Allegheny Power 2010 Annual Report Download - page 92

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Options outstanding and range of exercise price as of December 31, 2010 were as follows:
Options Outstanding and Exercisable
Weighted
Range of Average Remaining
Exercise Prices Shares Exercise Price Contractual Life
$ 29.50-29.71 894,054 $ 29.66 1.77
$ 34.45-39.46 1,995,012 $ 37.66 2.67
Total 2,889,066 $ 35.18 2.39
FirstEnergy reduced its use of stock options beginning in 2005 and increased its use of performance-based, restricted
stock units. As a result, all unvested stock options vested in 2008. No compensation expense was recognized for stock
options during 2010 and 2009, and compensation expense in 2008 was not material. Cash received from the exercise of
stock options in 2010, 2009 and 2008 was $6 million, $7 million and $74 million, respectively.
Performance Shares
Performance shares are share equivalents and do not have voting rights. The shares track the performance of
FirstEnergy's common stock over a three-year vesting period. During that time, dividend equivalents are converted into
additional shares. The final account value may be adjusted based on the ranking of FirstEnergy stock performance to a
composite of peer companies. Compensation expense (income) recognized for performance shares during 2010, 2009
and 2008, net of amounts capitalized, totaled approximately ($4) million, $3 million and $8 million, respectively. During
2010, no cash was paid to settle performance shares due to certain criteria not being met for the previous three-year
vesting period. Cash used to settle performance shares in 2009 and 2008 was $15 million and $14 million, respectively.
(B) ESOP
An ESOP Trust funded most of the matching contribution for FirstEnergy's 401(k) savings plan through December 31,
2007. All employees eligible for participation in the 401(k) savings plan are covered by the ESOP.
In 2008 and 2009, shares of FirstEnergy common stock were purchased on the market and contributed to participants’
accounts. Total ESOP-related compensation expenses in 2010, 2009 and 2008, net of amounts capitalized and
dividends on common stock, were $30 million, $36 million and $40 million, respectively.
(C) EDCP
Under the EDCP, covered employees can direct a portion of their compensation, including annual incentive awards
and/or long-term incentive awards, into an unfunded FirstEnergy stock account to receive vested stock units or into an
unfunded retirement cash account. Through December 31, 2010, covered employees received an additional 20%
premium in the form of stock units based on the amount allocated to the FirstEnergy stock account. During 2010, the
EDCP was amended to cease the 20% stock premium with respect to annual and long-term incentive awards earned
during any calendar years that commence on or after January 1, 2011. Dividends are calculated quarterly on stock units
outstanding and are paid in the form of additional stock units. Upon withdrawal, stock units are converted to FirstEnergy
shares. Payout typically occurs three years from the date of deferral; however, an election can be made in the year prior
to payout to further defer shares into a retirement stock account that will pay out in cash upon retirement (see Note 3).
Interest is calculated on the cash allocated to the cash account and the total balance will pay out in cash upon retirement.
Compensation expense (income) recognized on EDCP stock units, net of amounts capitalized, in 2010, 2009 and 2008
was ($3) million, ($0.2) million and ($13) million, respectively.
(D) DCPD
Under the DCPD, directors can elect to allocate all or a portion of their cash retainers, meeting fees and chair fees to
deferred stock or deferred cash accounts. Funds deferred into the stock account through December 31, 2010, receive a
20% match to the funds allocated. The 20% match and any appreciation on it are forfeited if the director leaves the Board
within three years from the date of deferral for any reason other than retirement, disability, death, upon a change in
control or when a director is ineligible to stand for re-election. Compensation expense is recognized for the 20% match
over the three-year vesting period. Directors may also elect to defer their equity retainers into the deferred stock account;
however, they do not receive a 20% match on that deferral. During 2010, the DCPD was amended to cease the 20%
match feature with respect to director’s fees earned for service performed during any calendar years that commence on
or after January 1, 2011. DCPD expenses recognized in 2010, 2009 and 2008 was $4 million, $3 million and $3 million,
respectively. The net liability recognized for DCPD of approximately $5 million as of December 31, 2010, 2009 and 2008
is included in the caption “Retirement benefits” on the Consolidated Balance Sheets.