Edgar Filing: CLEVELAND ELECTRIC ILLUMINATING CO

Form 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to


Commission	Registrant; State of Incorporation;	I.R.S. Employer
File Number	Address; and Telephone Number	Identification No.

333-21011	FIRSTENERGY CORP. (An Ohio Corporation) 76 South Main Street Akron, OH 44308 Telephone (800)736-3402	34-1843785

000-53742	FIRSTENERGY SOLUTIONS CORP. (An Ohio Corporation) c/o FirstEnergy Corp. 76 South Main Street Akron, OH 44308 Telephone (800)736-3402	31-1560186

1-2578	OHIO EDISON COMPANY (An Ohio Corporation) c/o FirstEnergy Corp. 76 South Main Street Akron, OH 44308 Telephone (800)736-3402	34-0437786

1-2323	THE CLEVELAND ELECTRIC ILLUMINATING COMPANY (An Ohio Corporation) c/o FirstEnergy Corp. 76 South Main Street Akron, OH 44308 Telephone (800)736-3402	34-0150020

1-3583	THE TOLEDO EDISON COMPANY (An Ohio Corporation) c/o FirstEnergy Corp. 76 South Main Street Akron, OH 44308 Telephone (800)736-3402	34-4375005

1-3141	JERSEY CENTRAL POWER & LIGHT COMPANY (A New Jersey Corporation) c/o FirstEnergy Corp. 76 South Main Street Akron, OH 44308 Telephone (800)736-3402	21-0485010

1-446	METROPOLITAN EDISON COMPANY (A Pennsylvania Corporation) c/o FirstEnergy Corp. 76 South Main Street Akron, OH 44308 Telephone (800)736-3402	23-0870160

1-3522	PENNSYLVANIA ELECTRIC COMPANY (A Pennsylvania Corporation) c/o FirstEnergy Corp. 76 South Main Street Akron, OH 44308 Telephone (800)736-3402	25-0718085

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yes þ No o		FirstEnergy Corp., FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


Yes þ No o		FirstEnergy Corp.

Yes o No o		FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company, and Pennsylvania Electric Company

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer þ		FirstEnergy Corp.

Accelerated Filer o		N/A

Non-accelerated Filer (Do not check if a smaller reporting company) þ		FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company

Smaller Reporting Company o		N/A

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).


Yes o No þ		FirstEnergy Corp., FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:


	OUTSTANDING
CLASS	AS OF OCTOBER 22, 2010
FirstEnergy Corp., $10 par value		304,835,407
FirstEnergy Solutions Corp., no par value		7
Ohio Edison Company, no par value		60
The Cleveland Electric Illuminating Company, no par value		67,930,743
The Toledo Edison Company, $5 par value		29,402,054
Jersey Central Power & Light Company, $10 par value		13,628,447
Metropolitan Edison Company, no par value		859,500
Pennsylvania Electric Company, $20 par value		4,427,577

FirstEnergy Corp. is the sole holder of FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company common stock.

This combined Form 10-Q is separately filed by FirstEnergy Corp., FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. No registrant makes any representation as to information relating to any other registrant, except that information relating to any of the FirstEnergy subsidiary registrants is also attributed to FirstEnergy Corp.

FirstEnergy Web Site

Each of the registrants’ Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are also made available free of charge on or through FirstEnergy’s Internet web site at www.firstenergycorp.com.

These reports are posted on the web site as soon as reasonably practicable after they are electronically filed with the SEC. Additionally, the registrants routinely post important information on FirstEnergy’s Internet web site and recognize FirstEnergy’s Internet web site as channel of distribution to reach public investors and as a means of disclosing material non-public information for complying with disclosure obligations under SEC Regulation FD. Information contained on FirstEnergy’s Internet web site shall not be deemed incorporated into, or to be part of, this report.

OMISSION OF CERTAIN INFORMATION

FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company meet the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and are therefore filing this Form 10-Q with the reduced disclosure format specified in General Instruction H(2) to Form 10-Q.

Forward-Looking Statements: This Form 10-Q includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements include declarations regarding management’s intents, beliefs and current expectations. These statements typically contain, but are not limited to, the terms “anticipate,” “potential,” “expect,” “believe,” “estimate” and similar words. 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.

Actual results may differ materially due to:

•

The speed and nature of increased competition in the electric utility industry and legislative and regulatory changes affecting how generation rates will be determined following the expiration of existing rate plans in Pennsylvania.

•

The impact of the regulatory process on the pending matters in Ohio, Pennsylvania and New Jersey.

•

Business and regulatory impacts from ATSI’s realignment into PJM.

•

Economic or weather conditions affecting future sales and margins.

•

Changes in markets for energy services.

•

Changing energy and commodity market prices and availability.

•

Financial derivative reforms that could increase our liquidity needs and collateral costs.

•

Replacement power costs being higher than anticipated or inadequately hedged.

•

The continued ability of FirstEnergy’s regulated utilities to recover regulatory assets or increased costs.

•

Operation and maintenance costs being higher than anticipated.

•

Other legislative and regulatory changes, and revised environmental requirements, including possible GHG emission and coal combustion residual regulations.

•

The potential impacts of the proposed rules promulgated by the EPA on July 6, 2010, in response to the U.S. Court of Appeals’ July 11, 2008 decision requiring revisions to the CAIR rules or any final laws, rules or regulations that may ultimately replace CAIR.

•

The uncertainty of the timing and amounts of the capital expenditures needed to, among other things, implement the Air Quality Compliance Plan (including that such amounts could be higher than anticipated or that certain generating units may need to be shut down) or levels of emission reductions related to the Consent Decree resolving the NSR litigation or other potential similar regulatory initiatives or actions.

•

Adverse regulatory or legal decisions and outcomes (including, but not limited to, the revocation of necessary licenses or operating permits and oversight) by the NRC.

•

Ultimate resolution of Met-Ed’s and Penelec’s TSC filings with the PPUC.

•

The continuing availability of generating units and their ability to operate at or near full capacity.

•

The ability to comply with applicable state and federal reliability standards and energy efficiency mandates.

•

The ability to accomplish or realize anticipated benefits from strategic goals (including employee workforce initiatives).

•

The ability to improve electric commodity margins and to experience growth in the distribution business.

•

The changing market conditions that could affect the value of assets held in the registrants’ nuclear decommissioning trusts, pension trusts and other trust funds, and cause FirstEnergy to make additional contributions sooner, or in amounts that are larger than currently anticipated.

•

The ability to access the public securities and other capital and credit markets in accordance with FirstEnergy’s financing plan and the cost of such capital.

•

Changes in general economic conditions affecting the registrants.

•

The state of the capital and credit markets affecting the registrants.

•

Interest rates and any actions taken by credit rating agencies that could negatively affect the registrants’ access to financing or their costs and increase requirements to post additional collateral to support outstanding commodity positions, LOCs and other financial guarantees.

•

The state of the national and regional economies and associated impacts on the registrants’ major industrial and commercial customers.

•

Issues concerning the soundness of financial institutions and counterparties with which the registrants do business.

•

The expected timing and likelihood of completion of the proposed merger with Allegheny Energy, Inc., including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the proposed merger that could reduce anticipated benefits or cause the parties to abandon the merger, the diversion of management’s time and attention from FirstEnergy’s ongoing business during this time period, the ability to maintain relationships with customers, employees or suppliers as well as the ability to successfully integrate the businesses and realize cost savings and any other synergies and the risk that the credit ratings of the combined company or its subsidiaries may be different from what the companies expect.

•

The risks and other factors discussed from time to time in the registrants’ SEC filings, and other similar factors.

The foregoing review of factors should not be construed as exhaustive. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor assess the impact of any such factor on the registrants’ business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements. A security rating is not a recommendation to buy, sell or hold securities that may be subject to revision or withdrawal at any time by the assigning rating organization. Each rating should be evaluated independently of any other rating. The registrants expressly disclaim any current intention to update any forward-looking statements contained herein as a result of new information, future events or otherwise.

TABLE OF CONTENTS


	Page

Glossary of Terms		iii-v

Item 1. Financial Statements

FirstEnergy Corp.

Consolidated Statements of Income		1

Consolidated Statements of Comprehensive Income		2

Consolidated Balance Sheets		3

Consolidated Statements of Cash Flows		4

FirstEnergy Solutions Corp.

Consolidated Statements of Income and Comprehensive Income		5

Consolidated Balance Sheets		6

Consolidated Statements of Cash Flows		7

Ohio Edison Company

Consolidated Statements of Income and Comprehensive Income		8

Consolidated Balance Sheets		9

Consolidated Statements of Cash Flows		10

The Cleveland Electric Illuminating Company

Consolidated Statements of Income (Loss) and Comprehensive Income		11

Consolidated Balance Sheets		12

Consolidated Statements of Cash Flows		13

The Toledo Edison Company

Consolidated Statements of Income and Comprehensive Income		14

Consolidated Balance Sheets		15

Consolidated Statements of Cash Flows		16

Jersey Central Power & Light Company

Consolidated Statements of Income and Comprehensive Income		17

Consolidated Balance Sheets		18

Consolidated Statements of Cash Flows		19

Metropolitan Edison Company

Consolidated Statements of Income and Comprehensive Income		20

Consolidated Balance Sheets		21

Consolidated Statements of Cash Flows		22

Pennsylvania Electric Company

Consolidated Statements of Income and Comprehensive Income		23

Consolidated Balance Sheets		24

Consolidated Statements of Cash Flows		25

TABLE OF CONTENTS (Cont’d)


	Page

Combined Notes To Consolidated Financial Statements		26

Item 2. Management’s Discussion and Analysis of Registrant and Subsidiaries		63

Management’s Narrative Analysis of Results of Operations

FirstEnergy Solutions Corp.		99

Ohio Edison Company		102

The Cleveland Electric Illuminating Company		104

The Toledo Edison Company		106

Jersey Central Power & Light Company		108

Metropolitan Edison Company		110

Pennsylvania Electric Company		112

Item 3. Quantitative and Qualitative Disclosures About Market Risk		114

Item 4. Controls and Procedures — FirstEnergy		114

Item 4T. Controls and Procedures — FES, OE, CEI, TE, JCP&L, Met-Ed and Penelec		114

Part II. Other Information

Item 1. Legal Proceedings		114

Item 1A. Risk Factors		114

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		114

Item 5. Other Information		114

Item 6. Exhibits		115

Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 12
Exhibit 31.1
Exhibit 31.2
Exhibit 32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

GLOSSARY OF TERMS

The following abbreviations and acronyms are used in this report to identify FirstEnergy Corp. and its current and former subsidiaries:


ATSI		American Transmission Systems, Incorporated, owns and operates transmission facilities
CEI		The Cleveland Electric Illuminating Company, an Ohio electric utility operating subsidiary
FENOC		FirstEnergy Nuclear Operating Company, operates nuclear generating facilities
FES		FirstEnergy Solutions Corp., provides energy-related products and services
FESC		FirstEnergy Service Company, provides legal, financial and other corporate support services
FEV		FirstEnergy Ventures Corp., invests in certain unregulated enterprises and business ventures
FGCO		FirstEnergy Generation Corp., owns and operates non-nuclear generating facilities
FirstEnergy		FirstEnergy Corp., a public utility holding company
Global Rail		A joint venture between FirstEnergy Ventures Corp. and WMB Loan Ventures II LLC, that owns coal transportation operations near Roundup, Montana
GPU		GPU, Inc., former parent of JCP&L, Met-Ed and Penelec, which merged with FirstEnergy on November 7, 2001
JCP&L		Jersey Central Power & Light Company, a New Jersey electric utility operating subsidiary
Met-Ed		Metropolitan Edison Company, a Pennsylvania electric utility operating subsidiary
NGC		FirstEnergy Nuclear Generation Corp., owns nuclear generating facilities
OE		Ohio Edison Company, an Ohio electric utility operating subsidiary
Ohio Companies		CEI, OE and TE
Penelec		Pennsylvania Electric Company, a Pennsylvania electric utility operating subsidiary
Penn		Pennsylvania Power Company, a Pennsylvania electric utility operating subsidiary of OE
Pennsylvania Companies		Met-Ed, Penelec and Penn
PNBV		PNBV Capital Trust, a special purpose entity created by OE in 1996
Shippingport		Shippingport Capital Trust, a special purpose entity created by CEI and TE in 1997
Signal Peak		A joint venture between FirstEnergy Ventures Corp. and WMB Loan Ventures LLC, that owns mining operations near Roundup, Montana
TE		The Toledo Edison Company, an Ohio electric utility operating subsidiary
Utilities		OE, CEI, TE, Penn, JCP&L, Met-Ed and Penelec

The following abbreviations and acronyms are used to identify frequently used terms in this report:


ALJ		Administrative Law Judge
AOCL		Accumulated Other Comprehensive Loss
AQC		Air Quality Control
ARO		Asset Retirement Obligation
BGS		Basic Generation Service
CAA		Clean Air Act
CAIR		Clean Air Interstate Rule
CAMR		Clean Air Mercury Rule
CATR		Clean Air Transport Rule
CBP		Competitive Bid Process
CO₂		Carbon Dioxide
CTC		Competitive Transition Charge
DOE		United States Department of Energy
DOJ		United States Department of Justice
DPA		Department of the Public Advocate, Division of Rate Counsel (New Jersey)
EE&C		Energy Efficiency and Conservation
EMP		Energy Master Plan
EPA		United States Environmental Protection Agency

iii

GLOSSARY OF TERMS, Cont’d.


ESP		Electric Security Plan
FASB		Financial Accounting Standards Board
FERC		Federal Energy Regulatory Commission
FMB		First Mortgage Bond
FPA		Federal Power Act
FRR		Fixed Resource Requirement
GAAP		Generally Accepted Accounting Principles in the United States
GHG		Greenhouse Gases
IRS		Internal Revenue Service
JOA		Joint Operating Agreement
kV		Kilovolt
KWH		Kilowatt-hours
LED		Light-Emitting Diode
LOC		Letter of Credit
MACT		Maximum Achievable Control Technology
MDPSC		Maryland Public Service Commission
MEIUG		Met-Ed Industrial users Group
MISO		Midwest Independent Transmission System Operator, Inc.
Moody’s		Moody’s Investors Service, Inc.
MRO		Market Rate Offer
MTEP		MISO Regional Transmission Expansion Plan
MW		Megawatts
MWH		Megawatt-hours
NAAQS		National Ambient Air Quality Standards
NERC		North American Electric Reliability Corporation
NJBPU		New Jersey Board of Public Utilities
NNSR		Non-Attainment New Source Review
NOAC		Northwest Ohio Aggregation Coalition
NOPEC		Northeast Ohio Public Energy Council
NOV		Notice of Violation
NO_X		Nitrogen Oxide
NRC		Nuclear Regulatory Commission
NSR		New Source Review
NUG		Non-Utility Generation
NUGC		Non-Utility Generation Charge
NYSEG		New York State Electric and Gas
OCC		Ohio Consumers’ Counsel
OCI		Other Comprehensive Income
OPEB		Other Post-Employment Benefits
OVEC		Ohio Valley Electric Corporation
PCRB		Pollution Control Revenue Bond
PICA		Pennsylvania Intergovernmental Cooperation Authority
PJM		PJM Interconnection L. L. C.
POLR		Provider of Last Resort; an electric utility’s obligation to provide generation service to customers whose alternative supplier fails to deliver service
PPUC		Pennsylvania Public Utility Commission
PSCWV		Public Service Commission of West Virginia
PSA		Power Supply Agreement
PSD		Prevention of Significant Deterioration
PUCO		Public Utilities Commission of Ohio
RECs		Renewable Energy Credits
RFP		Request for Proposal
RTEP		Regional Transmission Expansion Plan
RTC		Regulatory Transition Charge
RTO		Regional Transmission Organization
S&P		Standard & Poor’s Ratings Service
SB221		Amended Substitute Senate Bill 221
SBC		Societal Benefits Charge

GLOSSARY OF TERMS, Cont’d.


SEC		U.S. Securities and Exchange Commission
SIP		State Implementation Plan(s) Under the Clean Air Act
SNCR		Selective Non-Catalytic Reduction
SO₂		Sulfur Dioxide
TBC		Transition Bond Charge
TMI-2		Three Mile Island Unit 2
TSC		Transmission Service Charge
VIE		Variable Interest Entity
VSCC		Virginia State Corporation Commission

FIRSTENERGY CORP.

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)


	Three Months						Nine Months
	Ended September 30						Ended September 30
	2010			2009			2010			2009
	*(In millions, except per share amounts)*
REVENUES:
Electric utilities	$	2,757		$	2,940		$	7,673		$	8,751
Unregulated businesses		936			468			2,449			1,262

Total revenues*		3,693			3,408			10,122			10,013


EXPENSES:
Fuel		400			302			1,084			890
Purchased power		1,284			1,313			3,574			3,480
Other operating expenses		738			665			2,112			2,103
Provision for depreciation		182			188			565			550
Amortization of regulatory assets		176			261			549			903
Deferral of new regulatory assets		—			—			—			(136	)
General taxes		206			192			587			587
Impairment of long-lived assets		292			—			294			—

Total expenses		3,278			2,921			8,765			8,377


OPERATING INCOME		415			487			1,357			1,636


OTHER INCOME (EXPENSE):
Investment income		46			191			93			207
Interest expense		(208	)		(355	)		(628	)		(755	)
Capitalized interest		41			35			122			96

Total other expense		(121	)		(129	)		(413	)		(452	)


INCOME BEFORE INCOME TAXES		294			358			944			1,184

INCOME TAXES		119			128			364			430


NET INCOME		175			230			580			754

Loss attributable to noncontrolling interest		(4	)		(4	)		(19	)		(14	)


EARNINGS AVAILABLE TO FIRSTENERGY CORP.	$	179		$	234		$	599		$	768


BASIC EARNINGS PER SHARE OF COMMON STOCK	$	0.59		$	0.77		$	1.97		$	2.52


WEIGHTED AVERAGE NUMBER OF BASIC SHARES OUTSTANDING		304			304			304			304


DILUTED EARNINGS PER SHARE OF COMMON STOCK	$	0.59		$	0.77		$	1.96		$	2.51


WEIGHTED AVERAGE NUMBER OF DILUTED SHARES OUTSTANDING		305			306			305			306


DIVIDENDS DECLARED PER SHARE OF COMMON STOCK	$	1.10		$	1.10		$	1.65		$	1.65


*		Includes excise tax collections of $120 million and $106 million in the three months ended September 30, 2010 and 2009, respectively, and $328 million and $310 million in the nine months ended September 30, 2010 and 2009, respectively.

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

FIRSTENERGY CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)


	Three Months						Nine Months
	Ended September 30						Ended September 30
	2010			2009			2010			2009
	*(In millions)*

NET INCOME	$	175		$	230		$	580		$	754


OTHER COMPREHENSIVE INCOME (LOSS):
Pension and other postretirement benefits		17			(480	)		47			24
Unrealized gain on derivative hedges		6			19			16			57
Change in unrealized gain on available-for-sale securities		20			(108	)		32			(76	)

Other comprehensive income (loss)		43			(569	)		95			5
Income tax expense (benefit) related to other comprehensive income		14			(216	)		30			26

Other comprehensive income (loss), net of tax		29			(353	)		65			(21	)


COMPREHENSIVE INCOME (LOSS)		204			(123	)		645			733

COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST		(4	)		(4	)		(19	)		(14	)


COMPREHENSIVE INCOME (LOSS) AVAILABLE TO FIRSTENERGY CORP.	$	208		$	(119	)	$	664		$	747

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

FIRSTENERGY CORP.

CONSOLIDATED BALANCE SHEETS
(Unaudited)


	September 30,			December 31,
	2010			2009
	*(In millions)*
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	632		$	874
Receivables-
Customers (less allowances of $39 million in 2010 and $33 million in 2009)		1,414			1,244
Other (less allowances of $7 million in 2010 and 2009)		150			153
Materials and supplies, at average cost		652			647
Prepaid taxes		291			248
Other		252			154

		3,391			3,320

PROPERTY, PLANT AND EQUIPMENT:
In service		27,590			27,826
Less — Accumulated provision for depreciation		11,206			11,397

		16,384			16,429
Construction work in progress		3,154			2,735

		19,538			19,164

INVESTMENTS:
Nuclear plant decommissioning trusts		1,965			1,859
Investments in lease obligation bonds		486			543
Other		564			621

		3,015			3,023

DEFERRED CHARGES AND OTHER ASSETS:
Goodwill		5,575			5,575
Regulatory assets		2,246			2,356
Power purchase contract asset		116			200
Other		826			666

		8,763			8,797

	$	34,707		$	34,304

LIABILITIES AND CAPITALIZATION

CURRENT LIABILITIES:
Currently payable long-term debt	$	1,590		$	1,834
Short-term borrowings		1,000			1,181
Accounts payable		813			829
Accrued taxes		230			314
Other		1,339			1,130

		4,972			5,288

CAPITALIZATION:
Common stockholders’ equity-
Common stock, $0.10 par value, authorized 375,000,000 shares- 304,835,407 shares outstanding		31			31
Other paid-in capital		5,445			5,448
Accumulated other comprehensive loss		(1,350	)		(1,415	)
Retained earnings		4,591			4,495

Total common stockholders’ equity		8,717			8,559
Noncontrolling interest		(26	)		(2	)

Total equity		8,691			8,557
Long-term debt and other long-term obligations		12,104			11,908

		20,795			20,465

NONCURRENT LIABILITIES:
Accumulated deferred income taxes		2,824			2,468
Retirement benefits		1,541			1,534
Asset retirement obligations		1,394			1,425
Deferred gain on sale and leaseback transaction		968			993
Power purchase contract liability		756			643
Lease market valuation liability		228			262
Other		1,229			1,226

		8,940			8,551

COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 9)
	$	34,707		$	34,304

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

FIRSTENERGY CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


	Nine Months Ended
	September 30
	2010			2009
	*(In millions)*

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	580		$	754
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		565			550
Amortization of regulatory assets		549			903
Deferral of new regulatory assets		—			(136	)
Nuclear fuel and lease amortization		123			92
Deferred purchased power and other costs		(192	)		(235	)
Deferred income taxes and investment tax credits, net		259			421
Impairment of long-lived assets		294			—
Investment impairment		21			39
Gain on investment securities held in trusts		(39	)		(172	)
Loss on debt redemption		—			142
Deferred rents and lease market valuation liability		(21	)		(20	)
Accrued compensation and retirement benefits		48			20
Interest rate swap transactions		129			—
Commodity derivative transactions, net		(40	)		26
Cash collateral paid, net		(54	)		(85	)
Pension trust contribution		—			(500	)
Decrease (increase) in operating assets-
Receivables		(172	)		78
Materials and supplies		(6	)		30
Prepayments and other current assets		(4	)		(349	)
Increase (decrease) in operating liabilities-
Accounts payable		(16	)		(103	)
Accrued taxes		(18	)		(97	)
Accrued interest		63			121
Other		4			(15	)

Net cash provided from operating activities		2,073			1,464


CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt		251			4,151
Redemptions and Repayments-
Long-term debt		(422	)		(2,213	)
Short-term borrowings, net		(171	)		(764	)
Common stock dividend payments		(503	)		(503	)
Other		(25	)		(54	)

Net cash provided from (used for) financing activities		(870	)		617


CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(1,467	)		(1,575	)
Proceeds from asset sales		117			19
Sales of investment securities held in trusts		2,577			3,039
Purchases of investment securities held in trusts		(2,610	)		(3,101	)
Customer acquisition costs		(110	)		—
Cash investments		56			(4	)
Restricted funds for debt redemption		—			(150	)
Other		(8	)		(16	)

Net cash used for investing activities		(1,445	)		(1,788	)


Net change in cash and cash equivalents		(242	)		293
Cash and cash equivalents at beginning of period		874			545

Cash and cash equivalents at end of period	$	632		$	838

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

FIRSTENERGY SOLUTIONS CORP.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)


	Three Months Ended						Nine Months Ended
	September 30						September 30
	2010			2009			2010			2009
	*(In thousands)*
REVENUES:
Electric sales to affiliates	$	599,695		$	616,300		$	1,745,542		$	2,348,741
Electric sales to non-affiliates		904,752			443,819			2,302,240			928,944
Other		49,230			44,453			208,662			394,145

Total revenues		1,553,677			1,104,572			4,256,444			3,671,830


EXPENSES:
Fuel		391,087			294,693			1,061,719			871,160
Purchased power from affiliates		116,381			35,290			246,232			149,746
Purchased power from non-affiliates		411,084			205,200			1,160,119			551,155
Other operating expenses		309,793			305,935			916,366			891,555
Provision for depreciation		59,298			66,041			185,535			192,962
General taxes		21,804			21,700			70,822			66,361
Impairment of long-lived assets		291,934			—			293,767			—

Total expenses		1,601,381			928,859			3,934,560			2,722,939


OPERATING INCOME (LOSS)		(47,704	)		175,713			321,884			948,891


OTHER INCOME (EXPENSE):
Investment income		29,895			158,857			43,978			135,723
Miscellaneous income		4,765			2,804			10,468			12,840
Interest expense — affiliates		(2,497	)		(2,209	)		(7,362	)		(8,503	)
Interest expense — other		(49,544	)		(42,187	)		(150,560	)		(90,985	)
Capitalized interest		22,955			17,869			66,550			41,975

Total other income (expense)		5,574			135,134			(36,926	)		91,050


INCOME (LOSS) BEFORE INCOME TAXES		(42,130	)		310,847			284,958			1,039,941

INCOME TAXES		(5,404	)		111,164			107,833			372,175


NET INCOME (LOSS)		(36,726	)		199,683			177,125			667,766


OTHER COMPREHENSIVE INCOME (LOSS):
Pension and other postretirement benefits		886			(61,085	)		(8,063	)		13,604
Unrealized gain on derivative hedges		2,818			790			7,109			26,847
Change in unrealized gain on available-for-sale securities		17,445			(89,401	)		28,533			(51,374	)

Other comprehensive income (loss)		21,149			(149,696	)		27,579			(10,923	)
Income taxes related to other comprehensive income (loss)		7,694			(58,883	)		9,898			(3,549	)

Other comprehensive income (loss), net of tax		13,455			(90,813	)		17,681			(7,374	)


TOTAL COMPREHENSIVE INCOME (LOSS)	$	(23,271	)	$	108,870		$	194,806		$	660,392

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

FIRSTENERGY SOLUTIONS CORP.

CONSOLIDATED BALANCE SHEETS
(Unaudited)


	September 30,			December 31,
	2010			2009
	*(In thousands)*
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	10		$	12
Receivables-
Customers (less accumulated provisions of $16,277,000 and $12,041,000, respectively, for uncollectible accounts)		325,265			195,107
Associated companies		269,986			318,561
Other (less accumulated provisions of $6,702,000 for uncollectible accounts)		57,407			51,872
Notes receivable from associated companies		501,648			805,103
Materials and supplies, at average cost		554,043			539,541
Prepayments and other		204,065			107,782

		1,912,424			2,017,978

PROPERTY, PLANT AND EQUIPMENT:
In service		9,663,264			10,357,632
Less — Accumulated provision for depreciation		4,114,381			4,531,158

		5,548,883			5,826,474
Construction work in progress		2,736,635			2,423,446

		8,285,518			8,249,920

INVESTMENTS:
Nuclear plant decommissioning trusts		1,158,376			1,088,641
Other		7,400			22,466

		1,165,776			1,111,107

DEFERRED CHARGES AND OTHER ASSETS:
Accumulated deferred income tax benefits		3,357			86,626
Customer intangibles		127,420			16,566
Goodwill		24,248			24,248
Property taxes		50,125			50,125
Unamortized sale and leaseback costs		61,934			72,553
Other		164,332			121,665

		431,416			371,783

	$	11,795,134		$	11,750,788

LIABILITIES AND CAPITALIZATION

CURRENT LIABILITIES:
Currently payable long-term debt	$	1,396,792		$	1,550,927
Short-term borrowings-
Associated companies		9,642			9,237
Other		100,000			100,000
Accounts payable-
Associated companies		472,018			466,078
Other		204,928			245,363
Accrued taxes		59,422			83,158
Other		430,824			359,057

		2,673,626			2,813,820

CAPITALIZATION:
Common stockholders’ equity-
Common stock, without par value, authorized 750 shares, 7 shares outstanding		1,490,010			1,468,423
Accumulated other comprehensive loss		(85,320	)		(103,001	)
Retained earnings		2,326,274			2,149,149

Total common stockholders’ equity		3,730,964			3,514,571
Long-term debt and other long-term obligations		2,819,150			2,711,652

		6,550,114			6,226,223

NONCURRENT LIABILITIES:
Deferred gain on sale and leaseback transaction		967,583			992,869
Accumulated deferred investment tax credits		55,267			58,396
Asset retirement obligations		877,522			921,448
Retirement benefits		228,779			204,035
Property taxes		50,125			50,125
Lease market valuation liability		228,119			262,200
Other		163,999			221,672

		2,571,394			2,710,745

COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 9)
	$	11,795,134		$	11,750,788

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

FIRSTENERGY SOLUTIONS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


	Nine Months Ended
	September 30
	2010			2009
	*(In thousands)*

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	177,125		$	667,766
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		185,535			192,962
Nuclear fuel and lease amortization		126,071			94,244
Deferred rents and lease market valuation liability		(41,493	)		(40,143	)
Deferred income taxes and investment tax credits, net		96,152			268,812
Impairment of long-lived assets		293,767			—
Investment impairment		21,089			36,169
Accrued compensation and retirement benefits		15,887			5,860
Commodity derivative transactions, net		(40,048	)		25,794
Gain on asset sales		(2,213	)		(9,832	)
Gain on investment securities held in trusts		(34,292	)		(154,723	)
Cash collateral, net		(53,900	)		(92,618	)
Decrease (increase) in operating assets-
Receivables		(91,134	)		(55,774	)
Materials and supplies		(15,324	)		38,543
Prepayments and other current assets		36,004			(35,315	)
Increase (decrease) in operating liabilities-
Accounts payable		(50,114	)		(72,181	)
Accrued taxes		(8,404	)		23,846
Accrued interest		(14,130	)		31,770
Other		23,349			(43,369	)

Net cash provided from operating activities		623,927			881,811


CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt		249,520			2,356,762
Short-term borrowings, net		405			—
Redemptions and Repayments-
Long-term debt		(296,339	)		(618,213	)
Short-term borrowings, net		—			(1,164,823	)
Other		(798	)		(20,006	)

Net cash provided from (used for) financing activities		(47,212	)		553,720


CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(801,238	)		(842,600	)
Proceeds from asset sales		117,213			16,129
Sales of investment securities held in trusts		1,478,086			2,152,717
Purchases of investment securities held in trusts		(1,511,273	)		(2,175,135	)
Loans from (to) associated companies, net		303,455			(298,841	)
Customer acquisition costs		(110,073	)		—
Leasehold improvement payments to associated companies		(51,204	)		—
Other		(1,683	)		(20,882	)

Net cash used for investing activities		(576,717	)		(1,168,612	)


Net change in cash and cash equivalents		(2	)		266,919
Cash and cash equivalents at beginning of period		12			39

Cash and cash equivalents at end of period	$	10		$	266,958

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

OHIO EDISON COMPANY

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)


	Three Months Ended						Nine Months Ended
	September 30						September 30
	2010			2009			2010			2009
	*(In thousands)*
STATEMENTS OF INCOME

REVENUES:
Electric sales	$	456,531		$	575,377		$	1,351,893		$	1,942,612
Excise and gross receipts tax collections		30,058			27,127			82,482			81,055

Total revenues		486,589			602,504			1,434,375			2,023,667


EXPENSES:
Purchased power from affiliates		136,804			200,506			424,530			847,712
Purchased power from non-affiliates		84,264			161,732			257,322			397,875
Other operating expenses		94,804			102,463			271,934			372,231
Provision for depreciation		21,990			22,407			65,884			65,916
Amortization of regulatory assets, net		9,704			17,404			48,473			59,910
General taxes		48,909			45,164			139,763			138,187

Total expenses		396,475			549,676			1,207,906			1,881,831


OPERATING INCOME		90,114			52,828			226,469			141,836


OTHER INCOME (EXPENSE):
Investment income		5,438			20,285			16,991			39,796
Miscellaneous income		1,673			237			2,676			2,108
Interest expense		(21,975	)		(22,961	)		(66,440	)		(67,717	)
Capitalized interest		335			231			838			730

Total other expense		(14,529	)		(2,208	)		(45,935	)		(25,083	)


INCOME BEFORE INCOME TAXES		75,585			50,620			180,534			116,753

INCOME TAXES		29,332			15,885			60,797			36,742


NET INCOME		46,253			34,735			119,737			80,011


Income from noncontrolling interest		124			140			386			429


EARNINGS AVAILABLE TO PARENT	$	46,129		$	34,595		$	119,351		$	79,582


STATEMENTS OF COMPREHENSIVE INCOME

NET INCOME	$	46,253		$	34,735		$	119,737		$	80,011


OTHER COMPREHENSIVE INCOME LOSS:
Pension and other postretirement benefits		321			(49,043	)		4,658			46,559
Change in unrealized gain on available-for-sale securities		2,178			(7,695	)		2,989			(9,676	)

Other comprehensive income (loss)		2,499			(56,738	)		7,647			36,883
Income tax expense (benefit) related to other comprehensive income		562			(21,924	)		1,229			15,915

Other comprehensive income (loss), net of tax		1,937			(34,814	)		6,418			20,968


COMPREHENSIVE INCOME (LOSS)		48,190			(79	)		126,155			100,979

COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST		124			140			386			429


COMPREHENSIVE INCOME (LOSS) AVAILABLE TO PARENT	$	48,066		$	(219	)	$	125,769		$	100,550

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

OHIO EDISON COMPANY

CONSOLIDATED BALANCE SHEETS
(Unaudited)


	September 30,			December 31,
	2010			2009
	*(In thousands)*
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	288,092		$	324,175
Receivables-
Customers (less accumulated provisions of $4,951,000 and $5,119,000, respectively, for uncollectible accounts)		182,894			209,384
Associated companies		38,499			98,874
Other		20,777			14,155
Notes receivable from associated companies		16,234			118,651
Prepayments and other		9,490			15,964

		555,986			781,203

UTILITY PLANT:
In service		3,118,239			3,036,467
Less — Accumulated provision for depreciation		1,199,401			1,165,394

		1,918,838			1,871,073
Construction work in progress		38,915			31,171

		1,957,753			1,902,244

OTHER PROPERTY AND INVESTMENTS:
Investment in lease obligation bonds		204,707			216,600
Nuclear plant decommissioning trusts		129,685			120,812
Other		96,897			96,861

		431,289			434,273

DEFERRED CHARGES AND OTHER ASSETS:
Regulatory assets		413,596			465,331
Pension assets		39,271			19,881
Property taxes		67,037			67,037
Unamortized sale and leaseback costs		31,376			35,127
Other		17,540			39,881

		568,820			627,257

	$	3,513,848		$	3,744,977

LIABILITIES AND CAPITALIZATION

CURRENT LIABILITIES:
Currently payable long-term debt	$	1,479		$	2,723
Short-term borrowings-
Associated companies		47,648			92,863
Other		320			807
Accounts payable-
Associated companies		32,084			102,763
Other		23,994			40,423
Accrued taxes		55,236			81,868
Accrued interest		25,354			25,749
Other		133,060			81,424

		319,175			428,620

CAPITALIZATION:
Common stockholder’s equity-
Common stock, without par value, authorized 175,000,000 shares - 60 shares outstanding		951,839			1,154,797
Accumulated other comprehensive loss		(157,159	)		(163,577	)
Retained earnings		104,241			29,890

Total common stockholder’s equity		898,921			1,021,110
Noncontrolling interest		6,225			6,442

Total equity		905,146			1,027,552
Long-term debt and other long-term obligations		1,152,370			1,160,208

		2,057,516			2,187,760

NONCURRENT LIABILITIES:
Accumulated deferred income taxes		678,815			660,114
Accumulated deferred investment tax credits		10,521			11,406
Retirement benefits		169,070			174,925
Asset retirement obligations		83,194			85,926
Other		195,557			196,226

		1,137,157			1,128,597

COMMITMENTS AND CONTINGENCIES (Note 9)
	$	3,513,848		$	3,744,977

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

OHIO EDISON COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


	Nine Months Ended
	September 30
	2010			2009
	*(In thousands)*

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	119,737		$	80,011
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		65,884			65,916
Amortization of regulatory assets, net		48,473			59,910
Purchased power cost recovery reconciliation		3,906			15,372
Amortization of lease costs		28,314			28,394
Deferred income taxes and investment tax credits, net		7,612			32,658
Accrued compensation and retirement benefits		(16,659	)		(3,542	)
Accrued regulatory obligations		1,301			19,172
Electric service prepayment programs		—			(4,634	)
Cash collateral from suppliers		23,286			6,469
Pension trust contributions		—			(103,035	)
Decrease (increase) in operating assets-
Receivables		91,971			128,688
Prepayments and other current assets		10,331			(2,553	)
Decrease in operating liabilities-
Accounts payable		(87,108	)		(60,125	)
Accrued taxes		(26,425	)		(17,196	)
Accrued interest		(395	)		(59	)
Other		(9,695	)		(8,596	)

Net cash provided from operating activities		260,533			236,850


CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt		—			100,000
Short-term borrowings, net		—			74,514
Redemptions and Repayments-
Long-term debt		(9,628	)		(101,088	)
Short-term borrowings, net		(45,702	)		—
Common stock dividend payments		(250,000	)		(150,000	)
Other		(892	)		(2,138	)

Net cash used for financing activities		(306,222	)		(78,712	)


CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(110,645	)		(108,253	)
Leasehold improvement payments from associated companies		18,375			—
Sales of investment securities held in trusts		78,599			207,280
Purchases of investment securities held in trusts		(83,725	)		(214,592	)
Loan repayments from associated companies, net		102,417			134,975
Cash investments		12,296			7,070
Other		(7,711	)		(1,216	)

Net cash provided from investing activities		9,606			25,264


Net change in cash and cash equivalents		(36,083	)		183,402
Cash and cash equivalents at beginning of period		324,175			146,343

Cash and cash equivalents at end of period	$	288,092		$	329,745

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

THE CLEVELAND ELECTRIC ILLUMINATING COMPANY

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)


	Three Months Ended						Nine Months Ended
	September 30						September 30
	2010			2009			2010			2009
	*(In thousands)*
STATEMENTS OF INCOME

REVENUES:
Electric sales	$	309,236		$	417,900		$	901,913		$	1,307,592
Excise tax collections		19,480			17,629			52,548			52,748

Total revenues		328,716			435,529			954,461			1,360,340


EXPENSES:
Purchased power from affiliates		89,389			153,556			298,204			635,927
Purchased power from non-affiliates		35,151			87,689			105,200			208,849
Other operating expenses		36,441			37,822			96,613			141,829
Provision for depreciation		18,057			17,753			54,504			53,885
Amortization of regulatory assets		45,136			39,313			121,082			325,630
Deferral of new regulatory assets		—			—			—			(134,587	)
General taxes		39,878			37,752			107,207			112,749

Total expenses		264,052			373,885			782,810			1,344,282


OPERATING INCOME		64,664			61,644			171,651			16,058


OTHER INCOME (EXPENSE):
Investment income		6,604			7,565			20,756			23,599
Miscellaneous income		533			645			1,790			3,437
Interest expense		(33,384	)		(34,740	)		(100,267	)		(100,819	)
Capitalized interest		10			27			43			145

Total other expense		(26,237	)		(26,503	)		(77,678	)		(73,638	)


INCOME (LOSS) BEFORE INCOME TAXES		38,427			35,141			93,973			(57,580	)

INCOME TAX EXPENSE (BENEFIT)		13,479			9,755			33,107			(25,290	)


NET INCOME (LOSS)		24,948			25,386			60,866			(32,290	)


Income from noncontrolling interest		366			418			1,151			1,295


EARNINGS (LOSS) AVAILABLE TO PARENT	$	24,582		$	24,968		$	59,715		$	(33,585	)


STATEMENTS OF COMPREHENSIVE INCOME

NET INCOME (LOSS)	$	24,948		$	25,386		$	60,866		$	(32,290	)


OTHER COMPREHENSIVE INCOME (LOSS):
Pension and other postretirement benefits		3,228			(48,024	)		(16,129	)		(154	)
Unrealized loss on derivative hedges		—			(1,451	)		—			(1,451	)

Other comprehensive income (loss)		3,228			(49,475	)		(16,129	)		(1,605	)
Income tax expense (benefit) related to other comprehensive income		976			(17,854	)		(6,325	)		1,452

Other comprehensive income (loss), net of tax		2,252			(31,621	)		(9,804	)		(3,057	)


COMPREHENSIVE INCOME (LOSS)		27,200			(6,235	)		51,062			(35,347	)

COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST		366			418			1,151			1,295


COMPREHENSIVE INCOME (LOSS) AVAILABLE TO PARENT	$	26,834		$	(6,653	)	$	49,911		$	(36,642	)

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

THE CLEVELAND ELECTRIC ILLUMINATING COMPANY

CONSOLIDATED BALANCE SHEETS
(Unaudited)


	September 30,			December 31,
	2010			2009
	*(In thousands)*
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	247		$	86,230
Receivables-
Customers (less accumulated provisions of $5,271,000 and $5,239,000, respectively, for uncollectible accounts)		186,044			209,335
Associated companies		59,339			98,954
Other		4,910			11,661
Notes receivable from associated companies		23,905			26,802
Prepayments and other		4,362			9,973

		278,807			442,955

UTILITY PLANT:
In service		2,373,419			2,310,074
Less — Accumulated provision for depreciation		921,040			888,169

		1,452,379			1,421,905
Construction work in progress		30,482			36,907

		1,482,861			1,458,812

OTHER PROPERTY AND INVESTMENTS:
Investment in lessor notes		340,031			388,641
Other		10,084			10,220

		350,115			398,861

DEFERRED CHARGES AND OTHER ASSETS:
Goodwill		1,688,521			1,688,521
Regulatory assets		420,144			545,505
Pension assets (Note 6)		—			13,380
Property taxes		77,319			77,319
Other		12,897			12,777

		2,198,881			2,337,502

	$	4,310,664		$	4,638,130

LIABILITIES AND CAPITALIZATION

CURRENT LIABILITIES:
Currently payable long-term debt	$	148		$	117
Short-term borrowings-
Associated companies		129,912			339,728
Accounts payable-
Associated companies		14,803			68,634
Other		13,725			17,166
Accrued taxes		64,492			90,511
Accrued interest		39,261			18,466
Other		63,732			45,440

		326,073			580,062

CAPITALIZATION:
Common stockholders’ equity-
Common stock, without par value, authorized 105,000,000 shares, 67,930,743 shares outstanding		886,927			884,897
Accumulated other comprehensive loss		(147,962	)		(138,158	)
Retained earnings		556,963			597,248

Total common stockholders’ equity		1,295,928			1,343,987
Noncontrolling interest		17,651			20,592

Total equity		1,313,579			1,364,579
Long-term debt and other long-term obligations		1,852,511			1,872,750

		3,166,090			3,237,329

NONCURRENT LIABILITIES:
Accumulated deferred income taxes		628,244			644,745
Accumulated deferred investment tax credits		11,205			11,836
Retirement benefits		82,070			69,733
Other		96,982			94,425

		818,501			820,739

COMMITMENTS AND CONTINGENCIES (Note 9)
	$	4,310,664		$	4,638,130

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

THE CLEVELAND ELECTRIC ILLUMINATING COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended
	September 30
	2010			2009
	*(In thousands)*

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)	$	60,866		$	(32,290	)
Adjustments to reconcile net income (loss) to net cash from operating activities-
Provision for depreciation		54,504			53,885
Amortization of regulatory assets, net		121,082			325,630
Deferral of new regulatory assets		—			(134,587	)
Purchased power cost recovery reconciliation		—			(3,478	)
Deferred income taxes and investment tax credits, net		(24,283	)		(41,939	)
Accrued compensation and retirement benefits		10,467			10,311
Pension trust contribution		—			(89,789	)
Electric service prepayment programs		—			(3,510	)
Cash collateral from suppliers, net		19,245			5,404
Decrease (increase) in operating assets-
Receivables		86,725			30,977
Prepayments and other current assets		5,421			(633	)
Increase (decrease) in operating liabilities-
Accounts payable		(57,272	)		(32,240	)
Accrued taxes		(23,876	)		(17,003	)
Accrued interest		20,795			29,816
Other		740			11,489

Net cash provided from operating activities		274,414			112,043


CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt		—			298,398
Redemptions and Repayments-
Long-term debt		(84	)		(558	)
Short-term borrowings, net		(230,132	)		(111,128	)
Common stock dividend payments		(100,000	)		(93,000	)
Other		(4,100	)		(6,161	)

Net cash provided from (used for) financing activities		(334,316	)		87,551


CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(70,812	)		(73,577	)
Restricted cash		—			(155,573	)
Loan repayments from (to) associated companies, net		2,897			(4,638	)
Redemptions of lessor notes		48,610			37,072
Other		(6,776	)		(2,871	)

Net cash used for investing activities		(26,081	)		(199,587	)


Net change in cash and cash equivalents		(85,983	)		7
Cash and cash equivalents at beginning of period		86,230			226

Cash and cash equivalents at end of period	$	247		$	233

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

THE TOLEDO EDISON COMPANY

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)


	Three Months Ended						Nine Months Ended
	September 30						September 30
	2010			2009			2010			2009
	*(In thousands)*
STATEMENTS OF INCOME

REVENUES:
Electric sales	$	136,058		$	206,086		$	376,180		$	663,082
Excise tax collections		7,979			7,422			21,079			21,448

Total revenues		144,037			213,508			397,259			684,530


EXPENSES:
Purchased power from affiliates		42,338			86,278			144,062			342,166
Purchased power from non-affiliates		16,663			56,494			50,377			115,275
Other operating expenses		28,746			30,238			79,790			110,722
Provision for depreciation		7,800			7,847			23,763			23,136
Amortization (deferral) of regulatory assets, net		6,591			9,253			(3,708	)		30,921
General taxes		14,023			13,205			39,766			39,804

Total expenses		116,161			203,315			334,050			662,024


OPERATING INCOME		27,876			10,193			63,209			22,506


OTHER INCOME (EXPENSE):
Investment income		3,018			9,302			11,875			22,315
Miscellaneous expense		(502	)		(1,725	)		(2,853	)		(1,690	)
Interest expense		(10,479	)		(10,854	)		(31,421	)		(25,649	)
Capitalized interest		94			46			252			138

Total other expense		(7,869	)		(3,231	)		(22,147	)		(4,886	)


INCOME BEFORE INCOME TAXES		20,007			6,962			41,062			17,620

INCOME TAX EXPENSE (BENEFIT)		6,911			(138	)		13,241			3,123


NET INCOME		13,096			7,100			27,821			14,497


Income from noncontrolling interest		(4	)		14			1			17


EARNINGS AVAILABLE TO PARENT	$	13,100		$	7,086		$	27,820		$	14,480


STATEMENTS OF COMPREHENSIVE INCOME

NET INCOME	$	13,096		$	7,100		$	27,821		$	14,497


OTHER COMPREHENSIVE INCOME (LOSS):
Pension and other postretirement benefits		713			(24,201	)		1,723			(5,052	)
Change in unrealized gain on available-for-sale securities		427			(11,633	)		466			(15,181	)

Other comprehensive income (loss)		1,140			(35,834	)		2,189			(20,233	)
Income tax expense (benefit) related to other comprehensive income		330			(13,187	)		565			(5,982	)

Other comprehensive income (loss), net of tax		810			(22,647	)		1,624			(14,251	)


COMPREHENSIVE INCOME (LOSS)		13,906			(15,547	)		29,445			246

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTEREST		(4	)		14			1			17


COMPREHENSIVE INCOME (LOSS) AVAILABLE TO PARENT	$	13,910		$	(15,561	)	$	29,444		$	229

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

THE TOLEDO EDISON COMPANY

CONSOLIDATED BALANCE SHEETS
(Unaudited)


	September 30,			December 31,
	2010			2009
	*(In thousands)*
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	134,158		$	436,712
Receivables-
Customers		30			75
Associated companies		44,075			90,191
Other (less accumulated provisions of $224,000 and $208,000, respectively, for uncollectible accounts)		19,146			20,180
Notes receivable from associated companies		81,254			85,101
Prepayments and other		4,272			7,111

		282,935			639,370

UTILITY PLANT:
In service		938,532			912,930
Less — Accumulated provision for depreciation		440,510			427,376

		498,022			485,554
Construction work in progress		9,946			9,069

		507,968			494,623

OTHER PROPERTY AND INVESTMENTS:
Investment in lessor notes		103,848			124,357
Nuclear plant decommissioning trusts		76,051			73,935
Other		1,514			1,580

		181,413			199,872

DEFERRED CHARGES AND OTHER ASSETS:
Goodwill		500,576			500,576
Regulatory assets		74,297			69,557
Property taxes		23,658			23,658
Other		27,215			55,622

		625,746			649,413

	$	1,598,062		$	1,983,278

LIABILITIES AND CAPITALIZATION

CURRENT LIABILITIES:
Currently payable long-term debt	$	208		$	222
Accounts payable-
Associated companies		8,644			78,341
Other		6,212			8,312
Notes payable to associated companies		—			225,975
Accrued taxes		17,904			25,734
Lease market valuation liability		36,900			36,900
Other		44,745			29,273

		114,613			404,757

CAPITALIZATION:
Common stockholders’ equity-
Common stock, $5 par value, authorized 60,000,000 shares, 29,402,054 shares outstanding		147,010			147,010
Other paid-in-capital		178,170			178,181
Accumulated other comprehensive loss		(48,179	)		(49,803	)
Retained earnings		112,310			214,490

Total common stockholders’ equity		389,311			489,878
Noncontrolling interest		2,587			2,696

Total equity		391,898			492,574
Long-term debt and other long-term obligations		600,478			600,443

		992,376			1,093,017

NONCURRENT LIABILITIES:
Accumulated deferred income taxes		116,090			80,508
Accumulated deferred investment tax credits		6,039			6,367
Retirement benefits		67,953			65,988
Asset retirement obligations		28,287			32,290
Lease market valuation liability		208,525			236,200
Other		64,179			64,151

		491,073			485,504

COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 9)
	$	1,598,062		$	1,983,278

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

THE TOLEDO EDISON COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


	Nine Months Ended
	September 30
	2010			2009
	*(In thousands)*

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	27,821		$	14,497
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		23,763			23,136
Amortization (deferral) of regulatory assets, net		(3,708	)		30,921
Deferred rents and lease market valuation liability		(36,123	)		(34,556	)
Deferred income taxes and investment tax credits, net		18,927			(2,242	)
Accrued compensation and retirement benefits		4,529			3,039
Accrued regulatory obligations		40			4,841
Electric service prepayment programs		—			(1,458	)
Pension trust contribution		—			(21,590	)
Cash collateral from suppliers		9,874			2,830
Decrease in operating assets-
Receivables		61,051			24,561
Prepayments and other current assets		2,839			109
Increase (decrease) in operating liabilities-
Accounts payable		(69,846	)		(13,440	)
Accrued taxes		(6,172	)		(5,057	)
Accrued interest		10,050			14,033
Other		(10,971	)		(3,694	)

Net cash provided from operating activities		32,074			35,930


CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt		—			297,422
Redemptions and Repayments-
Long-term debt		(167	)		(292	)
Short-term borrowings, net		(225,975	)		(101,569	)
Common stock dividend payments		(130,000	)		(25,000	)
Other		(112	)		(351	)

Net cash provided from (used for) financing activities		(356,254	)		170,210


CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(29,592	)		(33,005	)
Leasehold improvement payments from associated companies		32,829			—
Loan repayments from associated companies, net		3,847			10,256
Redemptions of lessor notes		20,509			18,358
Sales of investment securities held in trusts		118,360			171,061
Purchases of investment securities held in trusts		(119,777	)		(173,214	)
Other		(4,550	)		(2,776	)

Net cash provided from (used for) investing activities		21,626			(9,320	)


Net change in cash and cash equivalents		(302,554	)		196,820
Cash and cash equivalents at beginning of period		436,712			14

Cash and cash equivalents at end of period	$	134,158		$	196,834

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

JERSEY CENTRAL POWER & LIGHT COMPANY

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)


	Three Months Ended						Nine Months Ended
	September 30						September 30
	2010			2009			2010			2009
	*(In thousands)*
REVENUES:
Electric sales	$	952,420		$	854,108		$	2,353,418		$	2,312,089
Excise tax collections		16,080			14,128			39,444			37,890

Total revenues		968,500			868,236			2,392,862			2,349,979


EXPENSES:
Purchased power		556,618			509,035			1,381,104			1,414,226
Other operating expenses		89,167			84,495			260,004			241,241
Provision for depreciation		26,614			26,565			81,678			76,969
Amortization of regulatory assets, net		100,476			96,051			251,250			262,900
General taxes		19,974			18,344			51,312			48,427

Total expenses		792,849			734,490			2,025,348			2,043,763


OPERATING INCOME		175,651			133,746			367,514			306,216


OTHER INCOME (EXPENSE):
Miscellaneous income		1,662			1,301			5,144			4,113
Interest expense		(30,220	)		(29,593	)		(89,684	)		(87,132	)
Capitalized interest		199			139			488			419

Total other expense		(28,359	)		(28,153	)		(84,052	)		(82,600	)


INCOME BEFORE INCOME TAXES		147,292			105,593			283,462			223,616

INCOME TAXES		64,440			43,435			121,491			95,834


NET INCOME		82,852			62,158			161,971			127,782


OTHER COMPREHENSIVE INCOME (LOSS):
Pension and other postretirement benefits		4,135			(51,932	)		24,198			(26,893	)
Unrealized gain on derivative hedges		69			69			207			207

Other comprehensive income (loss)		4,204			(51,863	)		24,405			(26,686	)
Income tax expense (benefit) related to other comprehensive income		1,443			(21,295	)		9,442			(8,806	)

Other comprehensive income (loss), net of tax		2,761			(30,568	)		14,963			(17,880	)


TOTAL COMPREHENSIVE INCOME	$	85,613		$	31,590		$	176,934		$	109,902

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

JERSEY CENTRAL POWER & LIGHT COMPANY

CONSOLIDATED BALANCE SHEETS
(Unaudited)


	September 30,			December 31,
	2010			2009
	*(In thousands)*
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	1		$	27
Receivables-
Customers (less accumulated provisions of $4,736,000 and $3,506,000, respectively, for uncollectible accounts)		378,822			300,991
Associated companies		3,900			12,884
Other		26,024			21,877
Notes receivable — associated companies		64,168			102,932
Prepaid taxes		71,153			34,930
Other		15,674			12,945

		559,742			486,586

UTILITY PLANT:
In service		4,568,640			4,463,490
Less — Accumulated provision for depreciation		1,666,918			1,617,639

		2,901,722			2,845,851
Construction work in progress		51,857			54,251

		2,953,579			2,900,102

OTHER PROPERTY AND INVESTMENTS:
Nuclear plant decommissioning trusts		175,254			166,768
Nuclear fuel disposal trust		208,870			199,677
Other		2,136			2,149

		386,260			368,594

DEFERRED CHARGES AND OTHER ASSETS:
Goodwill		1,810,936			1,810,936
Regulatory assets		722,086			888,143
Other		30,608			27,096

		2,563,630			2,726,175

	$	6,463,211		$	6,481,457

LIABILITIES AND CAPITALIZATION

CURRENT LIABILITIES:
Currently payable long-term debt	$	31,947		$	30,639
Accounts payable-
Associated companies		12,743			26,882
Other		154,872			168,093
Accrued taxes		24,798			12,594
Accrued interest		30,003			18,256
Other		78,903			111,156

		333,266			367,620

CAPITALIZATION:
Common stockholders’ equity-
Common stock, $10 par value, authorized 16,000,000 shares, 13,628,447 shares outstanding		136,284			136,284
Other paid-in capital		2,508,852			2,507,049
Accumulated other comprehensive loss		(228,049	)		(243,012	)
Retained earnings		197,046			200,075

Total common stockholders’ equity		2,614,133			2,600,396
Long-term debt and other long-term obligations		1,779,081			1,801,589

		4,393,214			4,401,985

NONCURRENT LIABILITIES:
Accumulated deferred income taxes		720,825			687,545
Nuclear fuel disposal costs		196,703			196,511
Retirement benefits		133,579			150,603
Asset retirement obligations		106,573			101,568
Power purchase contract liability		386,273			399,105
Other		192,778			176,520

		1,736,731			1,711,852

COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 9)
	$	6,463,211		$	6,481,457

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

JERSEY CENTRAL POWER & LIGHT COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


	Nine Months Ended
	September 30
	2010			2009
	*(In thousands)*

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	161,971		$	127,782
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		81,678			76,969
Amortization of regulatory assets, net		251,250			262,900
Deferred purchased power and other costs		(85,136	)		(106,340	)
Deferred income taxes and investment tax credits, net		14,984			40,989
Accrued compensation and retirement benefits		11,621			7,308
Cash collateral paid, net		(23,400	)		(210	)
Pension trust contribution		—			(100,000	)
Decrease (increase) in operating assets-
Receivables		(72,994	)		18,984
Prepayments and other current assets		(36,573	)		(83,538	)
Increase (decrease) in operating liabilities-
Accounts payable		(37,668	)		(40,670	)
Accrued taxes		35,326			(13,399	)
Accrued interest		11,747			20,946
Tax collections payable		—			(9,714	)
Other		(13,953	)		12,606

Net cash provided from operating activities		298,853			214,613


CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt		—			299,619
Redemptions and Repayments-
Common stock		—			(150,000	)
Long-term debt		(21,703	)		(20,570	)
Short-term borrowings, net		—			(114,766	)
Common stock dividend payments		(165,000	)		(88,000	)
Other		(2	)		(2,275	)

Net cash used for financing activities		(186,705	)		(75,992	)


CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(130,008	)		(121,342	)
Loans from (to) associated companies, net		38,764			(660	)
Sales of investment securities held in trusts		340,368			338,684
Purchases of investment securities held in trusts		(353,028	)		(351,216	)
Other		(8,270	)		(4,152	)

Net cash used for investing activities		(112,174	)		(138,686	)


Net change in cash and cash equivalents		(26	)		(65	)
Cash and cash equivalents at beginning of period		27			66

Cash and cash equivalents at end of period	$	1		$	1

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

METROPOLITAN EDISON COMPANY

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)


	Three Months Ended						Nine Months Ended
	September 30						September 30
	2010			2009			2010			2009
	*(In thousands)*
REVENUES:
Electric sales	$	460,864		$	424,901		$	1,334,454		$	1,194,609
Gross receipts tax collections		23,049			20,612			65,245			58,181

Total revenues		483,913			445,513			1,399,699			1,252,790


EXPENSES:
Purchased power from affiliates		166,039			94,768			476,119			273,497
Purchased power from non-affiliates		87,561			142,495			264,765			389,705
Other operating expenses		141,761			63,654			333,895			221,320
Provision for depreciation		12,978			13,262			39,176			38,320
Amortization of regulatory assets, net		15,480			84,631			112,869			173,770
General taxes		25,029			22,540			66,663			66,509

Total expenses		448,848			421,350			1,293,487			1,163,121


OPERATING INCOME		35,065			24,163			106,212			89,669


OTHER INCOME (EXPENSE):
Interest income		581			2,169			2,678			8,124
Miscellaneous income		1,539			1,068			5,093			2,982
Interest expense		(13,037	)		(14,380	)		(39,812	)		(42,502	)
Capitalized interest		176			47			461			124

Total other expense		(10,741	)		(11,096	)		(31,580	)		(31,272	)


INCOME BEFORE INCOME TAXES		24,324			13,067			74,632			58,397

INCOME TAXES		10,084			2,324			30,968			21,027


NET INCOME		14,240			10,743			43,664			37,370


OTHER COMPREHENSIVE INCOME (LOSS):
Pension and other postretirement benefits		2,161			(31,365	)		14,032			557
Unrealized gain on derivative hedges		84			84			252			252

Other comprehensive income (loss)		2,245			(31,281	)		14,284			809
Income tax expense (benefit) related to other comprehensive income		723			(13,112	)		5,624			2,273

Other comprehensive income (loss), net of tax		1,522			(18,169	)		8,660			(1,464	)


TOTAL COMPREHENSIVE INCOME (LOSS)	$	15,762		$	(7,426	)	$	52,324		$	35,906

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

METROPOLITAN EDISON COMPANY

CONSOLIDATED BALANCE SHEETS
(Unaudited)


	September 30,			December 31,
	2010			2009
	*(In thousands)*
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	124		$	120
Receivables-
Customers (less accumulated provisions of $4,344,000 and $4,044,000, respectively, for uncollectible accounts)		182,509			171,052
Associated companies		41,689			29,413
Other		13,654			11,650
Notes receivable from associated companies		11,201			97,150
Prepaid taxes		27,307			15,229
Other		2,523			1,459

		279,007			326,073

UTILITY PLANT:
In service		2,213,765			2,162,815
Less — Accumulated provision for depreciation		836,821			810,746

		1,376,944			1,352,069
Construction work in progress		31,488			14,901

		1,408,432			1,366,970

OTHER PROPERTY AND INVESTMENTS:
Nuclear plant decommissioning trusts		277,823			266,479
Other		877			890

		278,700			267,369

DEFERRED CHARGES AND OTHER ASSETS:
Goodwill		416,499			416,499
Regulatory assets		400,375			356,754
Power purchase contract asset		103,902			176,111
Other		64,084			36,544

		984,860			985,908

	$	2,950,999		$	2,946,320

LIABILITIES AND CAPITALIZATION

CURRENT LIABILITIES:
Currently payable long-term debt	$	28,500		$	128,500
Short-term borrowings-
Associated companies		6,296			—
Accounts payable-
Associated companies		34,204			40,521
Other		28,604			41,050
Accrued taxes		2,967			11,170
Accrued interest		11,717			17,362
Other		31,993			24,520

		144,281			263,123

CAPITALIZATION:
Common stockholders’ equity-
Common stock, without par value, authorized 900,000 shares, 859,500 shares outstanding		1,197,064			1,197,070
Accumulated other comprehensive loss		(134,891	)		(143,551	)
Retained earnings		48,064			4,399

Total common stockholders’ equity		1,110,237			1,057,918
Long-term debt and other long-term obligations		713,941			713,873

		1,824,178			1,771,791

NONCURRENT LIABILITIES:
Accumulated deferred income taxes		489,608			453,462
Accumulated deferred investment tax credits		6,978			7,313
Nuclear fuel disposal costs		44,434			44,391
Retirement benefits		28,268			33,605
Asset retirement obligations		189,489			180,297
Power purchase contract liability		175,259			143,135
Other		48,504			49,203

		982,540			911,406

COMMITMENTS AND CONTINGENCIES (Note 9)
	$	2,950,999		$	2,946,320

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

METROPOLITAN EDISON COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


	Nine Months Ended
	September 30
	2010			2009
	*(In thousands)*

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	43,664		$	37,370
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		39,176			38,320
Amortization of regulatory assets, net		112,869			173,770
Deferred costs recoverable as regulatory assets		(49,646	)		(70,044	)
Deferred income taxes and investment tax credits, net		23,781			59,393
Accrued compensation and retirement benefits		(282	)		6,712
Pension trust contribution		—			(123,521	)
Cash collateral paid, net		(17,647	)		(6,800	)
Decrease (increase) in operating assets-
Receivables		(18,444	)		(23,370	)
Prepayments and other current assets		(13,144	)		(22,614	)
Increase (decrease) in operating liabilities-
Accounts payable		(18,763	)		(17,293	)
Accrued taxes		(8,203	)		(11,095	)
Accrued interest		(5,645	)		5,001
Other		7,721			11,891

Net cash provided from operating activities		95,437			57,720


CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt		—			300,000
Short-term borrowings, net		6,296			—
Redemptions and Repayments-
Long-term debt		(100,000	)		—
Short-term borrowings, net		—			(265,003	)
Other		—			(2,268	)

Net cash provided from (used for) financing activities		(93,704	)		32,729


CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(77,921	)		(73,106	)
Sales of investment securities held in trusts		420,116			88,802
Purchases of investment securities held in trusts		(427,150	)		(95,982	)
Loans from (to) associated companies, net		85,949			(6,586	)
Other		(2,723	)		(3,597	)

Net cash used for investing activities		(1,729	)		(90,469	)


Net change in cash and cash equivalents		4			(20	)
Cash and cash equivalents at beginning of period		120			144

Cash and cash equivalents at end of period	$	124		$	124

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

PENNSYLVANIA ELECTRIC COMPANY

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)


	Three Months Ended						Nine Months Ended
	September 30						September 30
	2010			2009			2010			2009
	*(In thousands)*
REVENUES:
Electric sales	$	372,480		$	340,246		$	1,108,751		$	1,028,420
Gross receipts tax collections		17,414			15,246			51,100			47,342

Total revenues		389,894			355,492			1,159,851			1,075,762


EXPENSES:
Purchased power from affiliates		165,125			81,191			486,470			249,438
Purchased power from non-affiliates		92,648			144,777			270,900			397,260
Other operating expenses		58,832			47,785			198,296			171,375
Provision for depreciation		14,859			15,038			46,146			45,074
Amortization (deferral) of regulatory assets, net		(1,771	)		17,201			(22,259	)		44,090
General taxes		19,194			17,230			54,375			56,074

Total expenses		348,887			323,222			1,033,928			963,311


OPERATING INCOME		41,007			32,270			125,923			112,451


OTHER INCOME (EXPENSE):
Miscellaneous income		1,508			1,156			4,431			2,865
Interest expense		(17,581	)		(11,614	)		(52,501	)		(36,690	)
Capitalized interest		193			23			516			74

Total other expense		(15,880	)		(10,435	)		(47,554	)		(33,751	)


INCOME BEFORE INCOME TAXES		25,127			21,835			78,369			78,700

INCOME TAXES		5,311			6,039			28,280			29,393


NET INCOME		19,816			15,796			50,089			49,307


OTHER COMPREHENSIVE INCOME (LOSS):
Pension and other postretirement benefits		1,830			(79,579	)		12,207			(47,224	)
Unrealized gain on derivative hedges		16			17			48			49
Change in unrealized gain on available-for-sale securities		—			19			—			3

Other comprehensive income (loss)		1,846			(79,543	)		12,255			(47,172	)
Income tax expense (benefit) related to other comprehensive income		484			(33,141	)		4,251			(16,986	)

Other comprehensive income (loss), net of tax		1,362			(46,402	)		8,004			(30,186	)


TOTAL COMPREHENSIVE INCOME (LOSS)	$	21,178		$	(30,606	)	$	58,093		$	19,121

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

PENNSYLVANIA ELECTRIC COMPANY

CONSOLIDATED BALANCE SHEETS
(Unaudited)


	September 30,			December 31,
	2010			2009
	*(In thousands)*
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	8		$	14
Receivables-
Customers (less accumulated provisions of $3,481,000 and $3,483,000, respectively, for uncollectible accounts)		135,416			139,302
Associated companies		95,355			77,338
Other		14,413			18,320
Notes receivable from associated companies		14,569			14,589
Prepaid taxes		48,264			18,946
Other		2,115			1,400

		310,140			269,909

UTILITY PLANT:
In service		2,503,555			2,431,737
Less — Accumulated provision for depreciation		925,894			901,990

		1,577,661			1,529,747
Construction work in progress		28,498			24,205

		1,606,159			1,553,952

OTHER PROPERTY AND INVESTMENTS:
Nuclear plant decommissioning trusts		147,675			142,603
Non-utility generation trusts		92,034			120,070
Other		294			289

		240,003			262,962

DEFERRED CHARGES AND OTHER ASSETS:
Goodwill		768,628			768,628
Regulatory assets		202,801			9,045
Power purchase contract asset		5,746			15,362
Other		28,780			19,143

		1,005,955			812,178

	$	3,162,257		$	2,899,001

LIABILITIES AND CAPITALIZATION

CURRENT LIABILITIES:
Currently payable long-term debt	$	69,310		$	69,310
Short-term borrowings-
Associated companies		43,244			41,473
Accounts payable-
Associated companies		40,747			39,884
Other		28,427			41,990
Accrued taxes		4,164			6,409
Accrued interest		24,513			17,598
Other		25,871			22,741

		236,276			239,405

CAPITALIZATION:
Common stockholders’ equity-
Common stock, $20 par value, authorized 5,400,000 shares, 4,427,577 shares outstanding		88,552			88,552
Other paid-in capital		913,507			913,437
Accumulated other comprehensive loss		(154,100	)		(162,104	)
Retained earnings		141,590			91,501

Total common stockholders’ equity		989,549			931,386
Long-term debt and other long-term obligations		1,072,207			1,072,181

		2,061,756			2,003,567

NONCURRENT LIABILITIES:
Accumulated deferred income taxes		356,536			242,040
Retirement benefits		167,542			174,306
Asset retirement obligations		96,519			91,841
Power purchase contract liability		194,102			100,849
Other		49,526			46,993

		864,225			656,029

COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 9)
	$	3,162,257		$	2,899,001

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

PENNSYLVANIA ELECTRIC COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


	Nine Months Ended
	September 30
	2010			2009
	*(In thousands)*

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	50,089		$	49,307
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		46,146			45,074
Amortization (deferral) of regulatory assets, net		(22,259	)		44,090
Deferred costs recoverable as regulatory assets		(61,574	)		(76,953	)
Deferred income taxes and investment tax credits, net		94,015			56,144
Accrued compensation and retirement benefits		7,634			6,271
Cash collateral paid, net		(11,760	)		—
Pension trust contribution		—			(60,000	)
Decrease (increase) in operating assets-
Receivables		(2,584	)		3,687
Prepayments and other current assets		(30,034	)		(24,730	)
Increase (decrease) in operating liabilities-
Accounts payable		(12,766	)		(8,988	)
Accrued taxes		(2,245	)		(7,015	)
Accrued interest		6,915			(2,570	)
Other		10,127			13,392

Net cash provided from operating activities		71,704			37,709


CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt		—			498,583
Short-term borrowings, net		1,771			—
Redemptions and Repayments-
Long-term debt		—			(100,000	)
Short-term borrowings, net		—			(239,770	)
Common stock dividend payments		—			(85,000	)
Other		(125	)		(3,865	)

Net cash provided from financing activities		1,646			69,948


CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(91,924	)		(92,070	)
Sales of investment securities held in trusts		141,392			80,986
Purchases of investment securities held in trusts		(116,240	)		(91,105	)
Other		(6,584	)		(5,482	)

Net cash used for investing activities		(73,356	)		(107,671	)


Net change in cash and cash equivalents		(6	)		(14	)
Cash and cash equivalents at beginning of period		14			23

Cash and cash equivalents at end of period	$	8		$	9

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

COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND BASIS OF PRESENTATION

FirstEnergy is a diversified energy company that holds, directly or indirectly, all of the outstanding common stock of its principal subsidiaries: OE, CEI, TE, Penn (a wholly owned subsidiary of OE), ATSI, JCP&L, Met-Ed, Penelec, FENOC, FES and its subsidiaries FGCO and NGC, and FESC.

FirstEnergy and its subsidiaries follow GAAP and comply with the regulations, orders, policies and practices prescribed by the SEC, the FERC and, as applicable, the PUCO, the PPUC and the NJBPU. The preparation of financial statements in conformity with GAAP requires management to make periodic estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. Actual results could differ from these estimates. The reported results of operations are not indicative of results of operations for any future period. In preparing the financial statements, FirstEnergy and its subsidiaries have evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.

These statements should be read in conjunction with the financial statements and notes included in the combined Annual Report on Form 10-K for the year ended December 31, 2009 for FirstEnergy, FES and the Utilities, as applicable. The consolidated unaudited financial statements of FirstEnergy, FES and each of the Utilities reflect all normal recurring adjustments that, in the opinion of management, are necessary to fairly present results of operations for the interim periods. Certain prior year amounts have been reclassified to conform to the current year presentation. Unless otherwise indicated, defined terms used herein have the meanings set forth in the accompanying Glossary of Terms.

FirstEnergy and its subsidiaries consolidate all majority-owned subsidiaries over which they exercise control and, when applicable, entities for which they have a controlling financial interest. Intercompany transactions and balances are eliminated in consolidation. FirstEnergy consolidates a VIE when it is determined that it is the primary beneficiary (see Note 7). Investments in affiliates over which FirstEnergy and its subsidiaries have the ability to exercise significant influence, but are not the primary beneficiary and do not exercise control, follow the equity method of accounting. Under the equity method, the interest in the entity is reported as an investment in the Consolidated Balance Sheets and the percentage share of the entity’s earnings is reported in the Consolidated Statements of Income.

2. EARNINGS PER SHARE

Basic earnings per share of common stock is computed using the weighted average of actual common shares outstanding during the respective period as the denominator. The denominator for diluted earnings per share of common stock reflects the weighted average of common shares outstanding plus the potential additional common shares that could result if dilutive securities and other agreements to issue common stock were exercised. The following table reconciles basic and diluted earnings per share of common stock:


	Three Months				Nine Months
Reconciliation of Basic and Diluted Earnings per Share	Ended September 30				Ended September 30
of Common Stock	2010		2009		2010		2009
	*(In millions, except per share amounts)*

Earnings available to FirstEnergy Corp.	$	179	$	234	$	599	$	768


Weighted average number of basic shares outstanding		304		304		304		304
Assumed exercise of dilutive stock options and awards		1		2		1		2

Weighted average number of diluted shares outstanding		305		306		305		306


Basic earnings per share of common stock	$	0.59	$	0.77	$	1.97	$	2.52

Diluted earnings per share of common stock	$	0.59	$	0.77	$	1.96	$	2.51

3. GOODWILL

In a business combination, the excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed is recognized as goodwill. Goodwill is evaluated for impairment at least annually and more frequently if indicators of impairment arise. In accordance with the accounting standards, if the fair value of a reporting unit is less than its carrying value (including goodwill), the goodwill is tested for impairment. Impairment is indicated and a loss is recognized if the implied fair value of a reporting unit’s goodwill is less than the carrying value of its goodwill.

FirstEnergy’s goodwill primarily relates to its energy delivery services segment. FirstEnergy’s aggregated reporting units are consistent with its operating segments, which are energy delivery services and competitive energy. Goodwill is allocated to these operating segments based on the original purchase price allocation for acquisitions within the various reporting units. The goodwill allocated to competitive energy is insignificant to that segment and to FirstEnergy.

Annual impairment testing is conducted during the third quarter of each year and for 2010 the analysis indicated no impairment of goodwill. For purposes of annual testing the estimated fair values of energy delivery services and the utilities were determined using a discounted cash flow approach.

The discounted cash flow model of the reporting units, which are aggregated into operating segments, is based on the forecasted operating cash flow for the current year, projected operating cash flows for the next five years (determined using forecasted amounts as well as an estimated growth rate) and a terminal value beyond five years. Discounted cash flows consist of the operating cash flows for each reporting unit less an estimate for capital expenditures. The key assumptions incorporated in the discounted cash flow approach include growth rates, projected operating income, changes in working capital, projected capital expenditures, planned funding of pension plans, anticipated funding of nuclear decommissioning trusts, expected results of future rate proceedings and a discount rate equal to our assumed long term cost of capital. Cash flows may be adjusted to exclude certain non-recurring or unusual items. Reporting unit income, which excludes non-recurring or unusual items, was the starting point for determining operating cash flow and there were no non- recurring or unusual items excluded from the calculations of operating cash flow in any of the periods included in the determination of fair value.

Unanticipated changes in assumptions could have a significant effect on FirstEnergy’s evaluation of goodwill. At the time of annual impairment testing, fair value would have to have declined in excess of 52% for energy delivery services to indicate a potential goodwill impairment. Fair value would have to have declined more than 26% for CEI, 64% for TE, 38% for JCP&L, 56% for Met-Ed, and 57% for Penelec to indicate potential goodwill impairment.

4. FAIR VALUE OF FINANCIAL INSTRUMENTS

(A) LONG-TERM DEBT AND OTHER LONG-TERM OBLIGATIONS

All borrowings with initial maturities of less than one year are defined as short-term financial instruments under GAAP and are reported on the Consolidated Balance Sheets at cost, which approximates their fair market value, in the caption “short-term borrowings.” The following table provides the approximate fair value and related carrying amounts of long-term debt and other long-term obligations as of September 30, 2010 and December 31, 2009:


	September 30, 2010				December 31, 2009
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
	*(In millions)*

FirstEnergy (Consolidated)	$	13,592	$	14,920	$	13,753	$	14,502
FES		4,181		4,228		4,224		4,306
OE		1,159		1,409		1,169		1,299
CEI		1,853		2,144		1,873		2,032
TE		600		706		600		638
JCP&L		1,819		2,076		1,840		1,950
Met-Ed		742		849		842		909
Penelec		1,144		1,269		1,144		1,177

The fair values of long-term debt and other long-term obligations reflect the present value of the cash outflows relating to those securities based on the current call price, the yield to maturity or the yield to call, as deemed appropriate at the end of each respective period. The yields assumed were based on securities with similar characteristics offered by corporations with credit ratings similar to those of FES and the Utilities.

(B) INVESTMENTS

All temporary cash investments purchased with an initial maturity of three months or less are reported as cash equivalents on the Consolidated Balance Sheets at cost, which approximates their fair market value. Investments other than cash and cash equivalents include held-to-maturity securities, available-for-sale securities, and notes receivable.

Available-For-Sale Securities

The following table summarizes the amortized cost basis, unrealized gains and losses and fair values of investments held in nuclear decommissioning trusts, nuclear fuel disposal trusts and NUG trusts as of September 30, 2010 and December 31, 2009:


	September 30, 2010⁽¹⁾								December 31, 2009⁽²⁾
	Cost		Unrealized		Unrealized		Fair		Cost		Unrealized		Unrealized		Fair
	Basis		Gains		Losses		Value		Basis		Gains		Losses		Value
	*(In millions)*
Debt securities
FirstEnergy	$	1,795	$	73	$	—	$	1,868	$	1,727	$	22	$	—	$	1,749
FES		1,079		39		—		1,118		1,043		3		—		1,046
OE		124		4		—		128		55		—		—		55
TE		31		1		—		32		72		—		—		72
JCP&L		277		15		—		292		271		9		—		280
Met-Ed		129		8		—		137		120		5		—		125
Penelec		155		6		—		161		166		5		—		171

Equity securities
FirstEnergy	$	261	$	44	$	—	$	305	$	252	$	43	$	—	$	295
JCP&L		78		9		—		87		74		11		—		85
Met-Ed		122		23		—		145		117		23		—		140
Penelec		62		10		—		72		61		9		—		70


⁽¹⁾		Excludes cash balances: FirstEnergy — $93 million; FES — $40 million; OE — $2 million; TE — $44 million; JCP&L — $5 million; Met-Ed — $(5) million and Penelec — $6 million.

⁽²⁾		Excludes cash balances: FirstEnergy — $137 million; FES — $43 million; OE — $66 million; TE — $2 million; JCP&L — $3 million and Penelec — $23 million.

Proceeds from the sale of investments in available-for-sale securities, realized gains and losses on those sales, and interest and dividend income for the nine-month period ended September 30, 2010 and 2009 were as follows:


September 30, 2010	FirstEnergy		FES		OE		TE		JCP&L		Met-Ed		Penelec
	*(In millions)*
Proceeds from sales	$	2,577	$	1,478	$	79	$	118	$	340	$	420	$	141
Realized gains		132		101		2		3		10		10		6
Realized losses		118		88		—		1		10		12		7
Interest and dividend income		56		33		2		1		10		5		5


September 30, 2009	FirstEnergy		FES		OE		TE		JCP&L		Met-Ed		Penelec
	*(In millions)*
Proceeds from sales	$	3,040	$	2,153	$	207	$	171	$	339	$	89	$	81
Realized gains		186		162		11		7		4		1		1
Realized losses		96		62		3		—		11		13		7
Interest and dividend income		47		22		4		2		10		5		4

Held-To-Maturity Securities

The following table provides the amortized cost basis, unrealized gains and losses, and approximate fair values of investments in held-to-maturity securities as of September 30, 2010 and December 31, 2009:


	September 30, 2010								December 31, 2009
	Cost		Unrealized		Unrealized		Fair		Cost		Unrealized		Unrealized		Fair
	Basis		Gains		Losses		Value		Basis		Gains		Losses		Value
	*(In millions)*
Debt Securities
FirstEnergy	$	486	$	99	$	—	$	585	$	544	$	72	$	—	$	616
OE		205		60		—		265		217		29		—		246
CEI		340		31		—		371		389		43		—		432

Investments in emission allowances, employee benefits and cost and equity method investments totaling $256 million as of September 30, 2010, and $264 million as of December 31, 2009 are not required to be disclosed and are therefore excluded from the amounts reported above.

Notes Receivable

The table below provides the approximate fair value and related carrying amounts of notes receivable as of September 30, 2010 and December 31, 2009. The fair value of notes receivable represents the present value of the cash inflows based on the yield to maturity. The yields assumed were based on financial instruments with similar characteristics and terms.


	September 30, 2010				December 31, 2009
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
	*(In millions)*
Notes Receivable
FirstEnergy	$	7	$	8	$	36	$	35
FES		—		—		2		1
TE		104		114		124		141

The fair value of notes receivable represents the present value of the cash inflows based on the yield to maturity. The yields assumed were based on financial instruments with similar characteristics and terms.

(C) RECURRING FAIR VALUE MEASUREMENTS

Fair value is the price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between willing market participants on the measurement date. A fair value hierarchy has been established that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are as follows:

Level 1 — Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those where transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. FirstEnergy’s Level 1 assets and liabilities primarily consist of exchange-traded derivatives and equity securities listed on active exchanges that are held in various trusts.

Level 2 — Pricing inputs are either directly or indirectly observable in the market as of the reporting date, other than quoted prices in active markets included in Level 1. FirstEnergy’s Level 2 assets and liabilities consist primarily of investments in debt securities held in various trusts and commodity forwards. Additionally, Level 2 includes those financial instruments that are valued using models or other valuation methodologies based on assumptions that are observable in the marketplace throughout the full term of the instrument and can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Instruments in this category include non-exchange-traded derivatives such as forwards and certain interest rate swaps.

Level 3 — Pricing inputs include inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. FirstEnergy develops its view of the future market price of key commodities through a combination of market observation and assessment (generally for the short term) and fundamental modeling (generally for the long term). Key fundamental electricity model inputs are generally directly observable in the market or derived from publicly available historic and forecast data. Some key inputs reflect forecasts published by industry leading consultants who generally employ similar fundamental modeling approaches. Fundamental model inputs and results, as well as the selection of consultants, reflect the consensus of appropriate FirstEnergy management. Level 3 instruments include those that may be more structured or otherwise tailored to customers’ needs. FirstEnergy’s Level 3 instruments consist exclusively of NUG contracts.

FirstEnergy utilizes market data and assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. FirstEnergy primarily applies the market approach for recurring fair value measurements using the best information available. Accordingly, FirstEnergy maximizes the use of observable inputs and minimizes the use of unobservable inputs.

The following tables set forth financial assets and financial liabilities that are accounted for at fair value by level within the fair value hierarchy as of September 30, 2010 and December 31, 2009. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. FirstEnergy’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the fair valuation of assets and liabilities and their placement within the fair value hierarchy levels.


	Recurring Fair Value Measures as of September 30, 2010
	Level 1
	FirstEnergy		FES		OE		TE		JCP&L		Met-Ed		Penelec
	*(In millions)*
Assets
Nuclear Decommissioning Trust Investments — equity securities⁽¹⁾	$	305	$	—	$	—	$	—	$	88	$	145	$	73

Total Assets⁽²⁾	$	305	$	—	$	—	$	—	$	88	$	145	$	73


Liabilities
Derivatives — commodity contracts	$	2	$	2	$	—	$	—	$	—	$	—	$	—

Total Liabilities	$	2	$	2	$	—	$	—	$	—	$	—	$	—


	Level 2
	FirstEnergy		FES		OE		TE		JCP&L		Met-Ed		Penelec
	*(In millions)*
Assets
Nuclear Decommissioning Trust Investments
U.S. government debt securities	$	619	$	337	$	127	$	26	$	37	$	82	$	10
U.S. state debt securities		88		—		—		—		29		—		59
Foreign government debt securities		285		285		—		—		—		—		—
Corporate debt securities		580		496		—		6		23		47		8
Other		101		38		6		45		2		9		1

Total Nuclear Decommissioning Trust Investments	$	1,673	$	1,156	$	133	$	77	$	91	$	138	$	78


Rabbi Trust Investments
Equity securities — financial	$	1	$	—	$	—	$	—	$	—	$	—	$	—
Other		11		—		—		—		—		—		—

Total Rabbi Trust Investments	$	12	$	—	$	—	$	—	$	—	$	—	$	—


Nuclear Fuel Disposal Trust Investments
U.S. state debt securities	$	209	$	—	$	—	$	—	$	209	$	—	$	—

Total Nuclear Fuel Disposal Trust Investments	$	209	$	—	$	—	$	—	$	209	$	—	$	—


NUG Trust Investments
U.S. state debt securities	$	86	$	—	$	—	$	—	$	—	$	—	$	86
Other		6		—		—		—		—		—		6

Total NUG Trust Investments	$	92	$	—	$	—	$	—	$	—	$	—	$	92


Derivatives
Commodity contracts	$	183	$	174	$	—	$	—	$	2	$	5	$	2

Total Derivatives Contracts	$	183	$	174	$	—	$	—	$	2	$	5	$	2

Total Assets⁽²⁾	$	2,169	$	1,330	$	133	$	77	$	302	$	143	$	172


Liabilities
Derivatives
Commodity contracts	$	329	$	329	$	—	$	—	$	—	$	—	$	—

Total Liabilities	$	329	$	329	$	—	$	—	$	—	$	—	$	—


	Level 3
	FirstEnergy		FES		OE		TE		JCP&L		Met-Ed		Penelec
	*(In millions)*
Assets
Derivatives — NUG contracts⁽³⁾	$	116	$	—	$	—	$	—	$	7	$	104	$	6


Liabilities
Derivatives — NUG contracts⁽³⁾	$	756	$	—	$	—	$	—	$	386	$	175	$	194


⁽¹⁾		NDT funds hold equity portfolios whose performance is benchmarked against the S&P 500 Index or Russell 3000 Index.

⁽²⁾		Excludes $(13) million of receivables, payables and accrued income.

⁽³⁾		NUG contracts are subject to regulatory accounting and do not impact earnings.


	Recurring Fair Value Measures as of December 31, 2009
	Level 1
	FirstEnergy		FES		OE		TE		JCP&L		Met-Ed		Penelec
	*(In millions)*
Assets
Nuclear Decommissioning Trust Investments — equity securities⁽¹⁾	$	294	$	—	$	—	$	—	$	87	$	133	$	74

Total Assets⁽²⁾	$	294	$	—	$	—	$	—	$	87	$	133	$	74


Liabilities
Derivatives — commodity contracts	$	11	$	11	$	—	$	—	$	—	$	—	$	—

Total Liabilities	$	11	$	11	$	—	$	—	$	—	$	—	$	—


	Level 2
	FirstEnergy		FES		OE		TE		JCP&L		Met-Ed		Penelec
	*(In millions)*
Assets
Nuclear Decommissioning Trust Investments
U.S. government debt securities	$	558	$	306	$	118	$	72	$	23	$	30	$	9
U.S. state debt securities		188		15		—		—		41		82		50
Foreign government debt securities		279		279		—		—		—		—		—
Corporate debt securities		484		443		—		—		15		20		6
Other		35		29		2		—		1		2		1

Total Nuclear Decommissioning Trust Investments	$	1,544	$	1,072	$	120	$	72	$	80	$	134	$	66


Rabbi Trust Investments
Equity securities — financial	$	1	$	—	$	—	$	—	$	—	$	—	$	—
Other		9		—		—		—		—		—		—

Total Rabbi Trust Investments	$	10	$	—	$	—	$	—	$	—	$	—	$	—


Nuclear Fuel Disposal Trust Investments
U.S. state debt securities	$	189	$	—	$	—	$	—	$	189	$	—	$	—
Other		11		—		—		—		11		—		—

Total Nuclear Fuel Disposal Trust Investments	$	200	$	—	$	—	$	—	$	200	$	—	$	—


NUG Trust Investments
U.S. state debt securities	$	101	$	—	$	—	$	—	$	—	$	—	$	101
Other		19		—		—		—		—		—		19

Total NUG Trust Investments	$	120	$	—	$	—	$	—	$	—	$	—	$	120


Derivatives — Commodity Contracts	$	34	$	15	$	—	$	—	$	5	$	9	$	5

Other	$	1	$	—	$	—	$	—	$	—	$	—	$	—

Total Assets⁽²⁾	$	1,909	$	1,087	$	120	$	72	$	285	$	143	$	191


Liabilities
Derivatives — commodity contracts	$	224	$	224	$	—	$	—	$	—	$	—	$	—

Total Liabilities	$	224	$	224	$	—	$	—	$	—	$	—	$	—


	Level 3
	FirstEnergy		FES		OE		TE		JCP&L		Met-Ed		Penelec
	*(In millions)*
Assets
Derivatives — NUG contracts⁽³⁾	$	200	$	—	$	—	$	—	$	9	$	176	$	15


Liabilities
Derivatives — NUG contracts⁽³⁾	$	643	$	—	$	—	$	—	$	399	$	143	$	101


⁽¹⁾		NDT funds hold equity portfolios whose performance is benchmarked against the S&P 500 Index or Russell 3000 Index.

⁽²⁾		Excludes $21 million of receivables, payables and accrued income.

⁽³⁾		NUG contracts are subject to regulatory accounting and do not impact earnings.

The determination of the above fair value measures takes into consideration various factors. These factors include nonperformance risk, including counterparty credit risk and the impact of credit enhancements (such as cash deposits, LOCs and priority interests). The impact of nonperformance risk was immaterial in the fair value measurements.

The following tables set forth a reconciliation of changes in the fair value of NUG contracts classified as Level 3 in the fair value hierarchy for the three and nine months ended September 30, 2010 and 2009 (in millions):


	FirstEnergy			JCP&L			Met-Ed			Penelec
Balance as of January 1, 2010	$	(444	)	$	(391	)	$	33		$	(86	)
Settlements⁽¹⁾		209			99			60			50
Unrealized losses⁽¹⁾		(405	)		(88	)		(164	)		(153	)

Balance as of September 30, 2010	$	(640	)	$	(380	)	$	(71	)	$	(189	)


Balance as of July 1, 2010	$	(557	)	$	(371	)	$	(38	)	$	(148	)
Settlements⁽¹⁾		63			29			23			11
Unrealized losses⁽¹⁾		(146	)		(38	)		(56	)		(52	)

Balance as of September 30, 2010	$	(640	)	$	(380	)	$	(71	)	$	(189	)


	FirstEnergy			JCP&L			Met-Ed			Penelec
Balance as of January 1, 2009	$	(332	)	$	(518	)	$	150		$	36
Settlements⁽¹⁾		273			132			63			78
Unrealized losses⁽¹⁾		(406	)		(30	)		(178	)		(198	)

Balance as of September 30, 2009	$	(465	)	$	(416	)	$	35		$	(84	)


Balance as of July 1, 2009	$	(536	)	$	(466	)	$	23		$	(93	)
Settlements⁽¹⁾		93			42			20			31
Unrealized gains (losses)⁽¹⁾		(22	)		8			(8	)		(22	)

Balance as of September 30, 2009	$	(465	)	$	(416	)	$	35		$	(84	)


⁽¹⁾		Changes in fair value of NUG contracts are subject to regulatory accounting and do not impact earnings.

5. DERIVATIVE INSTRUMENTS

FirstEnergy is exposed to financial risks resulting from fluctuating interest rates and commodity prices, including prices for electricity, natural gas, coal and energy transmission. To manage the volatility relating to these exposures, FirstEnergy uses a variety of derivative instruments, including forward contracts, options, futures contracts and swaps. The derivatives are used for risk management purposes. In addition to derivatives, FirstEnergy also enters into master netting agreements with certain third parties. FirstEnergy’s Risk Policy Committee, comprised of members of senior management, provides general management oversight for risk management activities throughout FirstEnergy. The Committee is responsible for promoting the effective design and implementation of sound risk management programs and oversees compliance with corporate risk management policies and established risk management practices.

FirstEnergy accounts for derivative instruments on its Consolidated Balance Sheets at fair value unless they meet the normal purchases and normal sales criteria. Derivatives that meet those criteria are accounted for at cost under the accrual method of accounting. The changes in the fair value of derivative instruments that do not meet the normal purchases and normal sales criteria are included in purchased power, other expense, unrealized gain (loss) on derivative hedges in other comprehensive income (loss), or as part of the value of the hedged item. Based on derivative contracts held as of September 30, 2010, an adverse 10% change in commodity prices would decrease net income by approximately $6 million ($4 million net of tax) during the next twelve months. A hypothetical 10% increase in the interest rates associated with variable-rate debt would decrease net income by approximately $1 million for the three and nine months ended September 30, 2010.

Cash Flow Hedges

FirstEnergy has used forward starting swap agreements to hedge a portion of the consolidated interest rate risk associated with anticipated issuances of fixed-rate, long-term debt securities of its subsidiaries. These derivatives were treated as cash flow hedges, protecting against the risk of changes in future interest payments resulting from changes in benchmark U.S. Treasury rates between the date of hedge inception and the date of the debt issuance. As of September 30, 2010, no forward starting swap agreements were outstanding.

Total unamortized losses included in AOCL associated with prior interest rate cash flow hedges totaled $95 million ($62 million net of tax) as of September 30, 2010. Based on current estimates, approximately $11 million will be amortized to interest expense during the next twelve months. The table below provides the activity of AOCL related to interest rate cash flow hedges as of September 30, 2010 and 2009.


	Three Months Ended						Nine Months Ended
	September 30						September 30
	2010			2009			2010			2009
	*(In millions)*						*(In millions)*
Effective Portion
Gain (Loss) Recognized in AOCL	$	—		$	(17	)	$	—		$	(18	)
Reclassification from AOCL into Interest Expense		(3	)		(26	)		(9	)		(37	)

Fair Value Hedges

FirstEnergy has used fixed-for-floating interest rate swap agreements to hedge a portion of the consolidated interest rate risk associated with the debt portfolio of its subsidiaries. These derivatives were treated as fair value hedges of fixed-rate, long-term debt issues, protecting against the risk of changes in the fair value of fixed-rate debt instruments due to lower interest rates. As of September 30, 2010, no fixed-for-floating interest rate swap agreements were outstanding.

Total unamortized gains included in long-term debt associated with prior fixed-for-floating interest rate swap agreements totaled $129 million ($84 million net of tax) as of September 30, 2010. Based on current estimates, approximately $22 million will be amortized to interest expense during the next twelve months. Reclassifications from long-term debt into interest expense totaled $5 million and $7 million for the three and nine months ended September 30, 2010.

Commodity Derivatives

FirstEnergy uses both physically and financially settled derivatives to manage its exposure to volatility in commodity prices. Commodity derivatives are used for risk management purposes to hedge exposures when it makes economic sense to do so, including circumstances where the hedging relationship does not qualify for hedge accounting.

The following tables summarize the fair value of commodity derivatives in FirstEnergy’s Consolidated Balance Sheets:


Cash Flow Hedges
Derivative Assets					Derivative Liabilities
	Fair Value					Fair Value
	September 30,		December 31,			September 30,		December 31,
	2010		2009			2010		2009
	*(In millions)*					*(In millions)*

Electricity Forwards					Electricity Forwards
Current Assets	$	77	$	3	Current Liabilities	$	87	$	7
NonCurrent Assets		73		11	NonCurrent Liabilities		70		12
Natural Gas Futures					Natural Gas Futures
Current Assets		—		—	Current Liabilities		1		9
NonCurrent Assets		—		—	NonCurrent Liabilities		—		—
Other					Other
Current Assets		—		—	Current Liabilities		—		2
NonCurrent Assets		—		—	NonCurrent Liabilities		—		—

	$	150	$	14		$	158	$	30


Economic Hedges
Derivative Assets					Derivative Liabilities
	Fair Value					Fair Value
	September 30,		December 31,			September 30,		December 31,
	2010		2009			2010		2009
	*(In millions)*					*(In millions)*

NUG Contracts					NUG Contracts
Power Purchase					Power Purchase
Contract Asset	$	116	$	200	Contract Liability	$	756	$	643
Other					Other
Current Assets		17		—	Current Liabilities		138		106
NonCurrent Assets		15		19	NonCurrent Liabilities		34		97

		148		219			928		846

Total Commodity Derivatives	$	298	$	233	Total Commodity Derivatives	$	1,086	$	876

Electricity forwards are used to balance expected sales with expected generation and purchased power. Natural gas futures are entered into based on expected consumption of natural gas, primarily used in FirstEnergy’s peaking units. Heating oil futures are entered into based on expected consumption of oil and the financial risk in FirstEnergy’s coal transportation contracts. Derivative instruments are not used in quantities greater than forecasted needs. The following table summarizes the volume of FirstEnergy’s outstanding derivative transactions as of September 30, 2010:


	Purchases		Sales			Net			Units
	*(In thousands)*
Electricity Forwards		28,456		(32,604	)		(4,148	)	MWH
Heating Oil Futures		840		—			840		Gallons
Natural Gas Futures		500		(500	)		—		mmBtu

The effect of derivative instruments on the consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2010 and 2009, are summarized in the following tables:


	Three Months Ended September 30,
	Electricity			Natural Gas			Heating Oil
Derivatives in Cash Flow Hedging Relationships	Forwards			Futures			Futures			Total
	*(In millions)*
2010
Gain (Loss) Recognized in AOCL (Effective Portion)	$	(2	)	$	—		$	—		$	(2	)
Effective Gain (Loss) Reclassified to:⁽¹⁾
Purchased Power Expense		(1	)		—			—			(1	)
Fuel Expense		—			(3	)		(1	)		(4	)