Allegheny Power 2015 Annual Report Download - page 20

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•ChangingmarketconditionsthatcouldaffectthemeasurementofcertainliabilitiesandthevalueofassetsheldinourNDTs,
pensiontrustsandothertrustfunds,andcauseusand/oroursubsidiariestomakeadditionalcontributionssooner,orin
amountsthatarelargerthancurrentlyanticipated.
•Theimpactofchangestomaterialaccountingpolicies.
•Theabilitytoaccessthepublicsecuritiesandothercapitalandcreditmarketsinaccordancewithourfinancialplans,the
costofsuchcapitalandoverallconditionofthecapitalandcreditmarketsaffectingusandoursubsidiaries.
•Actionsthatmaybetakenbycreditratingagenciesthatcouldnegativelyaffectusand/oroursubsidiaries'accessto
financing, increase the costs thereof, and increase requirements to post additional collateral to support outstanding
commoditypositions,LOCsandotherfinancialguarantees.
•Changes in national and regional economic conditions affecting us, our subsidiaries and/or our major industrial and
commercialcustomers,andothercounterpartieswithwhichwedobusiness,includingfuelsuppliers.
•Theimpactofanychangesintaxlawsorregulationsoradversetaxauditresultsorrulings.
•Issuesconcerningthestabilityofdomesticandforeignfinancialinstitutionsandcounterpartieswithwhichwedo
business.
•Therisksassociatedwithcyberattacksandotherdisruptionstoourinformationtechnologysystemthatmaycompromise
ourgeneration,transmissionand/ordistributionservicesanddatasecuritybreachesofsensitivedata,intellectualproperty
and proprietary or personally identifiable information regarding our business, employees, shareholders, customers,
suppliers,businesspartnersandotherindividualsinourdatacentersandonournetworks.
•TherisksandotherfactorsdiscussedfromtimetotimeinourSECfilings,andothersimilarfactors.
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DividendsdeclaredfromtimetotimeonFE'scommonstockduringanyperiodmayintheaggregatevaryfrompriorperiodsdueto
circumstancesconsideredbyFE'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.
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Theseforwardlookingstatementsarealsoqualifiedby,andshouldbereadtogetherwith,theriskfactorsincludedin(a)Item1A.Risk
FactorsofourAnnualReportonForm10KfiledwiththeSEConFebruary16,2016,(b)thisItem7.Management'sDiscussionand
AnalysisofFinancialConditionandResultsofOperations,and(c)otherfactorsdiscussedhereinandinotherfilingswiththeSECby
FE.Theforegoingreviewoffactorsalso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FirstEnergy's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,exceptasrequiredbylaw,anyforwardlooking
statementscontainedhereinasaresultofnewinformation,futureeventsorotherwise.
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5
FIRSTENERGYCORP.
MANAGEMENT’SDISCUSSIONANDANALYSISOF
FINANCIALCONDITIONANDRESULTSOFOPERATIONS
FIRSTENERGY’SBUSINESS
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FirstEnergy'sreportablesegmentsareasfollows:RegulatedDistribution,RegulatedTransmission,andCES.
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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3,790MWsof
generationcapacity.
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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1,038
PennWesternPennsylvania164
CEINortheasternOhio746
TENorthwesternOhio308
JCP&LNorthern,WesternandEastCentralNewJersey1,109
MEEasternPennsylvania561
PNWesternPennsylvania588
WPSouthwest,SouthCentralandNorthernPennsylvania723
MPNorthern,CentralandSoutheasternWestVirginia390
PEWesternMarylandandEasternWestVirginia401
6,028
(1)AsofDecember31,2015
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).Thissegmentalsoincludes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 its 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.
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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13,162MWsofcapacity.TheCES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costsandcapacitycostschargedbyPJMtodeliverenergytothesegment’scustomers.
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TheCESsegmentexpectstosellitsannualgenerationoutputofapproximately75to80millionMWHs,withuptoanadditional5
millionMWHsavailablefromPPAsforwind,solaranditsentitlementfromOVEC,throughatargetportfoliomixofapproximately10to
15millionMWHsinGovernmentalAggregationsales,0to10millionMWHsofPOLRsales,0to20millionMWHsinlargecommercial
andindustrialsales(Direct),10to20millionMWHsinblockwholesalesales,includingStructuredSales,and10to20millionMWHs
ofspotwholesalesales.
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Corporatesupportandotherbusinessesthatdonotconstituteanoperatingsegment,interestexpenseonstandaloneholding
company debt and corporate income taxes are categorized as Corporate/Other for reportable business segment purposes.
Additionally, reconciling adjustments for the elimination of intersegment transactions are included in Corporate/Other. As of
December31,2015,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.