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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-13 · 1166 added, 892 removed, 817 unchanged (72% of the section changed)

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Forward-Looking Statements:

This Form 10-K includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 based on information currently available to management.

This Form 10-K includes forward-looking statements based on information currently available to management.

Such statements are subject to certain risks and uncertainties and readers are cautioned not to place undue reliance on these forward-looking statements.

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Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements, which may include the following (see Glossary of Terms for definitions of capitalized terms):

• The potential liabilities, increased costs and unanticipated developments resulting from government investigations and agreements, including those associated with compliance with or failure to comply with the DPA.

• The risks and uncertainties associated with government investigations and audits regarding HB 6 and related matters, including potential adverse impacts on federal or state regulatory matters, including, but not limited to, matters relating to rates.

• The risks and uncertainties associated with litigation, arbitration, mediation and similar proceedings, particularly regarding HB 6 related matters, including risks associated with obtaining dismissal of the derivative shareholder lawsuits.

• Changes in national and regional economic conditions, including recession, rising interest rates, inflationary pressure, supply chain disruptions, higher energy costs, and workforce impacts, affecting us and/or our customers and those vendors with which we do business.

• Weather conditions, such as temperature variations and severe weather conditions, or other natural disasters affecting future operating results and associated regulatory actions or outcomes in response to such conditions.

• Legislative and regulatory developments, including, but not limited to, matters related to rates, compliance and enforcement activity, cyber security, and climate change.

• The risks and uncertainties associated with litigation, arbitration, mediation and similar proceedings, particularly regarding HB 6 related matters.

• Changes in national and regional economic conditions, including recession, volatile interest rates, inflationary pressure, supply chain disruptions, higher fuel costs, and workforce impacts, affecting us and/or our customers and those vendors with which we do business.

• Variations in weather, such as mild seasonal weather variations and severe weather conditions (including events caused, or exacerbated, by climate change, such as wildfires, hurricanes, flooding, droughts, high wind events and extreme heat events) and other natural disasters, which may result in increased storm restoration expenses and negatively affect future operating results.

• The potential liabilities and increased costs arising from regulatory actions or outcomes in response to severe weather conditions and other natural disasters.

• Legislative and regulatory developments, and executive orders, including, but not limited to, matters related to rates, energy regulatory policies, compliance and enforcement activity, cyber security, climate change, and diversity, equity and inclusion.

• The risks associated with physical attacks, such as acts of war, terrorism, sabotage or other acts of violence, and cyber-attacks and other disruptions to our, or our vendors’, information technology system, which may compromise our operations, and data security breaches of sensitive data, intellectual property and proprietary or personally identifiable information.

• The ability to meet our goals relating to EESG opportunities, improvements, and efficiencies, including our GHG reduction goals.

• The ability to accomplish or realize anticipated benefits through establishing a culture of continuous improvement and our other strategic and financial goals, including, but not limited to, overcoming current uncertainties and challenges associated with the ongoing government investigations, executing Energize365 , our transmission and distribution investment plan, executing on our rate filing strategy, controlling costs, improving our credit metrics, growing earnings, strengthening our balance sheet, and satisfying the conditions necessary to close the FET Minority Equity Interest Sale.

• The ability to meet our goals relating to climate-related and environmental, social and governance matters, opportunities, improvements, and efficiencies, including our GHG reduction goals.

• The ability to accomplish or realize anticipated benefits through establishing a culture of continuous improvement and our other strategic and financial goals, including, but not limited to, executing Energize365 , our transmission and distribution investment plan, executing on our rate filing strategy, controlling costs, improving credit metrics, maintaining investment grade ratings, strengthening our balance sheet and growing earnings.

• Changing market conditions affecting the measurement of certain liabilities and the value of assets held in our pension trusts may negatively impact our forecasted growth rate, results of operations and may also cause us to make contributions to our pension sooner or in amounts that are larger than currently anticipated.

• Mitigating exposure for remedial activities associated with retired and formerly owned electric generation assets.

• Changes to environmental laws and regulations, including, but not limited to, those related to climate change.

• Mitigating exposure for remedial activities associated with retired and formerly owned electric generation assets, including those sites impacted by the legacy CCR rules that were finalized during 2024.

• Changes to environmental laws and regulations, including, but not limited to, rules finalized by the EPA and SEC, including those currently stayed, related to climate change, and potential changes to such laws and regulations as a result of the new U.S.

presidential administration.

• Changes in customers’ demand for power, including, but not limited to, economic conditions, the impact of climate change, emerging technology, particularly with respect to electrification, energy storage and distributed sources of generation.

• The ability to access the public securities and other capital and credit markets in accordance with our financial plans, the cost of such capital and overall condition of the capital and credit markets affecting us, including the increasing number of financial institutions evaluating the impact of climate change on their investment decisions.

• Future actions taken by credit rating agencies that could negatively affect either our access to or terms of financing or our financial condition and liquidity.

• Changes in assumptions regarding factors such as economic conditions within our territories, the reliability of our transmission and distribution system, or the availability of capital or other resources supporting identified transmission and distribution investment opportunities.

• Changes in assumptions regarding factors such as economic conditions within our territories, the reliability of our transmission and distribution system, generation resource planning, or the availability of capital or other resources supporting identified transmission and distribution investment opportunities.

• The potential of non-compliance with debt covenants in our credit facilities.

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• Changes to significant accounting policies.

• Any changes in tax laws or regulations, including, but not limited to, the IRA of 2022, or adverse tax audit results or rulings.

• Any changes in tax laws or regulations, including, but not limited to, the IRA of 2022, or adverse tax audit results or rulings and potential changes to such laws and regulations as a result of the new U.S.

presidential administration.

• The risks and other factors discussed from time to time in our SEC filings.

Dividends declared from time to time on our common stock during any period may in the aggregate vary from prior periods due to circumstances considered by the FE Board at the time of the actual declarations.

A security rating is not a recommendation to

buy or hold securities and is subject to revision or withdrawal at any time by the assigning rating agency.

A security rating is not a recommendation to buy or hold securities and is subject to revision or withdrawal at any time by the assigning rating agency.

Each rating should be evaluated independently of any other rating.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FIRSTENERGY’S BUSINESS

FE and its subsidiaries are principally involved in the transmission, distribution and generation of electricity through its reportable segments Regulated Distribution and Regulated Transmission.

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.

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 service areas and number of customers served by FirstEnergy's regulated distribution utilities as of December 31, 2023, are summarized below:

Company Area Served Customers Served

(In thousands)

JCP&L Northern, Western and East Central New Jersey 1,167

OE Central and Northeastern Ohio 1,072

CEI Northeastern Ohio 758

WP Southwest, South Central and Northern Pennsylvania 739

PN Western, Northern, and South Central Pennsylvania, and Western New York 589

ME Eastern Pennsylvania 590

PE Western Maryland and Eastern West Virginia 445

MP Northern, Central and Southeastern West Virginia 397

TE Northwestern Ohio 316

Penn Western Pennsylvania 171

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 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.

EXECUTIVE SUMMARY AND RECENT DEVELOPMENTS

Company Overview

FirstEnergy is dedicated to integrity, safety, reliability and operational excellence and is principally involved in the transmission, distribution and generation of electricity through its reportable segments:

Distribution, Integrated and Stand-Alone Transmission.

Its electric distribution companies form one of the nation's largest investor-owned electric systems, serving over six million customers in Ohio, Pennsylvania, New Jersey, West Virginia, Maryland and New York.

FirstEnergy’s transmission subsidiaries operate more than 24,000 miles of transmission lines that connect the Midwest and Mid-Atlantic regions and two regional transmission operation centers.

As of December 31, 2024, AGC and MP control 3,604 MWs of net maximum generation capacity.

Segment Overview

During the first quarter of 2024, FirstEnergy’s segment reporting structure was modified to increase transparency for leadership and investors, simplify the presentation to corresponding legal entities, and align FirstEnergy’s earnings, cash flows and balance sheets at the business unit level.

FirstEnergy’s reportable segments are as follows:

The Distribution segment, which consists of the Ohio Companies and FE PA, representing $11 billion in rate base as of December 31, 2024, distributes electricity through FirstEnergy’s electric operating companies in Ohio and Pennsylvania.

The Distribution segment serves approximately 4.3 million customers in Ohio and Pennsylvania across its distribution footprint and purchases power for its provider of last resort, SOS, standard service offer and default service requirements.

The segment’s results reflect the costs of securing and delivering electric generation to customers, including the deferral and amortization of certain costs.

The Integrated segment includes the distribution and transmission operations under JCP&L, MP and PE, as well as MP’s regulated generation operations, representing $9.6 billion in rate base as of December 31, 2024.

The Integrated segment distributes electricity to approximately 2 million customers in New Jersey, West Virginia and Maryland across its distribution footprint;

provides transmission infrastructure in New Jersey, West Virginia, Maryland and Virginia to transmit electricity and operates 3,604 MWs of regulated net maximum generation capacity located primarily in West Virginia and Virginia.

The segment will also include MP and PE’s 50 MWs of solar generation at five sites in West Virginia once complete.

The first two solar generation sites were completed and placed in service in January and September 2024, representing 24 MWs of net maximum generating capacity.

The remaining three sites, once completed, are expected to provide 26 MWs of additional net maximum generation capacity.

The Stand-Alone Transmission segment, which consists of FE's ownership in FET and KATCo, representing $5.3 billion in rate base as of December 31, 2024, includes transmission infrastructure owned and operated by the Transmission Companies and used to transmit electricity.

The segment’s revenues are primarily derived from 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.

As described above, Brookfield holds 19.9% of the issued and outstanding membership interests of FET and has entered into an agreement to purchase from FE, an incremental 30% equity interest in FET, such that Brookfield’s interest in FET will increase from 19.9% to 49.9%, while FE will retain the remaining 50.1%.

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

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

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.

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 Stand-Alone Transmission segment.

On January 1, 2024, WP transferred certain of its Pennsylvania-based transmission assets to KATCo and prior year results in the Stand-Alone Transmission segment reflect the earnings and results of those WP transmission assets.

Corporate/Other reflects corporate support and other costs not charged or attributable to the Electric Companies 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.

Also included in Corporate/Other for segment reporting is 67 MWs of net maximum generation capacity, representing AE Supply’s OVEC capacity entitlement.

As of December 31, 2024, Corporate/Other had approximately $6.1 billion of external FE holding company debt.

In 2024, FirstEnergy changed its reportable segments to include the following:

• Distribution Segment, which will consist of the Ohio Companies and FE PA;

• Integrated Segment, which will consist of MP, PE and JCP&L;

• Stand-Alone Transmission Segment, 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 continue to 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.

EXECUTIVE SUMMARY

FirstEnergy is a forward-thinking electric utility centered on integrity, powered by a diverse team of employees, committed to making customers’ lives brighter, the environment better and our communities stronger.

FirstEnergy's core values encompass what matters most to the company.

They guide the decisions we make and the actions we take.

FirstEnergy's core values should inspire our actions today and shine a light on who we aspire to be in the future.

FirstEnergy Core Values:

We always act ethically with honesty, humility and accountability.

We keep ourselves and others safe.

• Diversity, Equity and Inclusion:

We embrace differences, ensure every employee is treated fairly and create a culture where everyone feels they belong.

• Performance Excellence:

We pursue excellence and seek opportunities for growth, innovation and continuous improvement.

• Stewardship:

We positively impact our customers, communities and other stakeholders, and strive to protect the environment.

Employees are encouraged and expected to have conversations with their leaders and peers about the core values and FirstEnergy's commitment to building a culture centered on integrity.

At FirstEnergy, we are dedicated to staying true to our mission and core values.

We understand the impact our company can make in the world around us, which means pursuing initiatives and goals that align with our foundational principles, support our EESG and strategic priorities and positively impact our stakeholders.

To solidify our role as an industry leader, we have developed a long-term strategy with priorities that are centered on our mission statement.

These priorities reflect a strong foundation with a customer-centered focus that emphasizes modern experiences, new growth and affordable energy bills, and enables the energy transition to a clean, resilient and secure electric grid.

We are proud of the steps we have already taken to demonstrate our commitment to our strategy and look forward to improving our performance and executing on these strategic priorities.

On June 1, 2023, Brian X.

Tierney joined the FE Board and began serving as President and Chief Executive Officer of FirstEnergy.

Tierney previously served as Senior Managing Director and Global Head of Operations and Asset Management at Blackstone Infrastructure Partners.

Prior to joining Blackstone Infrastructure Partners in July 2021, Mr.

Tierney spent 23 years with AEP.

Somerhalder II ceased serving as Interim President and Chief Executive Officer on May 31, 2023, and continues to serve as the Chair of the FE Board.

We are focused on making the necessary investments in our core regulated businesses, our employees and in our systems to enhance the customer experience.

To execute that vision, we are shifting decision-making and accountability closer to where the work is being done to serve customers.

We are making progress to fill several key executive positions in an organization that will be structured to allow greater execution at the business unit level, including the following:

• On November 30, 2023, Toby L.

Thomas joined FirstEnergy as the Chief Operating Officer.

Thomas previously served as Senior Vice President, Energy Delivery at AEP, where he was responsible for transmission engineering, construction, operations, maintenance and compliance, and creating efficiencies by bringing together transmission and distribution-related engineering and standards.

Thomas spent 22 years at AEP.

• On December 18, 2023, A.

Wade Smith joined FirstEnergy as President, FirstEnergy Utilities.

Smith previously served as the Executive Vice President and Chief Operating Officer of Puget Sound Energy, Inc.

Prior to joining Puget Sound Energy, Inc., Mr.

Smith held a variety of roles and has more than 30 years of industry experience.

Additionally, five business unit executives will lead our state operations and our stand-alone transmission companies.

In our new organization, the business unit executives will have financial responsibility and will be accountable for regulatory direction and outcomes, as well as operational performance.

Beginning in 2024, FirstEnergy changed its reportable segments to align with its updated organizational structure, and will include:

Distribution Segment, which will consist of the Ohio Companies and FE PA;

Integrated Segment, which will consist of MP, PE and JCP&L and provides distribution, transmission, and for MP, generation, services to their customers;

and Stand-Alone Transmission Segment, which will consist of FE's ownership in FET and KATCo.

Corporate/Other will continue to reflect

corporate support and other support costs not charged to the Distribution, Integrated or Transmission segments, 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.

This will simplify its segment reporting to provide more transparency and align with its new organizational structure that allows for financial and operational decision-making in how we manage our business.

This provides:

FirstEnergy believes that this segment reporting serves to provide:

• Greater transparency into our business unit performance;

• Alignment with our cash flow, credit metrics, balance sheet and earnings;

• Simplification of our segment reporting so entire entity resides within a segment;

• Alignment with our cash flow, credit metrics, balance sheet and earnings to the companies comprising each segment;

• Simplification of our segment reporting so that each entire entity resides within a segment;

• Consistency with peers.

In 2023, FirstEnergy made investments of $3.7 billion, which was $300 million above our original plan.

As a fully regulated electric utility, FirstEnergy is focused on stable and predictable earnings and cash flow through investments that deliver enhanced customer service and reliability.

Energize365 is the centerpiece of FirstEnergy’s regulated distribution and transmission capital investment strategy that aims to utilize all investments to support our EESG and strategic priorities including clean energy, improving grid reliability and resiliency and supports a carbon neutral future.

Through the Energize365 program, FirstEnergy expects approximately $26 billion in system-wide capital investments from 2024 through 2028, which is comprised of 29% Distribution, 39% Integrated and 32% Stand-Alone Transmission and are focused on the following:

• Energy Transition:

Distribution and Transmission investments made to support improvements in grid reliability and resiliency and support interconnection of renewable sources.

◦ Clean Energy:

Including West Virginia solar generation, energy efficiency, electric vehicle infrastructure and energy storage

◦ Grid Modernization:

Programs to drive system resiliency through automation technology and communication, including Ohio's Grid Mod I and II, Pennsylvania's LTIIP, New Jersey's EnergizeNJ, and implementing advanced metering infrastructure

◦ Transmission:

▪ Operational Flexibility Projects that build capacity and support evolving grid such as interconnection of New Jersey offshore wind and data center load

▪ Enhance system performance by implementing new designs and technologies to reduce load at risk

▪ Upgrade system conditions that enhance reliability

• Infrastructure Renewal:

PA Consolidation

On January 1, 2024, FirstEnergy consolidated the Pennsylvania Companies into FE PA, rendering FE PA a new, single operating entity and the successor-in-interest to all assets and liabilities of the Pennsylvania Companies.

As of January 1, 2024, FE PA is FE’s only regulated distribution power company in Pennsylvania encompassing the operations previously conducted individually by the Pennsylvania Companies.

FirstEnergy continues to evaluate the legal, financial, operational and branding benefits of consolidating the Ohio Companies into a single Ohio power company.

Also on January 1, 2024, WP transferred certain of its Pennsylvania-based transmission assets to KATCo, and PN and ME contributed their respective Class B equity interests of MAIT to FE, which were ultimately contributed to FET in exchange for a special purpose membership interest in FET.

So long as FE holds the FET special purpose membership interests, it will receive 100% of any Class B distributions made by MAIT.

FET Equity Interest Sale

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 FET Equity Interest Sale closed on March 25, 2024 and FET continues to be consolidated in FirstEnergy’s financial statements.

The purchase price was paid in part by the issuance of two promissory notes at closing having an aggregate principal amount of $1.2 billion with:

(i) one promissory note having an aggregate principal amount of $750 million, at an interest rate of 5.75% per annum, with a maturity date of September 25, 2025 and (ii) one promissory note having an aggregate principal amount of $450 million, at an interest rate of 7.75% per annum, with a maturity date of December 31, 2024.

The remaining $2.3 billion of the purchase price was paid in cash at closing.

On July 17, 2024, Brookfield paid FE approximately $1.2 billion in full satisfaction of the promissory notes.

Interest income associated with the promissory notes was $24 million for the year ended December 31, 2024 and is reported within “Miscellaneous income, net” on FirstEnergy’s Consolidated Statements of Income.

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

Asset Retirement Obligations

On May 8, 2024, the EPA finalized changes to the CCR regulations addressing inactive surface impoundments at inactive electric utilities, known as legacy CCR surface impoundments, and in November 2024 and January 2025, the EPA made several technical corrections to the rule.

The rule extends 2015 CCR rule requirements for groundwater monitoring and protection procedures, operational and reporting procedures, as well as closure requirements for impoundments and landfills that were not originally included for coverage by the 2015 CCR rule.

In anticipation of such expenditures, FirstEnergy performed a preliminary assessment of former CCR disposal sites and calculated an initial estimate applying historical experience in remediating comparable sites.

As a result, FirstEnergy recorded a $139 million increase to its ARO during 2024, of which $113 million is included in “Other operating expenses” on the Consolidated Statements of Income and was not capitalized as an asset retirement cost since the associated plants do not have future cash flows.

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 to October 2024, which request was withdrawn by AE Supply on July 9, 2024, prior to the completion of the technical review by the EPA.

As of May 31, 2024, AE Supply ceased accepting waste at the McElroy’s Run CCR impoundment facility from Pleasants Power Station.

As of December 31, 2024, AE Supply continues to operate the dry landfill adjacent to McElroy’s Run as a disposal facility for Pleasants Power Station.

During the second quarter of 2024, as a result of the evaluation of closure options for McElroy’s Run and the adjacent landfill, AE Supply reviewed its ARO and future expected costs to remediate, resulting in an increase to the ARO liability and corresponding increase to “Other operating expense” of $87 million at Corporate/Other for segment reporting.

On February 3, 2025, AE Supply executed an environmental liability transfer agreement with a subsidiary of IDA Power, LLC, whereby AE Supply will transfer the McElroy’s Run CCR impoundment facility and adjacent dry landfill and related remediation obligations.

The agreement requires AE Supply to establish a $160 million escrow account that AE Supply will fund over five years.

The escrow funding obligation will be secured by a surety bond, which will be guaranteed by FE.

The transaction is expected to close before the end of the first quarter of 2025 and the derecognition of the ARO is not expected to have a material impact to FirstEnergy’s financial statements, however, no assurances of the closing of the transfer will be satisfied, including transfer of all required environmental permits.

See Note 10, “Asset Retirement Obligations,” of the Notes to Consolidated Financial Statements.

Powered by its employees and guided by its experienced leadership team and engaged FE Board, FirstEnergy is accelerating its transformation into a premier electric company.

The FE Board and FirstEnergy’s executive management team are aligned behind a business model grounded in investing, operating, recovering costs and financing our regulated electric company operations.

This business model aims to create a “virtuous cycle” that, in turn, serves to improve reliability and the customer experience, grow rate base, engage employees, improve returns and maintain a strong balance sheet.

Along with an unwavering commitment to ethics and integrity, performance excellence and continuous improvement, FirstEnergy anticipates that strong execution of this model will help achieve its strategic objectives and deliver value to its investors.

With a diversified asset mix, improved balance sheet and a strong affordability position, FirstEnergy is well positioned to significantly enhance the customer experience and provide value to its investors.

FirstEnergy invests in its regulated operations to improve reliability and the customer experience, and in its people to attract, retain and develop talented, diverse and engaged employees to carry out its strategy.

This includes the following:

• A robust plan for customer-focused growth, Energize365 is the centerpiece of FirstEnergy’s regulated distribution and transmission capital investment strategy that aims to strengthen the grid and enable the energy transition.

Through the Energize365 program, FirstEnergy invested $4.5 billion in 2024, approximately 20% higher than 2023, and expects to spend approximately $28 billion in system-wide capital investments from 2025 through 2029.

FirstEnergy expects that these investments will comprise the Distribution segment (26%), the Integrated segment (39%), and the Stand-Alone Transmission segment (34%), focusing on the following:

• Distribution and Transmission investments to support improvements in grid reliability and resiliency and support the energy transition, including through:

◦ Programs to drive system resiliency through automation technology and communication, including phases one and two of the Ohio Companies’ distribution grid modernization plans, Pennsylvania's LTIIP, New Jersey's EnergizeNJ, and implementing advanced metering infrastructure;

◦ Operational flexibility projects that are expected to build capacity and support the evolving grid such as interconnection of New Jersey offshore wind and data center load;

◦ Enhancing system performance by implementing new designs and technologies to reduce load at risk;

◦ Upgrading system conditions that enhance reliability.

• West Virginia solar generation projects, energy efficiency initiatives, electric vehicle infrastructure and energy storage projects.

• Base distribution projects to address aging infrastructure.

• Fossil Generation:

Projects to maintain operations of fossil plants and remain compliant with environmental regulations through the end of their useful life

FirstEnergy believes there is a continued long-term pipeline of investment opportunities for its existing distribution and transmission infrastructure beyond those identified through 2028, which are expected to strengthen grid and cyber security and make the transmission system more reliable, robust, secure and resistant to extreme weather events, with improved operational flexibility.

FirstEnergy has an active regulatory calendar to support its regulated growth strategy and address the critical investments that support reliability and a smarter and cleaner electric grid, including:

• 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.

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

An order is expected in the first quarter of 2024 concurrent with approval of MP and PE’s base rate case described below;

• On March 16, 2023, JCP&L filed a base rate case in New Jersey, requesting a $185 million increase in base distribution revenues, which supports investments to strengthen the energy grid, enhance the customer experience and provide assistance to low-income as well as senior citizen customers.

JCP&L subsequently updated its base rate case on August 7, 2023, which, among other things, increased its proposed annual net increase in base rate distribution revenues to approximately $192 million.

Key proposals to the filing include:

a distribution rate base of $3.1 billion, ROE of 10.4%, and a capital structure of debt/equity of 48%/52%.

• Generation maintenance projects that maintain operations of fossil fuel plants and remain compliant with environmental regulations through the end of their useful life.

• FirstEnergy believes there is a continued long-term pipeline of investment opportunities for its existing distribution and transmission infrastructure beyond those opportunities identified through 2029, which are expected to strengthen grid

and cyber security and make the transmission system more reliable, robust, secure and resistant to extreme weather events, with improved operational flexibility.

• On July 26, 2024, FE, VEPCO and Transource Energy, LLC, a subsidiary of AEP, entered into a joint proposal agreement in connection with PJM’s 2024 Regional Transmission Expansion Plan Open Window 1 process.

Pursuant to such joint proposal agreement, FET, VEPCO and Transource Energy, LLC jointly proposed certain regional electric transmission projects for PJM's consideration during the Open Window process.

On November 25, 2024, FET, Dominion High Voltage MidAtlantic, Inc., as affiliate of VEPCO, and Transource Energy, LLC, formed Valley Link, which is the holding company responsible for managing and executing any projects awarded by PJM, and entered into a limited liability agreement.

On February 26, 2025, PJM selected certain of the joint proposed projects, which included approximately $3 billion in investments for Valley Link to both build new and upgrade existing transmission infrastructure.

• A refreshed and revitalized leadership team.

During 2024, FirstEnergy appointed five executives to oversee the Maryland/West Virginia, Ohio, Pennsylvania, New Jersey and Transmission operations.

Additionally, FirstEnergy also announced the hiring of five vice presidents that will be responsible for developing and implementing the financial strategy and oversee relationships with regulators for Pennsylvania, New Jersey, West Virginia, Maryland, Ohio and Transmission.

FirstEnergy will continue to engage its skilled, trained, talented and diverse team of employees to effectively implement its investment plans, seek opportunities for continuous improvement as it delivers safe, reliable and affordable electricity to our customers, and deliver value to its investors.

It aims to do so through the following:

• Enhancing the focus on the customer.

FirstEnergy has shifted more decision-making and accountability for our operations closer to our customers, regulators and employees doing the work.

FirstEnergy’s new operating structure is organized as follows:

Ohio, Pennsylvania, New Jersey, West Virginia/Maryland and FirstEnergy’s Standalone Transmission properties.

This structure fosters better execution at the business unit level.

• Embracing a continuous improvement mindset.

FirstEnergy is focused on operational excellence through strong execution of our capital investments to enhance the customer experience and support the energy transition, managing costs and keeping customer bills affordable and reducing regulatory lag.

FirstEnergy is establishing a track record of strong execution.

Operating effectively leads to strong, predictable results and enhances credibility with our stakeholders.

In turn, FirstEnergy builds supportive relationships with regulators, customers and intervenors in an effort to drive positive rate outcomes that support recovery of its investments.

In order to achieve important regulatory milestones, FirstEnergy has an active regulatory calendar to support its regulated growth strategy and address the critical investments that support reliability and a smarter electric grid.

This includes the following:

• On March 16, 2023, JCP&L filed a base rate case in New Jersey, requesting a $185 million increase in base distribution revenues to support investments to strengthen the energy grid, enhance the customer experience and provide assistance to low-income and senior citizen customers.

On February 1, 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 be effective for customers on June 1, 2024;

• On April 5, 2023, the Ohio Companies sought approval from the PUCO for its ESP V.

The proposed plan would maintain an eight-year term beginning June 1, 2024, and seeks to continue riders recovering costs associated with distribution infrastructure investments and approved grid modernization investments.

ESP V additionally proposes new riders that would support reliability, and includes provisions supporting affordability and enhancing the customer experience;

• On May 31, 2023, MP and PE filed a base rate case in West Virginia requesting a $207 million increase in revenue, which supports reliability investments, grid resiliency, an enhanced customer experience and provides assistance to low-income customers.

Key proposals to the filing include:

a distribution rate base of $3.2 billion, ROE of 10.85%, and a capital structure of debt/equity of 51%/49%.

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.

Among other things,

the settlement additionally includes a new low-income customer advocacy program, storm restoration work and service reliability investments.

An order is expected by the end of the first quarter of 2024 with new rates to be effective upon the issuance of such order;

• On October 18, 2023, the MDPSC issued an order approving an annual increase in base distribution rates of $28 million, effective October 19, 2023, with respect to the base rate case that PE filed on March 22, 2023.

The MDPSC denied PE’s request to establish a pension/OPEB regulatory asset, rejected the continuation of PE’s EDIS, and allowed recovery of most COVID-19 deferred costs.

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;

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

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;

• FE PA plans to file a base rate case by April 2024 and request approval for the continuation of its LTIIP program by the end of the third quarter of 2024;

• The Ohio Companies plan to file a base rate case in the second quarter of 2024.

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 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.

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

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.

FirstEnergy is focused on continuous improvement, including the strategic reduction of operating expenditures and continued reinvestment in a more diverse capital program in support of our long-term strategy.

We have begun implementing our facility optimization plans, which focus on both cost savings and alignment with our flexible working arrangements, and will result in our 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.

Our corporate headquarters will remain in Akron, moving to our West Akron Campus, and we continue 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 our combined efforts will help build a stronger, more sustainable company for the near and long term.

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.

See “Capital Resources and Liquidity - Convertible Notes" below for more details.

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.

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.

Modest dividend growth enables enhanced shareholder returns, while still allowing for continued substantial regulated investments.

Dividend payments are subject to declaration by the FE Board and future dividend decisions determined by the FE Board may be impacted by earnings growth, cash flows, credit metrics, risks and uncertainties of the government investigations and other business conditions.

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.

Climate Strategy

Our commitment to climate is a significant component of our company’s overarching strategy, especially our desire to enable the transition to a clean energy future.

Executing our Climate Strategy and advancing the transition to clean energy requires addressing, among other things:

emerging federal and state decarbonization goals;

physical risks of climate change;

industry trends and technology advancements;

and customer expectations for cleaner energy, increased usage control, and more sustainable alternatives in transportation, manufacturing and industrial processes.

Through our investment plan, we aim to enhance the resiliency, reliability and security of the electric system and support the integration of renewables, electric vehicles, grid modernization improvements and other emerging technologies.

As part of our Climate Strategy, we pledged in 2020 to achieve carbon neutrality by 2050.

This GHG goal addresses company-wide emissions within our direct operational control, also known as Scope 1 emissions, across our transmission, distribution and regulated generation operations.

At that time, we also set an interim target to reduce our GHG emissions by 30% from the 2019 baseline by 2030.

After careful consideration and evaluation, we have made the determination to remove our interim target and remain focused on our 2050 goal.

FirstEnergy’s primary focus is on our transmission and distribution businesses.

However, emissions from our West Virginia power stations – Fort Martin and Harrison – serve as the primary source of our Scope 1 emissions - representing approximately 99% of our overall GHG emissions as of December 31, 2022 - and greatly outnumber the emissions from our transmission and distribution operations.

As such, achieving the 2030 interim target was dependent on GHG reductions at Fort Martin and Harrison that could be realized only through a meaningful reduction in operation of these two plants prior to 2030.

In 2020, the interim target and corresponding reduction strategy were believed to be within our operational control.

However, the following challenges have emerged, impeding our path to achieve the 2030 interim target:

• West Virginia supports coal generation, from political, regulatory, energy and economic perspectives, as illustrated in 2023 by its energy policy initiatives and actions.

We believe an intentional reduction in output at the power stations solely to reduce GHG emissions would not be prudent, as it is inconsistent with the state’s energy policy.

In light of the significant retirements of baseload generation scheduled through 2030, as reported by PJM, there is uncertainty about what resources will replace that generating capacity, including energy market developments that may make it more economical than originally projected to run our coal plants.

In light of these challenges, we believe it was prudent to remove our 2030 interim target.

We remain committed to achieving carbon neutrality for Scope 1 emissions by 2050.

While we can no longer project that we can meaningfully reduce generation-based GHG emissions in West Virginia by 2030, we have publicly stated through various filings with the WVPSC, that the end of useful life date is 2035 for Fort Martin and 2040 for Harrison.

These dates are based on our assessment of when it is projected to no longer be cost effective and beneficial to customers to make the capital investments needed to keep these facilities operating effectively and in compliance with evolving environmental regulations.

In 2025, FirstEnergy will submit an Integrated Resource Plan to the WVPSC that will include our analysis of market conditions and identify how we believe we can best fulfill our obligation to supply our generation customers with reliable and cost-effective energy through 2040 (a requirement every five years in the state of West Virginia).

In the near-term, we continue our focus on GHG reduction in our transmission and distribution businesses.

These emissions are within our control, pervasive in every state across our footprint, and aligned with our long-term, forward-looking transmission and distribution strategy to enable the energy transition.

In addition to moving beyond our two West Virginia power stations, key steps in working toward carbon neutrality by 2050 include:

• Reducing sulfur hexafluoride emissions:

We're working to repair or replace, as appropriate, transmission breakers that leak sulfur hexafluoride, which is a gas commonly used by energy companies as an electrical insulating material and arc extinguisher in high-voltage circuit breakers and switchgear.

If escaped to the atmosphere, it acts as a potent GHG with a global warming potential significantly greater than CO 2 ;

• Electrifying our vehicle fleet:

We’re targeting 30% electrification of our light-duty and aerial truck fleet by 2030 and 100% electrification by 2050.

To reach our electrification goal, we’re striving for 100% electric or hybrid vehicle purchases for our light-duty and aerial truck fleet moving forward.

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

If MP is unable to recover these costs, it could have a material adverse effect on FirstEnergy’s and/or MP’s financial condition, results of operations and cash flow.

The settlement, which was approved by the NJBPU on February 14, 2024, provides for an $85 million annual base distribution revenue increase for JCP&L, which became effective for customers on June 1, 2024.

• On November 9, 2023, JCP&L filed a petition for approval of its 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.

On February 14, 2024, the NJBPU approved the stipulated settlement between JCP&L and various parties, resolving JCP&L’s request for a distribution base rate increase.

On February 27, 2024, as part of the stipulated settlement, JCP&L amended its pending EnergizeNJ petition following receipt of NJBPU approval of the base rate case settlement, to remove the high-priority circuits that are to be addressed in the first phase of its reliability improvement plan and to include the second phase of its reliability improvement plan that is expected to further address certain high-priority circuits that require additional upgrades.

EnergizeNJ, if approved as amended, will result in the investment of approximately $930.5 million of total estimated costs over five years.

JCP&L and various parties are engaged in settlement discussions with respect to the pending EnergizeNJ petition.

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

30, 2024, the NJBPU approved the parties’ stipulation of settlement, wherein the parties agreed to a budget of approximately $817 million for EE&C Plan II, including $784 million of investments that will earn a return on equity of 9.6%, with an equity ratio of 52%, and will be recovered over 10 years.

• On April 5, 2023, the Ohio Companies sought approval from the PUCO for their ESP V.

The proposed plan would maintain an eight-year term beginning June 1, 2024, and continue riders recovering costs associated with distribution infrastructure investments and approved grid modernization investments.

ESP V additionally proposed new riders that would support reliability, and included provisions supporting affordability and enhancing the customer experience.

On May 15, 2024, the PUCO issued an order approving ESP V with modifications, which are described below in “Outlook - State Regulation - Ohio”.

On June 14, 2024, the Ohio Companies filed an Application for Rehearing, which was denied by operation of law as the PUCO did not rule on the applications for rehearing within 30 days of filing.

Due to the risks and uncertainty resulting from the Ohio Companies’ application for rehearing being denied by operation of law, on October 29, 2024, the Ohio Companies filed a notice of their intent to withdraw ESP V and proposed the terms under which they would resume operating under ESP IV, which was approved by the PUCO on December 18, 2024.

On January 22, 2025, the PUCO approved the Ohio Companies’ ESP IV compliance tariffs with an effective date of February 1, 2025, at which point the Ohio Companies resumed operating under ESP IV with modifications, as described below in “Outlook - State Regulation - Ohio”.

• On January 31, 2025, the Ohio Companies filed an application with the PUCO for ESP VI, which would begin concurrently with the effective date of any new base distribution rates resulting from the Ohio Companies’ pending base rate case and continue through May 31, 2028.

ESP VI proposes to continue existing riders to support continued maintenance of the distribution system, and to reestablish riders to recover vegetation management and storm restoration expenses.

ESP VI also includes provisions supporting affordability and enhancing the customer experience.

The PUCO has scheduled a technical conference for March 12, 2025.

• On April 12, 2024, the Ohio Companies and certain of the parties filed a stipulation that modified the Ohio Companies’ application for phase two of its grid modernization plan, which was approved by the PUCO on December 18, 2024.

The stipulation provides for the deployment of approximately 1.4 million smart meters to the balance of the Ohio Companies’ customers.

Phase two of the distribution grid modernization plan, as modified by the stipulation would be completed over a four-year budget period with estimated capital investments of approximately $421 million.

On December 18, 2024, the PUCO approved the stipulation and implementation has since begun.

• On May 31, 2024, the Ohio Companies filed their application for an increase in base distribution rates, based on a 2024 calendar year test period.

The Ohio Companies requested a net increase in base distribution revenues of approximately $94 million with a return on equity of 10.8% and capital structures of 44% debt and 56% equity for CEI, 46% debt and 54% equity for OE, and 45% debt and 55% equity for TE, which reflects a roll-in of current riders such as DCR and AMI.

The net increase represented a 1.5% average residential monthly bill increase.

Key components of the base rate case filing include a proposal to change pension and OPEB recovery to the delayed recognition method and to implement a mechanism 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 amount each year using this method.

Additionally, the Ohio Companies requested recovery of certain incurred costs, including the impact of major storms, a program to convert streetlights to LEDs, and others.

On June 14, 2024, the Ohio Companies filed supporting testimony and on July 31, 2024, filed an update with an adjusted net increase of base distribution revenues of approximately $190 million and to incorporate matters in the rate case as directed by the PUCO’s ESP V order.

On December 18, 2024, the PUCO issued an order approving the Ohio Companies’ withdrawal of ESP V.

On January 22, 2025, the PUCO approved the Ohio Companies’ revised ESP IV tariffs, effective February 1, 2025, at which time the Ohio Companies resumed operating under ESP IV.

On January 27, 2025, the Ohio Companies notified the PUCO of their intention to update their application for an increase in base distribution rates to remove ESP V related provisions from the base rate case.

The PUCO staff hired a third party auditor to assist in the review of the Ohio Companies’ base rate case filing and on February 21, 2025, PUCO staff and the third party auditor each filed their reports.

The auditor’s report recommended adjustments which would result in a net increase of the Ohio Companies’ base distribution revenues of approximately $8 million with a return on equity of 9.63% and capital structures of 48.8% debt and 51.2% equity for each of the Ohio Companies.

PUCO staff’s report takes limited positions on the auditor’s finding and recommendations and makes additional findings.

The Ohio Companies plan to respond and file supplemental testimony by March 24, 2025.

• On April 2, 2024, FE PA filed a base rate case with the PPUC seeking a net increase in base distribution revenues of approximately $502 million with a return on equity of 11.3% and capital structure of 46.2% debt and 53.8% equity, and which reflects a roll-in of several current riders such as DSIC, Tax Act, and smart meter.

Additionally, FE PA requested an enhanced ten year vegetation management program and recovery of certain incurred costs, including the impact of major storms, COVID-19, a program to convert streetlights to LEDs, and others.

On September 13, 2024, FE PA and the active parties to the proceeding filed a joint settlement agreement requesting that the administrative law judges

approve FE PA’s requested distribution base rate case increase subject to the terms and conditions of the settlement, which includes, among other things, an annual net revenue increase of $225 million.

Other key components of the settlement agreement include recovery of costs incurred for storms and COVID-19, additional cost recovery of ongoing storm costs, inspection and maintenance of overhead lines and transformers, and rate case expenses, as well as an enhanced vegetation management program.

On October 15, 2024, the administrative law judges issued a decision recommending that the PPUC approve, without modification, the September 13, 2024 settlement agreement.

On November 21, 2024, the PPUC unanimously approved the settlement agreement without modification and the rates became effective on January 1, 2025.

• On July 22, 2024, FE PA filed its application with the PPUC seeking approval for the next phase of its LTIIP program, which is expected to result in approximately $1.6 billion in investments, with approximately $1.4 billion of such investments going in service during the five-year period beginning January 1, 2025 and ending December 31, 2029.

FE PA’s application was approved by the PPUC on December 19, 2024, and implementation began in January 2025.

West Virginia

• 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.

On August 22, 2023, the parties filed a unanimous settlement of the case recommending a $33 million annual increase in depreciation expense, effective April 1, 2024, but deferred issues related to a change in the net energy metering credit.

An order was issued on March 26, 2024 approving the settlement without modification.

• On January 23, 2024, MP, PE and various parties filed a joint settlement agreement with the WVPSC, which recommended a base rate increase of $105 million, inclusive of the $33 million increase in depreciation expense, but deferred issues related to a change in the net energy metering credit.

Additionally, the settlement included 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 recovery (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 agreement on the net energy metering credit was subsequently submitted to the WVPSC and was materially approved as part of the base rate case order for rates effective March 27, 2024.

We believe that FirstEnergy represents a compelling investment.

With sound capital allocation targeting reliability, resiliency, the energy transition and customer experience, and supported by constructive regulatory outcomes, FirstEnergy expects to finance the business at a lower cost of capital, allowing it to begin the virtuous cycle all over again at “Invest.”

FirstEnergy aims to do this through a strengthened financial position.

Since 2021, FirstEnergy has raised $7 billion in equity capital and issued $1.5 billion in convertible notes in May 2023 to significantly improve its balance sheet.

The strength of FirstEnergy’s balance sheet supports its plan to fund Energize365 investments through organic internal cash flows and the issuance of debt rather than incremental equity.

FirstEnergy has optimized its financing plan to retain flexibility in an uncertain interest rate environment.

FirstEnergy has also taken steps to reduce potential volatility risk associated with its pension plan.

In January 2025, FirstEnergy executed an additional pension lift-out transaction associated with over $652 million in pension obligations relating to its former competitive generation employees.

This lift-out transaction, combined with the lift-out completed in 2023, removed approximately $1.4 billion in total pension plan assets and obligations associated with approximately 3,900 former competitive generation employees.

FirstEnergy also expects to continue returning value to shareholders.

In March 2024, the FE Board declared a $0.015 per share increase to the quarterly common stock dividend payable June 1, 2024, to $0.425 per share, which represents an approximate 6% increase compared to dividends declared in 2023.

Modest dividend growth is expected to enable enhanced shareholder returns, while still allowing for continued substantial regulated investments.

Dividend payments are subject to declaration by the FE Board, and future dividend decisions determined by the FE Board may be impacted by earnings growth, credit metrics and other business conditions.

HB 6 and Related Investigations

4 unchanged sentences

The $230 million payment will neither be recovered in rates or charged to FirstEnergy customers, nor will FirstEnergy seek any tax deduction related to such payment.

The criminal information will be dismissed after FirstEnergy fully complies with its obligations under the DPA, which is expected in July 2024.

The OAG, certain FE shareholders and FE customers filed several lawsuits against FirstEnergy and certain current and former directors, officers and other employees, each relating to the allegations against the now former Ohio House Speaker Larry Householder and other individuals and entities allegedly affiliated with Mr.

As of July 22, 2024, FirstEnergy had successfully completed the obligations required within the three-year term of the DPA.

Under the DPA, FirstEnergy has an

obligation to continue (i) publishing quarterly a list of all payments to 501(c)(4) entities and all payments to entities known by FirstEnergy operating for the benefit of a public official, either directly or indirectly;

(ii) not making any statements that contradict the DPA;

(iii) notifying the U.S.

Attorney’s Office of any changes in FirstEnergy’s corporate form;

and (iv) cooperating with the U.S.

Attorney’s Office until the conclusion of any related investigation, criminal prosecution, and civil proceeding brought by the U.S.

Attorney’s Office, including the January 17, 2025, indictment against two former FirstEnergy senior officers, as described below in “Outlook -- Other Legal Proceedings - United States v.

Larry Householder, et al.”.

Within 30 days of those matters concluding, and FirstEnergy’s successful completion of its remaining obligations, the U.S.

Attorney’s Office will dismiss the criminal information.

On February 9, 2022, FE, acting through the SLC, agreed to a settlement term sheet to resolve multiple shareholder derivative lawsuits that were filed in the S.D.

Ohio, the N.D.

Ohio, and the Ohio Court of Common Pleas, Summit County.

Ohio, and the Ohio Court of Common Pleas, Summit County, each relating to the allegations against the now former Ohio House Speaker Larry Householder and other individuals and entities allegedly affiliated with Mr.

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.

1 unchanged sentence

On August 23, 2022, the S.D.

Ohio granted final approval of the settlement.

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 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 issued a stay of the case pending the 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 fully resolve these shareholder derivative lawsuits.

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.

In addition, 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.

Subsequently, on April 28, 2021, July 11, 2022, and May 25, 2023, the SEC issued additional subpoenas to FE.

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 Further, in letters dated January 26, and February 22, 2021, staff of FERC's Division of Investigations notified FirstEnergy that it was investigating FirstEnergy’s lobbying and governmental affairs activities concerning HB 6.

On December 30, 2022, FERC approved a Stipulation and Consent Agreement that resolves the investigation.

The agreement obligates FE to pay a civil penalty of $3.86 million, which was paid in January 2023, and to submit two annual compliance monitoring reports to FERC’s Office of Enforcement regarding improvements to FirstEnergy’s compliance programs.

The first compliance monitoring report was submitted in December 2023.

Ohio granted final approval of the settlement, which was subsequently appealed.

On February 16, 2024, the U.S.

Court of Appeals for the Sixth Circuit affirmed the district court’s final settlement approval.

All appeal options were exhausted on May 16, 2024, and the judgment and settlement became final, resolving the derivative lawsuits.

On May 17, 2024, the N.D.

Ohio granted the parties’ motion to dismiss based upon the approval of the settlement by the S.D.

The state court action was also dismissed on September 2, 2022.

The above settlement included a series of corporate governance enhancements and a payment to FE of $180 million, less approximately $36 million in court-ordered attorney’s fees awarded to plaintiffs, and a $7 million net return on deposited funds, which was received in the second quarter of 2024.

The judgment and settlement are final and, therefore, the derivative lawsuits are now fully resolved.

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 relating to the conduct described in the DPA.

On April 28, 2021, July 11, 2022, and May 25, 2023, the SEC issued additional subpoenas to FE, with which FE has complied.

FirstEnergy cooperated fully with the SEC investigation, and on September 12, 2024, the SEC issued a settlement order that concluded and resolved the investigation in its entirety.

Under the terms of the settlement, FE agreed to pay a civil penalty of $100 million and to cease and desist from committing or causing any violations and any future violations of specified provisions of the federal securities laws and rules promulgated thereunder, which was recognized as a loss contingency of $100 million in the second quarter of 2024 at Corporate/Other for segment reporting and paid on September 25, 2024.

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 was not aware of the OOCIC’s investigation prior to receiving the subpoena and understood that the OOCIC’s investigation was also focused on the conduct described in the DPA, other than with respect to the March 25, 2024, felony indictment of Mr.

Householder brought in Cuyahoga County, Ohio.

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.

FirstEnergy has taken numerous steps to address challenges posed by the HB 6 investigations and improve its compliance culture, including the refreshment of the FE Board, the hiring of key senior executives committed to supporting transparency and integrity, and strengthening and enhancing FirstEnergy’s compliance culture through several initiatives;

however, the outcomes of the unresolved HB 6 investigations and state regulatory audits remain unknown.

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 now-deceased, former chairman of the PUCO, and two former FirstEnergy senior officers, charging each of them with several felony counts, including bribery, telecommunications fraud, money laundering and aggravated theft, related to payments described in the DPA.

On August 12, 2024, FirstEnergy entered into a settlement with the OAG's Office, and the Summit County Prosecutor’s Office to resolve both the OOCIC investigation and State of Ohio ex rel.

Dave Yost, Ohio Attorney General v.

FirstEnergy Corp., et al.

and City of Cincinnati and City of Columbus v.

FirstEnergy Corp., noted below.

The settlement includes, among other things, a non-prosecution agreement and a payment of $19.5 million, which was recorded as a loss contingency in the second quarter of 2024 in FirstEnergy’s Consolidated Statements of Income at Corporate/Other for segment reporting and was paid on August 16, 2024.

Despite the many disruptions FirstEnergy has faced, and continues to currently face, the leadership team remains committed and focused on executing its strategy and running the business.

See “Outlook - Other Legal Proceedings” below for additional details on the government investigations, the DPA, and subsequent litigation surrounding the investigation of HB 6.

See “Outlook - Other Legal Proceedings” below for additional details on the government investigations, the DPA, and ongoing litigation surrounding the investigation of HB 6.

See also “Outlook - State Regulation - Ohio” below for details on the PUCO proceeding reviewing political and charitable spending and legislative activity in response to the investigation of HB 6.

The outcome of the government investigations, PUCO proceedings, legislative activity, and any of these lawsuits is uncertain and could have a material adverse effect on FirstEnergy’s financial condition, results of operations and cash flows.

The Form 10-K discusses 2023 and 2022 items and year-over-year comparisons between 2023 and 2022.

Discussions of 2021 items and year-over-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of FirstEnergy’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 13, 2023.

RESULTS OF OPERATIONS

The financial results discussed below include revenues and expenses from transactions among FirstEnergy’s business segments.

FIRSTENERGY'S CONSOLIDATED RESULTS OF OPERATIONS

2024 Compared with 2023

(In millions) For the Years Ended December 31,

2024 2023 Increase (Decrease)

Revenues $ 13,472 $ 12,870 $ 602 5 %

Operating expenses (11,097) (10,604) 493 5 %

Other expenses, net (871) (802) 69 9 %

Income taxes (377) (267) 110 41 %

Income attributable to noncontrolling interest (149) (74) 75 101 %

Earnings attributable to FE from continuing operations $ 978 $ 1,123 $ (145) (13) %

Earnings attributable to FE from continuing operations was $978 million or $1.70 per basic and diluted share in 2024 compared to $1,123 million or $1.96 per basic and diluted share in 2023, representing a decrease of $145 million that was primarily due to the following:

• A $200 million charge relating to an increase in ARO liabilities associated with final CCR rules and changes in future expected costs to remediate McElroy’s Run during 2024;

• A $100 million civil penalty resulting from the SEC investigation and a $19.5 million settlement with the OAG's office as further discussed below in “Outlook - Other Legal Proceedings”;

• A $62 million impairment charge related to the Akron general office in the third quarter of 2024;

• Lower revenues associated with changes to the Ohio DCR as a result of the PUCO’s ESP V order that became effective June 1, 2024;

• A $46 million charge for an expected refund, with interest, as a result of the Sixth Circuit ruling eliminating the 50 basis point adder associated with RTO membership, as further discussed below in "Outlook - Other Proceedings;"

• Higher non-deferred storm restoration expenses and planned vegetation management costs;

• Lower investment earnings related to FEV’s equity method investment in Global Holding, net of an impairment charge in the fourth quarter 2024;

• The dilutive effect of the FET Equity Interest Sale that closed in March 2024;

• Higher non-recoverable charges associated with regulatory proceedings and abandoned transmission projects;

• Higher debt redemption costs;

• Higher interest expense on long-term debt and short-term borrowings, partially offset by the redemption of certain FE long-term debt and higher capitalized financing costs;

• A higher effective tax rate due to tax charges related to the PA Consolidation and FET Equity Interest Sale in 2024, and the absence of a reduction in state income taxes and release of a valuation allowance recognized in 2023, partially offset by discrete tax benefits in 2024 associated with certain equity method investments and the remeasurement of excess deferred income taxes.

These were partially offset by the following:

• Net proceeds from the shareholder derivative lawsuit settlement, as described below in “Outlook - Other Legal Proceedings”;

• The implementation of base rate case settlements in Maryland, New Jersey and West Virginia;

• Higher weather-related customer usage and demand;

• Increased earnings as a result of regulated investment programs that increased rate base;

• Higher interest income on the FET Equity Interest Sale promissory notes;

• Lower Pension and OPEB mark-to-market adjustment charges;

• The absence of expenses associated with the cancellation of sponsorship agreements in 2023;

• Lower labor and benefits expenses, including those associated with the PEER program and separation-related costs.

Detailed segment reporting explanations are included below.

Distribution services by customer class are summarized in the following table:

For the Years Ended December 31,

(In thousands) Actual Weather-Adjusted

Electric Distribution MWh Deliveries (1)

2024 2023 Increase 2024 2023 Increase (Decrease)

Residential 54,631 52,217 4.6 % 55,447 55,909 (0.8) %

Commercial (2)

39,021 38,179 2.2 % 39,298 39,468 (0.4) %

Industrial 52,950 52,252 1.3 % 52,951 52,252 1.3 %

Total Electric Distribution MWh Deliveries 146,602 142,648 2.8 % 147,696 147,629 — %

(1) Reflects the reclassification of certain Pennsylvania customers from Industrial to Commercial.

Due to the January 2024 consolidation of the Pennsylvania Companies, certain customers are classified as Commercial effective June 1, 2024.

The MWh deliveries prior to the effective date have been adjusted for comparability.

(2) Includes street lighting.

Residential and commercial distribution deliveries were impacted by higher customer usage as a result of the weather.

Cooling degree days in 2024 were 37% above 2023 and 15% above normal.

Heating degree days in 2024 were 1% below 2023 and 15% below normal.

The financial results discussed below in Segment Results of Operations include revenues and expenses from transactions among FirstEnergy’s business segments.

A reconciliation of segment financial results is provided in Note 16, “Segment Information,” of the Notes to Consolidated Financial Statements.

Earnings attributable to FE from continuing operations by business segment was as follows:

(In millions, except per share amounts) For the Years Ended December 31, Increase (Decrease)

2023 2022 2021 2023 vs 2022 2022 vs 2021

Earnings Attributable to FE from Continuing Operations by Business Segment:

Regulated Distribution $ 740 $ 957 $ 1,288 $ (217) $ (331)

Regulated Transmission 514 361 408 153 (47)

Corporate/Other (131) (912) (457) 781 (455)

FIRSTENERGY'S CONSOLIDATED RESULTS OF OPERATIONS

2023 Compared with 2022

(In millions) For the Years Ended December 31,

2023 2022 Increase (Decrease)

Revenues 12,870 12,459 $ 411 3 %

Operating expenses (10,604) (10,549) 55 1 %

Other expenses, net (802) (471) 331 70 %

Income taxes (267) (1,000) (733) (73) %

Income attributable to noncontrolling interest (74) (33) 41 124 %

Earnings attributable to FE from continuing operations $ 1,123 $ 406 $ 717 177 %

EPS Attributable to FE:

Basic - continuing operations $ 1.96 $ 0.71 $ 2.27 $ 1.25 $ (1.56)

Basic - discontinued operations (0.04) — 0.08 (0.04) (0.08)

Basic $ 1.92 $ 0.71 $ 2.35 $ 1.21 170.4 % $ (1.64) (69.8) %

Diluted - continuing operations $ 1.96 $ 0.71 $ 2.27 $ 1.25 $ (1.56)

Diluted - discontinued operations (0.04) — 0.08 (0.04) (0.08)

Diluted $ 1.92 $ 0.71 $ 2.35 $ 1.21 170.4 % $ (1.64) (69.8) %

Summary of Results of Operations — 2023 Compared with 2022

Earnings attributable to FE from continuing operations was $1,123 million or $1.96 per basic and diluted share in 2023 compared to $406 million or $0.71 per basic and diluted share in 2022, representing an increase of $717 million that was primarily due to the following:

• The absence of an income tax charge of $752 million in 2022, representing the deferred tax liability associated with the deferred tax gain on the 19.9% FET equity interest sale to Brookfield, and a 2023 tax benefit of $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 carryforwards based on an assessment of regulated business operations and a change in the composition of a state tax return filing group, partially offset by a $58 million tax charge in 2023 associated with a true-up adjustment associated with the deferred tax gain on the 19.9% FET equity interest sale that closed in May 2022;

• Higher revenues from regulated investment programs, higher weather-adjusted customer usage and demand, the absence of a reserve for customer refunds associated with the FERC Audit, as further discussed below, and a true-up adjustment for the recovery of certain transmission formula rate operating costs during 2023;

• Lower other operating expenses from lower vegetation management expenses, including accelerated work during 2022, fewer regulated generation planned outages, and the absence of a reserve for customer refunds and the reclassification of certain transmission capital assets that are not expected to be recoverable resulting from the FERC Audit that was recognized in the third quarter of 2022;

• Lower debt redemption costs.

These were partially offset by the following:

• Lower customer usage as a result of the weather;

• Higher other operating expenses from lump sum compensation and severance benefits associated with the PEER program and involuntary separations in 2023, and higher investigation and other related costs associated with the government investigations;

• Higher depreciation expense from a higher asset base;

• Higher pension and OPEB mark-to-market adjustment charges;

• Higher interest expense on short-term borrowings and long-term debt, including the 2026 Convertible Notes issuance;

• Higher non-recoverable charges related to abandoned transmission projects in 2023;

• The dilutive effect from the 19.9% FET equity interest sale that closed in May 2022.

Detailed segment reporting explanations are included below.

Distribution services by customer class are summarized in the following table:

For the Years Ended December 31,

(In thousands) Actual Weather-Adjusted

Electric Distribution MWh Deliveries (1)

2023 2022 Increase (Decrease) 2023 2022 Increase

Residential 52,217 55,994 (6.7) % 55,909 55,081 1.5 %

Commercial (2)

38,179 39,479 (3.3) % 39,468 39,185 0.7 %

Industrial 52,252 52,008 0.5 % 52,252 52,008 0.5 %

Total Electric Distribution MWh Deliveries 142,648 147,481 (3.3) % 147,629 146,274 0.9 %

(1) Reflects the reclassification of certain Pennsylvania customers from Industrial to Commercial.

Due to the January 2024 consolidation of the Pennsylvania Companies, certain customers are classified as Commercial effective June 1, 2024.

The MWh deliveries prior to the effective date have been adjusted for comparability.

(2) Includes street lighting.

Residential and commercial distribution deliveries were impacted by lower customer usage as a result of the weather.

Cooling degree days in 2023 were 23% below 2022 and 15% below normal.

Heating degree days in 2023 were 14% below 2022 and 15% below normal.

The financial results discussed below in Segment Results of Operations include revenues and expenses from transactions among FirstEnergy’s business segments.

A reconciliation of segment financial results is provided in Note 16, “Segment Information,” of the Notes to Consolidated Financial Statements.

Summary of Segment Results of Operations — 2024 Compared with 2023

Financial results for FirstEnergy’s business segments for the years ended December 31, 2024 and 2023, were as follows:

2023 Financial Results Regulated Distribution Regulated Transmission Corporate/Other and Reconciling Adjustments FirstEnergy Consolidated

2024 Financial Results

(In millions)

Distribution Integrated Stand-Alone Transmission Corporate/Other and Reconciling Adjustments FirstEnergy Consolidated

Electric $ 6,703 $ 4,815 $ 1,768 $ 9 $ 13,295

6 unchanged sentences

Provision for depreciation 648 521 336 76 1,581

Deferral of regulatory assets, net (256) (5) — (261)

Amortization (deferral) of regulatory assets, net (171) (66) 6 — (231)

General taxes 752 140 279 41 1,212

2 unchanged sentences

Debt redemption costs — — — (85) (85)

Equity method investment earnings — — 175 175

Equity method investment earnings, net — — — 58 58

Miscellaneous income, net 124 54 18 (7) 189

Pension and OPEB mark-to-market adjustment (78) (36) 36 (78)

Pension and OPEB mark-to-market adjustments 36 26 6 (90) (22)

Interest expense (432) (262) (275) (175) (1,144)

4 unchanged sentences

Earnings (Loss) Attributable to FE from Continuing Operations $ 624 $ 535 $ 294 $ (475) $ 978

2022 Financial Results Regulated Distribution Regulated Transmission Corporate/Other and Reconciling Adjustments FirstEnergy Consolidated

2023 Financial Results

(In millions)

Distribution Integrated Stand-Alone Transmission Corporate/Other and Reconciling Adjustments FirstEnergy Consolidated

Electric $ 6,690 $ 4,261 $ 1,731 $ 11 $ 12,693

6 unchanged sentences

Provision for depreciation 620 462 304 75 1,461

Deferral of regulatory assets, net (362) (3) — (365)

Amortization (deferral) of regulatory assets, net (259) (10) 8 — (261)

General taxes 734 129 257 44 1,164

2 unchanged sentences

Debt redemption costs — — — (36) (36)

Equity method investment earnings — — 168 168

Miscellaneous income, net 361 36 18 415

Pension and OPEB mark-to-market adjustment (50) (15) 137 72

Equity method investment earnings, net — — — 175 175

Miscellaneous income (expense), net 84 73 17 (10) 164

Pension and OPEB mark-to-market adjustments (33) (50) (32) 37 (78)

Interest expense (390) (257) (245) (232) (1,124)

1 unchanged sentence

Total Other Expense (318) (199) (222) (63) (802)

Income taxes 251 110 639 1,000

Income taxes (benefits) 147 37 146 (63) 267

Income attributable to noncontrolling interest — — 74 — 74

3 unchanged sentences

Financial Results

Increase (Decrease) Regulated Distribution Regulated Transmission Corporate/Other and Reconciling Adjustments FirstEnergy Consolidated

Increase (Decrease) Distribution Integrated Stand-Alone Transmission Corporate/Other and Reconciling Adjustments FirstEnergy Consolidated

(In millions)

7 unchanged sentences

Provision for depreciation 28 59 32 1 120

Deferral of regulatory assets, net 106 (2) — 104

Amortization (deferral) of regulatory assets, net 88 (56) (2) — 30

General taxes 18 11 22 (3) 48

2 unchanged sentences

Debt redemption costs — — — (49) (49)

Equity method investment earnings — — 7 7

Miscellaneous income, net (231) (34) 14 (251)

Pension and OPEB mark-to-market adjustment (28) (21) (101) (150)

Equity method investment earnings, net — — — (117) (117)

Miscellaneous income (expense), net 40 (19) 1 3 25

Pension and OPEB mark-to-market adjustments 69 76 38 (127) 56

Interest expense (42) (5) (30) 57 (20)

4 unchanged sentences

Earnings (Loss) Attributable to FE from Continuing Operations $ 37 $ 235 $ (105) $ (312) $ (145)

Regulated Distribution — 2023 Compared with 2022

Regulated Distribution's earnings attributable to FE from continuing operations decreased $217 million in 2023, as compared to 2022, primarily resulting from lower customer usage as a result of the weather, lower net pension and OPEB credits, and higher interest expense and costs from the PEER, as further discussed below, partially offset by lower other operating expenses, higher revenues from regulated investment programs and higher weather-adjusted customer usage and demand.

The $237 million increase in total revenues resulted from the following sources:

Distribution Segment — 2024 Compared with 2023

Distribution segment's earnings attributable to FE from continuing operations increased $37 million in 2024, as compared to 2023, primarily due to higher customer usage as a result of the weather, lower Ohio customer rate credits and lower Pension and OPEB mark-to-market adjustment charges, partially offset by lower weather-adjusted customer usage and demand, lower revenues due to changes in the Ohio DCR that became effective June 1, 2024, and higher operating expenses, including increases in the ARO liability.

Distribution's total revenues increased $9 million as a result of the following sources:

For the Years Ended December 31,

8 unchanged sentences

Total Revenues $ 6,863 $ 6,854 $ 9

Distribution services revenues increased $111 million in 2023, as compared to 2022, primarily resulting from higher rider revenues associated with certain investment programs, higher weather-adjusted customer usage and demand, lower customer refunds and credits associated with the PUCO-approved Ohio Stipulation and other rider rate adjustments at the Pennsylvania Companies, which have no material impact to current period earnings, partially offset by lower customer usage as a result of the weather and lower recovery of transmission expenses.

Distribution services by customer class are summarized in the following table:

Distribution services revenues increased $333 million in 2024, as compared to 2023, primarily due to higher customer usage as a result of the weather, higher rider revenues associated with a Pennsylvania regulated investment program, and lower customer credits associated with the PUCO-approved Ohio Stipulation.

Additionally, revenues increased due to the higher recovery of transmission expenses, and other FE PA rider rate adjustments, which have no material impact to earnings.

Higher distribution services revenues were partially offset by lower weather-adjusted customer usage and demand, and lower revenues associated with changes to the Ohio DCR as a result of the PUCO’s ESP V order that became effective June 1, 2024.

Generation sales revenues decreased $320 million in 2024, as compared to 2023, primarily due to lower retail generation sales as a result of increased customer shopping, partially offset by higher non-shopping generation auction rates.

Total generation provided by alternative suppliers as a percentage of total MWh deliveries for the Ohio Companies and FE PA in 2024, as compared to 2023, increased to 90% from 77% in Ohio and increased to 63% from 62% in Pennsylvania.

Retail and wholesale generation sales revenue have no material impact to earnings.

Operating Expenses —

Total operating expenses increased $54 million, primarily due to the following:

• Purchased power costs, which have no material impact to earnings, decreased $359 million in 2024, as compared to 2023, primarily due to lower generation sales volumes, as described above, and decreased capacity expenses, partially offset by higher unit costs.

• Other operating expenses increased $279 million in 2024, as compared to 2023, primarily due to:

• Higher network transmission expenses of $154 million, which are deferred for future recovery, resulting in no material impact to earnings;

• $46 million charge related to changes in ARO liabilities associated with final CCR rules;

• $32.5 million contribution commitment by the Ohio Companies, as a result of the PUCO's Ohio ESP V order;

• $31 million impairment charge related to the Akron general office in the third quarter of 2024;

• Higher planned vegetation management expenses of $57 million;

• Higher energy efficiency and other state mandated program costs of $8 million, which were deferred for future recovery;

• Higher storm restoration expenses of $48 million, of which $38 million were deferred for future recovery;

• Higher uncollectible expenses of $40 million, of which $14 million were deferred for future recovery, primarily due to a reduction to the allowance during 2023.

This increase was partially offset by:

• Lower other operating expenses of $138 million, primarily due to lower labor and benefits expenses, including those associated with the PEER program and separation-related costs.

• Depreciation expense increased $28 million in 2024, as compared to 2023, primarily due to a higher asset base.

• Deferral of regulatory assets decreased $88 million in 2024, as compared to 2023, primarily due to a $17 million decrease of certain Tax Act savings deferrals to FE PA customers, $69 million decrease from lower net generation and transmission related deferrals, and $40 million related to net decreases in other deferrals, partially offset by $38 million increase due to higher deferral of storm related expenses.

• General taxes increased $18 million in 2024, as compared to 2023, primarily due to higher gross receipts taxes.

Other Expense —

Other expense decreased $70 million in 2024, as compared to 2023, primarily due to $69 million in lower pension and OPEB mark-to-market adjustment charges.

Distribution segment's effective tax rate was 17.8% and 20.0% for 2024 and 2023, respectively, primarily due to the remeasurement of excess deferred income taxes in 2024.

Integrated Segment — 2024 Compared with 2023

Integrated segment’s earnings attributable to FE from continuing operations increased $235 million in 2024, as compared to 2023, primarily from the implementation of base rate cases, higher customer usage and demand, higher revenues from regulated investment programs, and lower Pension and OPEB mark-to-market adjustment charges, partially offset by higher operating expenses, including increases in the ARO liability, and a higher effective tax rate discussed below.

Integrated segment’s total revenues increased $556 million as a result of the following sources:

For the Years Ended December 31,

(In thousands) Actual Weather-Adjusted

Electric Distribution MWh Deliveries 2023 2022 Increase (Decrease) 2023 2022 Increase

Residential 52,216 55,995 (6.7) % 55,908 55,081 1.5 %

Commercial (1)

Revenues by Type of Service 2024 2023 Increase (Decrease)

(In millions)

Distribution services (1)

$ 1,600 $ 1,411 $ 189

Industrial 55,541 55,169 0.7 % 55,541 55,169 0.7 %

Total Electric Distribution MWh Deliveries 142,648 147,481 (3.3) % 147,629 146,274 0.9 %

(1) Includes street lighting.

Residential and commercial distribution deliveries were impacted by lower customer usage as a result of the weather.

Heating degree days in 2023 were 14% below 2022 and 15% below normal.

Cooling degree days in 2023 were 23% below 2022 and 15% below normal.

Increases in industrial distribution deliveries were primarily from oil and gas extraction, mining, and transportation equipment manufacturing, partially offset by decreases in deliveries to plastic and rubber manufacturing and chemical manufacturing.

Compared to pre-pandemic levels in 2019, weather-adjusted residential distribution deliveries in 2023 increased 4.3%, while commercial and industrial deliveries decreased 4.1% and 0.2%, respectively.

The following table summarizes the price and volume factors contributing to the $107 million increase in generation revenues in 2023, as compared to 2022:

Source of Change in Generation Revenues Increase (Decrease)

Generation sales:

Retail 2,689 2,324 365

Wholesale 146 208 (62)

Total generation sales 2,835 2,532 303

Transmission revenues:

JCP&L 243 206 37

MP & PE 137 112 25

Total transmission revenues 380 318 62

Other 61 59 2

Total Revenues $ 4,876 $ 4,320 $ 556

(1) Includes $10 million of ARP revenues in 2024, related to lost distribution revenues associated with energy efficiency in New Jersey.

Distribution services revenues increased $189 million in 2024, as compared to 2023, primarily due to higher revenues from the implementation of base rate cases, higher customer usage as a result of the weather, higher weather-adjusted customer usage and demand, and higher rider revenues associated with certain regulated investment programs.

Additionally, revenues increased due to the higher recovery of transmission expenses, which have no material impact to earnings.

Generation sales revenues increased $303 million in 2024, as compared to 2023, primarily due to higher retail revenues, partially offset by lower wholesale revenues.

• Retail generation sales increased $365 million in 2024, as compared to 2023, primarily due to higher customer usage as a result of the weather and higher non-shopping generation auction rates.

Retail generation sales, other than those in West Virginia, have no material impact to earnings.

• Wholesale generation revenues decreased $62 million in 2024, as compared to 2023, primarily due to lower capacity revenues and lower market prices, partially offset by higher sales volumes.

The difference between current wholesale generation revenues and certain energy costs incurred is deferred for future recovery or refund, with no material impact to earnings.

Transmission revenues increased $62 million in 2024, as compared to 2023, primarily due to higher rate base from regulated investment programs.

Operating Expenses —

Total operating expenses increased $269 million, primarily due to:

• Fuel costs decreased $74 million in 2024, as compared to 2023, primarily due to lower unit costs and consumption volumes.

Due to the ENEC, fuel expense has no material impact to earnings.

• Purchased power costs, which have no material impact to earnings, increased $161 million in 2024, as compared to 2023, primarily due to higher unit costs and volumes, partially offset by lower capacity expenses.

• Other operating expenses increased $168 million in 2024, as compared to 2023, primarily due to:

• $53 million charge at JCP&L in the first quarter of 2024 associated with certain corporate support costs recorded to capital accounts from the FERC Audit that were determined, as a result of the base rate case settlement agreement, to be disallowed from future recovery;

• Higher storm restoration expenses of $80 million, of which $63 million was deferred for future recovery;

• Higher network transmission expenses of $42 million, which were deferred for future recovery, resulting in no material impact to earnings;

• $16 million charge related to changes in ARO liabilities associated with final CCR rules;

• $17 million impairment charge related to the Akron general office in the third quarter of 2024;

• Higher planned vegetation management costs of $15 million, of which $8 million were deferred for future recovery;

• Higher uncollectible expenses of $17 million, which were mostly deferred for future recovery, primarily due to a reduction to the allowance during 2023;

• Higher energy efficiency and other state mandated program costs of $27 million, which were deferred for future recovery, resulting in no material impact to earnings.

This increase was partially offset by:

• Lower other operating and maintenance expenses of $99 million, primarily due to lower labor and benefit expenses, including those associated with the PEER program and separation-related costs and lower regulated generation costs.

• Depreciation expense increased $59 million in 2024, as compared to 2023, primarily due to a higher asset base.

• Deferral of regulatory assets increased $56 million in 2024, as compared to 2023, primarily due to:

• $63 million due to higher deferral of storm related expenses;

• $60 million due to the approval in the first quarter of 2024 to recover costs of certain retired generation stations by the WVPSC;

• $31 million related to net increases in other deferrals;

• $12 million due to higher energy efficiency related deferrals.

This increase was partially offset by:

• $98 million due to lower net generation and transmission related deferrals;

• $12 million due to higher vegetation management program-related amortizations.

• General taxes increased $11 million in 2024, as compared to 2023, primarily due to higher gross receipts taxes.

Other Expense —

Other expense decreased $64 million in 2024, as compared to 2023, primarily due to $76 million in lower pension and OPEB mark-to-market adjustment charges, higher interest expense on short-term borrowings and higher non-recoverable charges related to abandoned transmission projects, partially offset by higher capitalized interest.

Income Taxes —

Integrated segment’s effective tax rate was 22.2% and 11.0% in 2024 and 2023, respectively.

The increase in the effective tax rate is primarily due to the absence of discrete tax benefits related to the expected utilization of state NOL carryforwards and the release of an uncertain tax position related to state taxes recognized in 2023, partially offset by a remeasurement of excess deferred income taxes in 2024.

Stand-Alone Transmission Segment — 2024 Compared with 2023

Stand-Alone Transmission’s earnings attributable to FE from continuing operations decreased $105 million in 2024, as compared to 2023, primarily due to the dilutive effect of the FET Equity Interest Sale that closed in March 2024, and a charge for an expected refund, with interest, as a result of the Sixth Circuit ruling eliminating the 50 basis point adder associated with RTO membership, partially offset by higher revenues from regulated capital investments that increased rate base.

Total revenues increased $39 million in 2024, as compared to 2023, primarily due to higher rate base and recovery of higher transmission operating expenses partially offset by a charge for an expected refund as a result of the Sixth Circuit ruling eliminating the 50 basis point adder associated with RTO membership.

Revenues by transmission asset owner are shown in the following table:

For the Years Ended December 31,

Revenues by Transmission Asset Owner 2024 2023 Increase (Decrease)

(In millions)

Change in sales volumes $ (198)

Change in prices 571

Change in sales volumes (131)

Change in prices (94)

Capacity revenue (41)

Change in Generation Revenues $ 107

Retail generation sales, other than those in West Virginia, have no material impact to FirstEnergy's earnings.

The decrease in retail generation sales volumes was primarily due to lower usage as a result of the weather and increased customer shopping in Pennsylvania, Total generation provided by alternative suppliers as a percentage of total MWh deliveries in 2023, as compared to 2022, increased to 62% from 60% in Pennsylvania.

The increase in retail generation prices primarily resulted from higher non-shopping generation auction rates.

Wholesale generation revenues decreased $266 million in 2023, as compared to 2022, primarily due to lower capacity revenues, sales volumes and market prices.

The difference between current wholesale generation revenues and certain energy costs incurred is deferred for future recovery or refund, with no material impact to current period earnings.

ATSI $ 990 $ 974 $ 16

TrAIL 274 284 (10)

MAIT 440 399 41

KATCo 85 89 (4)

Other (2) 2 (4)

Total Revenues $ 1,787 $ 1,748 $ 39

Operating Expenses —

Total operating expenses increased $193 million primarily due to the following:

• Fuel expense decreased $192 million in 2023, as compared to 2022, primarily due to lower generation output and unit costs.

However, due to the ENEC, fuel expense has no material impact on current period earnings.

• Purchased power costs increased $245 million in 2023, as compared to 2022, primarily due to increased prices, partially offset by lower capacity expenses and decreased volumes as described above.

Source of Change in Purchased Power Increase (Decrease)

Total operating expenses increased $73 million in 2024, as compared to 2023, primarily due to higher operation and maintenance costs, higher property taxes and depreciation due to a higher asset base and a $11 million charge from FESC in connection with its planned exit from the Akron general office.

Other than the general office charge, nearly all operating expenses are recovered through formula rates, resulting in no material impact to earnings.

Other Expense —

Total other expense decreased $31 million in 2024, as compared to 2023, primarily due to lower pension and OPEB mark-to-market adjustment charges of $38 million, partially offset by higher net financing costs associated with new debt issuances and interest related to the expected refund associated with the Sixth Circuit ruling noted above.

Income Taxes —

Stand-Alone Transmission's effective tax rate was 28.1% and 23.6% for 2024 and 2023, respectively.

The increase in the effective tax rate was primarily due to discrete tax charges related to the FET Equity Interest Sale in 2024, as well as the absence of a discrete tax benefit related to the expected utilization of state NOL carryforwards recognized in 2023.

Corporate/Other — 2024 Compared with 2023

Financial results from Corporate/Other resulted in a $312 million increase in losses attributable to FE from continuing operations for 2024 compared to 2023, primarily due to:

• $120 million related to a civil penalty with the SEC and a settlement with the OAG's office as further discussed below in “Outlook - Other Legal Proceedings”;

• $111 million (after-tax) charge related to changes in ARO liabilities associated with final CCR rules and future expected costs to remediate McElroy’s Run;

• $99 million (after-tax) from higher pension and OPEB mark-to-market adjustment charges;

• $80 million (after-tax) in lower investment earnings related to FEV’s equity method investment in Global Holding;

• $38 million (after-tax) of higher debt redemption costs;

• $10 million (after-tax) related to an impairment charge recognized in the fourth quarter of 2024 associated with FirstEnergy's actions to exit FEV's equity method investment in Global Holding;

• $9 million (after-tax) of higher investigation and other related costs associated with the government investigations;

• Lower income tax benefits in 2024 as a result of tax charges related to the PA Consolidation and FET Equity Interest Sale, the absence of a reduction in state income taxes and release of valuation allowances recognized in 2023, partially offset by discrete tax benefits recognized in 2024 associated with certain equity method investments.

The increase in losses were partially offset by:

• $116 million (after-tax) of net proceeds from the shareholder derivative lawsuit settlement as described below in “Outlook - Other Legal Proceedings”;

• $23 million (after-tax) of lower other operating expenses primarily related to the absence of expenses associated with the cancellation of certain sponsorship agreements in 2023;

• $19 million (after-tax) of higher interest income on the FET Equity Interest Sale promissory notes;

• $16 million (after-tax) of lower interest expense as a result of the redemption of certain FE long-term debt and lower short-term borrowings.

Summary of Segment Results of Operations — 2023 Compared with 2022

Financial results for FirstEnergy’s business segments for the years ended December 31, 2023 and 2022, were as follows:

2023 Financial Results

(In millions)

Change due to unit costs $ 419

Change due to volumes (114)

Capacity expense (60)

Change in Purchased Power Costs $ 245

• Other operating expenses decreased $40 million in 2023, as compared to 2022, primarily due to:

• Lower other operating and maintenance expenses of $47 million, primarily associated with lower labor costs and fewer regulated generation planned outages;

Distribution Integrated Stand-Alone Transmission Corporate/Other and Reconciling Adjustments FirstEnergy Consolidated

Electric $ 6,690 $ 4,261 $ 1,731 $ 11 $ 12,693

Other 164 59 17 (63) 177

Total Revenues 6,854 4,320 1,748 (52) 12,870

Operating Expenses:

Fuel — 538 — — 538

Purchased power 2,578 1,509 — 21 4,108

Other operating expenses 2,129 1,156 338 (29) 3,594

Provision for depreciation 620 462 304 75 1,461

Amortization (deferral) of regulatory assets, net (259) (10) 8 — (261)

General taxes 734 129 257 44 1,164

Total Operating Expenses 5,802 3,784 907 111 10,604

Other Income (Expense):

Debt redemption costs — — — (36) (36)

Equity method investment earnings, net — — — 175 175

Miscellaneous income (expense), net 84 73 17 (10) 164

Pension and OPEB mark-to-market adjustments (33) (50) (32) 37 (78)

Interest expense (390) (257) (245) (232) (1,124)

Capitalized financing costs 21 35 38 3 97

Total Other Expense (318) (199) (222) (63) (802)

Income taxes (benefits) 147 37 146 (63) 267

Income attributable to noncontrolling interest — — 74 — 74

Earnings (Loss) Attributable to FE from Continuing Operations $ 587 $ 300 $ 399 $ (163) $ 1,123

2022 Financial Results

(In millions)

Distribution Integrated Stand-Alone Transmission Corporate/Other and Reconciling Adjustments FirstEnergy Consolidated

Electric $ 6,267 $ 4,425 $ 1,581 $ 27 $ 12,300

Other 158 45 16 (60) 159

Total Revenues 6,425 4,470 1,597 (33) 12,459

Operating Expenses:

Fuel — 730 — — 730

Purchased power 2,236 1,606 — 21 3,863

Other operating expenses 2,094 1,226 428 69 3,817

Provision for depreciation 593 430 277 75 1,375

Amortization (deferral) of regulatory assets, net (241) (128) 4 — (365)

General taxes 714 123 247 45 1,129

Total Operating Expenses 5,396 3,987 956 210 10,549

Other Income (Expense):

Debt redemption costs — — — (171) (171)

Equity method investment earnings, net — — — 168 168

Miscellaneous income, net 165 102 55 93 415

Pension and OPEB mark-to-market adjustments (12) (43) (10) 137 72

Interest expense (325) (225) (263) (226) (1,039)

Capitalized financing costs 19 28 36 1 84

Total Other Income (Expense) (153) (138) (182) 2 (471)

Income taxes 202 80 111 607 1,000

Income attributable to noncontrolling interest — — 33 — 33

Earnings (Losses) Attributable to FirstEnergy Corp.

from Continuing Operations $ 674 $ 265 $ 315 $ (848) $ 406

Changes Between 2023 and 2022

Financial Results

Increase (Decrease) Distribution Integrated Stand-Alone Transmission Corporate/Other and Reconciling Adjustments FirstEnergy Consolidated

(In millions)

Electric $ 423 $ (164) $ 150 $ (16) $ 393

Other 6 14 1 (3) 18

Total Revenues 429 (150) 151 (19) 411

Operating Expenses:

Fuel — (192) — — (192)

Purchased power 342 (97) — — 245

Other operating expenses 35 (70) (90) (98) (223)

Provision for depreciation 27 32 27 — 86

Amortization (deferral) of regulatory assets, net (18) 118 4 — 104

General taxes 20 6 10 (1) 35

Total Operating Expenses 406 (203) (49) (99) 55

Other Income (Expense):

Debt redemption costs — — — 135 135

Equity method investment earnings, net — — — 7 7

Miscellaneous income (expense), net (81) (29) (38) (103) (251)

Pension and OPEB mark-to-market adjustments (21) (7) (22) (100) (150)

Interest expense (65) (32) 18 (6) (85)

Capitalized financing costs 2 7 2 2 13

Total Other Income (Expense) (165) (61) (40) (65) (331)

Income taxes (benefits) (55) (43) 35 (670) (733)

Income attributable to noncontrolling interest — — 41 — 41

Earnings (Loss) Attributable to FE from Continuing Operations $ (87) $ 35 $ 84 $ 685 $ 717

Distribution Segment — 2023 Compared with 2022

Distribution segment's earnings attributable to FE from continuing operations decreased $87 million in 2023, as compared to 2022, primarily due to lower customer usage as a result of the weather, lower net pension and OPEB credits, and higher interest expense and costs from the PEER, partially offset by lower other operating expenses, higher revenues from regulated investment programs and higher weather-adjusted customer usage and demand.

Distribution's total revenue increased $429 million from the following sources:

For the Years Ended December 31,

Revenues by Type of Service 2023 2022 Increase

(In millions)

Distribution services $ 3,847 $ 3,689 $ 158

Generation sales:

Retail 2,823 2,559 264

Wholesale 20 19 1

Total generation sales 2,843 2,578 265

Other 164 158 6

Total Revenues $ 6,854 $ 6,425 $ 429

Distribution services revenues increased $158 million in 2023, as compared to 2022, primarily due to higher weather-adjusted customer usage and demand, higher rider revenues associated with a Pennsylvania regulated investment program, and lower customer credits associated with the PUCO-approved Ohio Stipulation.

Higher distribution services revenues were partially offset by lower customer usage as a result of the weather and lower recovery of transmission expenses, which have no material impact to earnings.

Generation sales revenues increased $265 million in 2023, as compared to 2022, primarily due to higher retail generation sales as a result of higher non-shopping generation auction rates, partially offset by lower customer usage as a result of the weather and increased customer shopping in Pennsylvania.

Total generation provided by alternative suppliers as a percentage of total MWh deliveries in Pennsylvania increased to 62% in 2023 as compared to 60% in 2022.

Retail and wholesale generation sales revenue have no material impact to earnings.

Operating Expenses —

Total operating expenses increased $406 million primarily due to the following:

• Purchased power costs, which have no material impact to earnings, increased $342 million in 2023, as compared to 2022, primarily due to higher volumes, partially offset by lower unit costs and capacity expenses.

• Other operating expenses increased $35 million in 2023, as compared to 2022, primarily due to:

• Lump sum compensation and severance benefits of $24 million associated with the PEER program and involuntary separations in 2023;

• Higher energy efficiency and other state mandated program costs of $26 million, which were deferred for future recovery;

• Higher storm restoration expenses of $95 million, which were mostly deferred for future recovery, resulting in no material impact to earnings recovery;

This increase was partially offset by:

• Lower vegetation management expenses of $72 million, including accelerated work during 2022;

• Lower network transmission expenses of $46 million.

These costs are deferred for future recovery, resulting in no material impact on current period earnings;

• Lower uncollectible expenses of $46 million of which $24 million was deferred for future recovery, resulting in no material impact on current period earnings;

partially offset by:

• Lump sum compensation and severance benefits of $42 million associated with the PEER program and involuntary separations in 2023, as further discussed below;

• Higher vegetation management in West Virginia, energy efficiency and other state mandated program costs of $58 million, which are deferred for future recovery, resulting in no material impact on current period earnings;

• Higher storm expenses of $85 million, which was all deferred for future recovery, resulting in no material impact on current period earnings.

• Lower network transmission expenses of $11 million, which are deferred for future recovery, resulting in no material impact to earnings;

• Lower uncollectible expenses of $27 million, of which $4 million was deferred for future recovery.

• Depreciation expense increased $27 million in 2023, as compared to 2022, primarily due to a higher asset base.

• Deferral of regulatory asset decreased $106 million in 2023, as compared to 2022, primarily due to:

• Deferral of regulatory assets increased $18 million in 2023, as compared to 2022, primarily due to:

• $83 million net increase due to higher generation and transmission related deferrals;

• $98 million increase due to higher deferral of storm related expenses;

This increase was partially offset by:

• $100 million decrease due to the absence of a return of certain Tax Act savings to Pennsylvania customers in 2022;

• $97 million net decrease due to lower generation and transmission related deferrals, and

• $51 million decrease due to the absence of the customer refunds associated with the Ohio Stipulation;

partially offset by:

• $91 million increase due to higher deferral of storm related expenses;

• $12 million net decreases in other deferrals.

• General taxes increased $20 million in 2023, as compared to 2022, primarily due to higher gross receipts taxes and Ohio property taxes, partially offset by lower Ohio kWh taxes.

Other Expense —

Other expense increased $165 million in 2023, as compared to 2023, primarily due to lower net pension and OPEB non-service credits, a $21 million change in pension and OPEB mark-to-market adjustment charges, higher net interest expense associated with new long-term issuances and higher short-term borrowings, and a charge from an environmental agreement requiring a $10 million contribution to the EPA associated with a former generation plant of OE.

Distribution segment's effective tax rate was 20.0% and 23.1% for 2023 and 2022, respectively.

Integrated Segment — 2023 Compared with 2022

Integrated segment’s earnings attributable to FE from continuing operations increased $35 million in 2023, as compared to 2022, primarily due to lower other operating expenses, higher revenues from regulated investment programs and higher weather-adjusted customer usage and demand, partially offset by lower customer usage as a result of the weather, lower net pension and OPEB credits, and higher interest expense and costs from the PEER.

Integrated segment’s total revenues decreased $150 million as a result of the following sources:

For the Years Ended December 31,

Revenues by Type of Service 2023 2022 Increase (Decrease)

(In millions)

Distribution services $ 1,411 $ 1,459 $ (48)

Generation sales:

Retail 2,324 2,209 115

Wholesale 208 475 (267)

Total generation sales 2,532 2,684 (152)

Transmission revenues:

JCP&L 206 203 3

MP & PE 112 79 33

Total transmission revenues 318 282 36

Other 59 45 14

Total Revenues $ 4,320 $ 4,470 $ (150)

Distribution services revenues decreased $48 million in 2023, as compared to 2022, primarily due to lower customer usage as a result of the weather and lower recovery of transmission expenses, partially offset by higher rider revenues associated with certain investment programs, and higher weather-adjusted customer usage and demand.

Generation sales revenues decreased $152 million in 2023, as compared to 2022, primarily due to lower wholesale revenues, partially offset by higher retail revenues.

• Retail generation sales increased $115 million in 2023, as compared to 2022, primarily due to higher non-shopping generation auction rates, partially offset by lower sales volumes.

Retail generation sales, other than those in West Virginia, have no material impact to earnings.

• Wholesale generation revenues decreased $267 million in 2023, as compared to 2022, primarily due to lower capacity revenues, market prices and sales volumes.

The difference between current wholesale generation revenues and certain energy costs incurred is deferred for future recovery or refund, with no material impact to earnings.

Transmission revenues increased $36 million in 2023, as compared to 2022, primarily due to higher rate base from regulated investment programs.

Operating Expenses —

Total operating expenses decreased $203 million, primarily due to:

• Fuel costs decreased $192 million in 2023, as compared to 2022, primarily due to lower unit costs and consumption volumes.

Due to the ENEC, fuel expense has no material impact to earnings.

• Purchased power costs, which have no material impact to earnings, decreased $97 million in 2023, as compared to 2022, primarily due to lower unit costs and capacity expenses, partially offset by higher volumes.

• Other operating expenses decreased $70 million in 2023, as compared to 2022, primarily due to:

• Lower network transmission expenses of $30 million, which are deferred for future recovery, resulting in no material impact to earnings;

• Lower uncollectible expenses of $19 million, which are deferred for future recovery, resulting in no material impact to earnings;

• Lower storm restoration expenses of $10 million, which were mostly deferred for future recovery, resulting in no material impact to earnings;

• Lower expenses of $60 million, primarily due to the absence of the reclassification of certain transmission capital assets to operating expenses as a result of the FERC Audit.

This decrease was partially offset by:

• Lump sum compensation and severance benefits of $18 million associated with the PEER program and involuntary separations in 2023;

• Higher vegetation management in West Virginia, energy efficiency and other state mandated program costs of $17 million, which were deferred for future recovery;

• Higher other operating expenses of $14 million, primarily due to higher contractor expenses, partially offset by fewer regulated generation planned outages.

• Depreciation expense increased $32 million in 2023, as compared to 2022, primarily due to a higher asset base.

• Deferral of regulatory assets decreased $118 million in 2023, as compared to 2022, primarily due to:

• $181 million net decrease due to lower generation and transmission related deferrals;

• $8 million decrease due to lower deferral of storm related expenses.

This decrease was partially offset by:

• $40 million increase due to lower vegetation management and other program-related amortizations;

• $15 million increase due to higher energy efficiency related deferrals;

• $16 million related to net increases in other deferrals.

• $9 million increase due to lower vegetation related amortizations.

• General taxes increased $20 million in 2023, as compared to 2022, primarily due to higher gross receipts taxes and Ohio property taxes, partially offset by lower Ohio kWh taxes.

• General taxes increased $6 million in 2023, as compared to 2022, primarily due to higher payroll taxes.

Other Expense —

Other expense increased $345 million in 2023, as compared to 2022, primarily due to lower net pension and OPEB non-service credits, a $28 million change in pension and OPEB mark-to-market adjustments, higher net interest expense associated with new long-term issuances and higher short-term borrowings, and a charge from an environmental settlement agreement requiring a $10 million contribution to the EPA associated with a former generation plant of OE.

Regulated Distribution’s effective tax rate was 18.4% and 20.8% for 2023 and 2022, respectively.

Regulated Transmission — 2023 Compared with 2022

Regulated Transmission’s earnings attributable to FE from continuing operations increased $153 million in 2023, as compared to 2022, primarily due to the absence of a reserve for customer refunds and the reclassification of certain transmission capital assets that are not expected to be recoverable resulting from the FERC Audit that was recognized in the third quarter of 2022, as further discussed below, and an adjustment associated with the recovery of certain costs during 2023.

Additionally, earnings increased as a result of regulated capital investments that increased rate base, which is partially offset by the 19.9% minority equity interest sale in FET that closed in May 2022.

Other expense increased $61 million in 2023, as compared to 2022, primarily due to lower net pension and OPEB non-service credits, a $7 million change in pension and OPEB mark-to-market adjustment charges, and higher net interest expense associated with new long-term issuances and higher short-term borrowings.

Income Taxes —

Integrated segment’s effective tax rate was 11.0% and 23.2% in 2023 and 2022, respectively.

The decrease in the effective tax rate is primarily due to discrete tax benefits related to the expected utilization of state NOL carryforwards and the release of an uncertain tax position related to state taxes recognized in 2023.

Stand-Alone Transmission Segment — 2023 Compared with 2022

Stand-Alone Transmission's earnings attributable to FE from continuing operations increased $84 million in 2023, as compared to 2022, primarily due to the absence of a reserve for customer refunds and the reclassification of certain transmission capital assets that are not expected to be recoverable resulting from the FERC Audit that was recognized in the third quarter of 2022, as further discussed below and as a result of regulated capital investments that increased rate base, partially offset by the dilutive effect of the 19.9% sale of FET equity interest that closed in May 2022.

Total revenues increased $151 million in 2023, as compared to 2022, primarily due to the absence of a reserve for customer refunds associated with the FERC Audit, as further discussed below, a true-up adjustment for the recovery of certain transmission formula rate operating costs during 2023 and a higher rate base.

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MAIT 399 344 55

JCP&L 205 203 2

MP, PE and WP 202 138 64

KATCo 89 59 30

Total Revenues $ 1,748 $ 1,597 $ 151

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Other Expense —

Total other expense increased $75 million in 2023, as compared to 2022, primarily due to lower affiliated company interest income at FET, lower net pension and OPEB non-service credits and higher net financing costs due to the new debt issuances at MAIT and ATSI.

Total other expense increased $40 million in 2023, as compared to 2022, primarily due to a change in pension and OPEB mark-to-market adjustment charges of $22 million and pension and OPEB non-service credits partially offset by lower interest on long-term debt and borrowings under the revolving credit facilities and higher unregulated money pool interest income at FET.

Income Taxes —

Regulated Transmission’s effective tax rate was 23.3% and 21.8% for 2023 and 2022, respectively.

Stand-Alone Transmission's effective tax rate was 23.6% and 24.2% for 2023 and 2022, respectively.

Corporate/Other — 2023 Compared with 2022

Financial results from Corporate/Other resulted in a $781 million decrease in losses attributable to FE from continuing operations for 2023 compared to 2022, primarily due to lower income tax expense, lower interest and debt redemption expenses from the redemption of certain FE notes, as further discussed below, and lower affiliated company borrowings.

Lower income tax expense was primarily due to the absence of an income tax charge of $752 million in 2022, representing the deferred tax liability associated with the deferred tax gain on the 19.9% sale of FET membership interest to Brookfield, and a 2023 tax benefit of $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 net operating losses based on an assessment of regulated business operation and the composition of a state tax return filing group, partially offset by a $58 million tax charge in 2023 associated with a true-up adjustment associated with the deferred tax gain on the 19.9% sale of FET membership interest.

Financial results compared to the same period of 2022 also reflect higher investment earnings on corporate-owned life insurance policies and FEV’s interests in Signal Peak and lower debt redemption costs, partially offset by expenses associated with the cancellation of certain sponsorship agreements in 2023, higher investigation and other related costs associated with government investigations, a charge associated with an update to the McElroy’s Run ARO, lower pension and OPEB non-service credits and higher interest from the 2026 Convertible Notes issuance.

Financial results from Corporate/Other resulted in a $685 million decrease in losses attributable to FE from continuing operations for 2023 compared to 2022, primarily due to:

• Lower income tax expense primarily due to the absence of an income tax charge of $752 million in 2022, representing the deferred tax liability associated with the deferred tax gain on the 19.9% FET equity interest sale to Brookfield, and a 2023 tax benefit of $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 carryforwards based on an assessment of regulated business operation and the composition of a state tax return filing group, partially offset by a $58 million tax charge in 2023 associated with a true-up adjustment associated with the deferred tax gain on the 19.9% FET equity

interest sale;

• $105 million (after-tax) of lower debt redemption costs;

• $6 million (after-tax) related to higher investment earnings on corporate-owned life insurance policies;

• $6 million (after-tax) in higher investment earnings related to FEV’s equity method investment in Global Holding.

The decrease in losses were partially offset by:

• $78 million (after-tax) related to lower pension and OPEB mark-to-market adjustment charges;

• $23 million (after-tax) of higher other operating expenses primarily related to the expenses associated with the cancellation of certain sponsorship agreements in 2023;

• $20 million (after-tax) from lower pension and OPEB non-service credits;

• $16 million (after-tax) of higher investigation and other related costs associated with the government investigations;

• $8 million (after-tax) for a charge associated with an update to the McElroy’s Run ARO;

• $5 million (after-tax) of higher interest expense from the 2026 Convertible Notes issuance.

REGULATORY ASSETS AND LIABILITIES

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Regulatory liabilities represent amounts that are expected to be credited to customers through future regulated rates or amounts collected from customers for costs not yet incurred.

FirstEnergy, the Utilities and the Transmission Companies net their regulatory assets and liabilities based on federal and state jurisdictions.

FirstEnergy, the Electric Companies and the Transmission Companies net their regulatory assets and liabilities based on federal and state jurisdictions.

Management assesses the probability of recovery of regulatory assets, and settlement of regulatory liabilities, at each balance sheet date and whenever new events occur.

Factors that may affect probability relate to changes in the regulatory environment, issuance of a regulatory commission order or passage of new legislation.

Upon material changes to these factors, where

applicable, FirstEnergy will record new regulatory assets and liabilities and will assess whether it is probable that currently recorded regulatory assets and liabilities will be recovered or settled in future rates.

Upon material changes to these factors, where applicable, FirstEnergy will record new regulatory assets and liabilities and will assess whether it is probable that currently recorded regulatory assets and liabilities will be recovered or settled in future rates.

The following table provides information about the composition of net regulatory assets and liabilities as of December 31, 2024 and 2023, and the changes during the year 2024:

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Asset removal costs - Primarily represents the rates charged to customers that include a provision for the cost of future activities to remove assets, including obligations for which an ARO has been recognized, that are expected to be incurred at the time of retirement.

Deferred transmission costs - Reflects differences between revenues earned based on actual costs for the formula-rate Transmission Companies and the amounts billed, including amounts expected to be refunded to, or recoverable from, wholesale transmission customers resulting from the FERC Audit, as further described below, which amounts are recorded as a regulatory asset or liability and recovered or refunded, respectively, in subsequent periods.

Also included is the recovery of non-market based costs or fees charged to certain of the Utilities by various regulatory bodies including FERC and RTOs, which can include PJM charges and credits for service including, but not limited to, procuring transmission services and transmission enhancement.

Deferred transmission costs - Reflects differences between revenues earned based on actual costs for the formula-rate Transmission Companies and the amounts billed, including amounts at December 31, 2023, expected to be refunded to, or recoverable from, wholesale transmission customers resulting from the FERC Audit, which amounts are recorded as a regulatory asset or liability and recovered or refunded, respectively, in subsequent periods.

Also included is the recovery of non-market based costs or fees charged to certain of the Electric Companies by various regulatory bodies including FERC and RTOs, which can include PJM charges and credits for service including, but not limited to, procuring transmission services and transmission enhancement.

Deferred generation costs - Primarily relates to regulatory assets associated with the securitized recovery of certain fuel and purchased power regulatory assets at the Ohio Companies (amortized through 2034) as well as the ENEC at MP and PE.

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Approximately $402 million and $254 million are currently being recovered through rates as of December 31, 2024 and 2023, respectively.

Energy efficiency program costs - Relates to the recovery of costs in excess of revenues associated with energy efficiency programs including, New Jersey energy efficiency and renewable energy programs, the Pennsylvania Companies' Energy Efficiency and Conservation programs, the Ohio Companies' Demand Side Management and Energy Efficiency Rider, and PE's EmPOWER Maryland Surcharge.

Energy efficiency program costs - Relates to the recovery of costs in excess of revenues associated with energy efficiency programs including New Jersey energy efficiency and renewable energy programs, FE PA's Energy Efficiency and Conservation programs, the Ohio Companies' Demand Side Management and Energy Efficiency Rider, and PE's EmPOWER Maryland Surcharge.

Investments in certain of these energy efficiency programs earn a long-term return.

New Jersey societal benefit costs - Primarily relates to regulatory assets associated with MGP remediation, universal service and lifeline funds, and the New Jersey Clean Energy Program.

Vegetation management costs - Relates to regulatory assets associated with the recovery of certain distribution vegetation management costs in New Jersey and West Virginia as well as certain transmission vegetation management costs at MAIT, ATSI and WP/PE (amortized through 2024, 2030 and 2036, respectively).

Vegetation management costs - Relates to regulatory assets associated with the recovery of certain distribution vegetation management costs in New Jersey, certain distribution and transmission vegetation management costs in West Virginia, and certain transmission vegetation management costs at ATSI (amortized through 2030) and KATCo (amortized through 2036).

The following table provides information about the composition of net regulatory assets that do not earn a current return as of December 31, 2024 and 2023, of which approximately $698 million and $371 million, respectively, are currently being recovered through rates over varying periods, through 2068, depending on the nature of the deferral and the jurisdiction:

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Storm-related costs 694 602 92

Pandemic-related costs 35 45 (10)

Vegetation management 16 21 (5)

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Short-term cash requirements not met by cash provided from operations are generally satisfied through short-term borrowings.

Long-term cash needs may be met through the issuance of long-term debt by FE and certain of its subsidiaries to, among other things, fund capital expenditures and other capital-like investments, and refinance short-term and maturing long-term debt, subject to market conditions and other factors.

Long-term cash needs may be met through the issuance of long-term debt by FE and certain of its subsidiaries to, among other things, fund capital expenditures and other capital-like investments, and

refinance short-term and maturing long-term debt, subject to market conditions and other factors.

FE may utilize instruments other than senior notes to fund its liquidity and capital requirements, including hybrid securities.

Investments in 2023 by business segment are included below:

Business Segment 2023

Capital investments by business segment are included below:

Business Segment 2022 Actual

(In millions)

Regulated Distribution (1)

Regulated Transmission 1,781

Distribution $ 1,047 $ 1,020 $ 1,285

Integrated (1)

1,111 1,336 1,690

Stand-Alone Transmission 1,005 1,273 1,427

Corporate/Other 81 118 97

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(1) Includes capital expenditures and capital-like investments that earn a return.

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.

Capital investment forecasts for the years ended 2025, 2026, 2027, 2028, and 2029 by business segment are included below:

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Distribution $ 1,405 $ 1,390 $ 1,460 $ 1,540 $ 1,645

Stand-Alone Transmission 1,400 1,500 1,600 1,700 1,900

Integrated (1)

1,835 1,910 2,150 2,410 2,530

Stand-Alone Transmission (2)

1,650 1,790 1,885 1,980 2,180

Corporate/Other 85 70 75 65 70

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(1) Includes capital expenditures and capital-like investments that earn a return.

(2) Consolidated plan includes Brookfield's non-controlling interest in FET

In alignment with FirstEnergy’s strategy to invest in its segments as a fully regulated company, FirstEnergy is focused on maintaining balance sheet strength and flexibility.

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