Lehman Brothers
2008 CEO Energy/Power Conference
New York City, NY • September 2-4, 2008




NYSE:FE
Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995
This presentation includes forward-lookin...
Agenda
 FirstEnergy Overview

 Transition to Market-Based Rates

 Maximize Generation Value

 Hedging Commodity Exposures
...
FirstEnergy Overview
Balanced Integrated Approach

               Regulated                                               ...
Transition to Market-Based Generation Rates
Ohio – 2009

  Our goals in this process
    – Offer achievable path toward a ...
Transition to Market-Based Generation Rates
ESP Benefits

  Comprehensive Plan
    – Transition toward market pricing for ...
Transition to Market-Based Generation Rates
ESP Benefits (continued)

   Comprehensive Plan
    – CEI Regulatory Transitio...
Transition to Market-Based Generation Rates
MRO Overview

  Alternative to ESP to secure competitively priced power supply...
Transition to Market-Based Generation Rates
Pennsylvania

  Transition periods
   – Transition to market-based pricing par...
Expand Generation Output
    “Mining our Assets” Initiatives*
       –   No new planned baseload additions
       –   Low-...
Maximize Generation Value
 Appropriate hedging
  – Coal, coal transportation, nuclear fuel, and emission allowance positio...
Effectively Hedge Commodity Exposures
 Strategic investment in Bull
 Mountain mine operation located
 in eastern Montana
 ...
Effectively Hedge Commodity Exposures
Bull Mountain Strategic Advantages

  FES secures long-term coal supply
    – Delive...
FirstEnergy is an Attractive Risk/Reward Opportunity

 Managing transition to competitive markets (OH & PA)
 Maximizing ge...
Appendix




NYSE:FE
Corporate Profile




                                                                         16
                        ...
FirstEnergy Corporate Profile
 Diversified energy company headquartered in Akron, Ohio
 Involved in generation, transmissi...
FirstEnergy Service Areas




                                                            Customers*        Square Miles*
...
Generation




                                                                         19
                               ...
FirstEnergy Generation – Diversity & Scale
    Michigan                                                             Ashtab...
FES Generation Fleet Overview
 Diversified and cost-effective generating fleet
  – Balanced fuel mix
  – Participates in b...
Realizing Full Potential of Generating Fleet
Fleet Characteristics and Mission-Driven Strategy

  Significant scale: First...
Realizing Full Potential of Generating Fleet
Mining Our Assets – incremental, low-risk investment approach to fleet expans...
Realizing Full Potential of Generating Fleet
Leading the Way in Procuring Renewable Energy to Meet Growing Demand

       ...
Reinvesting in the Business
Enhancing Our Generation Portfolio for the Future

  FirstEnergy Generation Corp. acquired par...
Fossil Operating Performance
 2007 Highlights                                                      2008 Highlights and Loo...
Nuclear Operating Performance
 2007 Highlights                                          2008 Highlights and Look Ahead
  –...
Top-Tier Operational Capability
Continued Improvement of Asset Utilization

  Garnered significant nuclear reliability imp...
Operational Performance Targets
                                                                                          ...
Nuclear Generation
Future Refueling Outages Focus on Reliability

                              Expected
                 ...
Generation – Implementing Plans for the Future

 Nuclear license renewal
                                               Cu...
Generation – Implementing Plans for the Future

 Nuclear spent fuel storage
  – At the federal level, Yucca Mountain has b...
Environmental Strategy




                                                                         33
                   ...
Reinvesting in the Business
Our Generation Fleet is Well-Positioned for the Future

                             Fleet Emi...
Reinvesting in the Business
AQC Construction Overview

  Sammis Plant (2,233 MW) – $1.65B
   – SO2 control (scrubbers) all...
AQC Upgrades – Sammis Plant
 Flue Duct Work – 9,000 tons (9,000 ft.)
 Electrical Cable – 9,120 circuits (530 miles)
 Found...
Environmental Strategy
FirstEnergy’s Climate Activities




                                                              ...
FirstEnergy’s Position on Global Climate Change

 Climate change is a global issue ultimately requiring a
 global solution...
Commodity Operations




                                                                         39
                     ...
Coal Commodity Position
                                                                    Continue working to secure lon...
Coal Transportation Position
                                                                    All transportation positi...
Fuel Flexibility Creates Margin & Fuel Choices
 Enhanced systems, tools and processes providing the ability to react
 and ...
Energy Delivery




                                                                         43
                          ...
FirstEnergy Utilities
Strong and Stable Cash Flows



  Large and balanced sales mix
   – Approximately 1/3 residential, 1...
Reinvesting in the Business
Energy Delivery – Striving to Achieve Top-Quartile Performance

                              ...
Capital Planning Enhancements
Energy Delivery Capital Allocation Tool (E-CAT)

  Benchmarked leading performers in the are...
Workforce Management
 Power Systems Institute (PSI)
   – Started in 2000; partnered with two colleges in Ohio to offer
   ...
Regulatory / Legislative Matters




                                                                               49
   ...
Retail Regulatory Structure
                                                                                              ...
Transitioning Generation to Market Prices
Restructuring Status
  New Jersey
   – Competitive generation service with marke...
Transitioning Generation to Market Prices
Ohio Legislative Update

  Existing S.B. 3 – Enacted 1999
   – Generation rates ...
Ohio Regulatory Update
ESP Components (as filed)
       Year           Generation Charge Phase In Credit                  ...
Ohio Regulatory Update
ESP Components (as filed)

  Generation charge will be fixed, with limited exceptions,
  including:...
Ohio Regulatory Update
 ESP Components (as filed)


                 Component                                    Amount
 ...
Ohio Regulatory Update
Other ESP Provisions (as filed)

   Transmission Rider
    – Recovery of all MISO, ancillary and co...
Ohio Regulatory Update
Other ESP Provisions (as filed)

   Economic Development Rider
    – Promotes gradualism, recognize...
Ohio Regulatory Update
MRO Procurement Process (as filed)

  Suppliers bid to provide energy, capacity, transmission servi...
Ohio Regulatory Update
MRO Procurement Process (as filed)




                                                            ...
Transition to Market-Based Generation Rates
Short-Term ESP Overview (as filed)


  Option provides flexibility and benefit...
Ohio Regulatory Update
Detailed Timeline


             ESP/MRO                                 PUCO ESP Procedural Schedu...
Ohio Regulatory Update
Distribution Rate Requests

  Ohio Edison, CEI and Toledo Edison
    – Case detail (as filed)
     ...
Ohio Regulatory Update
Distribution Rate Requests (as filed)

             Proposed Changes in Revenues ($ millions)      ...
FirstEnergy Utilities
Ohio Distribution Rate Cases
                                                                       ...
Ohio Regulatory Update
Supreme Court of Ohio Remand on Deferred Fuel Recovery

  Rate Certainty Plan provided for the defe...
Pennsylvania Regulatory Update
Commonwealth Court Appeals & Generation Procurement Filing

  Met-Ed (ME) and Penelec (PN)
...
Pennsylvania Regulatory Update
Penn Power POLR II Case

   Penn Power successfully transitioned to competitive generation ...
New Jersey Regulatory Matters
Jersey Central Power & Light

  Draft New Jersey Energy Master Plan (Apr. 17, 2008)
    – Pl...
Financial Matters




                                                                         69
                        ...
Reinvesting in the Business
Projected 2008 – 2012 Capital Expenditures*

                                                 ...
Reinvesting in the Business
Capital Expenditure Forecast*

                                                               ...
Acquired Additional Equity Interest in Beaver
Valley 2 and Perry
 On May 30, 2008 Nuclear Generation Corp. (NGC) purchased...
2008 Non-GAAP Earnings Per Share Guidance
Reconciliation of GAAP to Non-GAAP




As of Aug. 1, 2008

                     ...
Achieving Targeted Growth
Major Earnings Drivers 2009 – 2011

      Distribution rate case in OH effective 2009

      Inc...
Achieving Targeted Growth (continued)
Major Earnings Drivers 2009 – 2011

      Declining margin from OH transition plans
...
first energy Lehman Con9/03/08
first energy Lehman Con9/03/08
first energy Lehman Con9/03/08
first energy Lehman Con9/03/08
first energy Lehman Con9/03/08
first energy Lehman Con9/03/08
first energy Lehman Con9/03/08
first energy Lehman Con9/03/08
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first energy Lehman Con9/03/08

  1. 1. Lehman Brothers 2008 CEO Energy/Power Conference New York City, NY • September 2-4, 2008 NYSE:FE
  2. 2. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 This presentation includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements include declarations regarding our, or our management’s, intents, beliefs and current expectations. These statements typically contain, but are not limited to, the terms “anticipate,” “potential,” “expect,” “believe,” “estimate” and similar words. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Actual results may differ materially due to the speed and nature of increased competition in the electric utility industry and legislative and regulatory changes affecting how generation rates will be determined following the expiration of existing rate plans in Ohio and Pennsylvania, the impact of the PUCO’s rulemaking process on the Ohio Companies’ ESP and MRO filings, economic or weather conditions affecting future sales and margins, changes in markets for energy services, changing energy and commodity market prices and availability, replacement power costs being higher than anticipated or inadequately hedged, the continued ability of FirstEnergy’s regulated utilities to collect transition and other charges or to recover increased transmission costs, maintenance costs being higher than anticipated, other legislative and regulatory changes including revised environmental requirements and possible greenhouse gas emissions regulation, the impact of the U.S. Court of Appeals July 11, 2008 decision to vacate the CAIR rules and the scope of any laws, rules or regulations that may ultimately take their place, the uncertainty of the timing and amounts of the capital expenditures needed to, among other things, implement the Air Quality Compliance Plan (including that such amounts could be higher than anticipated) or levels of emission reductions related to the Consent Decree resolving the New Source Review litigation or other potential regulatory initiatives, adverse regulatory or legal decisions and outcomes (including, but not limited to, the revocation of necessary licenses or operating permits and oversight by the Nuclear Regulatory Commission including, but not limited to, the Demand for Information issued to FENOC on May 14, 2007) as disclosed in our SEC filings, the timing and outcome of various proceedings before the PUCO (including, but not limited to, the Distribution Rate Cases and the generation supply plan filing for the Ohio Companies and the successful resolution of the issues remanded to the PUCO by the Supreme Court of Ohio regarding the Rate Stabilization Plan and the Rate Certainty Plan, including the deferral of fuel costs) and Met-Ed’s and Penelec’s transmission service charge filings with the PPUC as well as the resolution of the Petitions for Review filed with the Commonwealth Court of Pennsylvania with respect to the transition rate plan for Met-Ed and Penelec, the continuing availability of generating units and their ability to continue to operate at or near full capacity, the ability to comply with applicable state and federal reliability standards, the ability to accomplish or realize anticipated benefits from strategic goals (including employee workforce initiatives), the ability to improve electric commodity margins and to experience growth in the distribution business, changing market conditions that could affect the value of assets held in our nuclear decommissioning trust fund, pension fund and other trust funds, the ability to access the public securities and other capital markets and the cost of such capital, the risks and other factors discussed from time to time in our SEC filings, and other similar factors. The foregoing review of factors should not be construed as exhaustive. New factors emerge from time to time, and it is not possible for us to predict all such factors, nor can we assess the impact of any such factor on our 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. Dividends declared from time to time on FirstEnergy's common stock during any annual period may in aggregate vary from the indicated amounts due to circumstances considered by FirstEnergy's Board of Directors at the time of the actual declarations. Also, a security rating is not a recommendation to buy, sell or hold securities, and it may be subject to revision or withdrawal at any time and each such rating should be evaluated independently of any other rating. We expressly disclaim any current intention to update any forward- looking statements contained herein as a result of new information, future events, or otherwise. 2 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  3. 3. Agenda FirstEnergy Overview Transition to Market-Based Rates Maximize Generation Value Hedging Commodity Exposures Financial Flexibility 3 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  4. 4. FirstEnergy Overview Balanced Integrated Approach Regulated Competitive 7 Regulated Utilities FirstEnergy Solutions (FES), an unregulated subsidiary: – Fifth largest U.S. investor-owned electric utility with 4.5 million customers in – Controls 14,000+ MW of generation OH, PA & NJ capacity – Geographic and regulatory diversity – Separate SEC Registrant Focus on Fundamentals Focus on Fundamentals – Enhance reliability and customer service – Transition to market-based rates – Invest in infrastructure – Expand generation output – Pursue timely cost recovery – Effectively hedge commodity exposures – Control expenditures through continuous – Leverage proven skills to succeed in improvement culture competitive markets Objective: Maximize margins from each business 4 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  5. 5. Transition to Market-Based Generation Rates Ohio – 2009 Our goals in this process – Offer achievable path toward a competitive generation market – Meet both financial and public policy objectives Electric Security Plan (ESP) – Comprehensive: covering generation, distribution and transmission – Predictable rates and customer benefits – Provides Public Utilities Commission of Ohio (PUCO) with flexibility – 3-year generation offer; PUCO option to terminate after 2 years – Commits to energy efficiency, economic development and infrastructure improvements – More favorable in the aggregate than expected MRO outcome Market Rate Offer (MRO) – If ESP not approved by PUCO – Competitive supply of generation 5 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  6. 6. Transition to Market-Based Generation Rates ESP Benefits Comprehensive Plan – Transition toward market pricing for generation ESP Effects 2009 2010 2011 Predictable Customer 5.32% 4.01% 5.99% Price Increases Generation Price $75/MWh $80/MWh $85/MWh Phase-in Credit $7.5/MWh $8.5/MWh $9.5/MWh Generation Price Deferrals $429M $488M $553M 6 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  7. 7. Transition to Market-Based Generation Rates ESP Benefits (continued) Comprehensive Plan – CEI Regulatory Transition Charge write-off – $485M – Resolves pending Distribution rate case – Increased distribution revenue for system and reliability improvements – Recovers prior deferrals and establishes new deferrals – Generation supply arrangement with FirstEnergy Solutions (FES) – Generation prices fixed with limited exceptions – FES commitment to add 1,000 MW of generation capacity – Environmental remediation and reclamation up to $45M Dec. 10, 2008 Dec. 26, 2008 Jan. 1, 2009 PUCO Order Required PUCO Order Requested ESP Rates Effective 7 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  8. 8. Transition to Market-Based Generation Rates MRO Overview Alternative to ESP to secure competitively priced power supply – Competitive Bidding Process (CBP) – Slice-of-system approach – Independent manager to ensure transparency of bidding process – Affiliates (FirstEnergy Solutions) may bid Power supply is a pass through for utilities Mitigates wholesale market volatility – Initial supply periods staggered – Subsequent to initial bid, 1/3 of total load bid annually via two solicitations Oct. 29, 2008 Jan. 1, 2009 PUCO MRO Order Required MRO Rates Effective 8 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  9. 9. Transition to Market-Based Generation Rates Pennsylvania Transition periods – Transition to market-based pricing partially implemented – Penn Power transitioned to market-based pricing in Jan. 2007 – Met-Ed (ME) and Penelec (PN) maintain POLR obligations at fixed rates through year-end 2010 – ME and PN scheduled to transition to market-based pricing in Jan. 2011 Pennsylvania legislation – Alternative Energy Investment Act enacted – $650M alternative energy fund – Other pending legislation addresses – Generation procurement – Expiration of rate caps – Conservation and renewable energy 9 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  10. 10. Expand Generation Output “Mining our Assets” Initiatives* – No new planned baseload additions – Low-cost, internally funded – Proven technology, quick to market – 2005-2007: 447 MW additions – 2008-2011: 322 MW forecast Fremont Natural Gas Plant – 544 MW load-following capacity; 163 MW peaking capacity – Expected to be in-service late 2009 Renewable Opportunities – Wind energy – 145 MW currently on-line – Additional 70 MW scheduled to be completed 4Q 2008 *includes efficiency and capacity factor improvements (see slide 9 in the Appendix) 10 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  11. 11. Maximize Generation Value Appropriate hedging – Coal, coal transportation, nuclear fuel, and emission allowance positions significantly closed for 2008-2010 forecasted generation – Rising total fuel costs of approx. $200M in 2008 – Primarily coal transportation and surcharges – Similar increase projected in 2009 – Eastern coal, other non-coal fossil, nuclear fuel “Fuel Flex” expands margins and fuel choices – Blend coal to match market conditions on near real-time basis – Maximize revenues when power prices are high – Minimize fuel costs when power prices are low 11 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  12. 12. Effectively Hedge Commodity Exposures Strategic investment in Bull Mountain mine operation located in eastern Montana Estimated annual output of 12 million to 14 million tons and reserves of approximately 440 million tons Equity investment of $125M; 45% interest in joint venture 15-year coal agreement Concurrent rail agreements 12 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  13. 13. Effectively Hedge Commodity Exposures Bull Mountain Strategic Advantages FES secures long-term coal supply – Delivery of up to 10M tons annually at competitive prices (starting in late 2009) – Closes FirstEnergy coal position through 2013 – Increased fuel optionality Higher heat content vs. Powder River Basin – 10,300 BTU vs. 8,800 BTU, resulting in higher production at FirstEnergy generating facilities – Avoided derates of approximately 170 to 200 MW Environmental advantages – 50% lower sulfur and ash content than eastern coal – Lower mercury content – Lower CO2 emissions per MW Opportunity to resell tonnage not used at FirstEnergy facilities Total FirstEnergy annual coal requirement = 22-25 million tons 13 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  14. 14. FirstEnergy is an Attractive Risk/Reward Opportunity Managing transition to competitive markets (OH & PA) Maximizing generation value Earnings and cash flow growth from competitive business Rigorous focus on fundamentals, execution and operational excellence Strong and stable utilities Financial flexibility for the future 2009 2010 2011 Bottom Line: Maximize benefits to shareholders 14 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  15. 15. Appendix NYSE:FE
  16. 16. Corporate Profile 16 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  17. 17. FirstEnergy Corporate Profile Diversified energy company headquartered in Akron, Ohio Involved in generation, transmission and distribution of electricity, as well as other energy-related services Fifth largest investor-owned electric utility in U.S. – 4.5 million customers in Ohio, Pennsylvania and New Jersey Controls over 14,000 MW of generating capacity – 37% nuclear; 63% fossil/other (2007 output MWh) Approx. $13B in annual revenues and more than $33B in assets Approx. $22B market capitalization Investment grade credit ratings PA OH NJ 17 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  18. 18. FirstEnergy Service Areas Customers* Square Miles* Toledo Edison 313,000 2,300 Ohio Edison 1,040,000 7,000 The Illuminating Company 756,000 1,600 Penelec 589,000 17,600 Penn Power 159,000 1,100 Met-Ed 546,000 3,300 Jersey Central Power & Light 1,087,000 3,200 Total 4,490,000 36,100 * Per 2007 10-K 18 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  19. 19. Generation 19 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  20. 20. FirstEnergy Generation – Diversity & Scale Michigan Ashtabula Perry 244 MW Seneca 1,273 MW Eastlake Sumpter 451 MW 1,262 MW 340 MW Bay Shore Stryker Erie 648 MW Lake Shore 18 MW Yards Creek Towanda 249 MW Toledo 200 MW Cleveland New Castle Pennsylvania Akron Davis-Besse Edgewater Morristown Richland 893 MW Newark 48 MW 432 MW West Lorain Johnstown Reading 545 MW Harrisburg Allenhurst Trenton W. H. Sammis 2,233 MW New Columbus Beaver Valley Bruce Mansfield Jersey R. E. Burger 1,779 MW 2,490 MW 413 MW Mad River 60 MW Ohio Unit Mission Strategy Baseload Peaking Units Other Load Following MW MW MW MW Mansfield 1-3 2,490 Sammis 1-5 1,020 West Lorain 545 OVEC 463 Wind 145 Beaver Valley 1,2 1,779 Eastlake 1-4 636 Seneca 451 Perry 1,273 Bay Shore 2-4 495 Richland 432 Total 608 FirstEnergy Power Sources* Sammis 6,7 1,200 Burger 4 -5 312 Sumpter 340 Davis-Besse 893 Lake Shore 245 Yards Creek 200 C Coal 7,469 MW Eastlake 5 597 Ashtabula 244 Burger 3 & EMDs 101 N Nuclear 3,945 Bay Shore 1 136 Mad River 60 H Hydro Total Load Following 2,952 651 Edgewater 48 G Gas & O Oil 1,599 Total Baseload 8,368 Stryker 18 Other 522 Other 63 Total 14,186 MW Total Peaking Units 2,258 * As of April 18, 2008. Does not reflect the Fremont plant 20 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  21. 21. FES Generation Fleet Overview Diversified and cost-effective generating fleet – Balanced fuel mix – Participates in both MISO and PJM markets Mission-driven strategy – Each unit plays a specific role in fleet: baseload, load-following, or peaking – Strategy optimizes performance and reliability Well-positioned for environmental regulations – CO2 control  over 35% of generation output is non-emitting 2007 Output Mix Generation Capacity (MWh) (MW)* Load- Following 22% Nuclear 37% Fossil Baseload Peaking and Other 61% 17% 63% * Based on May 2008 NDC 21 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  22. 22. Realizing Full Potential of Generating Fleet Fleet Characteristics and Mission-Driven Strategy Significant scale: FirstEnergy Solutions (FES) controls over 14,000 MW Fleet strategy optimizes performance and reliability – Each unit has a specific mission (baseload, load-following or peaking) – Increases efficiency and reduces wear and tear on baseload units Nuclear fleet produced a record 30.3 million MWh in 2007 Generation Output* 100 80 (million MWh) 60 40 20 0 2004 2005 2006 2007 2008F 2009F 2010F 2011F 29.9 28.7 29.0 30.3 32.0 31.0 32.2 32.0 Nuclear 46.5 51.5 53.0 50.7 52.7 52.4 53.7 54.6 Fossil * Does not reflect the Fremont plant. 22 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  23. 23. Realizing Full Potential of Generating Fleet Mining Our Assets – incremental, low-risk investment approach to fleet expansion Type of MW Addition 2005–2007 2008F–2011F Cumulative MW Fossil baseload uprates 130 100 230 Peaking unit uprates 16 0 16 Nuclear baseload uprates 152 93 245 Efficiency and capacity factor improvements 149* 129** 278 Total MW additions 447 322 769 *Reflects elimination of seasonal reductions in output due to summer temperatures on peaking units ** Reflects 45 MW baseload unit and 84 MW load-following unit efficiency and capacity factor improvements Mining Our Assets benefits: – ~$700/kW average capital cost is competitive vs. current market price of new capacity – Lower risk than large, long lead-time projects – Quicker to market Factors impacting future generation asset decisions: – Capacity and ancillary services market structure – Technological advances – Environmental regulations 23 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  24. 24. Realizing Full Potential of Generating Fleet Leading the Way in Procuring Renewable Energy to Meet Growing Demand FES Wind Energy Portfolio Renewable State Overview Mandate Status Capacity RECs/Year In-service 2007 145 MW 384 GWh Drives renewable PA 18% by 2020 Forecasted strategy today 70 MW 180 GWh In-service 2008 Total: 215 MW 564 GWh Leading wind energy supplier in PA Will impact OH 12.5% by 2025 renewable strategy Evaluating expansion of current wind portfolio Considering other renewable technologies: – Solar Represents small – Compressed air portion of total – NJ 22.5% by 2020 Biomass renewable – Land fill gas requirements – Anaerobic digestion 24 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  25. 25. Reinvesting in the Business Enhancing Our Generation Portfolio for the Future FirstEnergy Generation Corp. acquired partially complete 707-MW natural gas, combined-cycle generating plant in Fremont, Ohio – Includes two combined-cycle combustion turbines and a steam turbine – 544 MW of load-following capacity and 163 MW of peaking capacity – Purchased in bankruptcy auction from Calpine Corporation for $253.6M – Calpine construction costs exceeded $300M – FirstEnergy estimated cost to complete is approximately $208M Key benefits to FirstEnergy: – Plant is connected to two RTOs – MISO & PJM – Expands fleet capacity and further diversifies generation mix – Low-emitting characteristics will further reduce our average CO2 emission rate 25 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  26. 26. Fossil Operating Performance 2007 Highlights 2008 Highlights and Look Ahead – Top-quartile safety performance – Achieve top-decile safety performance – New monthly all time generation record – Drive continuous improvement through set Aug. 2007 (4.6 million MWh) fleet standardization of best practices, benchmarking and Fossil Excellence – Environmental projects (AQC) on track annual diagnostics – Outage performance improving – Continue to focus on transitioning – Implemented Fossil Excellence at workforce knowledge and skills to a new Bay Shore and Sammis (continuous generation of employees improvement) – Execute Mining Our Assets strategies – On track for workforce replenishment – Develop and implement a full start-up – Improved performance accountability testing, training and operation strategy – Mansfield Unit 3 uprate (30 MW) for AQC Fossil 2007 2008F 2011 Target* OSHA Incident Rate (per 100 employees) 1.04 1.12 0.80 Total Generation (million MWh) 50.7 52.7 54.6 Capacity Factor (Baseload %) 80.4 87.2 90.7 * Does not reflect the Fremont plant. 26 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  27. 27. Nuclear Operating Performance 2007 Highlights 2008 Highlights and Look Ahead – Top-quartile safety performance – Maintain top-quartile safety performance – DB worked > 7.6 million hours without – Targeting record generation a Lost Time Accident (32.0 million MWh) – Record Fleet Generation (30.3 million MWh) – Two outages – DB (Completed 2/14/08) and BV2 (Completed 5/22/08) – BV1 uprate (43 MW); BV2 uprate (24 MW) – 15 MW uprate at PY effective 1/1/08 – No forced losses at BV1; BV2 top quartile (0.05%) – Additional 12 MW from DB Caldon modification – NRC accepted BV license renewal application – Additional 45 MW from BV power uprate – Successful NRC Security drills at PY and BV – NRC Emergency Preparedness – Lowest BV dose during fall outage Evaluated Exercises at BV and PY – Dry Cask Fuel Storage underway at PY Nuclear 2007 2008F 2011 Target OSHA Incident Rate (per 100 employees) 0.29 0.25 0.25 Total Generation (million MWh) 30.3 32.0 32.0 Capacity Factor (%) 88.8 92.9 92.4 27 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  28. 28. Top-Tier Operational Capability Continued Improvement of Asset Utilization Garnered significant nuclear reliability improvements during 2006–2007 outages Fossil fleet expected to return to top-quartile performance in 2008 – AQC-related outages will lower capacity factors in 2009 and 2010 – Expect to reach top-decile performance levels by 2011 Baseload Capability/Capacity Factors 100% 95% Factors (%) 90% 85% 80% 75% 2004 2005 2006 2007 2008F 2011 Target 84.6% 86.9% 88.5% 80.4% 87.2% 90.7% Fossil baseload 89.5% 86.2% 86.8% 88.8% 92.9% 92.4% Nuclear 28 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  29. 29. Operational Performance Targets 2011 Operational Performance 2004 2005 2006 2007 2008F Targets* Total Generation (million MWh) 76.4 80.2 82.0 81.0 84.7 86.6 Fossil Reliability Capacity Factor (Baseload %) 84.6 86.9 88.5 80.4 87.2 90.7 Nuclear Reliability Capability Factor % 89.5 86.2 86.8 88.8 92.9 92.4 * Does not reflect the Fremont plant. 29 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  30. 30. Nuclear Generation Future Refueling Outages Focus on Reliability Expected Scope Driving Duration Year Plant Outage Duration (Items with asterisk* denote duration drivers) (days) Refueling * Davis-Besse In-vessel visual inspection (IVVI) Complete Rewind Main Generator 1R15 Reinforce welds on plant equipment 2008 Split Pins* Low Pressre-2 Turbine Inspection* Beaver Valley Complete Reactor Vessel Head Inspection Main Cond Tube Replacement, Expansion Joints* 2R13 Replace High Pressure Turbine* Type A Containment Pressurization Test Refueling* Perry 1R12 35 10-year IVVI / Bioshield In-service Inspection Recirc Pump Motor Replacement Replace Low Pressure Turbines (2)* Beaver Valley 2009F 30 Reactor Coolant System Loop Stop Valves (2) 1R19 Reactor Vessel Head Inspection Beaver Valley 25 Refueling* 2R14 30 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  31. 31. Generation – Implementing Plans for the Future Nuclear license renewal Current Submit Request Approval New Expiration (NRC Docket) Expected Expiration Beaver Valley Unit 1 2016 Submitted 2007* 2009 2036 Beaver Valley Unit 2 2027 Submitted 2007* 2009 2047 Davis-Besse 2017 2010 2012 2037 Perry 2026 2013 2015 2046 * The NRC accepted the application for review. Nuclear steam generator replacements – Davis-Besse in 2014 – Beaver Valley Unit 2 in 2017 31 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  32. 32. Generation – Implementing Plans for the Future Nuclear spent fuel storage – At the federal level, Yucca Mountain has been proposed as a site for long-term storage and may be available as early as 2017 to receive used fuel, but this is not likely. If Yucca Mountain is available in 2017, FirstEnergy will be eligible to ship fuel starting in 2021. Beaver Valley Implement dry storage by the end of 2014 Unit 1 Current ongoing criticality analysis will increase storage space Beaver Valley Re-rack before 2011 to provide capacity through 2025 Unit 2 Dry storage could then be implemented Continue with wet storage until 2021 Davis-Besse Switch back to dry storage in 2022 Perry Implement dry storage before 2011 32 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  33. 33. Environmental Strategy 33 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  34. 34. Reinvesting in the Business Our Generation Fleet is Well-Positioned for the Future Fleet Emission Control Status August 2008 2010F Capacity (MW) Fleet % Capacity (MW) Fleet % Non-Emitting 4,596 34% 4,653 32% Coal Controlled 2,626 19% 5,293 36% (SO2/NOx – full control) Natural Gas 1,197 9% 1,904 13% 8,419 62% 11,850 81% Longer-term environmental considerations: CO2 control – Over 35% of annual fleet output (MWh) is non-emitting – Involved in CO2 capture and sequestration R&D Mercury control – Excellent reduction through “co-benefits” – Participating in future mercury regulatory developments 34 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  35. 35. Reinvesting in the Business AQC Construction Overview Sammis Plant (2,233 MW) – $1.65B – SO2 control (scrubbers) all units – NOx control (SCRs) Units 6 & 7 (1,200 MW) NOx control (SNCR) Units 1–5 (1,033 MW) completed Mansfield Plant (2,490 MW) – $50M SO2 control (scrubber) upgrades completed Burger Plant – $180M – NOx control (SNCR) and SO2 control Electro-Catalytic Oxidation (ECO) Units 4 & 5 (312 MW) Eastlake Plant – $6M NOx control (SNCR) Unit 5 (597 MW) completed 35 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  36. 36. AQC Upgrades – Sammis Plant Flue Duct Work – 9,000 tons (9,000 ft.) Electrical Cable – 9,120 circuits (530 miles) Foundation Piles – 5,600 piles (445,000 LF) Concrete – 51,000 cubic yards Tons of Steel – 17,200 tons DCS I/O Points – 8,200 Large Bore Pipe – 88,300 ft. (17 miles) Small Bore Pipe – 13,000 ft. (2.5 miles) Overland “Pipe” Conveyor – 3.0 miles long Sammis Plant with computer overlay of Wet Flue Gas Desulphurization (WFGD) equipment 36 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  37. 37. Environmental Strategy FirstEnergy’s Climate Activities CO2 Capture and Storage Technologies Participating in Global Climate Change Policy • MRCSP – R.E. Burger Plant Sequestration test well • Global Roundtable on Climate Change • ECO2 Carbon Capture – Powerspan • EPRI Global Climate Policy Costs & Benefits Research • EPRI research • EEI Climate Change Policy Subcommittee • Power Partners • NEI Climate Change Policy Subcommittee • Oxy Fuel – B&W GHG Reduction Technologies & Voluntary Actions End-user Energy Management • Asia-Pacific Partnership • NJ Clean Energy Program • EPA SF6 Reduction Partnership • PA Sustainable Energy Fund • EPRI GHG Reduction and Electric Transportation Research • Ohio Energy-efficiency Programs • Climate Vision Renewables • DOE 1605(b) Voluntary Reporting of GHGs Program • 650 MWs Hydro • Powertree Carbon Company • >200 MWs Wind Purchase Agreements Generation Initiatives Renewal of Nuclear and Hydro Plant • Fossil plant efficiencies Operating Licenses • Nuclear plant uprates • Continued operation of non-emitting generation 37 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  38. 38. FirstEnergy’s Position on Global Climate Change Climate change is a global issue ultimately requiring a global solution Technology development is key – Energy efficiency and demand-side management – Clean coal technologies – Carbon capture and sequestration Significant future impact on price of electricity whether states are regulated or deregulated – Be consistent over broad geographic region – Include reasonable compliance timeframes – Encourage new cost-effective technologies 38 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  39. 39. Commodity Operations 39 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  40. 40. Coal Commodity Position Continue working to secure long- Securing Open Coal term fuel supply contracts Commodity Positions Actively testing alternate fuel blends at various plants to 100% optimize plant economics and 2008 flexibility Engaged in fuel flexibility 98% 2009 initiative to expand margins and fuel choices 100% FirstEnergy is well positioned 2010 with respect to its total coal supply 0 5,000 10,000 15,000 20,000 25,000 Total Needed Tons Total Covered Tons As of June 30, 2008 40 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  41. 41. Coal Transportation Position All transportation positions Securing Open Coal including both rail and barge are Transportation Positions closed thru 2010 year end Continuing to evaluate additional 100% delivery options to increase both 2008 capabilities and flexibility Enhanced rail unloading 100% 2009 capabilities in process at Ashtabula, Bay Shore and Lake Shore 100% 2010 In 2008, FES is managing PRB rail logistics previously outsourced 0 5,000 10,000 15,000 20,000 25,000 Total Needed Tons Total Covered Tons As of June 30, 2008 41 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  42. 42. Fuel Flexibility Creates Margin & Fuel Choices Enhanced systems, tools and processes providing the ability to react and adjust blends quickly to match power prices “Fuel Flex” creates value by continuously increasing fuel blend choices – Maximize revenues when real-time power prices are favorable – Minimize costs when power prices are low The Right Fuel at the Right Time 42 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  43. 43. Energy Delivery 43 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  44. 44. FirstEnergy Utilities Strong and Stable Cash Flows Large and balanced sales mix – Approximately 1/3 residential, 1/3 commercial, 1/3 industrial T&D infrastructure being upgraded to enhance system reliability and customer service Distribution outage duration reduced by 31% over past two years Constructive regulatory environments – Achieve timely and full recovery of costs – Distribution rate case pending for all three Ohio utilities – Ohio utilities requested resolution of distribution rates in ESP 44 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  45. 45. Reinvesting in the Business Energy Delivery – Striving to Achieve Top-Quartile Performance 2011 Focus Area Key Metrics 2007 2008F Target Reliability Distribution SAIDI (minutes) 131 128 107 Top-quartile performance SAIDI and TOF TOF (per circuit) * 0.72 0.69 0.63 Financial Performance Achieve top-quartile total Total Cost Per Customer $273 $272 $277 spend per customer * TOF has been revised to include all circuits 69KV and above (previously 230KV and above) Total Direct Cost per Customer SAIDI Performance 220 $300 Total Direct CPC 190 SAIDI (Minutes) $270 160 $240 130 100 $210 70 $180 40 $150 10 2005 2006 2007 2008 2009 2010 2011 2012 2005 2006 2007 2008 2009 2010 2011 2012 ED&CS Top Quartile ED&CS Top Quartile 45 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  46. 46. Capital Planning Enhancements Energy Delivery Capital Allocation Tool (E-CAT) Benchmarked leading performers in the area Game Plan: of capital allocation Selected Navigant to help develop capital Target spend with an emphasis on allocation tool based on fundamental improving reliability engineering economics (quantified benefits) Continued focus on operational improvements E-CAT provides the granularity which drives our ability to prioritize thousands of projects based on predicted benefits Capital planning has undergone a fundamental change to enhance our financial discipline 46 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  47. 47. Workforce Management Power Systems Institute (PSI) – Started in 2000; partnered with two colleges in Ohio to offer lineworker training – Currently, partnerships with 11 local community colleges and universities across OH, PA and NJ Enrollment/Hires Started 2008F 2009F Graduated Hired 2000–2007 Program Line Workers 276 236 214 123 177 Substation 110 87 82 31 60 Electricians Total 386 323 296 154 237 47 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  48. 48. Regulatory / Legislative Matters 49 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  49. 49. Retail Regulatory Structure Transition Generation Transmission Distribution Costs Ohio Edison Stable rates RTC thru: Pass thru Fixed rates CEI thru 2008 2008 – OE, TE thru 20081 MISO costs 2010 – CEI2 “g + RSC” Toledo Edison Market in In CTC ended Penn Power No restriction 2007 Generation Jan. 2006 CTC thru 20103 Met-Ed POLR rates Pass thru No restriction thru 2010 PJM costs CTC thru 20093 Penelec JCP&L BGS Supply No restriction MTC thru 2018 1 CEI fixed through April 2009. 2 Proposed waiver of CEI’s RTC beginning Jan. 1, 2009 as part of ESP. 3 NUG recovery thru 2020. 50 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  50. 50. Transitioning Generation to Market Prices Restructuring Status New Jersey – Competitive generation service with market-based pricing in effect (Basic Generation Service auction process began in 2002) Pennsylvania – Transition to market-based pricing partially implemented – Penn Power transitioned to market-based pricing in Jan. 2007 – Met-Ed (ME) and Penelec (PN) maintain POLR obligations at fixed rates through year-end 2010 – ME and PN scheduled to transition to market-based pricing in Jan. 2011 Ohio – Utilities transferred generation assets to competitive affiliate FES in 2005 – Utilities maintain POLR obligations at fixed rates through year-end 2008 – Utilities filed ESP and MRO with the PUCO for generation pricing effective Jan. 2009 51 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  51. 51. Transitioning Generation to Market Prices Ohio Legislative Update Existing S.B. 3 – Enacted 1999 – Generation rates to be market-based on Jan. 1, 2009 Amended Sub. S.B. 221 – Signed by Governor on May 1, 2008; effective July 31, 2008 – Requires all utilities to file an electric security plan (ESP) – Could also file a market rate offer (MRO) with the following criteria: – Belongs to a FERC-approved RTO – RTO has a market-monitor function and the ability to mitigate market power – A published source exists that identifies information for traded electricity and energy products scheduled for delivery two years into the future – The Commission may only approve the ESP if it finds it is more favorable in the aggregate as compared to the expected results from an MRO. – Bill also contains advanced and renewable energy standards and energy efficiency – Requires annual progress toward 2025 goal for renewable energy resources – Requires energy efficiency programs to achieve annual progress toward 2025 goal of cumulative energy usage reduction of 22% – On July 31, 2008 the Ohio utilities simultaneously filed an ESP and MRO with the PUCO 52 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  52. 52. Ohio Regulatory Update ESP Components (as filed) Year Generation Charge Phase In Credit Deferral* 2009 $75.00/MWh ($7.50)/MWh $429M 2010 $80.00/MWh ($8.50)/MWh $488M 2011 $85.00/MWh ($9.50)/MWh $553M Component Amount Deferred Fuel Cost Rider $0.34/MWh Not to exceed 25 yrs, eff. 1/1/09 Non-Distribution Uncollectible Rider $0.40/MWh Effective 1/1/09 FES Commitment/Capacity Additions 1,000 MW Between 1/1/07 and 12/31/11 Environmental Remediation/Reclamation $15M/yr $15M per yr. for 3 yrs. *Estimate; not including carrying charges Two options for financing of deferral amounts and carrying charges: • Company financing • Securitization transactions Recovery may not exceed 10 years Note: ESP Filing in Case No. 08-935-EL-SSO and docketed with the PUCO 53 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  53. 53. Ohio Regulatory Update ESP Components (as filed) Generation charge will be fixed, with limited exceptions, including: – Fuel transportation cost surcharges in excess of $30M in 2009, $20M in 2010, $10M in 2011 – 2011 increase in fuel costs (vs. 2010), excluding certain fuel components including emission allowances, fuel handling, disposal, lime, urea and ammonia – Planning reserve margin costs incurred annually between May 1 and Sept. 30 – Costs incurred for purchase of capacity by FES if owned generation is insufficient – New renewable requirements, taxes, or new environmental laws or interpretations of existing laws in excess of $50M during the plan period 54 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  54. 54. Ohio Regulatory Update ESP Components (as filed) Component Amount $150M 1 Distribution Rate Increase OE/TE effective 1/1/09; CEI 5/1/09 Allowed Rate of Return on Equity 10.50% CEI Distribution Deferral $25M Costs 1/1/09 through 5/1/09 $2.00/MWh2 Delivery Service Improvement Rider 1/1/09 through 12/31/11 CEI RTC Write-Off $485M 2008 GAAP earnings ($1.01/share) Deferred Transmission Rider $43.9M Effective 1/1/09 for 2 yrs. Energy Delivery Capital Investment $1B 1/1/09 through 12/31/13 Energy Efficiency/DSM Commitment Up to$5M/yr 1/1/09 through 12/31/13 Economic Development Commitment Up to $5M/yr 1/1/09 through 12/31/13 AMI Pilot Commitment Up to $1M During Plan 1$75M OE; $34.5M CEI; $40.5M TE, rates stable until Jan. 1, 2014 2May be adjusted annually (+/- 15%) based on SAIDI performance 55 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  55. 55. Ohio Regulatory Update Other ESP Provisions (as filed) Transmission Rider – Recovery of all MISO, ancillary and congestion costs; reconcilable Deferred Distribution Cost Recovery Rider – Includes Jan.-April 2009 CEI deferral, post-date certain distribution costs, and deferred transition taxes and unrecovered balances of line extension deferrals Storm Damage and Distribution Enhancement Rider – Storm damage expenses in excess of $13.9M annually – Line extension cost recovery – Depreciation, tax and carrying charges on capital investments to improve reliability 56 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  56. 56. Ohio Regulatory Update Other ESP Provisions (as filed) Economic Development Rider – Promotes gradualism, recognizes efficiency, mitigates overall bill impact to customers through credits and charges Reasonable Arrangements Rider – Mechanism to administer certain tariff discounts pursuant to PUCO proposed rules for customers committing to energy efficiency improvements Demand Side Management (DSM)/Energy Efficiency Rider – Recovers costs associated with energy efficiency, peak load reduction and DSM programs Delta Revenue Recovery Rider – Recovers the difference in revenues from applicable rate schedule resulting from reasonable arrangements and special discounts 57 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  57. 57. Ohio Regulatory Update MRO Procurement Process (as filed) Suppliers bid to provide energy, capacity, transmission service, transmission ancillaries Competitive Bid Process (CBP) with descending clock bidding format Slice of system approach/100 MW tranches – Supply procured on a total basis – Voltage and seasonal factors used to convert winning bid price to retail rates PUCO selects least cost bid winner(s) Required renewable resources met through an RFP separate from the CBP under the MRO Note: MRO Filing in Case No. 08-936-EL-SSO and docketed with the PUCO 58 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  58. 58. Ohio Regulatory Update MRO Procurement Process (as filed) 59 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  59. 59. Transition to Market-Based Generation Rates Short-Term ESP Overview (as filed) Option provides flexibility and benefits – Customers obtain early price certainty for Jan. 1, 2009 – Base generation rate of 7.75 cents/kWh, with 1.0 cent/kWh phase-in credit – PUCO gains additional time to consider longer-term ESP – Provides for more orderly CBP if the MRO is selected Severable by the PUCO – Acceptance of the longer-term ESP or MRO – PUCO inaction on ESP by Mar. 5, 2009 Nov. 14, 2008 Jan. 1, 2009 – May 1, 2009 PUCO Approval Required Short-Term ESP Window 60 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  60. 60. Ohio Regulatory Update Detailed Timeline ESP/MRO PUCO ESP Procedural Schedule 8/18/08 – Technical Conference 10/29/08 – PUCO MRO Order Required 9/4/08 – Motions to Intervene 11/14/08 – Short-Term ESP Decision 9/15/08 – Intervenor Testimony 12/10/08 – PUCO ESP Order Requested 9/19/08 – Discovery Due 12/26/08 – PUCO ESP Order Required 9/22/08 – PUCO Staff Testimony 1/1/09 – ESP or MRO rates effective 10/2/08 – Evidentiary Hearing(s) OR 1/1/09 – 5/1/09 – Short-Term ESP in effect, if implemented New generation prices under the ESP, MRO or Short- Term ESP effective January 1, 2009 61 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  61. 61. Ohio Regulatory Update Distribution Rate Requests Ohio Edison, CEI and Toledo Edison – Case detail (as filed) – Request: $332M increase (7% on overall rates) – Distribution revenue requirements: $212M – Deferral recovery: $120M – Case schedule – Filed June 2007, with 2008 test period and date certain of May 31, 2007 – PUCO Staff report issued Dec. 4, 2007 – Evidentiary hearings held Jan. 29, 2008 – Feb. 25, 2008 – Public hearings held Mar. 5 – Mar. 24 – Main briefs filed Mar. 28; reply briefs filed Apr. 18 – Rates to be effective Jan. 2009 (CEI in May 2009) – Ohio Companies requested resolution of distribution rates in ESP 62 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  62. 62. Ohio Regulatory Update Distribution Rate Requests (as filed) Proposed Changes in Revenues ($ millions) Total Current quot;Distributionquot; Revenues $1,118 Requested Increase: Associated with RCP Fuel Expense Deferrals 34 Associated with RCP Infrastructure Expense Deferrals 40 Associated with RCP DSM Deferrals (through a rider) 4 Associated with ETP & Ohio Line Extension Deferrals 42 quot;Basequot; Revenue Requirement Increases 212 Total Requested Increase to quot;Distributionquot; Revenues $332 Proposed quot;Distributionquot; Revenues $1,450 Offsetting RTC Decrease ($594) Net Decrease, Including Offsets * ($262) % Decrease, Including Offsets to Total Current Revenues * -5.7% * Assumes current Generation & Transmission rates 63 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  63. 63. FirstEnergy Utilities Ohio Distribution Rate Cases Company Requested Increase in Revenues ($ Millions) PUCO Brief Filing To be effective 1/09 for OE & TE 1/09; 5/09 for CEI Traditional distribution costs $212 $71 – $89 Recovery of costs deferred under prior rate plans 120 46 Total requested increase to quot;distributionquot; revenues $332 $117 – $135 Key PUCO Brief Differences Matters to be considered in other cases ($115)* ROE @ 10 to 11% (vs. Co. @ 11.75%) ($35) – ($16) Other issues (net) ($65) * $52M related to expenses in distribution case amount, $63M related to recovery of costs deferred for fuel and post date certain Ohio Companies requested resolution of distribution rates in ESP ESP also requested 10.5% ROE 64 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  64. 64. Ohio Regulatory Update Supreme Court of Ohio Remand on Deferred Fuel Recovery Rate Certainty Plan provided for the deferral of 2006 – 2008 incremental fuel costs – Recovery was planned to occur in distribution rates over 25 years, but Supreme Court of Ohio remanded the recovery mechanism to PUCO – On Jan. 9, 2008, the PUCO: – Authorized concurrent recovery of actual 2008 fuel costs via a fuel generation rider commencing Jan. 1, 2008 (currently projected at approx. $189M) – Directed the Companies to file an alternative recovery mechanism to collect the 2006-2007 deferred fuel costs ($220M) and carrying charges ($6M) – On Feb. 8, 2008, the Companies filed a separate fuel cost recovery rider for the 2006-2007 fuel and carrying charge deferrals – Proposed recovery periods ranging from 5 and 25 years – Evidentiary hearing scheduled for Sept. 29, 2008 – Ohio Companies requested resolution of 2006-2007 fuel deferral issue in ESP 65 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  65. 65. Pennsylvania Regulatory Update Commonwealth Court Appeals & Generation Procurement Filing Met-Ed (ME) and Penelec (PN) Commonwealth Court appeals of rate cases- – $109M net increase effective Jan. 2007 – Pending appeals to Commonwealth Court – ME & PN – denial of generation relief and tax expense adjustment – Industrials & OCA – transmission recovery – Oral arguments before panel of judges scheduled for September 2008 Transmission service charge (TSC) – The Pennsylvania Public Utility Commission (PPUC) approved the annual updates to the TSC rider for the period June 1, 2008, through May 31, 2009 – PPUC investigating reasonableness of Met-Ed’s TSC; hearings scheduled in Jan. 2009 Generation procurement filing plan – ME and PN transition to competitive generation market prices on Jan. 1, 2011 – Plan to submit generation procurement proposal in 2008 66 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  66. 66. Pennsylvania Regulatory Update Penn Power POLR II Case Penn Power successfully transitioned to competitive generation market prices on Jan. 1, 2007 POLR I RFPs implemented for Jan. 2007 – May 2008 POLR II (June 2008 – May 2011) – Multiple RFPs for residential and small commercial customers – Hourly pricing for large commercial and industrial customers RFP Tranches (50 MW) Group Term Feb 08 Mar 08 Apr 08 May 08 Oct 08 Jan 09 Oct 09 Jan 10 Residential 1 year 0 0 2 2 0 0 2 2 Residential 2 year 0 0 2 2 2 2 0 0 Small Commercial 1 year 3 4 0 0 3 4 3 4 Small Commercial Residential ■ RFPs held on Feb. 20 and Mar. 18 for June 2008 – May 2009 ■ RFPs held on Apr. 14 and May 14 for June 2008 – May 2010 ■ Average price of winning bids was $80.49/ MWH (before line ■ Average price of winning bids was $80.48/ MWH (before line losses, administration fees, and gross receipt taxes) losses, administration fees, and gross receipt taxes) 67 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  67. 67. New Jersey Regulatory Matters Jersey Central Power & Light Draft New Jersey Energy Master Plan (Apr. 17, 2008) – Plan goals – Maximize energy conservation and energy efficiency – Reduce peak electricity demand – Meet 22.5% of the State’s electricity needs from renewable resources – Develop new low carbon emitting, efficient power plants to help close the gap between supply and demand of electricity – Invest in innovative clean energy technologies and businesses to stimulate the industry’s growth in New Jersey – Public meetings held Apr. 28 and May 1 – Public roundtable discussions with state and national energy experts held in late June – Public hearings and comment period held through July – Expect final plan in 3rd or 4th quarter of 2008 JCP&L focus: Peak demand management and cost recovery 68 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  68. 68. Financial Matters 69 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  69. 69. Reinvesting in the Business Projected 2008 – 2012 Capital Expenditures* 2009F – 2012F 2008F ($ millions) Average Energy Delivery $730 $730 Nuclear 132 259 Fossil 395 210 Corporate/ Other 173 66 Subtotal without AQC $1,430 $1,265 Total with AQC $2,079 ($ millions) 2008F 2009F 2010F 2011F 2012F Air Quality Control (AQC) $649 $500 $156 $11 $4 Change from Prior Year $263 ($149) ($344) ($145) ($7) * Per 2007 10-K plus Fremont construction expenditures 70 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  70. 70. Reinvesting in the Business Capital Expenditure Forecast* Capital Expenditures ($ millions) Business Project Area 2009F-2012F Unit 2004 2005 2006 2007 2008F* Average* – Aged infrastructure rebuild Energy – Pockets of load growth $445 $724 $650 $746 $730 $730 Delivery – Reliability improvements – Improve managing operating risk – Upgrade aged equipment Fossil $106 $148 $116 $106 $395* $210* – Environmental / fuel enhancements – Availability improvements – Dry fuel storage / license renewal Nuclear $141 $173 $229 $150 $132 $259 – Materials issues – Information Technology, etc. Corporate $29 $45 $39 $108 $173 $66 Sub-Total $731 $1,090 $1,034 $1,110 $1,430 $1,265 Compliance strategy totals - Sammis, AQC $0 $54 $136 $386 $649 $168** Burger Units, Mansfield and Eastlake Unit 5 Total $731 $1,144 $1,170 $1,496 $2,079 $1,433 * Per 2007 10-K plus Fremont construction expenditures ** AQC annual expenditures include $500M (2009), $156M (2010), $11M (2011), $4M (2012) 71 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  71. 71. Acquired Additional Equity Interest in Beaver Valley 2 and Perry On May 30, 2008 Nuclear Generation Corp. (NGC) purchased 56.8 MW of lessor equity interests in the Perry Plant Between June 2, 2008, and June 9, 2008 NGC acquired ownership of an additional 202 MW of lessor equity interest in Beaver Valley Unit 2 (BV2) NGC exercised early purchase options under certain existing leases originally entered into in 1987 The previous lessors continue to lease these MWs under the respective sale and leaseback arrangements and the related lease debt remains outstanding 72 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  72. 72. 2008 Non-GAAP Earnings Per Share Guidance Reconciliation of GAAP to Non-GAAP As of Aug. 1, 2008 2008 EPS Basic EPS (GAAP basis) $4.27 – $4.37 Excluding Special Items*: Gain on Sale of Non-Core Assets (0.06) Litigation Settlement (0.03) Trust Securities Impairment 0.07 Basic EPS (Non-GAAP basis) $4.25 – $4.35 * Excludes possible write-off of $485 million of CEI’s estimated unrecoverable transition costs under the proposed ESP, which if recognized, would be categorized as a Special Item ($1.01 per share). 73 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  73. 73. Achieving Targeted Growth Major Earnings Drivers 2009 – 2011 Distribution rate case in OH effective 2009 Increased generation prices in OH in 2009 Market generation prices in PA in 2011 Asset mining / realizing full potential of generation assets Further operational enhancements 74 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference
  74. 74. Achieving Targeted Growth (continued) Major Earnings Drivers 2009 – 2011 Declining margin from OH transition plans Impact of expiring Met-Ed/Penelec third-party power contract in 2009 Increasing fuel and purchased power costs Increasing O&M costs Higher depreciation expenses (non-cash) 75 September 2-4, 2008 Lehman Brothers 2008 CEO Energy/Power Conference

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