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key GHGs increase the threat of climate change and may be regulated as “air pollutants” under the CAA. In April 2010, the EPA
finalized new GHG standards for model years 2012 to 2016 passenger cars, light-duty trucks and medium-duty passenger vehicles
and clarified that GHG regulation under the CAA would not be triggered for electric generating plants and other stationary sources
until January 2, 2011, at the earliest. In May 2010, the EPA finalized new thresholds for GHG emissions that define when NSR pre-
construction permits would be required including an emissions applicability threshold of 75,000 tons per year of CO2 equivalents
for existing facilities under the CAA's PSD program. On April 13, 2012, the EPA proposed new source performance standards for
GHG emissions from newly constructed fossil fuel generating units that are larger than 25 MW, which were ultimately withdrawn.
On June 25, 2013, a Presidential memorandum directed the EPA to complete, in a timely fashion, proposed new source performance
standards for GHG emissions from newly constructed fossil fuel generating units, starting with re-proposal by September 20, 2013.
The memorandum further directed the EPA to propose by June 1, 2014 and complete by June 1, 2015, GHG emission standards
for existing fossil fuel generating units. On September 20, 2013, the EPA proposed a new source performance standard of 1,000
lbs. CO2/MWH for large natural gas fired units (> 850 mmBTU/hr), and 1,100 lbs. CO2/MWH for other natural gas fired units 850
mmBTU/hr), and 1,100 lbs. CO2/MWH for fossil fuel fired units which would require partial carbon capture and storage. On October
15, 2013, the U.S. Supreme Court agreed to review a June 2012 D.C. Circuit Court of Appeals decision upholding the EPA's May
2010 regulations to decide a single narrow question: "Whether EPA permissibly determined that its regulation of greenhouse gas
emissions from new motor vehicles triggered permitting requirements under the CAA for stationary sources that emit greenhouse
gases?" Oral argument was held on February 24, 2014. Depending on the outcome of these proceedings and how any final rules
are ultimately implemented, the future cost of compliance may be substantial and changes to FirstEnergy's and FES' operations
may result.
At the international level, the Kyoto Protocol, signed by the U.S. in 1998 but never submitted for ratification by the U.S. Senate,
was intended to address global warming by reducing the amount of man-made GHG, including CO2, emitted by developed countries
by 2012. A December 2009 U.N. Climate Change Conference in Copenhagen did not reach a consensus on a successor treaty to
the Kyoto Protocol, but did take note of the Copenhagen Accord, a non-binding political agreement that recognized the scientific
view that the increase in global temperature should be below two degrees Celsius; includes a commitment by developed countries
to provide funds, approaching $30 billion over three years with a goal of increasing to $100 billion by 2020; and establishes the
“Green Climate Fund” to support mitigation, adaptation, and other climate-related activities in developing countries. To the extent
that they have become a party to the Copenhagen Accord, developed economies, such as the European Union, Japan, Russia and
the United States, would commit to quantified economy-wide emissions targets by 2020, while developing countries, including
Brazil, China and India, would agree to take mitigation actions, subject to their domestic measurement, reporting and verification.
In December 2010, the U.N. Climate Change Conference in Cancun, Mexico resulted in an acknowledgment to reduce emissions
from industrialized countries by 25 to 40 percent from 1990 emissions by 2020 and support enhanced action on climate change in
the developing world. In December 2011 the U.N. Climate Change Conference in Durban, South Africa, established a negotiating
process to develop a new post-2020 climate change protocol, called the “Durban Platform for Enhanced Action”. This negotiating
process contemplates developed countries, as well as developing countries such as China, India, Brazil, and South Africa, to
undertake legally binding commitments post-2020. In addition, certain countries agreed to extend the Kyoto Protocol for a second
commitment period, commencing in 2013 and expiring in 2018 or 2020. In December 2012, the U.N. Climate Change Conference
in Doha, Qatar, resulted in countries agreeing to a new commitment period under the Kyoto Protocol beginning in 2020. The new
Doha Amendment to establish a second commitment period requires the ratification of three-quarters of the parties to the Kyoto
Protocol before it becomes effective.
FirstEnergy cannot currently estimate the financial impact of climate change policies, although potential legislative or regulatory
programs restricting CO2 emissions, or litigation alleging damages from GHG emissions, could require significant capital and other
expenditures or result in changes to its operations. The CO2 emissions per KWH of electricity generated by FirstEnergy is lower
than many of its regional competitors due to its diversified generation sources, which include low or non-CO2 emitting gas-fired and
nuclear generators.
Clean Water Act
Various water quality regulations, the majority of which are the result of the federal CWA and its amendments, apply to FirstEnergy's
plants. In addition, the states in which FirstEnergy operates have water quality standards applicable to FirstEnergy's operations.
In 2004, the EPA established new performance standards under Section 316(b) of the CWA for reducing impacts on fish and shellfish
from cooling water intake structures at certain existing electric generating plants. The regulations call for reductions in impingement
mortality (when aquatic organisms are pinned against screens or other parts of a cooling water intake system) and entrainment
(which occurs when aquatic life is drawn into a facility's cooling water system). In 2007, the U.S. Court of Appeals for the Second
Circuit invalidated portions of the Section 316(b) performance standards and the EPA has taken the position that until further
rulemaking occurs, permitting authorities should continue the existing practice of applying their best professional judgment to
minimize impacts on fish and shellfish from cooling water intake structures. In April 2009, the U.S. Supreme Court reversed one
significant aspect of the Second Circuit's opinion and decided that Section 316(b) of the CWA authorizes the EPA to compare costs
with benefits in determining the best technology available for minimizing adverse environmental impact at cooling water intake
structures. On March 28, 2011, the EPA released a new proposed regulation under Section 316(b) of the CWA to reduce fish
impingement to a 12% annual average and determine site-specific controls, if any, to reduce entrainment of aquatic life following
studies to be provided to permitting authorities. The period for finalizing the Section 316(b) regulation was extended to April 17,
2014 under a Settlement Agreement between EPA and certain NGOs. FirstEnergy is studying various control options and their