1.0.0.3false6020 - FAIR VALUE MEASURESfalse1$falsefalseu000Standardhttp://www.xbrl.org/2003/iso4217USDiso42170u001Standardhttp://www.xbrl.org/2003/instancepurexbrli0u002Standardhttp://www.xbrl.org/2003/instancesharesxbrli020fe_FairValueMeasuresAbstractfefalsenadurationstringNo definition available.falsefalsefalsefalsefalsetruefalsefalsefalse1falsefalse00falsefalseNo definition available.false31us-gaap_FairValueDisclosuresTextBlockus-gaaptruenadurationstringThis item represents the complete disclosure regarding the fair value of financial instruments (as defined), including...falsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalse003. FAIR VALUE OF FINANCIAL INSTRUMENTS
(A) 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 on the Consolidated Balance Sheets at cost, which approximates their fair market value, in the caption "short-term borrowings." The following table provides the approximate fair value and related carrying amounts of long-term debt and other long-term obligations as of June 30, 2009 and December 31, 2008:
June 30, 2009 December 31, 2008
Carrying Fair Carrying Fair Value Value Value Value (In millions) FirstEnergy $ 12,389 $ 12,535 $ 11,585 $ 11,146 FES 2,556 2,559 2,552 2,528 OE 1,169 1,233 1,232 1,223 CEI 1,723 1,806 1,741 1,618 TE 600 621 300 244 JCP&L 1,856 1,873 1,569 1,520 Met-Ed 842 858 542 519 Penelec 679 676 779 721
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 FES and the Utilities.
(B) 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 held-to-maturity securities and available-for-sale securities.
FES and the Utilities periodically evaluate their investments for other-than-temporary impairment. They first consider their intent and ability to hold an equity investment until recovery and then consider, among other factors, the duration and the extent to which the security's fair value has been less than cost and the near-term financial prospects of the security issuer when evaluating an investment for impairment. For debt securities, in accordance with FSP FAS 115-2 and FAS 124-2, FES and the Utilities consider their intent to hold the security, the likelihood that they will be required to sell the security before recovery of its cost basis, and the likelihood of recovery of the security's entire amortized cost basis.
Available-For-Sale Securities
FES and the Utilities hold debt and equity securities within their nuclear decommissioning trusts, nuclear fuel disposal trusts and NUG trusts. These trust investments are classified as available-for-sale with the fair value representing quoted market prices. FES and the Utilities have no securities held for trading purposes.
The following table summarizes the amortized cost basis, unrealized gains and losses and fair values of investments in available-for-sale securities as of June 30, 2009 and December 31, 2008:
June 30, 2009(1) December 31, 2008(2)
Cost Unrealized Unrealized Fair Cost Unrealized Unrealized Fair Basis Gains Losses Value Basis Gains Losses Value Debt securities (In millions) FirstEnergy(3) $ 1,181 $ 44 $ - $ 1,225 $ 1,078 $ 56 $ - $ 1,134 FES 476 25 - 501 401 28 - 429 OE 93 3 - 96 86 9 - 95 TE 70 3 - 73 66 8 - 74 JCP&L 249 7 - 256 249 9 - 258 Met-Ed 116 3 - 119 111 4 - 115 Penelec 178 3 - 181 164 3 - 167 Equity securities FirstEnergy $ 512 $ 76 $ - $ 588 $ 589 $ 39 $ - $ 628
FES 275 55 - 330 355 25 - 380
OE 15 3 - 18 17 1 - 18 JCP&L 65 4 - 69 64 2 - 66 Met-Ed 104 10 - 114 101 9 - 110 Penelec 53 4 - 57 51 2 - 53 (1) Excludes cash balances of $231 million at FirstEnergy, $209 million at FES, $14 million at JCP&L, $4 million at OE, $3 million at Penelec and $1 million at TE.(2) Excludes cash balances of $244 million at FirstEnergy, $225 million at FES, $12 million at Penelec, $4 million at OE and $1 million at Met-Ed.(3) Includes fair values as of June 30, 2009 and December 31, 2008 of $982 million and $953 million of government obligations, $238 million and $175 million of corporate debt and $5 million and $6 million of mortgage backed securities.
Proceeds from the sale of investments in available-for-sale securities, realized gains and losses on those sales, and interest and dividend income as of June 30, 2009 were as follows:
FirstEnergy FES OE TE JCP&L Met-Ed Penelec
(In millions) Proceeds from sales $ 1,001 $ 537 $ 25 $ 77 $ 245 $ 63 $ 54 Realized gains 30 24 - 3 3 1 - Realized losses 91 58 3 - 11 12 7 Interest and dividend income 30 14 2 1 7 3 3
Unrealized gains applicable to the decommissioning trusts of OE, TE and FES are recognized in OCI in accordance with SFAS 115, as fluctuations in fair value will eventually impact earnings. The decommissioning trusts of JCP&L, Met-Ed and Penelec are subject to regulatory accounting in accordance with SFAS 71. Net unrealized gains and losses are recorded as regulatory assets or liabilities since the difference between investments held in trust and the decommissioning liabilities will be recovered from or refunded to customers.
The investment policy for the nuclear decommissioning trust funds restricts or limits the ability to hold certain types of assets including private or direct placements, warrants, securities of FirstEnergy, investments in companies owning nuclear power plants, financial derivatives, preferred stocks, securities convertible into common stock and securities of the trust fund's custodian or managers and their parents or subsidiaries.
Held-To-Maturity Securities
The following table provides the amortized cost basis, unrealized gains and losses, and approximate fair values of investments in held-to-maturity securities except for investments of $271 million and $293 million excluded by SFAS 107 as of June 30, 2009 and December 31, 2008:
June 30, 2009 December 31, 2008
Cost Unrealized Unrealized Fair Cost Unrealized Unrealized Fair Basis Gains Losses Value Basis Gains Losses Value Debt securities (In millions) FirstEnergy $ 627 $ 51 $ - $ 678 $ 673 $ 14 $ 13 $ 674
OE 230 9 - 239 240 - 13 227
CEI 389 43 - 432 426 9 - 435
The following table provides the approximate fair value and related carrying amounts of notes receivable as of June 30, 2009 and December 31, 2008:
June 30, 2009 December 31, 2008
Carrying Fair Carrying Fair Value Value Value Value Notes receivable (In millions) FirstEnergy $ 40 $ 38 $ 45 $ 44 FES 6 6 75 74 OE 193 233 257 294 TE 161 184 180 189
The fair value of notes receivable represents the present value of the cash inflows based on the yield to maturity. The yields assumed were based on financial instruments with similar characteristics and terms. The maturity dates range from 2009 to 2040.
(C) RECURRING FAIR VALUE MEASUREMENTS
FirstEnergy's valuation techniques, including the three levels of the fair value hierarchy as defined by SFAS 157, are disclosed in Note 5 of the Notes to Consolidated Financial Statements in FirstEnergy's Annual Report on Form 10-K for the year ended December 31, 2008.
The following tables set forth financial assets and financial liabilities that are accounted for at fair value by level within the fair value hierarchy as of June 30, 2009 and December 31, 2008. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. FirstEnergy's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the fair valuation of assets and liabilities and their placement within the fair value hierarchy levels.
Recurring Fair Value Measures as of June 30, 2009
Level 1 - Assets (In millions) Level 1 - Liabilities Derivatives Available-for-Sale Securities(1) Other Investments Total Derivatives NUG Contracts(2) TotalFirstEnergy $ 1 $ 495 $ - $ 496 $ 19 $ - $ 19FES 1 237 - 238 19 - 19OE - 18 - 18 - - -JCP&L - 70 - 70 - - -Met-Ed - 109 - 109 - - -Penelec - 61 - 61 - - - Level 2 - Assets Level 2 - Liabilities Derivatives Available-for-Sale Securities(1) Other Investments Total Derivatives NUG Contracts(2) TotalFirstEnergy $ 41 $ 1,547 $ 84 $ 1,672 $ 19 $ - $ 19FES 21 800 - 821 15 - 15OE - 98 - 98 - - -TE - 73 - 73 - - -JCP&L 5 270 - 275 - - -Met-Ed 9 126 - 135 - - -Penelec 5 179 - 184 - - - Level 3 - Assets Level 3 - Liabilities Derivatives Available-for-Sale Securities(1) NUG Contracts(2) Total Derivatives NUG Contracts(2) TotalFirstEnergy $ - $ - $ 214 $ 214 $ - $ 750 $ 750JCP&L - - 9 9 - 475 475Met-Ed - - 184 184 - 161 161Penelec - - 21 21 - 114 114
(1) Consists of investments in the nuclear decommissioning trusts, the spent nuclear fuel trusts and the NUG trusts. Balance excludes $2 million of receivables, payables and accrued income.
(2) NUG contracts are completely offset by regulatory assets and do not impact earnings.
Recurring Fair Value Measures as of December 31, 2008
Level 1 - Assets (In millions) Level 1 - Liabilities Derivatives Available-for-Sale Securities(1) Other Investments Total Derivatives NUG Contracts(2) TotalFirstEnergy $ - $ 537 $ - $ 537 $ 25 $ - $ 25FES - 290 - 290 25 - 25OE - 18 - 18 - - -JCP&L - 67 - 67 - - -Met-Ed - 104 - 104 - - -Penelec - 58 - 58 - - - Level 2 - Assets Level 2 - Liabilities Derivatives Available-for-Sale Securities(1) Other Investments Total Derivatives NUG Contracts(2) TotalFirstEnergy $ 40 $ 1,464 $ 83 $ 1,587 $ 31 $ - $ 31FES 12 744 - 756 28 - 28OE - 98 - 98 - - -TE - 73 - 73 - - -JCP&L 7 255 - 262 - - -Met-Ed 14 121 - 135 - - -Penelec 7 174 - 181 - - - Level 3 - Assets Level 3 - Liabilities Derivatives Available-for-Sale Securities(1) NUG Contracts(2) Total Derivatives NUG Contracts(2) TotalFirstEnergy $ - $ - $ 434 $ 434 $ - $ 766 $ 766JCP&L - - 14 14 - 532 532Met-Ed - - 300 300 - 150 150Penelec - - 120 120 - 84 84
(1) Consists of investments in the nuclear decommissioning trusts, the spent nuclear fuel trusts and the NUG trusts. Balance excludes $5 million of receivables, payables and accrued income.
(2) NUG contracts are completely offset by regulatory assets and do not impact earnings.
The determination of the above fair value measures takes into consideration various factors required under SFAS 157. These factors include nonperformance risk, including counterparty credit risk and the impact of credit enhancements (such as cash deposits, LOCs and priority interests). The impact of nonperformance risk was immaterial in the fair value measurements.
The following tables set forth a reconciliation of changes in the fair value of NUG contracts classified as Level 3 in the fair value hierarchy for the three and six months ended June 30, 2009 and 2008 (in millions):
FirstEnergy JCP&L Met-Ed Penelec
Balance as of January 1, 2009 $ (332 ) $ (518 ) $ 150 $ 36 Settlements(1) 179 90 43 47 Unrealized gains (losses)(1) (383 ) (38 ) (170 ) (176 ) Net transfers to (from) Level 3 - - - - Balance as of June 30, 2009 $ (536 ) $ (466 ) $ 23 $ (93 )
Change in unrealized gains (losses) relating to instruments held as of June 30, 2009 $ (383 ) $ (38 ) $ (170 ) $ (176 )
Balance as of April 1, 2009 $ (476 ) $ (518 ) $ 76 $ (34 ) Settlements(1) 96 44 26 27 Unrealized gains (losses)(1) (156 ) 8 (79 ) (86 )
Net transfers to (from) Level 3 - - - - Balance as of June 30, 2009 $ (536 ) $ (466 ) $ 23 $ (93 )
Change in unrealized gains (losses) relating to instruments held as of June 30, 2009 $ (156 ) $ 8 $ (79 ) $ (86 )
FirstEnergy JCP&L Met-Ed Penelec
Balance as of January 1, 2008 $ (803 ) $ (750 ) $ (28 ) $ (25 ) Settlements(1) 110 95 2 13 Unrealized gains (losses)(1) 676 11 376 290 Net transfers to (from) Level 3 - - - - Balance as of June 30, 2008 $ (17 ) $ (644 ) $ 350 $ 278 Change in unrealized gains (losses) relating to instruments held as of June 30, 2008 $ 676 $ 11 $ 376 $ 290
Balance as of April 1, 2008 $ (419 ) $ (682 ) $ 145 $ 119 Settlements(1) 46 45 (3 ) 5 Unrealized gains (losses)(1) 356 (7 ) 208 154 Net transfers to (from) Level 3 - - - - Balance as of June 30, 2008 $ (17 ) $ (644 ) $ 350 $ 278 Change in unrealized gains (losses) relating to instruments held as of June 30, 2008 $ 356 $ (7 ) $ 208 $ 154
(1) Changes in fair value of NUG contracts are completely offset by regulatory assets and do not impact earnings.
On January 1, 2009, FirstEnergy adopted FSP FAS 157-2, for financial assets and financial liabilities measured at fair value on a non-recurring basis. The impact of SFAS 157 on those financial assets and financial liabilities is immaterial.3. FAIR VALUE OF FINANCIAL INSTRUMENTS
(A) LONG-TERM DEBT AND OTHER LONG-TERM OBLIGATIONS
All borrowings with initial maturities of less than one year arefalsefalseThis item represents the complete disclosure regarding the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, 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 Company 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 risk is 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.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15B
-Subparagraph a, b
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 3, 10, 14, 15
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 133
-Paragraph 44A, 44B
Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 157
-Paragraph 32, 33, 34
Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15C, 15D
Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15A
-Subparagraph a-d
Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 159
-Paragraph 17-22, 27, 28
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