FirstEnergy - 10-Q quarterly report FY

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C.  20549

FORM 10-Q

(Mark One)

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

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2009

OR

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

SECURITIES EXCHANGE ACT OF 1934

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

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

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

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

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

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

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

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

Forward-Looking Statements:This Form 10-Q includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements include declarations regarding management’s intents, beliefs and current expectations. These statements typically contain, but are not limited to, the terms “anticipate,” “potential,” “expect,” “believe,” “estimate” and similar words. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Actual results may differ materially due to:

The foregoing review of factors should not be construed as exhaustive. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor assess the impact of any such factor on the registrants’ business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements. The registrants expressly disclaim any current intention to update any forward-looking statements contained herein as a result of new information, future events or otherwise.

TABLE OF CONTENTS

TABLE OF CONTENTS (Cont'd)

GLOSSARY OF TERMS

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

GLOSSARY OF TERMS Cont’d.

GLOSSARY OF TERMS Cont’d.

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

FIRSTENERGY CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EXECUTIVE SUMMARY

Net income in the first quarter of 2009 was $115 million, or basic and diluted earnings of $0.39 per share of common stock, compared with net income of $277 million, or basic earnings of $0.91 per share of common stock ($0.90 diluted) in the first quarter of 2008. The decrease in FirstEnergy’s earnings resulted principally from regulatory charges ($168 million after-tax) recognized in the first quarter of 2009 primarily related to the implementation of the Ohio Companies’ Amended ESP.

Regulatory Matters - Ohio

Ohio Regulatory Proceedings

On March 25, 2009, the PUCO issued an order approving the Ohio Companies’ Amended ESP, which includes provisions for establishing a competitive bid process for generation supply and pricing for a two-year period beginning June 1, 2009, freezing distribution rates through December 31, 2011, subject to limited exceptions, andreducing CEI’s recoverable Extended RTC balance as of May 31, 2009 by 50 percent ($216 million). On March 4, 2009, the PUCO issued an order allowing the Ohio Companies to provide electric generation service to their customers from April 1, 2009, through May 31, 2009, from FES at the average rate resulting from the Ohio Companies’ December 31, 2008, RFP. The PUCO also approved the continuation of CEI’s purchased power cost deferral and the process under which the Ohio Companies conducted their December RFP. The Amended ESP resulted from a stipulated agreement reached with the PUCO Staff and nearly all of the intervening parties to the case.

Regulatory Matters - Pennsylvania

Pennsylvania Legislative Process

The Governor of Pennsylvania signed Act 129 of 2008 into law in October 2008, which became effective November 14, 2008, to create an energy efficiency and conservation program with requirements to adopt and implement cost-effective plans to reduce energy consumption and peak demand. On March 26, 2009, the PPUC approved the company-specific energy consumption and peak demand reductions that must be achieved under Act 129, which requires electric distribution companies to reduce electricity consumption by 1% by May 31, 2011 and by 3% by May 31, 2013, and an annual system peak demand reduction of 4.5% by May 31, 2013. Costs associated with achieving the reduction will be recovered from customers. Under Act 129, electric distribution companies must develop and file their energy efficiency and peak load reduction plans for compliance with these requirements by July 1, 2009.

Act 129 also requires electric distribution companies to submit by August 14, 2009, a plan to deploy smart metering technology over a time period not to exceed fifteen years.  The costs of developing and implementing the plan as ultimately approved by the PPUC will be recovered from customers.

Met-Ed and Penelec Transmission Rider Filings

On April 15, 2009, Met-Ed and Penelec filed revised TSCs with the PPUC for the period June 1, 2009 through May 31, 2010, as required in connection with the PPUC’s January 2007 rate order. For Penelec’s customers, the new TSC would result in an approximate 1% decrease in monthly bills, reflecting projected PJM transmission costs as well as a reconciliation for costs already incurred. The TSC for Met-Ed’s customers would increase to recover the additional PJM charges paid by Met-Ed in the previous year and to reflect updated projected costs. In order to gradually transition customers to the higher rate, Met-Ed is proposing to continue to recover the prior period deferrals allowed in the PPUC’s May 2008 Order and defer $57.5 million of projected costs into a future TSC to be fully recovered by December 31, 2010. Under this proposal, monthly bills for Met-Ed’s customers would increase approximately 9.4% for the period June 2009 through May 2010.

On May 22, 2008, the PPUC approved the Met-Ed and Penelec annual updates to their TSC for the period June 1, 2008, through May 31, 2009. The PPUC ordered an investigation to review the reasonableness of Met-Ed’s TSC which included a transition approach that would recover past under-recovered costs of $144 million plus carrying charges over a 31-month period and deferral of a portion ($92 million) of projected costs for recovery over a 19-month period beginning June 1, 2009, through December 31, 2010. Hearings and briefing were concluded in February 2009. On March 4, 2009, MEIUG and PICA filed a Petition to reopen the record. Met-Ed and Penelec filed objections to MEIUG and PICA’s Petition on March 13, 2009, resulting in an April 1, 2009, order denying MEIUG & PICA’s Petition to reopen the record. Met-Ed is awaiting a final PPUC decision.

Met-Ed and Penelec Customer Prepayment Plan and Procurement Plan

On September 25, 2008, Met-Ed and Penelec filed a Voluntary Prepayment Plan with the PPUC that would provide an opportunity for residential and small commercial customers to prepay about 9.6% of their monthly electric bills during 2009 and 2010, which would earn interest at 7.5% and be used to reduce electricity charges in 2011 and 2012. Met-Ed, Penelec, the Office of Consumer Advocate and the Office of Small Business Advocate reached a settlement agreement on the Voluntary Prepayment Plan, which the PPUC approved on February 26, 2009.

On February 20, 2009, Met-Ed and Penelec filed with the PPUC a generation procurement plan covering the period January 1, 2011, through May 31, 2013. The plan is designed to provide adequate and reliable service through a prudent mix of long-term, short-term and spot market generation supply as required by Pennsylvania law. The plan proposes a staggered procurement schedule, which varies by customer class. On March 30, 2009, Met-Ed and Penelec filed written Direct Testimony; hearings are scheduled for July 15-17, 2009. Met-Ed and Penelec have requested PPUC approval of their plan by November 2009.

Met-Ed and Penelec NUG Statement Compliance Filing

On March 31, 2009, Met-Ed and Penelec submitted their 5-year NUG Statement Compliance Filing to the PPUC in accordance with their 1998 Restructuring Settlement. Met-Ed proposed to reduce its CTC rate for the residential class with a corresponding increase in the generation rate and the shopping credit, and Penelec proposed to reduce its CTC rate to zero for all classes with a corresponding increase in the generation rate and the shopping credit. While these changes would result in additional annual generation revenue (Met-Ed - $27 million and Penelec - $51 million), overall rates would remain unchanged. The PPUC must act on this filing within 120 days.

Regulatory Matters – New Jersey

JCP&L Solar Renewable Energy Proposal Approved

On March 27, 2009, the NJBPU approved JCP&L’s proposal to help increase the pace of solar energy project development in the state by establishing long-term agreements to purchase and sell Solar Renewable Energy Certificates, which will provide a stable basis for financing solar generation projects. The plan is expected to support the phase-in of approximately 42 megawatts of solar generating capacity over the next three years to help meet the state’s Renewable Portfolio Standards through 2012.

JCP&L Selected for Smart Grid Demonstration

JCP&L is one of three companies selected as a smart grid demonstration host site by the Electric Power Research Institute to test the integration of smart grid and other technologies into operations of existing systems. The technologies exhibited during this project may be one solution to accomplishing the goals of the New Jersey Energy Master Plan by meeting future electricity demand.

Operational Matters

Generation Outages

On February 23, 2009, the Perry Plant began its 12thscheduled refueling and maintenance outage, in which 280 of the plant’s 748 fuel assemblies will be exchanged, safety inspections will be conducted, and several maintenance projects will be completed, including replacement of the plant’s recirculation pump motor.

On April 20, 2009, Beaver Valley Unit 1 began a scheduled refueling and maintenance outage. During the outage, 62 of the 157 fuel assemblies will be exchanged and safety inspections will be conducted. Also, several projects will be completed to ensure continued safe and reliable operations, including maintenance on the cooling tower and the replacement of a pump motor. The unit operated safely and reliably for 545 consecutive days, beating the previous records of 456 days for Unit 1 and 537 days for Unit 2 set in 2006 and 2005, respectively.

R. E. Burger Plant

On April 1, 2009, FirstEnergy announced plans to retrofit Units 4 and 5 at its R.E. Burger Plant to repower the units with biomass. Retrofitting the Burger Plant will help meet the renewable energy goals set forth in Ohio SB221, utilize much of the existing infrastructure currently in place, preserve approximately 100 jobs and continue positive economic support to Belmont County, making the Burger Plant one of the largest biomass facilities in the United States.

OVEC Participation Interest Sale

On May 1, 2009, FGCO announced the sale of a 9% interest in the output from OVEC to Buckeye Power Generating LLC for $252 million. The sale involves the output of 214 MW from OVEC’s generating facilities in southern Indiana and Ohio. FGCO’s remaining interest in OVEC was reduced to 11.5%. This transaction is expected to increase earnings in the second quarter of 2009 by $159 million.

FirstEnergy Reorganization

On March 3, 2009, FirstEnergy announced it would reduce its management and support staff by 335 employees. This staffing reduction resulted from an effort to enhance efficiencies in response to the economic downturn. The reduction represents approximately four percent of FirstEnergy’s non-union workforce. Severance benefits and career counseling services were provided to eligible employees. Total one-time charges associated with the reorganization were approximately $22 million, or $0.05 per share of common stock.

Financial Matters

On January 20, 2009, Met-Ed issued $300 million of 7.70% Senior Notes due 2019 and used the net proceeds to repay short-term borrowings. On January 27, 2009, JCP&L issued $300 million of 7.35% Senior Notes due 2019 and used the net proceeds to repay short-term borrowings, repurchase equity from FirstEnergy, fund capital expenditures and for other general corporate purposes. On April 24, 2009, TE issued $300 million of 7.25% Senior Secured Notes due 2020 and used the net proceeds to repay short-term borrowings, to fund capital expenditures and for other general corporate purposes.

On February 12, 2009, $153 million of Wachovia LOCs supporting a like amount of NGC’s PCRBs were renewed until March 17, 2014, and on March 10, 2009, $100 million of FGCO’s PCRBs were converted from a variable-rate mode enhanced by Wachovia LOCs to a fixed-rate mode secured by FMBs.

On March 31, 2009, FES and FGCO executed a new $100 million, two-year secured term loan facility with The Royal Bank of Scotland Finance (Ireland) (RBSFI) that replaces an existing $100 million borrowing facility with RBSFI that was expiring in November 2009.

FIRSTENERGY’S BUSINESS

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

RESULTS OF OPERATIONS

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

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

Financial results for FirstEnergy's major business segments in the first three months of 2009 and 2008 were as follows:

This segment recognized a net loss of $42 million in the first three months of 2009 compared to net income of $179 million in the first three months of 2008, primarily due to CEI’s $216 million regulatory asset impairment related to the implementation of the Ohio Companies’ Amended ESP and other regulatory charges.

Revenues –

The decrease in total revenues of $103 million resulted from the following sources:

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

The lower revenues from distribution deliveries were driven by the reductions in sales volume. The decrease in electric distribution deliveries to commercial and industrial customers was primarily due to economic conditions in FirstEnergy’s service territory. In the industrial sector, KWH deliveries declined to major automotive (28.4%), steel (40.1%), and refinery customers (15.1%). Transition charges for OE and TE that ceased effective January 1, 2009, with the full recovery of related costs, were offset by PUCO-approved distribution rate increases (see Regulatory Matters – Ohio).

The following table summarizes the price and volume factors contributing to the $9 million decrease in generation revenues in the first quarter of 2009 compared to the first quarter of 2008:

The decrease in retail generation sales volumes was primarily due to weakened economic conditions partially offset by increased weather-related usage (heating degree days increased by 3.3% in the first quarter of 2009). The increase in retail generation prices during the first three months of 2009 reflected increased generation rates for JCP&L resulting from the New Jersey BGS auction and for Penn under its RFP process. Wholesale generation sales decreased principally as a result of JCP&L selling less power from NUGs. The decrease in prices reflected lower spot market prices for PJM market participants.

Transmission revenues increased $11 million primarily due to higher transmission rates for Met-Ed and Penelec resulting from the annual update to their TSC riders in mid-2008. Met-Ed and Penelec defer the difference between revenues from their transmission rider and transmission costs incurred, resulting in no material effect to current period earnings (see Regulatory Matters – Pennsylvania).

Expenses –

The $242 million increase in total expenses was due to the following:

Other Expense –

Other expense increased $23 million in 2009 compared to the first three months of 2008, due to lower investment income of $16 million resulting from the repayment of notes receivable from affiliates and higher interest expense (net of capitalized interest) of $7 million due to $600 million of senior notes issued by JCP&L and Met-Ed in January 2009.

Net income for this segment was $155 million in the first three months of 2009 compared to $87 million in the same period in 2008. The $68 million increase in net income reflected an increase in gross generation margin, partially offset by higher operating costs.

Revenues –

Total revenues increased $123 million in the first three months of 2009 compared to the same period in 2008. This increase primarily resulted from higher unit prices on affiliated generation sales to the Ohio Companies and increased non-affiliated wholesale sales, partially offset by lower retail sales.

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

The lower retail revenues reflect reduced commercial and industrial contract renewals in the PJM market and the termination of certain government aggregation programs in Ohio. Higher non-affiliated wholesale revenues resulted from higher PJM capacity prices and increased sales volumes in the MISO market, partially offset by lower unit prices and volumes in PJM.

The increased affiliated company generation revenues were due to higher unit prices for sales to the Ohio Companies under their CBP, partially offset by lower unit prices to the Pennsylvania Companies and an overall decrease in affiliated sales volumes. While unit prices for each of the Pennsylvania Companies did not change, the mix of sales among the companies caused the composite price to decline. FES supplied less power to the Ohio Companies in the first quarter of 2009 as one of four winning bidders in the Ohio Companies’ RFP process. The amount of power FES will supply to the Ohio Companies for periods beginning on or after June 1, 2009 will be determined by the extent to which FES is successful in bidding in the upcoming CBP, which is currently scheduled to begin on May 13, 2009.

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

Transmission revenues decreased $8 million due to decreased retail load in the MISO market ($14 million) partially offset by higher PJM congestion revenue ($6 million). Increased lease revenue represents NGC’s acquisition of the equity interests in the OE and TE  Beaver Valley and Perry sale and leaseback transactions.

Expenses -

Total expenses decreased $4 million in the first three months of 2009 due to the following factors:

Other Expense –

Total other expense in the first three months of 2009 was $14 million higher than the first quarter of 2008, primarily due to a $23 million decrease in earnings from nuclear decommissioning trust investments reflecting impairments in the value of securities. This impact was partially offset by a decline in interest expense (net of capitalized interest) of $9 million.

Net income for this segment increased to $24 million in the first three months of 2009 from $23 million in the same period of 2008. Higher operating revenues were almost entirely offset by higher operating expenses, primarily for purchased power.

Revenues –

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

The following table summarizes the price and volume factors contributing to the increase in sales revenues from retail customers:

The increase in generation sales was primarily due to reduced customer shopping as most of the Ohio Companies’ customers returned to PLR service in December 2008 due to the termination of certain government aggregation programs in Ohio. Average prices increased primarily due to an increase in the Ohio Companies’ fuel cost recovery rider that became effective in January 2009.

Increased transmission revenue of $17 million resulted from higher sales volumes and a PUCO-approved transmission tariff increase that was effective in mid-2008. The difference between transmission revenues accrued and transmission expenses incurred is deferred, resulting in no material impact to current period earnings.

Expenses -

Purchased power costs were $310 million higher due primarily to higher unit costs and volumes. The factors contributing to the higher costs are summarized in the following table:

The increase in purchased volumes was due to the higher retail generation sales requirements described above. The higher unit costs reflect the implementation of the Ohio Companies’ CBP for their power supply for retail customers.

Other operating expenses decreased $59 million due to lower MISO transmission-related expenses and increased intersegment credits related to the Ohio Companies’ generation leasehold interests. The deferral of regulatory assets increased by $45 million due to CEI’s deferral of purchased power costs as approved by the PUCO, partially offset by reduced MISO transmission cost deferrals. The difference between transmission revenues accrued and transmission expenses incurred is deferred or amortized, resulting in no material impact to current period earnings.

FirstEnergy’s financial results from other operating segments and reconciling items, including interest expense on holding company debt and corporate support services revenues and expenses, resulted in a $10 million decrease in FirstEnergy’s net income in the first three months of 2009 compared to the same period in 2008. The decrease resulted primarily from the absence of the gain on the 2008 sale of telecommunication assets ($19 million, net of taxes), partially offset by the favorable resolution in 2009 of income tax issues relating to prior years ($13 million).

CAPITAL RESOURCES AND LIQUIDITY

FirstEnergy expects its existing sources of liquidity to remain sufficient to meet its anticipated obligations and those of its subsidiaries. FirstEnergy’s business is capital intensive, requiring significant resources to fund operating expenses, construction expenditures, scheduled debt maturities and interest and dividend payments. During 2009 and in subsequent years, FirstEnergy expects to satisfy these requirements with a combination of cash from operations and funds from the capital markets as market conditions warrant. FirstEnergy also expects that borrowing capacity under credit facilities will continue to be available to manage working capital requirements during those periods.

As of March 31, 2009, FirstEnergy’s net deficit in working capital (current assets less current liabilities) was principally due to short-term borrowings ($2.4 billion) and the classification of certain variable interest rate PCRBs as currently payable long-term debt. Currently payable long-term debt as of March 31, 2009, included the following (in millions):

FirstEnergy had approximately $2.4 billion of short-term borrowings as of March 31, 2009, and December 31, 2008. FirstEnergy, along with certain of its subsidiaries, have access to $2.75 billion of short-term financing under a revolving credit facility that expires in August 2012. A total of 25 banks participate in the facility, with no one bank having more than 7.3% of the total commitment. As of May 1, 2009, FirstEnergy had $720 million of bank credit facilities in addition to the $2.75 billion revolving credit facility. Also, an aggregate of $550 million of accounts receivable financing facilities through the Ohio and Pennsylvania Companies may be accessed to meet working capital requirements and for other general corporate purposes. FirstEnergy’s available liquidity as of May 1, 2009, is summarized in the following table:

Revolving Credit Facility

FirstEnergy has the capability to request an increase in the total commitments available under the $2.75 billion revolving credit facility (included in the borrowing capability table above) up to a maximum of $3.25 billion, subject to the discretion of each lender to provide additional commitments. Commitments under the facility are available until August 24, 2012, unless the lenders agree, at the request of the borrowers, to an unlimited number of additional one-year extensions. Generally, borrowings under the facility must be repaid within 364 days. Available amounts for each borrower are subject to a specified sub-limit, as well as applicable regulatory and other limitations.

The following table summarizes the borrowing sub-limits for each borrower under the facility, as well as the limitations on short-term indebtedness applicable to each borrower under current regulatory approvals and applicable statutory and/or charter limitations as of March 31, 2009:

Under the revolving credit facility, borrowers may request the issuance of LOCs expiring up to one year from the date of issuance. The stated amount of outstanding LOCs will count against total commitments available under the facility and against the applicable borrower’s borrowing sub-limit.

The revolving credit facility contains financial covenants requiring each borrower to maintain a consolidated debt to total capitalization ratio of no more than 65%, measured at the end of each fiscal quarter. As of March 31, 2009, FirstEnergy’s and its subsidiaries' debt to total capitalization ratios (as defined under the revolving credit facility) were as follows:

$3.0 billion, or recognize a reduction in equity of approximately $1.6 billion, and

remain within the limitations of the financial covenants required by its revolving

credit facility.

The revolving credit facility does not contain provisions that either restrict the ability to borrow or accelerate repayment of outstanding advances as a result of any change in credit ratings. Pricing is defined in “pricing grids”, whereby the cost of funds borrowed under the facility is related to the credit ratings of the company borrowing the funds.

FirstEnergy's regulated companies also have the ability to borrow from each other and the holding company to meet their short-term working capital requirements. A similar but separate arrangement exists among FirstEnergy's unregulated companies. FESC administers these two money pools and tracks surplus funds of FirstEnergy and the respective regulated and unregulated subsidiaries, 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. The average interest rate for borrowings in the first three months of 2009 was 0.97% for the regulated companies’ money pool and 1.01% for the unregulated companies’ money pool.

As of March 31, 2009, FirstEnergy’s currently payable long-term debt includes approximately $1.6 billion (FES - $1.6 billion, Met-Ed - $29 million and Penelec - $45 million) of variable interest rate PCRBs, the bondholders of which are entitled to the benefit of irrevocable direct pay bank LOCs. The interest rates on the PCRBs are reset daily or weekly. Bondholders can tender their PCRBs for mandatory purchase prior to maturity with the purchase price payable from remarketing proceeds or; if the PCRBs are not successfully remarketed, by drawings on the irrevocable direct pay LOCs. The subsidiary obligor is required to reimburse the applicable LOC bank for any such drawings or, if the LOC bank fails to honor its LOC for any reason, must itself pay the purchase price.

The LOCs for FirstEnergy variable interest rate PCRBs were issued by the following banks:

In February 2009, holders of approximately $434 million principal of LOC-supported PCRBs of OE and NGC were notified that the applicable Wachovia Bank LOCs were to expire on March 18, 2009. As a result, these PCRBs were subject to mandatory purchase at a price equal to the principal amount, plus accrued and unpaid interest, which OE and NGC funded through short-term borrowings. In March 2009, FGCO remarketed $100 million of those PCRBs, which were previously held by OE. In addition, approximately $250 million of FirstEnergy’s PCRBs that are currently supported by LOCs are expected to be remarketed or refinanced in fixed interest rate modes and secured by FMBs, thereby eliminating or reducing the need for third-party credit support.

As of March 31, 2009, the Ohio Companies and Penn had the aggregate capability to issue approximately $2.7 billion of additional FMBs on the basis of property additions and retired bonds under the terms of their respective mortgage indentures. As a result of the issuance of senior secured notes by TE referred to below and related amendments to the TE mortgage indenture’s bonding ratio, that capacity decreased to $2.3 billion. The issuance of FMBs by the Ohio Companies is also subject to provisions of their senior note indentures generally limiting the incurrence of additional secured debt, subject to certain exceptions that would permit, among other things, the issuance of secured debt (including FMBs) supporting pollution control notes or similar obligations, or as an extension, renewal or replacement of previously outstanding secured debt. In addition, these provisions would permit OE, CEI and TE to incur additional secured debt not otherwise permitted by a specified exception of up to $171 million, $164 million and $117 million, respectively, as of March 31, 2009. In April 2009, TE issued $300 million of new senior secured notes backed by FMBs. Concurrently with that issuance and in order to satisfy the limitation on secured debt under its senior note indenture, TE issued an additional $300 million of FMBs to secure $300 million of its outstanding unsecured senior notes originally issued in November 2006. Based upon FGCO’s FMB indenture, net earnings and available bondable property additions as of March 31, 2009, FGCO had the capability to issue $2.7 billion of additional FMBs under the terms of that indenture. Met-Ed and Penelec had the capability to issue secured debt of approximately $423 million and $321 million, respectively, under provisions of their senior note indentures as of March 31, 2009.

FirstEnergy’s access to capital markets and costs of financing are influenced by the ratings of its securities. On March 2, 2009, Moody’s assigned a Baa1 senior secured rating to FES-related secured issuances. The following table displays FirstEnergy’s, FES’ and the Utilities’ securities ratings as of April 30, 2009. S&P’s and Moody’s outlook for FirstEnergy and its subsidiaries remains “stable.”

On September 22, 2008, FirstEnergy, along with the Shelf Registrants, filed an automatically effective shelf registration statement with the SEC for an unspecified number and amount of securities to be offered thereon. The shelf registration provides FirstEnergy the flexibility to issue and sell various types of securities, including common stock, preferred stock, debt securities, warrants, share purchase contracts, and share purchase units. The Shelf Registrants have utilized, and may in the future utilize, the shelf registration statement to offer and sell unsecured, and in some cases, secured debt securities.

As of March 31, 2009, FirstEnergy had $399 million in cash and cash equivalents compared to $545 million as of December 31, 2008. Cash and cash equivalents consist of unrestricted, highly liquid instruments with an original or remaining maturity of three months or less. As of March 31, 2009, approximately $311 million of cash and cash equivalents represented temporary overnight deposits.

FirstEnergy's consolidated net cash from operating activities is provided primarily by its energy delivery services and competitive energy services businesses (see Results of Operations above). Net cash provided from operating activities was $462 million in the first three months of 2009 compared to $359 million in the first three months of 2008, as summarized in the following table: