The following table provides information about the composition of net regulatory assets and liabilities as of December 31, 2022 and 2021, and the changes during the year ended December 31, 2022: As of December 31, Net Regulatory Assets (Liabilities) by Source 2022 2021 Change (In millions) Customer payables for future income taxes $ (2,463) $ (2,345) $ (118) Spent nuclear fuel disposal costs (83) (101) 18 Asset removal costs (675) (646) (29) Deferred transmission costs 50 (3) 53 Deferred generation costs 235 118 117 Deferred distribution costs 164 49 115 Storm-related costs 683 660 23 Uncollectible and pandemic-related costs 63 56 7 Energy efficiency program costs 94 47 47 New Jersey societal benefit costs 94 109 (15) Vegetation management 63 33 30 Other (39) (30) (9) Net Regulatory Liabilities included on the Consolidated Balance Sheets $ (1,814) $ (2,053) $ 239 The following table provides information about the composition of net regulatory assets that do not earn a current return as of December 31, 2022 and 2021, of which approximately $511 million and $228 million, respectively, are currently being recovered through rates over varying periods, through 2068, depending on the nature of the deferral and the jurisdiction: Regulatory Assets by Source Not Earning a As of December 31, Current Return 2022 2021 Change (In millions) Deferred transmission costs $ 8 $ 13 $ (5) Deferred generation costs 262 63 199 Deferred distribution costs 27 2 25 Storm-related costs 568 549 19 Pandemic-related costs 70 65 5 Vegetation management 52 31 21 Other 10 9 1 Regulatory Assets Not Earning a Current Return $ 997 $ 732 $ 265 DERIVATIVES FirstEnergy is exposed to limited financial risks resulting from fluctuating interest rates and commodity prices, including prices for electricity, coal and energy transmission. To manage the volatility related to these exposures, FirstEnergy’s Risk Policy Committee, comprised of senior management, provides general management oversight for risk management activities throughout FirstEnergy. The Risk Policy 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 practice. FirstEnergy may use a variety of derivative instruments for risk management purposes including forward contracts, options, futures contracts and swaps. FirstEnergy accounts for derivative instruments on its Consolidated Balance Sheets at fair value unless they meet the normal purchases and normal sales criteria. Derivative instruments meeting the normal purchases and normal sales criteria are accounted for under the accrual method of accounting with their effects included in earnings at the time of contract performance. EQUITY METHOD INVESTMENTS Investments in affiliates over which FE and its subsidiaries have the ability to exercise significant influence, but do not have a controlling financial interest, 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 reflected in "Investments". The percentage of FE's ownership share of the entity’s earnings is reported in the Consolidated Statements of Income and Comprehensive Income and reflected in “Miscellaneous Income, net”. Equity method investments are assessed for impairment annually or whenever events and changes 81
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