Edgar Filing: CLEVELAND ELECTRIC ILLUMINATING CO

main_10q.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission	Registrant; State of Incorporation;	I.R.S. Employer
File Number	Address; and Telephone Number	Identification No.

333-21011	FIRSTENERGY CORP.	34-1843785
	(An Ohio Corporation)
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402

000-53742	FIRSTENERGY SOLUTIONS CORP.	31-1560186
	(An Ohio Corporation)
	c/o FirstEnergy Corp.
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402

1-2578	OHIO EDISON COMPANY	34-0437786
	(An Ohio Corporation)
	c/o FirstEnergy Corp.
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402

1-2323	THE CLEVELAND ELECTRIC ILLUMINATING COMPANY	34-0150020
	(An Ohio Corporation)
	c/o FirstEnergy Corp.
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402

1-3583	THE TOLEDO EDISON COMPANY	34-4375005
	(An Ohio Corporation)
	c/o FirstEnergy Corp.
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402

1-3141	JERSEY CENTRAL POWER & LIGHT COMPANY	21-0485010
	(A New Jersey Corporation)
	c/o FirstEnergy Corp.
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402

1-446	METROPOLITAN EDISON COMPANY	23-0870160
	(A Pennsylvania Corporation)
	c/o FirstEnergy Corp.
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402

1-3522	PENNSYLVANIA ELECTRIC COMPANY	25-0718085
	(A Pennsylvania Corporation)
	c/o FirstEnergy Corp.
	76 South Main Street
	Akron, OH 44308
	Telephone (800)736-3402

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes (X) No ( )	FirstEnergy Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company
Yes ( ) No (X)	FirstEnergy Solutions Corp.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes (X) No ( )

FirstEnergy Corp.

Yes ( ) No ( )

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer (X)	FirstEnergy Corp.
Accelerated Filer ( )	N/A
Non-accelerated Filer (Do not check if a smaller reporting company) (X)	FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company

Smaller Reporting

Company

( )

N/A

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes ( ) No (X)

FirstEnergy Corp., FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

	OUTSTANDING
CLASS	AS OF August 3, 2009
FirstEnergy Corp., $0.10 par value	304,835,407
FirstEnergy Solutions Corp., no par value	7
Ohio Edison Company, no par value	60
The Cleveland Electric Illuminating Company, no par value	67,930,743
The Toledo Edison Company, $5 par value	29,402,054
Jersey Central Power & Light Company, $10 par value	13,628,447
Metropolitan Edison Company, no par value	859,500
Pennsylvania Electric Company, $20 par value	4,427,577

FirstEnergy Corp. is the sole holder of FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company common stock.

This combined Form 10-Q is separately filed by FirstEnergy Corp., FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. No registrant makes any representation as to information relating to any other registrant, except that information relating to any of the FirstEnergy subsidiary registrants is also attributed to FirstEnergy Corp.

OMISSION OF CERTAIN INFORMATION

FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company meet the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and are therefore filing this Form 10-Q with the reduced disclosure format specified in General Instruction H(2) to Form 10-Q.

Forward-Looking Statements: This Form 10-Q 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 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 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 Pennsylvania,

·	the impact of the PUCO’s regulatory process on the Ohio Companies associated with the distribution rate case,

·	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, revised environmental requirements, including possible GHG emission regulations,

·	the potential impacts of the U.S. Court of Appeals’ July 11, 2008 decision requiring revisions to 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 that certain generating units may need to be shut down) or levels of emission reductions related to the Consent Decree resolving the NSR 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 NRC,

·	Met-Ed’s and Penelec’s transmission service charge filings with the PPUC,

·	the continuing availability of generating units and their ability 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,

·	the changing market conditions that could affect the value of assets held in the registrants’ nuclear decommissioning trusts, pension trusts and other trust funds, and cause FirstEnergy to make additional contributions sooner, or in an amount that is larger than currently anticipated,

·	the ability to access the public securities and other capital and credit markets in accordance with FirstEnergy’s financing plan and the cost of such capital,

·	changes in general economic conditions affecting the registrants,

·	the state of the capital and credit markets affecting the registrants,

·	interest rates and any actions taken by credit rating agencies that could negatively affect the registrants’ access to financing or its costs and increase requirements to post additional collateral to support outstanding commodity positions, LOCs and other financial guarantees,

·	the continuing decline of the national and regional economy and its impact on the registrants’ major industrial and commercial customers,

·	issues concerning the soundness of financial institutions and counterparties with which the registrants do business, and

·	the risks and other factors discussed from time to time in the registrants’ 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 management to predict all such factors, nor assess the impact of any such factor on the registrants’ 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. A security rating is not a recommendation to buy, sell or hold securities that may be subject to revision or withdrawal at any time by the assigning rating organization. Each 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.

TABLE OF CONTENTS

		Pages

Glossary of Terms		iii-v

Part I. Financial Information

Items 1. and 2. - Financial Statements and Management's Discussion and Analysis ofFinancial Condition and Results of Operations.

FirstEnergy Corp.

	Management's Discussion and Analysis of Financial Condition and
	Results of Operations	1-44
	Report of Independent Registered Public Accounting Firm	45
	Consolidated Statements of Income	46
	Consolidated Statements of Comprehensive Income	47
	Consolidated Balance Sheets	48
	Consolidated Statements of Cash Flows	49

FirstEnergy Solutions Corp.

	Management's Narrative Analysis of Results of Operations	50-53
	Report of Independent Registered Public Accounting Firm	54
	Consolidated Statements of Income and Comprehensive Income	55
	Consolidated Balance Sheets	56
	Consolidated Statements of Cash Flows	57

Ohio Edison Company

	Management's Narrative Analysis of Results of Operations	58-59
	Report of Independent Registered Public Accounting Firm	60
	Consolidated Statements of Income and Comprehensive Income	61
	Consolidated Balance Sheets	62
	Consolidated Statements of Cash Flows	63

The Cleveland Electric Illuminating Company

	Management's Narrative Analysis of Results of Operations	64-65
	Report of Independent Registered Public Accounting Firm	66
	Consolidated Statements of Income and Comprehensive Income	67
	Consolidated Balance Sheets	68
	Consolidated Statements of Cash Flows	69

The Toledo Edison Company

	Management's Narrative Analysis of Results of Operations	70-71
	Report of Independent Registered Public Accounting Firm	72
	Consolidated Statements of Income and Comprehensive Income	73
	Consolidated Balance Sheets	74
	Consolidated Statements of Cash Flows	75

TABLE OF CONTENTS (Cont'd)

Jersey Central Power & Light Company		Pages

	Management's Narrative Analysis of Results of Operations	76-77
	Report of Independent Registered Public Accounting Firm	78
	Consolidated Statements of Income and Comprehensive Income	79
	Consolidated Balance Sheets	80
	Consolidated Statements of Cash Flows	81

Metropolitan Edison Company

	Management's Narrative Analysis of Results of Operations	82-83
	Report of Independent Registered Public Accounting Firm	84
	Consolidated Statements of Income and Comprehensive Income	85
	Consolidated Balance Sheets	86
	Consolidated Statements of Cash Flows	87

Pennsylvania Electric Company

	Management's Narrative Analysis of Results of Operations	88-89
	Report of Independent Registered Public Accounting Firm	90
	Consolidated Statements of Income and Comprehensive Income	91
	Consolidated Balance Sheets	92
	Consolidated Statements of Cash Flows	93

Combined Management's Discussion and Analysis of Registrant Subsidiaries		94-109

Combined Notes to Consolidated Financial Statements		110-147

Item 3. Quantitative and Qualitative Disclosures About Market Risk.		148

Item 4. Controls and Procedures – FirstEnergy.		148

Item 4T. Controls and Procedures – FES, OE, CEI, TE, JCP&L, Met-Ed and Penelec.		148

Part II. Other Information

Item 1. Legal Proceedings.		149

Item 1A. Risk Factors.		149

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.		149

Item 4. Submission of Matters to a Vote of Security Holders.		149-150

Item 6. Exhibits.		151-154

GLOSSARY OF TERMS

The following abbreviations and acronyms are used in this report to identify FirstEnergy Corp. and its current and former subsidiaries:

ATSI	American Transmission Systems, Incorporated, owns and operates transmission facilities
CEI	The Cleveland Electric Illuminating Company, an Ohio electric utility operating subsidiary
FENOC	FirstEnergy Nuclear Operating Company, operates nuclear generating facilities
FES	FirstEnergy Solutions Corp., provides energy-related products and services
FESC	FirstEnergy Service Company, provides legal, financial and other corporate support services
FEV	FirstEnergy Ventures Corp., invests in certain unregulated enterprises and business ventures
FGCO	FirstEnergy Generation Corp., owns and operates non-nuclear generating facilities
FirstEnergy	FirstEnergy Corp., a public utility holding company
GPU	GPU, Inc., former parent of JCP&L, Met-Ed and Penelec, which merged with FirstEnergy on November 7, 2001
JCP&L	Jersey Central Power & Light Company, a New Jersey electric utility operating subsidiary
JCP&L Transition Funding	JCP&L Transition Funding LLC, a Delaware limited liability company and issuer of transition bonds
JCP&L Transition Funding II	JCP&L Transition Funding II LLC, a Delaware limited liability company and issuer of transition bonds
Met-Ed	Metropolitan Edison Company, a Pennsylvania electric utility operating subsidiary
NGC	FirstEnergy Nuclear Generation Corp., owns nuclear generating facilities
OE	Ohio Edison Company, an Ohio electric utility operating subsidiary
Ohio Companies	CEI, OE and TE
Penelec	Pennsylvania Electric Company, a Pennsylvania electric utility operating subsidiary
Penn	Pennsylvania Power Company, a Pennsylvania electric utility operating subsidiary of OE
Pennsylvania Companies	Met-Ed, Penelec and Penn
PNBV	PNBV Capital Trust, a special purpose entity created by OE in 1996
Shelf Registrants	OE, CEI, TE, JCP&L, Met-Ed and Penelec
Shippingport	Shippingport Capital Trust, a special purpose entity created by CEI and TE in 1997
Signal Peak	A joint venture between FirstEnergy Ventures Corp. and Boich Companies, that owns mining and coal transportation operations near Roundup, Montana
TE	The Toledo Edison Company, an Ohio electric utility operating subsidiary
Utilities	OE, CEI, TE, Penn, JCP&L, Met-Ed and Penelec
Waverly	The Waverly Power and Light Company, a wholly owned subsidiary of Penelec

The following abbreviations and acronyms are used to identify frequently used terms in this report:

AEP	American Electric Power Company, Inc.
ALJ	Administrative Law Judge
AMP-Ohio	American Municipal Power-Ohio, Inc.
AOCL	Accumulated Other Comprehensive Loss
AQC	Air Quality Control
BGS	Basic Generation Service
CAA	Clean Air Act
CAIR	Clean Air Interstate Rule
CAMR	Clean Air Mercury Rule
CBP	Competitive Bid Process
CO2	Carbon Dioxide
CTC	Competitive Transition Charge
DOJ	United States Department of Justice
DPA	Department of the Public Advocate, Division of Rate Counsel
EMP	Energy Master Plan
EPA	United States Environmental Protection Agency
EPACT	Energy Policy Act of 2005
ESP	Electric Security Plan
FASB	Financial Accounting Standards Board
FERC	Federal Energy Regulatory Commission
FIN	FASB Interpretation
FIN 46R	FIN 46 (revised December 2003), "Consolidation of Variable Interest Entities"
FIN 48	FIN 48, "Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109"

iii

GLOSSARY OF TERMS, Cont'd.

FMB	First Mortgage Bond
FSP	FASB Staff Position
FSP FAS 115-2 and FAS 124-2	FSP FAS 115-2 and FAS 124-2, "Recognition and Presentation of Other-Than-Temporary Impairments"
FSP FAS 132(R)-1	FSP FAS 132(R)-1, "Employers' Disclosures about Postretirement Benefit Plan Assets"
FSP FAS 157-4	FSP FAS 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly"
GAAP	Accounting Principles Generally Accepted in the United States
GHG	Greenhouse Gases
ICE	Intercontinental Exchange
IRS	Internal Revenue Service
kV	Kilovolt
KWH	Kilowatt-hours
LED	Light-emitting Diode
LIBOR	London Interbank Offered Rate
LOC	Letter of Credit
MISO	Midwest Independent Transmission System Operator, Inc.
Moody's	Moody's Investors Service, Inc.
MRO	Market Rate Offer
MW	Megawatts
MWH	Megawatt-hours
NAAQS	National Ambient Air Quality Standards
NERC	North American Electric Reliability Corporation
NJBPU	New Jersey Board of Public Utilities
NOV	Notice of Violation
NOX	Nitrogen Oxide
NRC	Nuclear Regulatory Commission
NSR	New Source Review
NUG	Non-Utility Generation
NUGC	Non-Utility Generation Charge
NYMEX	New York Mercantile Exchange
OCI	Other Comprehensive Income
OPEB	Other Post-Employment Benefits
OVEC	Ohio Valley Electric Corporation
PCRB	Pollution Control Revenue Bond
PJM	PJM Interconnection L. L. C.
PLR	Provider of Last Resort; an electric utility's obligation to provide generation service to customers whose alternative supplier fails to deliver service
PPUC	Pennsylvania Public Utility Commission
PSA	Power Supply Agreement
PUCO	Public Utilities Commission of Ohio
RCP	Rate Certainty Plan
RFP	Request for Proposal
RTC	Regulatory Transition Charge
RTO	Regional Transmission Organization
S&P	Standard & Poor's Ratings Service
SB221	Amended Substitute Senate Bill 221
SBC	Societal Benefits Charge
SEC	U.S. Securities and Exchange Commission
SECA	Seams Elimination Cost Adjustment
SFAS	Statement of Financial Accounting Standards
SFAS 71	SFAS No. 71, "Accounting for the Effects of Certain Types of Regulation"
SFAS 107	SFAS No. 107, "Disclosure about Fair Value of Financial Instruments"
SFAS 115	SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
SFAS 133	SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"
SFAS 140	SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities – a replacement of FASB Statement No. 125”

GLOSSARY OF TERMS, Cont'd.

SFAS 157	SFAS No. 157, "Fair Value Measurements"
SFAS 160	SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements – an Amendment of ARB No. 51"
SFAS 166	SFAS No. 166, “Accounting for Transfers of Financial Assets – an amendment of FASB Statement No. 140”
SFAS 167	SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)”
SFAS 168	SFAS No. 168, “The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162”
SIP	State Implementation Plan(s) Under the Clean Air Act
SNCR	Selective Non-Catalytic Reduction
SO2	Sulfur Dioxide
TBC	Transition Bond Charge
TMI-2	Three Mile Island Unit 2
TSC	Transmission Service Charge
VIE	Variable Interest Entity

PART I. FINANCIAL INFORMATION

ITEMS 1. AND 2. FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

FIRSTENERGY CORP.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EXECUTIVE SUMMARY

Net income in the second quarter of 2009 was $408 million, or basic and diluted earnings of $1.36 per share of common stock, compared with net income of $263 million, or basic earnings of $0.86 per share of common stock ($0.85 diluted) in the second quarter of 2008. Results in the second quarter of 2009 include a gain of $0.52 per share resulting from the sale of FirstEnergy’s 9% participation interest in OVEC. Net income in the first six months of 2009 was $523 million, or basic and diluted earnings of $1.75 per share of common stock, compared with net income of $540 million, or basic earnings of $1.77 per share of common stock ($1.75 diluted) in the first six months of 2008.

Change in Basic Earnings Per Share From Prior Year Periods	Three Months Ended June 30				Six Months Ended June 30

Basic Earnings Per Share – 2008		$	0.86			$	1.77
Gain on non-core asset sales	0.52				0.46
Regulatory charges – 2009	-				(0.55			)
Income tax resolution – 2009	-				0.04
Organizational restructuring costs – 2009	(0.01			)	(0.06			)
Debt redemption premium / Penelec strike costs – 2009	(0.01			)	(0.01			)
Litigation settlement – 2008	(0.03			)	(0.03			)
Trust securities impairment	0.04				(0.01			)
Revenues (excluding asset sales)	(0.44			)	(0.26			)
Fuel and purchased power	0.17				(0.07			)
Transmission costs	0.20				0.26
Amortization of regulatory assets, net	(0.08			)	0.04
Other expenses		0.14				0.17
Basic Earnings Per Share – 2009		$	1.36			$	1.75

Regulatory Matters

Ohio

On May 14, 2009, FirstEnergy announced that an auction to secure generation supply and pricing for the Ohio Companies for the period June 1, 2009 through May 31, 2011, was completed and the results were approved by the PUCO. The auction resulted in an average weighted wholesale price for generation and transmission of 6.15 cents per KWH. FES was a successful bidder for 51% of the Ohio Companies’ PLR generation requirements. Twelve bidders qualified to participate in the auction with nine successful bidders each securing a portion of the Ohio Companies’ load. Subsequent to the auction FES purchased tranches totaling an additional 11% of the load from other winning bidders. Effective August 1, 2009, FES is supplying 62% of the Ohio Companies’ PLR generation requirements.

On June 17, 2009, the PUCO modified rules that implement the alternative energy portfolio standards created by SB221, including the incorporation of energy efficiency requirements, long-term forecast and greenhouse gas reporting and CO2 control planning. The PUCO filed the rules with the Joint Committee on Agency Rule Review on July 7, 2009, after which begins a 65-day review period. The Ohio Companies and one other party filed applications for rehearing on the rules with the PUCO on July 17, 2009.

On July 27, 2009, the Ohio Companies filed applications with the PUCO to recover three different categories of deferred distribution costs on an accelerated basis. In the Ohio Companies' Amended ESP, the PUCO approved the recovery of these deferrals, with collection originally set to begin in January 2011 and to continue over a 5 or 25 year period. The principal amount plus carrying charges through August 31, 2009 for these deferrals is a total of $298.4 million. If the applications are approved, recovery of this amount, together with carrying charges calculated as approved in the Amended ESP, will be collected in the 18 non-summer months from September 2009 through May 2011, subject to reconciliation until fully collected, with $165 million of the above amount being recovered from residential customers, and $133.4 million being recovered from non-residential customers. Pursuant to the applications, customers would pay significantly less over the life of the recovery of the deferral through the reduction in carrying charges as compared to the expected recovery under the previously approved recovery mechanism.

Pennsylvania

On May 28, 2009, the PPUC approved Met-Ed’s and Penelec’s annual updates to their TSC riders for the period June 1, 2009 through May 31, 2010, as required in connection with the PPUC’s January 2007 rate order. For Penelec’s customers the new TSC resulted in an approximate 1% decrease in monthly bills, reflecting projected PJM transmission costs as well as a reconciliation for costs previously incurred. The TSC for Met-Ed’s customers increased to recover the additional PJM charges paid by Met-Ed in the previous year and to reflect updated projected costs. In order to gradually transition customers to the higher rate, the PPUC approved Met-Ed’s proposal to continue to recover the prior period deferrals allowed in the PPUC’s May 2008 Order and defer $57.5 million of projected costs to a future TSC to be fully recovered by December 31, 2010. Under this proposal, monthly bills for Met-Ed’s customers are expected to increase approximately 9.4% for the period June 2009 through May 2010.

On February 20, 2009, Met-Ed and Penelec filed with the PPUC a generation procurement plan covering the period January 1, 2011, through May 31, 2013. The companies’ plan is designed to provide adequate and reliable service through a prudent mix of long-term, short-term and spot market generation supply as required by Act 129. The plan proposes a staggered procurement schedule, which varies by customer class. On March 30, 2009, Met-Ed and Penelec filed direct testimony pursuant to the March 5, 2009 case schedule issued by the ALJ. The PPUC is expected to issue a final decision in November 2009.

On June 18, 2009, the PPUC issued standards for the smart meter technology procurement and installation plans required by Act 129 to be filed by the state’s large electric distribution companies by August 14, 2009. The PPUC also provided guidance on the procedures to be followed for submittal, review and approval of all aspects of the smart meter plans. On June 18, 2009, the PPUC also adopted a total resource cost test to analyze the costs and benefits of energy efficiency and conservation plans filed under Act 129. On July 1, 2009, Met-Ed, Penelec and Penn filed energy efficiency and conservation plans in accordance with the requirements of Act 129.

FERC

On July 31, 2009, FirstEnergy announced its intention to withdraw its transmission facilities from MISO and realign them into PJM. The effect of the realignment is to consolidate essentially all of FirstEnergy's generation and transmission operations within a single RTO. FirstEnergy expects to make a filing with the FERC in August 2009 to obtain the necessary regulatory approvals. FirstEnergy plans to integrate its operations into PJM by June 1, 2011. FERC approval will be sought by the end of 2009 in order to allow FirstEnergy's load and generation operations currently in MISO to participate in the PJM capacity auction held in May 2010 for service beginning June 1, 2013.

Operational Matters

Recessionary Market Conditions and Weather Impacts

The demand for electricity produced and sold by FirstEnergy’s competitive subsidiary, FES, along with the value of that electricity, is materially impacted by conditions in competitive power markets, global economic activity, economic activity in the Midwest and Mid-Atlantic regions, and weather conditions in FirstEnergy’s service territories. The current recessionary economic conditions, particularly in the automotive and steel industries, compounded by unusually mild regional summertime temperatures, have directly impacted FirstEnergy’s operations and revenues over the last six to nine months.

The level of demand for electricity directly impacts FirstEnergy’s distribution, transmission and generation revenues, the quantity of electricity produced, purchased power expense and fuel expense. FirstEnergy has taken various actions and instituted a number of changes in operating practices to mitigate these external influences. These actions include employee severances, wage reductions, employee and retiree benefit changes, reduced levels of overtime and the use of fewer contractors. However, the continuation of recessionary economic conditions, coupled with unusually mild weather patterns and the resulting impact on electricity prices and demand could impact FirstEnergy's future operating performance and financial condition and may require further changes in FirstEnergy’s operations.

Refueling Outages

On May 13, 2009, the Perry Plant returned to service after completing its 12th refueling and maintenance outage which began on February 23, 2009. On May 21, 2009, the Beaver Valley Unit 1 returned to service after completing its 19th refueling outage which began on April 20, 2009. Several safety inspections and maintenance projects were completed during the outages which were designed to facilitate the continued safe and reliable operations of the units.

FES Retail Activities

As of August 1, 2009, FES has signed 50 government aggregation contracts that will provide discounted generation prices to approximately 600,000 residential and small commercial customers. The governmental aggregator may choose between a graduated or flat percentage discount. The graduated discount plan offers savings of 10%, 6%, 5%, and 4% in the years 2009-2012, respectively. The flat percentage contract offers a 6% discount through the end of the contract. Discounts will be based on the generation price customers would have been charged if they purchased electric generation service from their electric utility and will be effective beginning in late summer or early fall.

Union Contracts

On May 21, 2009, 517 Penelec employees, represented by the International Brotherhood of Electrical Workers (IBEW) Local 459, elected to strike. In response, on May 22, 2009, Penelec implemented its work-continuation plan to use nearly 400 non-represented employees with previous line experience and training drawn from Penelec and other FirstEnergy operations to perform service reliability and priority maintenance work in Penelec’s service territory. Penelec's IBEW Local 459 employees ratified a three-year contract agreement on July 19, 2009, and returned to work on July 20, 2009.

On June 26, 2009, FirstEnergy announced that seven of its union locals, representing about 2,600 employees, have ratified contract extensions. These unions include employees from Penelec, Penn, CEI, OE and TE, along with certain power plant employees.

On July 8, 2009, FirstEnergy announced that employees of Met-Ed represented by IBEW Local 777 ratified a two-year contract. Union members had been working without a contract since the previous agreement expired on April 30, 2009.

Voluntary Early Retirement Program

In June 2009, FirstEnergy offered a Voluntary Enhanced Retirement Option (VERO), which provides additional benefits for qualified employees who elect to retire. As of July 31, 2009, the VERO was accepted by 382 non-represented employees and 225 employees represented by unions.

Financial Matters

Rating Agency Actions

On June 17, 2009, Moody’s issued a report affirming FirstEnergy’s Baa3 and FES’ Baa2 credit ratings and maintained its stable outlook. On July 9, 2009, S&P reaffirmed ratings on FirstEnergy and its subsidiaries, including its BBB corporate credit rating, and maintained its stable outlook.

Financing Activities

On April 24, 2009, TE issued $300 million of 7.25% Senior Secured Notes due 2020 and used the net proceeds to repay short-term borrowings, to fund capital expenditures and for other general corporate purposes.

On June 16, 2009, NGC issued a total of approximately $487.5 million in principal amount of FMBs, of which $107.5 million related to one new refunding series of PCRBs and approximately $380 million related to amendments to existing letter of credit and reimbursement agreements supporting seven other series of PCRBs. Similarly, FGCO issued a total of approximately $395.9 million in principal amount of FMBs, of which $247.7 million related to three new refunding series of PCRBs and approximately $148.2 million related to amendments to existing letter of credit and reimbursement agreements supporting two other series of PCRBs. In addition, on June 16, 2009, NGC issued an FMB in a principal amount of up to $500 million in connection with its guaranty of FES’ obligations to post and maintain collateral under the PSA entered into by FES with the Ohio Companies as a result of the May 13-14, 2009 CBP auction.

On June 30, 2009, NGC issued a total of approximately $273.3 million in principal amount of FMBs, of which approximately $92 million related to three existing series of PCRBs and approximately $181.3 million related to amendments to existing letter of credit and reimbursement agreements supporting three other series of PCRBs. FGCO issued a total of approximately $52.1 million in principal amount of FMBs related to three existing series of PCRBs.

On June 30, 2009, Penn privately placed $100 million of FMBs having a fixed interest rate of 6.09%, and maturing on June 30, 2022. The proceeds were used by Penn to repurchase equity from OE and for capital expenditures.

FIRSTENERGY'S BUSINESS

FirstEnergy is a diversified energy company headquartered in Akron, Ohio, that operates primarily through three core business segments (see Results of Operations).

Energy Delivery Services transmits and distributes electricity through FirstEnergy's eight utility operating companies, serving 4.5 million customers within 36,100 square miles of Ohio, Pennsylvania and New Jersey and purchases power for its PLR and default service requirements in Pennsylvania and New Jersey. This business segment derives its revenues principally from the delivery of electricity within FirstEnergy's service areas and the sale of electric generation service to retail customers who have not selected an alternative supplier (default service) in its Pennsylvania and New Jersey franchise areas.

Competitive Energy Services supplies the electric power needs of end-use customers through retail and wholesale arrangements, including associated company power sales to meet a portion of the PLR and default service requirements of FirstEnergy's Ohio and Pennsylvania utility subsidiaries and competitive retail sales to customers primarily in Ohio, Pennsylvania, Maryland, Michigan and Illinois. This business segment owns or leases and operates 19 generating facilities with a net demonstrated capacity of 13,710 MW and also purchases electricity to meet sales obligations. The segment's net income is derived primarily from affiliated company power sales and non-affiliated electric generation sales revenues less the related costs of electricity generation, including purchased power and net transmission and ancillary costs charged by PJM and MISO to deliver energy to the segment's customers.

Ohio Transitional Generation Services supplies the electric power needs of non-shopping customers under the default service requirements of FirstEnergy's Ohio Companies. The segment's net income is derived primarily from electric generation sales revenues (including transmission) less the cost of power purchased through the Ohio Companies' CBP and transmission and ancillary costs charged by MISO to deliver energy to retail customers.

RESULTS OF OPERATIONS

The financial results discussed below include revenues and expenses from transactions among FirstEnergy's business segments. A reconciliation of segment financial results is provided in Note 11 to the consolidated financial statements. Earnings by major business segment were as follows:

	Three Months Ended June 30									Six Months Ended June 30
							Increase									Increase
	2009			2008			(Decrease)			2009			2008			(Decrease)
	(In millions, except per share data)
Earnings By Business Segment:
Energy delivery services	$	133		$	193		$	(60	)	$	91		$	372		$	(281	)
Competitive energy services		276			66			210			431			153			278
Ohio transitional generation services		21			20			1			45			43			2
Other and reconciling adjustments*		(16	)		(16	)		-			(34	)		(29	)		(5	)
Total	$	414		$	263		$	151		$	533		$	539		$	(6	)

Basic Earnings Per Share	$	1.36		$	0.86		$	0.50		$	1.75		$	1.77		$	(0.02	)
Diluted Earnings Per Share	$	1.36		$	0.85		$	0.51		$	1.75		$	1.75		$	-

* Consists primarily of interest expense related to holding company debt, corporate support services revenues and expenses, noncontrolling interests and the elimination of intersegment transactions.

Summary of Results of Operations – Second Quarter 2009 Compared with Second Quarter 2008

Financial results for FirstEnergy's major business segments in the second quarter of 2009 and 2008 were as follows:

							Ohio
	Energy			Competitive			Transitional			Other and
	Delivery			Energy			Generation			Reconciling			FirstEnergy
Second Quarter 2009 Financial Results	Services			Services			Services			Adjustments			Consolidated
	(In millions)
Revenues:
External
Electric	$	1,797		$	205		$	860		$	-		$	2,862
Other		127			299			8			(25	)		409
Internal		-			839			-			(839	)		-
Total Revenues		1,924			1,343			868			(864	)		3,271

Expenses:
Fuel		-			276			-			-			276
Purchased power		864			186			813			(839	)		1,024
Other operating expenses		314			315			14			(31	)		612
Provision for depreciation		110			68			-			7			185
Amortization of regulatory assets		184			-			49			-			233
Deferral of new regulatory assets		-			-			(45	)		-			(45	)
General taxes		152			25			2			5			184
Total Expenses		1,624			870			833			(858	)		2,469

Operating Income		300			473			35			(6	)		802
Other Income (Expense):
Investment income		35			6			-			(14	)		27
Interest expense		(114	)		(32	)		-			(60	)		(206	)
Capitalized interest		1			14			-			18			33
Total Other Expense		(78	)		(12	)		-			(56	)		(146	)

Income Before Income Taxes		222			461			35			(62	)		656
Income taxes		89			185			14			(40	)		248
Net Income		133			276			21			(22	)		408
Less: Noncontrolling interest income (loss)		-			-			-			(6	)		(6	)
Earnings available to FirstEnergy Corp.	$	133		$	276		$	21		$	(16	)	$	414

							Ohio
	Energy			Competitive			Transitional			Other and
	Delivery			Energy			Generation			Reconciling			FirstEnergy
Second Quarter 2008 Financial Results	Services			Services			Services			Adjustments			Consolidated
	(In millions)
Revenues:
External
Electric	$	2,030		$	324		$	670		$	-		$	3,024
Other		152			51			13			5			221
Internal		-			704			-			(704	)		-
Total Revenues		2,182			1,079			683			(699	)		3,245

Expenses:
Fuel		-			316			-			-			316
Purchased power		998			221			555			(704	)		1,070
Other operating expenses		413			312			81			(25	)		781
Provision for depreciation		104			59			-			5			168
Amortization of regulatory assets, net		235			-			11			-			246
Deferral of new regulatory assets		(98	)		-			-			-			(98	)
General taxes		149			24			2			5			180
Total Expenses		1,801			932			649			(719	)		2,663

Operating Income		381			147			34			20			582
Other Income (Expense):
Investment income		40			(8	)		(1	)		(15	)		16
Interest expense		(100	)		(38	)		-			(50	)		(188	)
Capitalized interest		1			10			-			2			13
Total Other Expense		(59	)		(36	)		(1	)		(63	)		(159	)

Income Before Income Taxes		322			111			33			(43	)		423
Income taxes		129			45			13			(27	)		160
Net Income		193			66			20			(16	)		263
Less: Noncontrolling interest income		-			-			-			-			-
Earnings available to FirstEnergy Corp.	$	193		$	66		$	20		$	(16	)	$	263

Changes Between Second Quarter 2009 and
Second Quarter 2008 Financial Results
Increase (Decrease)

Revenues:
External
Electric	$	(233	)	$	(119	)	$	190		$	-		$	(162	)
Other		(25	)		248			(5	)		(30	)		188
Internal		-			135			-			(135	)		-
Total Revenues		(258	)		264			185			(165	)		26

Expenses:
Fuel		-			(40	)		-			-			(40	)
Purchased power		(134	)		(35	)		258			(135	)		(46	)
Other operating expenses		(99	)		3			(67	)		(6	)		(169	)
Provision for depreciation		6			9			-			2			17
Amortization of regulatory assets		(51	)		-			38			-			(13	)
Deferral of new regulatory assets		98			-			(45	)		-			53
General taxes		3			1			-			-			4
Total Expenses		(177	)		(62	)		184			(139	)		(194	)

Operating Income		(81	)		326			1			(26	)		220
Other Income (Expense):
Investment income		(5	)		14			1			1			11
Interest expense		(14	)		6			-			(10	)		(18	)
Capitalized interest		-			4			-			16			20
Total Other Expense		(19	)		24			1			7			13

Income Before Income Taxes		(100	)		350			2			(19	)		233
Income taxes		(40	)		140			1			(13	)		88
Net Income		(60	)		210			1			(6	)		145
Less: Noncontrolling interest income		-			-			-			(6	)		(6	)
Earnings available to FirstEnergy Corp.	$	(60	)	$	210		$	1		$	-		$	151

Energy Delivery Services – Second Quarter 2009 Compared with Second Quarter 2008

Net income decreased $60 million to $133 million in the second quarter of 2009 compared to $193 million in the second quarter of 2008, primarily due to lower revenues and increased amortization of regulatory assets, partially offset by lower purchased power and other operating expenses.

Revenues –

The decrease in total revenues resulted from the following sources:

	Three Months
	Ended June 30
Revenues by Type of Service	2009		2008		Decrease
	(In millions)
Distribution services	$	813	$	919	$	(106)
Generation sales:
Retail		718		772		(54)
Wholesale		162		252		(90)
Total generation sales		880		1,024		(144)
Transmission		188		196		(8)
Other		43		43		-
Total Revenues	$	1,924	$	2,182	$	(258)

The decrease in distribution deliveries by customer class is summarized in the following table:

Electric Distribution KWH Deliveries
Residential	(2.8	)%
Commercial	(3.8	)%
Industrial	(20.8	)%
Total Distribution KWH Deliveries	(9.4	)%

Lower deliveries to residential customers reflected decreased weather-related usage in the second quarter of 2009, as heating and cooling degree days decreased by 2% and 23%, respectively, from the same period in 2008. The decrease in distribution deliveries to commercial and industrial customers was primarily due to economic conditions in FirstEnergy's service territory. In the industrial sector, KWH deliveries declined to major automotive (34.8%) and steel (50.7%). Transition charges for OE and TE that ceased effective January 1, 2009 with the full recovery of related costs and the Transition rate reduction for CEI effective June 1, 2009, were offset by PUCO-approved distribution rate increases (see Regulatory Matters – Ohio).

The following table summarizes the price and volume factors contributing to the $144 million decrease in generation revenues in the second quarter of 2009 compared to the second quarter of 2008:

Sources of Change in Generation Revenues	Increase (Decrease)
	(In millions)
Retail:
Effect of 9.5 % decrease in sales volumes	$	(73	)
Change in prices		19
		(54	)
Wholesale:
Effect of 12.7 % decrease in sales volumes		(32	)
Change in prices		(58	)
		(90	)
Net Decrease in Generation Revenues	$	(144	)

The decrease in retail generation sales volumes was primarily due to weakened economic conditions and the lower weather-related usage described above. The increase in retail generation prices during the second quarter of 2009 reflected increased generation rates for JCP&L resulting from the New Jersey BGS auction and for Penn under its RFP process. Wholesale generation sales decreased principally as a result of JCP&L selling less available power from NUGs due to the termination of a NUG purchase contract in October 2008. The decrease in prices reflected lower spot prices for PJM market participants.

Transmission revenues decreased $8 million primarily due to lower PJM transmission revenues partially offset by higher transmission rates for Met-Ed and Penelec resulting from the annual update to their TSC riders in June 2008 and 2009. Met-Ed and Penelec defer the difference between transmission revenues and transmission costs incurred, resulting in no material effect to current period earnings (see Regulatory Matters – Pennsylvania).

Expenses –

Total expenses decreased by $177 million due to the net impact of the following:

Purchased power costs were $134 million lower in the second quarter of 2009 due to lower volume requirements and an increase in the amount of NUG costs deferred. The increased unit costs reflected the effect of higher JCP&L costs resulting from the BGS auction process. However, JCP&L is permitted to defer for future collection from customers the amounts by which its costs of supplying BGS to non-shopping customers and costs incurred under NUG agreements exceed amounts collected through BGS and NUGC rates and market sales of NUG energy and capacity. The following table summarizes the sources of changes in purchased power costs:

Source of Change in Purchased Power	Increase (Decrease)
	(In millions)
Purchases from non-affiliates:
Change due to increased unit costs	$	45
Change due to decreased volumes		(165	)
		(120	)
Purchases from FES:
Change due to decreased unit costs		(7	)
Change due to increased volumes		15
		8

Increase in NUG costs deferred		(22	)
Net Decrease in Purchased Power Costs	$	(134	)

PJM transmission expenses were lower by $70 million resulting from reduced volumes and congestion costs.

Contractor and material costs decreased $18 million due primarily to reduced maintenance activities as more work was devoted to capital projects.

Labor and employee benefits decreased $13 million as a result of FirstEnergy cost control initiatives.

Storm related costs were $2 million higher than in the second quarter 2008.

Amortization of regulatory assets decreased $51 million due primarily to the cessation of transition cost amortizations for OE and TE, partially offset by PJM transmission cost amortization in the second quarter of 2009.

The deferral of new regulatory assets decreased by $98 million in the second quarter of 2009 principally due to the absence of PJM transmission cost deferrals and RCP distribution cost deferrals by the Ohio Companies.

Depreciation expense increased $6 million due to property additions since the second quarter of 2008.

General taxes increased $3 million primarily due to higher property taxes associated with the property additions noted above.

Other Expense –

Other expense increased $19 million in the second quarter of 2009 compared to the second quarter of 2008 due to lower investment income of $5 million, reflecting reduced loan balances to the regulated money pool, and higher interest expense (net of capitalized interest) of $14 million, reflecting $600 million of senior notes issuances by JCP&L and Met-Ed in January 2009, and $300 million by TE in April 2009.

Competitive Energy Services – Second Quarter 2009 Compared with Second Quarter 2008

Net income for this segment was $276 million in the second quarter of 2009 compared to $66 million in the same period in 2008. The $210 million increase in net income principally reflects FGCO's $252 million gain from the sale of 9% of its participation in OVEC ($158 million after tax) and an increase in gross sales margins.

Revenues –

Total revenues increased $264 million in the second quarter of 2009 due to the OVEC sale described above and higher unit prices on affiliated generation sales to the Ohio Companies, partially offset by lower non-affiliated generation sales volumes.

The net increase in total revenues resulted from the following sources:

	Three Months
	Ended June 30				Increase
Revenues By Type of Service	2009		2008		(Decrease)
	(In millions)
Non-Affiliated Generation Sales:
Retail	$	83	$	154	$	(71	)
Wholesale		122		170		(48	)
Total Non-Affiliated Generation Sales		205		324		(119	)
Affiliated Generation Sales		839		704		135
Transmission		16		33		(17	)
Sale of OVEC participation interest		252		-		252
Other		31		18		13
Total Revenues	$	1,343	$	1,079	$	264

The lower retail revenues reflect the expiration of certain government aggregation programs in Ohio at the end of 2008 that were supplied by FES, partially offset by the acquisition of new retail customer contracts in the MISO and PJM markets in the second quarter of 2009. As of August 1, 2009, FES has signed new government aggregation contracts with 50 communities that will provide discounted generation prices to approximately 600,000 residential and small commercial customers. The retail sales volumes associated with these new contracts are expected to result in an increased level of retail revenues in the second half of 2009 as compared to results for the period ended June 30, 2009.

Lower non-affiliated wholesale revenues resulted from lower capacity prices and sales volumes in both the PJM and MISO markets. The increased affiliated company generation revenues were due to higher unit prices for sales to the Ohio Companies under a PSA in April and May 2009 and the CBP in June 2009 (see Regulatory Matters – Ohio), partially offset by lower unit prices to the Pennsylvania Companies and a decrease in sales volumes to the Ohio Companies. Increased sales volumes to the Pennsylvania Companies reflect FES’ sales to Met-Ed and Penelec, following the expiration of a third-party supply contract at the end of 2008. While unit prices for each of the Pennsylvania Companies did not change, the mix of sales among the companies caused the composite price to decline. FES supplied 100% of the power for the Ohio Companies’ PLR service in April and May 2009 and approximately 56% of the Ohio Companies' supply needs for June 2009. Subsequent to the Ohio Companies’ CBP, FES purchased additional tranches from other winning bidders and effective August 1, 2009, FES will supply 62% of the Ohio Companies’ PLR generation requirements.

The following tables summarize the price and volume factors contributing to changes in revenues from generation sales:

Source of Change in Non-Affiliated Generation Revenues	Increase (Decrease)
	(In millions)
Retail:
Effect of 58.7 % decrease in sales volumes	$	(91	)
Change in prices		20
		(71	)
Wholesale:
Effect of 36.2 % decrease in sales volumes		(61	)
Change in prices		13
		(48	)
Net Decrease in Non-Affiliated Generation Revenues	$	(119	)

Source of Change in Affiliated Generation Revenues	Increase (Decrease)
	(In millions)
Ohio Companies:
Effect of 13.2 % decrease in sales volumes	$	(74	)
Change in prices		201
		127
Pennsylvania Companies:
Effect of 10 % increase in sales volumes		15
Change in prices		(7	)
		8
Net Increase in Affiliated Generation Revenues	$	135

Transmission revenues decreased $17 million due primarily to reduced loads following the termination of the government aggregation programs mentioned above. The increase in other revenues reflected NGC's increased rental income associated with its acquisition of additional equity interests in the Perry and Beaver Valley Unit 2 leases.

Expenses -

Total expenses decreased $62 million in the second quarter of 2009 due to the following factors:

·	Fuel costs decreased $40 million due to decreased generation volumes ($70 million) partially offset by higher unit prices ($30 million). The increased unit prices, which are expected to continue for the remainder of 2009, primarily reflect higher costs for eastern coal.

·	Purchased power costs decreased $35 million due primarily to lower unit costs ($34 million) and lower volume requirements ($1 million).

·	Fossil operating costs decreased $28 million due to a reduction in contractor and material costs ($18 million) and lower labor and employee benefit expenses ($10 million), reflecting FirstEnergy’s cost control initiatives.

·	Nuclear operating costs decreased $7 million due to lower labor and employee benefit expenses, partially offset by higher expenses associated with the 2009 Perry and Beaver Valley refueling outages and the Davis-Besse maintenance outage.

·	Other operating expenses increased $22 million due primarily to increased intersegment billings for leasehold costs from the Ohio Companies.

·	Transmission expense increased $17 million due primarily to increased net congestion and loss expenses in PJM.

Higher depreciation expense of $9 million was due primarily to NGC's increased ownership interests in Perry and Beaver Valley Unit 2 following its purchase of lease equity interests.

Other Expense –

Total other expense in the second quarter of 2009 was $24 million lower than the second quarter of 2008, primarily due to a $16 million decrease in trust securities impairments and a $10 million decrease in interest expense (net of capitalized interest).

Ohio Transitional Generation Services – Second Quarter 2009 Compared with Second Quarter 2008

Net income for this segment increased to $21 million in the second quarter of 2009 from $20 million in the same period of 2008. Higher generation revenues and lower operating expenses were partially offset by higher purchased power costs.

Revenues –

The increase in reported segment revenues resulted from the following sources:

	Three Months
	Ended June 30
Revenues by Type of Service	2009		2008	Increase (Decrease)
	(In millions)
Generation sales:
Retail	$	796	$