Potential Ownership of Generation Assets
Q: Are you considering owning peaking assets in rates?
A: Brian Tierney explained that in certain states, FirstEnergy could consider owning dispatchable generation if allowed. In West Virginia, they already own capacity; in Maryland and Ohio, ownership is possible under specific circumstances. If states request investment in such assets with regulated returns, they would consider it to benefit customers. "

Progress on Legal Issues
Q: Can you discuss progress on resolving legacy legal issues?
A: Brian highlighted significant advancements, including the end of the Deferred Prosecution Agreement (DPA) with full compliance. They made a reserve for the Ohio Office of the Consumers' Counsel Investigation (OOCIC) and reached an agreement in principle with the SEC. These steps show they are moving past previous issues and focusing on the future. "

Load Growth Outlook
Q: What's holding back your load growth figures, and when will you update investors?
A: Brian noted they're evaluating future load growth. Positives include data centers and electric vehicle adoption in Maryland and New Jersey, but overall growth is modest. Data centers often take service at the transmission level, which isn't as earnings impactful. The real opportunity lies in investing in transmission to serve data center loads, like the $800 million awarded in PJM Open Window 3. An update is anticipated around EEI. "

PJM Capacity Auction Concerns
Q: What's your stance on the Susquehanna ISA docket and PJM capacity auction?
A: Brian mentioned that while they are observing FERC's actions, the issue isn't significantly impacting their business now. He expressed concerns that despite high capacity auction prices, there's virtually no new generating capacity being added, questioning if this mechanism truly solves resource adequacy issues. "

Impact of Higher Prices on Strategy
Q: How do higher capacity and energy prices affect customers and your strategy?
A: Brian acknowledged the recent high capacity auction results and is analyzing the impact on customers in each jurisdiction. In West Virginia, the effect is expected to be neutral. He emphasized the need for a robust grid and is engaging with states about possibly investing in generation on a regulated basis to benefit customers. "

Balance Sheet Capacity and Capital Deployment
Q: How are you planning to finance your growing CapEx plan?
A: CFO Jon Taylor stated they have some balance sheet capacity, estimating it at less than 5% of the CapEx program. They aim to maintain a BBB flat credit rating and will consider factors like base capital and formula rate transmission capital in their financing strategy. "

Settlement in Pennsylvania Rate Case
Q: What's the likelihood of reaching a settlement in Pennsylvania?
A: Brian said settlement talks are in early stages but expressed optimism about achieving an agreement before hearings in August. They always strive for settlements in rate cases. "

Ohio Rate Case and ESP V
Q: Why are you seeking a shorter ESP V period in Ohio?
A: Brian explained that key aspects of ESP V were deferred to the base rate case, creating uncertainty beyond the current rate case. Accepting a five-year plan without clarity is challenging, so they prefer to align the ESP with the rate case for more certainty. "

Cost Savings Initiatives
Q: What cost savings are expected from facility optimization?
A: Jon Taylor mentioned that while savings from office moves are minimal, they're focusing on workforce productivity improvements, investing in technology for better decision-making, and reducing contractor expenses. They achieved $200 million in cost savings in '23, with $100 million being sustainable, and are targeting $70 million in savings this year. "

Residential and Commercial Load Growth
Q: What's driving strong residential and commercial load growth?
A: Jon noted higher average usage per customer, especially in Maryland and New Jersey, due to electric vehicle adoption and electrification efforts. They also see increased customer growth in Maryland. Commercial usage is rebounding post-pandemic, with three of the last four quarters showing growth, nearing pre-pandemic levels. "

Timing of Next Rate Cases
Q: How should we think about timing of future rate cases?
A: Brian believes a well-run, growing utility should regularly engage with regulators. He suggests filing rate cases every 2 to 3 years to update rates, clear trackers and riders, and reflect new investments. "

Interest in Offshore Wind
Q: Is offshore wind on your radar?
A: Brian stated that their focus is on the on-land aspect of offshore wind. They're investing hundreds of millions to enhance the transmission system in New Jersey to support offshore wind initiatives, but are not interested in owning generation assets in this area. "

Potential for NYSERDA-like Constructs
Q: Could you consider constructs like NYSERDA or NYPA in your states?
A: Brian is open to any construct allowing investment in capacity on a regulated basis. He suggested state agencies could procure long-term capacity through auctions open to utilities and independent power producers. Legislative changes would be required in all jurisdictions to implement such models. " , "

FirstEnergy's Reputation in Ohio
Q: How is FirstEnergy viewed in Ohio after resolving issues?
A: Brian indicated they're making significant progress in resolving legacy issues and moving forward. He believes their efforts are being well-received as they focus on future initiatives. "

Balance Sheet Metrics and Pension Plans
Q: What's your progress on target FFO/debt ratios, and plans for pension lift-outs?
A: Jon highlighted they've improved metrics by close to 200 basis points, reducing debt by about $2 billion compared to last year. They might not hit the 14% FFO/debt target this year due to accruals but expect to reach it next year. A pension lift-out would be funded through the pension plan without requiring external financing. "

Timing of Grid Mod II
Q: What's the timing for Grid Mod II implementation?
A: Brian anticipates receiving an order in the fourth quarter on the proposed settlement, allowing them to start investments immediately in Advanced Metering Infrastructure (AMI). "

Economic Growth and Capacity Issues
Q: Could generation capacity issues delay economic growth?
A: Brian doesn't believe current growth will be impacted as they have capacity to serve new load. However, long-term issues could arise, highlighting the need to address capacity challenges to maintain competitiveness. "