first energy annualanalystmtg2-01-07

Analyst MeetingNew York, NY • Feb. 1, 2007

Analyst Meeting • New York, NY • February 1, 2007

Safe Harbor StatementSafe Harbor Statement

Safe Harbor Statement

These presentations include forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements typically contain, but are not limited to, the terms“anticipate,” “potential,” “expect,” “believe,” “estimate” and similar words. Actual results may differ materially due to the speed and nature of increased competition and deregulation in the electric utility industry, economic or weather conditions affecting future sales and margins, changes in markets for energy services, changing energy and commodity market prices, replacement power costs being higher than anticipated or inadequately hedged, the continued ability of our regulated utilities to collect transition and other charges or to recover increased transmission costs, maintenance costs being higher than anticipated, legislative and regulatory changes (including revised environmental requirements), and the legal and regulatory changes resulting from the implementation of the Energy Policy Act of 2005 (including, but not limited to, the repeal of the Public Utility Holding Company Act of 1935), the uncertainty of the timing and amounts of the capital expenditures needed to, among other things, implement the Air Quality Compliance Plan (including that such amounts could be higher than anticipated) or levels of emission reductions related to the Consent Decree resolving the New Source Review litigation, adverse regulatory or legal decisions and outcomes (including, but not limited to, the revocation of necessary licenses or operating permits, fines or other enforcement actions and remedies) of governmental investigations and oversight, including by the Securities and Exchange Commission, the Nuclear Regulatory Commission and the various state public utility commissions as disclosed in our Securities and Exchange Commission filings, generally, and heightened scrutiny at the Perry Nuclear Power Plant in particular, the timing and outcome of various proceedings before the Public Utilities Commission of Ohio (including, but not limited to, the successful resolution of the issues remanded to the PUCO by the Ohio Supreme Court regarding the Rate Stabilization Plan) and the Pennsylvania Public Utility Commission, including the transition rate plan filings for Met-Ed and Penelec, the continuing availability and operation of generating units, the ability of generating units to continue to operate at, or near full capacity, the inability to accomplish or realize anticipated benefits from strategic goals (including employee workforce initiatives), the anticipated benefits from voluntary pension plan contributions, the ability to improve electric commodity margins and to experience growth in the distribution business, the ability to access the public securities and other capital markets and the cost of such capital, the outcome, cost and other effects of present and potential legal and administrative proceedings and claims related to the August 14, 2003 regional power outage, the successful structuring and completion of a potential sale and leaseback transaction for Bruce Mansfield Unit 1 currently under consideration by management, the successful implementation of the newly-approved share repurchase program announced today, the risks and other factors discussed from time to time in our Securities and Exchange Commission filings, including our annual report on Form 10-K for the year ended December 31, 2005, and other similar factors. We expressly disclaim any current intention to update any forward-looking statements contained herein as a result of new information, future events, or otherwise.


Today’s AgendaToday’s AgendaPerformance Overview – Tony AlexanderRegulatory Update – Leila VespoliOperations Overview – Dick GriggFossil Operations – Charlie LaskyEnvironmental Compliance – Guy PipitoneNuclear Operations – Gary Leidich– Break –Energy Delivery & Customer Service – Chuck JonesCommodity Operations – Ali JamshidiFinancial Outlook – Rich MarshClosing Remarks – Tony AlexanderPanel Q & A

Performance Overview – Tony AlexanderRegulatory Update – Leila VespoliOperations Overview – Dick GriggFossil Operations – Charlie LaskyEnvironmental Compliance – Guy PipitoneNuclear Operations – Gary Leidich– Break –Energy Delivery & Customer Service – Chuck JonesCommodity Operations – Ali JamshidiFinancial Outlook – Rich MarshClosing Remarks – Tony AlexanderPanel Q & A

Today’s Agenda

Performance Overview

Tony AlexanderPresident & CEO



Delivering Strong Results


Our focus continues to be on the fundamentals…

Improve operating performanceStrengthen financial performanceEnhance shareholder valueEnsure a safe working environment for employees

2

We’re in the best financial position I’ve seenin my 34 years with the company…

…and delivering top-decile performancein key measures across our operations

We delivered on these goals


Delivering Improved Operating PerformanceT&D Reliability:

Distribution SAIDI* improved 20% across operating companies… more than 40% in some areas

Transmission Outage Frequency per circuit is at 0.35— top-decile performance in our industry


3

* SAIDI (System Average Interruption Duration Index)


Delivering Improved Operating Performance


4

Fossil GenerationNuclear Generation

0

20

40

60

80

100

2003 2004 2005 2006

(million MWh)

RecordOutput

Record Generation

82807768


Delivering Strong Financial Results

2006 Non-GAAP Earnings Guidance:*Original (July ’05) $3.40 – $3.60** Final (Oct ’06) $3.75 – $3.85***

Preliminary Unaudited 2006Non-GAAP Earnings Per Share $3.87 – $3.89***


5

* Three adjustments were made to the original guidance.** Also reflected GAAP earnings guidance.*** See GAAP to Non-GAAP reconciliations in the Financial Outlook Appendix.


Delivering Enhanced Shareholder Value

Four dividend increases over past 2 years

Two programs to repurchase up to 26.5 million shares

2006 total shareholder return of 27.2%

3-year annualized TSR of 24.0%– Ranks 8/63 in EEI Index


6


Delivering World-Class Safety Results

Overall OSHA rate of 0.97 in 2006 – best ever for FirstEnergy, and one of best in industry


7

2003 2004 2005 2006

1.591.44

1.23

0.97

OSHA Incident Rate *

* Per 100 employees.


Building Long-Term Shareholder ValueEnhance financial strength and flexibility

Continue to deliver consistent and predictable financial results

– 2007 Non-GAAP Earnings Guidance: $4.05 – $4.25*– Compelling long-term earnings growth potential

– Transition to market-based generation rates– Phase out of transition cost amortization

8Performance Overview

* See GAAP to Non-GAAP reconciliation in the Financial Outlook Appendix.


Strategic Vision: 2007 and Beyond

Strategic Goals:

Manage transition to competitive markets —Ohio/Pennsylvania

Realize full potential of asset base

Control commodity costs and risks

Enhance financial strength and flexibility


9

Analyst Meeting • New York, NY • February 1, 2007 Performance Overview

10

Regulatory Update

Leila VespoliSr. Vice President & General Counsel



Regulatory Objectives

Manage transition to market-based ratesGeneration

DeliveryFull and timely recovery of costsTransmission: Recover volatile RTO costsDistribution: Maximize long-run equity return Transition: Full and timely stranded cost recovery

2Regulatory Update


FERC Strategy

Principles for Wholesale Power MarketsOperational excellenceLeader in regulatory complianceSupport development of electricity marketsEncourage infrastructure developmentTimely cost recovery

Active engagement and advocacyat FERC, PJM and MISO

3Regulatory Update


Regulatory StrategyManaging the Transition to Competitive Markets

Completed projects:– $182M in transition bonds issued– BPU approved framework for full recovery of

deferred costs — $110M annual increase [“NGC case”]

BGS auction process as a model forsuccessful transition to markets

Jersey Central Power & Light

4

New Jersey

Regulatory Update

Analyst Meeting • New York, NY • February 1, 2007 Regulatory Update


Successful transition to market-based generation ratesRFP process for 900 MW from Jan. 2007 – May 2008Average retail price of $85/MWh replaced $55/MWh

Penn Power

5

Pennsylvania

Met-Ed and PenelecGranted deferral of PJM transmission charges starting Jan. 2006PUC Order on transition rate plan issued Jan. 11, 2007NUG accounting case to be heard in Feb. 2007

Analyst Meeting • New York, NY • February 1, 2007 Regulatory Update


Overall: $109M increase effective Jan. 12, 2007Transmission recovery granted in full ($193M increase)– Ongoing costs recoverable using a reconcilable rider – 10-year recovery of 2006 deferral with carrying charges

Generation increase of $219M and NUG deferral of $92M deniedDistribution decrease of $84M; ROE set at 10.1%Restated FES Partial Requirements Agreementeffective Jan. 1, 2007

Summary: Met-Ed and PenelecTransition Plan Decision

6

Pennsylvania


Regulatory Strategy Managing the Transition to Competitive Markets

Regulatory Update

Ohio Senate Bill 3 – Ohio Restructuring Legislation(July 1999)

Generation Asset Transfer completed (4Q 2005)Rate Certainty Plan approved (Jan. 2006)– Stable transition for customers/companies through 2008– Provides for synchronization of the following in 2009:

– Distribution rate increase, including recovery ofRCP deferrals

– Market-based generation rates– Elimination/Reduction of transition cost recovery

7



Regulatory Update

Ohio

Average Unbundled FirstEnergy Ohio Rates

* Represents Non-Shopping Customers.

8

Illustrative Market Price Impact – 2009

Dist Dist

RTC

Trans

0.00

15.00

30.00

45.00

60.00

75.00

90.00

12/31/2008* 01/01/2009

Break-evenRetail Priceapprox. $61/ MWh

($ / MWh) $88.00 $88.00

GenGen

RSC

TransRTC


Regulatory Strategy Managing the Transition to Competitive Markets

Regulatory Update

OhioRate shock experienced in other states not likelyfor FirstEnergy

Termination/reduction of transition cost recovery(average of $15/MWh in 2008) will substantially mitigate any price increases to customers

9

Well positioned to participate in development of the post-2008 market structure in Ohio


appendix

App-1Regulatory Update


Retail Regulatory Structure

1 CEI fixed through April 2009.2 NUG recovery thru 2020.

Ohio Edison Stable ratesthru 2008“g + RSC”

RTC thru2008 – OE, TE2010 – CEI

Fixed ratesthru 20081

Pass thruMISO costs

Penn Power Market in2007

POLR ratesthru 2010

GenerationGeneration TransmissionTransmission DistributionDistribution Transition CostTransition Cost

Norestriction

JCP&L BGS Supply MTC thru 2018No restriction

Met-Ed

Penelec

Toledo Edison

CEI

CTC endedJan. 2006

CTC thru 20102

CTC thru 20092


Pass thruPJM costs

Norestriction

InGeneration


Transition Case Detail – Pennsylvania


Revenue Increase (Decrease)Distribution $ (21) $ (84)Transmission 193 193Generation 219 0Total Rate Increase $ 391 $ 109Deferral RequestCTC $ 1 $ 0NUG Cost Recovery 92 0Total Deferral $ 93 $ 0

RequestedRequested GrantedGranted($ millions)($ millions)


Revenue Increase (Decrease)Distribution $ (39) $ (75)Transmission 133 133Generation 131 0Total Rate Increase $ 225 $ 58Deferral RequestCTC $ 1 $ 0NUG Cost Recovery 43 0Total Deferral $ 44 $ 0

Transition Case Detail – Met-Ed




Revenue Increase (Decrease)Distribution $ 18 $ (9)Transmission 60 60Generation 88 0Total Rate Increase $ 166 $ 51Deferral RequestCTC $ 0 $ 0NUG Cost Recovery 49 0Total Deferral $ 49 $ 0

Transition Case Detail – Penelec



7

Dick GriggExecutive Vice President & COO

Operations Overview



Operations Strategy: Leveraging assets and maximizing opportunities is our focus across all business units.

DRIVING PERFORMANCE & DELIVERING RESULTS

Operations Overview

The key to our success will be:

Commodity OperationsCommodity Operations

Environmental Compliance


FossilFossilEnergy DeliveryEnergy Delivery

NuclearNuclear

2


Akron

Toledo

Reading

Beaver Valley1,712 MW

Davis-Besse898 MW

Perry1,258 MW

R. E. Burger413 MW

W. H. Sammis2,233 MW

Bruce Mansfield2,460 MW

Eastlake1,262 MW

Ashtabula244 MW

Seneca443 MW

Edgewater48 MW

Richland432 MW

Stryker18 MW

Yards Creek200 MW

York Haven19 MW

Mad River60 MW

West Lorain545 MW

Lake Shore249 MW

Sumpter340 MW

Erie

Ohio

Pennsylvania

NewJersey

Harrisburg

MorristownNewark

Allenhurst

Trenton

Bay Shore648 MW

Columbus

New Castle

Cleveland

Johnstown

Forked River86 MW

Michigan

Baseload Load Following Peaking Units

Plant Load Strategy

Towanda

MW MWMW

FirstEnergy Generation Sources

West Lorain 545Seneca 443Richland 432Sumpter 340Yards Creek 200Burger 3 & EMDs 101Forked River 86Mad River 60Other 129

Total Peaking Units 2,336

Mansfield 1-3 2,460Beaver Valley 1,2 1,712Perry 1,258Sammis 6,7 1,200Davis-Besse 898Eastlake 5 597Bay Shore 1 136York Haven 19

Total Baseload 8,280

Sammis 1-5 1,020Eastlake 1-4 636Bay Shore 2-4 495Burger 4 -5 312Lake Shore 245Ashtabula 244

Total Load Following 2,952

3

OVEC 463Wind 30

Total 493

Other MW

FirstEnergy Power Plants

C Coal 7,439 MWN Nuclear 3,868 H Hydro 662 G Gas & O Oil 1,599

Other 493Total 14,061MW

Operations Overview


Coal53%Coal53%

Nuclear28%

Nuclear28%

CTs11%CTs11%Hydro

5%Hydro

5%

14,061 MWNet Capacity14,061 MW

Net Capacity

Diverse Generation Portfolio

Hydro / CTs2%

Hydro / CTs2%Nuclear

35%Nuclear

35%

2006 ActualGeneration Output82.0 million MWh *

2006 ActualGeneration Output82.0 million MWh *

Coal63%Coal63%

4

Other3%

Other3%

* Excluding Wind and OVEC Generation

Operations Overview


Diverse Generation Portfolio

Hydro / CTs2%

Hydro / CTs2%Nuclear

38%Nuclear

38%

2007 ProjectedGeneration Output82.7 million MWh

2007 ProjectedGeneration Output82.7 million MWh

Coal60%Coal60%

5

* Excluding Wind and OVEC Generation

Operations Overview


Drive continuous improvement– Increased reliability– Outage execution– Excellence standards

WELL-POSITIONED TO SUCCEEDIN A COMPETITIVE GENERATION MARKET

Operations Overview

Operations StrategyGeneration

6

Explore opportunities to mine existing assets forcost-effective capacity additions

Effectively implement environmental compliance strategy

– Benchmark analysis– Controlling costs


Manage commodity value chain

Effectively deploy generation to capture market opportunities

Enhance fuel supply/logistics

Efficiently manage purchased power requirements

Employ strict risk management controls and oversight– Volume and price risks– Generation availability risks– Transmission congestion risks

COMMODITY OPERATIONS IS MAXIMIZING MARGINSBY MITIGATING RISKS AND MINIMIZING SUPPLY COSTS

Operations Overview

Operations StrategyCommodity Operations

7


Continued focus on enhancing reliability and customer service– Targeted reinvestment in T & D infrastructure – Leveraging technology

Implement “Energy Delivery Excellence Program”– Top-to-bottom review of entire operations– Identify operational, organizational, and technological

opportunities for improvement – Enhance construction budgeting, planning, scheduling

and oversight process

Achieve timely rate recovery of regulated capital spend

ENERGY DELIVERY IS WORKING THE PLANAND ACHIEVING RESULTS

Operations Overview

Operations StrategyEnergy Delivery

8


Unwavering commitment to safety

Underlying all of our strategies is the recruitment and retention of a talented workforce

To address an aging workforce, partnered with colleges across OH, PA and NJ to recruit and develop new talent:

– Energy Delivery implemented a Power Systems Institute(PSI) Program offering degrees in line and substation work

– Fossil Group initiated a 2-year Power Plant Technology program in 2003

– Nuclear Group started a 2-year associate’s degree programin nuclear engineering technology

Operations Overview

Operations StrategyEmployees

9


There are numerous opportunities to leverage our assets and build upon our strengths. Our team will discuss how we plan to execute and capture these opportunities.

Operations Overview

Operations Strategy

BUILDING LONG-TERM SHAREHOLDER VALUE

10

Fossil Operations

Charlie LaskyVice President, Fossil Operations



AgendaAgenda

Fossil Operations Overview

2006 Results

Fossil Excellence Standards

Fossil Operations Overview

2006 Results

Fossil Excellence Standards

Fossil Operations

2


Standard Operating SystemsStandard Operating Systems

Drive Consistent Performance in Critical MetricsDrive Consistent Performance in Critical Metrics

Fossil ExcellenceFossil Excellence

Fossil Operations

3


Fossil continues top quartile safety performance

Unwavering commitment to SafetyContinue drive towardsconsistent top decile performanceFocus Safety training on personal performance improvementsDrive personal employee engagement in SafetyinitiativesStandardize fleet-wide performance metricsthat drive accountability and engagement

Top quartile and decile performanceis based on EEI’s Annual Safety Surveys.

OSHA Incident Rate

1.02

1.40

2.12

1.71

2.16

1.55

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2001 2002 2003 2004 2005 2006

2005 Industry PerformanceTop 10% = 1.17 or betterTop 25% = 1.80 or better

Top Quartile

Fossil Operations

4

Top Decile

Analyst Meeting • New York, NY • February 1, 2007 Fossil Operations

Maximizing fleet utilization key to driving improved generation margin.

Fossil Generation

35

40

45

50

55

2001 2002 2003 2004 2005 2006 2007E

2006 record generation output with over 52.98 million MWh from Fossil FleetMansfield Plant record generation output with over 18.63 million MWhSteady growth of baseload generation with step improvement in load following generationSustained generation levels demonstrate strong linkage between plants and market dispatch

(million MWH)

5


Baseload units demonstrate consistent improvement.

88.6%

85.9%84.5%

79.6%

76.0%

82.2%

68%

70%

72%

74%

76%

78%

80%

82%

84%

86%

88%

90%

2002 2003 2004 2005 2006 2007E

Top Decile

Top Quartile

82.7%

90.7%

88.8%

91.4%

84.3%84.2%

78%

80%

82%

84%

86%

88%

90%

92%

94%

2002 2003 2004 2005 2006 2007E

Top decile base load capacity factor in 2006 compared to Navigant benchmark databaseIncreased capacity factors and reliability initiatives drive baseload units towards top decilein 2006 Equivalent Availability

Top Decile

Top Quartile

•Top performance came from Navigant benchmarking study •Top performance came from Navigant benchmarking study

Baseload Capacity FactorBaseload Capacity Factor Baseload Eq. AvailabilityBaseload Eq. Availability

Fossil Operations

6


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

*Excludes the peaking units.

0

5

10

15

20M NMWh

0%

25%

50%

75%

100%Capacity Factor

Load Following 15.2 18.2 16.6 14.4 19.5 19.1 19.8Capacity Factor 54% 64% 59% 51% 69% 69% 70%

2001 2002 2003 2004 2005 2006 2007E

Focus on total fleet output has positive impact on load following utilization.

Fossil Operations

7


Delivering value by driving down incremental costs and increasing generation output2006 incremental operating costs are 34% below 2001 inflated levels2007 Incremental costs reflect impact of scheduled outage cycle for units and emissions

Non-Fuel O&M Expense

$357.9 $357.8$443.8 $396.4 $374.4 $355.1 $425.5

-

200

400

600

800

2001 2002 2003 2004 2005 2006 2007E-

3

6

9

12($ millions) ($/NMWh)

$/Net MWh $9.01 $7.50 $9.47 $8.53 $7.27 $6.70 $8.26

3% Inflated $9.09 $9.35 $9.63 $9.92 $10.27 $10.59

2006 Fossil incremental Non-Fuel Costs declined 29% since 2003.

Fossil Operations

8


Bay Shore Plant pilots Fossil Excellence (FEx) to driveself-critical culture.

Successfully engaged multiple frontline personnel in defining plant vision and leading improvement initiatives

– 23 led initiatives and over 70 participated (out of ~200 employees at Plant)

Trained and building FEx skills in more than 70 frontline employees

Engaged& MotivatedWorkforce

Integrate plant diagnostic and annual Business Plan development to define a 18- to 24-month roadmap for Bay Shore to achieve significant performance improvementsSet up performance dialogs to enable continuous improvement

ContinuousImprovement

Culture

Developed key elements of the FEx Standards– Continuous improvement approach including employee engagement – FEx tools demonstrated successfully; equipment strategy, standard operating

responses, planning and scheduling, SMED

Develop standard approach on embedding one common operating system at all FirstEnergy Fossil plants

CommonOperating System

Pilot at Bay Shore set clear path to achieve top level performanceDemonstrated significant improvement in key management areas

Industry-leadingPerformance

9Fossil Operations


Generation StrategyCommitted to grow generation through base load up-rates

50100

130 130

49

92149

0

100

200

300

2005 2006 2007E 2008E

(Cumulative MW)

NuclearFossil

Fossil Operations

10

149

222

279


Generation strategy focused at growing earnings through potential opportunities linked to our existing asset base.

63%18%

16%

2%1%

Incremental Projects

CoalGasNuclear

OilOpportunistic Fuel

Potential enhancementsto sustain or improve capacity and generation outputLeverage and grow a diverse gen-eration base to maximize earnings potential and meet load growthCreate a strategy that supports incremental generation growth while minimizing environmental regulatory and capital recovery risksAuxiliary services markets and capacity revenues will impact gen-eration asset decisions in the future Technology enhancements will shape future fleet design and diversity

Fossil Operations

11


Grouping of Incremental Projects Low cost capacity improvement “quick hits”

Twelve projects supporting 197 MW of capacity improvements at anestimated capital cost of $12M ($61/kW)Projects focused largely around strengthening peak summer generation capacity from combustion turbines and continued operation of Burger Unit 3

Fossil Operations

12

Cumulative MW

0

50

100

150

200

2007 2008 2009 2010

CAPEX $M 6 6 0 0Cumulative MW 175 197 197 197

Quick Hits


Strategic OperationComprehensive environmental compliance and economic analysis for

Fossil Fleet ready for implementation– Clean Air Interstate Rule and Clean Air Mercury Rule – effective March 2005– New Source Review – effective July 1, 2005– Clean Water Act, Section 316(b) Phase II – effective July 9, 2004

Air Quality Control Group focused to address environmental compliance implementation plans across the fleet with $1.8 billion investment through 2010

Environmental considerations impactday-to-day as well as strategic decisions.Tactical Operation

Managed compliance with environmental operating standards to achieve 100% compliance

Optimized emission rates to maximize contribution to generation margin

Long-Term OperationActively partner with government agencies, EPRI, and equipment manufacturersto R&D new control technologies and system efficiency improvements to addresspotential future emissions regulations

Fossil Operations

13


In Summary … Focus on Consistent Execution

Fossil Operationscontinues to drive bottom-line contribution for FirstEnergy…

$EPS

$EPS

Unwavering commitment to achieve top decile in safetyDrive for enhanced operational margin through higher capacity utilization, improved reliability, and thorough equipment maintenanceExecute long-term environmental compliance plan to ensure reliable operation of fleetDrive continuous improvementin competitive operation through increased reliability, Fossil Excellence Standards and benchmark analysisFocus on building the next generation of our workforce

Fossil ExcellenceFossil Excellence

Fossil Operations

14


appendix

App-1Fossil Operations


EmployeeEngagementEmployee

Engagement

ContinuousImprovementContinuous

Improvement

Pred. MaintenanceRCA/BTF/Water Chem.Outage ExecutionEquipment ReliabilityOper. ProceduresHeat RateSubstation Maint.Alarms ResponseProtective Devices

ReliabilityInitiatives

AwarenessAccountabilityPreventionBenchmarking

Safety

Bill of MaterialsStagingReverse AuctionsStockingCentral WarehouseContract Models

MaterialsManagement

PM ComplianceOperating RoundsEquip. PerformanceEnvironmentalOutage SupportWork Prioritization

TacticalOperations

Generation Margin Business PlansSPOT SystemBudget ReportsCommitment ReportsAsset Utilization“8760” ToolFuel StrategiesBase load StrategyOperating Availability

Business PlanPerformance

Workforce ManualTech. Rotation ProgramCoop ProgramCore Skills TrainingForeman’s AcademyTalent Talks360 Development

WorkforceDevelopment

PM ComplianceSchedule ComplianceBacklog ManagementOutage PlansMaterial StagingPlanning

Maintenance

Title VNPDESCEMSSPCC

Environmental

Fossil Excellence

Fossil Operations

App-2


Guy PipitoneSr. Vice President,Operations Strategy & Development



Our Current Fleet Is Well Positioned

Non-Emitting 4,530 33%Coal Controlled(SO2/NOx – full control)Natural Gas Peaking 1,269 10%

8,368 62%

Capacity (MW) Fleet %

Excellent emission rate vs. competitorsExcellent mix of nuclear, coal and natural gasNSR Consent Decree in place since March 2005

Fleet Emission Control StatusFleet Emission Control Status

2

2,569 19%


Construction Overview

Sammis Plant (2,220 MW)– SO2 control (scrubbers) all units– NOx control (SCRs) Units 6 & 7 (1,200 MW)– NOx control (SNCR) Units 1–5 (1,020 MW)

Mansfield Plant (2,460 MW)– SO2 control (scrubber) upgrades all units

– complete 2007

NOx Controls (SNCR)– Eastlake Unit 5 (600 MW)– Burger Units 4 & 5 (300 MW)

Bay Shore Plant– NOx and SO2 control Unit 4 (215 MW)


3


AQCS Expenditures


4

54136

380

563496

178

0

200

400

600

2005 2006 2007E 2008E 2009E 2010E

Confident in our cost estimate ($1.8B)– Early SCR engineering (contracted in 1999)– Detailed project development in 2005– Early commitment by “premier” suppliers and subcontractors– Deeply experienced and highly qualified project teams

($ millions) Capital Expenditures


Project Management

Contracts contain incentives and liquidated damages provisions

Premier contractors whose project personnel were selected prior to award

Highly detailed schedule (16,000 activities)– Fully integrated– Real-time access– Continuously analyzed and updated

Cost control and monitoring– Scope containment– Performance measurement and trending– Targeted cost-reduction initiatives


5


Managing the Construction Process

Material supply– Shops fully loaded– Long lead times– Mitigation strategy includes expediting,

close interaction, and frequent updates

On-site craft labor availability– In competition with many other projects– Levelized labor usage– Desirable site conditions– Close relationships with local unions– Labor availability is a consent decree

“force majeure” provision


6


Longer-term Environmental Considerations

CO2 control– Approx. 40% fleet output nuclear– Heavily involved in CO2 capture and sequestration R&D

Mercury control– Excellent reduction through “co-benefits”– Based on current rules and plans, will be in compliance

until 2015


7


Nuclear OperationsNuclear OperationsGary LeidichPresident & Chief Nuclear Officer


TopicsTopics

Fulfilling Our Vision– Safety– Reliability– Outage Execution– Regulatory Status

Looking Forward– Power Uprates– License Renewal– Fuel Management– Production Costs

Summary

Fulfilling Our Vision– Safety– Reliability– Outage Execution– Regulatory Status

Looking Forward– Power Uprates– License Renewal– Fuel Management– Production Costs

Summary

2Nuclear Operations


Fulfilling Our Vision

Nuclear Operations

Continue to focus on:

Safe and event-free plant operationsReliable plant operationsImprovement in outage execution

3

Analyst Meeting • New York, NY • February 1, 2007 Nuclear Operations

Fulfilling Our Vision Best Personal Safety Record in the U.S.

Fleet OSHA Incident Rate

2005 NuclearIndustry Best = 0.26

0.00

0.10

0.20

0.30

0.40

0.50

Fleet 0.33 0.36 0.32 0.41 0.03 0.30 0.30 0.302002 2003 2004 2005 2006 2007E 2008E 2009E

Top Quartile = 0.39

Top Decile = 0.32

4


0

25

50

75

100

Beaver Valley Davis-Besse Perry

2004 Actual 2005 Actual 2006 Actual

Improving Safety Culture Assessment Scores– In 2006, aligned with Institute of Nuclear Power

Operators Safety Culture Principles

Nuclear Operations

Fulfilling Our Vision Strong Safety Culture

Safety Culture Performance Index Principles

Everyone is personally responsible for nuclear safety

Leaders demonstrate commitment to safety

Trust permeates the organization

Decision-making reflects safety first

Nuclear technology is recognized as special and unique

A questioning attitude is cultivated

Organizational learning is embraced

Nuclear safety undergoes constant examination

5


2006 Safety Conscious Work Environment Survey

Nuclear Operations


Survey Questions

6

Workers accepting responsibility for identifying problems and adverse conditions 98% positive

Raising a nuclear safety or quality concern 97% positive

Accepting personal responsibility for identification of errors or mistakes regardless of the consequence 96% positive

Not being subjected to retaliation for raising nuclear safety, quality or compliance concerns while working here within the last 6 months

96% positive

Not aware of instances that occurred on site within the last6 months in which workers have been subjected to retaliation for raising nuclear safety, quality, or compliance concerns

95% positive

Responses (average/site)



Currently, three open Office of Investigations issuesNRC Allegations are well below industry average

Average NRC Allegations (per site)

0

5

10

15

Fleet 15.0 10.0 14.6 8.0 2.7Industry 6.3 5.4 6.2 6.9 5.9

2002 2003 2004 2005 2006

7


Fulfilling Our Vision Improving Reliability

2006 Nuclear Fleet PerformanceAchieve top decile

– OSHA Rate– Fuel costs– Corrective Maintenance backlog

Recognized for on-line dose control Summer Capacity Factor = 97.6%

CapacityFactor (%)

Forced Loss Rate (%)

Net Generation (million MWh)

Beaver Valley Unit 1 80.4 1.16 5.8Beaver Valley Unit 2 87.7 1.75 6.3Davis-Besse 83.1 1.76 6.4Perry 96.8 3.44 10.5 *

Fleet 88.0 2.27 29.02002 – 2005 Avg 79.0 3.15 26.0

* Record generation

8


Fulfilling Our Vision Strong Plant Reliability

2006 Capability Factor with Planned Outages

Reliability improvements during 2006 outages

BV1 – New steam generators and reactor vessel head, main generator rewindBV2 – Weld overlay on pressurizer nozzles, enlarged containment sumpDB – Replaced two reactor coolant pumps, replaced low pressure turbine rotors and diaphragms

9

0

25

50

75

100

Beaver Valley 1 Beaver Valley 2 Davis-Besse Perry

99 94 94 97%


Elective Maintenance

Elective Maintenance

0

200

400

600

800

1000

1200

1400

1600

1800

2000

Jan '04 Jun '04 Jan '05 Jun '05 Oct '05 Dec '05 Dec '06 Dec '07 Dec '08 Dec '09

0

20

40

60

80

100

120

140

Jan '04 Jun '04 Jan '05 Jun '05 Oct '05 Dec'05

Dec'06

Dec'07

Dec'08

Dec'09

Beaver Valley 1 Beaver Valley 2 Davis-Besse Perry

Corrective MaintenanceCorrective

Maintenance Open Work

Orders

Open Work

Orders

Nuclear Operations

Top Quartile = 10

Fulfilling Our VisionReduced Maintenance Backlogs

Top Quartile = 250

10


Safety: No FENOC OSHA Recordables,under stretch dose goal by 2 remDuration: 65 days vs. a target of 76 Costs: Under O&M budget by $7MSignificant Scope:– 3 new steam generators– New simplified reactor vessel closure head– Atmospheric containment conversion– Main unit generator rotor and stator rewind– Long-range plan motor, valve and breaker maintenance– Generator exciter replacement (emergent)

Enabled 3% power uprate in August 2006 and 5% in 2007

Safety: No FENOC OSHA Recordables,under stretch dose goal by 2 remDuration: 65 days vs. a target of 76 Costs: Under O&M budget by $7MSignificant Scope:– 3 new steam generators– New simplified reactor vessel closure head– Atmospheric containment conversion– Main unit generator rotor and stator rewind– Long-range plan motor, valve and breaker maintenance– Generator exciter replacement (emergent)

Enabled 3% power uprate in August 2006 and 5% in 2007

Nuclear Operations

Fulfilling Our Vision Outage Execution – Beaver Valley 1 Steam Generatorand Reactor Head Replacement OutageWorld Class Performance

11


Fulfilling Our Vision Future Outages Focus on Reliability

Refueling *25$30Beaver Valley2R14

Replace Low Pressure Turbines (2) *Reactor Coolant System Loop Stop Valves (2)Reactor Vessel Head Inspection

30$30Beaver Valley1R19

Refueling *10-year IVVI / Bioshield In-service InspectionRecirc Pump Motor Replacement

25$30Perry1R12

2009

Split Pins *Low Pressre-2 Turbine Inspection *Reactor Vessel Head InspectionMain Cond Tube Replacement, Expansion Joints *Replace High Pressure Turbine *Type A Containment Pressurization Test


Rewind Main Generator *31$30Davis-Besse 1R15

2008

Split Pins *Containment Sump Modifications*Reactor Vessel ISI *100% Eddy Current TestReactor Vessel Head InspectionPressurizer Overlay


Refueling *IVVI30$30Perry

1R11

2007

Scope Driving DurationItems with asterisk denote duration drivers

Outage Duration

(days)

OutageCosts

($ millions)PlantYear

12


FleetFleet

Successfully completed the NRC Component DesignBasis Inspection with no findings or non-cited violations,an industry “first” for these types of inspectionsWhite NRC Finding in Emergency Preparedness

PerryPerry

Successful Independent Assessments — working withNRC Region III to modify Confirmatory Order

Additional inspections completeClose Confirmatory Action Letter and return toStandard Oversight

Davis-BesseDavis-Besse

Beaver ValleyBeaver Valley

Fulfilling Our VisionRegulatory Status

Third annual combined NRC Regional meeting heldJanuary 24, 2007

13Nuclear Operations


Looking Forward Growth Opportunities through Power Uprates

Implementing 170 new MW ahead of schedule

Beaver Valley Unit 1 25 MW in 2006 43 MW in 2007

Beaver Valley Unit 2 10 MW in 2006 45 MW in 2008

Davis-Besse 14 MW in 2006 12 MW in 2008

Perry 21 MW in 2011

Power UpratesPower Uprates

Nuclear Operations

14


Looking Forward Increasing Generation

20,000

22,500

25,000

27,500

30,000

32,500

Fleet 24,455 21,093 29,907 28,758 28,982 31,215 32,001 31,296 32,197

2002 2003 2004 2005 2006 2007E 2008E 2009E 2010E

GWhFleet Generation

2004 RecordFleet Generation

15


CurrentExpiration

Submit Request

(NRC Docket)

ApprovalExpected

NewExpiration

Beaver Valley Unit 1 2016 2007 2009 2036Beaver Valley Unit 2 2027 2007 2009 2047Davis-Besse 2017 2010 2012 2037Perry 2026 2013 2015 2046

Looking Forward Continued Safe Operations through License Renewal

Nuclear Operations

License Renewal Schedule

16


Looking Forward Managing Uranium Prices

Uranium Pricing – Historical Year-End U3O8 Spot Prices

Note: Value for 2006 reflects UPIS U3O8 Spot Price Indicator as of end of Dec 2006.Conversion of Then-Current $ to Constant 2006 $ based on U.S. GNP-IPD.

0

20

40

60

80

100

120

1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

($/lb U308)

2006 YE

Sources: 1973-1989: NUEXCO/TradeTech Exchange Value1990-2006: Uranium Price Information System (UPIS) U3O8 Spot Price Indicator, which reflects NAC’s judgment of the spot price

at the end of each month and excludes CIS/Russian-origin uranium.

Nuclear Operations

Range of Forecast

High Forecast

Then-Current $Constant 2006 $

Low Forecast

17


Looking Forward Fuel Cost ManagementFENOC Fuel Cost Projections

0.00

1.00

2.00

3.00

4.00

5.00

6.00

2006 2007E 2008E 2009E

($/MWh)

4.28 4.48 4.575.12

Current Fuel Contract Coverage (includes Letters of Intent)Uranium: 100% coverage through 2009; 69% coverage in 2010Enrichment: 100% coverage through 2010; 76% coverage in 2011Fabrication PY – life of unit contract

DB – 1 additional reload under contractBV1 – 5 additional reloads under contractBV2 – 5 additional reloads under contract

Negotiations for extension of DB fabrication contract are ongoing.

Disposal & OtherFabrication

EnrichmentUranium

Nuclear Operations

18


Looking Forward Managing Our Used Fuel

Through 2006, 46 of 102 plants reached capacity in used fuel pools49 operating plants built on-site dry cask fuel storage, 46 are under constructionPlans for federal repository for long-term storage — Yucca Mountain Congressional proposals for interim storage and reprocessing

FENOC PlanBV Unit 1BV Unit 1

BV Unit 2BV Unit 2

Davis-BesseDavis-Besse

PerryPerry

Implement dry storage by end of 2014

Criticality analysis frees up storage spaceRerack before 2011 to provide capacity through 2025Dry storage could then be implemented

Continue with wet storage until 2021Return to dry storage in 2022

Spent fuel pool campaign in 2007 ($7M)Implement dry storage before 2011 ($26M)

Nuclear Operations

19


Looking Forward Cost-effective Operations

0

5

10

15

20

25

Fleet 24.88 20.88 16.73 18.94 20.43 17.57 17.16 19.29

2002 2003 2004 2005 2006 2007E 2008E 2009E

$/MWhFleet Production Costs

20

Production Costs includes O&M and Fuel.


Summary

Maintaining best in class in personal and nuclear safety

Focusing on Operational Excellence

Closing the gaps to top industry performance

Nuclear Operations

21


Energy Delivery& Customer ServiceChuck JonesSr. Vice President,Energy Delivery & Customer Service


Our future plans will help us build upon recent success.

Employee safety record that is top decile

Across the board improvement in customer satisfaction

Significant improvement in distribution reliability

Top decile transmission reliability performance

Solid financial results

Energy Delivery & Customer Service

2


Four factors are driving our overall planning.

Aging Infrastructure

Aging Workforce

Reliability

Cost Recovery


3


While our plan is straightforward…


Optimize capital investment

Increase project management oversight

Fill 100% of vital positions

Transition “institutional memory”

Build regulatory “margin”

Deliver expected financial results

Timely recovery of regulatory spend

4


Issues: Cost Recovery Rate ImplicationsFinancial Management

Issues: Aging Workforce“Institutional Memory”Orderly Transition

Issues: ReliabilityCapacity PlanningCapacity Compliance

… each aspect of our “plan” has unique characteristics.


OperationsOperations

Issues: ReliabilityServiceTechnology

Customer ServiceCustomer Service

PeoplePeople

FinancialFinancial

5


Our 2007 infrastructure capital is not significantly different than recent years — the difference is the acceleration of selected capital projects.


6

InfrastructureCapacityNew BusinessForcedOther

Total

2005264

97138122104725

200622010013210989

650

2007E184197131120

103735


We continue to “fine-tune” our management structure. Two recent changes were specifically targeted to asset management and financial oversight.

Asset Management

Financial Management


Develop long-term asset strategyAsset and circuit health analysis and trackingIntegrated investment planningAsset performance tracking and analysis

State and Operating Company controllersIncreased financial skills throughout ED&CS5-year financial planningCommitment tracking and management reportingRegulatory focus to ensure full recovery

7


2006YTD=152

2005YE = 191

0

50

100

150

200

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

SAIDI (minutes)

Threshold2006 2005

175

The Transmission Outage Frequency (TOF) is a measure of the average number of transmission circuit outages per circuit in the 230–500kV voltage classes. Threshold, target, and maximum have been established as industry average, top quartile, and top decile as defined by the SGS benchmarking study.

Transmission Outage Frequency (TOF) Per Circuit

SAIDI represents the averagetotal duration of outage minutesper customer in a year adjustedfor major storms. The 2006 goal is 175 minutes.Note: Based on Commission criteria.

Distribution SAIDI (System Average Interruption Duration Index)

Everyone has a plan, but it is the results that define success.


(20% Improvement)

8

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Jan Feb Mar April May June July Aug Sept Oct Nov Dec

Out

ages

per

Circ

uit

Threshold = 0.78Target = 0.42

Max = 0.36

YTD = 0.35


Our Accelerated Reliability Improvement Plan (ARIP) is producing outstanding results.


Penn Power SAIDI

0

50

100

150

200

250

300


SAID

I (m

inut

es)

Threshold 2006 2005

9

Penelec SAIDI

0

50

100

150

200

250

300


SAID

I (m

inut

es)

Threshold 2006 2005

Analyst Meeting • New York, NY • February 1, 2007 Energy Delivery & Customer Service

We have a plan

We are working the plan

We are achieving results

Bottom-line:

10

Commodity OperationsAli JamshidiVice President,Commodity Operations



Topics

Focus AreasManaging Commodity RisksAsset UtilizationFuel and Related CommoditiesPurchased PowerWholesale SalesSummary

Commodity Operations

2


FOCUS AREAS

Manage commodity risks to create earnings certainty

Maximize the utilization of FirstEnergynuclear and coal-fired generation production

Manage fuel requirements to balanceminimizing costs and maximizing reliabilityof the fuel portfolio

Manage the fulfillment of purchased powerrequirements to optimize overall margin

Meet retail obligations and maximizeprofitable wholesale opportunities

Commodity Operations maximizes power marginby mitigating risks and minimizing supply costs.


3


Commodity Operations’ objective is to provide FEwith a predictable and profitable commodity margin.


GenerationMargin

GenerationMargin

MWH

COST

FENOC

31M MWh

FENOC

31M MWh

MWH

COST

Fossil

51M MWh

Fossil

51M MWh

MWH

COST

Purchased Power34M MWh

Purchased Power34M MWh

MWH

REV

RegulatedSales

80M MWh

RegulatedSales

80M MWh

MWH

REV

CompetitiveSales

12M MWh

CompetitiveSales

12M MWh

MWH

REV

WholesaleSales

20M MWh

WholesaleSales

20M MWh

MWHLosses &Pumping4M MWh

Losses &Pumping4M MWh

+ Generation Revenue– Fuel– Purchased Power

Generation Margin

CommodityMargin

CommodityMargin

Excludes JCP&L.

+ Generation Margin– Transmission Expense– RTO expense

Commodity Margin

PJM / MISO Expenses

PJM / MISO Expenses

4

Value ChainValue Chain

Volume & Price Risks

Quality

Reliability

Optionality


Regulatory Risks

Retail vs. Wholesale

Optionality

Generation Volume & Price Risks

Generation Availability Risks

Transmission Congestion Risks

Optionality


Availability

Reliability

Optionality

Fuel SupplyFuel Supply

Generation Portfolio

Management

Generation Portfolio

Management

FuelLogistics

FuelLogisticsCustomerCustomer

Managing across the value chain maximizes earnings.

5


Daily Corporate Margin (Weekday)

6

8

10

12

14

16

18

20

55 60 65 70 75 80 85 90Average Daily CLE Temperature (F)

1.5 M$

8 M$ 1M$ per 1F

47% Prob50% 3% Prob

Average

1M$

Effectively managing commodity risk ensures earnings certainty.


6

($ millions)

Illustrative


Strict risk controls and oversight of open positions minimize market risks.


7

Note: The red line represents the risk tolerance parameters determined by the Risk Policy Committee.

Electricity Position ($ millions)

-100

0

100

J F M A M J J A S O N D J F M A M J J A S O N D-100

0

100

On-Peak PJM Off-Peak PJM On-Peak MISO Off-Peak MISO Capacity Emission Allowances Net Net w/eFORs

2007 2008

Note: The thin red line represents the risk tolerance parameters determined by the Risk Policy Committee.

Illustrative


Continued improvement of asset utilization creates value.


8

45.7 46.5 51.1 52.4

32.0

51.152.6

28.729.9

21.1

29.0 31.2

0

20

40

60

80

100

2003 2004 2005 2006 2007E 2008E

NuclearFossil & Hydro

Note: Excludes JCP&L.

(million MWh)

66.876.4

79.8 81.6 82.3 84.4

Improved asset utilization

Analyst Meeting • New York, NY • February 1, 2007 Commodity Operations

Balanced emission allowance position minimizes risks.

Based on projected generation:

Emission allowance positions are well coveredNOx positions are completely covered2007 and 2008 net SO2positions are covered

SO2 Position (tons)

-30,000

60,000

150,000

240,000

330,000

2007 2008

Needed Covered Position

NOx Position (tons)

0

10,000

20,000

30,000

2007 2008

Needed Covered Position

9


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

Aggressively working to secure longer-term fuel supply requirements

Actively testing alternate fuel blends at various plants to optimize plant economics

Engaged in fuel flexibility initiative to create more options


10

0

5,000

10,00

015

,000

20,00

025

,000

2008

2007

Total Covered TonsTotal Needed Tons

94%

99%

Securing Open Coal Commodity Positions


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

2007 transportation positions100% covered based on budgeted generation

2008 transportation positions will be closed shortly —agreements reached

Evaluating additional delivery options to increase both capabilities and flexibility


11

54%

Securing Open Fuel Transportation Positions

0

5,000

10,00

015

,000

20,00

025

,000

2008

2007

Total Open TonsTotal Covered TonsTotal Needed Tons


Fuel and Transportationoptions create leverage.


EastlakeBurgerAshtabulaSammisMansfieldBay ShoreLake Shore

TruckVesselBargeRailCoal Delivery Options

0

5

10

15

PRB 3 3 0 3 4 3 5NAAP 0 0 10 3 3 5 3CAAP 3 4 0 6 6 6 6

Lake Shore Bay Shore Mansfield Sammis Ashtabula Burger Eastlake

67

10

1213

14 14Planned & PotentialMine Sources

# of

Min

es

12


Fuel CostsGeneration and Fuel Expense

0

300

600

900

1,200

1,500

$12.00

$16.00

$20.00

Total Fuel 1209.0 1231.7 1356.0

Nuclear Fuel 120.4 140.2 146.8

Fossil Fuel (excl JCPL) 1088.6 1091.5 1209.2

$'s per MWh $14.83 $15.23 $16.15

2006 2007E 2008E

($ millions) ($/MWh)

FOSSIL FUEL (excludes JCP&L)

0

300

600

900

1,200

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

Total Fossil Fuel 1,088.6 1,091.5 1,209.2

Other 1.4 1.5 1.5

Fuel Handling 20.8 22.9 24.6

Ash Disposal 14.9 13.1 13.8

Oil 11.2 11.8 12.0

Natural Gas 20.0 25.6 22.5

EmissionAllowances

57.3 34.8 45.9

Re-agents 52.8 58.6 62.5

Coal Transportation 254.6 358.8 402.2

Coal Commodity 655.6 564.4 624.2

Fuel per MWh $21.20 $21.02 $23.26

2006 2007E 2008E

($ millions) ($/MWh)

13Commodity Operations


Fuel Costs

Total Coal Expense

0

200,000

400,000

600,000

800,000

1,000,000

($000)

0.00

5.00

10.00

15.00

20.00

25.00

30.00

($/MWh)

Total $910,187 $923,235 $1,026,382

Coal Only $655,581 $564,406 $624,160

Transportation $254,606 $358,828 $402,222

$/MWh Total $18.00 $18.38 $19.79

$/MWh Coal Only $12.97 $11.23 $12.04

$/MWh Transportation $5.04 $7.14 $7.76

2006 2007E 2008E



Fuel Costs


Close coordination of Commodity Operations and Fossil Operations provides the opportunity to manage fuel market changes

0

200,000

400,000

600,000

800,000

0.00

5.00

10.00

15.00

20.00

25.00

Total 616,550 528,398 603,448

Coal Only 554,984 443,627 522,119

Transportation 61,566 84,771 81,329

$/MWh Delivered 17.42 16.87 18.36

2006 2007E 2008E

14.5 Mtons 12.4 M

tons

12.9 Mtons

Total ($000) $/MWh

0

100,000

200,000

300,000

400,000

500,000

0.00

5.00

10.00

15.00

20.00

25.00

Total 293,636 394,837 422,934

Coal Only 100,596 120,780 102,041

Transportation 193,040 274,057 320,893

$/MWh Delivered 19.37 20.86 23.18

2006 2007E 2008E

7.7 Mtons

10.7 Mtons

10.4 Mtons

Total ($000) $/MWh


Purchased Power

0

5

10

15

20

25

30

35

40

2007E Committed To BeCommitted

Spot

(million MWh)

16.6

10.3

4.4

2.7

34

Met-EdPenelec

To Be Committed and Spot Purchases, only 7.1 million MWh remain subject to market price exposure



Wholesale Sales

14.6

2.40.6 3.0

20.6

0

5

10

15

20

25

2007E Committed To BeCommitted

Spot TransmissionLosses

(million MWh)

To Be Committed and Spot Sales, only 3.0 million MWh remain subject to market price exposure



Penn Power Transition to Market

2006 Timeline2006 TimelineApr 5 RFP announced May 31 Bid #1 concludesJul 18 Bid #2 concludesAug 15 Bid #3 concludesSep 7–12 Supplemental

offers

SuccessesSuccessesTransitioned 5 million MWhto competitive marketCompeted in the bid processHedged shopping risksManaged a competitiveretail effortImplemented an integrated wholesale/retail strategyBalanced position



Summary


Effectively manage commodity risks

Improve asset utilization

Leverage added capacity

Manage across the value chain

Leverage presence in two RTOs

Leverage retail market competencies

Predictableand profitable commodity margin

19

Financial Outlook

Rich MarshSenior Vice President & CFO



Financial ObjectivesMaintain Financial Strength and Flexibility

Strong and stable cash flowsBalanced capital structure Investment grade credit metrics

Deliver Consistent and Predictable Financial ResultsImproved generation marginsEfficiency enhancements and cost reductionsEffectively manage transition to competitive markets

Deploy Cash Effectively to Increase Shareholder ValueSustainable dividend growth Share repurchasesReinvestment in business

Financial Outlook

2


2006 – Key AccomplishmentsPreliminary subject to audit

Consistent financial results– Preliminary unaudited 2006 earnings exceed revised guidance

Favorable cash flow– Unaudited net cash from operating activities approx. $2B – Unaudited cash generation (non-GAAP) of $506M*

(excluding changes in net collateral not included in guidance)

Enhanced capital structure– Replaced $1.0B of HoldCo debt with long-term utility debt

– Appropriately capitalizing utilities in regulatory context– Transferred $1.1B of tax-exempt pollution control debt from

utilities to unregulated Gencos

Enhanced long-term liquidity position– Renewed and upsized credit facility from $2.0B to $2.75B

Financial Outlook

3

* See reconciliation to GAAP on Slide #17.


Increased shareholder value– Total shareholder return of 27.2%– Three year annualized TSR of 24.0% ranks 8/63 in EEI Index– Dividend increase of 4.7% effective March 1, 2006– Announced dividend increase of 11.1% effective March 1, 2007 – Accelerated repurchase of approx. 10.5 million shares

Regulatory developments– Ohio Rate Certainty Plan, including fuel and distribution deferrals– Deferral of incremental PJM transmission expenses– $182M of JCP&L securitization bonds– JCP&L Non-Utility Generation Charge

2006 – Key Accomplishments

Financial Outlook

4


2007 Focal Points Continue to use cash to benefit shareholders– Net cash from operating activities expected to exceed $1.7B– Dividend increase / additional share repurchase program

Capture benefit of $785M of expiring tax capital loss carryforwardsContinued focus on capital structure management– Additional transfers of tax-exempt debt from operating companies

to Gencos– Utilize long-term debt issuances to meet maturities and

appropriately capitalize operating companies

Obtain investment-grade credit rating at FE SolutionsInvest efficiently in business to improve reliability, reduce risk,and generate future earnings– New business– T&D infrastructure enhancement– Capacity uprates and emerging asset “mining” opportunities

Financial Outlook

5


Sale and Leaseback – Mansfield Unit 1Structure of potential transaction under developmentMansfield 1 is an attractive asset — oldest unitof a high-quality, fully-scrubbed facility– 54MW (6.5%) previously sold and leased back

Projected after-tax cash proceeds of $1.2B – Highly tax efficient

Low-cost source of financing Potential capital structure impact– Maximum debt leverage impact of 200 bp– Potential operating lease treatment would reduce

lease debt equivalent

Financial Outlook

6


Sale and Leaseback – Mansfield Unit 1Conventional structure contemplatedNo strategic compromise — retain operating control of assetNo regulatory issues — can be completed quicklyTarget closing early in 2nd Qtr 2007NPV expected to exceed $500MCurrent use of proceeds assumptions– $900M Share repurchase– $193M Pension contribution (after-tax)– $107M Short-term debt paydown

Financial Outlook

7


Share RepurchaseOn January 30, FE board approved second repurchase program for up to 16M shares – Supersedes program approved 6/20/06– Represents approx. 5% of outstanding shares– Approx. $900M at $58 stock price

Financed by proceeds from proposed Mansfield 1 saleand leasebackCoupled with Aug. 2006 program of approx. 10.5 million shares, total buy-backs would equal approx. 8% of original shares outstanding Projected earnings impact from both buy-backs isapprox. $0.18 per share in 2007 vs. 2006

Financial Outlook

8


Pension Contribution

Financial Outlook

9

Previously contributed $1B to plan during 2004–2005Pension Protection Act of 2006 changed plan funding rules$300M contribution ($193M after-tax) made in JanuaryIncreases plan funding– Improves PBO funded ratio to 105%

Financial impact of contribution equates to 15% pre-taxcash return, 9% after-tax returnAccretive to annual earnings by approx. $0.05 per shareFAS 87/106 Cost: 2006 $ 94 M

2007F (89) M$ (183) M


Long-Term Dividend Policy

Payout ratio target of approx. 50–60%Annual growth target of 4–5%Sustainable annual increases

Dividend Changes:

Change fromPrior Period

Change fromPrior Period

Payment Date

Payment Date

Quarterly Rate

Quarterly Rate

AnnualizedRate

AnnualizedRate

Financial Outlook

10

1Q 2007 50.00¢ 11.1% $2.001Q 2006 45.00¢ 4.65% $1.804Q 2005 43.00¢ 4.24% $1.721Q 2005 41.25¢ 10.00% $1.654Q 2004 37.50¢ – $1.50


Cash Returned to Shareholders

2005 2006 2007E

Common Dividend $ 546 $ 586 $ 615

Share Repurchase – 600 900

Total $ 546 $ 1,186 $ 1,515

($ millions)

Financial Outlook

11


Controlling Benefit CostsRetiree Health Care Design Change

Limit per capita outlay for Medicare eligible retirees to$250 per month beginning 2008

Retirees can use Company contribution to buy FE healthplan coverage or commercial market Medicare offerings

Annual cost savings of approx. $116M reflected in FAS 106 calculation beginning 2007

Financial Outlook

12


FE Solutions (FES)Wholly-owned competitive subsidiary– Provides energy-related products & services to wholesale and

retail customers in MISO & PJM

Owned fossil and nuclear assets transferred at end of 2005 to Gencos pursuant to restructuring plans approved by Ohio and Pennsylvania regulatorsFocused on:– Transition to competitive markets– Realizing full potential of asset base– Mitigating commodity-related risks– Enhancing financial strength and flexibility

Financial Outlook

13


FE Solutions (FES) Capitalized at approx. 57% debt – Genco-level tax-exempt debt with 4% average current cost

comprises approx. 44% of debt portfolio

Believe that investment grade credit rating is warranted– Stability of cash flows under contracts with utilities– Diversity and quality of assets; favorable operating performance

and cost– Disciplined risk management approach

SEC registrant providing full financials during 2007

Financial Outlook

14


FE Solutions (FES)$1.4B of tax-exempt pollution control debt transferred from operating companies to Gencos – $700M remains to be transferred in 2007–2008

FES will likely issue taxable debt in futureInvestment grade rating will enable FES to guarantee– Mansfield 1 sale and leaseback performance and payment

obligations– Letters of credit supporting tax-exempt debt at the Gencos

(replacing FE guarantees)

Financial Outlook

15


$3.00

$3.50

$4.00

$4.50

$5.00

$3.88(1)

($0.05)

$0.07

($0.05)$4.15(1)

$0.18

Midpoint 2006 Preliminary

Non-GAAP EPS

GenerationOutput &

MixWiresGrowth

T&D Infra-structure

Midpoint 2007 Non-GAAP

EPS Guidance

$0.06

$0.17

($0.19)

NetBenefitCosts

ME/PERate Case (“D”)

OH Trans-ition Cost

Amort.

2007 Non-GAAP Earnings Per Share Guidance

(1) See GAAP to non-GAAP reconciliation in the Appendix. 2007 EPS guidance, excluding unusual items, is $4.05 – $4.25.On a GAAP basis, EPS is expected to be $4.10 – $4.30.

Net Share Repurchases Depr.

($0.10)

Financial Outlook

Penn Power

to Market

$0.12All

OtherNuclear Outage O&M

$0.08

16

($0.02)


2006 Cash Overview

17Financial Outlook

Reconciliation of 2006 Preliminary Unaudited Cash from Operating Activities (GAAP) toPreliminary Free Cash Flow (Non-GAAP) and Preliminary Cash Generation (Non-GAAP)

Net Cash from Operating Activities:Preliminary GAAP Net Income Range $ 1,255 – $1,262Adjustments:

Amortization of Regulatory Assets & Depreciation 1,460Deferrals (Reg Assets, Purch Power, Income Taxes) (900)BGS Collateral 60Other Collateral (137)Other, including changes in Working Capital 198

Net Cash from Operating Activities (GAAP) $ 1,939Other Items:

Capital Expenditures (1,153)Nuclear Fuel Fabrication (162)Common Stock Dividends (586)Other, Net 12

Free Cash Flow (Non-GAAP) $ 50Proceeds from Asset Sales 139JCP&L Securitization 180

Cash Generation (Non-GAAP)* $ 369* 2006 cash generation was $506M, excluding non-BGS collateral outflow of $137M that was not included

in 2006 cash generation guidance.

Unaudited


Net Pension Contribution: $373M ($90M tax benefit realized in 2006)

Securitization/Asset Sales in 2006: $310M

Higher Dividends / Capital Expenditures: $215M

Wires Growth: $20M

Gen Output/Mix: $15M

Penn Power to Market: $40M

Nuclear Outage O&M: $25M

PA Rate Increase: $60M

JCP&L NUG Recovery: $100M

Net Collateral: $80M

Financial Outlook

2007 Cash Flow Drivers

18


($ millions)

20062006 20072007 20082008

Energy Delivery $ 650 $ 735 $ 875FENOC 229 145 155Fossil 116 102 80General 36 87 55

Subtotal $ 1,031 $ 1,069 $ 1,165AQCS 136 380 563

Total $ 1,167 $ 1,449 $ 1,728

EstimateEstimatePreliminaryPreliminary

Capital Expenditures

2007–2008 expected to be peak total capital spending years

Financial Outlook

19


Volume

Fuel Costs &Supply Disruptions

Price

UnplannedGeneration Outages

EPS: (40)¢ (35¢) (30¢) (25¢) (20¢) (15¢) (10¢) (5¢) 0 5¢ 10¢ 15¢ 20¢ 25¢

Major Risks

20Financial Outlook

Probability Range: Low LowHigh


Higher Ohio transition cost amortization

T&D infrastructure investment

Increased fuel and purchased power costs

Growth in delivery sales

Increased generation margin

Lower generation-related outage maintenance costs

Financial Outlook

2008 Earnings Drivers

21


Conclusions 2007–2008 characterized by modest revenue growth

Capital spending peaks during 2007–2009 period– Driven by AQCS expenditures

Aggressive operating efficiencies / cost savingsto stimulate earnings growth

Upside potential in 2009 in Ohio– Transition cost amortization decreases by $238M– Distribution rate increases– POLR obligation shifts to market

Upside potential in 2011 in PA– POLR obligation shifts to market for Met-Ed

and Penelec

Financial Outlook

22


ConclusionsFE well-positioned to deliver continued value

Using strong cash flow to benefit shareholders andreinvest in business for future growth and reduced riskLow-cost, efficient generation assetsExperience in competitive generation markets and multiple RTOsDisciplined risk management approachWell-positioned to participate in OH debate regarding 2009

– Rate Plans allow orderly transition without customer rate shockExecutive compensation plans align management and shareholder interests

– EPS, cash generation and long-term stock performancekey incentives for senior management

Financial Outlook

23

Analyst Meeting • New York, NY • February 1, 2007 Financial Outlook

App-1

appendix


FirstEnergy Credit Ratings

Financial Outlook

Corporate Credit Rating (S&P) / Issuer Rating

(Moody's) / Issuer Default Rating (Fitch) Senior Secured

Senior Unsecured

S&P Moodys Fitch S&P Moodys Fitch S&P Moodys FitchFirstEnergy Corp. BBB Baa3 BBB- - - - BBB- Baa3 BBB-

Ohio Edison BBB Baa2 BBB- BBB+ Baa1 BBB+ BBB- Baa2 BBB

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

Toledo Edison BBB Baa3 BB BBB Baa2 BBB- BBB- Baa3 BB+

Pennsylvania Power BBB Baa2 BBB- BBB+ Baa1 BBB+ BBB- Baa2 BBB

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

Metropolitan Edison BBB Baa2 BBB- BBB+ Baa1 BBB+ BBB Baa2 BBB

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

As of January 24, 2007

App-2


Strong Liquidity Position

Substantial liquidity available– $1.6B available borrowing capacity as of January 26, 2007

Company Type Term Maturity Amount ($M)FE Corp. RCA* 5-year August 2011 $ 2,750FE Corp. Bank Lines Various Various 120OH & PA Utilities

Company Type Term Maturity Amount ($M)

Total $ 3,420

A/R Fin. 1-year 2007 550

* Revolving Credit Agreement.

Financial Outlook

App-3


Adjusted Total Debt / Total Capital Funds from Operations /Interest Coverage

Funds from Operations / Total Debt

Maintaining Financial Strength and FlexibilityMaintaining Financial Strength and Flexibility

3.53.53.73.0

2.5

0

1

2

3

4

5

2002 2003 2004 2005 2006E

17%18%18%

14%

11%

0%

5%

10%

15%

20%

2002 2003 2004 2005 2006E

58%56%58%60%67%

0%

10%

20%

30%

40%

50%

60%

70%

2002 2003 2004 2005 2006E*

FirstEnergy Credit Metrics

Financial Outlook

*Includes the equity reduction of approximately $409m from the implementation of FAS 158

App-4


2006 Finance Plan – Execution SummaryTransferred $253M of tax-exempt bonds from operating companies to GencosIssued $200M JCP&L Senior Notes to fund maturing JCP&L debtIssued $600M of OE Senior Notes and redeemed early $400M of the $1B FE Corp. 5.5% Notes maturing Nov 15

Repurchased 10.6M shares of FE common stockIssued $182M JCP&L securitization bonds

Issued $300M of 6.15% TE Senior NotesRetired remaining $600M of FE Corp. 5.5% Notes on Nov 15Issued $300M of 5.95% CEI Senior NotesTransferred $878M of tax-exempt bonds from operating companies to Gencos

Q2

Q3

Q4

Capital Structure Management Update:

* FirstEnergy consolidated 2006 financing activity is not cumulative of each regulated utility’s financing activities.** Credit View reflects adjustments to debt levels made by credit rating agencies to impute sale/leaseback debt equivalents and exclude JCP&L securitization debt.

Financial Outlook

App-5

BalanceSheet

CreditView**

LT DebtRetired/

Transferred

LT DebtIssued

CommonStock

Repurchased

BalanceSheet

CreditView**

FirstEnergy (Consolidated)* 54% 56% 1,308$ 1,608$ 500$ 56% 58%Ohio Edison (Consolidated) 37% 46% 606$ 600$ 600$ 40% 49%Penn Power 41% 41% 115$ -$ -$ 24% 24%Cleveland Electric Illuminating 55% 56% 376$ 300$ 300$ 58% 59%Toledo Edison 27% 48% 203$ 300$ 225$ 50% 66%Pennsylvania Electric 36% 36% -$ -$ -$ 33% 33%Metropolitan Edison 39% 39% 100$ -$ -$ 41% 41%Jersey Central Power & Light 30% 25% 207$ 382$ -$ 32% 26%

YE 2005 Debt/Capitalization 2006 Financing Activity ($ millions) 2006E Debt/Capitalization


Issued on October 25, 2006

2006 Non-GAAP Earnings Per Share GuidanceReconciliation GAAP to Non-GAAP

App-6

2006 EPSBasic EPS (GAAP basis) $3.70 – $3.80Excluding Unusual Items:

Non-Core Asset Sales / Impairments 0.03PPUC NUG Cost Reserve for Prior Years 0.02

Basic EPS (non-GAAP basis) $3.75 – $3.85


Issued on January 31, 2007

Preliminary Unaudited 2006 Earnings Per Share Reconciliation GAAP to Non-GAAP

App-7

Preliminary Unaudited2006 EPS

Basic EPS (GAAP basis) $3.85 – $3.87Excluding Unusual Items:

PPUC NUG Cost Reservefor Prior Years 0.02



Issued on January 31, 2007

2007 Non-GAAP Earnings Per Share GuidanceReconciliation GAAP to Non-GAAP

App-8

2007 EPSBasic EPS (GAAP basis) $4.10 – $4.30Excluding Unusual Items:

Benefit from New Regulatory AssetAuthorized by PPUC (0.05)


first energy annualanalystmtg2-01-07

Economy & Finance