FIRSTENERGY CORP (FE) FY 2024 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements: This Form 10-K includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties and readers are cautioned not to place undue reliance on these forward-looking statements. 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,” "forecast," "target," "will," "intend," “believe,” "project," “estimate," "plan" 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, which may include the following (see Glossary of Terms for definitions of capitalized terms):

•The potential liabilities, increased costs and unanticipated developments resulting from government investigations and agreements, including those associated with compliance with or failure to comply with the DPA, and settlements with the OAG's office and SEC.

•The risks and uncertainties associated with government investigations and audits regarding HB 6 and related matters, including potential adverse impacts on federal or state regulatory matters, including, but not limited to, matters relating to rates.

•The risks and uncertainties associated with litigation, arbitration, mediation and similar proceedings, particularly regarding HB 6 related matters.

•Changes in national and regional economic conditions, including recession, volatile interest rates, inflationary pressure, supply chain disruptions, higher fuel costs, and workforce impacts, affecting us and/or our customers and those vendors with which we do business.

•Variations in weather, such as mild seasonal weather variations and severe weather conditions (including events caused, or exacerbated, by climate change, such as wildfires, hurricanes, flooding, droughts, high wind events and extreme heat events) and other natural disasters, which may result in increased storm restoration expenses and negatively affect future operating results.

•The potential liabilities and increased costs arising from regulatory actions or outcomes in response to severe weather conditions and other natural disasters.

•Legislative and regulatory developments, and executive orders, including, but not limited to, matters related to rates, energy regulatory policies, compliance and enforcement activity, cyber security, climate change, and diversity, equity and inclusion.

•The risks associated with physical attacks, such as acts of war, terrorism, sabotage or other acts of violence, and cyber-attacks and other disruptions to our, or our vendors’, information technology system, which may compromise our operations, and data security breaches of sensitive data, intellectual property and proprietary or personally identifiable information.

•The ability to meet our goals relating to climate-related and environmental, social and governance matters, opportunities, improvements, and efficiencies, including our GHG reduction goals.

•The ability to accomplish or realize anticipated benefits through establishing a culture of continuous improvement and our other strategic and financial goals, including, but not limited to, executing Energize365, our transmission and distribution investment plan, executing on our rate filing strategy, controlling costs, improving credit metrics, maintaining investment grade ratings, strengthening our balance sheet and growing earnings.

•Changing market conditions affecting the measurement of certain liabilities and the value of assets held in our pension trusts may negatively impact our forecasted growth rate, results of operations and may also cause us to make contributions to our pension sooner or in amounts that are larger than currently anticipated.

•Mitigating exposure for remedial activities associated with retired and formerly owned electric generation assets, including those sites impacted by the legacy CCR rules that were finalized during 2024.

•Changes to environmental laws and regulations, including, but not limited to, rules finalized by the EPA and SEC, including those currently stayed, related to climate change, and potential changes to such laws and regulations as a result of the new U.S. presidential administration.

•Changes in customers’ demand for power, including, but not limited to, economic conditions, the impact of climate change, emerging technology, particularly with respect to electrification, energy storage and distributed sources of generation.

•The ability to access the public securities and other capital and credit markets in accordance with our financial plans, the cost of such capital and overall condition of the capital and credit markets affecting us, including the increasing number of financial institutions evaluating the impact of climate change on their investment decisions, and the loss of our status as a well-known seasoned issuer.

•Future actions taken by credit rating agencies that could negatively affect either our access to or terms of financing or our financial condition and liquidity.

•Changes in assumptions regarding factors such as economic conditions within our territories, the reliability of our transmission and distribution system, generation resource planning, or the availability of capital or other resources supporting identified transmission and distribution investment opportunities.

•The potential of non-compliance with debt covenants in our credit facilities.

•The ability to comply with applicable reliability standards and energy efficiency and peak demand reduction mandates.

•Human capital management challenges, including among other things, attracting and retaining appropriately trained and qualified employees and labor disruptions by our unionized workforce.

•Changes to significant accounting policies.

•Any changes in tax laws or regulations, including, but not limited to, the IRA of 2022, or adverse tax audit results or rulings and potential changes to such laws and regulations as a result of the new U.S. presidential administration.

•The risks and other factors discussed from time to time in our SEC filings.

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Dividends declared from time to time on our common stock during any period may in the aggregate vary from prior periods due to circumstances considered by the FE Board at the time of the actual declarations. A security rating is not a recommendation to buy or hold securities and is subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating.

These forward-looking statements are also qualified by, and should be read together with, the risk factors included in (a) Item 1A. Risk Factors, (b) Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and (c) other factors discussed herein and in FirstEnergy's other filings with the SEC. The foregoing review of factors also should not be construed as exhaustive. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor assess the impact of any such factor on 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. We expressly disclaim any obligation to update or revise, except as required by law, any forward-looking statements contained herein or in the information incorporated by reference as a result of new information, future events or otherwise.

Forward-looking and other statements in this Annual Report on Form 10-K regarding our Climate Strategy, including our GHG emission reduction goals, are not an indication that these statements are necessarily material to investors or required to be disclosed in our filings with the SEC. In addition, historical, current and forward-looking statements regarding climate matters, including GHG emissions, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve and assumptions that are subject to change in the future.

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FIRSTENERGY CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EXECUTIVE SUMMARY AND RECENT DEVELOPMENTS

Company Overview

FirstEnergy is dedicated to integrity, safety, reliability and operational excellence and is principally involved in the transmission, distribution and generation of electricity through its reportable segments: Distribution, Integrated and Stand-Alone Transmission. Its electric distribution companies form one of the nation's largest investor-owned electric systems, serving over six million customers in Ohio, Pennsylvania, New Jersey, West Virginia, Maryland and New York. FirstEnergy’s transmission subsidiaries operate more than 24,000 miles of transmission lines that connect the Midwest and Mid-Atlantic regions and two regional transmission operation centers. As of December 31, 2024, AGC and MP control 3,604 MWs of net maximum generation capacity.

Segment Overview

During the first quarter of 2024, FirstEnergy’s segment reporting structure was modified to increase transparency for leadership and investors, simplify the presentation to corresponding legal entities, and align FirstEnergy’s earnings, cash flows and balance sheets at the business unit level. FirstEnergy’s reportable segments are as follows:

The Distribution segment, which consists of the Ohio Companies and FE PA, representing $11 billion in rate base as of December 31, 2024, distributes electricity through FirstEnergy’s electric operating companies in Ohio and Pennsylvania. The Distribution segment serves approximately 4.3 million customers in Ohio and Pennsylvania across its distribution footprint and purchases power for its provider of last resort, SOS, standard service offer and default service requirements. The segment’s results reflect the costs of securing and delivering electric generation to customers, including the deferral and amortization of certain costs.

The Integrated segment includes the distribution and transmission operations under JCP&L, MP and PE, as well as MP’s regulated generation operations, representing $9.6 billion in rate base as of December 31, 2024. The Integrated segment distributes electricity to approximately 2 million customers in New Jersey, West Virginia and Maryland across its distribution footprint; provides transmission infrastructure in New Jersey, West Virginia, Maryland and Virginia to transmit electricity and operates 3,604 MWs of regulated net maximum generation capacity located primarily in West Virginia and Virginia. The segment will also include MP and PE’s 50 MWs of solar generation at five sites in West Virginia once complete. The first two solar generation sites were completed and placed in service in January and September 2024, representing 24 MWs of net maximum generating capacity. The remaining three sites, once completed, are expected to provide 26 MWs of additional net maximum generation capacity.

The Stand-Alone Transmission segment, which consists of FE's ownership in FET and KATCo, representing $5.3 billion in rate base as of December 31, 2024, includes transmission infrastructure owned and operated by the Transmission Companies and used to transmit electricity. The segment’s revenues are primarily derived from forward-looking formula rates, pursuant to which the revenue requirement is updated annually based on a projected rate base and projected costs, which is subject to an annual true-up based on actual rate base and costs. The segment’s results also reflect the net transmission expenses related to the delivery of electricity on FirstEnergy’s transmission facilities. KATCo, which was a subsidiary of FET, became a wholly owned subsidiary of FE prior to the closing of the FET P&SA I and remains in the Stand-Alone Transmission segment. On January 1, 2024, WP transferred certain of its Pennsylvania-based transmission assets to KATCo and prior year results in the Stand-Alone Transmission segment reflect the earnings and results of those WP transmission assets.

Corporate/Other reflects corporate support and other costs not charged or attributable to the Electric Companies or Transmission Companies, including FE’s retained pension and OPEB assets and liabilities of former subsidiaries, interest expense on FE’s holding company debt and other investments or businesses that do not constitute an operating segment, including FEV’s investment of 33-1/3% equity ownership in Global Holding. Also included in Corporate/Other for segment reporting is 67 MWs of net maximum generation capacity, representing AE Supply’s OVEC capacity entitlement. As of December 31, 2024, Corporate/Other had approximately $6.1 billion of external FE holding company debt.

FirstEnergy believes that this segment reporting serves to provide:

•Greater transparency into our business unit performance;

•Alignment with our cash flow, credit metrics, balance sheet and earnings to the companies comprising each segment;

•Simplification of our segment reporting so that each entire entity resides within a segment; and

•Consistency with peers.

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PA Consolidation

On January 1, 2024, FirstEnergy consolidated the Pennsylvania Companies into FE PA, rendering FE PA a new, single operating entity and the successor-in-interest to all assets and liabilities of the Pennsylvania Companies. As of January 1, 2024, FE PA is FE’s only regulated distribution power company in Pennsylvania encompassing the operations previously conducted individually by the Pennsylvania Companies. FirstEnergy continues to evaluate the legal, financial, operational and branding benefits of consolidating the Ohio Companies into a single Ohio power company.

Also on January 1, 2024, WP transferred certain of its Pennsylvania-based transmission assets to KATCo, and PN and ME contributed their respective Class B equity interests of MAIT to FE, which were ultimately contributed to FET in exchange for a special purpose membership interest in FET. So long as FE holds the FET special purpose membership interests, it will receive 100% of any Class B distributions made by MAIT.

FET Equity Interest Sale

On February 2, 2023, FE, along with FET, entered into the FET P&SA II with Brookfield and the Brookfield Guarantors, pursuant to which FE agreed to sell to Brookfield at the closing, and Brookfield agreed to purchase from FE, an incremental 30% equity interest in FET for a purchase price of $3.5 billion. The FET Equity Interest Sale closed on March 25, 2024 and FET continues to be consolidated in FirstEnergy’s financial statements. The purchase price was paid in part by the issuance of two promissory notes at closing having an aggregate principal amount of $1.2 billion with: (i) one promissory note having an aggregate principal amount of $750 million, at an interest rate of 5.75% per annum, with a maturity date of September 25, 2025 and (ii) one promissory note having an aggregate principal amount of $450 million, at an interest rate of 7.75% per annum, with a maturity date of December 31, 2024. The remaining $2.3 billion of the purchase price was paid in cash at closing. On July 17, 2024, Brookfield paid FE approximately $1.2 billion in full satisfaction of the promissory notes. Interest income associated with the promissory notes was $24 million for the year ended December 31, 2024 and is reported within “Miscellaneous income, net” on FirstEnergy’s Consolidated Statements of Income. As a result of the consummation of the transaction, Brookfield’s interest in FET increased from 19.9% to 49.9%, while FE retained the remaining 50.1% ownership interests of FET.

Asset Retirement Obligations

On May 8, 2024, the EPA finalized changes to the CCR regulations addressing inactive surface impoundments at inactive electric utilities, known as legacy CCR surface impoundments, and in November 2024 and January 2025, the EPA made several technical corrections to the rule. The rule extends 2015 CCR rule requirements for groundwater monitoring and protection procedures, operational and reporting procedures, as well as closure requirements for impoundments and landfills that were not originally included for coverage by the 2015 CCR rule. In anticipation of such expenditures, FirstEnergy performed a preliminary assessment of former CCR disposal sites and calculated an initial estimate applying historical experience in remediating comparable sites. As a result, FirstEnergy recorded a $139 million increase to its ARO during 2024, of which $113 million is included in “Other operating expenses” on the Consolidated Statements of Income and was not capitalized as an asset retirement cost since the associated plants do not have future cash flows.

On November 30, 2020, AE Supply submitted a closure deadline extension request to the EPA seeking to extend the cease accepting waste date for the McElroy's Run CCR impoundment facility to October 2024, which request was withdrawn by AE Supply on July 9, 2024, prior to the completion of the technical review by the EPA. As of May 31, 2024, AE Supply ceased accepting waste at the McElroy’s Run CCR impoundment facility from Pleasants Power Station. As of December 31, 2024, AE Supply continues to operate the dry landfill adjacent to McElroy’s Run as a disposal facility for Pleasants Power Station. During the second quarter of 2024, as a result of the evaluation of closure options for McElroy’s Run and the adjacent landfill, AE Supply reviewed its ARO and future expected costs to remediate, resulting in an increase to the ARO liability and corresponding increase to “Other operating expense” of $87 million at Corporate/Other for segment reporting. On February 3, 2025, AE Supply executed an environmental liability transfer agreement with a subsidiary of IDA Power, LLC, whereby AE Supply will transfer the McElroy’s Run CCR impoundment facility and adjacent dry landfill and related remediation obligations. The agreement requires AE Supply to establish a $160 million escrow account that AE Supply will fund over five years. The escrow funding obligation will be secured by a surety bond, which will be guaranteed by FE. The transaction is expected to close before the end of the first quarter of 2025 and the derecognition of the ARO is not expected to have a material impact to FirstEnergy’s financial statements, however, no assurances of the closing of the transfer will be satisfied, including transfer of all required environmental permits. See Note 10, “Asset Retirement Obligations,” of the Notes to Consolidated Financial Statements.

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Our Strategy

Powered by its employees and guided by its experienced leadership team and engaged FE Board, FirstEnergy is accelerating its transformation into a premier electric company. The FE Board and FirstEnergy’s executive management team are aligned behind a business model grounded in investing, operating, recovering costs and financing our regulated electric company operations. This business model aims to create a “virtuous cycle” that, in turn, serves to improve reliability and the customer experience, grow rate base, engage employees, improve returns and maintain a strong balance sheet. Along with an unwavering commitment to ethics and integrity, performance excellence and continuous improvement, FirstEnergy anticipates that strong execution of this model will help achieve its strategic objectives and deliver value to its investors.

With a diversified asset mix, improved balance sheet and a strong affordability position, FirstEnergy is well positioned to significantly enhance the customer experience and provide value to its investors.

Invest

FirstEnergy invests in its regulated operations to improve reliability and the customer experience, and in its people to attract, retain and develop talented, diverse and engaged employees to carry out its strategy. This includes the following:

•A robust plan for customer-focused growth, Energize365 is the centerpiece of FirstEnergy’s regulated distribution and transmission capital investment strategy that aims to strengthen the grid and enable the energy transition. Through the Energize365 program, FirstEnergy invested $4.5 billion in 2024, approximately 20% higher than 2023, and expects to spend approximately $28 billion in system-wide capital investments from 2025 through 2029. FirstEnergy expects that these investments will comprise the Distribution segment (26%), the Integrated segment (39%), and the Stand-Alone Transmission segment (34%), focusing on the following:

•Distribution and Transmission investments to support improvements in grid reliability and resiliency and support the energy transition, including through:

◦Programs to drive system resiliency through automation technology and communication, including phases one and two of the Ohio Companies’ distribution grid modernization plans, Pennsylvania's LTIIP, New Jersey's EnergizeNJ, and implementing advanced metering infrastructure;

◦Operational flexibility projects that are expected to build capacity and support the evolving grid such as interconnection of New Jersey offshore wind and data center load;

◦Enhancing system performance by implementing new designs and technologies to reduce load at risk; and

◦Upgrading system conditions that enhance reliability.

•West Virginia solar generation projects, energy efficiency initiatives, electric vehicle infrastructure and energy storage projects.

•Base distribution projects to address aging infrastructure.

•Generation maintenance projects that maintain operations of fossil fuel plants and remain compliant with environmental regulations through the end of their useful life.

•FirstEnergy believes there is a continued long-term pipeline of investment opportunities for its existing distribution and transmission infrastructure beyond those opportunities identified through 2029, which are expected to strengthen grid

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and cyber security and make the transmission system more reliable, robust, secure and resistant to extreme weather events, with improved operational flexibility.

•On July 26, 2024, FE, VEPCO and Transource Energy, LLC, a subsidiary of AEP, entered into a joint proposal agreement in connection with PJM’s 2024 Regional Transmission Expansion Plan Open Window 1 process. Pursuant to such joint proposal agreement, FET, VEPCO and Transource Energy, LLC jointly proposed certain regional electric transmission projects for PJM's consideration during the Open Window process. On November 25, 2024, FET, Dominion High Voltage MidAtlantic, Inc., as affiliate of VEPCO, and Transource Energy, LLC, formed Valley Link, which is the holding company responsible for managing and executing any projects awarded by PJM, and entered into a limited liability agreement. On February 26, 2025, PJM selected certain of the joint proposed projects, which included approximately $3 billion in investments for Valley Link to both build new and upgrade existing transmission infrastructure.

•A refreshed and revitalized leadership team. During 2024, FirstEnergy appointed five executives to oversee the Maryland/West Virginia, Ohio, Pennsylvania, New Jersey and Transmission operations. Additionally, FirstEnergy also announced the hiring of five vice presidents that will be responsible for developing and implementing the financial strategy and oversee relationships with regulators for Pennsylvania, New Jersey, West Virginia, Maryland, Ohio and Transmission.

Operate

FirstEnergy will continue to engage its skilled, trained, talented and diverse team of employees to effectively implement its investment plans, seek opportunities for continuous improvement as it delivers safe, reliable and affordable electricity to our customers, and deliver value to its investors. It aims to do so through the following:

•Enhancing the focus on the customer. FirstEnergy has shifted more decision-making and accountability for our operations closer to our customers, regulators and employees doing the work. FirstEnergy’s new operating structure is organized as follows: Ohio, Pennsylvania, New Jersey, West Virginia/Maryland and FirstEnergy’s Standalone Transmission properties. This structure fosters better execution at the business unit level.

•Embracing a continuous improvement mindset. FirstEnergy is focused on operational excellence through strong execution of our capital investments to enhance the customer experience and support the energy transition, managing costs and keeping customer bills affordable and reducing regulatory lag.

Recover

FirstEnergy is establishing a track record of strong execution. Operating effectively leads to strong, predictable results and enhances credibility with our stakeholders. In turn, FirstEnergy builds supportive relationships with regulators, customers and intervenors in an effort to drive positive rate outcomes that support recovery of its investments.

In order to achieve important regulatory milestones, FirstEnergy has an active regulatory calendar to support its regulated growth strategy and address the critical investments that support reliability and a smarter electric grid. This includes the following:

New Jersey

•On March 16, 2023, JCP&L filed a base rate case in New Jersey, requesting a $185 million increase in base distribution revenues to support investments to strengthen the energy grid, enhance the customer experience and provide assistance to low-income and senior citizen customers. On February 1, 2024, JCP&L, joined by various parties, filed a stipulated settlement with the NJBPU resolving JCP&L’s request for a distribution base rate increase. The settlement, which was approved by the NJBPU on February 14, 2024, provides for an $85 million annual base distribution revenue increase for JCP&L, which became effective for customers on June 1, 2024.

•On November 9, 2023, JCP&L filed a petition for approval of its EnergizeNJ with the NJBPU that would, among other things, support grid modernization, system resiliency and substation modernization in technologies designed to provide enhanced customer benefits. On February 14, 2024, the NJBPU approved the stipulated settlement between JCP&L and various parties, resolving JCP&L’s request for a distribution base rate increase. On February 27, 2024, as part of the stipulated settlement, JCP&L amended its pending EnergizeNJ petition following receipt of NJBPU approval of the base rate case settlement, to remove the high-priority circuits that are to be addressed in the first phase of its reliability improvement plan and to include the second phase of its reliability improvement plan that is expected to further address certain high-priority circuits that require additional upgrades. EnergizeNJ, if approved as amended, will result in the investment of approximately $930.5 million of total estimated costs over five years. JCP&L and various parties are engaged in settlement discussions with respect to the pending EnergizeNJ petition.

•On December 1, 2023, JCP&L filed a petition with the NJBPU requesting approval of its EE&C Plan II, which covers the January 1, 2025 through June 30, 2027 period and had a proposed budget of approximately $964 million. On October

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30, 2024, the NJBPU approved the parties’ stipulation of settlement, wherein the parties agreed to a budget of approximately $817 million for EE&C Plan II, including $784 million of investments that will earn a return on equity of 9.6%, with an equity ratio of 52%, and will be recovered over 10 years.

Ohio

•On April 5, 2023, the Ohio Companies sought approval from the PUCO for their ESP V. The proposed plan would maintain an eight-year term beginning June 1, 2024, and continue riders recovering costs associated with distribution infrastructure investments and approved grid modernization investments. ESP V additionally proposed new riders that would support reliability, and included provisions supporting affordability and enhancing the customer experience. On May 15, 2024, the PUCO issued an order approving ESP V with modifications, which are described below in “Outlook - State Regulation - Ohio”. On June 14, 2024, the Ohio Companies filed an Application for Rehearing, which was denied by operation of law as the PUCO did not rule on the applications for rehearing within 30 days of filing. Due to the risks and uncertainty resulting from the Ohio Companies’ application for rehearing being denied by operation of law, on October 29, 2024, the Ohio Companies filed a notice of their intent to withdraw ESP V and proposed the terms under which they would resume operating under ESP IV, which was approved by the PUCO on December 18, 2024. On January 22, 2025, the PUCO approved the Ohio Companies’ ESP IV compliance tariffs with an effective date of February 1, 2025, at which point the Ohio Companies resumed operating under ESP IV with modifications, as described below in “Outlook - State Regulation - Ohio”.

•On January 31, 2025, the Ohio Companies filed an application with the PUCO for ESP VI, which would begin concurrently with the effective date of any new base distribution rates resulting from the Ohio Companies’ pending base rate case and continue through May 31, 2028. ESP VI proposes to continue existing riders to support continued maintenance of the distribution system, and to reestablish riders to recover vegetation management and storm restoration expenses. ESP VI also includes provisions supporting affordability and enhancing the customer experience. The PUCO has scheduled a technical conference for March 12, 2025.

•On April 12, 2024, the Ohio Companies and certain of the parties filed a stipulation that modified the Ohio Companies’ application for phase two of its grid modernization plan, which was approved by the PUCO on December 18, 2024. The stipulation provides for the deployment of approximately 1.4 million smart meters to the balance of the Ohio Companies’ customers. Phase two of the distribution grid modernization plan, as modified by the stipulation would be completed over a four-year budget period with estimated capital investments of approximately $421 million. On December 18, 2024, the PUCO approved the stipulation and implementation has since begun.

•On May 31, 2024, the Ohio Companies filed their application for an increase in base distribution rates, based on a 2024 calendar year test period. The Ohio Companies requested a net increase in base distribution revenues of approximately $94 million with a return on equity of 10.8% and capital structures of 44% debt and 56% equity for CEI, 46% debt and 54% equity for OE, and 45% debt and 55% equity for TE, which reflects a roll-in of current riders such as DCR and AMI. The net increase represented a 1.5% average residential monthly bill increase. Key components of the base rate case filing include a proposal to change pension and OPEB recovery to the delayed recognition method and to implement a mechanism to establish a regulatory asset (or liability) to recover (or refund) net differences between the amount of pension and OPEB expense requested in the proceeding and the actual amount each year using this method. Additionally, the Ohio Companies requested recovery of certain incurred costs, including the impact of major storms, a program to convert streetlights to LEDs, and others. On June 14, 2024, the Ohio Companies filed supporting testimony and on July 31, 2024, filed an update with an adjusted net increase of base distribution revenues of approximately $190 million and to incorporate matters in the rate case as directed by the PUCO’s ESP V order. On December 18, 2024, the PUCO issued an order approving the Ohio Companies’ withdrawal of ESP V. On January 22, 2025, the PUCO approved the Ohio Companies’ revised ESP IV tariffs, effective February 1, 2025, at which time the Ohio Companies resumed operating under ESP IV. On January 27, 2025, the Ohio Companies notified the PUCO of their intention to update their application for an increase in base distribution rates to remove ESP V related provisions from the base rate case. The PUCO staff hired a third party auditor to assist in the review of the Ohio Companies’ base rate case filing and on February 21, 2025, PUCO staff and the third party auditor each filed their reports. The auditor’s report recommended adjustments which would result in a net increase of the Ohio Companies’ base distribution revenues of approximately $8 million with a return on equity of 9.63% and capital structures of 48.8% debt and 51.2% equity for each of the Ohio Companies. PUCO staff’s report takes limited positions on the auditor’s finding and recommendations and makes additional findings. The Ohio Companies plan to respond and file supplemental testimony by March 24, 2025.

Pennsylvania

•On April 2, 2024, FE PA filed a base rate case with the PPUC seeking a net increase in base distribution revenues of approximately $502 million with a return on equity of 11.3% and capital structure of 46.2% debt and 53.8% equity, and which reflects a roll-in of several current riders such as DSIC, Tax Act, and smart meter. Additionally, FE PA requested an enhanced ten year vegetation management program and recovery of certain incurred costs, including the impact of major storms, COVID-19, a program to convert streetlights to LEDs, and others. On September 13, 2024, FE PA and the active parties to the proceeding filed a joint settlement agreement requesting that the administrative law judges

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approve FE PA’s requested distribution base rate case increase subject to the terms and conditions of the settlement, which includes, among other things, an annual net revenue increase of $225 million. Other key components of the settlement agreement include recovery of costs incurred for storms and COVID-19, additional cost recovery of ongoing storm costs, inspection and maintenance of overhead lines and transformers, and rate case expenses, as well as an enhanced vegetation management program. On October 15, 2024, the administrative law judges issued a decision recommending that the PPUC approve, without modification, the September 13, 2024 settlement agreement. On November 21, 2024, the PPUC unanimously approved the settlement agreement without modification and the rates became effective on January 1, 2025.

•On July 22, 2024, FE PA filed its application with the PPUC seeking approval for the next phase of its LTIIP program, which is expected to result in approximately $1.6 billion in investments, with approximately $1.4 billion of such investments going in service during the five-year period beginning January 1, 2025 and ending December 31, 2029. FE PA’s application was approved by the PPUC on December 19, 2024, and implementation began in January 2025.

West Virginia

•On January 13, 2023, MP and PE filed a request with the WVPSC seeking approval of new depreciation rates for existing and future capital assets. On August 22, 2023, the parties filed a unanimous settlement of the case recommending a $33 million annual increase in depreciation expense, effective April 1, 2024, but deferred issues related to a change in the net energy metering credit. An order was issued on March 26, 2024 approving the settlement without modification.

•On January 23, 2024, MP, PE and various parties filed a joint settlement agreement with the WVPSC, which recommended a base rate increase of $105 million, inclusive of the $33 million increase in depreciation expense, but deferred issues related to a change in the net energy metering credit. Additionally, the settlement included a new low-income customer advocacy program, a pilot program for service reliability investments and recovery of costs related to storm restoration, retired generation assets and COVID-19. The settlement did not include the request to establish a regulatory asset (or liability) for recovery (or refund) associated with pension and OPEB expense, however, it did not preclude MP and PE from pursuing that in a future separate proceeding. An agreement on the net energy metering credit was subsequently submitted to the WVPSC and was materially approved as part of the base rate case order for rates effective March 27, 2024.

Finance

We believe that FirstEnergy represents a compelling investment. With sound capital allocation targeting reliability, resiliency, the energy transition and customer experience, and supported by constructive regulatory outcomes, FirstEnergy expects to finance the business at a lower cost of capital, allowing it to begin the virtuous cycle all over again at “Invest.”

FirstEnergy aims to do this through a strengthened financial position. Since 2021, FirstEnergy has raised $7 billion in equity capital and issued $1.5 billion in convertible notes in May 2023 to significantly improve its balance sheet. The strength of FirstEnergy’s balance sheet supports its plan to fund Energize365 investments through organic internal cash flows and the issuance of debt rather than incremental equity. FirstEnergy has optimized its financing plan to retain flexibility in an uncertain interest rate environment. FirstEnergy has also taken steps to reduce potential volatility risk associated with its pension plan. In January 2025, FirstEnergy executed an additional pension lift-out transaction associated with over $652 million in pension obligations relating to its former competitive generation employees. This lift-out transaction, combined with the lift-out completed in 2023, removed approximately $1.4 billion in total pension plan assets and obligations associated with approximately 3,900 former competitive generation employees.

FirstEnergy also expects to continue returning value to shareholders. In March 2024, the FE Board declared a $0.015 per share increase to the quarterly common stock dividend payable June 1, 2024, to $0.425 per share, which represents an approximate 6% increase compared to dividends declared in 2023. Modest dividend growth is expected to enable enhanced shareholder returns, while still allowing for continued substantial regulated investments. Dividend payments are subject to declaration by the FE Board, and future dividend decisions determined by the FE Board may be impacted by earnings growth, credit metrics and other business conditions.

HB 6 and Related Investigations

On July 21, 2021, FE entered into a three-year DPA with the U.S. Attorney’s Office that, subject to court proceedings, resolves the U.S. Attorney’s Office investigation into FirstEnergy relating to FirstEnergy’s lobbying and governmental affairs activities concerning HB 6 related to the federal criminal allegations made in July 2020, against former Ohio House Speaker Larry Householder and other individuals and entities allegedly affiliated with Mr. Householder. Among other things under the DPA, FE paid a $230 million monetary penalty in 2021 and agreed to the filing of a criminal information charging FE with one count of conspiracy to commit honest services wire fraud. The $230 million payment will neither be recovered in rates or charged to FirstEnergy customers, nor will FirstEnergy seek any tax deduction related to such payment. As of July 22, 2024, FirstEnergy had successfully completed the obligations required within the three-year term of the DPA. Under the DPA, FirstEnergy has an

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obligation to continue (i) publishing quarterly a list of all payments to 501(c)(4) entities and all payments to entities known by FirstEnergy operating for the benefit of a public official, either directly or indirectly; (ii) not making any statements that contradict the DPA; (iii) notifying the U.S. Attorney’s Office of any changes in FirstEnergy’s corporate form; and (iv) cooperating with the U.S. Attorney’s Office until the conclusion of any related investigation, criminal prosecution, and civil proceeding brought by the U.S. Attorney’s Office, including the January 17, 2025, indictment against two former FirstEnergy senior officers, as described below in “Outlook -- Other Legal Proceedings - United States v. Larry Householder, et al.”. Within 30 days of those matters concluding, and FirstEnergy’s successful completion of its remaining obligations, the U.S. Attorney’s Office will dismiss the criminal information.

On February 9, 2022, FE, acting through the SLC, agreed to a settlement term sheet to resolve multiple shareholder derivative lawsuits that were filed in the S.D. Ohio, the N.D. Ohio, and the Ohio Court of Common Pleas, Summit County, each relating to the allegations against the now former Ohio House Speaker Larry Householder and other individuals and entities allegedly affiliated with Mr. Householder. On March 11, 2022, the parties executed a stipulation and agreement of settlement, and filed a motion the same day requesting preliminary settlement approval in the S.D. Ohio, which was granted on May 9, 2022. On August 23, 2022, the S.D. Ohio granted final approval of the settlement, which was subsequently appealed. On February 16, 2024, the U.S. Court of Appeals for the Sixth Circuit affirmed the district court’s final settlement approval. All appeal options were exhausted on May 16, 2024, and the judgment and settlement became final, resolving the derivative lawsuits. On May 17, 2024, the N.D. Ohio granted the parties’ motion to dismiss based upon the approval of the settlement by the S.D. Ohio. The state court action was also dismissed on September 2, 2022.

The above settlement included a series of corporate governance enhancements and a payment to FE of $180 million, less approximately $36 million in court-ordered attorney’s fees awarded to plaintiffs, and a $7 million net return on deposited funds, which was received in the second quarter of 2024. The judgment and settlement are final and, therefore, the derivative lawsuits are now fully resolved.

On August 10, 2020, the SEC, through its Division of Enforcement, issued an order directing an investigation of possible securities laws violations by FE, and on September 1, 2020, issued subpoenas to FE and certain FE officers relating to the conduct described in the DPA. On April 28, 2021, July 11, 2022, and May 25, 2023, the SEC issued additional subpoenas to FE, with which FE has complied. FirstEnergy cooperated fully with the SEC investigation, and on September 12, 2024, the SEC issued a settlement order that concluded and resolved the investigation in its entirety. Under the terms of the settlement, FE agreed to pay a civil penalty of $100 million and to cease and desist from committing or causing any violations and any future violations of specified provisions of the federal securities laws and rules promulgated thereunder, which was recognized as a loss contingency of $100 million in the second quarter of 2024 at Corporate/Other for segment reporting and paid on September 25, 2024.

On June 29, 2023, the OOCIC served FE a subpoena, seeking information relating to the conduct described in the DPA. FirstEnergy was not aware of the OOCIC’s investigation prior to receiving the subpoena and understood that the OOCIC’s investigation was also focused on the conduct described in the DPA, other than with respect to the March 25, 2024, felony indictment of Mr. Householder brought in Cuyahoga County, Ohio. FirstEnergy is cooperating with the OOCIC in its investigation. On February 12, 2024, and in connection with the OOCIC’s ongoing investigation, an indictment by a grand jury of Summit County, Ohio was unsealed against the now-deceased, former chairman of the PUCO, and two former FirstEnergy senior officers, charging each of them with several felony counts, including bribery, telecommunications fraud, money laundering and aggravated theft, related to payments described in the DPA. On August 12, 2024, FirstEnergy entered into a settlement with the OAG's Office, and the Summit County Prosecutor’s Office to resolve both the OOCIC investigation and State of Ohio ex rel. Dave Yost, Ohio Attorney General v. FirstEnergy Corp., et al. and City of Cincinnati and City of Columbus v. FirstEnergy Corp., noted below. The settlement includes, among other things, a non-prosecution agreement and a payment of $19.5 million, which was recorded as a loss contingency in the second quarter of 2024 in FirstEnergy’s Consolidated Statements of Income at Corporate/Other for segment reporting and was paid on August 16, 2024.

Despite the many disruptions FirstEnergy has faced, and continues to currently face, the leadership team remains committed and focused on executing its strategy and running the business. See “Outlook - Other Legal Proceedings” below for additional details on the government investigations, the DPA, and ongoing litigation surrounding the investigation of HB 6. See also “Outlook - State Regulation - Ohio” below for details on the PUCO proceeding reviewing political and charitable spending and legislative activity in response to the investigation of HB 6. The outcome of the government investigations, PUCO proceedings, legislative activity, and any of these lawsuits is uncertain and could have a material adverse effect on FirstEnergy’s financial condition, results of operations and cash flows.

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FIRSTENERGY'S CONSOLIDATED RESULTS OF OPERATIONS

2024 Compared with 2023

Earnings attributable to FE from continuing operations was $978 million or $1.70 per basic and diluted share in 2024 compared to $1,123 million or $1.96 per basic and diluted share in 2023, representing a decrease of $145 million that was primarily due to the following:

•A $200 million charge relating to an increase in ARO liabilities associated with final CCR rules and changes in future expected costs to remediate McElroy’s Run during 2024;

•A $100 million civil penalty resulting from the SEC investigation and a $19.5 million settlement with the OAG's office as further discussed below in “Outlook - Other Legal Proceedings”;

•A $62 million impairment charge related to the Akron general office in the third quarter of 2024;

•Lower revenues associated with changes to the Ohio DCR as a result of the PUCO’s ESP V order that became effective June 1, 2024;

•A $46 million charge for an expected refund, with interest, as a result of the Sixth Circuit ruling eliminating the 50 basis point adder associated with RTO membership, as further discussed below in "Outlook - Other Proceedings;"

•Higher non-deferred storm restoration expenses and planned vegetation management costs;

•Lower investment earnings related to FEV’s equity method investment in Global Holding, net of an impairment charge in the fourth quarter 2024;

•The dilutive effect of the FET Equity Interest Sale that closed in March 2024;

•Higher non-recoverable charges associated with regulatory proceedings and abandoned transmission projects;

•Higher debt redemption costs;

•Higher interest expense on long-term debt and short-term borrowings, partially offset by the redemption of certain FE long-term debt and higher capitalized financing costs; and

•A higher effective tax rate due to tax charges related to the PA Consolidation and FET Equity Interest Sale in 2024, and the absence of a reduction in state income taxes and release of a valuation allowance recognized in 2023, partially offset by discrete tax benefits in 2024 associated with certain equity method investments and the remeasurement of excess deferred income taxes.

These were partially offset by the following:

•Net proceeds from the shareholder derivative lawsuit settlement, as described below in “Outlook - Other Legal Proceedings”;

•The implementation of base rate case settlements in Maryland, New Jersey and West Virginia;

•Higher weather-related customer usage and demand;

•Increased earnings as a result of regulated investment programs that increased rate base;

•Higher interest income on the FET Equity Interest Sale promissory notes;

•Lower Pension and OPEB mark-to-market adjustment charges;

•The absence of expenses associated with the cancellation of sponsorship agreements in 2023; and

•Lower labor and benefits expenses, including those associated with the PEER program and separation-related costs.

Detailed segment reporting explanations are included below.

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Distribution services by customer class are summarized in the following table:

(1) Reflects the reclassification of certain Pennsylvania customers from Industrial to Commercial. Due to the January 2024 consolidation of the Pennsylvania Companies, certain customers are classified as Commercial effective June 1, 2024. The MWh deliveries prior to the effective date have been adjusted for comparability.

(2) Includes street lighting.

Residential and commercial distribution deliveries were impacted by higher customer usage as a result of the weather. Cooling degree days in 2024 were 37% above 2023 and 15% above normal. Heating degree days in 2024 were 1% below 2023 and 15% below normal.

The financial results discussed below in Segment Results of Operations include revenues and expenses from transactions among FirstEnergy’s business segments. A reconciliation of segment financial results is provided in Note 16, “Segment Information,” of the Notes to Consolidated Financial Statements.

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FIRSTENERGY'S CONSOLIDATED RESULTS OF OPERATIONS

2023 Compared with 2022

Earnings attributable to FE from continuing operations was $1,123 million or $1.96 per basic and diluted share in 2023 compared to $406 million or $0.71 per basic and diluted share in 2022, representing an increase of $717 million that was primarily due to the following:

•The absence of an income tax charge of $752 million in 2022, representing the deferred tax liability associated with the deferred tax gain on the 19.9% FET equity interest sale to Brookfield, and a 2023 tax benefit of $65 million, net of a reserve for uncertain tax positions, from the reduction of state income taxes and partial release of a valuation allowance for the expected utilization of state NOL carryforwards based on an assessment of regulated business operations and a change in the composition of a state tax return filing group, partially offset by a $58 million tax charge in 2023 associated with a true-up adjustment associated with the deferred tax gain on the 19.9% FET equity interest sale that closed in May 2022;

•Higher revenues from regulated investment programs, higher weather-adjusted customer usage and demand, the absence of a reserve for customer refunds associated with the FERC Audit, as further discussed below, and a true-up adjustment for the recovery of certain transmission formula rate operating costs during 2023;

•Lower other operating expenses from lower vegetation management expenses, including accelerated work during 2022, fewer regulated generation planned outages, and the absence of a reserve for customer refunds and the reclassification of certain transmission capital assets that are not expected to be recoverable resulting from the FERC Audit that was recognized in the third quarter of 2022; and

•Lower debt redemption costs.

These were partially offset by the following:

•Lower customer usage as a result of the weather;

•Higher other operating expenses from lump sum compensation and severance benefits associated with the PEER program and involuntary separations in 2023, and higher investigation and other related costs associated with the government investigations;

•Higher depreciation expense from a higher asset base;

•Higher pension and OPEB mark-to-market adjustment charges;

•Higher interest expense on short-term borrowings and long-term debt, including the 2026 Convertible Notes issuance;

•Higher non-recoverable charges related to abandoned transmission projects in 2023; and

•The dilutive effect from the 19.9% FET equity interest sale that closed in May 2022.

Detailed segment reporting explanations are included below.

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Distribution services by customer class are summarized in the following table:

(1) Reflects the reclassification of certain Pennsylvania customers from Industrial to Commercial. Due to the January 2024 consolidation of the Pennsylvania Companies, certain customers are classified as Commercial effective June 1, 2024. The MWh deliveries prior to the effective date have been adjusted for comparability.

(2) Includes street lighting.

Residential and commercial distribution deliveries were impacted by lower customer usage as a result of the weather. Cooling degree days in 2023 were 23% below 2022 and 15% below normal. Heating degree days in 2023 were 14% below 2022 and 15% below normal.

The financial results discussed below in Segment Results of Operations include revenues and expenses from transactions among FirstEnergy’s business segments. A reconciliation of segment financial results is provided in Note 16, “Segment Information,” of the Notes to Consolidated Financial Statements.

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Summary of Segment Results of Operations — 2024 Compared with 2023

Financial results for FirstEnergy’s business segments for the years ended December 31, 2024 and 2023, were as follows:

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Distribution Segment — 2024 Compared with 2023

Distribution segment's earnings attributable to FE from continuing operations increased $37 million in 2024, as compared to 2023, primarily due to higher customer usage as a result of the weather, lower Ohio customer rate credits and lower Pension and OPEB mark-to-market adjustment charges, partially offset by lower weather-adjusted customer usage and demand, lower revenues due to changes in the Ohio DCR that became effective June 1, 2024, and higher operating expenses, including increases in the ARO liability.

Revenues —

Distribution's total revenues increased $9 million as a result of the following sources:

Distribution services revenues increased $333 million in 2024, as compared to 2023, primarily due to higher customer usage as a result of the weather, higher rider revenues associated with a Pennsylvania regulated investment program, and lower customer credits associated with the PUCO-approved Ohio Stipulation. Additionally, revenues increased due to the higher recovery of transmission expenses, and other FE PA rider rate adjustments, which have no material impact to earnings. Higher distribution services revenues were partially offset by lower weather-adjusted customer usage and demand, and lower revenues associated with changes to the Ohio DCR as a result of the PUCO’s ESP V order that became effective June 1, 2024.

Generation sales revenues decreased $320 million in 2024, as compared to 2023, primarily due to lower retail generation sales as a result of increased customer shopping, partially offset by higher non-shopping generation auction rates. Total generation provided by alternative suppliers as a percentage of total MWh deliveries for the Ohio Companies and FE PA in 2024, as compared to 2023, increased to 90% from 77% in Ohio and increased to 63% from 62% in Pennsylvania. Retail and wholesale generation sales revenue have no material impact to earnings.

Operating Expenses —

Total operating expenses increased $54 million, primarily due to the following:

•Purchased power costs, which have no material impact to earnings, decreased $359 million in 2024, as compared to 2023, primarily due to lower generation sales volumes, as described above, and decreased capacity expenses, partially offset by higher unit costs.

•Other operating expenses increased $279 million in 2024, as compared to 2023, primarily due to:

•Higher network transmission expenses of $154 million, which are deferred for future recovery, resulting in no material impact to earnings;

•$46 million charge related to changes in ARO liabilities associated with final CCR rules;

•$32.5 million contribution commitment by the Ohio Companies, as a result of the PUCO's Ohio ESP V order;

•$31 million impairment charge related to the Akron general office in the third quarter of 2024;

•Higher planned vegetation management expenses of $57 million;

•Higher energy efficiency and other state mandated program costs of $8 million, which were deferred for future recovery;

•Higher storm restoration expenses of $48 million, of which $38 million were deferred for future recovery; and

•Higher uncollectible expenses of $40 million, of which $14 million were deferred for future recovery, primarily due to a reduction to the allowance during 2023.

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This increase was partially offset by:

•Lower other operating expenses of $138 million, primarily due to lower labor and benefits expenses, including those associated with the PEER program and separation-related costs.

•Depreciation expense increased $28 million in 2024, as compared to 2023, primarily due to a higher asset base.

•Deferral of regulatory assets decreased $88 million in 2024, as compared to 2023, primarily due to a $17 million decrease of certain Tax Act savings deferrals to FE PA customers, $69 million decrease from lower net generation and transmission related deferrals, and $40 million related to net decreases in other deferrals, partially offset by $38 million increase due to higher deferral of storm related expenses.

•General taxes increased $18 million in 2024, as compared to 2023, primarily due to higher gross receipts taxes.

Other Expense —

Other expense decreased $70 million in 2024, as compared to 2023, primarily due to $69 million in lower pension and OPEB mark-to-market adjustment charges.

Income Taxes

Distribution segment's effective tax rate was 17.8% and 20.0% for 2024 and 2023, respectively, primarily due to the remeasurement of excess deferred income taxes in 2024.

Integrated Segment — 2024 Compared with 2023

Integrated segment’s earnings attributable to FE from continuing operations increased $235 million in 2024, as compared to 2023, primarily from the implementation of base rate cases, higher customer usage and demand, higher revenues from regulated investment programs, and lower Pension and OPEB mark-to-market adjustment charges, partially offset by higher operating expenses, including increases in the ARO liability, and a higher effective tax rate discussed below.

Revenues —

Integrated segment’s total revenues increased $556 million as a result of the following sources:

(1) Includes $10 million of ARP revenues in 2024, related to lost distribution revenues associated with energy efficiency in New Jersey.

Distribution services revenues increased $189 million in 2024, as compared to 2023, primarily due to higher revenues from the implementation of base rate cases, higher customer usage as a result of the weather, higher weather-adjusted customer usage and demand, and higher rider revenues associated with certain regulated investment programs. Additionally, revenues increased due to the higher recovery of transmission expenses, which have no material impact to earnings.

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Generation sales revenues increased $303 million in 2024, as compared to 2023, primarily due to higher retail revenues, partially offset by lower wholesale revenues.

•Retail generation sales increased $365 million in 2024, as compared to 2023, primarily due to higher customer usage as a result of the weather and higher non-shopping generation auction rates. Retail generation sales, other than those in West Virginia, have no material impact to earnings.

•Wholesale generation revenues decreased $62 million in 2024, as compared to 2023, primarily due to lower capacity revenues and lower market prices, partially offset by higher sales volumes. The difference between current wholesale generation revenues and certain energy costs incurred is deferred for future recovery or refund, with no material impact to earnings.

Transmission revenues increased $62 million in 2024, as compared to 2023, primarily due to higher rate base from regulated investment programs.

Operating Expenses —

Total operating expenses increased $269 million, primarily due to:

•Fuel costs decreased $74 million in 2024, as compared to 2023, primarily due to lower unit costs and consumption volumes. Due to the ENEC, fuel expense has no material impact to earnings.

•Purchased power costs, which have no material impact to earnings, increased $161 million in 2024, as compared to 2023, primarily due to higher unit costs and volumes, partially offset by lower capacity expenses.

•Other operating expenses increased $168 million in 2024, as compared to 2023, primarily due to:

•$53 million charge at JCP&L in the first quarter of 2024 associated with certain corporate support costs recorded to capital accounts from the FERC Audit that were determined, as a result of the base rate case settlement agreement, to be disallowed from future recovery;

•Higher storm restoration expenses of $80 million, of which $63 million was deferred for future recovery;

•Higher network transmission expenses of $42 million, which were deferred for future recovery, resulting in no material impact to earnings;

•$16 million charge related to changes in ARO liabilities associated with final CCR rules;

•$17 million impairment charge related to the Akron general office in the third quarter of 2024;

•Higher planned vegetation management costs of $15 million, of which $8 million were deferred for future recovery;

•Higher uncollectible expenses of $17 million, which were mostly deferred for future recovery, primarily due to a reduction to the allowance during 2023; and

•Higher energy efficiency and other state mandated program costs of $27 million, which were deferred for future recovery, resulting in no material impact to earnings.

This increase was partially offset by:

•Lower other operating and maintenance expenses of $99 million, primarily due to lower labor and benefit expenses, including those associated with the PEER program and separation-related costs and lower regulated generation costs.

•Depreciation expense increased $59 million in 2024, as compared to 2023, primarily due to a higher asset base.

•Deferral of regulatory assets increased $56 million in 2024, as compared to 2023, primarily due to:

•$63 million due to higher deferral of storm related expenses;

•$60 million due to the approval in the first quarter of 2024 to recover costs of certain retired generation stations by the WVPSC;

•$31 million related to net increases in other deferrals; and

•$12 million due to higher energy efficiency related deferrals.

This increase was partially offset by:

•$98 million due to lower net generation and transmission related deferrals; and

•$12 million due to higher vegetation management program-related amortizations.

•General taxes increased $11 million in 2024, as compared to 2023, primarily due to higher gross receipts taxes.

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Other Expense —

Other expense decreased $64 million in 2024, as compared to 2023, primarily due to $76 million in lower pension and OPEB mark-to-market adjustment charges, higher interest expense on short-term borrowings and higher non-recoverable charges related to abandoned transmission projects, partially offset by higher capitalized interest.

Income Taxes —

Integrated segment’s effective tax rate was 22.2% and 11.0% in 2024 and 2023, respectively. The increase in the effective tax rate is primarily due to the absence of discrete tax benefits related to the expected utilization of state NOL carryforwards and the release of an uncertain tax position related to state taxes recognized in 2023, partially offset by a remeasurement of excess deferred income taxes in 2024.

Stand-Alone Transmission Segment — 2024 Compared with 2023

Stand-Alone Transmission’s earnings attributable to FE from continuing operations decreased $105 million in 2024, as compared to 2023, primarily due to the dilutive effect of the FET Equity Interest Sale that closed in March 2024, and a charge for an expected refund, with interest, as a result of the Sixth Circuit ruling eliminating the 50 basis point adder associated with RTO membership, partially offset by higher revenues from regulated capital investments that increased rate base.

Revenues —

Total revenues increased $39 million in 2024, as compared to 2023, primarily due to higher rate base and recovery of higher transmission operating expenses partially offset by a charge for an expected refund as a result of the Sixth Circuit ruling eliminating the 50 basis point adder associated with RTO membership. Revenues by transmission asset owner are shown in the following table:

Operating Expenses —

Total operating expenses increased $73 million in 2024, as compared to 2023, primarily due to higher operation and maintenance costs, higher property taxes and depreciation due to a higher asset base and a $11 million charge from FESC in connection with its planned exit from the Akron general office. Other than the general office charge, nearly all operating expenses are recovered through formula rates, resulting in no material impact to earnings.

Other Expense —

Total other expense decreased $31 million in 2024, as compared to 2023, primarily due to lower pension and OPEB mark-to-market adjustment charges of $38 million, partially offset by higher net financing costs associated with new debt issuances and interest related to the expected refund associated with the Sixth Circuit ruling noted above.

Income Taxes —

Stand-Alone Transmission's effective tax rate was 28.1% and 23.6% for 2024 and 2023, respectively. The increase in the effective tax rate was primarily due to discrete tax charges related to the FET Equity Interest Sale in 2024, as well as the absence of a discrete tax benefit related to the expected utilization of state NOL carryforwards recognized in 2023.

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Corporate/Other — 2024 Compared with 2023

Financial results from Corporate/Other resulted in a $312 million increase in losses attributable to FE from continuing operations for 2024 compared to 2023, primarily due to:

•$120 million related to a civil penalty with the SEC and a settlement with the OAG's office as further discussed below in “Outlook - Other Legal Proceedings”;

•$111 million (after-tax) charge related to changes in ARO liabilities associated with final CCR rules and future expected costs to remediate McElroy’s Run;

•$99 million (after-tax) from higher pension and OPEB mark-to-market adjustment charges;

•$80 million (after-tax) in lower investment earnings related to FEV’s equity method investment in Global Holding;

•$38 million (after-tax) of higher debt redemption costs;

•$10 million (after-tax) related to an impairment charge recognized in the fourth quarter of 2024 associated with FirstEnergy's actions to exit FEV's equity method investment in Global Holding;

•$9 million (after-tax) of higher investigation and other related costs associated with the government investigations; and

•Lower income tax benefits in 2024 as a result of tax charges related to the PA Consolidation and FET Equity Interest Sale, the absence of a reduction in state income taxes and release of valuation allowances recognized in 2023, partially offset by discrete tax benefits recognized in 2024 associated with certain equity method investments.

The increase in losses were partially offset by:

•$116 million (after-tax) of net proceeds from the shareholder derivative lawsuit settlement as described below in “Outlook - Other Legal Proceedings”;

•$23 million (after-tax) of lower other operating expenses primarily related to the absence of expenses associated with the cancellation of certain sponsorship agreements in 2023;

•$19 million (after-tax) of higher interest income on the FET Equity Interest Sale promissory notes; and

•$16 million (after-tax) of lower interest expense as a result of the redemption of certain FE long-term debt and lower short-term borrowings.

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Summary of Segment Results of Operations — 2023 Compared with 2022

Financial results for FirstEnergy’s business segments for the years ended December 31, 2023 and 2022, were as follows:

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Distribution Segment — 2023 Compared with 2022

Distribution segment's earnings attributable to FE from continuing operations decreased $87 million in 2023, as compared to 2022, primarily due to lower customer usage as a result of the weather, lower net pension and OPEB credits, and higher interest expense and costs from the PEER, partially offset by lower other operating expenses, higher revenues from regulated investment programs and higher weather-adjusted customer usage and demand.

Revenues —

Distribution's total revenue increased $429 million from the following sources:

Distribution services revenues increased $158 million in 2023, as compared to 2022, primarily due to higher weather-adjusted customer usage and demand, higher rider revenues associated with a Pennsylvania regulated investment program, and lower customer credits associated with the PUCO-approved Ohio Stipulation. Higher distribution services revenues were partially offset by lower customer usage as a result of the weather and lower recovery of transmission expenses, which have no material impact to earnings.

Generation sales revenues increased $265 million in 2023, as compared to 2022, primarily due to higher retail generation sales as a result of higher non-shopping generation auction rates, partially offset by lower customer usage as a result of the weather and increased customer shopping in Pennsylvania. Total generation provided by alternative suppliers as a percentage of total MWh deliveries in Pennsylvania increased to 62% in 2023 as compared to 60% in 2022. Retail and wholesale generation sales revenue have no material impact to earnings.

Operating Expenses —

Total operating expenses increased $406 million primarily due to the following:

•Purchased power costs, which have no material impact to earnings, increased $342 million in 2023, as compared to 2022, primarily due to higher volumes, partially offset by lower unit costs and capacity expenses.

•Other operating expenses increased $35 million in 2023, as compared to 2022, primarily due to:

•Lump sum compensation and severance benefits of $24 million associated with the PEER program and involuntary separations in 2023;

•Higher energy efficiency and other state mandated program costs of $26 million, which were deferred for future recovery; and

•Higher storm restoration expenses of $95 million, which were mostly deferred for future recovery, resulting in no material impact to earnings recovery;

This increase was partially offset by:

•Lower vegetation management expenses of $72 million, including accelerated work during 2022;

•Lower network transmission expenses of $11 million, which are deferred for future recovery, resulting in no material impact to earnings; and

•Lower uncollectible expenses of $27 million, of which $4 million was deferred for future recovery.

•Depreciation expense increased $27 million in 2023, as compared to 2022, primarily due to a higher asset base.

•Deferral of regulatory assets increased $18 million in 2023, as compared to 2022, primarily due to:

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•$83 million net increase due to higher generation and transmission related deferrals; and

•$98 million increase due to higher deferral of storm related expenses;

This increase was partially offset by:

•$100 million decrease due to the absence of a return of certain Tax Act savings to Pennsylvania customers in 2022;

•$51 million decrease due to the absence of the customer refunds associated with the Ohio Stipulation; and

•$12 million net decreases in other deferrals.

•General taxes increased $20 million in 2023, as compared to 2022, primarily due to higher gross receipts taxes and Ohio property taxes, partially offset by lower Ohio kWh taxes.

Other Expense —

Other expense increased $165 million in 2023, as compared to 2023, primarily due to lower net pension and OPEB non-service credits, a $21 million change in pension and OPEB mark-to-market adjustment charges, higher net interest expense associated with new long-term issuances and higher short-term borrowings, and a charge from an environmental agreement requiring a $10 million contribution to the EPA associated with a former generation plant of OE.

Income Taxes

Distribution segment's effective tax rate was 20.0% and 23.1% for 2023 and 2022, respectively.

Integrated Segment — 2023 Compared with 2022

Integrated segment’s earnings attributable to FE from continuing operations increased $35 million in 2023, as compared to 2022, primarily due to lower other operating expenses, higher revenues from regulated investment programs and higher weather-adjusted customer usage and demand, partially offset by lower customer usage as a result of the weather, lower net pension and OPEB credits, and higher interest expense and costs from the PEER.

Revenues —

Integrated segment’s total revenues decreased $150 million as a result of the following sources:

Distribution services revenues decreased $48 million in 2023, as compared to 2022, primarily due to lower customer usage as a result of the weather and lower recovery of transmission expenses, partially offset by higher rider revenues associated with certain investment programs, and higher weather-adjusted customer usage and demand.

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Generation sales revenues decreased $152 million in 2023, as compared to 2022, primarily due to lower wholesale revenues, partially offset by higher retail revenues.

•Retail generation sales increased $115 million in 2023, as compared to 2022, primarily due to higher non-shopping generation auction rates, partially offset by lower sales volumes. Retail generation sales, other than those in West Virginia, have no material impact to earnings.

•Wholesale generation revenues decreased $267 million in 2023, as compared to 2022, primarily due to lower capacity revenues, market prices and sales volumes. The difference between current wholesale generation revenues and certain energy costs incurred is deferred for future recovery or refund, with no material impact to earnings.

Transmission revenues increased $36 million in 2023, as compared to 2022, primarily due to higher rate base from regulated investment programs.

Operating Expenses —

Total operating expenses decreased $203 million, primarily due to:

•Fuel costs decreased $192 million in 2023, as compared to 2022, primarily due to lower unit costs and consumption volumes. Due to the ENEC, fuel expense has no material impact to earnings.

•Purchased power costs, which have no material impact to earnings, decreased $97 million in 2023, as compared to 2022, primarily due to lower unit costs and capacity expenses, partially offset by higher volumes.

•Other operating expenses decreased $70 million in 2023, as compared to 2022, primarily due to:

•Lower network transmission expenses of $30 million, which are deferred for future recovery, resulting in no material impact to earnings;

•Lower uncollectible expenses of $19 million, which are deferred for future recovery, resulting in no material impact to earnings;

•Lower storm restoration expenses of $10 million, which were mostly deferred for future recovery, resulting in no material impact to earnings; and

•Lower expenses of $60 million, primarily due to the absence of the reclassification of certain transmission capital assets to operating expenses as a result of the FERC Audit.

This decrease was partially offset by:

•Lump sum compensation and severance benefits of $18 million associated with the PEER program and involuntary separations in 2023;

•Higher vegetation management in West Virginia, energy efficiency and other state mandated program costs of $17 million, which were deferred for future recovery; and

•Higher other operating expenses of $14 million, primarily due to higher contractor expenses, partially offset by fewer regulated generation planned outages.

•Depreciation expense increased $32 million in 2023, as compared to 2022, primarily due to a higher asset base.

•Deferral of regulatory assets decreased $118 million in 2023, as compared to 2022, primarily due to:

•$181 million net decrease due to lower generation and transmission related deferrals; and

•$8 million decrease due to lower deferral of storm related expenses.

This decrease was partially offset by:

•$40 million increase due to lower vegetation management and other program-related amortizations;

•$15 million increase due to higher energy efficiency related deferrals; and

•$16 million related to net increases in other deferrals.

•General taxes increased $6 million in 2023, as compared to 2022, primarily due to higher payroll taxes.

Other Expense —

Other expense increased $61 million in 2023, as compared to 2022, primarily due to lower net pension and OPEB non-service credits, a $7 million change in pension and OPEB mark-to-market adjustment charges, and higher net interest expense associated with new long-term issuances and higher short-term borrowings.

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Income Taxes —

Integrated segment’s effective tax rate was 11.0% and 23.2% in 2023 and 2022, respectively. The decrease in the effective tax rate is primarily due to discrete tax benefits related to the expected utilization of state NOL carryforwards and the release of an uncertain tax position related to state taxes recognized in 2023.

Stand-Alone Transmission Segment — 2023 Compared with 2022

Stand-Alone Transmission's earnings attributable to FE from continuing operations increased $84 million in 2023, as compared to 2022, primarily due to the absence of a reserve for customer refunds and the reclassification of certain transmission capital assets that are not expected to be recoverable resulting from the FERC Audit that was recognized in the third quarter of 2022, as further discussed below and as a result of regulated capital investments that increased rate base, partially offset by the dilutive effect of the 19.9% sale of FET equity interest that closed in May 2022.

Revenues —

Total revenues increased $151 million in 2023, as compared to 2022, primarily due to the absence of a reserve for customer refunds associated with the FERC Audit, as further discussed below, a true-up adjustment for the recovery of certain transmission formula rate operating costs during 2023 and a higher rate base.

Revenues by transmission asset owner are shown in the following table:

Operating Expenses —

Total operating expenses decreased $49 million in 2023, as compared to 2022, primarily due to the absence of the reclassification of certain transmission capital assets to operating expenses as a result of the FERC Audit, as further discussed below, partially offset by higher depreciation and property tax expenses from a higher asset base. Other than the write-off of nonrecoverable transmission assets, nearly all operating expenses are recovered through formula rates, resulting in no material impact on current period earnings.

Other Expense —

Total other expense increased $40 million in 2023, as compared to 2022, primarily due to a change in pension and OPEB mark-to-market adjustment charges of $22 million and pension and OPEB non-service credits partially offset by lower interest on long-term debt and borrowings under the revolving credit facilities and higher unregulated money pool interest income at FET.

Income Taxes —

Stand-Alone Transmission's effective tax rate was 23.6% and 24.2% for 2023 and 2022, respectively.

Corporate/Other — 2023 Compared with 2022

Financial results from Corporate/Other resulted in a $685 million decrease in losses attributable to FE from continuing operations for 2023 compared to 2022, primarily due to:

•Lower income tax expense primarily due to the absence of an income tax charge of $752 million in 2022, representing the deferred tax liability associated with the deferred tax gain on the 19.9% FET equity interest sale to Brookfield, and a 2023 tax benefit of $65 million, net of a reserve for uncertain tax positions, from the reduction of state income taxes and partial release of a valuation allowance for the expected utilization of state NOL carryforwards based on an assessment of regulated business operation and the composition of a state tax return filing group, partially offset by a $58 million tax charge in 2023 associated with a true-up adjustment associated with the deferred tax gain on the 19.9% FET equity

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interest sale;

•$105 million (after-tax) of lower debt redemption costs;

•$6 million (after-tax) related to higher investment earnings on corporate-owned life insurance policies; and

•$6 million (after-tax) in higher investment earnings related to FEV’s equity method investment in Global Holding.

The decrease in losses were partially offset by:

•$78 million (after-tax) related to lower pension and OPEB mark-to-market adjustment charges;

•$23 million (after-tax) of higher other operating expenses primarily related to the expenses associated with the cancellation of certain sponsorship agreements in 2023;

•$20 million (after-tax) from lower pension and OPEB non-service credits;

•$16 million (after-tax) of higher investigation and other related costs associated with the government investigations;

•$8 million (after-tax) for a charge associated with an update to the McElroy’s Run ARO; and

•$5 million (after-tax) of higher interest expense from the 2026 Convertible Notes issuance.

REGULATORY ASSETS AND LIABILITIES

Regulatory assets represent incurred costs that have been deferred because of their probable future recovery from customers through regulated rates. Regulatory liabilities represent amounts that are expected to be credited to customers through future regulated rates or amounts collected from customers for costs not yet incurred. FirstEnergy, the Electric Companies and the Transmission Companies net their regulatory assets and liabilities based on federal and state jurisdictions.

Management assesses the probability of recovery of regulatory assets, and settlement of regulatory liabilities, at each balance sheet date and whenever new events occur. Factors that may affect probability relate to changes in the regulatory environment, issuance of a regulatory commission order or passage of new legislation. Upon material changes to these factors, where applicable, FirstEnergy will record new regulatory assets and liabilities and will assess whether it is probable that currently recorded regulatory assets and liabilities will be recovered or settled in future rates.

The following table provides information about the composition of net regulatory assets and liabilities as of December 31, 2024 and 2023, and the changes during the year 2024:

The following is a description of the regulatory assets and liabilities described above:

Customer payables for future income taxes - Reflects amounts to be recovered or refunded through future rates to pay income taxes that become payable when rate revenue is provided to recover items such as AFUDC equity and depreciation of property, plant and equipment for which deferred income taxes were not recognized for ratemaking purposes, including amounts attributable to federal and state tax rate changes such as the Tax Act and Pennsylvania House Bill 1342. These amounts are being amortized over the period in which the related deferred tax assets reverse, which is generally over the expected life of the underlying asset.

Spent nuclear fuel disposal costs - Reflects amounts collected from customers, and the investment income, losses and changes in fair value of the trusts for spent nuclear fuel disposal costs related to former nuclear generating facilities, Oyster Creek and Three Mile Island Unit 1.

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Asset removal costs - Primarily represents the rates charged to customers that include a provision for the cost of future activities to remove assets, including obligations for which an ARO has been recognized, that are expected to be incurred at the time of retirement.

Deferred transmission costs - Reflects differences between revenues earned based on actual costs for the formula-rate Transmission Companies and the amounts billed, including amounts at December 31, 2023, expected to be refunded to, or recoverable from, wholesale transmission customers resulting from the FERC Audit, which amounts are recorded as a regulatory asset or liability and recovered or refunded, respectively, in subsequent periods. Also included is the recovery of non-market based costs or fees charged to certain of the Electric Companies by various regulatory bodies including FERC and RTOs, which can include PJM charges and credits for service including, but not limited to, procuring transmission services and transmission enhancement.

Deferred generation costs - Primarily relates to regulatory assets associated with the securitized recovery of certain fuel and purchased power regulatory assets at the Ohio Companies (amortized through 2034) as well as the ENEC at MP and PE. MP and PE recover net power supply costs, including fuel costs, purchased power costs and related expenses, net of related market sales revenue through the ENEC. Generally, the ENEC rate is updated annually.

Deferred distribution costs - Primarily relates to the Ohio Companies' deferral of certain distribution-related expenses, including interest (amortized through 2034).

Storm-related costs - Relates to the deferral of storm costs, which vary by jurisdiction. Approximately $402 million and $254 million are currently being recovered through rates as of December 31, 2024 and 2023, respectively.

Energy efficiency program costs - Relates to the recovery of costs in excess of revenues associated with energy efficiency programs including New Jersey energy efficiency and renewable energy programs, FE PA's Energy Efficiency and Conservation programs, the Ohio Companies' Demand Side Management and Energy Efficiency Rider, and PE's EmPOWER Maryland Surcharge. Investments in certain of these energy efficiency programs earn a long-term return.

New Jersey societal benefit costs - Primarily relates to regulatory assets associated with MGP remediation, universal service and lifeline funds, and the New Jersey Clean Energy Program.

Vegetation management costs - Relates to regulatory assets associated with the recovery of certain distribution vegetation management costs in New Jersey, certain distribution and transmission vegetation management costs in West Virginia, and certain transmission vegetation management costs at ATSI (amortized through 2030) and KATCo (amortized through 2036).

The following table provides information about the composition of net regulatory assets that do not earn a current return as of December 31, 2024 and 2023, of which approximately $698 million and $371 million, respectively, are currently being recovered through rates over varying periods, through 2068, depending on the nature of the deferral and the jurisdiction:

CAPITAL RESOURCES AND LIQUIDITY

FirstEnergy’s business is capital intensive, requiring significant resources to fund operating expenses, construction and other investment expenditures, scheduled debt maturities and interest payments, dividend payments and potential contributions to its pension plan.

FE and its subsidiaries expect their existing sources of liquidity to remain sufficient to meet their respective anticipated obligations. In addition to internal sources to fund liquidity and capital requirements for 2025 and beyond, FE and its subsidiaries expect to rely on external sources of funds. Short-term cash requirements not met by cash provided from operations are generally satisfied through short-term borrowings. Long-term cash needs may be met through the issuance of long-term debt by FE and certain of its subsidiaries to, among other things, fund capital expenditures and other capital-like investments, and

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refinance short-term and maturing long-term debt, subject to market conditions and other factors. FE may utilize instruments other than senior notes to fund its liquidity and capital requirements, including hybrid securities.

Capital investments by business segment are included below:

(1) Includes capital expenditures and capital-like investments that earn a return.

Capital investment forecasts for the years ended 2025, 2026, 2027, 2028, and 2029 by business segment are included below:

(1) Includes capital expenditures and capital-like investments that earn a return.

(2) Consolidated plan includes Brookfield's non-controlling interest in FET

In alignment with FirstEnergy’s strategy to invest in its segments as a fully regulated company, FirstEnergy is focused on maintaining balance sheet strength and flexibility. Specifically, at the regulated businesses, regulatory authority has been obtained for various regulated subsidiaries to issue and/or refinance debt.

Any financing plans by FE or any of its consolidated subsidiaries, including the issuance of equity and debt, and the refinancing of short-term and maturing long-term debt are subject to market conditions and other factors. No assurance can be given that any such issuances, financing or refinancing, as the case may be, will be completed as anticipated or at all. Any delay in the completion of financing plans could require FE or any of its consolidated subsidiaries to utilize short-term borrowing capacity, which could impact available liquidity. In addition, FE and its consolidated subsidiaries expect to continually evaluate any planned financings, which may result in changes from time to time.

On February 2, 2023, FE, along with FET, entered into the FET P&SA II with Brookfield and the Brookfield Guarantors, pursuant to which FE agreed to sell to Brookfield at the closing, and Brookfield agreed to purchase from FE, an incremental 30% equity interest in FET for a purchase price of $3.5 billion. The FET Equity Interest Sale closed on March 25, 2024 and FET continues to be consolidated in FirstEnergy’s financial statements. The purchase price was paid in part by the issuance of two promissory notes at closing having an aggregate principal amount of $1.2 billion with: (i) one promissory note having an aggregate principal amount of $750 million, at an interest rate of 5.75% per annum, with a maturity date of September 25, 2025 and (ii) one promissory note having an aggregate principal amount of $450 million, at an interest rate of 7.75% per annum, with a maturity date of December 31, 2024. The remaining $2.3 billion of the purchase price was paid in cash at closing. On July 17, 2024, Brookfield paid FE approximately $1.2 billion in full satisfaction of the promissory notes. Interest income associated with the promissory notes was $24 million for the year ended December 31, 2024 and is reported within “Miscellaneous income, net” on FirstEnergy’s Consolidated Statements of Income. As a result of the consummation of the transaction, Brookfield’s interest in FET increased from 19.9% to 49.9%, while FE retained the remaining 50.1% ownership interests of FET.

On January 1, 2024, FirstEnergy consolidated the Pennsylvania Companies into FE PA, rendering FE PA a new, single operating entity and the successor-in-interest to all assets and liabilities of the Pennsylvania Companies. As of January 1, 2024, FE PA is FE’s only regulated distribution power company in Pennsylvania encompassing the operations previously conducted individually by the Pennsylvania Companies.

Also on January 1, 2024, WP transferred certain of its Pennsylvania-based transmission assets to KATCo, and PN and ME contributed their respective Class B equity interests of MAIT to FE, which were ultimately contributed to FET in exchange for a special purpose membership interest in FET. So long as FE holds the FET special purpose membership interests, it will receive 100% of any Class B distributions made by MAIT.

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Economic conditions have stabilized across numerous material categories, but not all lead times have returned to pre-pandemic levels. Several key suppliers have seen improvements with capacity, but FirstEnergy continues to monitor the situation as demand increases across the industry, including due to data center usage. Inflationary pressures have moderated, which has improved the cost of materials, but certain categories have remained elevated. FirstEnergy continues to implement mitigation strategies to address supply constraints and does not expect any corresponding service disruptions or any material impact on its capital investment plan. However, the situation remains fluid and a prolonged continuation or further increase in demand, or the continuation of uncertain or adverse macroeconomic conditions, including inflationary pressures and new or increased existing tariffs, could lead to an increase in supply chain disruptions that could, in turn, have an adverse effect on FirstEnergy’s results of operations, cash flow and financial condition.

In February 2025, the new U.S. presidential administration announced the imposition of widespread and substantial tariffs on imports, with plans for additional tariffs to potentially be adopted in the future. Although certain of these tariffs were subsequently temporarily stayed, the situation is dynamic and subject to rapid change. The imposition of these or any other new or increased tariffs or resultant trade wars could have an adverse effect on FirstEnergy's results of operations, cash flow and financial condition.

In December 2023, FirstEnergy, executed a lift-out transaction with Banner Life Insurance Company and Reinsurance Group of America that transferred approximately $683 million of plan assets and $719 million of plan obligations, associated with approximately 1,900 former competitive generation employees, who will assume future and full responsibility to fund and administer their benefit payments. There was no change to the pension benefits for any participants as a result of the transfer. The transaction was funded by pension plan assets and resulted in a pre-tax gain of approximately $36 million, which was included in the fourth quarter 2023 pension and OPEB mark-to-market adjustment charge.

Additionally, in January 2025, FirstEnergy executed a lift-out transaction with MetLife, that transferred approximately $640 million of plan assets and $652 million of plan obligations, associated with approximately 2,000 former competitive generation employees, who will assume future and full responsibility to fund and administer their benefit payments. Similar to the lift-out in 2023, there was no change to the pension benefits for any participant as a result of the transfer and the transaction was funded by pension plan assets. FirstEnergy believes that this lift-out transaction, in addition to the lift-out in 2023, further de-risked potential volatility with the pension plan assets and liabilities, and will continue to evaluate other lift-outs in the future based on market and other conditions.

As of December 31, 2024, FirstEnergy’s net deficit in working capital (current assets less current liabilities) was primarily due to accounts payable, current portion of long-term debt, short-term borrowings and accrued interest, taxes, and compensation and benefits. FirstEnergy believes its cash from operations and available liquidity will be sufficient to meet its current working capital needs. See further discussion on cash from operations below.

Short-Term Borrowings / Revolving Credit Facilities

On October 24, 2024, FE and certain of its subsidiaries entered into the following amendments to each of the 2021 Credit Facilities to, among other things: (i) extend the maturity date of the 2021 Credit Facilities for an additional one-year period, from October 18, 2027 to October 18, 2028, and (ii) increase the borrowing limit of the JCP&L credit facility from $500 million to $750 million. Also on October 24, 2024, each of FET and KATCo entered into amendments of the 2023 Credit Facilities, to, among other things, extend the maturity date of the 2023 Credit Facilities for an additional one-year period, from October 20, 2028 to October 20, 2029 and from October 20, 2027 to October 20, 2028, for the FET credit facility and KATCo credit facility, respectively.

The 2021 Credit Facilities and 2023 Credit Facilities, as amended on October 24, 2024, are as follows:

•FE, $1.0 billion revolving credit facility;

•FET, $1.0 billion revolving credit facility;

•Ohio Companies, $800 million revolving credit facility;

•FE PA, $950 million revolving credit facility;

•JCP&L, $750 million revolving credit facility;

•MP and PE, $400 million revolving credit facility;

•ATSI, MAIT and TrAIL, $850 million revolving credit facility; and

•KATCo, $150 million revolving credit facility.

Borrowings under the 2021 Credit Facilities and 2023 Credit Facilities may be used for working capital and other general corporate purposes. Generally, borrowings under each of the credit facilities are available to each borrower separately and mature on the earlier of 364 days from the date of borrowing or the commitment termination date, as the same may be extended. Each of the 2021 Credit Facilities and 2023 Credit Facilities contain financial covenants requiring each borrower, with the exception of FE, to maintain a consolidated debt-to-total-capitalization ratio (as defined under each of the 2021 Credit Facilities and 2023 Credit Facilities) of no more than 65%, and 75% for FET, measured at the end of each fiscal quarter. FE is required under its credit facility to maintain a consolidated interest coverage ratio of not less than 2.50 times, measured at the end of each fiscal quarter for the last four fiscal quarters.

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The 2021 Credit Facilities and 2023 Credit Facilities bear interest at fluctuating interest rates, primarily based on SOFR, including term SOFR and daily simple SOFR. FirstEnergy has not hedged its interest rate exposure with respect to its floating rate debt. Accordingly, FirstEnergy’s interest expense for any particular period will fluctuate based on SOFR and other variable interest rates. Restricted access to capital markets and/or increased borrowing costs could have an adverse effect on FirstEnergy’s results of operations, cash flows, financial condition and liquidity.

FirstEnergy had $550 million and $775 million of outstanding short-term borrowings as of December 31, 2024 and 2023, respectively. FirstEnergy’s available liquidity from external sources as of February 25, 2025, was as follows:

The following table summarizes the limitations on short-term indebtedness applicable to each borrower under current regulatory approvals and applicable statutory and/or charter limitations as of December 31, 2024:

(1) Regulatory debt limitations include amounts which may be borrowed under the regulated companies’ money pool.

(2) FE is not required to maintain a debt-to-total-capitalization ratio under its credit facility. However, FE is required to maintain a consolidated interest coverage ratio of not less than 2.50 times, measured at the end of each fiscal quarter for the last four fiscal quarters beginning with the quarter ending December 31, 2021. FE's consolidated interest coverage ratio as of December 31, 2024 was approximately 4.5 times.

Subject to each borrower’s sublimit, the amounts noted below are available for the issuance of LOCs (subject to borrowings drawn under the 2021 Credit Facilities and 2023 Credit Facilities) expiring up to one year from the date of issuance. The stated amount of outstanding LOCs will count against total commitments available under each of the 2021 Credit Facilities and 2023 Credit Facilities and against the applicable borrower’s borrowing sublimit. As of December 31, 2024, FirstEnergy had $170 million in outstanding LOCs, $139 million of which are issued under the revolving credit facilities.

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The 2021 Credit Facilities and 2023 Credit Facilities do not contain provisions that restrict the ability to borrow or accelerate payment of outstanding advances in the event of any change in credit ratings of the borrowers. Pricing is defined in “pricing grids,” whereby the cost of funds borrowed under the 2021 Credit Facilities and the 2023 Credit Facilities are related to the credit ratings of the company borrowing the funds. Additionally, borrowings under each of the 2021 Credit Facilities and 2023 Credit Facilities are subject to the usual and customary provisions for acceleration upon the occurrence of events of default, including a cross-default for other indebtedness in excess of $100 million.

As of December 31, 2024, FE was in compliance with its applicable consolidated interest coverage ratio and the borrowers in each case as defined under the 2021 Credit Facilities and 2023 Credit Facilities, were in compliance with their debt-to-total-capitalization ratio covenants.

FirstEnergy Money Pools

FirstEnergy’s regulated operating subsidiary companies also have the ability to borrow from each other and FE to meet their short-term working capital requirements. Effective September 23, 2024, AGC and KATCo became participants in the regulated companies’ money pool. Similar but separate arrangements exist among FirstEnergy’s unregulated companies with AE Supply, FE, FET, FEV and certain other unregulated subsidiaries. As of June 1, 2024, FET no longer participated in the unregulated money pool. FESC administers these money pools and tracks surplus funds of FE and the respective regulated and unregulated subsidiaries, as the case may be, as well as proceeds available from bank borrowings. Companies receiving a loan under the money pool agreements must repay the principal amount of the loan, together with accrued interest, within 364 days of borrowing the funds. The rate of interest is the same for each company receiving a loan from their respective pool and is based on the average cost of funds available through the pool.

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Long-Term Debt Capacity

FE’s and its subsidiaries’ access to capital markets and costs of financing are influenced by the credit ratings of their securities. The following table displays FE’s and its subsidiaries’ credit ratings as of February 25, 2025:

(1) S = Stable, P = Positive

The applicable undrawn and drawn margin on the 2021 Credit Facilities and 2023 Credit Facilities are subject to ratings-based pricing grids. The applicable fee paid on the undrawn commitments under the 2021 Credit Facilities and 2023 Credit Facilities are based on each borrower’s senior unsecured non-credit enhanced debt ratings as determined by S&P and Moody’s. The fees paid on actual borrowings are determined based on each borrower’s senior unsecured non-credit enhanced debt ratings as determined by S&P and Moody’s.

The interest rates payable on approximately $2.1 billion in FE’s senior unsecured notes are subject to adjustments from time to time if the ratings on the notes from any one or more of S&P, Moody’s and Fitch decreases to a rating set forth in the applicable governing documents. Generally, a one-notch downgrade by the applicable rating agency may result in a 25 basis point coupon rate increase beginning at BB, Ba1, and BB+ for S&P, Moody’s and Fitch, respectively, to the extent such rating is applicable to the series of outstanding senior unsecured notes, during the next interest period, subject to an aggregate cap of 2% from issuance interest rate.

Debt capacity is subject to the consolidated interest coverage ratio in FE's credit facility. As of December 31, 2024, FirstEnergy could incur approximately $930 million of incremental interest expense or incur an approximate $2.3 billion reduction to the consolidated interest coverage earnings numerator, as defined under the covenant, and FE would remain within the limitations of the financial covenant requirements of FE's credit facility.

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Cash Requirements and Commitments

FirstEnergy has certain obligations and commitments to make future payments under contracts, including contracts executed in connection with certain of the planned construction expenditures.

(1) Excludes unamortized discounts and premiums, fair value accounting adjustments and finance leases.

(2) See Note 8, "Leases," of the Notes to Consolidated Financial Statements.

(3) Based on estimated annual amounts under contract with fixed or minimum quantities, and includes payment obligations under termination agreements.

(4) Amounts represent committed capital expenditures and other capital-like investments that earn a return.

(5) As discussed further below, FirstEnergy does not currently expect to have a required contribution to the pension plan until 2027.

Excluded from the table above are estimates for the cash outlays from power purchase contracts entered into by most of the Electric Companies and under which they procure the power supply necessary to provide generation service to their customers who do not choose an alternative supplier. Although actual amounts will be determined by future customer behavior, consumption levels and power prices, management currently estimates these cash outlays will be approximately $4.1 billion in 2025.

The table above also excludes AROs, reserves for litigation, injuries and damages and environmental remediation since the amount and timing of the cash payments are uncertain. The table also excludes accumulated deferred income taxes since cash payments for income taxes are determined based primarily on taxable income for each applicable fiscal year and/or the application of the corporate AMT which, as further discussed below, is uncertain and subject to the issuance of future U.S. Treasury regulations.

FirstEnergy’s pension funding policy is based on actuarial computations using the projected unit credit method. FirstEnergy does not currently expect to have a required contribution to the pension plan until 2027, which based on various assumptions, including an expected rate of return on assets of 8.5% for 2025, is expected to be approximately $300 million. However, FirstEnergy may elect to contribute to the pension plan voluntarily.

Convertible Notes

As discussed above, on May 4, 2023, FE issued $1.5 billion aggregate principal amount of 2026 Convertible Notes, with a fixed interest rate of 4.00% per year, payable semiannually in arrears on May 1 and November 1 of each year, beginning on November 1, 2023. The 2026 Convertible Notes are unsecured and unsubordinated obligations of FE, and will mature on May 1, 2026, unless required to be converted or repurchased in accordance with their terms. However, FE may not elect to redeem the 2026 Convertible Notes prior to the maturity date. The 2026 Convertible Notes are included within “Long-term debt and other long-term obligations” on the FirstEnergy Consolidated Balance Sheets. Proceeds from the issuance were approximately $1.48 billion, net of issuance costs.

Prior to the close of business on the business day immediately preceding February 1, 2026, the 2026 Convertible Notes will be convertible at the option of the holders only under the following conditions:

•During any calendar quarter, if the last reported sale price of FE’s common stock for at least 20 trading days during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

•During the five consecutive business day period immediately after any 10 consecutive trading day period in which the trading price per $1,000 principal amount of the 2026 Convertible Notes for each trading day of such 10 trading day period was less than 98% of the product of the last reported sale price of FE’s common stock and the conversion rate on each such trading day; or

•Upon the occurrence of certain corporate events specified in the indenture governing the 2026 Convertible Notes.

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On and after February 1, 2026, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the 2026 Convertible Notes may convert all or any portion of their 2026 Convertible Notes at their option at any time at the conversion rate then in effect, irrespective of these conditions. FE will settle conversions of the 2026 Convertible Notes, if any, by paying cash up to the aggregate principal amount of the 2026 Convertible Notes being converted and by paying cash or delivering shares of FE’s common stock (or a combination of each), at its election, of its conversion obligation in excess of the aggregate principal amount of the 2026 Convertible Notes being converted.

The conversion rate for the 2026 Convertible Notes will initially be 21.3620 shares of FE’s common stock per $1,000 principal amount of the 2026 Convertible Notes (equivalent to an initial conversion price of approximately $46.81 per share of FE’s common stock). The initial conversion price of the 2026 Convertible Notes represents a premium of approximately 20% over the last reported sale price of FE’s common stock on the New York Stock Exchange on May 1, 2023. The conversion rate and the corresponding conversion price will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. FE may not elect to redeem the 2026 Convertible Notes prior to the maturity date.

If FE undergoes a fundamental change (as defined in the relevant indenture), subject to certain conditions, holders of the 2026 Convertible Notes may require FE to repurchase for cash all or any portion of their 2026 Convertible Notes at a repurchase price equal to 100% of the principal amount of the 2026 Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date (as defined in the relevant indenture). In addition, if certain fundamental changes occur, FE may be required, in certain circumstances, to increase the conversion rate for any 2026 Convertible Notes converted in connection with such fundamental changes by a specified number of shares of its common stock.

Changes in Cash Position

As of December 31, 2024, FirstEnergy had $111 million of cash and cash equivalents and $43 million of restricted cash compared to $137 million of cash and cash equivalents and $42 million of restricted cash as of December 31, 2023, on the Consolidated Balance Sheets.

The following table summarizes the major classes of cash flow items:

Cash Flows From Operating Activities

FirstEnergy’s most significant sources of cash are derived from electric service provided by its operating subsidiaries. The most significant use of cash from operating activities is buying electricity to serve non-shopping customers, return of cash collateral associated with certain generation suppliers that serve shopping customers, pension contributions and paying fuel suppliers, employees, tax authorities, lenders and others for a wide range of materials and services.

Net cash provided from operating activities was $2,891 million during 2024, $1,387 million during 2023, and $2,683 million during 2022. The increase in cash from operating activities in 2024 from 2023 is primarily due to:

•Lower payments, primarily on generation energy purchases for certain customers, net of related customer receivable receipts;

•The return of cash collateral in 2024 that was previously posted with PJM, which was replaced with issuances of letters of credit;

•The absence of cash collateral returned to certain generation suppliers that serve shopping customers during 2023 that was previously received as a result of changes in power prices;

•$750 million cash contribution to qualified pension plan in the second quarter of 2023;

•Receipt of the derivative lawsuit settlement proceeds in the second quarter of 2024;

•Higher net transmission revenue collection based on the timing of formula rate collections; and

•Higher returns from distribution, integrated, and transmission capital investments.

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The increase in cash provided from operating activities was partially offset by:

•Lower dividend distribution received by FEV from its equity investments in Global Holding;

•Higher payments associated with Pennsylvania gross receipts taxes; and

•Payment of the SEC civil penalty and OAG settlement in the third quarter of 2024.

FirstEnergy's Consolidated Statements of Cash Flows combines cash flows from discontinued operations with cash flows from continuing operations within each cash flow category. The following table summarizes the major classes of cash flow items from discontinued operations for the years ended December 31, 2024, 2023 and 2022:

Cash Flows From Investing Activities

Cash used for investing activities in 2024 principally represented cash used for capital investments. The following table summarizes cash used for investing activities for the years ended 2024, 2023 and 2022:

Cash used for investing activities during 2024 increased $698 million, compared to 2023, primarily due to higher planned capital investment spend.

Cash Flows From Financing Activities

Cash provided from (used for) financing activities was $1,434 million, $2,238 million, and $(912) million in 2024, 2023, and 2022, respectively. The following table summarizes financing activities for the years ended 2024, 2023, and 2022.

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During the year ended December 31, 2024, FirstEnergy had the following redemptions and issuances:

(1) Excludes principal payments on securitized bonds.

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As noted above, on September 5, 2024, FET issued $400 million of unsecured senior notes due in 2030 and $400 million of unsecured senior notes due in 2035 in a private offering that included a registration rights agreement in which FET agreed to conduct an exchange offer of these senior notes for like principal amounts registered under the Securities Act. On October 8, 2024, FET filed a registration statement on Form S-4 for the exchange offer with the SEC, which was declared effective on December 20, 2024. On January 24, 2025, FET completed an exchange offer of these senior notes for like principal amounts registered under the Securities Act.

As noted above, on December 5, 2024, JCP&L issued $700 million of unsecured senior notes due in 2035 in a private offering that included a registration rights agreement in which JCP&L agreed to conduct an exchange offer of these senior notes for like principal amounts registered under the Securities Act. JCP&L also agreed to file a shelf registration statement with the SEC to cover resales of the senior notes under certain circumstances. In the event that JCP&L's exchange offer is not completed or the shelf registration statement, if required, is not effective by the 366th day after December 5, 2024, or the effective shelf registration stops being effective for 60 days during any 12-month period, then additional interest will accrue on the coupon. Interest will accrue at a rate of 25 basis points for the first 90 days and an additional 25 basis points in the subsequent 90-day period, but not to exceed 50 basis points per year. However, if the additional interest is triggered, the interest rate will reset to the original notes rate once the registration statement is effective, or the shelf registration, if required, becomes effective. JCP&L plans to file a registration statement for the exchange offer before the end of the first quarter of 2025.

FE or its affiliates may, from time to time, seek to retire or purchase outstanding debt through open-market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will be upon such terms and at such prices as FE or its affiliates may determine, and will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors.

GUARANTEES AND OTHER ASSURANCES

FirstEnergy has various financial and performance guarantees and indemnifications which are issued in the normal course of business. These contracts include performance guarantees, stand-by LOCs, debt guarantees, surety bonds and indemnifications. FirstEnergy enters into these arrangements to facilitate commercial transactions with third parties by enhancing the value of the transaction to the third party. As of December 31, 2024, outstanding guarantees and other assurances aggregated approximately $923 million, consisting of parental guarantees on behalf of its consolidated subsidiaries ($495 million) and other assurances ($428 million).

Collateral and Contingent-Related Features

In the normal course of business, FE and its subsidiaries may enter into physical or financially settled contracts for the sale and purchase of electric capacity, energy, fuel and emission allowances. Certain agreements contain provisions that require FE or its subsidiaries to post collateral. This collateral may be posted in the form of cash or credit support with thresholds contingent upon FE's or its subsidiaries' credit rating from each of the major credit rating agencies. The collateral and credit support requirements vary by contract and by counterparty.

As of December 31, 2024, $170 million of collateral, in the form of LOCs, has been posted by FE or its subsidiaries. FE or its subsidiaries are holding $29 million of net cash collateral as of December 31, 2024, from certain generation suppliers, and such amount is included in "Other current liabilities" on FirstEnergy's Consolidated Balance Sheets.

These credit-risk-related contingent features stipulate that if the subsidiary were to be downgraded or lose its investment grade credit rating (based on its senior unsecured debt rating), it would be required to provide additional collateral. See Note 15, "Commitments, Guarantees and Contingencies," of the Notes to Consolidated Financial Statements for more information.

MARKET RISK INFORMATION

FirstEnergy uses various market risk sensitive instruments, including derivative contracts, primarily to manage the risk of price and interest rate fluctuations. FirstEnergy’s Enterprise Risk Management Committee, comprised of members of senior management, provides general oversight for risk management activities throughout FirstEnergy, including market risk.

Commodity Price Risk

FirstEnergy has limited exposure to financial risks resulting from fluctuating commodity prices, including prices for electricity, coal and energy transmission.

The valuation of derivative contracts is based on observable market information. As of December 31, 2024, FirstEnergy has a net asset of $7 million in non-hedge derivative contracts that are related to FTRs at certain of the Electric Companies. FTRs are subject to regulatory accounting and do not impact earnings.

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Equity Price Risk

As of December 31, 2024, the FirstEnergy pension plan assets were allocated approximately as follows: 25% in public equity securities, 23% in fixed income securities, 4% in hedge funds, 1% in insurance-linked securities, (1)% in derivatives, 9% in real estate funds, 20% in private equity and debt funds and 19% in cash and short-term securities. FirstEnergy does not currently expect to have a required contribution to the pension plan until 2027, which based upon various assumptions, including an expected rate of return on assets of 8.5% for 2025, is expected to be approximately $300 million. However, FirstEnergy may elect to contribute to the pension plan voluntarily.

As of December 31, 2024, FirstEnergy's OPEB plan assets were allocated approximately as follows: 55% in equity securities, 25% in fixed income securities and 20% in cash and short-term securities. See Note 5, "Pension and Other Postemployment Benefits," of the Notes to Consolidated Financial Statements for additional details on FirstEnergy's pension and OPEB plans.

During 2024, FirstEnergy's pension plan assets have lost approximately 0.4% as compared to an annual expected return on plan assets of 8.0%, and FirstEnergy's OPEB plan assets have gained approximately 13.4% as compared to an annual expected return on plan assets of 7.0%.

Interest Rate Risk

FirstEnergy’s exposure to fluctuations in market interest rates is largely mitigated as all long-term debt, with the exception of the 2021 Credit Facilities and the 2023 Credit Facilities, has fixed interest rates, as noted in the table below. However, FirstEnergy is subject to the inherent interest rate risks related to refinancing maturing debt by issuing new debt securities.