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DISCONTINUED OPERATIONS | 12 Months Ended
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Dec. 31, 2020
Discontinued Operations and Disposal Groups [Abstract] |
DISCONTINUED OPERATIONS | DISCONTINUED OPERATIONS FES and FENOC Chapter 11 Bankruptcy Filing On March 31, 2018, the FES Debtors announced that, in order to facilitate an orderly financial restructuring, they filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code with the Bankruptcy Court. In September 2018, the Bankruptcy Court approved a FES Bankruptcy settlement agreement by and among FirstEnergy, two groups of key FES creditors (collectively, the FES Key Creditor Groups), the FES Debtors and the UCC. The FES Bankruptcy settlement agreement resolved certain claims by FirstEnergy against the FES Debtors, all claims by the FES Debtors and the FES Key Creditor Groups against FirstEnergy, as well as releases from third parties who voted in favor of the FES Debtors' plan of reorganization, in return for among other things, a cash payment of $853 million upon emergence. The FES Bankruptcy settlement was conditioned on the FES Debtors confirming and effectuating a plan of reorganization acceptable to FirstEnergy. On February 18, 2020, the FES Debtors and FirstEnergy entered into an IT Access Agreement that provided IT support to enable the FES Debtors to emerge from bankruptcy prior to full IT separation by the FES Debtors. As part of the IT Access Agreement, the FES Debtors and FirstEnergy resolved, among other things, the on-going reconciliation of outstanding tax sharing payments for tax years 2018, 2019 and 2020 for a total of $125 million. On February 25, 2020, the Bankruptcy Court approved the IT Access Agreement. On February 27, 2020, the FES Debtors effectuated their plan, emerged from bankruptcy and FirstEnergy tendered the settlement payments totaling $853 million and the $125 million tax sharing payment to the FES Debtors, with no material impact to net income in 2020. By eliminating a significant portion of its competitive generation fleet with the deconsolidation of the FES Debtors, FirstEnergy has concluded the FES Debtors meet the criteria for discontinued operations, as this represents a significant event in management’s strategic review to exit commodity-exposed generation and transition to a fully regulated company. Services Agreement Pursuant to the FES Bankruptcy settlement agreement, FirstEnergy entered into an amended and restated shared services agreement with the FES Debtors to extend the availability of shared services until June 30, 2020, subject to reductions in services if requested by the FES Debtors, and extensions of time, subject to FirstEnergy’s approval. Under the amended shared services agreement, and consistent with the prior shared services agreements, costs are directly billed or assigned at no more than cost. As of June 30, 2020, FirstEnergy had substantially ceased providing post-emergence services to FES Debtors under the terms of the amended and restated shared services agreement. In connection with the FES Debtors emergence from bankruptcy, FirstEnergy entered into an amended separation agreement with the FES Debtors to implement the separation of FES Debtors and their businesses from FirstEnergy. Income Taxes For U.S. federal income taxes, the FES Debtors were included in FirstEnergy’s consolidated tax return until emergence from bankruptcy on February 27, 2020. As a result of the FES Debtors’ deconsolidation, FirstEnergy recognized a worthless stock deduction for the remaining tax basis in the FES Debtors of approximately $4.9 billion, net of unrecognized tax benefits of $316 million. Tax-effected, the worthless stock deduction is approximately $1.1 billion, net of valuation allowances recorded against the state tax benefit ($80 million) and the aforementioned unrecognized tax benefits ($72 million). Additionally, the Tax Act amended Section 163(j) of the Internal Revenue Code, limiting interest expense deductions for corporations but with exemption for certain regulated utilities. Based on interpretation of subsequently issued proposed regulations, FirstEnergy estimated the amount of deductible interest for its consolidated group in 2018 and 2019, with nondeductible portions being carried forward with an indefinite life and for which deferred tax assets were recorded. However, full valuation allowances were recorded against the deferred tax assets related to the carryforward of nondeductible interest as future utilization of the carryforwards requires taxable income from sources other than regulated utility businesses. Final regulations under Section 163(j) were issued in July 2020 and January 2021 but do not materially change these results. All tax expense related to nondeductible interest in 2018 and 2019 was recorded in discontinued operations as it was entirely attributed to the inclusion of the FES Debtors in FirstEnergy's consolidated tax group. Pursuant to certain safe harbor rules in the final regulations under Section 163(j), and due to the FES Debtors’ emergence from bankruptcy on February 27, 2020, FirstEnergy expects all interest expense for 2020 to be fully deductible. See Note 7, “Income Taxes” for further information Upon emergence, FirstEnergy paid the FES Debtors $125 million to settle all reconciliations under the Intercompany Tax Allocation Agreement for 2018, 2019 and 2020 tax years, including all issues regarding nondeductible interest. In September 2020, FirstEnergy filed its 2019 federal income tax return with the IRS and recognized a $6 million charge to discontinued operations in the third quarter of 2020, resulting from final adjustments to 2019 intercompany tax sharing related to the FES Debtors. The final intercompany tax sharing adjustment for the 2020 federal income tax return to be filed during 2021 is an estimated $12 million tax benefit and was recorded during the fourth quarter of 2020 in discontinued operations. Competitive Generation Asset Sales As contemplated under the FES Bankruptcy settlement agreement, AE Supply entered into an agreement on December 31, 2018, to transfer the 1,300 MW Pleasants Power Station and related assets to FG, while retaining certain specified liabilities. Under the terms of the agreement, FG acquired the economic interests in Pleasants as of January 1, 2019, and AE Supply operated Pleasants until ownership was transferred on January 30, 2020. AE Supply will continue to provide access to the McElroy's Run CCR impoundment facility, which was not transferred, and FE will provide guarantees for certain retained environmental liabilities of AE Supply, including the McElroy’s Run CCR impoundment facility. During the first quarter of 2020, FG paid AE Supply approximately $65 million of cash for related materials and supplies (at book value) and the settlement of FG’s economic interest in Pleasants. Summarized Results of Discontinued Operations Summarized results of discontinued operations for the years ended December 31, 2020, 2019, and 2018 were as follows:
|  | For the Years Ended December 31,
(In millions) |  | 2020 |  | 2019 |  | 2018(1)
Revenues |  | $ | 7 |  |  | $ | 188 |  |  | $ | 989 |
Fuel |  | (6) |  |  | (140) |  |  | (304) |
Purchased power |  | — |  |  | — |  |  | (84) |
Other operating expenses |  | (6) |  |  | (63) |  |  | (435) |
Provision for depreciation |  | — |  |  | — |  |  | (96) |
General taxes |  | — |  |  | (14) |  |  | (35) |
Pleasants economic interest(2) |  | 5 |  |  | 27 |  |  | — |
Other expense, net |  | — |  |  | (2) |  |  | (83) |
Loss from discontinued operations, before tax |  | — |  |  | (4) |  |  | (48) |
Income tax expense (benefit) |  | — |  |  | 47 |  |  | 61 |
Loss from discontinued operations, net of tax |  | — |  |  | (51) |  |  | (109) |
Removal of investment in FES and FENOC |  | — |  |  | — |  |  | 2,193 |
Assumption of benefit obligations retained at FE |  | — |  |  | — |  |  | (820) |
Guarantees and credit support provided by FE |  | — |  |  | — |  |  | (139) |
Reserve on receivables and allocated pension/OPEB mark-to-market |  | — |  |  | — |  |  | (914) |
Settlement consideration and services credit |  | (1) |  |  | 7 |  |  | (1,197) |
Accelerated net pension and OPEB prior service credits |  | 18 |  |  | — |  |  | — |
Gain (loss) on Disposal of FES and FENOC, before tax |  | 17 |  |  | 7 |  |  | (877) |
Income tax benefit including worthless stock deduction |  | (59) |  |  | (52) |  |  | (1,312) |
Gain on disposal of FES and FENOC, net of tax |  | 76 |  |  | 59 |  |  | 435 |
Income from discontinued operations |  | $ | 76 |  |  | $ | 8 |  |  | $ | 326 |
(1) Discontinued operations include results of FES and FENOC through March 31, 2018, when deconsolidated from FirstEnergy's financial statements. (2) Reflects the estimated amounts owed from FG for its economic interests in Pleasants effective January 1, 2019. As discussed above, settlement of the economic interests occurred during the first quarter of 2020. FirstEnergy's Consolidated Statements of Cash Flows combines cash flows from discontinued operations with cash flows from continuing operations within each cash flow category. The following table summarizes the major classes of cash flow items from discontinued operations for the years ended December 31, 2020, 2019 and 2018:
|  | For the Years Ended December 31,
(In millions) |  | 2020 |  | 2019 |  | 2018
CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |  |  |  |
Income from discontinued operations |  | $ | 76 |  |  | $ | 8 |  |  | $ | 326 |
Gain on disposal, net of tax |  | (76) |  |  | (59) |  |  | (435) |
Depreciation and amortization, including nuclear fuel, regulatory assets, net, intangible assets and deferred debt-related costs |  | — |  |  | — |  |  | 110 |
Deferred income taxes and investment tax credits, net |  | — |  |  | 47 |  |  | 61 |
Unrealized (gain) loss on derivative transactions |  | — |  |  | — |  |  | (10) |
CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |  |  |  |
Property additions |  | — |  |  | — |  |  | (27) |
Sales of investment securities held in trusts |  | — |  |  | — |  |  | 109 |
Purchases of investment securities held in trusts |  | — |  |  | — |  |  | (122) |

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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