first energy MorganStanleyConference_100907

Morgan Stanley Electric Utilities
Corporate Access Day
Chicago, IL
October 9, 2007

Safe Harbor Statement under the
Private Securities Litigation Reform Act of 1995
Forward-looking Statements. This presentation includes forward-looking statements based on information currently available to management.
Such statements are subject to certain risks and uncertainties. These statements typically contain, but are not limited to, the terms “anticipate,”
“potential,” “expect,” “believe,” “estimate” and similar words. Actual results may differ materially due to the speed and nature of increased
competition and deregulation in the electric utility industry, economic or weather conditions affecting future sales and margins, changes in markets
for energy services, changing energy and commodity market prices, 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, legislative and regulatory changes (including revised environmental requirements), and the legal
and regulatory changes resulting from the implementation of the EPACT (including, but not limited to, the repeal of the PUHCA), 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, adverse regulatory or legal decisions and outcomes (including, but not limited to, the revocation of necessary licenses or operating
permits and oversight) by the NRC (including, but not limited to, the Demand for Information issued to FENOC on May 14, 2007) and the various
state public utility commissions as disclosed in the registrants’ SEC filings, the timing and outcome of various proceedings before the PUCO
(including, but not limited to, the Distribution Rate Cases for the Ohio Companies and the successful resolution of the issues remanded to the
PUCO by the Ohio Supreme Court regarding the Rate Stabilization Plan and the Rate Certainty Plan, including the deferral of fuel costs) and the
Pennsylvania Public Utility Commission (including Penn’s default service plan filing), the resolution of the Petitions for Review filed with the
Commonwealth Court of Pennsylvania with respect to the transition rate plan filing for Met-Ed and Penelec, the continuing availability and
operation of generating units, the ability of generating units to continue to operate at, or near full capacity, the inability to accomplish or realize
anticipated benefits from strategic goals (including employee workforce initiatives), the anticipated benefits from voluntary pension plan
contributions, the ability to improve electric commodity margins and to experience growth in the distribution business, the ability to access the
public securities and other capital markets and the cost of such capital, the outcome, cost and other effects of present and potential legal and
administrative proceedings and claims related to the August 14, 2003 regional power outage, the successful structuring and completion of a
potential sale and leaseback transaction for Bruce Mansfield Unit 1 currently under consideration by management, any purchase price adjustment
under the accelerated share repurchase program announced March 2, 2007, the risks and other factors discussed from time to time in the
registrants’ SEC filings, and other similar factors. 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. The registrants expressly disclaim any current intention to
update any forward-looking statements contained herein as a result of new information, future events, or otherwise.

Morgan Stanley Electric Utilities Corporate Access Day
Chicago, IL • October 9 ,2007

Corporate Profile &
Strategic Vision

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 based on
customers served
4.5 million customers within 36,100 square miles of Ohio,
Pennsylvania and New Jersey
Control more than 14,000 megawatts of generating capacity
$11.5B in annual revenues and more than $31B in assets
Approx. $19B market capitalization

Morgan Stanley Electric Utilities Corporate Access Day Corporate Profile & Strategic Vision
2

Key Themes: 2007 and Beyond
Driving performance & delivering results
Striving for continuous improvement
– Realize full potential of generation assets
– Mine existing opportunities for cost effective capacity additions
– Reinvest to improve the long-term viability of our generation
fleet, distribution reliability and customer service
Successfully manage regulatory transitions
– Seek full and timely recovery of distribution costs
– Transition POLR load to competitive generation markets
Optimize financial strength and flexibility
– Deploy cash effectively to increase shareholder value
– Maintain strategic flexibility

Morgan Stanley Electric Utilities Corporate Access Day Corporate Profile & Strategic Vision
3

FirstEnergy Sources of Power
Michigan Ashtabula
Perry 244 MW
Seneca
1,258 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

Pennsylvania
New Castle
Akron
Davis-Besse Edgewater Morristown
Richland Newark
893 MW 48 MW
432 MW
West Lorain Johnstown Reading
Harrisburg
545 MW Allenhurst

Trenton

W. H. Sammis
2,233 MW
New
Columbus Beaver Valley Bruce Mansfield
Jersey
R. E. Burger 1,779 MW 2,460 MW
413 MW
Mad River Forked River
60 MW
Ohio 86 MW
Plant Load Strategy
Baseload Peaking Units Other
Load Following
MW MW MW MW

Mansfield 1-3 2,460 Sammis 1-5 1,020 West Lorain 545 OVEC 463
Wind 30
Beaver Valley 1,2 1,779 Eastlake 1-4 636 Seneca 451
Perry 1,258 Bay Shore 2-4 495 Richland 432 Total 493
FirstEnergy Power Sources Sammis 6,7 1,200 Burger 4 -5 312 Sumpter 340
C Coal Davis-Besse 893 Lake Shore 245 Yards Creek 200
7,439 MW
Eastlake 5 597 Ashtabula 244 Burger 3 & EMDs 101
N Nuclear 3,930
Bay Shore 1 136 Forked River 86
H Hydro Total Load Following 2,952
651 Mad River 60
G Gas & O Oil 1,599
Total Baseload 8,323
Edgewater 48
Other 493 Stryker 18
Other 63
Total 14,112 MW
Total Peaking Units 2,344

Morgan Stanley Electric Utilities Corporate Access Day Generation
2

Striving for Continuous Improvement
Realize full generation potential
14,112 MW Capacity
Diverse and cost effective
generation portfolio
Nuclear
– Over 35% of fleet is non-emitting 28%

Continue improvement of Coal
CT’s
53%
11%
asset utilization
– 2003 to 2006 = 22% increase in Hydro 5%
generation output Other 3%

– 3 consecutive generation output records
Generation Output (MWh)
– Targeting new records in 2007 & 2008
100
84.3
82.7
82.0
Focus on reliability initiatives 80.2
76.4
80
68.0
32.0

(million MWh)
and outage execution 29.0 31.2
28.7
29.9
60 21.1

40

53.0 52.3
51.5 51.5
46.9 46.5
20

0
2003 2004 2005 2006 2007E 2008E

Fossil & Other Nuclear

3

Baseload units demonstrate consistent improvement

Baseload Capacity Factor
Top decile base load
90%
88.6%
capacity factor in 2006
87.8%
88%

compared to Navigant
85.9%
86%
84.5%
Top Decile
benchmark database
84%

82% 80.9%
Increased capacity factors
Top Quartile
80%
79.6%
and reliability initiatives
78%
76.0%
drive baseload units
76%

74%
towards top decile in 2006
72%
Equivalent Availability
70%

68%
2002 2003 2004 2005 2006 2007E 2008E
•Top performance came from Navigant benchmarking study

4

Focus on total fleet output has positive impact
on fossil load following utilization
M NMWh Capacity Factor
20 100%

15 75%

10 50%

5 25%

0 0%
2001 2002 2003 2004 2005 2006 2007E
15.2 18.2 16.6 14.4 19.5 19.1 19.8
Load Following
54% 64% 59% 51% 69% 69% 70%
Capacity Factor
*Excludes the peaking units.

2006 generation reflects sustaining generation increase of close to 5M MWh over 2004
Maximize operational flexibility for regulation, minimum loads and system ramping
Dispatch strategies focused on maximizing utilization in profitable markets

5

Nuclear Generation
Strong plant reliability
Reliability improvements during 2006 / 2007 outages
– BV1 – New steam generators and reactor vessel head, main generator rewind
– BV2 – Weld overlay on pressurizer nozzles, enlarged containment sump
– DB – Replaced two reactor coolant pumps, replaced low pressure turbine
rotors and diaphragms

2006 Fleet Performance YTD 2007

Capacity Net Generation Forced Loss Forced Loss
Plant
Factor (%) (million MWh) Rate Rate
Beaver Valley Unit 1 80.4 5.8 1.16 0.00

Beaver Valley Unit 2 87.7 6.3 1.75 0.08
Davis-Besse 83.1 6.4 1.76 0.17
Perry 96.8 10.5* 3.44 19.84
Fleet 88.0 29.0 2.27 5.64
2002-2005 Avg 79.0 26.0 3.15 3.15
* Record generation

6

Nuclear Generation
Future refueling outages focus on reliability
Expected Expected
Scope Driving Duration
Year Plant Outage Costs Outage Duration
(Items with asterisk* denote duration drivers)
($ millions) (days)
Refueling *
IVVI
Perry 1R11 $30 30
Actual Outage Period (4/2/07 – 5/13/07)
Split Pins *
Containment Sump Modifications*
2007 Reactor Vessel ISI *
Beaver Valley 1R18 $32 28 100% Eddy Current Test
Reactor Vessel Head Inspection
Pressurizer Overlay
Rewind Main Generator *
Davis-Besse 1R15 $30 31
Split Pins *
Low Pressre-2 Turbine Inspection *
Beaver Valley 2R13
2008 $30 30 Main Cond Tube Replacement, Expansion Joints *
Replace High Pressure Turbine *
Type A Containment Pressurization Test
Refueling *
10-year IVVI / Bioshield In-service Inspection
Perry 1R12 $30 25
Recirc Pump Motor Replacement
Replace Low Pressure Turbines (2) *
2009
Reactor Coolant System Loop Stop Valves (2)
Beaver Valley 1R19 $30 30
Refueling *
Beaver Valley 2R14 $30 25

7

Nuclear Generation
Managing our used fuel
Through 2006, 46 of 102 plants reached capacity in used fuel pools
49 operating plants built on-site dry cask fuel storage, 46 are under construction
Plans for federal repository for long-term storage – Yucca Mountain
Congressional proposals for interim storage and reprocessing

FENOC Plan
Implement dry storage by end of 2014
BV Unit 1

Criticality analysis frees up storage space
BV Unit 2 Rerack before 2011 to provide capacity through 2025
Dry storage could then be implemented

Continue with wet storage until 2021
Davis-Besse
Return to dry storage in 2022

Spent fuel pool campaign in 2007
Perry
Implement dry storage before 2011

8

Nuclear Generation
Continued safe operations through license renewal
License Renewal Schedule

Submit
Current Approval New
Request
Expiration Expected Expiration
(NRC Docket)

Beaver Valley Unit 1 2016 2007* 2009 2036

Beaver Valley Unit 2 2027 2007* 2009 2047

Davis-Besse 2017 2010 2012 2037

Perry 2026 2013 2015 2046

* License renewal application submitted to the NRC on August 27, 2007.

9

Asset mining initiatives
MW Additions 2005–2006 2007E–2008E Cumulative
Fossil baseload uprates 100 30 130
Nuclear baseload uprates 49 100 149
Peaking capacity enhancements* 0 182 182
Wind power contracts 30 184 214
Total MW additions 179 496 675

* Reflects 12 separate projects including returning 70 MW at Burger Unit 3 that has not been available since summer 2005.

Mining existing asset base for low risk, cost-effective growth
Wind power contracts helping to meet renewable portfolio standards
Additional longer-term initiatives under review

10

Realizing Full Potential of Asset Base
Baseload capacity uprates
(MW) 2005 2006 2007 2008 Total
Nuclear
Davis-Besse 14 12 26
Beaver Valley 1 25 43 68
Beaver Valley 2 10 45 55
Total 49 43 57 149
Fossil
Mansfield 1 50 50
Mansfield 2 50 50
Mansfield 3 30 30
Total 50 50 30 130
Total Uprates 50 99 73 57 279

11

Environmental Strategy
Our generation fleet is well positioned for the future
Fleet Emission Control Status
Capacity (MW) Fleet %
Non-Emitting 4,600 33%
Coal Controlled
2,569 18%
(SO2/NOx – full control)
Natural Gas Peaking 1,269 9%
8,438 60%

Longer-term environmental considerations
CO2 control – Over 35% of annual fleet output is non-emitting
– Involved in CO2 capture and sequestration R&D
Mercury control – Excellent reduction through “co-benefits”
– Based on current rules and plans, additional equipment not required before 2018

Morgan Stanley Electric Utilities Corporate Access Day Environmental Strategy
2

Ensure the long-term viability of the fleet
AQCS expenditures estimated at $1.9B

AQCS Capital Expenditures
$593
$600 $530

$387
($ millions)

$400

$180
$200 $136
$54
$13
$0
2005 2006 2007E 2008E 2009E 2010E 2011E

3

AQCS Construction Overview
Sammis Plant (2,220 MW) – $1.65 Billion
– SO2 control (scrubbers) all units
– NOx control (SCRs) Units 6 & 7 (1,200 MW)
– NOx control (SNCR) Units 1–5 (1,020 MW)
completed
Mansfield Plant (2,460 MW) – $50 Million
– SO2 control (scrubber) upgrades
– 1,660 MW completed, 800 MW to be
completed in 2007
Burger Plant – $180 Million
– NOx control (SNCR) and SO2 control (ECO)
Units 4 & 5 (312 MW)
NOx Controls (SNCR) – $6 Million
– Eastlake Unit 5 (600 MW) completed
4

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

5

Firstenergy’s Diverse Generation Provides
Strong Competitive Position
Over 35% of generation from non-emitting nuclear
units in 2006
Uprates will further increase nuclear generating
capacity
Long-term contracts for more than 200 MW of
wind capacity

6

Current Greenhouse Gas Reduction Actions
$100M in investments planned 2006–2010
– $50M on products, programs and activities to help reduce greenhouse
gas emissions
– $50M to support relicensing and capacity uprates at non-emitting
generating plants; renewable energy development

Fleet modernization a key strategy:
– Increased ownership of nuclear generation and decreased ownership
of coal
– 1,383 MW of older coal-based boilers out of service since 1990
(estimated annual CO2 avoidance of 1.5 million tons)
– 1,155 MW of new natural gas-fired peaking capacity since 1999
– > 200 MW of wind generation secured through long-term agreements

Overall efforts resulted in average annual reductions of
8.9 million tons of CO2 equivalent; 143 million tons
since 1991

7

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

8

Additional Key Technologies FirstEnergy
is Actively Co-Funding
Plug-in hybrid electric
vehicles (PHEV)
– Considerably cleaner than
internal combustion engine
vehicle, including battery
charging
– 30% less GHG
– 15% less SO2 and NOx
– Provides largely off-peak demand,
an opportunity for growth
– Advanced meters are an
enabling technology

9

Commodity Operations Strategy
Effectively managing commodity margins and risks
Manage commodity value chain
Effectively deploy generation to capture market
opportunities
Enhance fuel supply / logistics to maximize optionality
Efficiently manage purchased power requirements
Employ strict risk management controls and oversight
– Volume and price risks
– Generation availability risks
– Transmission congestion risks

Maximizing Margins by
Mitigating Risks And Minimizing Supply Costs
Morgan Stanley Electric Utilities Corporate Access Day Commodity Operations
2

Commodity Operations Strategy
Effectively hedging commodity positions
% Hedged 2007 2008
Coal only* 100% 95%
Coal transportation* 100% 98%
SO2* 100% 94%
NOx* 100% 100%
Nuclear fuel* 100% 100%
* Represents the percentage hedged of total forecasted generation.

Coal delivery optionality and fuel flexibility
– 3 coal delivery options for largest baseload plants
– 8 units can burn any of 3 coal types and can switch quickly
– 9 additional units can operate within a wide blending range

3

Commodity Operations’ objective is to provide FirstEnergy
with a predictable and profitable commodity margin
Commodity + Generation Margin
– Transmission Expense
Margin – RTO expense
Commodity Margin

+ Generation Revenue
– Fuel
PJM / MISO
– Purchased Power
Expenses Generation Margin

Regulated
MWH
Sales
MWH
FENOC REV
80M MWh
80M MWh
COST
31M MWh
31M MWh
Competitive
MWH
Sales
REV
MWH
Generation 12M MWh
12M MWh
Fossil
Margin
COST
Wholesale
51M MWh
51M MWh MWH
Sales
REV
20M MWh
20M MWh
Purchased Power MWH
34M MWh
34M MWh Losses &
COST Pumping
MWH

4M MWh
4M MWh
Excludes JCP&L and OVEC.

4

Balanced emission allowance position minimizes risks
SO2 Position (tons)
Based on projected
Needed Covered Position
330,000
generation:
240,000
Emission allowance
150,000
positions are well covered
60,000 2007 SO2 position is
covered
-30,000
2007 2008
2008 SO2 is slightly short
due to economic fuel
NOx Position (tons)
switching decisions in
30,000 Needed Covered Position
recent strategic planning
process
20,000
NOx positions are
10,000 completely covered
0
2007 2008

5

Procurement of coal supply will be vital to asset
utilization and a “predictable” margin

Securing Open Coal
Commodity Positions
Continue working to
secure long-term fuel
100%
2007 supply contracts
Actively testing alternate
fuel blends at various
95%
plants to optimize plant
2008
economics
Engaged in fuel flexibility
00

00

00

00
0

0
00

,0

,0

,0

,0

initiative to create more
5,

10

15

20

25

options
Total Covered Tons
Total Needed Tons

6

Secured fuel transportation position will be vital
to asset utilization and a “predictable” margin

Securing Open Fuel
2007 transportation positions
Transportation Positions
100% covered based on
forecasted generation
100%
2007
2008 transportation positions
will be closed shortly —
agreements reached
98%
2008
Evaluating additional delivery
options to increase both
capabilities and flexibility
00

00

00

00
0

0
00

,0

,0

,0

,0
5,

10

15

20

25

Actively working to close long
term transportation position
Total Covered Tons
beyond 2009
Total Needed Tons

7

Coal Delivery Options
Fuel and Transportation Rail Barge Vessel Truck
options create leverage Lake Shore
Bay Shore
Mansfield
Sammis
Ashtabula
Burger
Eastlake
Planned & Potential
Mine Sources 19
20 17
16
# of Mines

14
15
10
10
10 7

5

0
Lake Shore Bay Shore Mansfield Sammis Ashtabula Burger Eastlake
3 3 0 3 3 3 6
PRB
1 0 10 3 3 8 3
NAAP
6 4 0 10 8 8 8
CAAP

8

Coal Supply
Balanced and economic

Coal Supply 2007E Coal Mix by Origin (tons)

Annual requirement CAPP
of 22–25 million tons 15%
Increasing usage of NAPP
39%
PRB coal
2003 – 23%
2004 – 25%
2005 – 35%
PRB
2006 – 37%
46%
2007E – 46%

9

FirstEnergy Service Areas

Pennsylvania

New
Ohio Jersey

Customers Square Miles

Ohio Edison 1,042,000 7,000
Illuminating Company 762,000 1,600
Toledo Edison 314,000 2,300
Met-Ed 542,000 3,300
Penelec 589,000 17,600
Pennsylvania Power 159,000 1,100
Jersey Central Power & Light 1,082,000 3,200
Total 4,490,000 36,100

Morgan Stanley Electric Utilities Corporate Access Day Energy Delivery
2

Improve distribution reliability and customer service
Targeted reinvestment in T&D infrastructure
– Focus on reducing outages, restoration time, and customers affected

Leveraging technology
– Focus on customer service and outage management

Implement “Energy Delivery Excellence Program”
– Comprehensive review identified operational, technological,
scheduling and financial control opportunities for improvement

Significant improvement in reliability metrics
– In 2006, outage duration improved 20%
– 2007 YTD through June, outage duration improved 13%; outage
frequency improved 7%
– Transmission outage frequency per circuit is at top-decile

3

FirstEnergy’s Strengths
Attractive Customer Base
Large and Balanced

Electric Customers – 5th Largest Balanced Sales Mix

Ohio
Commercial
Residential
2.1 million
32%
35%

Pennsylvania
New Jersey Industrial
1.3 million
1.1 million 33%

4

Energy Delivery Reliability Improvements
0.50
Transmission Outage Frequency
Industry Avg.* = 0.50
(TOF) Per Circuit 0.40
Top Quartile* = 0.39

Outages per Circuit
Top Decile* = 0.31
The Transmission Outage Frequency (TOF) is a 0.30
YTD = 0.30
measure of the average number of transmission
0.20
circuit outages per circuit in the 230–500kV
voltage classes.
0.10

0.00
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
* As defined by SGS benchmarking study.

2006
Distribution SAIDI
200
YE = 152
(System Average Interruption
150
Duration Index)
2007 Comm ission
SAIDI (minutes)

Threshold = 148
Threshold
SAIDI represents the average
100
2007 total duration of outage
2007
50 minutes per customer in a year
2006
YTD= 93.9
adjusted for major storms.
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

5

Retail Regulatory Structure
Generation Transmission Distribution Transition Cost
Ohio Edison
RTC thru
Stable rates
Pass thru Fixed rates
thru 2008 2008 – OE, TE
CEI
thru 20081
MISO costs
“g + RSC” 2010 – CEI
Toledo Edison
Market in No CTC ended
In
Penn Power
2007 restriction Jan. 2006
Generation
CTC thru 20102
Met-Ed
POLR rates Pass thru No
thru 2010 PJM costs restriction CTC thru 20092
Penelec

JCP&L BGS Supply No restriction MTC thru 2018
1 CEI fixed through April 2009.
2 NUG recovery thru 2020.

Morgan Stanley Electric Utilities Corporate Access Day Regulatory Matters
2

Successfully Manage Regulatory Transitions
Seek full and timely recovery of distribution costs
Ohio Edison, CEI, and Toledo Edison
Ohio
Comprehensive Distribution rate requests filed on
June 7; Update filed on August 6
Proposed rates would be effective January 1, 2009 for
OE and TE; expected to be effective in May 2009 for CEI

Proposed increase:
Traditional distribution costs 212
Recovery of costs deferred under prior rate plans 120
Total proposed increase to quot;distributionquot; revenues $332
Offsetting RTC decrease ($594)
Net decrease, including offsets * ($262)
% Decrease, including offsets to total current revenues * -5.7%
* Assumes current Generation & Transmission rates

3

Transition to competitive generation markets
Generation asset transfer completed in 2005
Ohio In July 2007, filed comprehensive generation supply plan
for competitively priced service beginning January 2009
Proposal includes:
– Option to phase in generation price increases for residential tariff
groups with > 15% increase in average total price
– Time-of-day and hourly pricing options
– Renewable energy component
PUCO decision requested by November 1, 2007
– Technical conference held on August 16
– Initial Comments filed on September 5; PUCO Staff comments
filed on September 21; reply comments by October 12
Competitive bid structuring alternatives
– By Customer Class or Slice of System

4

Bid structuring process
Ohio – Descending clock bidding format
– Full requirements product (energy, capacity, transmission)
– Individual bidders limited to 75% of total customer load
– Multiple solicitations; three-year ladder
Initial bids to be conducted:
– January 2008 (Slice of System), or
– March 2008 (Customer Class)
Bids secured in 2008 would be for service beginning
January 1, 2009, and ending:
– May 31, 2010 (17-month)
– May 31, 2011 (29-month)
– May 31, 2012 (41-month)
Subsequent annual bids for 1/3 of load (3-year supply)
5

On August 29, Governor Strickland Proposes Energy,
Job and Progress Plan – 7 Key Principles
Ohio
– Market Rate Plan or Electricity Security Plan
– Advanced Energy Portfolio Standard – 25% by 2025
– Transparency & Accountability
– Promote aggregation, demand response and advanced metering
– Modernizing electric infrastructure/single issue ratemaking
– Energy Efficiency Standard – 25% of projected growth,
decoupling
– Address global climate change

Plan introduced as SB 221 on September 25
– http://www.legislature.state.oh.us/bills.cfm?ID=127_SB_221

6

Supreme Court Remand on Rate Certainty Plan

Ohio Edison, CEI, and Toledo Edison
Ohio
On August 29, the Ohio Supreme Court remanded the
recovery of deferred fuel costs in distribution rates back
to the PUCO for further consideration
The Court reaffirmed all other aspects of the Rate
Certainty Plan
On September 7, the Companies filed a Motion for
Reconsideration with the Court
On September 10, the Companies filed an Application on
Remand with the PUCO proposing generation-related
fuel cost recovery riders

7

Met-Ed and Penelec
Transition Plan Rate Case
– $109M increase effective January 2007
– Pending Appeals to Commonwealth Court
– ME / PN: denial of generation relief and tax expense adjustment
– Industrials / OCA: Transmission recovery
– Oral arguments expected late 4Q or early 2008
NUG Accounting Case
– ALJ Initial Decision was to deny the Companies’ request
– Awaiting PPUC Final Order
Generation transitions to market-based rates in 2011
Governor’s Energy Independence Strategy – Special
Legislative Session
– PennSecurity Initiative (biofuel)
– $850 million Energy Independence Fund – renewables and
efficiency
Morgan Stanley Electric Utilities Corporate Access Day Regulatory Update
8

Penn Power

POLR 1: transition to market-based generation rates
– RFP process for 900 MW from January 2007–May 2008
POLR 2: continuation starting June 2008
– Proposed full requirements product by class
– Multiple RFPs with staggered delivery through 2011
– Three year phase-out of promotional generation rates
– Settlement Agreement filed on September 28, 2007
– Anticipate commission order by November 29, 2007

9

Regulatory Matters
Jersey Central Power & Light

Generation supplied through BGS auction process

Sale of Forked River Generating Station
– Proceeds approximately $20M
Energy Master Plan – Goals
– Reduce total projected electricity demand by 20% by 2020
– Meet 22.5% of electricity needs with renewable energy
– Reduce air pollution and energy use
– Encourage and maintain economic development
– Achieve a 20% reduction in CAIDI and SAIFI by 2020
– Unit prices at no more than +5% of the regional price level
– Eliminate transmission congestion by 2020

10

Optimize Financial Strength and Flexibility
Maintain strategic flexibility
Use cash to benefit shareholders
– Sustainable common stock dividend growth
– 11.1% increase (March 1, 2007)
– Share repurchase
– 14.4 million ASR (March 2, 2007)

Continue focus on capital structure management
– Additional transfers of tax-exempt debt from operating companies
– Appropriately capitalize operating companies

Remain flexible to capitalize market opportunities
– Executed Mansfield Unit 1 sale and leaseback transaction on July 13

Deliver consistent and predictable financial results

Morgan Stanley Electric Utilities Corporate Access Day Financial Matters
2

Reinvest in the business

2006 2007E 2008E
($ millions)

Energy Delivery $ 650 $ 780 $ 896
FENOC 229 126 110
Fossil 116 58 70
Environmental 136 396 609
Other 39 104 59
Total $ 1,170 $ 1,464 $ 1,744

* Total capital expenditures forecast for 2009–2011 estimated to be approx. $4.7B

3

Share Repurchase
On March 2, FirstEnergy repurchased 14.4 million shares
– Represents approx. 4.5% of outstanding shares
– $900M ASR at initial price of $62.63 per share
– Final purchase price to be adjusted to reflect volume-weighted
average price of stock during acquisition period (up to
approximately one year)
Coupled with August 2006 ASR program of 10.6 million
shares, total buy-backs equal approx. 7.6% of shares
outstanding
Projected net earnings impact from both buy-backs
is approx. $0.18 per share in 2007 vs. 2006

4

Pension Contribution
Previously contributed $1B to plan during 2004–2005
Pension Protection Act of 2006 changed plan funding rules
$300M contribution ($193M after-tax) made in January
Increases plan funding
– Improves PBO funded ratio to 105%
Financial impact of contribution equates to 15% pre-tax
cash return, 9% after-tax return
Accretive to annual earnings by approx. $0.05 per share
FAS 87/106 cost: 2006 $ 94 M
2007E (89) M
$ (183) M

5

Long-Term Dividend Policy
Annual growth target of 4–5%
Sustainable annual growth and a payout ratio
appropriate for our level of earnings

Dividend Changes:
Payment Quarterly Change from Annualized
Date Rate Prior Period Rate
1Q 2007 50.00¢ 11.1% $2.00
1Q 2006 45.00¢ 4.65% $1.80
4Q 2005 43.00¢ 4.24% $1.72
1Q 2005 41.25¢ 10.00% $1.65
4Q 2004 37.50¢ – $1.50

6

FirstEnergy Solutions (FES)
Wholly-owned competitive subsidiary
– Holding company for FirstEnergy Genco and FirstEnergy
Nuclear Genco
– Provides energy-related products and services to wholesale
and retail customers in MISO and PJM
Generation assets transferred in 2005
Investment grade ratings (BBB/Baa2) received
in March
SEC registrant providing full financials
Targeting a debt ratio in the upper 50% range by 2008
– $1.4B of genco-level tax exempt debt (4% avg. cost)
comprises approx. 45% of debt portfolio

7

FirstEnergy Solutions (FES) (cont.)
Executed Mansfield Unit 1 sale and leaseback transaction
– Traditional leveraged lease structure: approx. 85% / 15%
debt/equity
– After-tax proceeds of $1.2B used to repay short-term debt drawn
to fund share repurchases and voluntary pension contribution
– Equivalent to borrowing at 3.6% for a term of 33 years
Additional transfers of tax-exempt debt from utilities
– Planning to issue $455M insured Genco auction rate securities
– Subsequent to this transaction, $1.9B of PCRBs will have been
transferred to FES with $265M PCRBs remaining at utilities to
be transferred

8

2007 Non-GAAP Earnings Per Share Guidance(2)
Issued January 31, 2007
$5.00

$0.18 ($0.19)
$4.50 $0.17 ($0.05)
($0.05)
($0.10)
$0.08 Net Share ME/PE
Repurchases Rate OH Trans- ($0.02) $4.15(1)
$0.12 Depr.
Case ition Cost
Net T&D Infra-
$0.06 Amort.
Nuclear All
(“D”)
Benefit
$0.07 structure
$4.00 Outage Other
Penn
$3.88(1) Costs
O&M
Generation Power
Wires Output & to Market
Growth Mix

$3.50

$3.00
Midpoint 2006 Midpoint 2007
Non-GAAP EPS Non-GAAP
EPS Guidance

(1) See GAAP to non-GAAP reconciliations in subsequent slides.
(2) 2007 EPS guidance, excluding unusual items, is $4.05 – $4.25. On a GAAP basis, EPS is expected to be $4.09 – $4.29.

9

2007 Cash Flow Drivers
Wires Growth: $20M
Gen Output/Mix: $15M
Penn Power to Market: $40M
Nuclear Outage O&M: $25M
PA Rate Increase: $60M
JCP&L NUG Recovery: $100M
Net Collateral: $80M

Net Pension Contribution: $373M
($90M tax benefit realized in 2006)
Securitization/Asset Sales in 2006: $310M
Higher Dividends / Capital Expenditures: $215M
10

2008 Earnings Drivers
Growth in delivery sales
Increased generation margin
Lower generation-related outage maintenance costs

Higher Ohio transition cost amortization
T&D infrastructure investment
Increased fuel and purchased power costs

11

FirstEnergy Credit Metrics
Funds from Operations / Interest Coverage
Adjusted Total Debt / Total Capital
5
70%

67%
60%
4
60%
60% 58% 58%
56%
50%
3.7 3.5 3.5 3.5
3
40%
3.0
30%
2.5
2
20%
1
10%

0% 0
2002 2003 2004 2005 2006 2007E 2002 2003 2004 2005 2006 2007E

Funds from Operations / Total Debt
20%

18% 18%
15% 17% 17%
14%
10%
11%

5%

0%
2002 2003 2004 2005 2006 2007

Maintaining Financial Strength and Flexibility
12

FirstEnergy Credit Ratings
S&P’s outlook on all companies is stable
Moody’s outlook on FE Solutions is stable and positive for all other companies

Corporate Credit
Senior
Business Rating (S&P) /
Senior Secured
As of September 7, 2007 Profile Issuer Rating Unsecured
(Moody's)
S&P S&P Moodys S&P Moodys S&P Moodys
FirstEnergy Corp. 7 BBB Baa3 - - BBB- Baa3

FirstEnergy Solutions 8 BBB Baa2 - - - -

Ohio Edison 5 BBB Baa2 BBB+ Baa1 BBB- Baa2

Cleveland Electric Illuminating Co. 5 BBB Baa3 BBB+ Baa2 BBB- Baa3

Toledo Edison 5 BBB Baa3 BBB Baa2 BBB- Baa3

Pennsylvania Power 5 BBB Baa2 A- Baa1 BBB- Baa2

Jersey Central Power & Light 4 BBB Baa2 BBB+ Baa1 BBB Baa2

Metropolitan Edison 4 BBB Baa2 BBB+ Baa1 BBB Baa2

Pennsylvania Electric Co. 4 BBB Baa2 BBB+ Baa1 BBB Baa2

13

Strong Liquidity Position

Company Type Term Maturity Amount ($M)

FirstEnergy Corp. RCA* 5-year Aug. 2011 $ 2,750

FirstEnergy Corp. Bank Lines Various Various 120

OH & PA Utilities A/R Fin. 1-year Various 550

Total $ 3,420
* Revolving Credit Agreement

Substantial liquidity available
– $3.0B available borrowing capacity as of September 13, 2007

14

2006 Earnings Per Share
Reconciliation of GAAP to Non-GAAP
Issued on February 20, 2007

2006 EPS
Basic EPS (GAAP basis) $ 3.84
Excluding Unusual Items:
Trust Securities Impairment 0.02
PPUC NUG Cost Reserve for Prior Years 0.02
Basic EPS (non-GAAP basis) $ 3.88

15

2007 Non-GAAP Earnings Per Share Guidance
Reconciliation of GAAP to Non-GAAP
As of August 7, 2007
2007 EPS
Basic EPS (GAAP basis) $4.11 – $4.31
Excluding Unusual Items:
Benefit from New Regulatory Asset
Authorized by PPUC (0.05)
Gain on sale of non-core assets (0.04)
Trust Securities Impairment 0.03
Basic EPS (non-GAAP basis) $4.05 – $4.25

16

FirstEnergy – Driving Performance & Delivering Results

An attractive risk/reward opportunity

Effectively managing transition
to competitive markets
Realizing full potential of assets
Significant
Reinvesting for future growth
Earnings
Growth
Effectively deploying strong cash flow
Potential
Striving for continuous improvement
Maintaining strategic flexibility
Well-positioned for climate legislation

Morgan Stanley Electric Utilities Corporate Access Day Investment Highlights
2

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