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FAIR VALUE MEASUREMENTS | 3 Months Ended
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Mar. 31, 2024
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS RECURRING FAIR VALUE MEASUREMENTS Authoritative accounting guidance establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy gives the highest priority to Level 1 measurements and the lowest priority to Level 3 measurements. The three levels of the fair value hierarchy and a description of the valuation techniques are as follows:
Level 1 | - | Quoted prices for identical instruments in active market.
Level 2 | - | Quoted prices for similar instruments in active market.
| - | Quoted prices for identical or similar instruments in markets that are not active.
| - | Model-derived valuations for which all significant inputs are observable market data.
Models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors and current market and contractual prices for the underlying instruments, as well as other relevant economic measures.
Level 3 | - | Valuation inputs are unobservable and significant to the fair value measurement.
FirstEnergy produces a long-term power and capacity price forecast annually with periodic updates as market conditions change. When underlying prices are not observable, prices from the long-term price forecast are used to measure fair value. FTRs are financial instruments that entitle the holder to a stream of revenues (or charges) based on the hourly day-ahead congestion price differences across transmission paths. FTRs are acquired by FirstEnergy in the annual, monthly and long-term PJM auctions and are initially recorded using the auction clearing price less cost. After initial recognition, FTRs’ carrying values are periodically adjusted to fair value using a mark-to-model methodology, which approximates market. The primary inputs into the model, which are generally less observable than objective sources, are the most recent PJM auction clearing prices and the FTRs’ remaining hours. The model calculates the fair value by multiplying the most recent auction clearing price by the remaining FTR hours less the prorated FTR cost. Significant increases or decreases in inputs in isolation may have resulted in a higher or lower fair value measurement. FirstEnergy primarily applies the market approach for recurring fair value measurements using the best information available. Accordingly, FirstEnergy maximizes the use of observable inputs and minimizes the use of unobservable inputs. There were no changes in valuation methodologies used as of March 31, 2024, from those used as of December 31, 2023. The determination of the fair value measures takes into consideration various factors, including but not limited to, nonperformance risk, counterparty credit risk and the impact of credit enhancements (such as cash deposits, LOCs and priority interests). The impact of these forms of risk was not significant to the fair value measurements. The following table sets forth the recurring assets and liabilities that are accounted for at fair value by level within the fair value hierarchy:
| March 31, 2024 |  | December 31, 2023
| Level 1 |  | Level 2 |  | Level 3 |  | Total |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets | (In millions)
Derivative assets FTRs(1) | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 4 |  |  | $ | 4 |
Equity securities | 2 |  |  | — |  |  | — |  |  | 2 |  |  | 2 |  |  | — |  |  | — |  |  | 2 |
U.S. state and municipal debt securities | — |  |  | 274 |  |  | — |  |  | 274 |  |  | — |  |  | 275 |  |  | — |  |  | 275 |
Cash, cash equivalents and restricted cash(2) | 915 |  |  | — |  |  | — |  |  | 915 |  |  | 179 |  |  | — |  |  | — |  |  | 179 |
Other(3) | — |  |  | 46 |  |  | — |  |  | 46 |  |  | — |  |  | 40 |  |  | — |  |  | 40 |
Total assets | $ | 917 |  |  | $ | 320 |  |  | $ | — |  |  | $ | 1,237 |  |  | $ | 181 |  |  | $ | 315 |  |  | $ | 4 |  |  | $ | 500 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivative liabilities FTRs(1) | $ | — |  |  | $ | — |  |  | $ | (1) |  |  | $ | (1) |  |  | $ | — |  |  | $ | — |  |  | $ | (1) |  |  | $ | (1) |
Total liabilities | $ | — |  |  | $ | — |  |  | $ | (1) |  |  | $ | (1) |  |  | $ | — |  |  | $ | — |  |  | $ | (1) |  |  | $ | (1) |
Net assets (liabilities) | $ | 917 |  |  | $ | 320 |  |  | $ | (1) |  |  | $ | 1,236 |  |  | $ | 181 |  |  | $ | 315 |  |  | $ | 3 |  |  | $ | 499 |
(1) Contracts are subject to regulatory accounting treatment and changes in market values do not impact earnings. (2) Restricted cash of $27 million and $42 million as of March 31, 2024 and December 31, 2023, respectively, primarily relates to cash collected from MP, PE and the Ohio Companies’ customers that is specifically used to service debt of their respective securitization or funding companies. (3) Primarily consists of short-term investments. INVESTMENTS All temporary cash investments purchased with an initial maturity of three months or less are reported as cash equivalents on the Consolidated Balance Sheets at cost, which approximates their fair market value. Investments other than cash and cash equivalents include equity securities, AFS debt securities and other investments. FirstEnergy has no debt securities held for trading purposes. Generally, unrealized gains and losses on equity securities are recognized in income whereas unrealized gains and losses on AFS debt securities are recognized in AOCI. However, the spent nuclear fuel disposal trusts of JCP&L are subject to regulatory accounting with all gains and losses on equity and AFS debt securities offset against regulatory assets. Spent Nuclear Fuel Disposal Trusts JCP&L holds debt securities within the spent nuclear fuel disposal trust, which are classified as AFS securities, recognized at fair market value. The trust is intended for funding spent nuclear fuel disposal fees to the United States Department of Energy associated with the previously owned Oyster Creek and Three Mile Island Unit 1 nuclear power plants. The following table summarizes the amortized cost basis, unrealized gains, unrealized losses and fair values of investments held in spent nuclear fuel disposal trusts as of March 31, 2024, and December 31, 2023:
|  | March 31, 2024(1) |  | December 31, 2023(1)
|  | Cost Basis |  | Unrealized Gains |  | Unrealized Losses |  | Fair Value |  | Cost Basis |  | Unrealized Gains |  | Unrealized Losses |  | Fair Value
|  | (In millions)
Debt securities |  | $ | 303 |  |  | $ | — |  |  | $ | (29) |  |  | $ | 274 |  |  | $ | 301 |  |  | $ | 1 |  |  | $ | (27) |  |  | $ | 275 |
(1) Excludes short-term cash investments of $6 million as of March 31, 2024 and December 31, 2023. Proceeds from the sale of investments in AFS debt securities, realized gains and losses on those sales and interest and dividend income for the three months ended March 31, 2024 and 2023, were as follows:
|  |  |  | For the Three Months Ended March 31,
|  |  |  |  |  | 2024 |  | 2023
|  |  |  |  |  | (In millions)
Sale proceeds |  |  |  |  |  | $ | 13 |  |  | $ | 1 |
Realized gains |  |  |  |  |  | — |  |  | — |
Realized losses |  |  |  |  |  | (1) |  |  | (1) |
Interest and dividend income |  |  |  |  |  | 3 |  |  | 3 |
Other Investments Other investments include employee benefit trusts, which are primarily invested in corporate-owned life insurance policies, and equity method investments. Earnings and losses associated with corporate-owned life insurance policies are reflected in “Miscellaneous income, net” on FirstEnergy’s Consolidated Statements of Income. The total carrying value of other investments were $408 million and $382 million as of March 31, 2024, and December 31, 2023, respectively, and are excluded from the amounts reported above. See Note 1, "Organization and Basis of Presentation," for additional information on FirstEnergy's equity method investments. Pre-tax income related to corporate-owned life insurance policies was $9 million and $7 million for the three months ended March 31, 2024 and 2023, respectively. Corporate-owned life insurance policies are valued using the cash surrender value and any changes in value during the period are recognized as income or expense. LONG-TERM DEBT AND OTHER LONG-TERM OBLIGATIONS All borrowings with initial maturities of less than one year are defined as short-term financial instruments under GAAP and are reported as Short-term borrowings on the Consolidated Balance Sheets at cost. Since these borrowings are short-term in nature, FirstEnergy believes that their costs approximate their fair market value. The following table provides the approximate fair value and related carrying amounts of long-term debt, which excludes finance lease obligations and net unamortized debt issuance costs, unamortized fair value adjustments, premiums and discounts as of March 31, 2024 and December 31, 2023:
| March 31, 2024 |  | December 31, 2023
| (In millions)
Carrying value | $ | 24,381 |  |  | $ | 24,254 |
Fair value | $ | 22,904 |  |  | $ | 23,003 |
The fair values of long-term debt and other long-term obligations reflect the present value of the cash outflows relating to those securities based on the current call price, the yield to maturity or the yield to call, as deemed appropriate at the end of each respective period. The yields assumed were based on securities with similar characteristics offered by corporations with credit ratings similar to those of FirstEnergy. FirstEnergy classified short-term borrowings, long-term debt and other long-term obligations as Level 2 in the fair value hierarchy as of March 31, 2024, and December 31, 2023. FirstEnergy had the following issuances and redemptions during the three months ended March 31, 2024:
Company | Type | Issuance Date | Interest Rate | Maturity | Amount (In millions) | Description
Issuance
ATSI | Senior Unsecured Note | March, 2024 | 5.63% | 2034 | $150 | Proceeds were used to repay short-term borrowings, to finance capital expenditures and for other general corporate purposes.
In March 2024, notice of redemption was provided for all remaining $463 million of FE’s 7.375% Notes, due 2031, which was completed on April 15, 2024, with a make-whole premium of approximately $80 million. Due to the redemption, the $463 million remaining notes are included within currently payable long-term debt on the Consolidated Balance Sheets as of March 31, 2024. On April 1, 2024, JCP&L redeemed its $500 million 4.70% unsecured notes that became due. On April 15, 2024, MP redeemed its $400 million 4.10% FMBs that became due. On April 18, 2024, MAIT agreed to sell $250 million of new 5.94% Unsecured Notes due May 1, 2031. The sale is expected to settle on May 2, 2024. Proceeds are expected to be used to repay short-term borrowings, to finance capital expenditures and for other general corporate purposes.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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