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LEASES

12 Months Ended

Dec. 31, 2024

Leases [Abstract]

LEASES

LEASES

FirstEnergy primarily leases vehicles as well as building space, office equipment, and other property and equipment under cancellable and non-cancelable leases. FirstEnergy does not have any material leases in which it is the lessor.

FirstEnergy accounts for leases under, "Leases (Topic 842)". Leases with an initial term of 12 months or less are recognized as lease expense on a straight-line basis over the lease term and not recorded on the balance sheet. Most leases include one or more options to renew, with renewal terms that can extend the lease term from 1 to 40 years, and certain leases include options to terminate. The exercise of lease renewal options is at FirstEnergy’s sole discretion. Renewal options are included within the lease liability if they are reasonably certain based on various factors relative to the contract. Certain leases also include options to purchase the leased property. The depreciable life of leased assets and leasehold improvements are limited by the expected lease term unless there is a transfer of title or purchase option reasonably certain of exercise. FirstEnergy’s lease agreements do not contain any material restrictive covenants. FirstEnergy has elected a policy to not separate lease components from non-lease components for all asset classes.

For vehicles leased under certain master lease agreements, the lessor is guaranteed a residual value up to a stated percentage of the equipment cost at the end of the lease term. If the actual fair value of the leased equipment is below the guaranteed residual value at the end of the lease term, FirstEnergy is committed to pay the difference in the actual fair value and the residual value guarantee. FirstEnergy does not believe it is probable that it will be required to pay anything pertaining to the residual value guarantee, and the lease liabilities and right-of-use assets are measured accordingly.

In December 2023, FirstEnergy exercised a purchase option within their lease to purchase the General Office building in Akron, Ohio, with the intention to sell it in the future.

Finance leases for assets used in regulated operations are recognized in FirstEnergy’s Consolidated Statements of Income such that amortization of the right-of-use asset and interest on lease liabilities equals the expense recorded for ratemaking purposes. Finance leases for regulated and non-regulated operations are accounted for as if the assets were owned and financed, with associated expense recognized in Interest expense and Provision for depreciation on FirstEnergy’s Consolidated Statements of Income, while all operating lease expenses are recognized in Other operating expense. The components of lease expense were as follows:

						For the Year Ended December 31, 2024
(In millions)						Vehicles						Buildings						Other						Total
Operating lease costs(1)						$	82					$	3					$	6					$	91
Finance lease costs:
Amortization of right-of-use assets						1						1						2						4
Interest on lease liabilities						—						2						—						2
Total finance lease cost						1						3						2						6
Total lease cost						$	83					$	6					$	8					$	97

(1) Includes $35 million of short-term lease costs.

						For the Year Ended December 31, 2023
(In millions)						Vehicles						Buildings						Other						Total
Operating lease costs(1)						$	60					$	5					$	14					$	79
Finance lease costs:
Amortization of right-of-use assets						4						2						2						8
Interest on lease liabilities						—						5						—						5
Total finance lease cost						4						7						2						13
Total lease cost						$	64					$	12					$	16					$	92

(1) Includes $27 million of short-term lease costs.

						For the Year Ended December 31, 2022
(In millions)						Vehicles						Buildings						Other						Total
Operating lease costs(1)						$	50					$	8					$	15					$	73
Finance lease costs:
Amortization of right-of-use assets						10						1						2						13
Interest on lease liabilities						—						3						—						3
Total finance lease cost						10						4						2						16
Total lease cost						$	60					$	12					$	17					$	89

(1) Includes $19 million of short-term lease costs.

Supplemental cash flow information related to leases was as follows:

						For the Years Ended December 31,
(In millions)						2024						2023						2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases						$	60					$	54					$	56
Operating cash flows from finance leases						2						3						3
Finance cash flows from finance leases						2						8						12
Right-of-use assets obtained in exchange for lease obligations:
Operating leases						$	69					$	13					$	26
Finance leases						—						—						—

Lease terms and discount rates were as follows:

						As of December 31,
						2024						2023						2022
Weighted-average remaining lease terms (years)
Operating leases						5.62						5.93						7.30
Finance leases						12.38						12.26						11.33
Weighted-average discount rate(1)
Operating leases						5.00		%				4.51		%				4.22		%
Finance leases						15.39		%				14.73		%				14.77		%

(1) When an implicit rate is not readily determinable, an incremental borrowing rate is utilized, determining the present value of lease payments. The rate is determined based on expected term and information available at the commencement date.

Supplemental balance sheet information related to leases was as follows:

												As of December 31,
(In millions)						Financial Statement Line Item						2024						2023
Assets
Operating lease(1)						Deferred charges and other assets						$	228					$	205
Finance lease(2)						Property, plant and equipment						32						35
Total leased assets												$	260					$	240
Liabilities
Current:
Operating						Other current liabilities						$	51					$	47
Finance						Currently payable long-term debt						3						3
Noncurrent:
Operating						Other noncurrent liabilities						192						179
Finance						Long-term debt and other long-term obligations						9						11
Total leased liabilities												$	255					$	240

(1) Operating lease assets are recorded net of accumulated amortization of $174 million and $139 million as of December 31, 2024 and 2023, respectively.

(2) Finance lease assets are recorded net of accumulated amortization of $14 million and $33 million as of December 31, 2024 and 2023, respectively.

Maturities of lease liabilities as of December 31, 2024, were as follows:

(In millions)						Operating Leases						Finance Leases						Total
2025						$	61					$	4					$	65
2026						56						4						60
2027						48						3						51
2028						43						4						47
2029						28						—						28
Thereafter						46						—						46
Total lease payments(1)						282						15						297
Less imputed interest						39						3						42
Total net present value						$	243					$	12					$	255

(1) Operating lease payments for certain leases are offset by sublease receipts of $7 million over 8 years.

As of December 31, 2024, lease agreements for vehicles and fiber lines that have not yet commenced are $40 million, which are expected to commence from 2025-2029 with lease terms of 5 to 30 years. Additionally, a building lease agreement is expected to commence in 2025 with a lease term of 22 years with annual rents of approximately $2 million.

LEASES

LEASES

FirstEnergy primarily leases vehicles as well as building space, office equipment, and other property and equipment under cancellable and non-cancelable leases. FirstEnergy does not have any material leases in which it is the lessor.

FirstEnergy accounts for leases under, "Leases (Topic 842)". Leases with an initial term of 12 months or less are recognized as lease expense on a straight-line basis over the lease term and not recorded on the balance sheet. Most leases include one or more options to renew, with renewal terms that can extend the lease term from 1 to 40 years, and certain leases include options to terminate. The exercise of lease renewal options is at FirstEnergy’s sole discretion. Renewal options are included within the lease liability if they are reasonably certain based on various factors relative to the contract. Certain leases also include options to purchase the leased property. The depreciable life of leased assets and leasehold improvements are limited by the expected lease term unless there is a transfer of title or purchase option reasonably certain of exercise. FirstEnergy’s lease agreements do not contain any material restrictive covenants. FirstEnergy has elected a policy to not separate lease components from non-lease components for all asset classes.

For vehicles leased under certain master lease agreements, the lessor is guaranteed a residual value up to a stated percentage of the equipment cost at the end of the lease term. If the actual fair value of the leased equipment is below the guaranteed residual value at the end of the lease term, FirstEnergy is committed to pay the difference in the actual fair value and the residual value guarantee. FirstEnergy does not believe it is probable that it will be required to pay anything pertaining to the residual value guarantee, and the lease liabilities and right-of-use assets are measured accordingly.

In December 2023, FirstEnergy exercised a purchase option within their lease to purchase the General Office building in Akron, Ohio, with the intention to sell it in the future.

Finance leases for assets used in regulated operations are recognized in FirstEnergy’s Consolidated Statements of Income such that amortization of the right-of-use asset and interest on lease liabilities equals the expense recorded for ratemaking purposes. Finance leases for regulated and non-regulated operations are accounted for as if the assets were owned and financed, with associated expense recognized in Interest expense and Provision for depreciation on FirstEnergy’s Consolidated Statements of Income, while all operating lease expenses are recognized in Other operating expense. The components of lease expense were as follows:

						For the Year Ended December 31, 2024
(In millions)						Vehicles						Buildings						Other						Total
Operating lease costs(1)						$	82					$	3					$	6					$	91
Finance lease costs:
Amortization of right-of-use assets						1						1						2						4
Interest on lease liabilities						—						2						—						2
Total finance lease cost						1						3						2						6
Total lease cost						$	83					$	6					$	8					$	97

(1) Includes $35 million of short-term lease costs.

						For the Year Ended December 31, 2023
(In millions)						Vehicles						Buildings						Other						Total
Operating lease costs(1)						$	60					$	5					$	14					$	79
Finance lease costs:
Amortization of right-of-use assets						4						2						2						8
Interest on lease liabilities						—						5						—						5
Total finance lease cost						4						7						2						13
Total lease cost						$	64					$	12					$	16					$	92

(1) Includes $27 million of short-term lease costs.

						For the Year Ended December 31, 2022
(In millions)						Vehicles						Buildings						Other						Total
Operating lease costs(1)						$	50					$	8					$	15					$	73
Finance lease costs:
Amortization of right-of-use assets						10						1						2						13
Interest on lease liabilities						—						3						—						3
Total finance lease cost						10						4						2						16
Total lease cost						$	60					$	12					$	17					$	89

(1) Includes $19 million of short-term lease costs.

Supplemental cash flow information related to leases was as follows:

						For the Years Ended December 31,
(In millions)						2024						2023						2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases						$	60					$	54					$	56
Operating cash flows from finance leases						2						3						3
Finance cash flows from finance leases						2						8						12
Right-of-use assets obtained in exchange for lease obligations:
Operating leases						$	69					$	13					$	26
Finance leases						—						—						—

Lease terms and discount rates were as follows:

						As of December 31,
						2024						2023						2022
Weighted-average remaining lease terms (years)
Operating leases						5.62						5.93						7.30
Finance leases						12.38						12.26						11.33
Weighted-average discount rate(1)
Operating leases						5.00		%				4.51		%				4.22		%
Finance leases						15.39		%				14.73		%				14.77		%

(1) When an implicit rate is not readily determinable, an incremental borrowing rate is utilized, determining the present value of lease payments. The rate is determined based on expected term and information available at the commencement date.

Supplemental balance sheet information related to leases was as follows:

												As of December 31,
(In millions)						Financial Statement Line Item						2024						2023
Assets
Operating lease(1)						Deferred charges and other assets						$	228					$	205
Finance lease(2)						Property, plant and equipment						32						35
Total leased assets												$	260					$	240
Liabilities
Current:
Operating						Other current liabilities						$	51					$	47
Finance						Currently payable long-term debt						3						3
Noncurrent:
Operating						Other noncurrent liabilities						192						179
Finance						Long-term debt and other long-term obligations						9						11
Total leased liabilities												$	255					$	240

(1) Operating lease assets are recorded net of accumulated amortization of $174 million and $139 million as of December 31, 2024 and 2023, respectively.

(2) Finance lease assets are recorded net of accumulated amortization of $14 million and $33 million as of December 31, 2024 and 2023, respectively.

Maturities of lease liabilities as of December 31, 2024, were as follows:

(In millions)						Operating Leases						Finance Leases						Total
2025						$	61					$	4					$	65
2026						56						4						60
2027						48						3						51
2028						43						4						47
2029						28						—						28
Thereafter						46						—						46
Total lease payments(1)						282						15						297
Less imputed interest						39						3						42
Total net present value						$	243					$	12					$	255

(1) Operating lease payments for certain leases are offset by sublease receipts of $7 million over 8 years.

As of December 31, 2024, lease agreements for vehicles and fiber lines that have not yet commenced are $40 million, which are expected to commence from 2025-2029 with lease terms of 5 to 30 years. Additionally, a building lease agreement is expected to commence in 2025 with a lease term of 22 years with annual rents of approximately $2 million.

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- Definition

The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 842
-SubTopic 20
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org/842-20/tableOfContent

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- Definition

The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 842
-SubTopic 20
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org/842-20/tableOfContent

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