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5
FIRSTENERGY CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FIRSTENERGY’S BUSINESS
FirstEnergy's reportable segments are as follows: Regulated Distribution, Regulated Transmission, and CES.
The Regulated Distribution segment distributes electricity through FirstEnergy’s ten utility operating companies, serving
approximately six million customers within 65,000 square miles of Ohio, Pennsylvania, West Virginia, Maryland, New Jersey and
New York, and purchases power for its POLR, SOS, SSO and default service requirements in Ohio, Pennsylvania, New Jersey and
Maryland. This segment also includes regulated electric generation facilities located primarily in West Virginia, Virginia and New
Jersey that MP and JCP&L, respectively, own or contractually control. The segment's results reflect the commodity costs of securing
electric generation and the deferral and amortization of certain fuel costs. This business segment currently controls approximately
3,790 MWs of generation capacity.
The service areas of, and customers served by, FirstEnergy's regulated distribution utilities are summarized below (in thousands):
Company Area Served Customers
Served (1)
OE Central and Northeastern Ohio 1,036
Penn Western Pennsylvania 162
CEI Northeastern Ohio 745
TE Northwestern Ohio 308
JCP&L Northern, Western and East Central New Jersey 1,103
ME Eastern Pennsylvania 558
PN Western Pennsylvania 588
WP Southwest, South Central and Northern Pennsylvania 721
MP Northern, Central and Southeastern West Virginia 390
PE Western Maryland and Eastern West Virginia 397
6,008
(1) As of December 31, 2014
The Regulated Transmission segment transmits electricity through transmission facilities owned and operated by ATSI, TrAIL, and
certain of FirstEnergy's utilities (JCP&L, ME, PN, MP, PE and WP), and the regulatory asset associated with the abandoned PATH
project. The segment's revenues are primarily derived from rates that recover costs and provide a return on transmission capital
investment. Except for the recovery of the PATH abandoned project regulatory asset, these revenues are primarily from transmission
services provided pursuant to the PJM Tariff to LSEs. The segment's results also reflect the net transmission expenses related to
the delivery of electricity on FirstEnergy's transmission facilities.
The CES segment, through FES and AE Supply, primarily supplies electricity to end-use customers through retail and wholesale
arrangements, including competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Michigan, New Jersey and
Maryland, and the provision of partial POLR and default service for some utilities in Ohio, Pennsylvania and Maryland, including
the Utilities. This business segment currently controls approximately 14,068 MWs of capacity, including 885 MWs of capacity
scheduled to be deactivated by April 2015. The segment’s net income is primarily derived from electric generation sales less the
related costs of electricity generation, including fuel, purchased power and net transmission (including congestion) and ancillary
and capacity costs charged by PJM to deliver energy to the segment’s customers.
The CES segment derives its revenues from the sale of generation to direct, governmental aggregation, POLR, structured and
wholesale customers. The segment is exposed to various market and financial risks, including the risk of price fluctuations in the
wholesale power markets. Wholesale power prices may be impacted by the prices of other commodities, including coal and natural
gas, and energy efficiency and DR programs, as well as regulatory and legislative actions, such as MATS, among other factors.
The segment attempts to mitigate the market risk inherent in its energy position by economically hedging its exposure and
continuously monitoring various risk measurement metrics to ensure compliance with its risk management policies.
Corporate/Other contains corporate support and other businesses that are below the quantifiable threshold for separate disclosure
as a reportable segment and interest expense on stand-alone holding company debt and corporate income taxes. Additionally,
reconciling adjustments for the elimination of inter-segment transactions are included in Corporate/Other. As of December 31, 2014,
Corporate/Other had $4.2 billion of stand-alone holding company long-term debt, of which 28% was subject to variable-interest
rates, and $1.7 billion was borrowed by FE under its revolving credit facility.