2022 Annual Report
FirstEnergy Board of Directors Jana T. Croom Chief financial officer of Kimball Electronics, Inc. Director of FirstEnergy since 2022 James F. O’Neil III Chief executive officer and vice chairman of Orbital Infrastructure Group, Inc. Director of FirstEnergy since 2017 Steven J. Demetriou Executive board chair of Jacobs Solutions Inc. Director of FirstEnergy since 2017 Andrew Teno Portfolio manager of Icahn Capital LP Director of FirstEnergy since 2021 Lisa Winston Hicks Retired as board chair of MV Transportation, Inc. Director of FirstEnergy since 2021 Leslie M. Turner Retired as senior vice president, general counsel and corporate secretary of The Hershey Company Director of FirstEnergy since 2018 Paul Kaleta Retired as executive vice president and general counsel at First Solar, Inc. Director of FirstEnergy since 2021 John W. Somerhalder II Interim president, chief executive officer and board chair of FirstEnergy Corp. Director of FirstEnergy since 2021 Sean T. Klimczak Senior managing director and global head of infrastructure at Blackstone Inc. Director of FirstEnergy since 2022 Melvin D. Williams Retired as president of Nicor Gas and retired as senior vice president of Southern Company Gas Director of FirstEnergy since 2021 Jesse A. Lynn General counsel of Icahn Enterprises LP Director of FirstEnergy since 2021
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the FISCAL YEAR ended December 31, 2022 OR ☐ 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 34-1843785 (An Ohio Corporation) 76 South Main Street Akron OH 44308 Telephone (800) 736-3402 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Title of Each Class Trading Symbol Name of Each Exchange on Which Registered Common Stock, $0.10 par value per share FE New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑ 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 ☑ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large Accelerated Filer ☑ Accelerated Filer ☐ Non-accelerated Filer ☐ Smaller Reporting Company ☐ Emerging Growth Company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐ Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentivebased compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑ State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and ask price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $21,916,076,568 as of June 30, 2022 Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: CLASS AS OF JANUARY 31, 2023 Common Stock, $0.10 par value 572,245,184 Documents Incorporated By Reference PART OF FORM 10-K INTO WHICH DOCUMENT DOCUMENT IS INCORPORATED Proxy Statement for 2023 Annual Meeting of Shareholders of FirstEnergy Corp. to be held May 24, 2023 Part III
TABLE OF CONTENTS Page Glossary of Terms iii Part I Item 1. Business 1 The Companies 1 Utility Regulation 3 Capital Requirements 4 System Demand 5 Regional Reliability 5 Competition 5 Seasonality 5 Human Capital 6 Information About Our Executive Officers 8 FirstEnergy Website and Other Social Media Sites and Applications 8 Item 1A. Risk Factors 9 Item 1B. Unresolved Staff Comments 23 Item 2. Properties 23 Item 3. Legal Proceedings 24 Item 4. Mine Safety Disclosures 24 Part II 25 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 25 Item 6. [Reserved] 25 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 26 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 70 Item 8. Financial Statements and Supplementary Data 70 Report of Independent Registered Public Accounting Firm 71 Financial Statements Consolidated Statements of Income 73 Consolidated Statements of Comprehensive Income 74 Consolidated Balance Sheets 75 Consolidated Statements of Stockholders' Equity 76 Consolidated Statements of Cash Flows 77 Notes to Consolidated Financial Statements 78 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 129 Item 9A. Controls and Procedures 129 Item 9B. Other Information 129 Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections 129 i
Part III 129 Item 10. Directors, Executive Officers and Corporate Governance 129 Item 11. Executive Compensation 130 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 131 Item 13. Certain Relationships and Related Transactions, and Director Independence 131 Item 14. Principal Accounting Fees and Services 131 Part IV 132 Item 15. Exhibits, Financial Statement Schedule 132 Item 16. Form 10-K Summary 136 ii
GLOSSARY OF TERMS The following abbreviations and acronyms are used in this report to identify FirstEnergy Corp. and its current and former subsidiaries: AE Supply Allegheny Energy Supply Company, LLC, an unregulated generation subsidiary AGC Allegheny Generating Company, a generation subsidiary of MP ATSI American Transmission Systems, Incorporated, a subsidiary of FET, which owns and operates transmission facilities CEI The Cleveland Electric Illuminating Company, an Ohio electric utility operating subsidiary FE FirstEnergy Corp., a public utility holding company FELHC, Inc. FirstEnergy License Holding Company FENOC Energy Harbor Nuclear Corp. (formerly known as FirstEnergy Nuclear Operating Company), a subsidiary of EH, which operates EH’s nuclear generating facilities FES Energy Harbor LLC. (formerly known as FirstEnergy Solutions Corp.), a subsidiary of EH, which provides energyrelated products and services FES Debtors FENOC, FES, and FES’ subsidiaries as of March 31, 2018 FESC FirstEnergy Service Company, which provides legal, financial, and other corporate support services FET FirstEnergy Transmission, LLC, the parent company of ATSI, MAIT and TrAIL, and has a joint venture in PATH FEV FirstEnergy Ventures Corp., which invests in certain unregulated enterprises and business ventures FG Energy Harbor Generation LLC (formerly known as FirstEnergy Generation, LLC), a subsidiary of EH, which owns and operates fossil generating facilities FirstEnergy FirstEnergy Corp., together with its consolidated subsidiaries Global Holding Global Mining Holding Company, LLC, a joint venture between FEV, WMB Marketing Ventures, LLC and Pinesdale LLC GPU GPU, Inc., former parent of JCP&L, ME and PN, that merged with FE on November 7, 2001 JCP&L Jersey Central Power & Light Company, a New Jersey electric utility operating subsidiary KATCo Keystone Appalachian Transmission Company, a former subsidiary of FET which became a subsidiary of FE in May 2022 MAIT Mid-Atlantic Interstate Transmission, LLC, a subsidiary of FET, which owns and operates transmission facilities ME Metropolitan Edison Company, a Pennsylvania electric utility operating subsidiary MP Monongahela Power Company, a West Virginia electric utility operating subsidiary OE Ohio Edison Company, an Ohio electric utility operating subsidiary Ohio Companies CEI, OE and TE PATH Potomac-Appalachian Transmission Highline, LLC, a joint venture between FE and a subsidiary of AEP PATH-Allegheny PATH Allegheny Transmission Company, LLC PATH-WV PATH West Virginia Transmission Company, LLC PE The Potomac Edison Company, a Maryland and West Virginia electric utility operating subsidiary Penn Pennsylvania Power Company, a Pennsylvania electric utility operating subsidiary of OE Pennsylvania Companies ME, PN, Penn and WP PN Pennsylvania Electric Company, a Pennsylvania electric utility operating subsidiary Signal Peak Signal Peak Energy, LLC, an indirect subsidiary of Global Holding that owns mining operations near Roundup, Montana TE The Toledo Edison Company, an Ohio electric utility operating subsidiary TrAIL Trans-Allegheny Interstate Line Company, a subsidiary of FET, which owns and operates transmission facilities Transmission Companies ATSI, MAIT and TrAIL Utilities OE, CEI, TE, Penn, JCP&L, ME, PN, MP, PE, and WP WP West Penn Power Company, a Pennsylvania electric utility operating subsidiary iii
The following abbreviations and acronyms are used to identify frequently used terms in this report: 2021 Credit Facilities Collectively, the six separate senior unsecured five-year syndicated revolving credit facilities entered into by FE, FET, the Utilities and the Transmission Companies, on October 18, 2021 CWA Clean Water Act 2031 Notes FE’s 7.375% Notes, Series C, due 2031 D.C. Circuit United States Court of Appeals for the District of Columbia Circuit 2047 Notes FE’s 4.85% Notes, Series C, due 2047 DCPD FE Deferred Compensation Plan for Outside Directors A&R FET LLC Agreement Fourth Amended and Restated Limited Liability Company Operating Agreement of FET DCR Delivery Capital Recovery ACE Affordable Clean Energy DEI Diversity, Equity and Inclusion ADIT Accumulated Deferred Income Taxes DMR Distribution Modernization Rider AEP American Electric Power Company, Inc. DPA Deferred Prosecution Agreement entered into on July 21, 2021 between FE and U.S. Attorney’s Office for the Southern District of Ohio AEPSC American Electric Power Service Corporation DSIC Distribution System Improvement Charge AFS Available-for-sale DSP Default Service Plan AFSI Adjusted Financial Statement Income DTA Deferred Tax Asset AFUDC Allowance for Funds Used During Construction E&P Earnings and Profits AMI Advance Metering Infrastructure EDC Electric Distribution Company AMT Alternative Minimum Tax EDCP FE Amended and Restated Executive Deferred Compensation Plan AOCI Accumulated Other Comprehensive Income (Loss) EEI Edison Electric Institute ARO Asset Retirement Obligation EESG Employee, Environmental, Social, Corporate Governance ARP Alternative Revenue Program EGS Electric Generation Supplier ASC Accounting Standards Codification EGU Electric Generation Units ASU Accounting Standards Update EH Energy Harbor Corp. Bankruptcy Court U.S. Bankruptcy Court in the Northern District of Ohio in Akron ELG Effluent Limitation Guidelines BGS Basic Generation Service EmPOWER Maryland EmPOWER Maryland Energy Efficiency Act Brookfield North American Transmission Company II L.P., a controlled investment vehicle entity of Brookfield Infrastructure Partners ENEC Expanded Net Energy Cost Brookfield Guarantors Brookfield Super-Core Infrastructure Partners L.P., Brookfield Super-Core Infrastructure Partners (NUS) L.P., and Brookfield Super-Core Infrastructure Partners (ER) SCSp EPA United States Environmental Protection Agency CAA Clean Air Act EPS Earnings per Share CCR Coal Combustion Residuals ESP IV Electric Security Plan IV CERCLA Comprehensive Environmental Response, Compensation, and Liability Act of 1980 Exchange Act Securities and Exchange Act of 1934, as amended CFIUS Committee on Foreign Investments in the United States Facebook® Facebook is a registered trademark of Facebook, Inc. CFR Code of Federal Regulations FASB Financial Accounting Standards Board CO2 Carbon Dioxide FCA Financial Conduct Authority COVID-19 Coronavirus disease FE Board FE Board of Directors CPP EPA's Clean Power Plan FE Revolving Facility FE and the Utilities’ former five-year syndicated revolving credit facility, as amended, and replaced by the 2021 Credit Facilities on October 18, 2021 CSAPR Cross-State Air Pollution Rule FERC Federal Energy Regulatory Committee CTA Consolidated Tax Adjustment FES Bankruptcy FES Debtors' voluntary petitions for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code with the Bankruptcy Court iv
FET Board The Board of Directors of FET NJBPU New Jersey Board of Public Utilities FET LLC Agreement Third Amended and Restated Limited Liability Company Operating Agreement of FET NJ Rate Counsel New Jersey Division of Rate Counsel FET Minority Equity Interest Sale Sale of membership interests of FET, such that Brookfield will own 49.9% of FET NOL Net Operating Loss FET P&SA I Purchase and Sale Agreement entered into on November 6, 2021, by and between FE, FET, Brookfield and the Brookfield Guarantors NOx Nitrogen Oxide FET P&SA II Purchase and Sale Agreement entered into on February 2, 2023, by and between FE, FET, Brookfield, and the Brookfield Guarantors NSR New Source Review FET Revolving Facility FET and certain of its subsidiaries’ former five-year syndicated revolving credit facility, as amended, and replaced by the 2021 Credit Facilities on October 18, 2021 NUG Non-Utility Generation Fitch Fitch Ratings Service NYPSC New York State Public Service Commission FMB First Mortgage Bond OAG Ohio Attorney General FPA Federal Power Act OCC Ohio Consumers' Counsel FTR Financial Transmission Right ODSA Ohio Development Service Agency GAAP Accounting Principles Generally Accepted in the United States of America Ohio Stipulation Stipulation and Recommendation, dated November 1, 2021, entered into by and among the Ohio Companies, the OCC, PUCO Staff, and several other signatories GHG Greenhouse Gases OPEB Other Post-Employment Benefits HB 6 House Bill 6, as passed by Ohio's 133rd General Assembly OPEIU Office and Professional Employees International Union IBA ICE Benchmark Administration Limited OPIC Other Paid-in Capital IBEW International Brotherhood of Electrical Workers OSHA Occupational Safety and Health Administration ICP 2015 FirstEnergy Corp. 2015 Incentive Compensation Plan OSMRE United States Department of Interior, Office of Surface Mining Reclamation and Enforcement ICP 2020 FirstEnergy Corp. 2020 Incentive Compensation Plan OVEC Ohio Valley Electric Corporation IRA of 2022 Inflation Reduction Act of 2022 PA Consolidation Consolidation of the Pennsylvania Companies IRS Internal Revenue Service PA NewCo In connection with the PA Consolidation, a new Pennsylvania corporation as a wholly-owned, indirect subsidiary of FE ISO Independent System Operator PJM PJM Interconnection, LLC kV Kilovolt PJM Tariff PJM Open Access Transmission Tariff kWh Kilowatt-hour POLR Provider of Last Resort LIBOR London Inter-Bank Offered Rate PPA Purchase Power Agreement LOC Letter of Credit PPUC Pennsylvania Public Utility Commission LTIIPs Long-Term Infrastructure Improvement Plans PUCO Public Utilities Commission of Ohio MDPSC Maryland Public Service Commission Recoupment Policy FirstEnergy Executive Compensation Recoupment Policy MGP Manufactured Gas Plants Regulation FD Regulation Fair Disclosure promulgated by the SEC MISO Midcontinent Independent System Operator, Inc. RFC ReliabilityFirst Corporation Moody’s Moody’s Investors Service, Inc. RFP Request for Proposal MW Megawatt RGGI Regional Greenhouse Gas Initiative MWH Megawatt-hour ROE Return on Equity NCI Noncontrolling Interest RTO Regional Transmission Organization N.D. Ohio Federal District Court, Northern District of Ohio SBC Societal Benefits Charge NERC North American Electric Reliability Corporation S.D. Ohio Federal District Court, Southern District of Ohio v
SEC United States Securities and Exchange Commission Tax Act Tax Cuts and Jobs Act adopted December 22, 2017 SEET Significantly Excessive Earnings Test TMI-1 Three Mile Island Unit 1 SIP State Implementation Plan(s) under the Clean Air Act TMI-2 Three Mile Island Unit 2 SLC Special Litigation Committee of the FE Board TO Transmission Owner SO2 Sulfur Dioxide Twitter® Twitter is a registered trademark of Twitter, Inc. SOFR Secured Overnight Financing Rate UWUA Utility Workers Union of America SOS Standard Offer Service VAR Volt-Amps Reactive, the measuring unit for reactive power SREC Solar Renewable Energy Credit VEPCO Virginia Electric and Power Company SSO Standard Service Offer VIE Variable Interest Entity SVC Static Var Compensator VSCC Virginia State Corporation Commission S&P Standard & Poor’s Ratings Service WVPSC Public Service Commission of West Virginia S&P 500 Standard & Poor’s 500 index vi
PART I ITEM 1. BUSINESS The Companies FE and its subsidiaries are principally involved in the transmission, distribution, and generation of electricity. FirstEnergy’s ten utility operating companies comprise one of the nation’s largest investor-owned electric systems, based on serving over six million customers in the Midwest and Mid-Atlantic regions. FirstEnergy’s transmission operations include over 24,000 miles of transmission lines and two regional transmission operation centers. AGC and MP control 3,580 MWs of total capacity. FirstEnergy’s revenues are primarily derived from electric service provided by the Utilities and Transmission Companies. Regulated Utility Operating Subsidiaries The Utilities’ combined service areas encompass approximately 65,000 square miles in Ohio, Pennsylvania, West Virginia, Maryland, New Jersey, and New York. The areas they serve have a combined population of approximately 14 million. OE owns property and does business as an electric public utility in Ohio. OE engages in the distribution and sale of electric energy to communities in central and northeastern Ohio. The area it serves has a population of approximately 2.4 million. Penn owns property and does business as an electric public utility in Pennsylvania. Penn furnishes electric service to communities in western Pennsylvania. The area it serves has a population of approximately 0.4 million. CEI does business as an electric public utility in Ohio. CEI engages in the distribution and sale of electric energy in northeastern Ohio. The area it serves has a population of approximately 1.7 million. TE does business as an electric public utility in Ohio. TE engages in the distribution and sale of electric energy in northwestern Ohio. The area it serves has a population of approximately 0.7 million. JCP&L owns property and does business as an electric public utility in New Jersey. JCP&L provides transmission and distribution services in northern, western, and east central New Jersey. The area it serves has a population of approximately 2.9 million. ME owns property and does business as an electric public utility in Pennsylvania. ME provides distribution services in eastern and south central Pennsylvania. The area it serves has a population of approximately 1.3 million. PN owns property and does business as an electric public utility in Pennsylvania. PN provides distribution services in western, northern, and south central Pennsylvania. The area PN serves has a population of approximately 1.2 million. Also, PN, as lessee of the property of its subsidiary, the Waverly Electric Light & Power Company, serves approximately 4,000 customers in the Waverly, New York vicinity. PE owns property and does business as an electric public utility in Maryland, Virginia, and West Virginia. PE provides transmission and distribution services in portions of Maryland and West Virginia and provides transmission services in Virginia. The area it serves has a population of approximately 1.0 million. MP owns property and does business as an electric public utility in West Virginia. MP provides generation, transmission, and distribution services in northern West Virginia. The area it serves has a population of approximately 0.8 million. MP is contractually obligated to provide power to PE to meet its load obligations in West Virginia. MP owns or contractually controls 3,580 MWs of generation capacity that is supplied to its electric utility business, including a 16.25% undivided interest in the Bath County pumped-storage hydroelectric generation facility in Virginia (487 MWs) through its wholly owned subsidiary AGC. WP owns property and does business as an electric public utility in Pennsylvania. WP provides transmission and distribution services in southwestern, south-central, and northern Pennsylvania. The area it serves has a population of approximately 1.6 million. FirstEnergy is proceeding with the consolidation of the Pennsylvania Companies into a new, single operating entity. The PA Consolidation will require, among other steps: (a) the transfer of certain Pennsylvania-based transmission assets owned by WP to KATCo, (b) the transfer of Class B equity interests of MAIT currently held by PN and ME to FE (and ultimately transferred to FET as part of the FET Minority Equity Interest Sale), (c) the formation of PA NewCo and (d) the merger of each of the Pennsylvania Companies with and into PA NewCo, with PA NewCo surviving such mergers as the successor-in-interest to all assets and liabilities of the Pennsylvania Companies. Following completion of the PA Consolidation, PA NewCo will be FE’s only regulated utility in Pennsylvania encompassing the operations previously conducted individually by the Pennsylvania Companies. Consummation of the PA Consolidation is contingent upon numerous conditions, including the approval of NYPSC, PPUC and FERC. Subject to receipt of such regulatory approvals, FirstEnergy expects that the PA Consolidation will close by early 2024. 1
Regulated Transmission Operating Subsidiaries FET, the parent of ATSI, MAIT, PATH, and TrAIL, is a subsidiary of FE which holds 80.1% of its issued and outstanding membership interests. Brookfield owns the remaining 19.9% of the issued and outstanding membership interests of FET. Through its subsidiaries, FET owns and operates high-voltage transmission facilities in the PJM Region. FET's subsidiaries are subject to regulation by FERC and applicable state regulatory authorities. On February 2, 2023, FE, along with FET, entered into the FET P&SA II with Brookfield and the Brookfield Guarantors, pursuant to which FE agreed to sell to Brookfield at the closing, and Brookfield agreed to purchase from FE, an incremental 30% equity interest in FET for a purchase price of $3.5 billion. The purchase price will be payable in part by the issuance of a promissory note expected to be in the principal amount of $1.75 billion. The remaining $1.75 billion of the purchase price will be payable in cash at the closing. As a result of the consummation of the transaction, Brookfield’s interest in FET will increase from 19.9% to 49.9%, while FE will retain the remaining 50.1% ownership interests of FET. The transaction is subject to customary closing conditions, including approval from the FERC and certain state utility commissions, and completion of review by the CFIUS. In addition, pursuant to the FET P&SA II, FirstEnergy has agreed to make the necessary filings with the applicable regulatory authorities for the PA Consolidation. The FET Minority Equity Interest Sale is expected to close by early 2024. Upon closing, FET will continue to be consolidated in FirstEnergy’s GAAP financial statements. ATSI owns high-voltage transmission facilities in PJM, which consist of approximately 7,900 circuit miles of transmission lines with nominal voltages of 345 kV, 138 kV and 69 kV in Ohio and Pennsylvania. TrAIL owns high-voltage transmission facilities in PJM, which consists of approximately 260 circuit miles of transmission lines, including a 500 kV transmission line extending approximately 150 miles from southwestern Pennsylvania through West Virginia to a point of interconnection with VEPCO in northern Virginia. MAIT owns high-voltage transmission facilities in PJM, which consist of approximately 4,300 circuit miles of transmission lines with nominal voltages of 500 kV, 345 kV, 230 kV, 138 kV, 115 kV, 69 kV and 46 kV in Pennsylvania. KATCo was formed to accommodate new transmission construction in the WP, MP and PE footprint and currently does not own or operate any transmission assets. Service Company FESC provides legal, financial, and other corporate support services at cost, in accordance with its cost allocation manual, to affiliated FirstEnergy companies. Operating Segments FirstEnergy's reportable operating segments are comprised of the Regulated Distribution and Regulated Transmission segments. The Regulated Distribution segment distributes electricity through FirstEnergy’s ten utility operating companies, serving approximately six million customers within 65,000 square miles of Ohio, Pennsylvania, West Virginia, Maryland, New Jersey and New York, and purchases power for its POLR, SOS, SSO and default service requirements in Ohio, Pennsylvania, New Jersey, and Maryland. This segment also controls 3,580 MWs of regulated electric generation capacity located primarily in West Virginia and Virginia. The segment's results reflect the costs of securing and delivering electric generation from transmission facilities to customers, including the deferral and amortization of certain related costs. The Regulated Transmission segment provides transmission infrastructure owned and operated by the Transmission Companies and certain of FirstEnergy's utilities (JCP&L, MP, PE and WP) to transmit electricity from generation sources to distribution facilities. The segment's revenues are primarily derived from forward-looking formula rates. Under forward-looking formula rates, the revenue requirement is updated annually based on a projected rate base and projected costs, which is subject to an annual true-up based on actual rate base and costs. The segment's results also reflect the net transmission expenses related to the delivery of electricity on FirstEnergy's transmission facilities. On November 6, 2021, FirstEnergy, along with FET, entered into the FET P&SA I, with Brookfield and the Brookfield Guarantors pursuant to which FET agreed to issue and sell to Brookfield at the closing, and Brookfield agreed to purchase from FET, certain newly issued membership interests of FET, such that Brookfield would own 19.9% of the issued and outstanding membership interests of FET, for a purchase price of $2.375 billion. The transaction closed on May 31, 2022. On February 2, 2023, FE, along with FET, entered into the FET P&SA II with Brookfield and the Brookfield Guarantors, pursuant to which FE agreed to sell to Brookfield at the closing, and Brookfield agreed to purchase from FE, an incremental 30% equity interest in FET for a purchase price of $3.5 billion. The purchase price will be payable in part by the issuance of a promissory note expected to be in the principal amount of $1.75 billion. The remaining $1.75 billion of the purchase price will be payable in cash at the closing. As a result of the consummation of the transaction, Brookfield’s interest in FET will increase from 19.9% to 49.9%, while FE will retain the remaining 50.1% ownership interests of FET. The transaction is subject to customary closing conditions, including approval from the FERC and certain state utility commissions, and completion of review by the CFIUS. In addition, pursuant to the FET P&SA II, FirstEnergy has agreed to make 2
the necessary filings with the applicable regulatory authorities for the PA Consolidation. The FET Minority Equity Interest Sale is expected to close by early 2024. Upon closing, FET will continue to be consolidated in FirstEnergy’s GAAP financial statements. Corporate/Other reflects corporate support and other costs not charged or attributable to the Utilities or Transmission Companies, including FE's retained Pension and OPEB assets and liabilities of the FES Debtors, interest expense on FE’s holding company debt and other investments or businesses that do not constitute an operating segment. Additionally, reconciling adjustments for the elimination of inter-segment transactions are included in Corporate/Other. As of December 31, 2022, 67 MWs of electric generating capacity, representing AE Supply's OVEC capacity entitlement, was also included in Corporate/Other for segment reporting. As of December 31, 2022, Corporate/Other had approximately $5.4 billion of FE holding company debt. Utility Regulation Regulatory Accounting FirstEnergy accounts for the effects of regulation through the application of regulatory accounting to the Utilities and the Transmission Companies since their rates are established by a third-party regulator with the authority to set rates that bind customers, are cost-based and can be charged to and collected from customers. The Utilities and the Transmission Companies recognize, as regulatory assets and regulatory liabilities, costs which FERC and the various state utility commissions, as applicable, have authorized for recovery from or return to customers in future periods or for which authorization is probable. Without the probability of such authorization, costs currently recorded as regulatory assets and regulatory liabilities would have been charged or credited to income as incurred. All regulatory assets and liabilities are expected to be recovered from or returned to customers. Based on current ratemaking procedures, the Utilities and the Transmission Companies continue to collect cost-based rates for their transmission and distribution services; accordingly, it is appropriate that the Utilities and the Transmission Companies continue the application of regulatory accounting to those operations. Regulatory accounting is applied only to the parts of the business that meet the above criteria. If a portion of the business applying regulatory accounting no longer meets those requirements, previously recorded regulatory assets and liabilities are removed from the balance sheet in accordance with GAAP. State Regulation The following table summarizes the allowed ROE and the aggregate actual ROE of the Regulated Distribution Utilities by state for the year ended December 31, 2022, as determined for regulatory purposes: State Allowed ROE Actual ROE(1) Maryland 9.65% 8.8% New Jersey 9.6% 7.0% Ohio 10.5% 8.4% Pennsylvania Settled(2) 8.1% West Virginia Settled(2) 6.6% (1) Actual ROE is based on methodology used in last distribution rate case and/or quarterly earnings reports, as applicable. Rate base is for distribution assets only (except West Virginia, which includes generation and transmission assets) and reflects the actual capital structure for Pennsylvania, West Virginia and Maryland, and the allowed capital structure for Ohio. Actual ROEs reflect actual revenue (not weather normalized) and historical results should not be relied upon to estimate the outcome of future rate cases as regulatory assumptions may vary. ROEs may not tie to upcoming rate filings due to items such as updated allocators, taxes, and adjustments. (2) Commission-approved settlement agreements did not disclose ROE rates. See "Outlook - State Regulation" in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information and discussion. Federal Regulation See "Outlook - FERC Regulatory Matters" in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information and discussion. Environmental Matters See "Outlook - Environmental Matters" in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information and discussion. 3
Capital Requirements FirstEnergy’s business is capital intensive, requiring significant resources to fund operating expenses, construction and other investment expenditures, scheduled debt maturities and interest payments, dividend payments and potential contributions to its pension plan. See "Capital Resources and Liquidity" in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information and discussion. Supply Plan Supply Chain FirstEnergy has continued to experience supply chain challenges due to economic conditions following the global pandemic. Lead times continue to increase across numerous material categories, with some as much as doubling from pre-pandemic lead times. Suppliers continue to struggle with labor shortages and raw material availability, which, along with inflationary pressure, have increased the costs and decreased the availability of certain materials, equipment and contractors. FirstEnergy continues to monitor supply chain risk as it anticipates these challenges continuing into 2023 and is mitigating these risks by: • Utilizing a cross-functional team to forecast potential impacts to operations and programs; • Expanding supply base to increase resiliency; • Enhancing the demand management and material reservation process; • Evaluating substitute products, reserving production capacity, and buying ahead in targeted categories; and • Staying updated by participating in discussions with other utilities through EEI, which has a long history of mutual assistance in the electric utility industry. Default Service Certain of the Utilities have default service obligations to provide power to non-shopping customers who have elected to continue to receive service under regulated retail tariffs. The volume of these sales can vary depending on the level of shopping that occurs and these default service plans vary by state and by service territory. JCP&L’s default service, or BGS supply, is secured through a statewide competitive procurement process approved by the NJBPU. Default service for the Ohio Companies, Pennsylvania Companies and PE's Maryland jurisdiction are provided through a competitive procurement process approved by the PUCO (under ESP IV), PPUC (under the DSP) and MDPSC (under the SOS), respectively. If any supplier fails to deliver power to any one of those Utilities’ service areas, the Utility serving that area may need to procure the required power in the market in their role as the default Load Serving Entity. West Virginia electric generation continues to be regulated by the WVPSC. Fuel Supply MP currently has coal contracts with various terms to purchase approximately 7.4 million tons of coal for the year 2023, which, along with its 2022 year-end inventory levels, accounts for nearly all of its forecasted 2023 coal requirements. MP has the ability to acquire additional tonnage through options available in its current contracts, as well as purchases through the spot market. The contracts expire at various times through 2026. This contracted coal is produced primarily from mines located in Pennsylvania, Illinois and West Virginia. In order to meet emission requirements, MP holds contracts for a variety of reagents expiring at various times through 2026, as well as the ability to purchase additional reagents through the spot market. Additionally, MP is granted emission allowances by the EPA and purchases additional allowances as needed to meet emission requirements. See "Outlook - Environmental Matters" in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information pertaining to the impact of increased environmental regulations on fuel supply. 4
System Demand The maximum hourly demand for each of the Utilities was: System Demand 2022 2021 2020 (in MWs) CEI 4,266 4,253 4,188 JCP&L 6,122 5,902 6,056 ME 3,021 2,976 2,974 MP 2,124 2,114 2,121 OE 5,652 5,598 5,494 PE 3,514 2,905 3,609 Penn 944 889 946 PN 2,838 2,908 3,020 TE 2,277 2,265 2,787 WP 3,827 3,827 4,012 Regional Reliability All of FirstEnergy's facilities are located within PJM and operate under the reliability oversight of a regional entity known as RFC. This regional entity operates under the oversight of NERC in accordance with a delegation agreement approved by FERC. Competition Within FirstEnergy’s Regulated Distribution segment, generally there is no competition for electric distribution service in the Utilities’ respective service territories in Ohio, Pennsylvania, West Virginia, Maryland, New Jersey and New York. Additionally, there has traditionally been no competition for transmission service in PJM. However, pursuant to FERC’s Order No. 1000 and subject to state and local siting and permitting approvals, non-incumbent developers now can compete for certain PJM transmission projects in the service territories of FirstEnergy’s Regulated Transmission segment. This could result in additional competition to build transmission facilities in the Regulated Transmission segment’s service territories while also allowing the Regulated Transmission segment the opportunity to seek to build facilities in non-incumbent service territories. Seasonality The sale of electric power is generally a seasonal business, and weather patterns can have a material impact on FirstEnergy’s Regulated Distribution segment operating results. Demand for electricity in our service territories historically peaks during the summer and winter months. Accordingly, FirstEnergy’s annual results of operations and liquidity position may depend disproportionately on its operating performance during the summer and winter. Mild weather conditions may result in lower power sales and consequently lower revenue and earnings. 5
Human Capital FirstEnergy focuses on a number of human capital resources, measures and objectives in managing its business, including: integrity, safety, diversity, equity and inclusion, workplace flexibility, employee development and compensation and benefits. During 2022, the company continued to enhance its dedicated focus on employees by providing employees with additional opportunities to improve belonging, inclusion and engagement within our workforce. Collectively, these focus areas may be material to understanding its business under certain circumstances. Employees and Collective Bargaining Agreements As of December 31, 2022, FirstEnergy had 12,335 employees, all of whom were located in the United States as follows: Total Employees Bargaining Unit Employees FESC 5,099 554 CEI 824 565 JCP&L 1,361 1,052 ME 579 452 MP 1,080 750 OE 1,069 735 PE 501 330 Penn 173 131 PN 694 487 TE 331 253 WP 624 465 Total 12,335 5,774 As of December 31, 2022, the IBEW, the UWUA and the OPEIU unions collectively represented approximately half of FirstEnergy’s employees. There are 15 collective bargaining agreements between FirstEnergy’s subsidiaries and its unions, which have three, four or five- year terms. In 2022, FirstEnergy’s subsidiaries reached new agreements with 3 IBEW locals, covering 620 employees, and 3 UWUA locals, covering 945 employees. Safety Safety is a core value of FirstEnergy. FirstEnergy employees have the power and responsibility to keep each other safe and eliminate life-changing events, which are injuries that have life-changing impacts or fatal results. Safety metrics, such as injuries that result in days away or restricted time and life-changing events, are regularly monitored, internally reported, and are included in our annual incentive compensation program to reinforce that a safe work environment is crucial to FirstEnergy’s success. FirstEnergy has shifted its focus from achieving low OSHA rates to proactively identifying and mitigating life-changing event exposure. This shift in focus strengthens FirstEnergy’s safety-first culture by aligning our leadership around the same goal and driving safer decisions from an engaged workforce who puts safety first. FirstEnergy continues to embed its "Leading with Safety" learnings and experiences and continues to enhance and reinforce leader and employee safety training and exposure control concepts to improve job site exposure identification, communication and mitigation to prevent life changing events. Further, FirstEnergy continues to expand its “Leading with Safety” experiences with its employees to achieve excellence in personal, contractor and public safety. Diversity, Equity and Inclusion DEI is a core value, as well as a corporate objective because a diverse, equitable and inclusive work environment delivers better service to customers, strong operational performance, innovation, and a safe, rewarding work experience for employees. FirstEnergy is focused on building a diverse workforce for the future, advancing a culture of equity, inclusion and belonging, and enhancing our diversity focus with our customers, in our communities and with our suppliers. Affirmative steps taken at FirstEnergy to promote the core value of diversity, equity and inclusion include: • FirstEnergy sponsors an executive diversity, equity and inclusion council consisting of senior management and other leaders across the company; • Recently developed FirstEnergy Utilities Operations DEI Council focused on DEI related strategy and initiatives specific to operations employees including a large represented physical work group; • Holding an annual “Employee Engagement Survey” to capture employees’ perspectives on their work experience and progress toward embracing a more inclusive culture. The survey results are discussed with employees in order to drive initiatives and action plans for improvement. This includes establishing: 6
▪ a cross-functional working group to oversee the development and implementation of diversity, equity and inclusion action plans company-wide; ▪ additional teams of employees embedded throughout FirstEnergy to implement local actions supporting diversity, equity and inclusion; • FirstEnergy’s employees have established multiple employee business resource groups, known as "EBRGs," to further support diversity, equity and inclusion objectives through networking, mentoring, coaching, recruiting, development and community outreach; • Employees are provided ongoing training and education on a variety of diversity, equity and inclusion topics; • Enhanced transparency of diversity, equity and inclusion data, talent processes and measurement of progress; • FirstEnergy has enhanced the recruiting processes to increase the number of diverse candidates considered for open positions and expand the diversity of teams interviewing those candidates. These enhancements include: ▪ expanded relationship building with key diverse professional organizations, colleges and universities; ▪ a more strategic approach to proactive talent sourcing that ensures increased diversity of candidate slates presented to hiring managers; ▪ expanded diversity of teams interviewing those candidates. • Increase leadership accountability by including diversity, equity and inclusion metrics in FirstEnergy’s annual incentive compensation program. Workplace Flexibility FirstEnergy is committed to supporting employees’ work/life balance by providing flexible work arrangements for many of its employees, and encouraging career growth as well as personal balance. In Fall 2022, FirstEnergy formally adopted guidelines to facilitate flexible work arrangements for eligible full-time and part-time non-bargaining employees. Flexible work arrangements, like permitting certain employees to work from alternate locations or to begin and end work at variable times, offer a variety of approaches to the way employees work. These approaches can help employees achieve their priorities and meet customer and business needs while promoting enhanced convenience and balance between work and personal commitments. Employee Development FirstEnergy’s employees are empowered to take ownership of their careers with increased openness into FirstEnergy’s internal and external hiring process and greater availability of tools and processes that support career management, talent reviews, succession planning and leadership selection. FirstEnergy is committed to preparing its high-performing workforce for the future and helping employees reach their full potential. That means developing employee skills and competencies and preparing emerging and experienced leaders for future management responsibilities. Understanding FirstEnergy’s rapidly changing industry and strategy is key to employees’ ability to support FirstEnergy’s mission and meet its customers’ evolving needs. Key FirstEnergy development programs include: • a mentoring program; • new supervisor and manager program; • experienced leader program; • aspiring leader program; • external partnership with the Center for Creative Leadership® and BeingFirst® for senior and executive leadership development, • "Educate to Elevate," which provides access to post-secondary education and a path to both Associate’s and Bachelor’s degrees for employees; • Power Systems Institute, an award-winning program for recruiting and developing the next generation of highly trained, dedicated and motivated line and substation workers; and • A pilot apprentice line worker program in Ohio and Pennsylvania that was launched in 2022 and designed to address labor shortages in areas where we have had difficulty attracting talent or have experienced higher-than-average attrition rates. Compensation and Benefits FirstEnergy’s total rewards program is designed to attract, motivate, retain and reward employees for their role in the success of FirstEnergy. The base pay program is designed to provide individual base pay levels that balance an employee’s value to FirstEnergy with comparable jobs at peer companies. FirstEnergy is committed to ensuring that our internal policies and processes support pay equity, which was confirmed in a third-party review of our practices in 2019 and continues to be part of our normal ongoing process. Our internal processes ensure pay equity considerations are part of our normal ongoing process. The annual incentive compensation program is designed to reward the achievement of near-term corporate and business unit objectives. Additionally, FirstEnergy’s long-term incentive compensation program is designed to reward eligible executives for FirstEnergy’s achievement of longer-term goals intended to drive shareholder value and growth. In addition to base pay and incentive compensation plans, FirstEnergy offers a comprehensive benefits program, including a 401(k) savings plan and a defined benefit pension plan. 7
Information About Our Executive Officers (as of February 13, 2023) Name Age Positions Held During Past Five Years Dates John W. Somerhalder II 67 Interim Chief Executive Officer (A) 2022-Present (H) Interim President (B) 2022-Present Vice Chair and Executive Director (A) 2021-2022 CenterPoint Energy Inc, Interim President & Chief Executive Officer 2020 Samuel L. Belcher 54 Senior Vice President, Operations (B) 2021-Present (I) President (C) (E) 2018-Present Senior Vice President and President, FirstEnergy Utilities (B) 2018-2021 President and Chief Nuclear Officer (G) *-2018 Hyun Park 61 Senior Vice President and Chief Legal Officer (A) (B) 2021-Present Senior Vice President and General Counsel (C) (D) (E) 2021-2022 LimNexus, Partner and General Counsel 2019-2021 Latham & Watkins, Of Counsel *-2019 K. Jon Taylor 49 Senior Vice President, Chief Financial Officer and Strategy (A) (B) 2021-Present Senior Vice President and Chief Financial Officer (C) (E) 2020-Present Senior Vice President and Chief Financial Officer (A) (B) 2020-2021 Vice President, Utility Operations (B) 2019-2020 President (D) 2019-2020 President, Ohio Operations (B) 2018-2019 Vice President (C) 2018-2019 Vice President and Controller (C) (E) *-2018 Vice President, Controller and Chief Accounting Officer (A) (B) *-2018 Jason J. Lisowski 41 Vice President, Controller and Chief Accounting Officer (A) (B) 2018-Present Vice President and Controller (C) (E) 2018-Present Controller and Treasurer (F) (G) *-2018 Christine L. Walker 57 Senior Vice President, Chief Human Resources Officer and Corporate Services (B) 2021-Present Senior Vice President and Chief Human Resources Officer (B) 2019-2021 Vice President, Human Resources (B) 2018-2019 Executive Director, Talent Management (B) *-2018 * Indicates position held at least since January 1, 2018 (A) Denotes position held at FE (B) Denotes position held at FESC (C) Denotes position held at the Ohio Companies, the Pennsylvania Companies, MP, PE, FET, KATCo, TrAIL and ATSI (D) Denotes position held at AGC (E) Denotes position held at MAIT (F) Denotes position held at FES and FG (G) Denotes position held at FENOC (H) Also served as Chair of the FE Board from May 2022 - Present (I) On January 17, 2023, Samuel L. Belcher notified FirstEnergy of his intent to retire effective May 1, 2023 FirstEnergy Website and Other Social Media Sites and Applications FirstEnergy's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, amendments to those reports, and all other documents filed with or furnished to the SEC pursuant to Section 13(a) of the Exchange Act are made available free of charge on or through the "Investors" page of FirstEnergy’s website at www.firstenergycorp.com. These documents are also available to the public from commercial document retrieval services and the website maintained by the SEC at www.sec.gov. These SEC filings are posted on the website as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Additionally, FirstEnergy routinely posts additional important information, including press releases, investor presentations, investor factbooks and notices of upcoming events under the "Investors" section of FirstEnergy’s website and recognizes FirstEnergy’s website as a channel of distribution to reach public investors and as a means of disclosing material non-public information for complying with disclosure obligations under Regulation FD. Investors may be notified of postings to the website by signing up for email alerts and Rich Site Summary feeds on the "Investors" page of FirstEnergy's website. FirstEnergy also uses Twitter® and Facebook® as additional channels of distribution to reach public investors and as a supplemental means of disclosing material non-public information for complying with its disclosure obligations under Regulation FD. Information contained on FirstEnergy’s website, Twitter® handle or Facebook® page, and any corresponding applications of those sites, shall not be deemed incorporated into, or to be part of, this report. 8
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