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 March 31, 2011


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 April 29, 2011
FirstEnergy Corp., $.10 par value		418,216,437
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		740,905
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 a 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.

•

The impact of the regulatory process on the pending matters in the various states in which we do business including, but not limited to, matters related to rates.

•

The status of the PATH project in light of PJM’s direction to suspend work on the project pending review of its planning process, its re-evaluation of the need for the project and the uncertainty of the timing and amounts of any related capital expenditures.

•

Business and regulatory impacts from ATSI’s realignment into PJM Interconnection, L.L.C.

•

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 collect transition and other costs.

•

Operation and maintenance costs being higher than anticipated.

•

Other legislative and regulatory changes, and revised environmental requirements, including possible GHG emission, water intake and coal combustion residual regulations, the potential impacts of any laws, rules or regulations that ultimately replace CAIR and the effects of the EPA’s recently released MACT proposal to establish certain mercury and other emission standards for electric generating units.

•

The uncertainty of the timing and amounts of the capital expenditures that may arise in connection with any NSR litigation or potential regulatory initiatives or rulemakings (including that such expenditures could result in our decision to shut down or idle certain generating units).

•

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, including as a result of the incident at Japan’s Fukushima Daiichi Nuclear Plant.

•

Adverse legal decisions and outcomes related to Met-Ed’s and Penelec’s transmission service charge appeal at the Commonwealth Court of Pennsylvania.

•

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

•

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

•

Changes in customers’ demand for power, including but not limited to, changes resulting from the implementation of state and federal energy efficiency mandates.

•

The ability to accomplish or realize anticipated benefits from strategic goals.

•

Efforts and our ability to improve electric commodity margins and the impact of, among other factors, the increased cost of coal and coal transportation on such margins.

•

The ability 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, the cost of such capital and overall condition of the capital and credit markets affecting the registrants and other FirstEnergy subsidiaries.

•

Changes in general economic conditions affecting the registrants and other FirstEnergy subsidiaries.

•

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 continuing uncertainty of the national and regional economy and its impact on the registrants’ major industrial and commercial customers and those of other FirstEnergy subsidiaries.

•

Issues concerning the soundness of financial institutions and counterparties with which the registrants and FirstEnergy’s other subsidiaries do business.

•

Issues arising from the recently completed merger of FirstEnergy and Allegheny Energy, Inc. and the ongoing coordination of their combined operations including FirstEnergy’s 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.

Dividends declared from time to time on FirstEnergy’s common stock during any annual period may in aggregate vary from the indicated amount due to circumstances considered by FirstEnergy’s Board of Directors at the time of the actual declarations. A security rating is not a recommendation to buy, or hold securities and is subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating.

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. 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

Part I. Financial Information

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		78

Management’s Narrative Analysis of Results of Operations

FirstEnergy Solutions Corp.		117

Ohio Edison Company		120

The Cleveland Electric Illuminating Company		122

The Toledo Edison Company		124

Jersey Central Power & Light Company		126

Metropolitan Edison Company		128

Pennsylvania Electric Company		130

Item 3. Quantitative and Qualitative Disclosures About Market Risk		132

Item 4. Controls and Procedures — FirstEnergy		132

Part II. Other Information

Item 1. Legal Proceedings		133

Item 1A. Risk Factors		133

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		134

Item 5. Other Information		135

Item 6. Exhibits		136

Exhibit 10.1
Exhibit 10.5
Exhibit 10.6
Exhibit 10.7
Exhibit 10.8
Exhibit 10.9
Exhibit 10.10
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:


AE		Allegheny Energy, Inc., a Maryland utility holding company that merged with a subsidiary of FirstEnergy on February 25, 2011
AESC		Allegheny Energy Service Corporation, a subsidiary of AE
AE Supply		Allegheny Energy Supply Company LLC, an unregulated generation subsidiary of AE
AGC		Allegheny Generating Company, a generation subsidiary of AE
Allegheny		Allegheny Energy, Inc., together with its consolidated subsidiaries
AVE		Allegheny Ventures, Inc.
ATSI		American Transmission Systems, Incorporated, which owns and operates transmission facilities
CEI		The Cleveland Electric Illuminating Company, an Ohio electric utility operating subsidiary
FENOC		FirstEnergy Nuclear Operating Company, which operates nuclear generating facilities
FES		FirstEnergy Solutions Corp., which provides energy-related products and services
FESC		FirstEnergy Service Company, which provides legal, financial and other corporate support services
FEV		FirstEnergy Ventures Corp., which invests in certain unregulated enterprises and business ventures
FGCO		FirstEnergy Generation Corp., which owns and operates non-nuclear generating facilities
FirstEnergy		FirstEnergy Corp., a public utility holding company
Global Rail		A joint venture between FEV 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, that 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
MP		Monongahela Power Company, a West Virginia electric utility operating subsidiary of AE
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
PATH		Potomac-Appalachian Transmission Highline LLC, a joint venture between Allegheny and a subsidiary of American Electric Power Company, Inc.
PATH-VA		PATH Allegheny Virginia Transmission Corporation
PE		The Potomac Edison Company, a Maryland electric operating subsidiary of AE
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, Penn and WP
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 FEV and WMB Loan Ventures LLC, that owns mining operations near Roundup, Montana
TE		The Toledo Edison Company, an Ohio electric utility operating subsidiary
TrAIL		Trans-Allegheny Interstate Line Company
Utilities		OE, CEI, TE, Penn, JCP&L, Met-Ed, Penelec, MP, PE and WP
Utility Registrants		OE, CEI, TE, JCP&L, Met-Ed and Penelec
WP		West Penn Power Company, a Pennsylvania electric utility operating subsidiary of AE

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


ALJ		Administrative Law Judge
AOCL		Accumulated Other Comprehensive Loss
AEP		American Electric Power
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
CDWR		California Department of Water Resources
CO₂		Carbon Dioxide
CTC		Competitive Transition Charge

iii

GLOSSARY OF TERMS, Cont’d.


DCPD		Deferred Compensation Plan for Outside Directors
DOE		United States Department of Energy
DOJ		United States Department of Justice
DPA		Department of the Public Advocate, Division of Rate Counsel (New Jersey)
DSP		Default Service Plan
EDCP		Executive Deferred Compensation Plan
EE&C		Energy Efficiency and Conservation
EIS		Energy Insurance Services, Inc.
EMP		Energy Master Plan
ENEC		Expanded Net Energy Cost
EPA		United States Environmental Protection Agency
ESOP		Employee Stock Ownership Plan
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
FTRs		Financial Transmission Rights
GAAP		Generally Accepted Accounting Principles in the United States
RGGI		Regional Greenhouse Gas Initiative
GHG		Greenhouse Gases
IRS		Internal Revenue Service
JOA		Joint Operating Agreement
kV		Kilovolt
KWH		Kilowatt-hours
LED		Light-Emitting Diode
LOC		Letter of Credit
LTIP		Long-Term Incentive Plan
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
MSHA		Mine Safety and Health Administration
MTEP		MISO Regional Transmission Expansion Plan
MW		Megawatts
MWH		Megawatt-hours
NAAQS		National Ambient Air Quality Standards
NDT		Nuclear Decommissioning Trusts
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
PADEP		Pennsylvania Department of Environmental Protection
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

GLOSSARY OF TERMS, Cont’d.


PSCWV		Public Service Commission of West Virginia
PSA		Power Supply Agreement
PSD		Prevention of Significant Deterioration
PUCO		Public Utilities Commission of Ohio
PURPA		Public Utility Regulatory Policies Act of 1978
RECs		Renewable Energy Credits
RFP		Request for Proposal
RGGI		Regional Greenhouse Gas Initiative
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
SEC		U.S. Securities and Exchange Commission
SIP		State Implementation Plan(s) Under the Clean Air Act
SMIP		Smart Meter Implementation Plan
SNCR		Selective Non-Catalytic Reduction
SO₂		Sulfur Dioxide
SOS		Standard Offer Service
TBC		Transition Bond Charge
TDS		Total Dissolved Solid
TMDL		Total Maximum Daily Load
TMI-2		Three Mile Island Unit 2
TSC		Transmission Service Charge
VIE		Variable Interest Entity
VSCC		Virginia State Corporation Commission
WVDEP		West Virginia Department of Environmental Protection
WVPSC		Public Service Commission of West Virginia

FIRSTENERGY CORP.

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)


	Three Months Ended
	March 31
In millions, except per share amounts	2011			2010

REVENUES:
Electric utilities	$	2,332		$	2,543
Unregulated businesses		1,244			756

Total revenues*		3,576			3,299


EXPENSES:
Fuel		453			334
Purchased power		1,186			1,238
Other operating expenses		1,033			701
Provision for depreciation		220			193
Amortization of regulatory assets		132			212
General taxes		237			205

Total expenses		3,261			2,883


OPERATING INCOME		315			416


OTHER INCOME (EXPENSE):
Investment income		21			16
Interest expense		(231	)		(213	)
Capitalized interest		18			41

Total other expense		(192	)		(156	)


INCOME BEFORE INCOME TAXES		123			260

INCOME TAXES		78			111


NET INCOME		45			149

Loss attributable to noncontrolling interest		(5	)		(6	)


EARNINGS AVAILABLE TO FIRSTENERGY CORP.	$	50		$	155


BASIC EARNINGS PER SHARE OF COMMON STOCK	$	0.15		$	0.51


WEIGHTED AVERAGE NUMBER OF BASIC SHARES OUTSTANDING		342			304


DILUTED EARNINGS PER SHARE OF COMMON STOCK	$	0.15		$	0.51


WEIGHTED AVERAGE NUMBER OF DILUTED SHARES OUTSTANDING		343			306


DIVIDENDS DECLARED PER SHARE OF COMMON STOCK	$	0.55		$	0.55


*		Includes $119 and $109 million of excise tax collections in the three months ended March 31, 2011 and 2010, 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 Ended
	March 31
(In millions)	2011			2010

NET INCOME	$	45		$	149


OTHER COMPREHENSIVE INCOME:
Pension and other postretirement benefits		19			13
Unrealized gain (loss) on derivative hedges		(6	)		4
Change in unrealized gain on available-for-sale securities		9			6

Other comprehensive income		22			23
Income tax expense related to other comprehensive income		1			7

Other comprehensive income, net of tax		21			16


COMPREHENSIVE INCOME		66			165

COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST		(5	)		(6	)


COMPREHENSIVE INCOME AVAILABLE TO FIRSTENERGY CORP.	$	71		$	171

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

FIRSTENERGY CORP.

CONSOLIDATED BALANCE SHEETS
(Unaudited)


	March 31,			December 31,
(In millions)	2011			2010
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	1,101		$	1,019
Receivables-
Customers, net of allowance for uncollectible accounts of $38 in 2011 and $36 in 2010		1,636			1,392
Other, net of allowance for uncollectible accounts of $10 in 2011 and $8 in 2010		229			176
Materials and supplies		852			638
Prepaid taxes		241			199
Derivatives		377			182
Other		210			92

		4,646			3,698

PROPERTY, PLANT AND EQUIPMENT:
In service		38,168			29,451
Less — Accumulated provision for depreciation		11,345			11,180

		26,823			18,271
Construction work in progress		2,322			1,517
Property, plant and equipment held for sale, net		490			—

		29,635			19,788

INVESTMENTS:
Nuclear plant decommissioning trusts		2,018			1,973
Investments in lease obligation bonds		422			476
Nuclear fuel disposal trust		207			208
Other		434			345

		3,081			3,002

DEFERRED CHARGES AND OTHER ASSETS:
Goodwill		6,527			5,575
Regulatory assets		2,084			1,826
Intangible assets		1,075			256
Other		818			660

		10,504			8,317

	$	47,866		$	34,805

LIABILITIES AND CAPITALIZATION

CURRENT LIABILITIES:
Currently payable long-term debt	$	1,385		$	1,486
Short-term borrowings		486			700
Accounts payable		1,080			872
Accrued taxes		412			326
Accrued compensation and benefits		312			315
Derivatives		425			266
Other		1,062			733

		5,162			4,698

CAPITALIZATION:
Common stockholders’ equity-
Common stock, $0.10 par value, authorized 490,000,000 shares- 418,216,437 shares outstanding		42			31
Other paid-in capital		9,779			5,444
Accumulated other comprehensive loss		(1,518	)		(1,539	)
Retained earnings		4,426			4,609

Total common stockholders’ equity		12,729			8,545
Noncontrolling interest		(40	)		(32	)

Total equity		12,689			8,513
Long-term debt and other long-term obligations		17,535			12,579

		30,224			21,092


NONCURRENT LIABILITIES:
Accumulated deferred income taxes		4,832			2,879
Retirement benefits		2,313			1,868
Asset retirement obligations		1,443			1,407
Deferred gain on sale and leaseback transaction		951			959
Power purchase contract liability		606			466
Other		2,335			1,436

		12,480			9,015

COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 9)
	$	47,866		$	34,805

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)


	Three Months Ended
	March 31
(In millions)	2011			2010

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	45		$	149
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		220			193
Amortization of regulatory assets		132			212
Nuclear fuel and lease amortization		47			41
Deferred purchased power and other costs		(58	)		(77	)
Deferred income taxes and investment tax credits, net		171			59
Deferred rents and lease market valuation liability		(15	)		(17	)
Accrued compensation and retirement benefits		(13	)		(81	)
Commodity derivative transactions, net		(25	)		33
Pension trust contribution		(157	)		—
Asset impairments		31			12
Cash collateral paid		(28	)		(46	)
Decrease (increase) in operating assets-
Receivables		164			2
Materials and supplies		40			(42	)
Prepayments and other current assets		118			33
Increase (decrease) in operating liabilities-
Accounts payable		(90	)		(57	)
Accrued taxes		(182	)		7
Accrued interest		76			66
Other		15			19

Net cash provided from operating activities		491			506


CASH FLOWS FROM FINANCING ACTIVITIES:
New financing-
Long-term debt		217			—
Redemptions and repayments-
Long-term debt		(359	)		(109	)
Short-term borrowings, net		(214	)		(295	)
Common stock dividend payments		(190	)		(168	)
Other		(4	)		(22	)

Net cash used for financing activities		(550	)		(594	)


CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(449	)		(508	)
Proceeds from asset sales		—			114
Sales of investment securities held in trusts		969			733
Purchases of investment securities held in trusts		(993	)		(755	)
Customer acquisition costs		(1	)		(101	)
Cash investments		47			49
Cash received in Allegheny merger		590			—
Other		(22	)		(8	)

Net cash provided from (used for) investing activities		141			(476	)


Net change in cash and cash equivalents		82			(564	)
Cash and cash equivalents at beginning of period		1,019			874

Cash and cash equivalents at end of period	$	1,101		$	310


SUPPLEMENTAL CASH FLOW INFORMATION:
Non-cash transaction: merger with Allegheny, common stock issued	$	4,354		$	—

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
	March 31
(In thousands)	2011			2010

STATEMENTS OF INCOME
REVENUES:
Electric sales to non-affiliates	$	1,044,490		$	668,685
Electric sales to affiliates		260,874			607,302
Other		85,724			112,106

Total revenues		1,391,088			1,388,093


EXPENSES:
Fuel		343,109			328,221
Purchased power from affiliates		68,743			60,953
Purchased power from non-affiliates		296,938			450,216
Other operating expenses		495,935			304,510
Provision for depreciation		68,452			62,918
General taxes		29,105			26,746
Impairment of long-lived assets		13,800			1,833

Total expenses		1,316,082			1,235,397


OPERATING INCOME		75,006			152,696


OTHER INCOME (EXPENSE):
Investment income		5,861			717
Miscellaneous income		19,241			3,143
Interest expense — affiliates		(1,017	)		(2,305	)
Interest expense — other		(52,960	)		(49,644	)
Capitalized interest		9,919			19,690

Total other expense		(18,956	)		(28,399	)


INCOME BEFORE INCOME TAXES		56,050			124,297

INCOME TAXES		20,116			44,371


NET INCOME		35,934			79,926


Loss attributable to noncontrolling interest		(76	)		—


EARNINGS AVAILABLE TO PARENT	$	36,010		$	79,926


STATEMENTS OF COMPREHENSIVE INCOME

NET INCOME	$	35,934		$	79,926


OTHER COMPREHENSIVE INCOME (LOSS):
Pension and other postretirement benefits		1,512			(9,834	)
Unrealized gain (loss) on derivative hedges		(8,879	)		1,274
Change in unrealized gain on available-for-sale securities		7,807			5,028

Other comprehensive income (loss)		440			(3,532	)
Income tax benefit related to other comprehensive income		(2,362	)		(1,340	)

Other comprehensive income (loss), net of tax		2,802			(2,192	)


COMPREHENSIVE INCOME		38,736			77,734

COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST		(76	)		—


COMPREHENSIVE INCOME ATTRIBUTABLE TO PARENT	$	38,812		$	77,734

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

FIRSTENERGY SOLUTIONS CORP.

CONSOLIDATED BALANCE SHEETS
(Unaudited)


	March 31,			December 31,
(In thousands)	2011			2010
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	6,839		$	9,281
Receivables-
Customers, net of allowance for uncollectible accounts of $18,636 in 2011 and $16,591 in 2010		388,951			365,758
Associated companies		533,280			477,565
Other, net of allowances for uncollectible accounts of $6,702 in 2011 and $6,765 in 2010		86,711			89,550
Notes receivable from associated companies		478,418			396,770
Materials and supplies, at average cost		488,997			545,342
Derivatives		328,156			181,660
Prepayments and other		50,938			60,171

		2,362,290			2,126,097

PROPERTY, PLANT AND EQUIPMENT:
In service		11,239,565			11,321,318
Less — Accumulated provision for depreciation		4,107,542			4,024,280

		7,132,023			7,297,038
Construction work in progress		756,305			1,062,744
Property, plant and equipment held for sale, net		476,602			—

		8,364,930			8,359,782

INVESTMENTS:
Nuclear plant decommissioning trusts		1,159,903			1,145,846
Other		9,744			11,704

		1,169,647			1,157,550

DEFERRED CHARGES AND OTHER ASSETS:
Customer intangibles		131,870			133,968
Goodwill		24,248			24,248
Property taxes		41,112			41,112
Unamortized sale and leaseback costs		90,803			73,386
Derivatives		211,223			97,603
Other		53,057			48,689

		552,313			419,006

	$	12,449,180		$	12,062,435

LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES:
Currently payable long-term debt	$	986,863		$	1,132,135
Short-term borrowings-
Associated companies		360,543			11,561
Other		661			—
Accounts payable-
Associated companies		499,936			466,623
Other		189,144			241,191
Accrued taxes		66,493			70,129
Derivatives		380,744			266,411
Other		224,525			251,671

		2,708,909			2,439,721

CAPITALIZATION:
Common stockholders’ equity-
Common stock, without par value, authorized 750 shares- 7 shares outstanding		1,487,565			1,490,082
Accumulated other comprehensive loss		(117,612	)		(120,414	)
Retained earnings		2,454,587			2,418,577

Total common stockholders’ equity		3,824,540			3,788,245
Noncontrolling interest		16			(504	)

Total equity		3,824,556			3,787,741
Long-term debt and other long-term obligations		3,144,997			3,180,875

		6,969,553			6,968,616

NONCURRENT LIABILITIES:
Deferred gain on sale and leaseback transaction		950,726			959,154
Accumulated deferred income taxes		117,503			57,595
Accumulated deferred investment tax credits		53,181			54,224
Asset retirement obligations		866,643			892,051
Retirement benefits		289,285			285,160
Property taxes		41,112			41,112
Lease market valuation liability		205,366			216,695
Derivatives		168,409			81,393
Other		78,493			66,714

		2,770,718			2,654,098

COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 9)
	$	12,449,180		$	12,062,435

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)


	Three Months Ended
	March 31
(In thousands)	2011			2010

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	35,934		$	79,926
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		68,452			62,918
Nuclear fuel and lease amortization		46,653			42,118
Deferred rents and lease market valuation liability		(38,759	)		(40,869	)
Deferred income taxes and investment tax credits, net		61,268			37,773
Asset impairments		18,791			11,439
Commodity derivative transactions, net		(35,293	)		32,900
Cash collateral paid		(27,063	)		(21,411	)
Decrease (increase) in operating assets-
Receivables		(76,069	)		(158,288	)
Materials and supplies		60,633			(8,700	)
Prepayments and other current assets		8,728			13,516
Increase (decrease) in operating liabilities-
Accounts payable		(18,734	)		(41,057	)
Accrued taxes		(3,164	)		(16,300	)
Accrued interest		(11,845	)		(14,930	)
Other		4,093			12,069

Net cash provided from (used for) operating activities		93,625			(8,896	)


CASH FLOWS FROM FINANCING ACTIVITIES:
New financing-
Long-term debt		150,190			—
Short-term borrowings, net		349,643			—
Redemptions and repayments-
Long-term debt		(331,428	)		(1,278	)
Short-term borrowings, net		—			(9,237	)
Other		(1,017	)		(731	)

Net cash provided from (used for) financing activities		167,388			(11,246	)


CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(159,006	)		(301,603	)
Proceeds from asset sales		—			114,272
Sales of investment securities held in trusts		215,620			272,094
Purchases of investment securities held in trusts		(230,912	)		(284,888	)
Loans from (to) associated companies, net		(81,647	)		321,680
Customer acquisition costs		(1,103	)		(100,615	)
Other		(6,407	)		(799	)

Net cash provided from (used for) investing activities		(263,455	)		20,141


Net change in cash and cash equivalents		(2,442	)		(1	)
Cash and cash equivalents at beginning of period		9,281			12

Cash and cash equivalents at end of period	$	6,839		$	11

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
	March 31
(In thousands)	2011			2010

STATEMENTS OF INCOME

REVENUES:
Electric sales	$	363,831		$	479,925
Excise and gross receipts tax collections		28,195			28,475

Total revenues		392,026			508,400


EXPENSES:
Purchased power from affiliates		93,262			153,677
Purchased power from non-affiliates		60,379			94,231
Other operating costs		101,462			88,855
Provision for depreciation		21,876			21,880
Amortization of regulatory assets, net		774			29,345
General taxes		49,426			47,492

Total expenses		327,179			435,480


OPERATING INCOME		64,847			72,920


OTHER INCOME (EXPENSE):
Investment income		4,308			5,244
Miscellaneous income (expense)		290			(292	)
Interest expense		(22,145	)		(22,310	)
Capitalized interest		331			208

Total other expense		(17,216	)		(17,150	)


INCOME BEFORE INCOME TAXES		47,631			55,770

INCOME TAXES		17,491			19,609


NET INCOME		30,140			36,161


Income attributable to noncontrolling interest		116			132


EARNINGS AVAILABLE TO PARENT	$	30,024		$	36,029


STATEMENTS OF COMPREHENSIVE INCOME

NET INCOME	$	30,140		$	36,161


OTHER COMPREHENSIVE INCOME (LOSS):
Pension and other postretirement benefits		339			4,015
Change in unrealized gain on available-for-sale securities		(22	)		291

Other comprehensive income		317			4,306
Income tax expense (benefit) related to other comprehensive income		(1,496	)		693

Other comprehensive income, net of tax		1,813			3,613


COMPREHENSIVE INCOME		31,953			39,774

COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST		116			132


COMPREHENSIVE INCOME AVAILABLE TO PARENT	$	31,837		$	39,642

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

OHIO EDISON COMPANY

CONSOLIDATED BALANCE SHEETS
(Unaudited)


	March 31,			December 31,
(In thousands)	2011			2010

ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	345,030		$	420,489
Receivables-
Customers (net of allowance for uncollectible accounts of $3,774 in 2011 and $4,086 in 2010)		158,146			176,591
Associated companies		74,125			118,135
Other		17,290			12,232
Notes receivable from associated companies		16,762			16,957
Prepayments and other		29,366			6,393

		640,719			750,797

UTILITY PLANT:
In service		3,156,648			3,136,623
Less — Accumulated provision for depreciation		1,217,827			1,207,745

		1,938,821			1,928,878
Construction work in progress		48,302			45,103

		1,987,123			1,973,981

OTHER PROPERTY AND INVESTMENTS:
Investment in lease obligation bonds		190,340			190,420
Nuclear plant decommissioning trusts		126,826			127,017
Other		94,604			95,563

		411,770			413,000

DEFERRED CHARGES AND OTHER ASSETS:
Regulatory assets		385,005			400,322
Pension assets		59,104			28,596
Property taxes		71,331			71,331
Unamortized sale and leaseback costs		28,877			30,126
Other		16,007			17,634

		560,324			548,009

	$	3,599,936		$	3,685,787

LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES:
Currently payable long-term debt	$	1,424		$	1,419
Short-term borrowings-
Associated companies		103,071			142,116
Other		320			320
Accounts payable-
Associated companies		96,003			99,421
Other		25,515			29,639
Accrued taxes		68,415			78,707
Accrued interest		25,334			25,382
Other		105,315			74,947

		425,397			451,951

CAPITALIZATION:
Common stockholders’ equity-
Common stock, without par value, authorized 175,000,000 shares- 60 shares outstanding		951,802			951,866
Accumulated other comprehensive loss		(177,263	)		(179,076	)
Retained earnings		71,645			141,621

Total common stockholders’ equity		846,184			914,411
Noncontrolling interest		5,796			5,680

Total equity		851,980			920,091
Long-term debt and other long-term obligations		1,152,171			1,152,134

		2,004,151			2,072,225


NONCURRENT LIABILITIES:
Accumulated deferred income taxes		719,979			696,410
Accumulated deferred investment tax credits		9,799			10,159
Retirement benefits		182,461			183,712
Asset retirement obligations		69,793			74,456
Other		188,356			196,874

		1,170,388			1,161,611

COMMITMENTS AND CONTINGENCIES (Note 9)
	$	3,599,936		$	3,685,787

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)


	Three Months Ended
	March 31
(In thousands)	2011			2010

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	30,140		$	36,161
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		21,876			21,880
Amortization of regulatory assets, net		774			29,345
Purchased power cost recovery reconciliation		(4,926	)		(5,908	)
Amortization of lease costs		32,933			32,934
Deferred income taxes and investment tax credits, net		26,682			(2,489	)
Accrued compensation and retirement benefits		(7,944	)		(12,160	)
Pension trust contribution		(27,000	)		—
Decrease (increase) in operating assets-
Receivables		82,291			65,141
Prepayments and other current assets		(22,973	)		(21,802	)
Decrease in operating liabilities-
Accounts payable		(19,625	)		(35,461	)
Accrued taxes		(10,305	)		(15,849	)
Accrued interest		(48	)		(226	)
Other		2,438			9,647

Net cash provided from operating activities		104,313			101,213


CASH FLOWS FROM FINANCING ACTIVITIES:
Redemptions and repayments-
Long-term debt		(110	)		(1,363	)
Short-term borrowings, net		(39,045	)		(92,863	)
Common stock dividend payments		(100,000	)		(250,000	)
Other		—			(113	)

Net cash used for financing activities		(139,155	)		(344,339	)


CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(37,651	)		(35,680	)
Sales of investment securities held in trusts		7,972			2,424
Purchases of investment securities held in trusts		(8,896	)		(2,971	)
Loan repayments from associated companies, net		195			14,469
Cash investments		(136	)		(384	)
Other		(2,101	)		1,773

Net cash used for investing activities		(40,617	)		(20,369	)


Net change in cash and cash equivalents		(75,459	)		(263,495	)
Cash and cash equivalents at beginning of period		420,489			324,175

Cash and cash equivalents at end of period	$	345,030		$	60,680

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
	March 31
(In thousands)	2011			2010

STATEMENTS OF INCOME
REVENUES:
Electric sales	$	206,742		$	312,497
Excise tax collections		18,145			17,573

Total revenues		224,887			330,070


EXPENSES:
Purchased power from affiliates		46,168			109,393
Purchased power from non-affiliates		18,220			37,398
Other operating expenses		35,036			31,235
Provision for depreciation		18,426			18,111
Amortization of regulatory assets		23,370			45,139
General taxes		40,212			38,489

Total expenses		181,432			279,765


OPERATING INCOME		43,455			50,305


OTHER INCOME (EXPENSE):
Investment income		6,597			7,547
Miscellaneous income		636			581
Interest expense		(33,078	)		(33,621	)
Capitalized interest		27			26

Total other expense		(25,818	)		(25,467	)


INCOME BEFORE INCOME TAXES		17,637			24,838

INCOME TAXES		4,436			10,843


NET INCOME		13,201			13,995


Income attributable to noncontrolling interest		366			419


EARNINGS AVAILABLE TO PARENT	$	12,835		$	13,576


STATEMENTS OF COMPREHENSIVE INCOME

NET INCOME	$	13,201		$	13,995


OTHER COMPREHENSIVE INCOME (LOSS):
Pension and other postretirement benefits		2,967			(22,585	)
Income tax benefit related to other comprehensive income		(462	)		(8,277	)

Other comprehensive income (loss), net of tax		3,429			(14,308	)


COMPREHENSIVE INCOME (LOSS)		16,630			(313	)

COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST		366			419


TOTAL COMPREHENSIVE INCOME (LOSS) AVAILABLE TO PARENT	$	16,264		$	(732	)

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)


	March 31,			December 31,
(In thousands)	2011			2010

ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	30,244		$	238
Receivables-
Customers (less allowance for doubtful accounts of $3,018 in 2011 and $4,589 in 2010, respectively)		107,418			183,744
Associated companies		34,819			77,047
Other		4,848			11,544
Notes receivable from associated companies		22,704			23,236
Prepayments and other		13,894			3,656

		213,927			299,465

UTILITY PLANT:
In service		2,407,827			2,396,893
Less — Accumulated provision for depreciation		937,105			932,246

		1,470,722			1,464,647
Construction work in progress		48,572			38,610

		1,519,294			1,503,257

OTHER PROPERTY AND INVESTMENTS:
Investment in lessor notes		286,747			340,029
Other		10,035			10,074

		296,782			350,103

DEFERRED CHARGES AND OTHER ASSETS:
Goodwill		1,688,521			1,688,521
Regulatory assets		337,189			370,403
Property taxes		80,614			80,614
Other		11,176			11,486

		2,117,500			2,151,024

	$	4,147,503		$	4,303,849

LIABILITIES AND CAPITALIZATION

CURRENT LIABILITIES:
Currently payable long-term debt	$	174		$	161
Short-term borrowings-
Associated companies		23,303			105,996
Accounts payable-
Associated companies		43,564			32,020
Other		8,811			14,947
Accrued taxes		75,771			84,668
Accrued interest		39,256			18,555
Other		40,862			44,569

		231,741			300,916

CAPITALIZATION:
Common stockholder’s equity-
Common stock, without par value, authorized 105,000,000 shares- 67,930,743 shares outstanding		886,995			887,087
Accumulated other comprehensive loss		(149,758	)		(153,187	)
Retained earnings		531,741			568,906

Total common stockholder’s equity		1,268,978			1,302,806
Noncontrolling interest		14,886			18,017

Total equity		1,283,864			1,320,823
Long-term debt and other long-term obligations		1,831,011			1,852,530

		3,114,875			3,173,353


NONCURRENT LIABILITIES:
Accumulated deferred income taxes		631,507			622,771
Accumulated deferred investment tax credits		10,784			10,994
Retirement benefits		60,682			95,654
Other		97,914			100,161

		800,887			829,580

COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 9)
	$	4,147,503		$	4,303,849

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)


	Three Months Ended
	March 31
(In thousands)	2011			2010

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	13,201		$	13,995
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		18,426			18,111
Amortization of regulatory assets, net		23,370			45,139
Deferred income taxes and investment tax credits, net		4,140			(13,627	)
Accrued compensation and retirement benefits		2,158			2,282
Accrued regulatory obligations		(863	)		(26	)
Pension trust contribution		(35,000	)		—
Decrease (increase) in operating assets-
Receivables		136,887			70,633
Prepayments and other current assets		(10,236	)		(9,133	)
Increase (decrease) in operating liabilities-
Accounts payable		5,408			(14,387	)
Accrued taxes		(8,898	)		(16,616	)
Accrued interest		20,701			20,795
Other		(3,870	)		(2,636	)

Net cash provided from operating activities		165,424			114,530


CASH FLOWS FROM FINANCING ACTIVITIES:
Redemptions and repayments-
Long-term debt		(36	)		(26	)
Short-term borrowings, net		(104,228	)		(126,334	)
Common stock dividend payments		(50,000	)		(100,000	)
Other		(3,497	)		(3,365	)

Net cash used for financing activities		(157,761	)		(229,725	)


CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(29,334	)		(19,735	)
Loans to associated companies, net		532			1,426
Redemptions of lessor notes		53,282			48,606
Other		(2,137	)		(1,085	)

Net cash provided from investing activities		22,343			29,212


Net change in cash and cash equivalents		30,006			(85,983	)
Cash and cash equivalents at beginning of period		238			86,230

Cash and cash equivalents at end of period	$	30,244		$	247

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
	March 31
(In thousands)	2011			2010

STATEMENTS OF INCOME

REVENUES:
Electric sales	$	106,325		$	125,431
Excise tax collections		7,302			7,041

Total revenues		113,627			132,472


EXPENSES:
Purchased power from affiliates		35,517			54,618
Purchased power from non-affiliates		13,988			18,491
Other operating expenses		36,587			25,545
Provision for depreciation		7,931			7,950
Deferral of regulatory assets, net		(11,478	)		(8,499	)
General taxes		14,452			13,461

Total expenses		96,997			111,566


OPERATING INCOME		16,630			20,906


OTHER INCOME (EXPENSE):
Investment income		2,922			3,800
Miscellaneous expense		(1,629	)		(1,406	)
Interest expense		(10,443	)		(10,487	)
Capitalized interest		102			78

Total other expense		(9,048	)		(8,015	)


INCOME BEFORE INCOME TAXES		7,582			12,891

INCOME TAXES		1,735			5,382


NET INCOME		5,847			7,509


Income attributable to noncontrolling interest		2			3


EARNINGS AVAILABLE TO PARENT	$	5,845		$	7,506


STATEMENTS OF COMPREHENSIVE INCOME

NET INCOME	$	5,847		$	7,509


OTHER COMPREHENSIVE INCOME:
Pension and other postretirement benefits		592			296
Change in unrealized gain on available-for-sale securities		1,305			369

Other comprehensive income		1,897			665
Income tax expense related to other comprehensive income		334			170

Other comprehensive income, net of tax		1,563			495


COMPREHENSIVE INCOME		7,410			8,004

COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST		2			3


COMPREHENSIVE INCOME AVAILABLE TO PARENT	$	7,408		$	8,001

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)


	March 31,			December 31,
(In thousands)	2011			2010

ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	150,014		$	149,262
Receivables-
Customers (net of allowance for uncollectible accounts of $1,209 in 2011 and $1 in 2010)		45,749			29
Associated companies		56,913			31,777
Other (net of allowance for uncollectible accounts of $343 in 2011 and $330 in 2010)		18,752			18,464
Notes receivable from associated companies		35,489			96,765
Prepayments and other		8,302			2,306

		315,219			298,603

UTILITY PLANT:
In service		952,874			947,203
Less — Accumulated provision for depreciation		449,791			446,401

		503,083			500,802
Construction work in progress		12,647			12,604

		515,730			513,406

OTHER PROPERTY AND INVESTMENTS:
Investment in lessor notes		82,133			103,872
Nuclear plant decommissioning trusts		77,141			75,558
Other		1,469			1,492

		160,743			180,922

DEFERRED CHARGES AND OTHER ASSETS:
Goodwill		500,576			500,576
Regulatory assets		83,544			72,059
Pension assets		24,427			—
Property taxes		24,990			24,990
Other		36,167			23,750

		669,704			621,375

	$	1,661,396		$	1,614,306

LIABILITIES AND CAPITALIZATION

CURRENT LIABILITIES:
Currently payable long-term debt	$	191		$	199
Accounts payable-
Associated companies		36,055			17,168
Other		5,238			7,351
Accrued taxes		23,043			24,401
Accrued interest		15,983			5,931
Lease market valuation liability		36,900			36,900
Other		54,905			23,145

		172,315			115,095

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		178,122			178,182
Accumulated other comprehensive loss		(47,620	)		(49,183	)
Retained earnings		108,379			117,534

Total common stockholders’ equity		385,891			393,543
Noncontrolling interest		2,591			2,589

Total equity		388,482			396,132
Long-term debt and other long-term obligations		600,508			600,493

		988,990			996,625


NONCURRENT LIABILITIES:
Accumulated deferred income taxes		157,797			132,019
Accumulated deferred investment tax credits		5,822			5,930
Retirement benefits		51,253			71,486
Asset retirement obligations		29,245			28,762
Lease market valuation liability		190,075			199,300
Other		65,899			65,089

		500,091			502,586

COMMITMENTS AND CONTINGENCIES (Note 9)
	$	1,661,396		$	1,614,306

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)


	Three Months Ended
	March 31
(In thousands)	2011			2010

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	5,847		$	7,509
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		7,931			7,950
Deferral of regulatory assets, net		(11,478	)		(8,499	)
Deferred rents and lease market valuation liability		6,141			6,141
Deferred income taxes and investment tax credits, net		25,046			11,287
Accrued compensation and retirement benefits		(142	)		837
Pension trust contribution		(45,000	)		—
Decrease (increase) in operating assets-
Receivables		(70,694	)		45,376
Prepayments and other current assets		(5,996	)		(4,569	)
Increase (decrease) in operating liabilities-
Accounts payable		16,774			(35,414	)
Accrued taxes		(1,358	)		(4,933	)
Accrued interest		10,052			10,050
Other		6,098			(4,578	)

Net cash provided from (used for) operating activities		(56,779	)		31,157


CASH FLOWS FROM FINANCING ACTIVITIES:
Redemptions and repayments-
Long-term debt		(56	)		(56	)
Short-term borrowings, net		—			(225,975	)
Common stock dividend payments		(15,000	)		(130,000	)
Other		—			(2	)

Net cash used for financing activities		(15,056	)		(356,033	)


CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(9,507	)		(9,597	)
Loan repayments from (loans to) associated companies, net		61,276			(33,587	)
Redemptions of lessor notes		21,739			20,509
Sales of investment securities held in trusts		13,883			31,067
Purchases of investment securities held in trusts		(14,338	)		(31,705	)
Other		(466	)		(1,227	)

Net cash provided from (used for) investing activities		72,587			(24,540	)


Net change in cash and cash equivalents		752			(349,416	)
Cash and cash equivalents at beginning of period		149,262			436,712

Cash and cash equivalents at end of period	$	150,014		$	87,296

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
	March 31
(In thousands)	2011			2010

STATEMENTS OF INCOME
REVENUES:
Electric sales	$	634,023		$	691,392
Excise tax collections		12,487			12,352

Total revenues		646,510			703,744


EXPENSES:
Purchased power		370,168			414,016
Other operating expenses		86,079			95,660
Provision for depreciation		25,314			27,971
Amortization of regulatory assets, net		81,587			69,448
General taxes		17,411			16,436

Total expenses		580,559			623,531


OPERATING INCOME		65,951			80,213


OTHER INCOME (EXPENSE):
Miscellaneous income		1,910			1,833
Interest expense		(30,657	)		(29,423	)
Capitalized interest		427			133

Total other expense		(28,320	)		(27,457	)


INCOME BEFORE INCOME TAXES		37,631			52,756

INCOME TAXES		18,078			23,530


NET INCOME	$	19,553		$	29,226


STATEMENTS OF COMPREHENSIVE INCOME

NET INCOME	$	19,553		$	29,226


OTHER COMPREHENSIVE INCOME:
Pension and other postretirement benefits		4,221			15,928
Unrealized gain on derivative hedges		69			69

Other comprehensive income		4,290			15,997
Income tax expense related to other comprehensive income		1,590			6,558

Other comprehensive income, net of tax		2,700			9,439


COMPREHENSIVE INCOME	$	22,253		$	38,665

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)


	March 31,			December 31,
(In thousands)	2011			2010
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1		$	4
Receivables-
Customers (net of allowance for uncollectible accounts of $3,842 in 2011 and $3,769 in 2010)		268,171			323,044
Associated companies		27,144			53,780
Other		21,269			26,119
Notes receivable — associated companies		298,274			177,228
Prepaid taxes		10,968			10,889
Other		16,357			12,654

		642,184			603,718

UTILITY PLANT:
In service		4,579,753			4,562,781
Less — Accumulated provision for depreciation		1,667,017			1,656,939

		2,912,736			2,905,842
Construction work in progress		78,819			63,535

		2,991,555			2,969,377

OTHER PROPERTY AND INVESTMENTS:
Nuclear fuel disposal trust		206,833			207,561
Nuclear plant decommissioning trusts		190,424			181,851
Other		2,111			2,104

		399,368			391,516

DEFERRED CHARGES AND OTHER ASSETS:
Goodwill		1,810,936			1,810,936
Regulatory assets		460,156			513,395
Other		25,243			27,938

		2,296,335			2,352,269

	$	6,329,442		$	6,316,880

LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES:
Currently payable long-term debt	$	32,855		$	32,402
Accounts payable-
Associated companies		16,983			28,571
Other		123,814			158,442
Accrued compensation and benefits		33,415			35,232
Customer deposits		23,494			23,385
Accrued taxes		15,142			2,509
Accrued interest		29,926			18,111
Other		25,663			22,263

		301,292			320,915

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		2,508,754			2,508,874
Accumulated other comprehensive loss		(250,842	)		(253,542	)
Retained earnings		246,723			227,170

Total common stockholder’s equity		2,640,919			2,618,786
Long-term debt and other long-term obligations		1,762,365			1,769,849

		4,403,284			4,388,635

NONCURRENT LIABILITIES:
Accumulated deferred income taxes		729,478			715,527
Power purchase contract liability		238,677			233,492
Nuclear fuel disposal costs		196,843			196,768
Retirement benefits		175,175			182,364
Asset retirement obligations		110,050			108,297
Other		174,643			170,882

		1,624,866			1,607,330

COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 9)
	$	6,329,442		$	6,316,880

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)


	Three Months Ended
	March 31
(In thousands)	2011			2010

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	19,553		$	29,226
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		25,314			27,971
Amortization of regulatory assets, net		81,587			69,448
Deferred purchased power and other costs		(26,516	)		(32,775	)
Deferred income taxes and investment tax credits, net		25,560			(2,082	)
Accrued compensation and retirement benefits		(4,776	)		(5,847	)
Cash collateral returned to suppliers		(250	)		(23,400	)
Decrease (increase) in operating assets-
Receivables		86,359			33,257
Prepayments and other current assets		(1,687	)		16,472
Increase (decrease) in operating liabilities-
Accounts payable		(61,612	)		(40,992	)
Accrued taxes		12,631			50,857
Accrued interest		11,815			11,816
Tax collections payable		7,084			14,544
Other		7,448			466

Net cash provided from operating activities		182,510			148,961


CASH FLOWS FROM FINANCING ACTIVITIES:
Redemptions and repayments-
Long-term debt		(7,190	)		(6,773	)
Common stock dividend payments		—			(90,000	)

Net cash used for financing activities		(7,190	)		(96,773	)


CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(47,604	)		(37,338	)
Loans to associated companies, net		(121,046	)		(7,620	)
Sales of investment securities held in trusts		217,103			190,198
Purchases of investment securities held in trusts		(221,695	)		(194,748	)
Other		(2,081	)		(2,706	)

Net cash used for investing activities		(175,323	)		(52,214	)


Net change in cash and cash equivalents		(3	)		(26	)
Cash and cash equivalents at beginning of period		4			27

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
	March 31
(In thousands)	2011			2010

STATEMENTS OF INCOME

REVENUES:
Electric sales	$	338,416		$	451,560
Gross receipts tax collections		18,800			21,567

Total revenues		357,216			473,127


EXPENSES:
Purchased power from affiliates		49,889			161,080
Purchased power from non-affiliates		153,043			91,928
Other operating expenses		47,232			101,983
Provision for depreciation		12,423			12,758
Amortization of regulatory assets, net		32,094			48,800
General taxes		22,150			21,740

Total expenses		316,831			438,289


OPERATING INCOME		40,385			34,838


OTHER INCOME (EXPENSE):
Interest income		93			1,217
Miscellaneous income		970			2,173
Interest expense		(13,057	)		(13,773	)
Capitalized interest		147			126

Total other expense		(11,847	)		(10,257	)


INCOME BEFORE INCOME TAXES		28,538			24,581

INCOME TAXES		5,951			12,266


NET INCOME	$	22,587		$	12,315


STATEMENTS OF COMPREHENSIVE INCOME

NET INCOME	$	22,587		$	12,315


OTHER COMPREHENSIVE INCOME:
Pension and other postretirement benefits		1,963			9,709
Unrealized gain on derivative hedges		84			84

Other comprehensive income		2,047			9,793
Income tax expense related to other comprehensive income		763			4,177

Other comprehensive income, net of tax		1,284			5,616


COMPREHENSIVE INCOME	$	23,871		$	17,931

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

METROPOLITAN EDISON COMPANY

CONSOLIDATED BALANCE SHEETS
(Unaudited)


	March 31,			December 31,
(In thousands)	2011			2010

ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	117		$	243,220
Receivables-
Customers (less allowance for doubtful accounts of $3,841 in 2011 and $3,868 in 2010, respectively)		159,801			178,522
Associated companies		23,110			24,920
Other		16,836			13,007
Notes receivable from associated companies		9,542			11,028
Prepaid taxes		40,883			343
Other		1,973			2,289

		252,262			473,329

UTILITY PLANT:
In service		2,260,156			2,247,853
Less — Accumulated provision for depreciation		852,326			846,003

		1,407,830			1,401,850
Construction work in progress		27,714			23,663

		1,435,544			1,425,513

OTHER PROPERTY AND INVESTMENTS:
Nuclear plant decommissioning trusts		303,906			289,328
Other		881			884

		304,787			290,212

DEFERRED CHARGES AND OTHER ASSETS:
Goodwill		416,499			416,499
Regulatory assets		285,300			295,856
Power purchase contract asset		107,055			111,562
Other		51,939			31,699

		860,793			855,616

	$	2,853,386		$	3,044,670

LIABILITIES AND CAPITALIZATION

CURRENT LIABILITIES:
Currently payable long-term debt	$	42,450		$	28,760
Short-term borrowings-
Associated companies		109,709			124,079
Accounts payable-
Associated companies		35,758			33,942
Other		47,450			29,862
Accrued taxes		14,514			60,856
Accrued interest		11,738			16,114
Other		29,543			29,278

		291,162			322,891

CAPITALIZATION:
Common stockholders’ equity-
Common stock, without par value, authorized 900,000 shares- 740,905 shares outstanding		1,046,970			1,197,076
Accumulated other comprehensive loss		(141,099	)		(142,383	)
Retained earnings		29,994			32,406

Total common stockholder’s equity		935,865			1,087,099
Long-term debt and other long-term obligations		705,125			718,860

		1,640,990			1,805,959

NONCURRENT LIABILITIES:
Accumulated deferred income taxes		481,530			473,009
Accumulated deferred investment tax credits		6,761			6,866
Nuclear fuel disposal costs		44,465			44,449
Asset retirement obligations		195,883			192,659
Retirement benefits		22,405			29,121
Power purchase contract liability		118,123			116,027
Other		52,067			53,689

		921,234			915,820

COMMITMENTS AND CONTINGENCIES (Note 9)
	$	2,853,386		$	3,044,670

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)


	Three Months Ended
	March 31
(In thousands)	2011			2010

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	22,587		$	12,315
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		12,423			12,758
Amortization of regulatory assets, net		32,094			48,800
Deferred costs recoverable as regulatory assets		(12,082	)		(18,276	)
Deferred income taxes and investment tax credits, net		1,304			(10,308	)
Accrued compensation and retirement benefits		(1,433	)		(2,527	)
Cash collateral returned from (paid to) suppliers		1,000			(700	)
Pension trust contributions		(35,000	)		—
Decrease (increase) in operating assets-
Receivables		16,702			(5,083	)
Prepayments and other current assets		(40,225	)		(52,040	)
Increase (decrease) in operating liabilities-
Accounts payable		15,749			(7,279	)
Accrued taxes		(46,006	)		19,960
Accrued interest		(4,376	)		(5,674	)
Other		6,337			2,373

Net cash used for operating activities		(30,926	)		(5,681	)


CASH FLOWS FROM FINANCING ACTIVITIES:
New financing-
Short-term borrowings, net		—			48,793
Redemptions and repayments-
Long-term debt		—			(100,000	)
Short-term borrowings, net		(14,369	)		—
Common stock		(150,000	)		—
Common stock dividend payments		(25,000	)		—

Net cash used for financing activities		(189,369	)		(51,207	)


CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(21,126	)		(25,526	)
Sales of investment securities held in trusts		335,860			143,713
Purchases of investment securities held in trusts		(337,632	)		(146,056	)
Loans repayments from associated companies, net		1,486			85,383
Other		(1,396	)		(618	)

Net cash provided from (used for) investing activities		(22,808	)		56,896


Net increase (decrease) in cash and cash equivalents		(243,103	)		8
Cash and cash equivalents at beginning of period		243,220			120

Cash and cash equivalents at end of period	$	117		$	128

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
	March 31
(In thousands)	2011			2010

STATEMENTS OF INCOME
REVENUES:
Electric sales	$	308,316		$	385,936
Gross receipts tax collections		16,529			17,524

Total revenues		324,845			403,460


EXPENSES:
Purchased power from affiliates		47,484			168,400
Purchased power from non-affiliates		141,436			91,423
Other operating expenses		41,328			72,394
Provision for depreciation		14,573			14,682
Amortization (deferral) of regulatory assets, net		13,007			(9,966	)
General taxes		20,736			16,534

Total expenses		278,564			353,467


OPERATING INCOME		46,281			49,993


OTHER INCOME (EXPENSE):
Miscellaneous income		25			1,613
Interest expense		(17,234	)		(17,290	)
Capitalized interest		22			140

Total other expense		(17,187	)		(15,537	)


INCOME BEFORE INCOME TAXES		29,094			34,456

INCOME TAXES		11,788			17,157


NET INCOME	$	17,306		$	17,299


STATEMENTS OF COMPREHENSIVE INCOME

NET INCOME	$	17,306		$	17,299


OTHER COMPREHENSIVE INCOME:
Pension and other postretirement benefits		1,585			8,547
Unrealized gain on derivative hedges		16			16

Other comprehensive income		1,601			8,563
Income tax expense related to other comprehensive income		555			3,284

Other comprehensive income, net of tax		1,046			5,279


COMPREHENSIVE INCOME	$	18,352		$	22,578

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

PENNSYLVANIA ELECTRIC COMPANY

CONSOLIDATED BALANCE SHEETS
(Unaudited)


	March 31,			December 31,
(In thousands)	2011			2010

ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	3		$	5
Receivables-
Customers (net of allowance for uncollectible accounts of $3,395 in 2011 and $3,369 in 2010)		139,058			148,864
Associated companies		16,921			54,052
Other		12,142			11,314
Notes receivable from associated companies		12,334			14,404
Prepaid taxes		47,126			14,026
Other		1,843			1,592

		229,427			244,257

UTILITY PLANT:
In service		2,545,211			2,532,629
Less — Accumulated provision for depreciation		939,247			935,259

		1,605,964			1,597,370
Construction work in progress		40,799			30,505

		1,646,763			1,627,875

OTHER PROPERTY AND INVESTMENTS:
Nuclear plant decommissioning trusts		159,999			152,928
Non-utility generation trusts		80,275			80,244
Other		294			297

		240,568			233,469

DEFERRED CHARGES AND OTHER ASSETS:
Goodwill		768,628			768,628
Regulatory assets		179,092			163,407
Power purchase contract asset		4,169			5,746
Other		15,140			19,287

		967,029			957,068

	$	3,083,787		$	3,062,669

LIABILITIES AND CAPITALIZATION

CURRENT LIABILITIES:
Currently payable long-term debt	$	45,000		$	45,000
Short-term borrowings-
Associated companies		90,363			101,338
Accounts payable-
Associated companies		41,231			35,626
Other		33,125			41,420
Accrued taxes		4,262			5,075
Accrued interest		24,069			17,378
Other		23,467			22,541

		261,517			268,378

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		913,439			913,519
Accumulated other comprehensive loss		(162,480	)		(163,526	)
Retained earnings		58,299			60,993

Total common stockholder’s equity		897,810			899,538
Long-term debt and other long-term obligations		1,072,339			1,072,262

		1,970,149			1,971,800

NONCURRENT LIABILITIES:
Accumulated deferred income taxes		393,088			371,877
Retirement benefits		187,888			187,621
Power purchase contract liability		121,558			116,972
Asset retirement obligations		99,773			98,132
Other		49,814			47,889

		852,121			822,491

COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 9)
	$	3,083,787		$	3,062,669

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)


	Three Months Ended
	March 31
(In thousands)	2011			2010

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	17,306		$	17,299
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		14,573			14,682
Amortization (deferral) of regulatory assets, net		13,007			(9,966	)
Deferred costs recoverable as regulatory assets		(17,771	)		(20,461	)
Deferred income taxes and investment tax credits, net		16,648			21,772
Accrued compensation and retirement benefits		1,551			(169	)
Cash collateral paid, net		(2,124	)		(400	)
Decrease (increase) in operating assets-
Receivables		46,100			(4,641	)
Prepayments and other current assets		(33,350	)		(50,186	)
Increase (decrease) in operating liabilities-
Accounts payable		(8,534	)		(1,348	)
Accrued taxes		(813	)		(2,142	)
Accrued interest		6,691			6,882
Other		10,204			7,162

Net cash provided from (used for) operating activities		63,488			(21,516	)


CASH FLOWS FROM FINANCING ACTIVITIES:
New financing-
Short-term borrowings, net		—			51,334
Redemptions and repayments-
Short-term borrowings, net		(10,975	)		—
Common stock dividend payments		(20,000	)		—
Other		26			(6	)

Net cash provided from (used for) financing activities		(30,949	)		51,328


CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(31,128	)		(27,388	)
Loan repayments from associated companies, net		2,070			279
Sales of investment securities held in trusts		178,927			93,057
Purchases of investment securities held in trusts		(180,411	)		(94,464	)
Other		(1,999	)		(1,298	)

Net cash used for investing activities		(32,541	)		(29,814	)


Net change in cash and cash equivalents		(2	)		(2	)
Cash and cash equivalents at beginning of period		5			14

Cash and cash equivalents at end of period	$	3		$	12

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, AE and its principal subsidiaries (AE Supply, AGC, MP, PE, WP and TrAIL Company), FES and its subsidiaries FGCO and NGC, and FESC. AE merged with a subsidiary of FirstEnergy on February 25, 2011, with AE remaining as the surviving corporation and becoming a wholly-owned subsidiary of FirstEnergy (See Note 2, Merger).

FirstEnergy and its subsidiaries follow GAAP and comply with the regulations, orders, policies and practices prescribed by the SEC, the FERC, the NERC and, as applicable, the PUCO, the PPUC, the MDPSC, the NYPSC, the WVPSC 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, 2010 for FirstEnergy, FES and the Utility Registrants, as applicable, and the Current Report on Form 8-K filed by FirstEnergy on February 25, 2011, as amended on April 19, 2011. The consolidated unaudited financial statements of FirstEnergy, FES and each of the Utility Registrants 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, Variable Interest Entities). Investments in affiliates over which FirstEnergy and its subsidiaries have the ability to exercise significant influence, but with respect to which 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. MERGER

Merger

On February 25, 2011, the merger between FirstEnergy and Allegheny closed. Pursuant to the terms of the Agreement and Plan of Merger among FirstEnergy, Element Merger Sub, Inc., a Maryland corporation and a wholly-owned subsidiary of FirstEnergy (Merger Sub), and AE, Merger Sub merged with and into AE, with AE continuing as the surviving corporation and becoming a wholly-owned subsidiary of FirstEnergy. As part of the merger, AE shareholders received 0.667 of a share of FirstEnergy common stock for each share of AE common stock outstanding as of the date the merger was completed, and all outstanding AE equity-based employee compensation awards were converted into FirstEnergy equity-based awards on the same basis.

The merger created a combined company with increased scale and scope and greater diversification in energy delivery, generation and transmission. The combined company is the largest U.S. diversified electric utility by customers and operates one of the largest unregulated power generation fleets in the United States with FirstEnergy’s total current capacity of approximately 23,000 MW, which includes approximately 3,000 MW of regulated generation.

The total consideration in the merger was based on the closing price of a share of FirstEnergy common stock on February 24, 2011, the day prior to the date the merger was completed, and was calculated as follows (in millions, except per share data):


Shares of Allegheny common stock outstanding on February 24, 2011		170
Exchange ratio		0.667

Number of shares of FirstEnergy common stock issued		113
Closing price of FirstEnergy common stock on February 24, 2011	$	38.16

Fair value of shares issued by FirstEnergy	$	4,327
Fair value of replacement share-based compensation awards relating to pre-merger service		27

Total consideration transferred	$	4,354

The preliminary allocation of the total consideration transferred to the assets acquired and liabilities assumed includes adjustments for the fair value of coal contracts, energy supply contracts, emission allowances, unregulated property, plant and equipment, derivative instruments, goodwill, intangible assets, long-term debt and deferred income taxes. The preliminary allocation of the purchase price is as follows:


	Preliminary
	Purchase Price
(In millions)	Allocation

Current assets	$	1,509
Property, plant and equipment		9,656
Investments		138
Goodwill		952
Other noncurrent assets		1,262
Current liabilities		(714	)
Noncurrent liabilities		(3,453	)
Long-term debt and other long-term obligations		(4,996	)

	$	4,354

Assumptions and estimates underlying the fair value adjustments are subject to change pending further review of the assets acquired and liabilities assumed.

The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed was recognized as goodwill. The Allegheny delivery, transmission and generation businesses have been assigned to the Regulated Distribution, Regulated Independent Transmission and Competitive Energy Services segments, respectively. The preliminary estimate of goodwill from the merger of $952 million was assigned entirely to the Competitive Energy Services segment based on expected synergies from the merger. The goodwill is not deductible for tax purposes.

Total goodwill recognized by segment in FirstEnergy’s Consolidated Balance Sheet is as follows:


			Competitive		Regulated
	Regulated		Energy		Independent		Other/
(In millions)	Distribution		Services		Transmission		Corporate		Consolidated

Balance at December 31, 2010	$	5,551	$	24	$	—	$	—	$	5,575

Merger with Allegheny		—		952		—		—		952


Balance at March 31, 2011	$	5,551	$	976	$	—	$	—	$	6,527

The preliminary valuation of the additional intangible assets and liabilities recorded as result of the merger is as follows:


	Preliminary		Weighted Average
(In millions)	Valuation		Amortization Period
Above market contracts:
Energy supply contracts	$	189	10 years
NUG contracts		124	25 years
Coal supply contracts		525	8 years

		838

Below market contracts:
NUG contracts		143	13 years
Coal supply contracts		86	7 years
Transportation contract		35	8 years

		264


	$	574

The fair value measurements of intangible assets and liabilities were primarily based on significant unobservable inputs and thus represent level 3 measurements as defined in accounting guidance for fair value measurements.

The fair value of Allegheny’s energy, NUG and gas transportation contracts, both above-market and below-market, were estimated based on the present value of the above/below market cash flows attributable to the contracts based on the contract type, discounted by a current market interest rate consistent with the overall credit quality of the portfolio. The above/below market cash flows were estimated by comparing the expected cash flow based on existing contracted prices and expected volumes with the cash flows from estimated current market contract prices for the same expected volumes. The estimated current market contract prices were derived considering current market prices, such as the price of energy and transmission, miscellaneous fees and a normal profit margin. The weighted average amortization period was determined based on the expected volumes to be delivered over the life of the contract.

The fair value of coal supply contracts was determined in a similar manner based on the present value of the above/below market cash flows attributable to the contracts. The fair value of these contracts will be amortized based on expected deliveries under each contract.

Total intangible assets recorded on FirstEnergy’s Consolidated Balance Sheet as of March 31, 2011 are as follows:


	Intangible
(In millions)	Assets
Purchase contract assets
NUG	$	241
OVEC		52

		293

Intangible assets
Coal contracts		520
FES customer intangible assets		132
Energy contracts		130

		782


	$	1,075

Other intangible assets acquired in the Allegheny merger include land easements and software, having a fair value of $126 million, are included in “Property, plant and equipment” on FirstEnergy’s Consolidated Balance Sheet as of March 31, 2011.

In connection with the merger, FirstEnergy recorded approximately $82 million ($68 million net of tax) and $14 million ($10 million net of tax) of merger transaction costs during the first quarter of 2011 and 2010, respectively. These costs are included in “Other operating expenses” in the Consolidated Statement of Income. Merger transaction costs recognized in the first quarter of 2011 include $56 million ($47 net of tax) of change in control and other benefit payments to AE executives.

FirstEnergy also recorded approximately $75 million in merger integration costs during the first quarter of 2011, including an inventory valuation adjustment. In connection with the merger, FirstEnergy reviewed its inventory levels as a result of combining the inventory of both companies. Following this review FirstEnergy management determined the combined inventory stock contained excess and duplicative items. FirstEnergy management also adopted a consistent excess and obsolete inventory practice for the combined entity. Application of the revised practice, in conjunction with those items identified as excess and duplicative, resulted in an inventory valuation adjustment of $67 million ($42 million net of tax).

The amounts of revenue and earnings of Allegheny since the merger date included in FirstEnergy’s Consolidated Statement of Income for the quarter ended March 31, 2011 are as follows:


	February 26 -
(In millions, except per share amounts)	March 31, 2011

Total revenues	$	437
Net Income⁽¹⁾		(46	)

Basic Earnings Per Share	$	(0.13	)
Diluted Earnings Per Share	$	(0.13	)


⁽¹⁾		Includes Allegheny’s after-tax merger costs of $52 million.

Pro Forma Financial Information

The following unaudited pro forma financial information reflects the consolidated results of operations of FirstEnergy as if the merger with Allegheny had taken place on January 1, 2010. The unaudited pro forma information has been calculated after applying FirstEnergy’s accounting policies and adjusting Allegheny’s results to reflect the depreciation and amortization that would have been charged assuming fair value adjustments to property, plant and equipment, debt and intangible assets had been applied on January 1, 2010, together with the consequential tax effects.

FirstEnergy and Allegheny both incurred non-recurring costs directly related to the merger that have been included in the pro forma earnings presented below. Approximately $83 million and $27 million of combined pre-tax transaction costs were incurred in the three months ended March 31, 2011 and March 31, 2010, respectively. In addition, in the three months ended March 31, 2011, $75 million of pre-tax merger integration costs and $24 million of charges from merger settlements approved by regulatory agencies have been recognized. Charges resulting from merger settlements are not expected to be material in future periods.

The unaudited pro forma financial information has been presented for illustrative purposes only and is not necessarily indicative of results of operations that would have been achieved had the pro forma events taken place on the dates indicated, or the future consolidated results of operations of the combined company.


	Three Months Ended
	March 31
(Pro forma amounts in millions, except per share amounts)	2011		2010

Revenues	$	4,786	$	4,685
Net income attributable to FirstEnergy	$	137	$	255

Basic Earnings Per Share	$	0.33	$	0.61

Diluted Earnings Per Share	$	0.33	$	0.61

3. EARNINGS PER SHARE

Basic earnings per share of common stock are computed using the weighted average of actual common shares outstanding during the relevant 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 would be issued 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 Ended
Reconciliation of Basic and Diluted	March 31
Earnings per Share of Common Stock	2011		2010
	*(In millions, except per*
	*share amounts)*

Earnings available to FirstEnergy Corp.	$	50	$	155


Weighted average number of basic shares outstanding⁽¹⁾		342		304
Assumed exercise of dilutive stock options and awards		1		2

Weighted average number of diluted shares outstanding⁽¹⁾		343		306


Basic earnings per share of common stock	$	0.15	$	0.51

Diluted earnings per share of common stock	$	0.15	$	0.51


⁽¹⁾		Includes 113 million shares issued to AE stockholders for the period subsequent to the merger date. (See Note 2, Merger)

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 March 31, 2011 and December 31 2010:


	March 31, 2011				December 31, 2010
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
	*(In millions)*
FirstEnergy⁽¹⁾	$	18,743	$	19,776	$	13,928	$	14,845
FES		4,099		4,227		4,279		4,403
OE		1,159		1,334		1,159		1,321
CEI		1,831		2,035		1,853		2,035
TE		600		666		600		653
JCP&L		1,802		1,980		1,810		1,962
Met-Ed		742		826		742		821
Penelec		1,120		1,190		1,120		1,189


⁽¹⁾		Includes debt assumed in the Allegheny merger (See Note 2) with a carrying value and a fair value as of March 31, 2011 of $4,995 million and $5,004 million, respectively.

The fair values of long-term debt and other long-term obligations reflect the present value of the cash outflows relating to those obligations 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 debt with similar characteristics offered by corporations with credit ratings similar to those of FirstEnergy, FES, the Utilities and other subsidiaries.

(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.

FES and the Utilities periodically evaluate their investments for other-than-temporary impairment. They first consider their intent and ability to hold an equity investment until recovery and then consider, among other factors, the duration and the extent to which the security’s fair value has been less than cost and the near-term financial prospects of the security issuer when evaluating an investment for impairment. For debt securities, FES and the Utilities consider their intent to hold the security, the likelihood that they will be required to sell the security before recovery of their cost basis, and the likelihood of recovery of the security’s entire amortized cost basis.

Available-For-Sale Securities

FES and the Utilities hold debt and equity securities within their nuclear decommissioning trusts, nuclear fuel disposal trusts and NUG trusts. These trust investments are considered as available-for-sale at fair market value. FES and the Utilities have no securities held for trading purposes.

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 March 31, 2011 and December 31, 2010:


	March 31, 2011⁽¹⁾								December 31, 2010⁽²⁾
	Cost		Unrealized		Unrealized		Fair		Cost		Unrealized		Unrealized		Fair
	Basis		Gains		Losses		Value		Basis		Gains		Losses		Value
	*(In millions)*
Debt securities
FirstEnergy	$	1,985	$	32	$	—	$	2,017	$	1,699	$	31	$	—	$	1,730
FES		1,012		18		—		1,030		980		13		—		993
OE		124		1		—		125		123		1		—		124
TE		51		—		—		51		42		—		—		42
JCP&L		358		7		—		365		281		9		—		290
Met-Ed		240		4		—		244		127		4		—		131
Penelec		200		2		—		202		145		4		—		149

Equity securities
FirstEnergy	$	186	$	7	$	—	$	193	$	268	$	69	$	—	$	337
FES		88		5		—		93		—		—		—		—
TE		24		1		—		25		—		—		—		—
JCP&L		21		—		—		21		80		17		—		97
Met-Ed		33		1		—		34		125		35		—		160
Penelec		20		—		—		20		63		16		—		79


⁽¹⁾		Excludes cash investments, receivables, payables, deferred taxes and accrued income: FirstEnergy — $97 million; FES — $37 million; OE — $2 million; TE — $1 million; JCP&L — $12 million; Met-Ed — $27 million and Penelec — $18 million.

⁽²⁾		Excludes cash investments, receivables, payables, deferred taxes and accrued income: FirstEnergy — $193 million; FES — $153 million; OE — $3 million; TE — $34 million; JCP&L — $3 million; Met-Ed — $(3) million and Penelec — $4 million.

Proceeds from the sale of investments in available-for-sale securities, realized gains and losses on those sales net of adjustments recorded, and interest and dividend income for the three months ended March 31, 2011 and 2010 were as follows:


								Interest and
March 31, 2011	Sales Proceeds		Realized Gains		Realized Losses			Dividend Income
	*(In millions)*
FirstEnergy	$	970	$	100	$	(29	)	$	24
FES		216		12		(15	)		15
OE		8		—		—			1
TE		14		1		(1	)		1
JCP&L		217		22		(4	)		4
Met-Ed		336		43		(5	)		2
Penelec		179		22		(4	)		1


								Interest and
March 31, 2010	Sales Proceeds		Realized Gains		Realized Losses			Dividend Income
	*(In millions)*
FirstEnergy	$	733	$	37	$	(51	)	$	22
FES		272		13		(24	)		13
OE		2		—		—			1
TE		31		1		(1	)		1
JCP&L		190		8		(8	)		4
Met-Ed		144		9		(11	)		2
Penelec		93		6		(7	)		1

Unrealized gains applicable to the decommissioning trusts of FES, OE and TE are recognized in OCI because fluctuations in fair value will eventually impact earnings. The decommissioning trusts of JCP&L, Met-Ed and Penelec are subject to regulatory accounting. Net unrealized gains and losses are recorded as regulatory assets or liabilities because the difference between investments held in trust and the decommissioning liabilities will be recovered from or refunded to customers.

The investment policy for the nuclear decommissioning trust funds restricts or limits the plans’ ability to hold certain types of assets including private or direct placements, warrants, securities of FirstEnergy, investments in companies owning nuclear power plants, financial derivatives, preferred stocks, securities convertible into common stock and securities of the trust fund’s custodian or managers and their parents or subsidiaries.

FirstEnergy recognized $3 million and $11 million of net realized losses for the three-month period ended March 31, 2011 and 2010, respectively, resulting from the sale of securities held in nuclear decommissioning trusts.

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 March 31, 2011 and December 31, 2010:


	March 31, 2011								December 31, 2010
	Cost		Unrealized		Unrealized		Fair		Cost		Unrealized		Unrealized		Fair
	Basis		Gains		Losses		Value		Basis		Gains		Losses		Value
	*(In millions)*
Debt Securities
FirstEnergy	$	422	$	79	$	—	$	501	$	476	$	91	$	—	$	567
OE		190		45		—		235		190		51		—		241
CEI		287		33		—		320		340		41		—		381

Investments in emission allowances, employee benefits and cost and equity method investments totaling $345 million as of March 31, 2011 and $259 million as of December 31, 2010 are not required to be disclosed and are 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 March 31, 2011 and December 31, 2010. 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. The maturity dates range from 2013 to 2021.


	March 31, 2011				December 31, 2010
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
	*(In millions)*
Notes Receivable
FirstEnergy	$	7	$	8	$	7	$	8
TE		82		94		104		118

(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 in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

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. 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 may 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 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 determination of the 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 financial assets and liabilities that are accounted for at fair value by level within the fair value hierarchy as of March 31, 2011 and December 31, 2010. 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. The fair value of financial assets and liabilities as of March 31, 2011 assumed in the merger with Allegheny totaled $52 million and $51 million, respectively. There were no significant transfers between Level 1, Level 2 and Level 3 as of March 31, 2011 and December 31, 2010.

FirstEnergy Corp.

The following tables summarize assets and liabilities recorded on FirstEnergy’s Consolidated Balance Sheets at fair value as of March 31, 2011 and December 31, 2010:


March 31, 2011	Level 1		Level 2			Level 3			Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	877		$	—		$	877
Derivative assets — commodity contracts		—		524			—			524
Derivative assets — FTRs		—		—			1			1
Derivative assets — interest rate swaps		—		4			—			4
Derivative assets — NUG contracts⁽¹⁾		—		—			117			117
Equity securities⁽²⁾		194		—			—			194
Foreign government debt securities		—		150			—			150
U.S. government debt securities		—		681			—			681
U.S. state debt securities		—		297			—			297

Other⁽⁴⁾		—		148			—			148

Total assets	$	194	$	2,681		$	118		$	2,993


Liabilities
Derivative liabilities — commodity contracts	$	—	$	(583	)	$	—		$	(583	)
Derivative liabilities — FTRs		—		—			(12	)		(12	)
Derivative liabilities — interest rate swaps		—		(5	)		—			(5	)

Derivative liabilities — NUG contracts⁽¹⁾		—		—			(478	)		(478	)

Total liabilities	$	—	$	(588	)	$	(490	)	$	(1,078	)


Net assets (liabilities)⁽³⁾	$	194	$	2,093		$	(372	)	$	1,915


December 31, 2010	Level 1		Level 2			Level 3			Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	597		$	—		$	597
Derivative assets — commodity contracts		—		250			—			250
Derivative assets — NUG contracts⁽¹⁾		—		—			122			122
Equity securities⁽²⁾		338		—			—			338
Foreign government debt securities		—		149			—			149
U.S. government debt securities		—		595			—			595
U.S. state debt securities		—		379			—			379
Other⁽⁴⁾		—		219			—			219

Total assets	$	338	$	2,189		$	122		$	2,649


Liabilities
Derivative liabilities — commodity contracts	$	—	$	(348	)	$	—		$	(348	)
Derivative liabilities — NUG contracts⁽¹⁾		—		—			(466	)		(466	)

Total liabilities	$	—	$	(348	)	$	(466	)	$	(814	)


Net assets (liabilities)⁽³⁾	$	338	$	1,841		$	(344	)	$	1,835


⁽¹⁾		NUG contracts are subject to regulatory accounting and do not impact earnings.

⁽²⁾		NDT funds hold equity portfolios the performance of which is benchmarked against the S&P 500 Index or Russell 3000 Index.

⁽³⁾		Excludes $(31) million and $(7) million as of March 31, 2011 and December 31, 2010, respectively, of receivables, payables, deferred taxes and accrued income associated with the financial instruments reflected within the fair value table.

⁽⁴⁾		Primarily consists of cash and cash equivalents.

Rollforward of Level 3 Measurements

The following table provides a reconciliation of changes in the fair value of NUG contracts held by the Utilities and FTRs held by FirstEnergy and classified as Level 3 in the fair value hierarchy for the periods ending March 31, 2011 and December 31, 2010, respectively:


	Derivative Asset⁽¹⁾			Derivative Liability⁽¹⁾			Net⁽¹⁾
	*(In millions)*
January 1, 2011 Balance	$	122		$	(466	)	$	(344	)
Realized gain (loss)		—			—			—
Unrealized gain (loss)		(1	)		(89	)		(90	)
Purchases		—			—			—
Issuances		—			—			—
Sales		—			—			—
Settlements		(3	)		77			74
Transfers in (out) of Level 3		—			(12	)		(12	)

March 31, 2011 Balance	$	118		$	(490	)	$	(372	)


January 1, 2010 Balance	$	200		$	(643	)	$	(443	)
Realized gain (loss)		—			—			—
Unrealized gain (loss)		(71	)		(110	)		(181	)
Purchases		—			—			—
Issuances		—			—			—
Sales		—			—			—
Settlements		(7	)		287			280
Transfers in (out) of Level 3		—			—			—

December 31, 2010 Balance	$	122		$	(466	)	$	(344	)


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

FirstEnergy Solutions Corp.

The following tables summarize assets and liabilities recorded on FES’ Consolidated Balance Sheets at fair value as of March 31, 2011 and December 31, 2010:


March 31, 2011	Level 1		Level 2			Level 3		Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	567		$	—	$	567
Derivative assets — commodity contracts		—		476			—		476
Derivative assets — FTRs		—		—			1		1
Equity securities⁽³⁾		93		—			—		93
Foreign government debt securities		—		148			—		148
U.S. government debt securities		—		304			—		304

U.S. state debt securities		—		8			—		8
Other⁽²⁾		—		43			—		43

Total assets	$	93	$	1,546		$	1	$	1,640


Liabilities
Derivative liabilities — commodity contracts	$	—	$	(549	)	$	—	$	(549	)

Total liabilities	$	—	$	(549	)	$	—	$	(549	)


Net assets (liabilities)⁽¹⁾	$	93	$	997		$	1	$	1,091


December 31, 2010	Level 1		Level 2			Level 3		Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	528		$	—	$	528
Derivative assets — commodity contracts		—		241			—		241
Foreign government debt securities		—		147			—		147
U.S. government debt securities		—		308			—		308
U.S. state debt securities		—		6			—		6
Other⁽²⁾		—		148			—		148

Total assets	$	—	$	1,378		$	—	$	1,378


Liabilities
Derivative liabilities – commodity contracts	$	—	$	(348	)	$	—	$	(348	)

Total liabilities	$	—	$	(348	)	$	—	$	(348	)


Net assets (liabilities)⁽¹⁾	$	—	$	1,030		$	—	$	1,030


⁽¹⁾		Excludes $(3) million and $7 million as of March 31, 2011 and December 31, 2010, respectively, of receivables, payables, deferred taxes and accrued income associated with the financial instruments reflected within the fair value table.

⁽²⁾		Primarily consists of cash and cash equivalents.

⁽³⁾		NDT funds hold equity portfolios the performance of which is benchmarked against the S&P 500 Index or Russell 3000 Index.

Rollforward of Level 3 Measurements

The following table provides a reconciliation of changes in the fair value of FTRs held by FES and classified as Level 3 in the fair value hierarchy for the period ending March 31, 2011:


	Derivative Asset		Derivative Liability		Net
	FTRs		FTRs		FTRs
	*(In millions)*
January 1, 2011 Balance	$	—	$	—	$	—
Realized gain (loss)		—		—		—
Unrealized gain (loss)		1		—		1
Purchases		—		—		—
Issuances		—		—		—
Sales		—		—		—
Settlements		—		—		—
Transfers in (out) of Level 3		—		—		—

March 31, 2011 Balance	$	1	$	—	$	1

Ohio Edison Company

The following tables summarize assets and liabilities recorded on OE’s Consolidated Balance Sheets at fair value as of March 31, 2011 and December 31, 2010:


March 31, 2011	Level 1		Level 2		Level 3		Total
	*(In millions)*
Assets
U.S. government debt securities	$	—	$	125	$	—	$	125
Other		—		6		—		6

Total assets⁽¹⁾	$	—	$	131	$	—	$	131


December 31, 2010	Level 1		Level 2		Level 3		Total
	*(In millions)*
Assets
U.S. government debt securities	$	—	$	124	$	—	$	124
Other		—		2		—		2

Total assets⁽¹⁾	$	—	$	126	$	—	$	126


⁽¹⁾		Excludes $(3) million and $1 million as of March 31, 2011 and December 31, 2010 of receivables, payables, deferred taxes and accrued income associated with the financial instruments reflected within the fair value table.

Toledo Edison Company

The following tables summarize assets and liabilities recorded on TE’s Consolidated Balance Sheets at fair value as of March 31, 2011 and December 31, 2010:


March 31, 2011	Level 1		Level 2		Level 3		Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	16	$	—	$	16
Equity securities⁽³⁾		25		—		—		25
U.S. government debt securities		—		32		—		32
U.S. state debt securities		—		2		—		2
Other⁽²⁾		—		3		—		3

Total assets⁽¹⁾	$	25	$	53	$	—	$	78


December 31, 2010	Level 1		Level 2		Level 3		Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	7	$	—	$	7
U.S. government debt securities		—		33		—		33
U.S. state debt securities		—		1		—		1
Other⁽²⁾		—		35		—		35

Total assets⁽¹⁾	$	—	$	76	$	—	$	76


⁽¹⁾		Excludes $(1) million and $2 million as of March 31, 2011 and December 31, 2010 of receivables, payables, deferred taxes and accrued income associated with the financial instruments reflected within the fair value table.

⁽²⁾		Primarily consists of cash and cash equivalents.

⁽³⁾		NDT funds hold equity portfolios the performance of which is benchmarked against the S&P 500 Index or Russell 3000 Index.

Jersey Central Power & Light Company

The following tables summarize assets and liabilities recorded on JCP&L’s Consolidated Balance Sheets at fair value as of March 31, 2011 and December 31, 2010:


March 31, 2011	Level 1		Level 2		Level 3			Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	92	$	—		$	92
Derivative assets — commodity contracts		—		—		—			—
Derivative assets — NUG contracts⁽¹⁾		—		—		6			6
Equity securities⁽²⁾		21		—		—			21
Foreign government debt securities		—		1		—			1
U.S. government debt securities		—		60		—			60
U.S. state debt securities		—		214		—			214

Other		—		16		—			16

Total assets	$	21	$	383	$	6		$	410


Liabilities
Derivative liabilities – NUG contracts⁽¹⁾	$	—	$	—	$	(239	)	$	(239	)

Total liabilities	$	—	$	—	$	(239	)	$	(239	)


Net assets (liabilities)⁽³⁾	$	21	$	383	$	(233	)	$	171


December 31, 2010	Level 1		Level 2		Level 3			Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	23	$	—		$	23
Derivative assets — commodity contracts		—		2		—			2
Derivative assets — NUG contracts⁽¹⁾		—		—		6			6
Equity securities⁽²⁾		96		—		—			96
U.S. government debt securities		—		33		—			33
U.S. state debt securities		—		236		—			236
Other		—		4		—			4

Total assets	$	96	$	298	$	6		$	400


Liabilities
Derivative liabilities – NUG contracts⁽¹⁾	$	—	$	—	$	(233	)	$	(233	)

Total liabilities	$	—	$	—	$	(233	)	$	(233	)


Net assets (liabilities)⁽³⁾	$	96	$	298	$	(227	)	$	167


⁽¹⁾		NUG contracts are subject to regulatory accounting and do not impact earnings.

⁽²⁾		NDT funds hold equity portfolios the performance of which is benchmarked against the S&P 500 Index or Russell 3000 Index.

⁽³⁾		Excludes $(8) million and $(3) million as of March 31, 2011 and December 31, 2010 of receivables, payables, deferred taxes and accrued income associated with the financial instruments reflected within the fair value table.

Rollforward of Level 3 Measurements

The following table provides a reconciliation of changes in the fair value of NUG contracts held by JCP&L and classified as Level 3 in the fair value hierarchy for the periods ending March 31, 2011 and December 31, 2010:


	Derivative Asset			Derivative Liability			Net
	NUG Contracts⁽¹⁾			NUG Contracts⁽¹⁾			NUG Contracts⁽¹⁾
	*(In millions)*
January 1, 2011 Balance	$	6		$	(233	)	$	(227	)
Realized gain (loss)		—			—			—
Unrealized gain (loss)		—			(42	)		(42	)
Purchases		—			—			—
Issuances		—			—			—
Sales		—			—			—
Settlements		—			36			36
Transfers in (out) of Level 3		—			—			—

March 31, 2011 Balance	$	6		$	(239	)	$	(233	)


January 1, 2010 Balance	$	8		$	(399	)	$	(391	)
Realized gain (loss)		—			—			—
Unrealized gain (loss)		(1	)		36			35
Purchases		—			—			—
Issuances		—			—			—
Sales		—			—			—
Settlements		(1	)		130			129
Transfers in (out) of Level 3		—			—			—

December 31, 2010 Balance	$	6		$	(233	)	$	(227	)


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

Metropolitan Edison Company

The following tables summarize assets and liabilities recorded on Met-Ed’s Consolidated Balance Sheets at fair value as of March 31, 2011 and December 31, 2010:


March 31, 2011	Level 1		Level 2		Level 3			Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	131	$	—		$	131
Derivative assets — commodity contracts		—		—		—			—
Derivative assets — NUG contracts⁽¹⁾		—		—		107			107
Equity securities⁽²⁾		34		—		—			34
Foreign government debt securities		—		2		—			2
U.S. government debt securities		—		100		—			100
U.S. state debt securities		—		2		—			2
Other		—		37		—			37

Total assets	$	34	$	272	$	107		$	413


Liabilities
Derivative liabilities – NUG contracts⁽¹⁾	$	—	$	—	$	(118	)	$	(118	)

Total liabilities	$	—	$	—	$	(118	)	$	(118	)


Net assets (liabilities)⁽³⁾	$	34	$	272	$	(11	)	$	295


December 31, 2010	Level 1		Level 2		Level 3			Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	32	$	—		$	32
Derivative assets — commodity contracts		—		5		—			5
Derivative assets — NUG contracts⁽¹⁾		—		—		112			112
Equity securities⁽²⁾		160		—		—			160
Foreign government debt securities		—		1		—			1
U.S. government debt securities		—		88		—			88
U.S. state debt securities		—		2		—			2
Other		—		14		—			14

Total assets	$	160	$	142	$	112		$	414


Liabilities
Derivative liabilities – NUG contracts⁽¹⁾	$	—	$	—	$	(116	)	$	(116	)

Total liabilities	$	—	$	—	$	(116	)	$	(116	)


Net assets (liabilities)⁽³⁾	$	160	$	142	$	(4	)	$	298


⁽¹⁾		NUG contracts are subject to regulatory accounting and do not impact earnings.

⁽²⁾		NDT funds hold equity portfolios the performance of which is benchmarked against the S&P 500 Index or Russell 3000 Index.

⁽³⁾		Excludes $(1) million and $(9) million as of March 31, 2011 and December 31, 2010, respectively, of receivables, payables, deferred taxes and accrued income associated with the financial instruments reflected within the fair value table.

Rollforward of Level 3 Measurements

The following table provides a reconciliation of changes in the fair value of NUG contracts held by Met-Ed and classified as Level 3 in the fair value hierarchy for the periods ending March 31, 2011 and December 31, 2010:


	Derivative Asset			Derivative Liability			Net
	NUG Contracts⁽¹⁾			NUG Contracts⁽¹⁾			NUG Contracts⁽¹⁾
	*(In millions)*
January 1, 2011 Balance	$	112		$	(116	)	$	(4	)
Realized gain (loss)		—			—			—
Unrealized gain (loss)		(2	)		(16	)		(18	)
Purchases		—			—			—
Issuances		—			—			—
Sales		—			—			—
Settlements		(3	)		14			11
Transfers in (out) of Level 3		—			—			—

March 31, 2011 Balance	$	107		$	(118	)	$	(11	)


January 1, 2010 Balance	$	176		$	(143	)	$	33
Realized gain (loss)		—			—			—
Unrealized gain (loss)		(59	)		(38	)		(97	)
Purchases		—			—			—
Issuances		—			—			—
Sales		—			—			—
Settlements		(5	)		65			60
Transfers in (out) of Level 3		—			—			—

December 31, 2010 Balance	$	112		$	(116	)	$	(4	)


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

Pennsylvania Electric Company

The following tables summarize assets and liabilities recorded on Penelec’s Consolidated Balance Sheets at fair value as of March 31, 2011 and December 31, 2010:


March 31, 2011	Level 1		Level 2		Level 3			Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	70	$	—		$	70
Derivative assets — commodity contracts		—		—		—			—
Derivative assets — NUG contracts⁽¹⁾		—		—		4			4
Equity securities⁽²⁾		20		—		—			20
Foreign government debt securities		—		—		—			—
U.S. government debt securities		—		60		—			60
U.S. state debt securities		—		72		—			72

Other		—		32		—			32

Total assets	$	20	$	234	$	4		$	258


Liabilities
Derivative liabilities – NUG contracts⁽¹⁾	$	—	$	—	$	(122	)	$	(122	)

Total liabilities	$	—	$	—	$	(122	)	$	(122	)


Net assets (liabilities)⁽³⁾	$	20	$	234	$	(118	)	$	136


December 31, 2010	Level 1		Level 2		Level 3			Total
	*(In millions)*
Assets
Corporate debt securities	$	—	$	8	$	—		$	8
Derivative assets — commodity contracts		—		2		—			2
Derivative assets — NUG contracts⁽¹⁾		—		—		4			4
Equity securities⁽²⁾		81		—		—			81
U.S. government debt securities		—		9		—			9
U.S. state debt securities		—		133		—			133
Other		—		5		—			5

Total assets	$	81	$	157	$	4		$	242


Liabilities
Derivative liabilities – NUG contracts⁽¹⁾	$	—	$	—	$	(117	)	$	(117	)

Total liabilities	$	—	$	—	$	(117	)	$	(117	)


Net assets (liabilities)⁽³⁾	$	81	$	157	$	(113	)	$	125


⁽¹⁾		NUG contracts are subject to regulatory accounting and do not impact earnings.

⁽²⁾		NDT funds hold equity portfolios the performance of which is benchmarked against the S&P 500 Index or Russell 3000 Index.

⁽³⁾		Excludes $(15) million and $(3) million as of March 31, 2011 and December 31, 2010, respectively, of receivables, payables and accrued income associated with the financial instruments reflected within the fair value table.

Rollforward of Level 3 Measurements

The following table provides a reconciliation of changes in the fair value of NUG and commodity contracts held by Penelec and classified as Level 3 in the fair value hierarchy for the periods ended March 31, 2011 and December 31, 2010:


	Derivative Asset			Derivative Liability			Net
	NUG Contracts⁽¹⁾			NUG Contracts⁽¹⁾			NUG Contracts⁽¹⁾
	*(In millions)*
January 1, 2011 Balance	$	4		$	(117	)	$	(113	)
Realized gain (loss)		—			—			—
Unrealized gain (loss)		—			(30	)		(30	)
Purchases		—			—			—
Issuances		—			—			—
Sales		—			—			—
Settlements		—			25			25
Transfers in (out) of Level 3		—			—			—

March 31, 2011 Balance	$	4		$	(122	)	$	(118	)


January 1, 2010 Balance	$	16		$	(101	)	$	(85	)
Realized gain (loss)		—			—			—
Unrealized gain (loss)		(11	)		(108	)		(119	)
Purchases		—			—			—
Issuances		—			—			—
Sales		—			—			—
Settlements		(1	)		92			91
Transfers in (out) of Level 3		—			—			—

December 31, 2010 Balance	$	4		$	(117	)	$	(113	)


⁽¹⁾		Changes in the 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 established a Risk Policy Committee, comprised of members of senior management, which 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 practice. FirstEnergy also uses a variety of derivative instruments for risk management purposes including forward contracts, options, futures contracts and swaps. In addition to derivatives, FirstEnergy also enters into master netting agreements with certain third parties.

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 under the accrual method of accounting, and their effects are included in earnings at the time of contract performance. Changes in the fair value of derivative instruments that qualify and are designated as cash flow hedge instruments are recorded to AOCL. Change in the fair value of derivative instruments that are not designated as cash flow hedge instruments are recorded in the income statement on a mark-to-market basis. FirstEnergy’s has contractual derivative agreements through December 2018.

Cash Flow Hedges

FirstEnergy has used cash flow hedges for risk management purposes to manage the volatility related to exposures associated with fluctuating interest rates and commodity prices. The effective portion of gains and losses on the derivative contract are reported as a component of AOCL with subsequent reclassification to earnings in the period during which the hedged forecasted transaction affects earnings.

As of December 31, 2010, commodity derivative contracts designated in cash flow hedging relationships were $104 million of assets and $101 million of liabilities. In February 2011, FirstEnergy elected to dedesignate all outstanding cash flow hedge relationships. Total net unamortized losses included in AOCL associated with dedesignated cash flow hedges totaled $6 million as of March 31, 2011. Since the forecasted transactions remain probable of occurring, these amounts were “frozen” in AOCL and will be amortized into earnings over the life of the hedging instruments. Reclassifications from AOCL into other operating expense totaled $5 million for the three-months ended March 31, 2011. Approximately $16 million will be amortized to earnings as expense during the next twelve months.

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 March 31, 2011, no forward starting swap agreements were outstanding. Total unamortized losses included in AOCL associated with prior interest rate cash flow hedges totaled $87 million ($57 million net of tax) as of March 31, 2011. Based on current estimates, approximately $10 million will be amortized to interest expense during the next twelve months. Reclassifications from AOCL into interest expense totaled $3 million for the three-months ended March 31, 2011 and 2010.

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 derivative instruments 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 March 31, 2011, no fixed-for-floating interest rate swap agreements were outstanding.

As of March 31, 2010, FirstEnergy held fixed-for-floating interest rate swap agreements with combined notional amounts of $950 million. The gains included in interest expense related to interest rate swaps totaled $1 million and the fair value of the derivative instruments totaled $(3) million. There was no impact on the results of operations as a result of ineffectiveness from fair value hedges.

Total unamortized gains included in long-term debt associated with prior fixed-for-floating interest rate swap agreements totaled $118 million ($77 million net of tax) as of March 31, 2011. 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 approximately $5 million and $1 million for the three-months ended March 31, 2011 and 2010, respectively.

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.

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 natural gas 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. Interest rate swaps inc