Allegheny Power 2015 Annual Report Download - page 21

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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.
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.
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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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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
1,038
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.
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.
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.
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.