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   &lt;div style="font-family: Helvetica,Arial,sans-serif; margin-left: 0in; "&gt;
   &lt;div align="left"&gt;
   &lt;/div&gt;
   &lt;div align="justify" style="font-size: 10pt; margin-top: 0pt"&gt;&lt;b&gt;&lt;/b&gt;
   &lt;/div&gt;
   &lt;div align="justify" style="font-size: 10pt; margin-top: 10pt"&gt;&lt;b&gt;1. ORGANIZATION AND BASIS OF PRESENTATION&lt;/b&gt;
   &lt;/div&gt;
   &lt;div align="justify" style="font-size: 10pt; margin-top: 10pt"&gt;FirstEnergy is a diversified energy company that holds, directly or indirectly, all of the
   outstanding common stock of its principal subsidiaries: OE, CEI, TE, Penn (a wholly owned
   subsidiary of OE), ATSI, JCP&amp;#038;L, Met-Ed, Penelec, FENOC, AE and its principal subsidiaries (AE
   Supply, AGC, MP, PE, WP and TrAIL Company), FES and its subsidiaries FGCO and NGC, and FESC. AE
   merged with a subsidiary of FirstEnergy on February&amp;#160;25, 2011, with AE remaining as the surviving
   corporation and becoming a wholly-owned subsidiary of FirstEnergy (See Note 2, Merger).
   &lt;/div&gt;
   &lt;div align="justify" style="font-size: 10pt; margin-top: 10pt"&gt;FirstEnergy and its subsidiaries follow GAAP and comply with the regulations, orders, policies and
   practices prescribed by the SEC, the FERC, the NERC and, as applicable, the PUCO, the PPUC, the
   MDPSC, the NYPSC, the WVPSC and the NJBPU. The preparation of financial statements in conformity
   with GAAP requires management to make periodic estimates and assumptions that affect the reported
   amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and
   liabilities. Actual results could differ from these estimates. The reported results of operations
   are not indicative of results of operations for any future period. In preparing the financial
   statements, FirstEnergy and its subsidiaries have evaluated events and transactions for potential
   recognition or disclosure through the date the financial statements were issued.
   &lt;/div&gt;
   &lt;div align="justify" style="font-size: 10pt; margin-top: 10pt"&gt;These statements should be read in conjunction with the financial statements and notes included in
   the combined Annual Report on Form 10-K for the year ended December&amp;#160;31, 2010 for FirstEnergy, FES
   and the Utility Registrants, as applicable, and the Current Report on Form 8-K filed by FirstEnergy
   on February&amp;#160;25, 2011, as amended on April&amp;#160;19, 2011. The consolidated unaudited financial statements
   of FirstEnergy, FES and each of the Utility Registrants reflect all normal recurring adjustments
   that, in the opinion of management, are necessary to fairly present results of operations for the
   interim periods. Certain prior year amounts have been reclassified to conform to the current year
   presentation. Unless otherwise indicated, defined terms used herein have the meanings set forth in
   the accompanying Glossary of Terms.
   &lt;/div&gt;
   &lt;div align="justify" style="font-size: 10pt; margin-top: 10pt"&gt;FirstEnergy and its subsidiaries consolidate all majority-owned subsidiaries over which they
   exercise control and, when applicable, entities for which they have a controlling financial
   interest. Intercompany transactions and balances are eliminated in consolidation. FirstEnergy
   consolidates a VIE when it is determined that it is the primary beneficiary (see Note 7, Variable
   Interest Entities). Investments in affiliates over which FirstEnergy and its subsidiaries have the
   ability to exercise significant influence, but with respect to which are not the primary
   beneficiary and do not exercise control, follow the equity method of accounting. Under the equity
   method, the interest in the entity is reported as an investment in the Consolidated Balance Sheets
   and the percentage share of the entity&amp;#8217;s earnings is reported in the Consolidated Statements of
   Income.
   &lt;/div&gt;
   &lt;/div&gt;
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