and settlement of existing regulatory assets and liabilities.

These procedures also included, among others, obtaining the Company’s correspondence with regulators, evaluating the reasonableness of management’s assessment regarding regulatory guidance, proceedings, and legislation and the related accounting implications, and calculating regulatory assets and liabilities based on provisions outlined in rate orders and other correspondence with regulators.

These procedures also included, among others, (i) obtaining the Company’s correspondence with regulators, (ii) evaluating the reasonableness of management’s assessment regarding regulatory guidance, proceedings, and legislation and the related accounting implications, and (iii) calculating regulatory assets and liabilities based on provisions outlined in rate orders and other correspondence with regulators.

/s/ PricewaterhouseCoopers LLP

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DPA penalty (Note 14)

Gain on sale of Yards Creek (Note 14)

Gain on sale of Yards Creek — — ( 109 )

Total operating expenses 10,604 10,549 9,406

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Total other expense ( 802 ) ( 471 ) ( 167 )

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

INCOME BEFORE INCOME TAXES 1,464 1,439 1,559

INCOME TAXES 267 1,000 320

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$ 1,102 $ 406 $ 1,283

AMOUNTS ATTRIBUTABLE TO FIRSTENERGY CORP.

Earnings from continuing operations $ 1,123 $ 406 $ 1,239

Earnings from discontinued operations ( 21 ) — 44

EARNINGS ATTRIBUTABLE TO FIRSTENERGY CORP.

$ 1,102 $ 406 $ 1,283

EARNINGS PER SHARE ATTRIBUTABLE TO FIRSTENERGY CORP.

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Basic - discontinued operations ( 0.04 ) — 0.08

Basic - Earnings Per Share Attributable to FirstEnergy Corp.

$ 0.71 $ 2.35 $ 1.99

Basic $ 1.92 $ 0.71 $ 2.35

Diluted - continuing operations $ 1.96 $ 0.71 $ 2.27

Diluted - discontinued operations ( 0.04 ) — 0.08

Diluted - Earnings Per Share Attributable to FirstEnergy Corp.

$ 0.71 $ 2.35 $ 1.99

Diluted $ 1.92 $ 0.71 $ 2.35

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:

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(1) Includes excise and gross receipts tax collections of $ 420 million, $ 406 million and $ 374 million in 2023, 2022 and 2021, respectively.

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

(2) Net of income tax benefit (expense) of ($ 21 million) and $ 48 million in 2023 and 2021, respectively.

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

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Other 1,137 1,135

$ 46,108 $ 45,432

LIABILITIES AND CAPITALIZATION

TOTAL ASSETS $ 48,767 $ 46,108

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

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Other 241 364

CAPITALIZATION:

Stockholders’ equity-

NONCURRENT LIABILITIES:

Long-term debt and other long-term obligations 22,885 21,203

Accumulated deferred income taxes 4,530 4,202

Retirement benefits 1,663 2,335

Regulatory liabilities 1,214 1,847

Other 2,173 1,920

32,465 31,507

TOTAL LIABILITIES 37,851 35,465

Common stockholders' equity-

Common stock, $ 0.10 par value, authorized 700,000,000 shares - 574,335,396 and 572,130,932 shares outstanding as of December 31, 2023 and 2022, respectively

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TOTAL EQUITY 10,916 10,643

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

31,846 30,923

NONCURRENT LIABILITIES:

Accumulated deferred income taxes 4,202 3,437

Retirement benefits 2,335 2,669

Regulatory liabilities 1,847 2,124

Other 1,920 1,863

10,304 10,093

COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 14)

$ 46,108 $ 45,432

TOTAL LIABILITIES AND EQUITY $ 48,767 $ 46,108

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

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Common Stock OPIC AOCI Accumulated Deficit Total Common Stockholders' Equity

Common Stock Other Paid-In Capital AOCI Accumulated Deficit Total Common Stockholders' Equity

(In millions) Shares Amount NCI Total Equity

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— — ( 859 ) — — ( 859 ) — ( 859 )

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

Net income 1,283 1,283 1,283

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

Cash dividends declared on common stock (1)

( 859 ) ( 859 ) ( 859 )

Common stock issuance (Note 11)

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

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

Net income — — — — 1,102 1,102 74 1,176

Other comprehensive loss, net of tax — — — ( 3 ) — ( 3 ) — ( 3 )

Cash dividends declared on common stock (2)

— — ( 917 ) — — ( 917 ) — ( 917 )

Stock Investment Plan and share-based benefit plans 2 — 89 — — 89 — 89

Distribution to FET minority interest — — — — — — ( 72 ) ( 72 )

Balance, December 31, 2023 574 $ 57 $ 10,494 $ ( 17 ) $ ( 97 ) $ 10,437 $ 479 $ 10,916

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

(2) Dividends declared for each share of common stock totaled $ 1.60 during 2023.

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

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Depreciation, amortization and impairments 1,280 1,317 1,664

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

Employee benefit costs, net ( 9 ) ( 279 ) ( 300 )

Pension and OPEB mark-to-market adjustments 78 ( 72 ) ( 382 )

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Gain on sale of Yards Creek — — ( 109 )

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

Gain on disposal, net of tax (Note 15)

— ( 47 ) ( 76 )

Pension trust contribution ( 750 ) — —

Loss (gain) on disposal, net of tax (Note 16)

Changes in current assets and liabilities-

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Cash collateral, net ( 218 ) 111 31

Employee benefit plan funding and related payments ( 50 ) ( 49 ) ( 48 )

Other ( 36 ) 55 ( 67 )

Net cash provided from operating activities 1,387 2,683 2,811

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital investments ( 3,356 ) ( 2,848 ) ( 2,487 )

Proceeds from sale of Yards Creek — — 155

Sales of investment securities held in trusts 38 48 48

Purchases of investment securities held in trusts ( 50 ) ( 59 ) ( 59 )

Asset removal costs ( 274 ) ( 213 ) ( 226 )

Other ( 10 ) ( 4 ) 10

Net cash used for investing activities ( 3,652 ) ( 3,076 ) ( 2,559 )

CASH FLOWS FROM FINANCING ACTIVITIES:

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

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

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

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Net cash provided from (used for) financing activities 2,238 ( 912 ) ( 542 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Property additions ( 2,756 ) ( 2,445 ) ( 2,657 )

Proceeds from sale of Yards Creek — 155 —

Sales of investment securities held in trusts 48 48 186

Purchases of investment securities held in trusts ( 59 ) ( 59 ) ( 208 )

Asset removal costs ( 213 ) ( 226 ) ( 224 )

Other ( 96 ) ( 32 ) ( 5 )

Net cash used for investing activities ( 3,076 ) ( 2,559 ) ( 2,908 )

Net change in cash, cash equivalents and restricted cash ( 27 ) ( 1,305 ) ( 290 )

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Income taxes, net of refunds $ 58 $ 21 $ ( 7 )

Significant non-cash transactions:

Accrued capital investments $ 252 $ 207 $ 114

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

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6 Stock-Based Compensation Plans 97

9 Variable Interest Entities 106

10 Fair Value Measurements 108

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FE was incorporated under Ohio law in 1996.

FE’s principal business is the holding, directly or indirectly, of all of the outstanding equity of its principal subsidiaries:

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).

FE’s principal business is the holding, directly or indirectly, of all of the outstanding equity of its principal subsidiaries as of December 31, 2023:

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 KATCo.

Additionally, FET is a majority-owned subsidiary of FE, and is the parent company of ATSI, MAIT, PATH and TrAIL.

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.

On January 1, 2024, FirstEnergy consolidated the Pennsylvania Companies into FE PA, including OE subsidiary, Penn, making FE PA a new, single operating entity.

In addition to merging each of the Pennsylvania Companies with and into FE PA, with FE PA surviving such mergers as the successor-in-interest to all assets and liabilities of the Pennsylvania Companies, (i) WP transferred certain of its Pennsylvania-based transmission assets to KATCo, and (ii) PN and ME contributed their respective Class B equity interests of MAIT to FE.

FE PA, as of January 1, 2024, is FE’s only regulated distribution utility in Pennsylvania encompassing the operations previously conducted individually by the Pennsylvania Companies and serves an area with a population of approximately 4.5 million.

FE PA operates under the rate districts of the former Pennsylvania Companies.

FirstEnergy is also evaluating the legal, financial, operational and branding benefits of consolidating the Ohio Companies into a single Ohio utility company.

On May 31, 2022, Brookfield and the Brookfield Guarantors acquired 19.9 % of the issued and outstanding membership interests of FET.

FirstEnergy presents the third-party investors’ ownership portion of FirstEnergy's net income, net assets and comprehensive income as NCI.

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

FESC provides legal, financial and other corporate support services at cost, in accordance with its cost allocation manual, to affiliated FirstEnergy companies.

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

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FE and its subsidiaries are principally involved in the transmission, distribution, and generation of electricity.

FirstEnergy’s ten utility operating companies comprise one of the nation’s largest investor-owned electric systems, based on serving over six million customers in the Midwest and Mid-Atlantic regions.

FirstEnergy’s transmission operations include over 24,000 miles of transmission lines and two regional transmission operation centers.

FirstEnergy’s utility operating companies comprise one of the nation’s largest investor-owned electric systems, serving over six million customers in the Midwest and Mid-Atlantic regions.

FirstEnergy’s transmission operations include more than 24,000 miles of transmission lines and two regional transmission operation centers.

AGC and MP control 3,580 MWs of total capacity.

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

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

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.

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Under the equity method, the interest in the entity is reported as an investment in the Consolidated Balance Sheets and the percentage of FE's ownership share of the entity’s earnings is reported in the Consolidated Statements of Income and Comprehensive Income.

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

Certain prior year amounts have been reclassified to conform to the current year presentation, including presenting long-term debt and other long-term obligations within “Noncurrent Liabilities” on the Consolidated Balance Sheets as compared to “Total Capitalization”.

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.

Post-pandemic economic conditions have increased supply chain lead times across numerous material categories, with some as much as tripling from pre-pandemic lead times.

Several key suppliers have struggled with labor shortages and raw material availability, which along with inflationary pressure that appears to be moderating, 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

Facility Optimization

FirstEnergy has begun implementing its facility optimization plans, which focus on both cost savings and alignment with our flexible working arrangements and EESG priorities, which will result in exiting the General Office in Akron, Ohio, and other corporate facilities in Brecksville, Ohio, Greensburg, Pennsylvania and Morristown, New Jersey beginning in 2024.

In December 2023, FirstEnergy purchased the General Office building with the intention to sell in the future.

It is currently expected that the exit of the General Office and sale will occur in 2025.

The corporate headquarters will remain in Akron, Ohio, moving to the West Akron Campus, and FirstEnergy continues to explore real estate options and relocation opportunities for the other corporate facilities.

As FirstEnergy continues to transform the business and implement initiatives to reduce costs, including the facility optimization plan, the impact of such actions may result in future impairments or other charges that may be significant.

The result of these combined efforts will help build a stronger, more sustainable company for the near and long term.

Sale of 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.

The majority of the purchase price is expected to be paid in cash upon closing, and the remainder will be payable by the issuance of a promissory note, which is expected to be repaid by the end of 2024.

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.

The transaction is subject to customary closing conditions, including approval from the PPUC.

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

The FET Minority Equity Interest Sale is expected to close by the end of the first quarter of 2024.

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

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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.

Reference Rate Reform

In March of 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

“Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (issued March 2020 and subsequently updated).

This ASU, which introduces Topic ASC 848 to the FASB codification, provides temporary optional expedients and exceptions, that if elected, will ease the financial reporting burdens related to the market transition from London Inter-Bank Offered Rate and other interbank offered rates to alternative reference rates.

On April 27, 2023, FE, FET, the Utilities and the Transmission Companies entered into amendments to the 2021 Credit Facilities to, among other things:

(i) permit the sale from FE to Brookfield of an incremental 30 % equity interest in FET for a purchase price of $ 3.5 billion, (ii) permit the consolidation of the Pennsylvania Companies into a new, single operating entity, FE PA, which will be FE’s only regulated utility in Pennsylvania encompassing the operations previously conducted individually by the Pennsylvania Companies, and (iii) transition the benchmark interest rate for borrowings under the 2021 Credit Facilities from London Inter-Bank Offered Rate to SOFR.

During the second quarter of 2023, FirstEnergy utilized the optional expedient within ASC 848 to account for the amendments to the credit facilities as a continuation of the existing contract without additional analysis.

ACCOUNTING FOR THE EFFECTS OF REGULATION

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See Note 13, "Regulatory Matters," of the Notes to Consolidated Financial Statements for additional information.

The following table provides information about the composition of net regulatory assets and liabilities as of December 31, 2022 and 2021, and the changes during the year ended December 31, 2022:

The following table provides information about the composition of net regulatory assets and liabilities as of December 31, 2023 and 2022, and the changes during the year 2023:

As of December 31,

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Storm-related costs 799 683 116

Uncollectible and pandemic-related costs 63 56 7

Energy efficiency program costs 198 94 104

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Vegetation management 21 52 ( 31 )

Other 33 35 ( 2 )

Regulatory Assets Not Earning a Current Return $ 1,197 $ 997 $ 200

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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.

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 “Other Income (Expense)”.

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.

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

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

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As of December 31, 2023 and 2022, the carrying value of the equity method investment was $ 66 million and $ 57 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.

During 2023 and 2022, FEV received cash dividends from Global Holding totaling $ 165 million and $ 170 million, respectively, which were classified with “Cash from Operating Activities” on FirstEnergy’s Consolidated Statements of Cash Flow.

PATH WV - PATH, was 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.

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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.

As of December 31, 2023 and 2022, the carrying value of the equity method investment was $ 17 million and $ 18 million, respectively.

FirstEnergy's pre-tax equity earnings in PATH-WV were immaterial for the years ended December 31, 2023, 2022 and 2021.

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.

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FirstEnergy's reporting units are consistent with its reportable segments and consist of Regulated Distribution and Regulated Transmission.

The following table presents goodwill by reporting unit as of December 31, 2022:

The following table presents goodwill by reporting unit as of December 31, 2023 and 2022:

(In millions) Regulated Distribution Regulated Transmission Consolidated

Goodwill $ 5,004 $ 614 $ 5,618

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 and supplies inventory primarily includes fuel inventory, emission allowances, 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.

Fuel inventory consists primarily of coal and reagents that are consumed at MP's generation plants, and is accounted for at weighted average cost when purchased and recorded to fuel expense when consumed.

Emission allowances are accounted for as inventory at cost when purchased.

FirstEnergy’s emission allowance compliance obligation, principally associated with MP's generation plant operations, is accrued to fuel expense at a weighted average cost based on each month’s emissions.

When emission allowances are submitted to the EPA, inventory and the compliance obligation are reduced.

Due to the ENEC, fuel, emission allowances and other fuel-related expenses have no material impact on current period earnings.

NONCONTROLLING INTEREST

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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.

On May 31, 2022, Brookfield and the Brookfield Guarantors acquired 19.9 % of the issued and outstanding membership interests of FET.

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.

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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

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(1) Includes finance leases of $ 68 million and $ 105 million as of December 31, 2023 and 2022, respectively.

(2) Includes finance lease accumulated amortization of $ 33 million and $ 60 million as of December 31, 2023 and 2022, respectively.

Regulated Distribution has approximately $ 2.2 billion of total regulated generation property, plant and equipment as of December 31, 2023.

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

The respective annual composite depreciation rates for FirstEnergy were approximately 2.7 % in each 2022, 2021 and 2020.

The respective annual composite depreciation rates for FirstEnergy were approximately 2.8 % in 2023 and 2.7 % in each of 2022 and 2021.

For the years ended December 31, 2023, 2022 and 2021, capitalized financing costs on FirstEnergy's Consolidated Statements of Income include $ 44 million, $ 56 million and $ 48 million, respectively, of allowance for equity funds used during construction and $ 53 million, $ 28 million and $ 27 million, respectively, of capitalized interest.

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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

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.

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Balance, December 31, 2023 $ 209

In April 2015, the EPA finalized regulations for the disposal of CCRs (non-hazardous), establishing national standards for landfill design, structural integrity design and assessment criteria for surface impoundments, groundwater monitoring and protection procedures and other operational and reporting procedures to assure the safe disposal of CCRs from electric generating plants.

On September 13, 2017, the EPA announced that it would reconsider certain provisions of the final regulations.

On July 29, 2020, the EPA published a final rule again revising the date that certain CCR impoundments must cease accepting waste and initiate closure to April 11, 2021.

The final rule allowed for an extension of the closure deadline based on meeting identified site-specific criteria.

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 through the end of the first quarter of 2024, which request is pending technical review by the EPA.

AE Supply continues to operate McElroy’s Run as a disposal facility for Pleasants Power Station, which is owned and operated by a non-affiliate.

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.

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 $ 145 million representing AGC's share in this facility as of December 31, 2023.

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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.

AGC provides the generation capacity from this facility to its owner, MP, which is recovered from the ENEC.

NEW ACCOUNTING PRONOUNCEMENTS

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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.

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

ASU 2023-07, " Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures " (Issued in November 2023):

ASU 2023-07 enhances interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, provides new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements.

Disclosure requirements within ASU 2023-07 include disclosing significant segment expenses by reportable segment if they are regularly provided to the CODM and included in each reported measure of segment profit or loss.

Disclosures are required on both an annual and an interim basis.

For FirstEnergy, the guidance will be effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

ASU 2023-09, " Income taxes (Topic 280):

Improvements to Income Tax Disclosures " (Issued in December 2023):

ASU 2023-09 enhances disclosures primarily related to existing rate reconciliation and income taxes paid information to help investors better assess how a company’s operations and related tax risks and tax planning and operational opportunities affect the tax rate and prospects for future cash flows.

For FirstEnergy, the guidance will be effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The amendments within ASU 2023-09 are to be applied on a prospective basis, with retrospective application permitted.

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

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Regulated Distribution

The Regulated Distribution segment distributes electricity through FirstEnergy’s ten utility operating companies and also controls 3,580 MWs of regulated electric generation capacity located primarily in West Virginia and Virginia.

The Regulated Distribution segment distributes electricity through FirstEnergy’s utility operating companies and also controls 3,580 MWs of regulated electric generation capacity located primarily in West Virginia and Virginia.

Each of the Utilities earns revenue from state-regulated rate tariffs under which it provides distribution services to residential, commercial and industrial customers in its service territory.

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Customer payments vary by state but are generally due within 30 days.

ASC 606 excludes industry-specific accounting guidance for recognizing revenue from ARPs as these programs represent contracts between the utility and its regulators, as opposed to customers.

ASC 606 excludes industry-specific accounting guidance for recognizing revenue from Alternative Revenue Programs as these programs represent contracts between the utility and its regulators, as opposed to customers.

Therefore, revenues from these programs are not within the scope of ASC 606 and regulated utilities are permitted to continue to recognize such revenues in accordance with existing practice but are presented separately from revenue arising from contracts with customers.

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.

Regulated Transmission

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 derived from forward-looking formula rates.

The segment's revenues are derived from primarily forward-looking formula rates.

See Note 13, “Regulatory Matters,” for additional information.

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Industrial 1,298 1,338 1,091

Other 85 75 81

Street lighting/Other

Wholesale 228 494 362

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Total revenues from contracts with customers 10,927 10,700 9,644

Alternative Revenue Program (3)

Other revenue unrelated to contracts with customers (4)

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See Note 13, “Regulatory Matters,” for further discussion.

(2) Primarily includes amounts collected from customers to administer and repay securitization bonds and pole attachment revenue.

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

(4) Primarily includes late payment charges and revenue from derivatives.

(5) 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.

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

Billed and unbilled customer receivables as of December 31, 2023 and 2022, are included below.

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(1) Includes approximately $ 288 million and $ 290 million as of December 31, 2023 and 2022, respectively, that are past due by greater than 30 days.

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.

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 customer receivables should be further adjusted in accordance with the accounting guidance for credit losses.

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

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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.

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

During 2023, various regulatory actions, including extended installment plans, continue to impact the level of past due balances in certain states, resulting in the allowances for uncollectible customer receivables to remain elevated above 2019 pre-pandemic levels.

However, normal collection activity has resumed, and arrears levels continue to decline towards pre-pandemic levels.

As a result, FirstEnergy recognized a $ 77 million decrease to its allowance during 2023, of which $ 41 million was applied to existing deferred regulatory assets.

Activity in the allowance for uncollectible accounts on receivables for the years ended December 31, 2023, 2022 and 2021 are as follows:

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End of year balance $ 15 $ 11 $ 10

(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.

(1) Customer receivable amounts charged to income for the years ended December 31, 2023, 2022, and 2021, include approximately $( 15 ) million, $ 11 million, and $ 12 million, respectively, deferred for future recovery (refund).

(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

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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.

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

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 2026 Convertible Notes, as further discussed in Note 11, "Capitalization" under Long-term debt and other long-term obligations, is computed using the if-converted method.

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

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Diluted EPS $ 1.92 $ 0.71 $ 2.35

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.

For the years ended December 31, 2023, 2022 and 2021, there was no material amount of shares excluded from the calculation of diluted shares outstanding, as their inclusion would be antidilutive.

The dilutive effect of the 2026 Convertible Notes is limited to the conversion obligation in excess of the aggregate principal amount of the 2026 Convertible Notes being converted.

For the year ended December 31, 2023, there was no dilutive effect resulting from the 2026 Convertible Notes as the average market price of FE shares of common stock was below the initial conversion price of $ 46.81 per share.

See Note 11, "Capitalization" for additional details on the 2026 Convertible Notes that were issued during the second quarter of 2023.

ACCUMULATED OTHER COMPREHENSIVE INCOME

The changes in AOCI for the years ended December 31, 2023, 2022 and 2021, for FirstEnergy are shown in the following table:

Gains & Losses on Cash Flow Hedges (1)

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

2023 2022 2021

(In millions)

Gains & Losses on Cash Flow Hedges (1)

AOCI Balance, January 1, $ — $ ( 7 ) $ ( 8 )

Amounts reclassified from AOCI 2 9 1

Other comprehensive income (loss) 1 ( 34 ) ( 33 )

Income tax (benefits) on other comprehensive income (loss) — ( 8 ) ( 8 )

Other comprehensive income (loss), net of tax 1 ( 26 ) ( 25 )

Income tax on other comprehensive income — 2 —

Other comprehensive income, net of tax 2 7 1

AOCI Balance, December 31, $ 2 $ — $ ( 7 )

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

AOCI Balance, January 1, $ ( 14 ) $ ( 8 ) $ 3

Amounts reclassified from AOCI ( 6 ) ( 9 ) ( 14 )

Other comprehensive income (loss) 1 ( 14 ) ( 13 )

Income tax (benefits) on other comprehensive income (loss) — ( 3 ) ( 3 )

Other comprehensive income (loss), net of tax 1 ( 11 ) ( 10 )

Income tax benefits on other comprehensive loss ( 1 ) ( 3 ) ( 3 )

Other comprehensive loss, net of tax ( 5 ) ( 6 ) ( 11 )

AOCI Balance, December 31, $ ( 19 ) $ ( 14 ) $ ( 8 )

Amounts reclassified from AOCI 9 ( 9 ) —

Other comprehensive income (loss) 9 ( 9 ) —

Income tax (benefits) on other comprehensive income (loss) 2 ( 3 ) ( 1 )

Total FirstEnergy Corp.

AOCI Balance, January 1, $ ( 14 ) $ ( 15 ) $ ( 5 )

Other comprehensive income (loss), net of tax ( 3 ) 1 ( 10 )

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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 5, "Pension and Other Post-Employment Benefits," for additional details.

(2) Amortization of 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 5, "Pension and Other Postemployment 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

PENSION AND OTHER POSTEMPLOYMENT BENEFITS

FirstEnergy provides noncontributory qualified defined benefit pension plans that cover substantially all of its employees and non-qualified pension plans that cover certain employees.

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FirstEnergy also has obligations to former or inactive employees after employment, but before retirement, for disability-related benefits.

FirstEnergy’s pension and OPEB funding policy is based on actuarial computations using the projected unit credit method.

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 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.

On May 9, 2023, FirstEnergy announced a voluntary retirement program for eligible non-bargaining employees, known as the PEER.

More than 65 % of eligible employees, totaling approximately 450 employees, accepted the PEER, which included lump sum compensation equivalent to severance benefits, healthcare continuation costs and a temporary pension enhancement.

Most PEER participating employees departed in 2023.

The temporary pension enhancement and healthcare continuation costs are classified as special termination costs within net periodic benefit costs (credits).

In addition to the PEER, FirstEnergy notified and involuntarily separated approximately 90 employees on May 9, 2023.

Management expects the cost savings resulting from these initiatives to support FirstEnergy’s growth plans.

FirstEnergy’s pension funding policy is based on actuarial computations using the projected unit credit method.

On May 12, 2023, FirstEnergy made a $ 750 million voluntary cash contribution to the qualified pension plan.

FirstEnergy does not currently expect to have a required contribution to the pension plan until 2028, which based on various assumptions, including an expected rate of return on assets of 8.0 %, is expected to be approximately $260 million.

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

Pension and OPEB costs are affected by employee demographics (including age, compensation levels and employment periods), the level of contributions made to the plans and earnings on plan assets.

Pension and OPEB costs may also be affected by changes in key assumptions, including anticipated rates of return on plan assets, the discount rates and health care trend rates used in determining the projected benefit obligations for pension and OPEB costs.

FirstEnergy uses a December 31 measurement date for its pension and OPEB plans.

Pension and OPEB costs may also be affected by changes in key assumptions, including anticipated rates of return on plan assets, the discount rates and health care

trend rates used in determining the projected benefit obligations for pension and OPEB costs.

FirstEnergy uses a December 31 measurement date for its pension and OPEB plans or whenever a plan is determined to qualify for a remeasurement.

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

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2022 2021 2023 (2)

2022 2021 2020 (2)

Assumptions Related to Benefit Obligations:

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Year that the rate reaches the ultimate trend rate N/A N/A N/A 2033 2029 2028

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

(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.

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

(2) As a result of the interim plan remeasurement during 2023, there were different rates in effect from January 1, 2023, through April 30, 2023 compared to May 1, 2023 through December 31, 2023.

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.

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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 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.

Expected Return on Plan Assets - 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.

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.

Pension and OPEB Returns 2023 2022 2021

Actual gains or (losses) on plan assets - $ millions $ 751 $ ( 1,830 ) $ 689

Actual gains or (losses) on plan assets - % 11.2 % ( 19.1 ) % 7.9 %

Expected return on plan assets - $ millions $ 601 $ 696 $ 688

Expected return on plan assets - % 8.00 % for pension

7.00 % for OPEB

7.50 % 7.50 %

Mortality Rates - During 2023, the Society of Actuaries elected not to release a new mortality improvement scale due to data available being severely impacted by COVID-19.

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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.

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Amortization of prior service costs (credits) 2 2 3 ( 8 ) ( 11 ) ( 17 )

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

One-time termination benefits (3)

Special termination benefits (2)

Pension & OPEB mark-to-market 108 ( 98 ) ( 253 ) ( 30 ) 26 ( 129 )

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(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.

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

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.

(2) Related to benefits provided in connection with the PEER.

For the years ended December 31, 2023, 2022 and 2021, approximately $ 36 million, $ 15 million and $( 31 ) million, respectively, 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.

FirstEnergy recognizes a pension and OPEB mark-to-market adjustment for the change in 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 remeasurement.

The size of the voluntary contribution made on May 12, 2023, in relation to total pension assets triggered a remeasurement of the pension plan, and as a result, FirstEnergy recognized a non-cash, pre-tax pension mark-to-market adjustment gain of approximately $ 59 million in the second quarter of 2023.

FirstEnergy elected the practical expedient to remeasure pension plan assets and obligations as of April 30, 2023, which is the month-end closest to the date of the voluntary contribution.

The pension mark-to-market adjustment primarily reflects higher than expected return on assets, partially offset by a 29 basis points decrease in the discount rate used to measure benefit obligations.

In the fourth quarter of 2023, FirstEnergy recognized a $ 137 million pension and OPEB mark-to-market adjustment loss, primarily reflecting lower than expected return on assets, partially offset by an 11 basis points increase in the discount rate used to measure pension benefit obligations from May 1, 2023, and the gain associated with the pension lift-out, as described below.

In December 2023, FirstEnergy, executed a lift-out transaction with Banner Life Insurance Company and Reinsurance Group of America that transferred approximately $683 million of plan assets and $719 million of plan obligations, associated with approximately 1,900 former FES and FENOC employees, who will assume future and full responsibility to fund and administer their benefit payments.

There was no change to the pension benefits for any participants as a result of the transfer.

The transaction was funded by pension plan assets and resulted in a pre-tax gain of approximately $36 million, which was included in the fourth quarter 2023 pension mark-to-market charge.

FirstEnergy expects that the transaction further de-risked potential volatility with the pension plan assets and liabilities, and FirstEnergy will continue to evaluate other lift-outs in the future based on market and other conditions.

Obligations/Funded Status - Qualified and Non-Qualified Plans 2023 2022 2023 2022

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Plan participants’ contributions — — 4 3

Special termination benefits 21 — 8 —

Medicare retiree drug subsidy — — — 1

Lift-out transaction ( 719 ) — — —

Actuarial loss (gain) 256 ( 2,515 ) 8 ( 83 )

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Actual return on plan assets 682 ( 1,760 ) 69 ( 70 )

Lift-out transaction ( 683 ) — — —

Company contributions 777 26 24 24

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(1) Excludes $( 48 ) million as of December 31, 2023, 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.

(2) NAV used as a practical expedient to approximate fair value.

December 31, 2022 Asset Allocation

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(1) Excludes $ 350 million as of December 31, 2022, of receivables, payables, taxes 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.

(2) NAV used as a practical expedient to approximate fair value.

Private – equity and debt funds:

Private equity and private debt funds primarily include limited partnerships that invest in equity or directly originated senior loans of high-quality middle market operating companies.

Distributions are received periodically through the liquidation of underlying assets in each fund.

For most private equity and debt funds, immediate access to capital at the limited partner’s discretion is not available and such funds prevent full redemption and return of capital until fund liquidation.

The purpose of each fund is to maximize total return of capital with an emphasis on minimizing default risk.

Each fund’s NAV is made available to fund participants quarterly.

Insurance Linked Securities funds :

The insurance linked securities funds invest in securities which indirectly participate in portfolios of reinsurance and retrocession contracts which primarily cover catastrophe property risks.

Redemptions can be achieved with 90-day notices with gating factors that may apply.

The purpose of these investments is to generate attractive risk-adjusted returns that are demonstrably uncorrelated with traditional asset classes.

Each fund’s NAV is made available to fund participants monthly.

Hedge funds :

The hedge funds invest in a combination of long and short equity, multi-strategy, global macro and structured credit strategies.

Redemptions can be achieved with 90-day notices with gating factors that may apply.

The purpose of these investments is to deliver diversified risk-adjusted returns to traditional asset classes.

Each fund’s NAV is made available to fund participants monthly.

Real estate funds:

The real estate funds primarily invest in U.S commercial real estate markets that include office, residential, retail, industrial, life science/lab space, storage and student housing.

The investment values of the real estate properties are determined on a quarterly basis by independent market appraisers hired by the board of directors of each fund.

Distributions from each fund will be received as the underlying investments of the fund are liquidated.

Each investor’s ability to withdraw capital from certain funds may be limited depending on whether a queue has been established.

The purpose of each fund is to invest in real estate and real estate related assets that generate a total return from current income and capital appreciation which exceeds the applicable fund’s index.

Each fund’s NAV is made available to fund participants quarterly.

As of December 31, 2023, and 2022, the OPEB trust investments measured at fair value were as follows:

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Fixed income — 158 — 158 31 %

$ 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.

Total $ 258 $ 258 $ — $ 516 100 %

December 31, 2022 Asset Allocation

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— 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.

FirstEnergy’s target asset allocations for its pension and OPEB trust portfolios for 2023 were as follows :

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

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:

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

Pension Benefit Payments Subsidy Receipts

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FirstEnergy grants stock-based awards through the ICP 2020, primarily in the form of restricted stock and performance-based restricted stock units.

There are also awards currently outstanding issued through the ICP 2015 primarily in the form of restricted stock and performance-based restricted stock units.

No shares are available for future grants or issuance under ICP 2015.

The ICP 2020 and ICP 2015 include shareholder authorization to each issue 10 million shares of common stock or their equivalent.

As of December 31, 2022, approximately 11.9 million shares were available for future grants under the ICP 2020 assuming maximum performance metrics are achieved for the outstanding cycles of restricted stock units.

No shares are available for future grants under ICP 2015.

Shares not issued due to forfeitures or cancellations originally granted through the ICP 2015 may be added back to the ICP 2020.

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 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.

As of December 31, 2023, approximately 10.1 million shares were available for future grants under the ICP 2020 assuming maximum performance metrics are achieved for the outstanding cycles of restricted stock units.

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

Vesting periods for stock-based awards range from less

than a year, primarily due to the issuance of prorated awards to newly hired executives, to four years, with the majority of awards having a vesting period of three years .

FirstEnergy also issues stock through its 401(k) savings plan 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.

FirstEnergy accounts for forfeitures as they occur.

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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.

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.

Beginning with awards granted in 2022, restricted stock units include a relative total shareholder return as a performance metric, weighted at 35 %, 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 %.

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

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Restricted Stock

Certain employees receive awards of FE restricted stock (as opposed to "units" with the right to receive shares at the end of the restriction period) subject to restrictions that lapse over a defined period of time or upon achieving performance results.

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

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 2022, was not material.

Restricted stock activity for the year ended 2023, was as follows:

Restricted Stock Activity Shares

(in millions)

Weighted-Average Grant Date Fair Value (per share)

Nonvested as of January 1, 2023 0.20 $ 42.35

Granted in 2023 0.30 37.42

Forfeited in 2023 ( 0.02 ) 36.86

Vested in 2023 ( 0.02 ) 39.45

Nonvested as of December 31, 2023 0.46 $ 39.57

The weighted average vesting period for restricted stock granted in 2023 was 2.4 years.

As of December 31, 2023, there was $ 11 million of total unrecognized compensation cost related to non-vested restricted stock, which is expected to be recognized over a period of approximately four years .

401(k) Savings Plan

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

In each of 2023 and 2022, 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.

Annual incentive and long-term incentive awards may be deferred in FE stock accounts.

Annual incentive and long-term incentive awards may be deferred in FE stock accounts, where they are tracked as units.

Base salary and annual incentive awards may be deferred into a retirement cash account which earns interest.

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

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

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.

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

The liability recognized for EDCP of approximately $ 175 million and $ 193 million as of December 31, 2023 and 2022, respectively, is included in “Retirement benefits,” on the Consolidated Balance Sheets.

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

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.

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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.

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

Accordingly, FirstEnergy made a first quarter estimated payment of AMT of approximately $ 49 million in April 2023.

In June 2023, the U.S.

Treasury issued additional guidance that eliminated the requirement of corporations to include AMT in quarterly estimated tax payments, pending further guidance on the application and administration of AMT.

Therefore, as a result of guidance issued to date, the current forecast of AMT obligation, and the amount of AMT already paid in April 2023, FirstEnergy did not make any additional AMT payments for the 2023 tax year.

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,

INCOME TAXES (1)

Treasury regulations are issued, the amount of AMT FirstEnergy pays 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 may also be subject to regulation by FERC and/or applicable state regulatory authorities.

Any adverse development in this legislation, including guidance from the U.S.

Treasury and/or the IRS or unfavorable regulatory treatment, could negatively impact FirstEnergy’s cash flows, results of operations and 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 $ 7.5 billion tax gain from the combined sale of 49.9 % of the membership interests of FET for consideration received and recapture of negative tax basis in FET.

As of December 31, 2023, FirstEnergy had approximately $ 8.1 billion of gross federal NOL carryforwards, as further discussed below, which will be used to offset a majority of the tax gain from the FET sale and expected taxable income in 2024, however due to certain limitations on utilization enacted in the Tax Act, a portion of the NOL will carry into 2025 and possibly beyond.

As a result of the expected additional 30% 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 initial 19.9 % sale of FET that closed in May 2022, such deferred gain consisting of consideration received on the sale and the recapture of estimated negative tax basis in FET impacted by taxable income and loss among other factors.

In the fourth quarter of 2023, FirstEnergy recognized a charge to income tax expense of approximately $ 58 million as a true-up of the deferred tax liability associated with the deferred tax gain.

During the third quarter of 2023, FirstEnergy recognized a tax benefit of approximately $ 65 million, net of a reserve for uncertain tax positions, from the reduction of state income taxes and partial release of a valuation allowance for the expected utilization of state NOL based on an assessment of regulated business operations and a change in the composition of a state tax return filing group.

In the fourth quarter of 2023, FirstEnergy recognized a tax benefit of approximately $ 37 million from the remeasurement of valuation allowance previously recorded on business interest expense carryforwards, net of carryforward adjustments, based on the expectation that FirstEnergy will be able to utilize these tax benefits on realized and future earnings and distributions from FirstEnergy’s interests in FET and FEV.

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, however, the Tax Act provides that the nondeductible interest can be carried forward indefinitely and deducted against income from non-utility operations.

During 2022, FirstEnergy recognized an approximate $ 38 million tax benefit from remeasurement of the prior valuation allowance on interest expense carryforwards.

On March 29, 2023, the West Virginia Governor signed into law House Bill 3286, which provides corporate taxpayers a reduction to pre-apportionment federal taxable income with the amount necessary to offset the increase in the net deferred tax liability (or decrease in the net deferred tax asset) caused by West Virginia’s apportionment law change enacted in 2021.

Beginning with the 2033 tax year, qualifying taxpayers can subtract one-tenth of the amount each year for ten years.

Taxpayers intending to claim this subtraction will have to file a statement with the West Virginia tax commissioner by July 1, 2024, specifying the total amount of subtraction to be claimed.

Accordingly, FirstEnergy recorded a state deferred tax asset of approximately $ 9 million in the first quarter of 2023, which was fully reserved.

In conjunction with the assessment of regulated business operations discussed above, FirstEnergy removed the $ 9 million reserve and reduced the state deferred tax asset to approximately $ 4 million, and recorded a corresponding $ 4 million regulatory liability associated with the amount expected to be refunded to customers in future rates.

The following table provides the composite of income taxes on income from continuing operations for the years ended 2023, 2022 and 2021:

INCOME TAXES ON INCOME FROM CONTINUING OPERATIONS For the Years Ended December 31,

2023 2022 2021

(In millions)

Currently payable (receivable)-

$ — $ 2 $ ( 14 )

Currently payable -

State 1 11 21

Deferred, net -

47 127 ( 38 )

State ( 24 ) 47 127

Investment tax credit amortization ( 3 ) ( 4 ) ( 4 )

Total income taxes $ 1,000 $ 320 $ 126

(1) Income Taxes on Income from Continuing Operations.

(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.

Total income taxes on income from continuing operations $ 267 $ 1,000 $ 320

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

(2) Excludes $ 21 million of federal tax expense and $ 46 million of federal tax benefits associated with discontinued operations for the years ended December 31, 2023 and 2021, respectively.

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.

The following tables provide a reconciliation of federal income tax expense (benefit) at the federal statutory rate to the total income taxes (benefits) for the years ended December 31, 2022, 2021 and 2020:

The following table provides a reconciliation of federal income tax expense at the federal statutory rate to the total income taxes on income from continuing operations for the years ended December 31, 2023, 2022 and 2021:

For the Years Ended December 31,

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Income from continuing operations, before income taxes $ 1,464 $ 1,439 $ 1,559

Federal income tax expense at statutory rate (21%) $ 302 $ 327 $ 237

Federal income tax expense at the 21% statutory rate $ 307 $ 302 $ 327

Increases (reductions) in taxes resulting from-

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Excess deferred tax amortization due to the Tax Act ( 46 ) ( 51 ) ( 54 )

TMI-2 reversal of tax regulatory liabilities

Uncertain tax positions 41 2 ( 82 )

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Other, net 9 19 5

Total income taxes $ 1,000 $ 320 $ 126

Effective income tax rate 69.5 % 20.5 % 11.2 %

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

Total income taxes on income from continuing operations $ 267 $ 1,000 $ 320

Effective income tax rate (continuing operations) 18.2 % 69.5 % 20.5 %

Accumulated deferred income taxes as of December 31, 2023 and 2022, are as follows:

As of December 31,

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Pension and OPEB ( 331 ) ( 496 )

AROs ( 22 ) ( 21 )

Regulatory asset/liability 647 432

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Valuation reserve 226 440

All other ( 210 ) ( 253 )

Net deferred income tax liability $ 4,202 $ 3,437

Other ( 264 ) ( 232 )

Net accumulated deferred income tax liability $ 4,530 $ 4,202

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, 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.

As of December 31, 2023, FirstEnergy's loss carryforwards primarily consisted of $ 8.1 billion ($ 1.7 billion, net of tax) of federal NOL carryforwards, $ 5.9 billion ($ 1.2 billion, net of tax) of which have no expiration and the remainder that will begin to expire in 2031.

As discussed above, FirstEnergy expects to utilize the majority of its federal NOL carryforwards by the end of 2024.

However, due to certain limitations on utilization enacted in the Tax Act, a portion of the NOL will carry into 2025 and possibly beyond.

In addition, FirstEnergy's tax credit carryforwards primarily consisted of AMT credits of $ 57 million, which have no expiration, and federal general business tax credits of $ 12 million that begin to expire in 2039.

The table below summarizes pre-tax NOL carryforwards and their respective anticipated expirations for state and local income tax purposes of approximately $ 13.5 billion ($ 436 million, net of tax) for FirstEnergy, of which approximately $ 6.1 billion ($ 233 million, net of tax) is expected to be utilized based on current estimates and assumptions.

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$ 8,189 $ 5,269

The following table summarizes the changes in valuation allowances on federal, state and local DTAs related to disallowed interest and certain employee remuneration, in addition to state and local NOLs discussed above for the years ended December 31, 2022, 2021 and 2020:

The following table summarizes the changes in valuation allowances on federal, state, and local deferred tax assets related to business interest expense carryforwards and employee compensation deduction limitations under section 162(m), in addition to state and local NOLs discussed above for the years ended December 31, 2023, 2022 and 2021:

(In millions) 2023 2022 2021

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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.

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

As of December 31, 2022, it is reasonably possible that approximately $ 25 million of unrecognized tax benefits may be resolved during 2023 as a result of settlements with taxing authorities or the statute of limitations expiring, of which $ 24 million would ultimately affect FirstEnergy's effective tax rate.

The following table summarizes the changes in unrecognized tax positions for the years ended December 31, 2022, 2021 and 2020:

If ultimately recognized in future years, all of the unrecognized income tax benefits would impact the effective tax rate.

The following table summarizes the changes (gross) in uncertain tax positions for the years ended December 31, 2023, 2022 and 2021:

(In millions)

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Balance, December 31, 2021 $ 47

Current year increases 15

Prior year decreases ( 8 )

Effectively settled with taxing authorities

Prior year increases 2

Decrease for lapse in statute

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Prior years increases 88

Effectively settled with taxing authorities

Decrease for lapse in statute

Balance, December 31, 2023 $ 105

As of December 31, 2023, none of the unrecognized tax benefits are expected to be resolved during 2024 as a result of settlements with taxing authorities or the statute of limitations expiring.

FirstEnergy recognizes interest expense or income and penalties related to uncertain tax positions in income taxes by applying the applicable statutory interest rate to the difference between the tax position recognized and the amount previously taken, or expected to be taken, on the tax return.

FirstEnergy includes net interest and penalties in the provision for income taxes.

FirstEnergy's recognition of net interest associated with unrecognized tax benefits in 2022, 2021 and 2020, was not material.

For the years ended December 31, 2022 and 2021, the cumulative net interest payable recorded by FirstEnergy was not material.

IRS review of FirstEnergy’s federal income tax returns is complete through the 2020 tax year with no pending adjustments.

FirstEnergy’s tax returns for some state jurisdictions are open from tax years 2009 to 2020.

FirstEnergy includes interest expense or income and penalties in the provision for income taxes.

Due to uncertain tax positions that were effectively settled with tax authorities during 2023, approximately $ 9 million in net interest was reversed.

There was no material interest expense or income, or penalties, related to uncertain tax positions in 2022 and 2021.

General Taxes

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Most leases include one or more options to renew, with renewal terms that can extend the lease term from 1 to 40 years, and certain leases include options to terminate.

In December 2023, FirstEnergy purchased the General Office building in Akron, Ohio with the intention to sell in the future.

It is currently expected that the exit of the General Office and sale will occur in 2025.

The exercise of lease renewal options is at FirstEnergy’s sole discretion.

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FirstEnergy does not believe it is probable that it will be required to pay anything pertaining to the residual value guarantee, and the lease liabilities and right-of-use assets are measured accordingly.

Finance leases for assets used in regulated operations are recognized in FirstEnergy’s Consolidated Statements of Income such that amortization of the right-of-use asset and interest on lease liabilities equals the expense allowed for ratemaking purposes.

Finance leases for regulated and non-regulated operations are accounted for as if the assets were owned and financed, with associated expense recognized in Interest expense and Provision for depreciation on FirstEnergy’s Consolidated Statements of Income, while all operating lease expenses are recognized in Other operating expense.

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These leases are expected to commence within the next 18 months with lease terms of 5 to 10 years.

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

Total assets on the FirstEnergy consolidated balance sheets include approximately $ 11,024 million and $ 10,104 million of consolidated VIE assets, as of December 31, 2023 and 2022, respectively, that can only be used to settle the liabilities of the applicable VIE.

Total liabilities include approximately $ 7,835 million and $ 7,573 million as of December 31, 2023 and 2022, respectively, of consolidated VIE liabilities for which the VIE's creditors do not have recourse to FirstEnergy.

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

Securitization Companies

• Ohio Securitization Companies - In June 2013, the 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.

The phase-in recovery bonds are payable only from, and secured by, phase in recovery property owned by the SPEs.

The bondholder has no recourse to the general credit of FirstEnergy or any of the Ohio Companies.

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.

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

As of December 31, 2023 and 2022, $ 191 million and $ 206 million of the phase-in recovery bonds were outstanding, respectively.

• MP and PE Environmental Funding Companies - The consolidated financial statements of FirstEnergy include environmental control bonds issued by two bankruptcy remote, special purpose limited liability companies that are indirect subsidiaries of MP and PE.

Proceeds from the bonds were used to construct environmental control facilities.

Principal and interest owed on the environmental control bonds is secured by, and payable solely from, the proceeds of the environmental control charges.

Creditors of FirstEnergy, other than the limited liability company SPEs, have no recourse to any assets or revenues of the special purpose limited liability companies.

As of December 31, 2023 and 2022, $ 218 million and $ 247 million of environmental control bonds were outstanding, respectively.

Restricted cash included on the FE Consolidated Balance Sheets of $ 40 million and $ 41 million as of December 31, 2023 and 2022 respectively, relates to cash collected from MP, PE and the Ohio Companies' customers that is specifically used to service debt of their respective funding companies.

FET is a holding company that owns equity interests in ATSI, MAIT, TrAIL and PATH.

As of December 31, 2023, FE has ownership in FET of 80.1 % with Brookfield having 19.9 %.

As further discussed above, on February 2, 2023, FE entered into an agreement with Brookfield to sell an incremental 30 % equity interest in FET, which will bring FE’s equity ownership in FET to 50.1 % and Brookfield to 49.9 %.

The FET Minority Equity Interest Sale is expected to close by the end of first quarter of 2024.

FirstEnergy has concluded that FET is a VIE and that FE is the primarily beneficiary because FE has exposure to the economics of FET and the power to direct significant activities of FET through the FESC services agreement, which represents a separate variable interest.

Although Brookfield will be granted incremental consent rights upon closing of the incremental 30 % sale, Brookfield will not have unilateral control over any activities that most significantly impact FET’s economic performance.

However, FE will continue to retain power over the activities that most significantly impact FET’s economic performance through its incremental decision making rights under the existing FESC services agreement, through which executive management and workforce services are provided to FET.

As a result, FE is the primary beneficiary of FET and FET will continue to be consolidated in FirstEnergy’s financial statements.

The following shows the carrying amounts and classification of the FET assets and liabilities included in the consolidated financial statements as of December 31, 2023 and 2022.

Amounts exclude intercompany balances which were eliminated in consolidation.

The assets of FET can only be used to settle its obligations, and creditors of FET do not have recourse to the general credit of FirstEnergy.

Assets December 31,

2023 December 31,

Cash and cash equivalents $ 76 $ 77

Receivables 88 79

Materials and supplies, at average cost 1 1

Prepaid taxes and other 23 23

Total current assets 188 180

Property, plant and equipment, net 10,227 9,365

Goodwill 224 224

Investments 19 20

Regulatory assets 16 1

Other 310 273

Total noncurrent assets 10,796 9,883

TOTAL ASSETS $ 10,984 $ 10,063

Liabilities December 31,

2023 December 31,

Accounts payable 2 —

Accrued interest 63 58

Accrued taxes 262 278

Total current liabilities 341 343

Long-term debt and other long-term obligations 5,275 4,949

Accumulated deferred income taxes 1,218 1,129

Regulatory liabilities 307 443

Other 285 256

Total noncurrent liabilities 7,085 6,777

TOTAL LIABILITIES $ 7,426 $ 7,120

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.

As of December 31, 2023, FirstEnergy maintains four 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, it does not have a variable interest, or the entities do not meet the criteria to be considered a VIE.

During 2023, FirstEnergy terminated the PPA with the NUG entity in which it had previously 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.

FAIR VALUE MEASUREMENTS

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The impact of these forms of risk was not significant to the fair value measurements.

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 5, "Pension And Other Postemployment Benefits" for the pension financial assets accounted for at fair value by level within the fair value hierarchy.

The following tables set forth the recurring assets and liabilities that are accounted for at fair value by level within the fair value hierarchy:

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(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.

(2) Restricted cash of $ 42 million and $ 46 million as of December 31, 2023 and 2022, respectively, primarily relates to cash collected from MP, PE and the Ohio Companies' customers that is specifically used to service debt of their respective funding companies.

See Note 11, Capitalization for additional information.

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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 United States Department of Energy 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 Three Mile Island Unit 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, 2023 and 2022:

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Interest and Dividend Income 12 11 11

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

See above for additional information.

Other Investments

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Retained Earnings and Dividends

As of December 31, 2022, FirstEnergy had an accumulated deficit of $ 1 billion.

Dividends declared in 2022 and 2021 totaled $ 1.56 per share in each period.

Dividends of $ 0.39 per share were paid in the first, second, third and fourth quarters in 2022 and 2021, respectively.

On December 13, 2022, the FE Board declared a quarterly dividend of $ 0.39 per share to be paid from OPIC in the first quarter of 2023.

As of December 31, 2023, FirstEnergy had an accumulated deficit of $ 97 million.

Dividends declared in 2023 totaled $ 1.60 per share and dividends declared in 2022 totaled $ 1.56 per share.

Dividends of $ 0.39 per share were declared in the first, second, third and fourth quarters in 2022 and the first and second quarters in 2023.

In September 2023, the FE Board declared a $ 0.02 per share increase to the quarterly common dividend payable December 1, 2023, to $ 0.41 per share, which represents a 5 % increase compared to the quarterly payments of $ 0.39 per share paid by FE since March 2020.

The dividend declared in the fourth quarter of 2023, payable on March 1, 2024, was also $ 0.41 per share.

The amount and timing of all dividend declarations are subject to the discretion of the FE Board and its consideration of business conditions, results of operations, financial condition, risks and uncertainties of the government investigations, and other factors.

In addition to paying dividends from retained earnings, the Ohio Companies, Penn, JCP&L, ME and PN have authorization from FERC to pay cash dividends to FE from paid-in capital accounts, as long as their FERC-defined equity-to-total-capitalization ratio remains above 35 %.

When FE makes distributions to shareholders, it is required to subsequently determine and report the tax characterization of those distributions for purposes of shareholders’ income taxes.

Whether a distribution is characterized as a dividend or a return of capital (and possible capital gain) depends upon an internal tax calculation to determine earnings and profits for income tax purposes.

Earnings and profits should not be confused with earnings or net income under GAAP.

Further, after FE reports the expected tax characterization of distributions it has paid, the actual characterization could vary from its expectation with the result that holders of FE's common stock could incur different income tax liabilities than expected.

In general, distributions are characterized as dividends to the extent the amount of such distributions do not exceed FE's calculation of current or accumulated earnings and profits.

Distributions in excess of current and accumulated earnings and profits may be treated as a non-taxable return of capital.

Generally, a non-taxable return of capital will reduce an investor’s basis in FirstEnergy's stock for federal tax purposes, which will impact the calculation of gain or loss when the stock is sold.

Provided the FET Minority Equity Interest Sale closes as anticipated, FE expects to realize an over $ 7 billion tax gain in 2024.

This tax gain is estimated to create sufficient earnings and profits to cause distributions made during 2024 to be characterized as ordinary dividends for federal income tax purposes.

Upon such characterization, shareholders are urged to consult their own tax advisors regarding the income tax treatment of FE's distributions to them.

In addition to paying dividends from retained earnings, the Ohio Companies and JCP&L have authorization from FERC to pay cash dividends to FE from paid-in capital accounts, as long as their FERC-defined equity-to-total-capitalization ratio remains above 35 %.

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 %.

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OE 8,000,000 $ 25

Penn 1,200,000 $ 100

1,200,000 $ 100

CEI 4,000,000 no par 3,000,000 no par

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JCP&L 15,600,000 no par

ME 10,000,000 no par

PN 11,435,000 no par

10,000,000 no par

11,435,000 no par

MP 940,000 $ 100

PE 10,000,000 $ 0.01

WP 32,000,000 no par

32,000,000 no par

(1) On January 1, 2024, FirstEnergy consolidated the Pennsylvania Companies into FE PA, making it a new, single operating entity.

FE PA has not been authorized to issue preferred stock or preference stock.

As of December 31, 2023 and 2022, there were no preferred stock or preference stock outstanding.

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As of December 31, 2023 As of December 31,

(Dollar amounts in millions) Maturity Date Interest Rate 2022 2021

Maturity Date Interest Rate 2023 2022

(In millions)

FMBs and secured notes - fixed rate 2024-2059 2.650 % - 8.250 %

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(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.

Redemptions (1)

ME Unsecured Notes March, 2023 3.50 % 2023 $ 300 ME redeemed unsecured notes that became due.

FE Unsecured Notes May, 2023 7.38 % 2031 $ 194 FE repurchased approximately $ 194 million of the principal amount of its 2031 Notes through the open market for $ 228 million including a premium of approximately $ 34 million ($ 27 million after-tax).

In addition, FE recognized approximately $ 2 million ($ 1 million after-tax) of deferred cash flow hedge losses associated with the FE debt redemptions.

WP FMBs January, 2023 5.29 % 2033 $ 50 Proceeds were used to repay short-term borrowings, to finance capital expenditures and for other general corporate purposes.

MAIT Unsecured Notes February, 2023 5.39 % 2033 $ 175 Proceeds were used to repay short-term borrowings, to finance capital expenditures and for other general corporate purposes.

ME Unsecured Notes March, 2023 5.20 % 2028 $ 425 Proceeds were used to repay short-term borrowings, including borrowings incurred to repay, at maturity, the $ 300 million aggregate principal amount of ME's 3.50 % unsecured notes due March 15, 2023, to finance capital expenditures and for other general corporate purposes.

PN Unsecured Notes March, 2023 5.15 % 2026 $ 300 Proceeds were used to repay short-term borrowings, to finance capital expenditures and for other general corporate purposes.

ATSI Unsecured Notes May, 2023 5.13 % 2033 $ 150 Proceeds were used to repay short-term borrowings, to finance capital expenditures and for other general corporate purposes.

FE Unsecured Convertible Notes May, 2023 4.00 % 2026 $ 1,500 Proceeds were used to repay short-term borrowings, to repurchase a portion of its 2031 Notes, to fund the qualified pension plan and for other general corporate purposes.

PE FMBs September, 2023 5.64 % 2028 $ 100 Proceeds were used to repay short-term borrowings, to finance capital expenditures and for other general corporate purposes.

PE FMBs September, 2023 5.73 % 2030 $ 50 Proceeds were used to repay short-term borrowings, to finance capital expenditures and for other general corporate purposes.

MP FMBs September, 2023 5.85 % 2034 $ 400 Proceeds are to be used for repaying short-term and long-term debt, including MP’s $ 400 million 4.10 % FMBs due April 15, 2024, to finance capital expenditures and for other general corporate purposes.

(1) Excludes principal payments on securitized bonds.

Convertible Notes

As discussed above, on May 4, 2023, FE issued $ 1.5 billion aggregate principal amount of 2026 Convertible Notes, with a fixed interest rate of 4.00 % per year, payable semiannually in arrears on May 1 and November 1 of each year, beginning on November 1, 2023.

The 2026 Convertible Notes are unsecured and unsubordinated obligations of FE, and will mature on May 1, 2026, unless required to be converted or repurchased in accordance with their terms.

However, FE may not elect to redeem the 2026 Convertible Notes prior to the maturity date.

The 2026 Convertible Notes are included within “Long-term debt and other long-term obligations” on the FirstEnergy Consolidated Balance Sheets.

Proceeds from the issuance were approximately $ 1.48 billion, net of issuance costs.

Prior to the close of business on the business day immediately preceding February 1, 2026, the 2026 Convertible Notes will be convertible at the option of the holders only under the following conditions:

• During any calendar quarter, if the last reported sale price of FE’s common stock for at least 20 trading days during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

• During the five consecutive business day period immediately after any 10 consecutive trading day period in which the trading price per $1,000 principal amount of the 2026 Convertible Notes for each trading day of such 10 trading day period was less than 98 % of the product of the last reported sale price of FE’s common stock and the conversion rate on each such trading day;

• Upon the occurrence of certain corporate events specified in the indenture governing the 2026 Convertible Notes.

On and after February 1, 2026, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the 2026 Convertible Notes may convert all or any portion of their 2026 Convertible Notes at their option at any time at the conversion rate then in effect, irrespective of these conditions.

FE will settle conversions of the 2026 Convertible Notes, if any, by paying cash up to the aggregate principal amount of the 2026 Convertible Notes being converted and by paying cash or delivering shares of FE’s common stock (or a combination of each), at its election, of its conversion obligation in excess of the aggregate principal amount of the 2026 Convertible Notes being converted.

The conversion rate for the 2026 Convertible Notes will initially be 21.3620 shares of FE’s common stock per $1,000 principal amount of the 2026 Convertible Notes (equivalent to an initial conversion price of approximately $ 46.81 per share of FE’s

common stock).

The initial conversion price of the 2026 Convertible Notes represents a premium of approximately 20 % over the last reported sale price of FE’s common stock on the New York Stock Exchange on May 1, 2023.

The conversion rate and the corresponding conversion price will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest.

FE may not elect to redeem the 2026 Convertible Notes prior to the maturity date.

If FE undergoes a fundamental change (as defined in the relevant indenture), subject to certain conditions, holders of the 2026 Convertible Notes may require FE to repurchase for cash all or any portion of their 2026 Convertible Notes at a repurchase price equal to 100 % of the principal amount of the 2026 Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date (as defined in the relevant indenture).

In addition, if certain fundamental changes occur, FE may be required, in certain circumstances, to increase the conversion rate for any 2026 Convertible Notes converted in connection with such fundamental changes by a specified number of shares of its common stock.

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, 2023.

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As of December 31, 2023 and 2022, $ 191 million and $ 206 million of the phase-in recovery bonds were outstanding, respectively.

The Ohio Companies and Penn each have a first mortgage indenture under which they can issue FMBs secured by a direct first mortgage lien on substantially all of their property and franchises, other than specifically excepted property.

The Ohio Companies, Penn, MP, PE, and WP each have a first mortgage indenture under which they can issue FMBs secured by a direct first mortgage lien on substantially all of their property and franchises, other than specifically excepted property.

The outstanding debt under the FMBs of specific FE PA predecessors (WP and Penn) were assumed by FE PA.

Debt Covenant Default Provisions

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These provisions generally trigger a default in the applicable financing arrangement of an entity if it, or any of its significant subsidiaries, default under another financing arrangement in excess of a certain principal amount, typically $ 100 million.

Such defaults by any of the Utilities or Transmission Companies would cross-default certain FE financing arrangements containing these provisions, and a certain FET Financing arrangement, with respect to the Transmission Companies only, such defaults by AE Supply would not cross-default to applicable financing arrangements of FE.

Such defaults by AE Supply would not cross-default to applicable financing arrangements of FE.

Also, defaults by FE would generally not cross-default applicable financing arrangements of any of FE’s subsidiaries.

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SHORT-TERM BORROWINGS AND BANK LINES OF CREDIT

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.

FirstEnergy had $775 million and $100 million of outstanding short-term borrowings as of December 31, 2023 and 2022, respectively.

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.

and PNC Bank, National Association that replaced the FE Revolving Facility and the FET Revolving Facility, and provide for aggregate commitments of $4.5 billion.

The 2021 Credit Facilities are available until October 18, 2026, as follows:

• FE and FET, $1.0 billion revolving credit facility;

Under the 2021 Credit Facilities, an aggregate amount of $4.5 billion is available to be borrowed, repaid and reborrowed, subject to each borrower’s respective sublimit under the respective facilities.

These credit facilities provide substantial liquidity to support the Regulated businesses, and each of the operating companies within the businesses.

On October 20, 2023, FE and certain of its subsidiaries entered into the amendments to each of the 2021 Credit Facilities to, among other things;

(i) amend the FE Revolving Facility to release FET as a borrower and (ii) extend the maturity date of the 2021 Credit Facilities for an additional one-year period, from October 18, 2026 to October 18, 2027.

Also, on October 20, 2023, each of FET and KATCo entered into the 2023 Credit Facilities.

In connection with PA Consolidation, the Pennsylvania Companies' rights and obligations under their revolving credit facility were assumed by FE PA on January 1, 2024.

Under the FET Revolving Facility, $1.0 billion is available to be borrowed, repaid and reborrowed until October 20, 2028.

Under the KATCo Revolving Facility, (i) $150 million is available to be borrowed, repaid and reborrowed until October 20, 2027, (ii) borrowings will mature on the earlier of 364 days from the date of borrowing or the commitment termination date, as the same may be extended;

upon KATCo demonstrating to the administrative agent authorization to borrow amounts maturing more than 364 days from the date of borrowing, its borrowings will mature on the latest commitment termination date.

KATCo may not draw on the KATCo Credit Facility until the satisfaction of certain conditions, including the availability of first quarter financial statements, which are expected to be completed during the second quarter of 2024.

The 2021 Credit Facilities and 2023 Credit Facilities are as follows:

• FE, $1.0 billion revolving credit facility;

• FET, $1.0 billion revolving credit facility;

• Ohio Companies, $800 million revolving credit facility;

• Pennsylvania Companies, $950 million revolving credit facility;

• FE PA, $950 million revolving credit facility;

• JCP&L, $500 million revolving credit facility;

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• Transmission Companies, $850 million revolving credit facility;

These new credit facilities provide substantial liquidity to support the Regulated Distribution and Regulated Transmission businesses, and each of the operating companies within the businesses.

As of December 31, 2022, available liquidity under the 2021 Credit Facilities was $ 4.5 billion.

Borrowings under the 2021 Credit Facilities may be used for working capital and other general corporate purposes.

• KATCo, $150 million revolving credit facility.

As of December 31, 2023, available liquidity under the 2021 and 2023 Credit Facilities was approximately $ 5.0 billion.

Borrowings under the 2021 Credit Facilities and 2023 Credit Facilities may be used for working capital and other general corporate purposes.

Generally, borrowings under each of the credit facilities are available to each borrower separately and mature on the earlier of 364 days from the date of borrowing or the commitment termination date, as the same may be extended.

Each of the 2021 Credit Facilities contain financial covenants requiring each borrower, with the exception of FE, to maintain a consolidated debt-to-total-capitalization ratio (as defined under each of the 2021 Credit Facilities) of no more than 65%, and 75% for FET, measured at the end of each fiscal quarter.

Each of the 2021 Credit Facilities and 2023 Credit Facilities contain financial covenants requiring each borrower, with the exception of FE, to maintain a consolidated debt-to-total-capitalization ratio (as defined under each of the 2021 Credit Facilities and 2023 Credit Facilities) of no more than 65%, and 75% for FET, measured at the end of each fiscal quarter.

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, 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.

Subject to each borrower’s sublimit, certain amounts are available for the issuance of LOCs (subject to borrowings drawn under the 2021 Credit Facilities and 2023 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 2023 Credit Facilities and against the applicable borrower’s borrowing sublimit.

As of December 31, 2023, FirstEnergy had $4 million in outstanding LOCs.

The 2021 Credit Facilities do not contain provisions that restrict the ability to borrow or accelerate payment of outstanding advances in the event of any change in credit ratings of the borrowers.

Pricing is defined in “pricing grids,” whereby the cost of funds borrowed under the 2021 Credit Facilities are related to the credit ratings of the company borrowing the funds.

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, 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.

The 2021 Credit Facilities and 2023 Credit Facilities do not contain provisions that restrict the ability to borrow or accelerate payment of outstanding advances in the event of any change in credit ratings of the borrowers.

Pricing is defined in “pricing grids,” whereby the cost of funds borrowed under the 2021 Credit Facilities and the 2023 Credit Facilities are related to the credit ratings of the company borrowing the funds.

Additionally, borrowings under each of the 2021 Credit Facilities and 2023 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, 2023, 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 and 2023 Credit Facilities.

FirstEnergy Money Pools

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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.

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.

The high interest rate environment has caused the rate and interest expense on borrowings under the various FirstEnergy credit facilities to be significantly higher.

Average Interest Rates Regulated Companies’ Money Pool Unregulated Companies’ Money Pool

2023 2022 2023 2022

For the Years Ended December 31, 6.30 % 2.27 % 6.01 % 2.14 %

Weighted Average Interest Rates

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Each of the Utilities' retail rates, conditions of service, issuance of securities and other matters are subject to regulation in the states in which it operates - in Maryland by the MDPSC, in New Jersey by the NJBPU, in Ohio by the PUCO, in Pennsylvania by the PPUC, in West Virginia by the WVPSC and in New York by the NYPSC.

The transmission operations of PE in Virginia, ATSI in Ohio, and the Transmission Companies in Pennsylvania are subject to certain regulations of the VSCC, PUCO and PPUC, respectively.

The transmission operations of PE and TrAIL in Virginia, ATSI in Ohio, the Transmission Companies in Pennsylvania, PE and MP in West Virginia, and PE in Maryland are subject to certain regulations of the VSCC, PUCO, PPUC, WVPSC, and MDPSC, respectively.

In addition, under Ohio law, municipalities may regulate rates of a public utility, subject to appeal to the PUCO if not acceptable to the utility.

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JCP&L November 2021 48.6 % / 51.4 %

48.6 % / 51.4 %

OE January 2009 51 % / 49 %

PE (West Virginia) February 2015 51 % / 49 %

PE (Maryland) March 2019 47 % / 53 %

PE (Maryland) October 2023 47 % / 53 %

January 2017 47.4 % / 52.6 %

3 unchanged sentences

(1) Reflects filed debt/equity as final settlement/orders do not specifically include capital structure.

Additionally, on January 1, 2024, FirstEnergy consolidated the Pennsylvania Companies into FE PA, making it a new, single operating entity, and will operate under the rate districts of the former Pennsylvania Companies.

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

(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.

PE operates under MDPSC approved base rates that were effective as of October 19, 2023.

PE also provides SOS pursuant to a combination of settlement agreements, MDPSC orders and regulations, and statutory provisions.

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PE recovers its costs plus a return for providing SOS.

The EmPOWER Maryland program requires each electric utility to file a plan to reduce electric consumption and demand 0.2% per year, up to the ultimate goal of 2% annual savings, for the duration of the 2021-2023 EmPOWER Maryland program cycles to the extent the MDPSC determines that cost-effective programs and services are available.

PE's approved 2021-2023 EmPOWER Maryland plan continues and expands upon prior years' programs for a projected total investment of approximately $148 million over the three-year period.

On March 22, 2023, PE filed a base rate case with the MDPSC, utilizing a test year based on twelve months of actual 2022 data.

The base rate case request included an annual increase in base distribution rates of $50.4 million, plus a request to establish a regulatory asset (or liability) to recover (or refund) in a subsequent base rate case the net differences between the amount of pension and OPEB expense requested in the proceeding (based on average expense from 2018 to 2022) and the actual annual amount each year using the delayed recognition method.

The rate case additionally requested approval to continue an EDIS to fund three service reliability and resiliency programs, two new proposed programs to assist low-income customers and cost recovery of certain expenses associated with PE’s pilot electric vehicle charger program and its COVID-19 pandemic response.

On October 18, 2023, the MDPSC approved an annual increase in base distribution rates of $28 million, effective October 19, 2023.

The order denied PE’s request to establish a pension/OPEB regulatory asset (or liability), allowed recovery of most COVID-19 deferred costs;

and rejected the continuation of PE’s EDIS, as PE's reliability has improved such that the surcharge recovery mechanism is no longer merited at this time.

The MDPSC also ordered an independent audit of certain allocations from FESC to PE and denied recovery of approximately $12 million in rate base associated with certain corporate support costs recorded to capital accounts resulting from the FERC Audit.

On January 3, 2024, the MDPSC issued an order granting PE’s request for reconsideration and increased PE’s allowed distribution rates by another $0.7 million.

The EmPOWER Maryland program requires each electric utility to file a plan to reduce electric consumption and demand 0.2% per year, up to the ultimate goal of 2% annual savings.

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.

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.

On August 1, 2023, PE filed its proposed plan for the 2024-2026 cycle as required by the MDPSC.

Consistent with a December 29, 2022, order by the MDPSC phasing out the ability of Maryland utilities to earn a return on EmPOWER investments, PE will be required to expense 33% of its EmPOWER program costs in 2024, 67% in 2025 and 100% in 2026.

Notwithstanding the order to phase out PE’s ability to earn a return on its EmPOWER investments, all previously unamortized costs for prior cycles will continue to earn a return and be collected by the end of 2029, consistent with the plan PE submitted on January 11, 2023.

In the 2024-2026 order issued on December 29, 2023, the period to pay down the amortized balances was extended through the end of 2031.

Additionally at the direction of the MDPSC, PE together with other Maryland utilities are required to address GHG reductions in addition to energy efficiency.

In compliance with the MDPSC directive, PE submitted three scenarios with projected costs over a three-year cycle of $310 million, $354 million, and $510 million, respectively.

The MDPSC conducted hearings on the proposed plans for all Maryland utilities on November 6-8, 2023.

On December 29, 2023, the MDPSC issued an order approving the $310 million scenario for most programs, with some modifications.

On April 17, 2023, PE submitted a proposal to the MDPSC seeking approval to end its PPA with the Warrior Run generating station.

The PPA for Warrior Run was a requirement of the Public Utility Regulatory Policies Act of 1978.

PE’s Maryland customers currently pay a surcharge on their electric bill in connection with the Warrior Run PPA, which fluctuates from year to year based on the difference between what PE pays for the output of the plant and what PE is able to recover by reselling that output into PJM.

PE negotiated a termination of the PPA, which the MDPSC approved on June 21, 2023, and became effective June 28, 2023, requiring it to pay Warrior Run a fixed amount of $51 million annually through 2029, for a total of $357 million.

During the second quarter of 2023, a liability was established for the $357 million termination fee, of which $55 million was included in “Other current liabilities” and $302 million in “Other non-current liabilities”, and as the cost of the termination fee will be recovered through the current surcharge, an offsetting regulatory asset was established on FirstEnergy’s Consolidated Balance Sheets, and results in no impact to FirstEnergy’s or PE’s current or future earnings and is expected to result in savings for PE’s Maryland customers.

On July 26, 2023, the MDPSC approved the change in surcharge, effective August 1, 2023, after previously approving the termination of the agreement.

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.

1 unchanged sentence

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:

On March 16, 2023, JCP&L filed a base rate case with the NJBPU, utilizing a test year based on six months of actual data for the second half of calendar year 2022, and six months of forecasted data for the first half of calendar year 2023.

The rate case requested an annual net increase in base distribution revenues of approximately $185 million, plus a request to establish a regulatory asset (or liability) to recover (or refund) in a subsequent base rate case the net differences between the amount of pension and OPEB expense requested in the proceeding (based on 2023 expense) and the actual annual amount each year using the delayed recognition method.

JCP&L updated its base rate case in filings made on June 2, 2023 and August 7, 2023 to provide actual test-year data for the twelve months ended June 30, 2023, and update its proposed annual net increase in base rate distribution revenues to approximately $192 million.

In addition to the above, JCP&L’s request includes, among other things, approval of two new proposed programs to assist low-income customers, cost recovery of certain investments and expenses associated with its electric vehicle and AMI programs, an update of its depreciation rates, modifications to its storm cost recovery, and tariff modifications to update standard construction costs.

A procedural schedule was adopted with evidentiary hearings to be held the week of January 8, 2024.

On October 17, 2023, JCP&L requested a suspension of the procedural schedule to enter into

formal settlement discussions, which all parties agreed, and the administrative law judge granted the same day.

On February 2, 2024, JCP&L, joined by various parties, filed a stipulated settlement with the NJBPU resolving JCP&L’s request for a distribution base rate increase.

The settlement provides for an $85 million annual base distribution revenues increase for JCP&L, which, if approved by the NJBPU, is expected to take effect February 15, 2024, and be effective for customers on June 1, 2024.

Until those new rates become effective for customers, JCP&L would begin to amortize an existing regulatory liability totaling approximately $18 million to offset the base rate increase that otherwise would have occurred in this period.

Under the base rate case settlement agreement, JCP&L also agreed to a two-phase reliability improvement plan to enhance the reliability related to 18 high-priority circuits, the first phase of which will begin no later than March 1, 2024 and represents an approximate investment of $95 million.

JCP&L expects to amend its pending EnergizeNJ petition upon receipt of NJBPU approval of the base rate case settlement, to include the second phase of its reliability improvement plan that is expected to address any remaining high-priority circuits not addressed in the first phase.

The settlement did not include the request to establish a regulatory asset (or liability) to recover (or refund) net differences between the amount of pension and OPEB expense requested in the proceeding and the actual annual amount each year using the delayed recognition method, however, JCP&L has the ability to pursue in a future separate proceeding.

JCP&L has implemented 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 (July 2021-June 2024) including total program costs of $203 million, of which $160 million of investment is recovered over a ten-year amortization period with a return as well as $43 million in operations and maintenance expenses and financing costs recovered on an annual basis.

On December 5, 2023, JCP&L filed a petition with the NJBPU for a six-month extension of EE&C Plan I, which was originally scheduled to end on June 30, 2024, but would end on December 31, 2024, with the extension.

The proposed budget for the extension period would add approximately $69 million to the original program cost.

Under the proposal, JCP&L would recover the costs of the extension period and the revenue impact of sales losses resulting therefrom through two separate tariff riders.

On December 1, 2023, JCP&L filed a related petition with the NJBPU requesting approval of its EE&C Plan II, which covers the January 1, 2025 through June 30, 2027 period and has a proposed budget of approximately $964 million.

EE&C Plan II consists of a portfolio of ten energy efficiency programs, one peak demand reduction program and one building decarbonization program.

Under the proposal, JCP&L would recover its EE&C Plan II revenue requirements and lost revenues from reduced electricity sales associated with EE&C Plan II.

On March 6, 2023, the NJBPU issued final rules modifying its regulations to reflect its CTA policy in base rate cases to:

(i) calculate savings using a five-year look back from the beginning of the test year;

(ii) allocate savings with 75% retained by the company and 25% allocated to customers;

and (iii) exclude transmission assets of electric distribution companies in the savings calculation.

On January 17, 2019, the NJBPU approved the proposed CTA rules with no changes.

On May 17, 2019, the NJ Rate Counsel filed an appeal with the Appellate Division of the Superior Court of New Jersey and on June 7, 2021, the Superior Court issued an order reversing the NJBPU’s CTA rules and remanded the case back to the NJBPU.

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 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.

(ii) allocate 100% of CTA savings to customers;

and (iii) exclude transmission assets of EDCs in the savings calculation.

The final rules of practice were applied by JCP&L in its most recent base rate case filing described above.

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.

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.

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

On April 12, 2023, the NJBPU accepted the final management audit report for filing purposes and ordered that interested stakeholders file comments on the report by May 22, 2023, which deadline was extended until July 31, 2023.

JCP&L filed its comments on July 31, 2023.

The parties have filed responses.

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.

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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.

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.

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.

No moratorium on residential disconnections remains in effect for investor-owned electric utilities such as JCP&L.

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.

On July 17, 2023, JCP&L submitted a stand-alone filing to recover approximately $31 million, through October 1, 2023, in incremental costs and interest incurred during the COVID-19 pandemic.

On September 17, 2021, 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.

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

The proposal, as accepted, included approximately $723 million in investments for JCP&L 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.

On April 17, 2023, JCP&L applied for the FERC “abandonment” transmission rates incentive, which would provide for recovery of 100% of the cancelled prudent project costs that are incurred after the incentive is approved, and 50% of the costs incurred prior to that date, in the event that some or all of the project is cancelled for reasons beyond

JCP&L’s control.

FERC staff subsequently requested additional information on JCP&L’s application, which JCP&L provided.

On August 21, 2023, FERC approved JCP&L’s application, effective August 22, 2023.

On October 31, 2023, offshore wind developer, Orsted, announced plans to cease development of two offshore wind projects in New Jersey—Ocean Wind 1 and 2—having a combined planned capacity of 2,248 MW.

At this time, Orsted’s announcement does not affect JCP&L’s awarded projects and JCP&L is moving forward with preconstruction activities for the planned transmission infrastructure.

Construction is expected to begin in 2025.

Consistent with the commitments made in its proposal to the NJBPU, JCP&L formally submitted in November 2023 the first part of its application to the United States Department of Energy to finance a portion of the project using low-interest rate loans available under the United States Department of Energy’s Energy Infrastructure Reinvestment Program of the IRA of 2022.

JCP&L anticipates submitting the second part of its two-part application in the first quarter of 2024.

On November 9, 2023, JCP&L filed a petition for approval of its second EnergizeNJ with the NJBPU that would, among other things, support grid modernization, system resiliency and substation modernization in technologies designed to provide enhanced customer benefits.

JCP&L proposes EnergizeNJ will be implemented over a five-year budget period with estimated costs of approximately $935 million over the deployment period, of which, $906 million is capital investments and $29 million is operating and maintenance expenses.

Under the proposal, the costs of EnergizeNJ would be recovered through JCP&L's base rates via annual and semi-annual base rate adjustment filings.

Public hearings have been requested but are not yet scheduled.

JCP&L has requested that the NJBPU issue a final decision and order no later than May 22, 2024, based on a June 1, 2024, commencement date for EnergizeNJ.

JCP&L anticipates filing amendments to the EnergizeNJ program after receipt of approval from the NJBPU of the base rate case stipulation that was filed on February 2, 2024.

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;

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

On April 5, 2023, the Ohio Companies filed an application with the PUCO for approval of ESP V, for an eight-year term beginning June 1, 2024, and continuing through May 31, 2032.

ESP V proposes to continue providing power to non-shopping customers at market-based prices set through an auction process, with process enhancements designed to reduce costs to customers.

ESP V also proposes to continue riders supporting investment in the Ohio Companies’ distribution system, including Rider DCR with annual revenue cap increases of $15 to $21 million per year, based on reliability performance, and Rider AMI for recovery of approved grid modernization investments.

ESP V proposes new riders to support continued maintenance of the distribution system, including vegetation management and storm restoration operating expense.

In addition, ESP V proposes four-year energy efficiency and peak demand reduction programs for residential and commercial customers, with cost recovery spread over eight years.

ESP V further includes a commitment to spend $52 million in total over the eight-year term, without recovery from customers, on initiatives to assist low-income customers, education and incentives to help ensure customers have good experiences with electric vehicles.

Hearings commenced on November 7, 2023 and concluded on December 6, 2023.

On December 6, 2023, certain intervenors filed a motion requesting a limited stay of the Ohio Companies’ proposal to continue Rider DCR.

The Ohio Companies contested the motion, which is pending.

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.

This matter remains pending before the PUCO.

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 thousand 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.

Hearings are scheduled to commence on April 16, 2024.

On January 22, 2024, OCC filed a motion requesting a stay of phase two.

The Ohio Companies contested the motion, which is pending.

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.

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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.

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.

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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.

On February 22, 2023, the U.S.

Attorney for the Southern District of Ohio again 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 March 8, 2023.

On August 10, 2023, 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 additional months, which was approved by the PUCO on August 23, 2023.

On September 22, 2023, OCC filed an application for rehearing challenging the PUCO’s August 23, 2023, order, which the PUCO denied on October 18, 2023.

On November 17, 2023, OCC filed an application for rehearing challenging the October 18, 2023 entry to the extent the PUCO decided not to stay ESP V as well as Grid Mod I and Grid Mod II along with the investigations.

On November 27, 2023, the Ohio Companies filed a memorandum contra OCC’s application for rehearing.

The four cases remain 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.

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The Ohio Companies contested the motions, which are pending before the PUCO.

On May 15, 2023, the Ohio Companies filed their application for determination of the existence of SEET under ESP IV for calendar year 2022, which demonstrated that each of the individual Ohio Companies did not have significantly excessive earnings.

This matter remains pending before the PUCO.

See Note 14, "Commitments, Guarantees and Contingencies" below for additional details on the government investigations and subsequent litigation surrounding the investigation of HB 6.

The Pennsylvania Companies operate under rates approved by the PPUC, effective as of January 27, 2017.

On November 18, 2021, the PPUC issued orders to each of the Pennsylvania Companies directing they operate under DSPs for the June 1, 2019 through May 31, 2023 delivery period, which DSPs provide for the competitive procurement of generation supply for customers who do not receive service from an alternative EGS.

Under the 2019-2023 DSPs, supply will be provided by wholesale suppliers through a mix of 3, 12 and 24-month energy contracts, as well as two RFPs for 2-year SREC contracts for ME, PN and Penn.

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.

In March 2018, the PPUC approved adjusted customer rates of the Pennsylvania Companies to reflect the net impact of the Tax Act.

As a result, the Pennsylvania Companies established riders that, beginning July 1, 2018, refunded to customers tax savings attributable to the Tax Act as compared to the amounts established in their most recent base rate proceedings on a current and going forward basis.

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.

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, 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.

The Pennsylvania Companies operated under rates approved by the PPUC, effective as of January 27, 2017.

On January 1, 2024, each of the Pennsylvania Companies merged with and into FE PA.

As a result of the PA Consolidation, FE PA will have five rate districts in Pennsylvania – four that correspond to the territories previously serviced by ME, PN, Penn, and WP and one rate district that corresponds to WP’s service provided to The Pennsylvania State University.

The rate districts created by the PA Consolidation will continue the current rate structure of ME, PN, Penn, and WP until the earlier of 2033 or in the fourth base rate case filed after January 1, 2025.

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 fourth phase of FE PA’s energy efficiency and peak demand reduction program, which runs for the five -year period beginning June 1, 2021 through May 31, 2026, was approved by the PPUC on June 18, 2020, providing through cost recovery of approximately $390 million to be recovered through Energy Efficiency and Conservation Phase IV Riders for each FE PA rate district.

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.

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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 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.

The PPUC issued the order as directed.

On March 6, 2023, FirstEnergy filed applications with the PPUC, NYPSC and FERC seeking approval to consolidate the Pennsylvania Companies into a new, single operating entity.

The PA Consolidation includes, among other steps:

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

On August 30, 2023, the parties filed a settlement agreement recommending that the PPUC approve the PA Consolidation subject to the terms of the settlement, which include among other things, $650 thousand over five years in bill assistance for income-eligible customers and the Pennsylvania Companies’ commitment to (i) not seek full distribution rate unification until the earlier of 10 years or in the fourth base rate case filed after January 1, 2025 and (ii) track and share with customers certain operational and administrative efficiency costs associated with the PA Consolidation.

The PPUC, NYPSC and FERC approved FirstEnergy’s applications on December 7, 2023, November 16, 2023, and August 14, 2023, respectively.

The transaction closed on January 1, 2024 making FE PA FirstEnergy's only regulated utility in Pennsylvania.

On May 5, 2023, FirstEnergy and Brookfield submitted applications to FERC and to the PPUC to facilitate the FET Minority Equity Interest Sale.

On May 12, 2023, the parties also filed an application with the VSCC, which was approved on June 20, 2023.

On August 14, 2023, FERC issued an order approving the FET Minority Equity Interest Sale.

On November 24, 2023,

CFIUS notified FET, Brookfield and the Abu Dhabi Investment Authority that it has determined that there were no unresolved national security issues and its review of the transaction was concluded.

On November 29, 2023, the parties filed a settlement agreement recommending that the PPUC approve the transaction subject to the terms of the settlement, which include among other things, a number of ring-fencing provisions and a commitment to improve transmission reliability over the next five years.

The settlement is currently pending PPUC approval.

WEST VIRGINIA

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MP’s and PE’s ENEC rate is updated annually.

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.

The increase was driven by an under recovery during the review period (July 1, 2021, to June 30, 2022) of approximately $145 million due to higher coal, reagent, and emission allowance expenses.

This filing additionally addresses, among other things, the WVPSC’s May 2022 request for a prudence review of current rates.

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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.

The order also instructed MP to evaluate the feasibility of purchasing the 1,300 MW Pleasants Power Station and file a summary of the evaluation, which MP and PE filed on March 31, 2023.

MP and PE provided the WVPSC with regular status reports throughout the second quarter of 2023 regarding the process of their evaluation.

Subsequently, the owner of Pleasants entered into an agreement to sell Pleasants to an indirect wholly owned subsidiary of Omnis Global Technologies, LLC, which transaction closed on August 1, 2023.

As a result, MP and PE ceased consideration of the possible purchase of Pleasants and on August 30, 2023, the WVPSC closed the proceeding.

On August 31, 2023, MP and PE filed with the WVPSC their annual ENEC case requesting an increase in ENEC rates of $167.5 million beginning January 1, 2024, which represents a 9.9% increase in overall rates.

This increase, which was driven primarily by higher fuel expenses, includes the approximate $92 million carried over from the 2022 ENEC proceeding and a portion of the approximately $267 million under recovery balance at the end of the review period (July 1, 2022 to June 30, 2023).

The remaining $75.6 million of the under recovery balance not recovered in 2024 will be deferred for collection during 2025, with an annual carrying charge of 4%.

A hearing was held on November 30, 2023, at which time a joint stipulation for settlement that was agreed to by all but one party was presented to the WVPSC.

The settlement provides for a net $55.4 million increase in ENEC rates beginning March 27, 2024 with the net deferred ENEC balance of approximately $255 million to be recovered through 2026.

There will be no 2024 ENEC case unless MP and PE over or under recover more than $50 million than the 2024 ENEC balance and a party elects to invoke a case filing.

An order is expected by March 2024.

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.

The plan includes a tariff to offer solar power to West Virginia customers and cost recovery for MP and PE through a surcharge for any solar investment not fully subscribed by their customers.

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.

Martin and Harrison Power Stations to comply with the EPA’s ELG and operate these plants beyond 2028.

The request includes a surcharge to recover the expected $142 million capital investment and $3 million in annual operation and maintenance expense.

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 April 24, 2023, MP and PE sought final tariff approval from the WVPSC for three of the five solar sites, representing 30 MWs of generation, and requested approval of a surcharge to recover any costs above the final approved tariff.

The first solar generation site went into service in January 2024 and construction of the remaining four sites are expected to be completed no later than the end of 2025 at a total investment cost of approximately $110 million.

On August 23, 2023, the WVPSC approved the customer surcharge and granted approval to construct three of the five solar sites.

The surcharge went into effect January 1, 2024.

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.

Specifically, MP and PE are seeking to increase depreciation expense by approximately $76 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.

On August 22, 2023, a unanimous settlement of the case was filed recommending a $33 million per year increase in depreciation expense, effective April 1, 2024.

An order from the WVPSC is expected in the first quarter 2024.

On March 2, 2023, the WVPSC ordered an audit of MP and PE focused on:

(i) the lobbying and promotional/image building expenses, including those related to HB 6, incurred by MP and PE from 2018 to 2022 (ii) intra-corporate charges, (iii) the accounting for charges included in the ENEC cost recovery accounts of MP and PE during the same time period, and (iv) review and report on the findings, including those specific to MP and PE, set forth in the FERC Audit described below as well as a review and report of the responses by MP and PE thereto.

The audit began in September 2023 and concluded with a filing of the report on December 28, 2023.

The audit found no evidence that HB 6 related costs were included in the 2022 test year, and no errors or omission were identified that would materially affect lobbying and image building costs or expenses charged to the

ENEC for the period 2018 to 2022.

Additionally, there were several recommended adjustments and recommendations, however, none are expected to have a material effect on FirstEnergy, MP or PE.

The report was evaluated as part of the ongoing base rate case.

On May 31, 2023, MP and PE filed a base rate case with the WVPSC requesting a total revenue increase of approximately $207 million utilizing a test year of 2022 with adjustments plus a request to establish a regulatory asset (or liability) to recover (or refund) in a subsequent base rate case the net differences between the amount of pension and OPEB expense requested in the proceeding (based on average expense from 2018 to 2022) and the actual annual amount each year using the delayed recognition method.

Among other things, the increase includes the approximate $76 million requested in a depreciation case filed on January 13, 2023 and described more fully above, and amounts to support a new low-income customer advocacy program, storm restoration work and service reliability investments.

New rates are expected to be effective by the end of March 2024.

On January 23, 2024, MP, PE and various parties filed with a joint settlement agreement with the WVPSC, which recommends a base rate increase of $105 million, inclusive of the $33 million increase in depreciation expense.

Additionally, the settlement includes a new low-income customer advocacy program, a pilot program for service reliability investments and recovery of costs related to storm restoration, retired generation assets and COVID-19.

The settlement did not include the request to establish a regulatory asset (or liability) for recover (or refund) associated with pension and OPEB expense, however, it did not preclude MP and PE from pursuing that in a future separate proceeding.

An order is expected by the end of the first quarter of 2024 with new rates to be effective March 27, 2024.

On August 31, 2023, MP and PE filed its biennial review of their vegetation management program and surcharge.

MP and PE have proposed an approximate $17 million increase in the surcharge rates, due to an under recovery in the prior two-year period and increased forecast costs.

The case was unanimously settled by the parties on November 29, 2023, approved by the WVPSC on January 8, 2024, and the $17 million increase proposed by MP and PE went into effect on January 1, 2024.

See Note 14, “Commitments, Guarantees and Contingencies - Environmental Matters - Clean Water Act" below, for additional details on the EPA's ELG.

FERC REGULATORY MATTERS

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.

Under the Federal Power Act, 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.

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Transmission facilities of JCP&L, MP, PE, WP and the Transmission Companies are subject to functional control by PJM and transmission service using their transmission facilities is provided by PJM under the PJM Tariff.

On January 1, 2024, WP transferred certain of its Pennsylvania-based transmission assets to KATCo.

The following table summarizes the key terms of rate orders in effect for transmission customer billings for FirstEnergy's transmission owner entities as of December 31, 2023:

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January 2020 Actual (13-month average) 10.20 %

MP January 1, 2021 (1)

Actual (13-month average) (1)

PE January 1, 2021 (1)

Actual (13-month average) (1)

WP January 1, 2021 (1)

Actual (13-month average) (1)

MP January 2021 Lower of Actual (13-month average) or 56 %

PE January 2021 Lower of Actual (13-month average) or 56 %

January 2021 Lower of Actual (13-month average) or 56 %

MAIT July 2017 Lower of Actual (13-month average) or 60 %

TrAIL July 1, 2008 Actual (year-end) 12.7 %(TrAIL the Line & Black Oak SVC)

TrAIL July 2008 Actual (year-end) 12.7 % (2) / 11.7 % (3)

(1) On January 1, 2024, WP transferred certain of its Pennsylvania-based transmission assets to KATCo

(2) TrAIL the Line and Black Oak Static Var Compensator

(3) All other projects

(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.

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.

The Utilities and AE Supply each have been authorized by FERC to sell wholesale power in interstate commerce at market-based rates and have a market-based rate tariff on file with FERC, although in the case of the Utilities major wholesale purchases remain subject to review and regulation by the relevant state commissions.

The Utilities and AE Supply each have the necessary authorization from FERC to sell their wholesale power, if any, in interstate commerce at market-based rates, although in the case of the Utilities major wholesale purchases remain subject to review and regulation by the relevant state commissions.

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.

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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.

FirstEnergy is currently recovering approximately $105 million of costs reclassified to operating expenses in its transmission formula rate revenue requirements, of which $13 million of costs have been recovered as of December 31, 2023.

On December 8, 2023, FERC audit staff issued a letter advising that two unresolved audit matters, primarily related to FirstEnergy’s plan to recover the reclassified operating expenses in formula transmission rates, were being referred to other offices within FERC for further review.

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

On May 1, 2020, ATSI filed amendments to its formula rate to recover regulatory assets for certain costs that ATSI incurred as a result of its 2011 move from MISO to PJM, certain costs allocated to ATSI by FERC for transmission projects that were constructed by other MISO transmission owners, and certain costs for transmission-related vegetation management programs.

A portion of these costs would have been charged to the Ohio Companies.

Additionally, ATSI proposed certain income tax-related adjustments and certain tariff changes addressing the revenue credit components of the formula rate template.

On June 30, 2020, FERC issued an initial order accepting the tariff amendments subject to refund and setting the matter for hearing and settlement proceedings.

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 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 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

On March 15, 2018, FERC initiated proceedings on the question of how to address possible changes to ADIT and bonus depreciation as a result of the Tax Act.

Such possible changes could impact FERC-jurisdictional rates, including transmission rates.

On November 21, 2019, FERC issued a final rule (Order No.

864 requires utilities with transmission formula rates to update their formula rate templates to include mechanisms to:

(i) deduct any excess ADIT from or add any deficient ADIT to their rate base;

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.

Per FERC directives, ATSI submitted its compliance filing on May 1, 2020.

MAIT submitted its compliance filing on June 1, 2020.

On November 18, 2021, FERC issued an order that:

(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 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;

(ii) directed MAIT to make a further compliance filing by February 1, 2022;

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 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.

On May 4, 2021, FERC staff requested additional information about PATH’s proposed rate base adjustment mechanism, and PATH submitted the requested information on June 3, 2021.

On July 12, 2021, FERC staff requested additional information about TrAIL’s proposed rate base adjustment mechanism.

TrAIL filed its response on August 6, 2021.

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 – 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.

Furthermore, FirstEnergy’s distribution utilities are in the process of addressing the outcomes of the FERC Audit with the applicable state commissions and proceedings, which includes seeking continued rate base treatment of approximately $310 million of certain corporate support costs allocated to distribution capital assets.

If FirstEnergy is unable to recover these transmission or distribution costs, it could result in future charges and/or adjustments and have an adverse impact on FirstEnergy’s financial condition.

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.

On February 24, 2022, the OCC filed a complaint with FERC against ATSI, AEP’s Ohio affiliates and American Electric Power Service Corporation, 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.

AEP and OCC appealed FERC’s orders to the Sixth Circuit.

FirstEnergy is actively participating in the appeal and the case remains pending.

FirstEnergy is unable to predict the outcome of this proceeding, but it is not expected to have a material impact.

Transmission ROE Incentive

Transmission ROE Methodology

On March 20, 2020, FERC initiated a rulemaking proceeding on the transmission rate incentives provisions of Section 219 of the 2005 Energy Policy Act.

FirstEnergy submitted comments through EEI and as part of a consortium of PJM Transmission Owners.

In a supplemental rulemaking proceeding that was initiated on April 15, 2021, FERC requested comments on, among other things, whether to require utilities that have been members of an RTO for three years or more and that have been collecting an “RTO membership” ROE incentive adder to file tariff updates that would terminate collection of the incentive adder.

FirstEnergy submitted comments through the Edison Electric Institute and as part of a consortium of PJM Transmission Owners.

that have been collecting an “RTO membership” ROE incentive adder to file tariff updates that would terminate collection of the incentive adder.

Initial comments on the proposed rule were filed on June 25, 2021, and reply comments were filed on July 26, 2021.

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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.

Also on January 18, 2023, MP, PE and WP filed a motion for interim rates to implement certain aspects of the settled rate.

The interim rates were approved by the FERC Chief Administrative Law Judge and took effect on January 1, 2023.

On May 4, 2023, FERC issued an order approving the settlement agreement without condition or modification.

Pursuant to the order, a compliance filing was filed on May 19, 2023, that implemented the terms of the settlement.

On June 26, 2023, FERC issued a letter order approving the compliance filing.

Transmission Planning Supplemental Projects:

Ohio Consumers Counsel v ATSI, et al.

On September 27, 2023, the OCC filed a complaint against ATSI, PJM and other transmission utilities in Ohio alleging that the PJM Tariff and operating agreement are unjust, unreasonable, and unduly discriminatory because they include no provisions to ensure PJM’s review and approval for the planning, need, prudence and cost-effectiveness of the PJM Tariff Attachment M-3 “Supplemental Projects.” Supplemental Projects are projects that are planned and constructed to address local needs on the transmission system.

The OCC demands that FERC:

(i) require PJM to review supplemental projects for need, prudence and cost-effectiveness;

(ii) appoint an independent transmission monitor to assist PJM in such review;

and (iii) require that Supplemental Projects go into rate base only through a “stated rate” procedure whereby prior FERC approval would be needed for projects with costs that exceed an established threshold.

ATSI and the other transmission utilities in Ohio and PJM filed comments and the complaint is pending before FERC.

COMMITMENTS, GUARANTEES AND CONTINGENCIES

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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, 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).

As of December 31, 2023, outstanding guarantees and other assurances aggregated approximately $ 815 million, consisting of parental guarantees on behalf of its consolidated subsidiaries ($ 515 million) and other assurances ($ 300 million).

COLLATERAL AND CONTINGENT-RELATED FEATURES

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As of December 31, 2023, $ 89 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.

FE or its subsidiaries are holding $ 27 million of net cash collateral as of December 31, 2023, from certain generation suppliers, 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.

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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.

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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 prior CSAPR Update and the New York Section 126 petition.

On March 15, 2021, the EPA issued a revised CSAPR Update that addressed, 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.

On April 6, 2022, the EPA published proposed rules seeking to impose further significant reductions in EGU NOx emissions in 25 upwind states, including West Virginia, with the stated purpose of allowing downwind states to attain or maintain compliance with the 2015 ozone National Ambient Air Quality Standards.

On February 13, 2023, the EPA disapproved 21 SIPs, which was a prerequisite for the EPA to issue a final Good Neighbor Plan or FIP.

On June 5, 2023, the EPA issued the final Good Neighbor Plan with an effective date 60 days thereafter.

Certain states, including West Virginia, have appealed the disapprovals of their respective SIPs, and some of those states have obtained stays of those disapprovals precluding the Good Neighbor Plan from taking effect in those states.

On August 10, 2023, the 4th Circuit granted West Virginia an interim stay of the disapproval of its SIP and on January 10, 2024, after a hearing held on October 27, 2023, granted a full stay which precludes the Good Neighbor Plan from going into effect in West Virginia.

In addition to West Virginia, certain other states, and certain trade organizations, including the Midwest Ozone Group of which FE is a member, have separately appealed and filed motions to stay the Good Neighbor Plan itself at the D.C.

On September 25, 2023, the D.C.

Circuit denied the motions to stay the Good Neighbor Plan.

On October 13, 2023, the aggrieved parties filed an Emergency Application for an Immediate Stay of the Good Neighbor Plan with the U.S.

Supreme Court, which remains pending.

Oral argument is scheduled for February 21, 2024.

Climate Change

There are several initiatives to reduce GHG emissions at the state, federal and international level.

Certain northeastern states are participating in the RGGI and western states led by California, have implemented programs, primarily cap and trade mechanisms, to control emissions of certain GHGs.

Additional policies reducing GHG emissions, such as demand reduction programs, renewable portfolio standards and renewable subsidies have been implemented across the nation.

In September 2016, the U.S.

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On January 20, 2021, President Biden signed an executive order re-adopting the agreement on behalf of the U.S.

In November 2020, FirstEnergy published its Climate Story which includes its climate position and strategy, as well as a new comprehensive and ambitious GHG emission goal.

FirstEnergy pledged to achieve carbon neutrality by 2050 and set an interim goal for a 30% reduction in GHGs within FirstEnergy’s direct operational control by 2030, based on 2019 levels.

Future resource plans to achieve carbon reductions, including any determination of retirement dates of the regulated coal-fired generation, will be developed by working collaboratively with regulators in West Virginia.

There are several initiatives to reduce GHG emissions at the state, federal and international level.

Certain northeastern states are participating in the Regional Greenhouse Gas Initiative and western states led by California, have implemented programs, primarily cap and trade mechanisms, to control emissions of certain GHGs.

Additional policies reducing GHG emissions, such as demand reduction programs, renewable portfolio standards and renewable subsidies have been implemented across the nation.

FirstEnergy has pledged to achieve carbon neutrality by 2050 in GHGs within FirstEnergy’s direct operational control (Scope 1).

With respect to our coal-fired plants in West Virginia, we have identified that the end of the useful life date is 2035 for Fort Martin and 2040 for Harrison.

Determination of the useful life of the regulated coal-fired generation could result in changes in depreciation, and/or continued collection of net plant in rates after retirement, securitization, sale, impairment, or regulatory disallowances.

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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.

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 CAA 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.

Supreme Court in West Virginia v.

Environmental Protection Agency held that the method the EPA used to regulate GHGs (generation shifting) under Section 111(d) of the CAA (the CPP) was not authorized by Congress and remanded the rule to the EPA for further reconsideration.

In response, on May 23, 2023, the EPA published a proposed rule pursuant to CAA Section 111 (b) and (d) in line with the decision in West Virginia v.

Environmental Protection Agency intended to reduce power sector GHG emissions (primarily CO 2 emissions) from fossil fuel based EGUs.

The rule proposes stringent emissions limitations based on fuel type and unit retirement date.

Comments on the proposed rule were submitted to the EPA on August 8, 2023.

Depending on how final rules are ultimately implemented and the outcome of any appeals, compliance with these standards could require additional capital expenditures or changes in operation at the Ft.

Martin and Harrison power stations.

Clean Water Act

Various water quality regulations, the majority of which are the result of the federal CWA and its amendments, apply to FirstEnergy’s facilities.

Various water quality regulations, the majority of which are the result of the federal Clean Water Act and its amendments, apply to FirstEnergy’s facilities.

In addition, the states in which FirstEnergy operates have water quality standards applicable to FirstEnergy’s operations.

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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 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 operation at the Ft.

On March 29, 2023, the EPA published proposed revised ELGs applicable to coal-fired power plants that include more stringent effluent limitations for wet scrubber systems and ash transport water, and new limits on landfill leachate.

Public hearings on the proposed rules were held in April 2023 and comments were accepted through May 30, 2023.

the interim, the rule issued on August 31, 2020, remains in effect.

Depending on the outcome of appeals and how final revised rules are ultimately implemented, 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 2020 ELG rule.

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On July 29, 2020, the EPA published a final rule again revising the date that certain CCR impoundments must cease accepting waste and initiate closure to April 11, 2021.

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 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.

The final rule allowed for an extension of the closure deadline based on meeting identified site-specific criteria.

AE Supply continues to operate McElroy’s Run as a disposal facility for Pleasants Power Station, which is owned and operated by a non-affiliate.

FE or its subsidiaries have been named as potentially responsible parties at waste disposal sites, which may require cleanup under the CERCLA.

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however, federal law provides that all potentially responsible parties for a particular site may be liable on a joint and several basis.

Environmental liabilities that are considered probable have been recognized on the Consolidated Balance Sheets as of December 31, 2022, based on estimates of the total costs of cleanup, FirstEnergy’s proportionate responsibility for such costs and the financial ability of other unaffiliated entities to pay.

Total liabilities of approximately $97 million have been accrued through December 31, 2022, of which, approximately $62 million are for environmental remediation of former MGP and gas holder facilities in New Jersey, which are being recovered by JCP&L through a non-bypassable SBC.

Environmental liabilities that are considered probable have been recognized on the Consolidated Balance Sheets as of September 30, 2023, based on estimates of the total costs of cleanup, FirstEnergy’s proportionate responsibility for such costs and the financial ability of other unaffiliated entities to pay.

Total liabilities of approximately $97 million have been accrued through December 31, 2023, of which, approximately $75 million are for environmental remediation of former MGP and gas holder facilities in New Jersey, which are being recovered by JCP&L through a non-bypassable societal benefits charge.

FE or its subsidiaries could be found potentially responsible for additional amounts or additional sites, but the loss or range of losses cannot be determined or reasonably estimated at this time.

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On July 21, 2020, a complaint and supporting affidavit containing federal criminal allegations were unsealed against the now former Ohio House Speaker Larry Householder and other individuals and entities allegedly affiliated with Mr.

Also, on July 21, 2020, and in connection with the investigation, FirstEnergy received subpoenas for records from the U.S.

In March 2023, a jury found Mr.

Householder and his co-defendant, Matthew Borges, guilty and in June 2023, the two were sentenced to prison for 20 and 5 years, respectively.

Householder and Borges have appealed their sentences.

Also, on July 21, 2020, and in connection with the DOJ’s investigation, FirstEnergy received subpoenas for records from the U.S.

Attorney’s Office for the Southern District Ohio.

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(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;

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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, and July 11, 2022, the SEC issued additional subpoenas to FE, with which FE has complied.

On April 28, 2021, July 11, 2022, and May 25, 2023, 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.

On June 29, 2023, the OOCIC served FE a subpoena, seeking information relating to the conduct described in the DPA.

FirstEnergy was not aware of the OOCIC’s investigation prior to receiving the subpoena and understands that the OOCIC’s investigation is also focused on the conduct described in the DPA.

FirstEnergy is cooperating with the OOCIC in its investigation.

On February 12, 2024, and in connection with the OOCIC’s ongoing investigation, an indictment by a grand jury of Summit County, Ohio was unsealed against the former chairman of the PUCO, Samuel Randazzo, and two former FirstEnergy senior officers, Charles E.

Jones, and Michael J.

Dowling, charging each of them with several felony counts, including bribery, telecommunications fraud, money laundering and aggravated theft, related to payments described in the DPA.

No contingency has been reflected in FirstEnergy’s consolidated financial statements, as a loss is neither probable, nor is a loss or range of loss reasonably estimable.

In addition to the subpoenas referenced above under “—United States v.

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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.

On March 30, 2023, the court granted plaintiffs’ motion for class certification.

On April 14, 2023, FE filed a petition in the U.S.

Court of Appeals for the Sixth Circuit seeking to appeal that order, which the Sixth Circuit granted on November 16, 2023.

On November 30, 2023, FE filed a motion with the S.D.

Ohio to stay all proceedings pending the circuit court appeal.

All discovery is stayed during the pendency of the district court motion.

FE believes that it is probable that it will incur a loss in connection with the resolution of this lawsuit.

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Securities Litigation described above.

All discovery is stayed during the pendency of the district court motion in In re FirstEnergy Corp.

Securities Litigation described above.

FE believes that it is probable that it will incur losses in connection with the resolution of these lawsuits.

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(Common Pleas Court, Franklin County, OH, all actions have been consolidated);

on September 23, 2020 and October 27, 2020, the OAG and the cities of Cincinnati and Columbus, respectively, filed complaints against several parties including FE (the OAG also named FES as a defendant), each alleging civil violations of the Ohio Corrupt Activity Act in connection with the passage of HB 6.

on September 23, 2020 and October 27, 2020, the OAG and the cities of Cincinnati and Columbus, respectively, filed complaints against several parties including FE, each alleging civil violations of the Ohio Corrupt Activity Act and related claims in connection with the passage of HB 6.

On January 13, 2021, the OAG filed a motion for a temporary restraining order and preliminary injunction against FirstEnergy seeking to enjoin FirstEnergy from collecting the Ohio Companies' decoupling rider.

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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.

The cases are stayed pending final resolution of the United States v.

On August 13, 2021, new defendants were added to the complaint, including two former officers of FirstEnergy.

On December 2, 2021, the cities and FE entered a stipulated dismissal with

prejudice of the cities’ suit.

After a stay, pending final resolution of the United States v.

Larry Householder, et al.

criminal proceeding described above, although on August 13, 2021, new defendants were added to the complaint, including two former officers of FirstEnergy.

On November 9, 2021, the OAG filed a motion to lift the agreed-upon stay, which FE opposed on November 19, 2021;

the motion remains pending.

On December 2, 2021, the cities and FE entered a stipulated dismissal with prejudice of the cities’ suit.

FirstEnergy Corp.

et al., Buldas v.

FirstEnergy Corp.

et al., and Hudock and Cameo Countertops, Inc.

FirstEnergy Corp.

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.

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.

(Common Pleas Court, Cuyahoga County, OH);

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.

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.

criminal proceeding described above, the litigation has resumed pursuant to an order, dated March 15, 2023.

Discovery is ongoing.

On July 31, 2023, FE and other defendants filed motions to dismiss in part the OAG’s section amended complaint, which the OAG opposed.

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.

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Anderson, et al.

(Common Pleas Court, Summit County, OH, all actions have been consolidated);

on July 26, 2020 and July 31, 2020, respectively, purported stockholders of FE filed shareholder derivative action lawsuits against certain FE directors and officers, alleging, among other things, breaches of fiduciary duty.

(Common Pleas Court, Summit County, Ohio, all actions have been consolidated);

on July 26, 2020 and July 31, 2020, respectively, purported stockholders of FE filed shareholder derivative action lawsuits against certain current and former FE directors and officers, alleging, among other things, breaches of fiduciary duty.

Anderson, et al.

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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.

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 23, 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;

• 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 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.

The settlement includes a series of corporate governance enhancements and a payment to FE of $180 million, to be paid by insurance after the judgment has become final, less approximately $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.

The parties filed oppositions to that motion on October 11, 2022, and the S.D.

Ohio denied that motion on May 22, 2023.

On June 15, 2023, the purported FE stockholder filed an appeal in the U.S.

Court of Appeals for the Sixth Circuit.

Ohio’s final settlement approval is affirmed by the U.S.

Court of Appeals for the Sixth Circuit, the settlement agreement is expected to resolve fully these shareholder derivative lawsuits.

On June 2, 2022, the N.D.

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The parties filed their objections by that deadline, and on September 2, 2022, the applicants responded to those objections.

violations of Section 14(a) of the Exchange Act as well as a claim against a third party for professional negligence and malpractice.

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.

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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.

On September 29, 2023, the N.D.

Ohio issued a stay of the case pending the appeal in the U.S.

Court of Appeals for the Sixth Circuit.

In letters dated January 26, and February 22, 2021, staff of FERC's Division of Investigations notified FirstEnergy that the Division was 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.

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.

FE paid the civil penalty on January 4, 2023 and it will not be recovered from customers.

The first annual compliance monitoring report was submitted in December 2023.

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.

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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.

FirstEnergy evaluates segment performance based on earnings attributable to FE from continuing operations.

The Regulated Distribution segment distributes electricity through FirstEnergy’s 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 segment's revenues are primarily derived from forward-looking formula rates.

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 rate base and costs.

The segment's revenues are derived from primarily forward-looking formula rates, pursuant to which 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 rate base and costs.

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.

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.

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.

The transaction is subject to customary closing conditions, including approval from the PPUC.

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

The FET Minority Equity Interest Sale is expected to close by the end of the first quarter of 2024.

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

Corporate/Other reflects corporate support and other costs not charged or attributable to the Utilities or Transmission Companies, including FE's retained Pension and OPEB assets and liabilities of former subsidiaries, interest expense on FE’s holding company debt and other investments or businesses that do not constitute an operating segment, including FEV's investment of 33-1/3% equity ownership in Global Holding.

Reconciling adjustments for the elimination of inter-segment transactions are shown separately in the following table of Segment Financial Information.

As of December 31, 2023, 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.

As of December 31, 2023, Corporate/Other had approximately $ 7.1 billion of external FE holding company debt.

2024 Segment Changes

Beginning in 2024, FirstEnergy changed its reportable segments to include Distribution, which will consist of the Ohio Companies and FE PA;

Integrated, which will consist of MP, PE and JCP&L;

and Stand-Alone Transmission, which will consist of FE's ownership in FET and KATCo.

On January 1, 2024, WP transferred certain of its Pennsylvania-based transmission assets to KATCo.

Corporate/Other will reflect corporate support and other support costs not charged or attributable to the Utilities or Transmission Companies, including FE's retained Pension and OPEB assets and liabilities of former subsidiaries, interest expense on FE's holding company debt and other investments or businesses that do not constitute an operating segment, including FEV's investment of 33-1/3% equity ownership in Global Holding.

Financial information for FirstEnergy’s business segments and reconciliations to consolidated amounts is presented below:

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Total DPA penalty $ — $ — $ 230

Miscellaneous income (expense), net

Equity method investment earnings

Regulated Distribution $ — $ — $ —

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Reconciling Adjustments — — —

Total miscellaneous income (expense), net $ 415 $ 486 $ 430

Total equity method investment earnings $ 175 $ 168 $ 31

Interest expense

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Reconciling Adjustments — — —

Total income taxes (benefits) $ 1,000 $ 320 $ 126

Total income taxes $ 267 $ 1,000 $ 320

For the Years Ended December 31,

(In millions) 2023 2022 2021

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

Earnings (losses) attributable to FE from continuing operations

Regulated Distribution $ 740 $ 957 $ 1,288

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Reconciling Adjustments — — —

Total earnings attributable to FE $ 406 $ 1,283 $ 1,079

Property additions

Total earnings attributable to FE from continuing operations $ 1,123 $ 406 $ 1,239

Cash Flows From Investing Activities:

Capital investments

Regulated Distribution $ 1,631 $ 1,605 $ 1,437

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Reconciling Adjustments — — —

Total property additions $ 2,756 $ 2,445 $ 2,657

Total capital investments $ 3,356 $ 2,848 $ 2,487

As of December 31,

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On February 27, 2020, the FES Debtors effectuated their plan, emerged from bankruptcy and FirstEnergy tendered the Bankruptcy Court approved settlement payments totaling $ 853 million and a $ 125 million tax sharing payment to the FES Debtors.

The FES Bankruptcy settlement was conditioned on the FES Debtors confirming and effectuating a plan of reorganization acceptable to FirstEnergy.

As contemplated under the FES Bankruptcy settlement agreement, AE Supply entered into an agreement on December 31, 2018, to transfer the 1,300 MW Pleasants Power Station and related assets to FG, while retaining certain specified liabilities.

Under the terms of the agreement, FG acquired the economic interests in Pleasants as of January 1, 2019, and AE Supply operated Pleasants until ownership was transferred on January 30, 2020.

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.

The settlement was conditioned on the FES Debtors confirming and effectuating a plan of reorganization acceptable to FirstEnergy.

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.

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(In millions) 2023 2022 2021

Revenues $ — $ — $ 7

Fuel — — ( 6 )

Other operating expenses — — ( 6 )

Pleasants economic interest (1)

Other expense, net — — ( 4 )

Loss from discontinued operations, before tax — — ( 4 )

Income tax expense (benefit) — ( 1 ) —

Income tax benefit — — ( 1 )

Loss from discontinued operations, net of tax — — ( 3 )

Settlement consideration and services credit — — ( 1 )

Accelerated net pension and OPEB prior service credits — — 18

Gain on disposal of FES and FENOC, before tax — — 17

Income tax benefits, including worthless stock deduction — ( 47 ) ( 59 )

Gain on disposal of FES and FENOC, net of tax — 47 76

Income from discontinued operations (2)

Income tax expense (benefit), including worthless stock deduction 21 — ( 47 )

Gain (loss) on disposal, net of tax ( 21 ) — 47

Income (loss) from discontinued operations (1)

$ ( 21 ) $ — $ 44

(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.

(1) Income from discontinued operations is included in Corporate/Other.

On February 27, 2020, the FES Debtors emerged from bankruptcy and were deconsolidated from FirstEnergy’s consolidated federal income tax group.

The bankruptcy, emergence and deconsolidation resulted in FirstEnergy recognizing certain income tax benefits and charges, which were classified as discontinued operations.

During the third quarter of 2023, FirstEnergy recognized a $ 21 million tax-effected charge to income tax expense as a result of identifying an out of period adjustment related to the allocation of certain deferred income tax liabilities associated with the FES Debtors and their tax return deconsolidation in 2020.

This adjustment was immaterial to the 2023 and prior period financial statements.

FirstEnergy's Consolidated Statements of Cash Flows combines cash flows from discontinued operations with cash flows from continuing operations within each cash flow category.

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CASH FLOWS FROM OPERATING ACTIVITIES:

Income from discontinued operations $ — $ 44 $ 76

Gain on disposal, net of tax — ( 47 ) ( 76 )

Income (loss) from discontinued operations $ ( 21 ) $ — $ 44

Loss (gain) on disposal, net of tax 21 — ( 47 )

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