SECURITIES AND EXCHANGE COMMISSION

(Release No. 35-27647;70-9793)

FirstEnergy Corp., et al

Supplemental Order Authorizing Extension of Time; Reservation of Jurisdiction

January 31, 2003

FirstEnergy Corp., ("FirstEnergy") and FirstEnergy's two service company subsidiaries, FirstEnergy Service Company ("ServeCo") and GPU Service, Inc. ("GPU Service"), all located in Akron, Ohio (collectively, "Applicants"), have filed with the Securities and Exchange Commission ("Commission") a post-effective amendment, under section 13(b) of the Public Utility Holding Company Act, as amended ("Act") and rules 54, 88, 90, and 91 under the Act, to a previously filed application ("Application"). The Commission issued a notice of the underlying Application on August 31, 2001 (HCAR No. 27435).

By order dated October 29, 2001 (HCAR No. 27459) ("Merger Order"), as supplemented by orders dated November 8, 2001 (HCAR No. 27483) and December 23, 2002 (HCAR No. 27628), the Commission authorized the merger between FirstEnergy Corp. ("FirstEnergy"), an Ohio corporation, and GPU, Inc. ("GPU"), a Pennsylvania corporation ("Merger"). The Merger became effective on November 7, 2001, with FirstEnergy as the surviving entity, and FirstEnergy registered under the Act as a holding company on the same day. As a result of the Merger, FirstEnergy directly or indirectly owns all of the outstanding common stock of ten electric utility subsidiaries ("Utility Subsidiaries") which provide gas distribution and transportation service to approximately 5,000 customers in central and northeast Ohio.¹

FirstEnergy also directly owns all of the issued and outstanding common stock of ServeCo, an Ohio corporation, which was organized in 2001 in order to become a new service company subsidiary of FirstEnergy, and GPU Service, a Pennsylvania corporation, which was formerly a direct service company subsidiary of GPU. FirstEnergy also directly or indirectly holds investments in numerous nonutility subsidiaries that are engaged in a variety of energy-related, exempt, or otherwise functionally related nonutility businesses ("Nonutility Subsidiaries" and together, with the Utility Subsidiaries, "Subsidiaries").

Under the Merger Order, the Commission granted FirstEnergy a temporary exemption until such time as all of the service functions performed by FirstEnergy and GPU Service have been consolidated in ServeCo. The order enabled FirstEnergy to continue to provide certain common corporate services² to the Subsidiaries that FirstEnergy held before the Merger. The Merger Order specified that ServeCo would begin at least minimal operations within ninety days following closing of the merger, and that all service functions of FirstEnergy and GPU Service would be transferred to ServeCo not later than February 1, 2003. Employees of FirstEnergy were transferred to ServeCo by January 1, 2002 and employees of GPU Service were transferred to ServCo by January 1, 2003. GPU Service and FirstEnergy no longer have any employees and no longer provide any services.

Applicants request that the Commission authorize a three-month extension of the original February 1, 2003 date for full compliance of the above service company activities to June 1, 2003. Applicants state that this extension will coincide with FirstEnergy's implementation of its SAP Enterprise IT Solution project.³

In addition, Applicants request authorization to consolidate all common corporate services provided during the pre-merger period to associate companies in the FirstEnergy system by FirstEnergy and GPU Service in ServeCo. Applicants request authority for ServeCo to institute policies and procedures and to enter into a service agreement ("ServCo Service Agreement"), including cost allocation methods, with FirstEnergy and each Subsidiary that requests services. In addition, Applicants request authorization to adopt a separate service agreement between certain of FirstEnergy's Ohio Utility Subsidiaries and Pennsylvania Power Company ("Separate Service Agreement").⁴ Applicants request that the Commission reserve jurisdiction over the approval of the ServCo policies and procedures, the ServCo Service Agreement, and the Separate Service Agreement until the record is complete.

FirstEnergy states, for purposes of rule 54, that it is in compliance with all requirements of rule 53(a), except clause (1). In the Merger Order, the Commission authorized FirstEnergy to invest up to $5 billion in exempt wholesale generators ("EWGs") and foreign utility companies ("FUCOs"), as defined in sections 32 and 33 of the Act, respectively. The Merger Order also specifies that this $5 billion amount may include amounts invested in EWGs and FUCOs by FirstEnergy and GPU at the time of the Merger Order ("Current Investments") and amounts relating to possible transfers to EWGs of certain generating facilities owned by certain of FirstEnergy's operating utilities ("GenCo Investments"). FirstEnergy committed that through June 30, 2003, its aggregate investment in EWGs and FUCOs other than the Current Investments and GenCo Investments ("Other Investments") will not exceed $1.5 billion. The Commission has reserved jurisdiction over investments that exceed such amount. As of September 30, 2002, FirstEnergy's aggregate investment in EWGs and FUCOs was approximately $1.27 billion.⁵ FirstEnergy's consolidated retained earnings for the four quarters ended September 30, 2002, were $1.85 billion.

Although FirstEnergy's aggregate investment exceeds the 50 percent "safe harbor" limitation contained in rule 53, FirstEnergy's aggregate investment is below the $5 billion limit authorized in the EWG Order. FirstEnergy maintains that since the date of the Merger Order, there has been no material adverse impact on FirstEnergy's consolidated capitalization resulting from FirstEnergy's investments in EWGs and FUCOs. As of December 31, 2001, the close of the quarter in which the Merger occurred, FirstEnergy's consolidated common equity to total capitalization ratio was 30.3% common equity, 3.1% cumulative preferred stock, 2.2% subsidiary-obligated mandatorily redeemable preferred securities, 60.9% long-term debt and 3.5% notes payable. As of September 30, 2002, FirstEnergy's consolidated capitalization consisted of 34.8% common equity, 1.7% cumulative preferred stock, 1.8% subsidiary-obligated mandatorily redeemable preferred securities, 56.1% long-term debt and 5.6% notes payable. FirstEnergy, thus maintains that FirstEnergy's investment in EWGs and FUCOs have not had any adverse impact on FirstEnergy's capitalization. FirstEnergy maintains that it complies, and will continue to comply, with the record-keeping requirements of rule 53(a)(2), the employee limitation under rule 53(a)(3) and the requirements of rule 53(a)(4) concerning the submission of copies of certain filings under the Act to retail regulatory commissions. With respect to rule 53(b), none of the circumstances enumerated in subparagraphs (1), (2), and (3) have occurred. Thus, in determining whether to approve the proposed transactions, the Commission has considered the effect on the FirstEnergy system of the capitalization or earnings of any FirstEnergy subsidiary that is an EWG or FUCO.

FirstEnergy estimates that the total fees, commissions and expenses to be incurred in connection with the transaction as a whole will not exceed $25,000. Applicants state that, other than as discussed above, no state commission and no federal commission, other than this Commission, has jurisdiction over the proposed transaction.

Due notice of the filing of the Application has been given in the manner prescribed in rule 23 under the Act, and no hearing has been requested of, or ordered by, the Commission. On the basis of the facts, it is found that, except as to those matters over which jurisdiction has been reserved, the applicable standards of the Act and rules under the Act are satisfied, and that no adverse findings are necessary.

IT IS ORDERED, under the applicable provisions of the Act and rules under the

Act, that, except as to those matters over which jurisdiction has been reserved, the post-effective amendment, as amended, be permitted to become effective immediately, subject to the terms and conditions contained in rule 24 under the Act.

IT IS FURTHER ORDERED, that jurisdiction be reserved over Applicants' requests for (i) authority to consolidate FirstEnergy's service company functions into ServCo, (ii) approval of ServCo's procedures and procedures, (iii) approval of the ServCo Service Agreement, and (iv) approval of the Separate Services Agreement, pending completion of the record.

For the Commission, by the Division of Investment Management, under delegated authority.

¹ The Utility Subsidiaries consist of: Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, American Transmission Systems, Incorporated, Jersey Central Power & Light Company, Pennsylvania Electric Company, Metropolitan Edison Company, Pennsylvania Power Company, York Haven Power Company, and The Waverly Electric Power & Light Company, which together provide service to approximately 4,300,000 retail and wholesale electric customers in a 37,200 square-mile area in Ohio, New Jersey, New York and Pennsylvania; and one gas utility subsidiary, Northeast Ohio Natural Gas Corp. Applicants state that the New Jersey Board of Public Utilities and the Pennsylvania Pubic Utility Commission have jurisdiction under their respective state affiliate interests statutes over the proposed Service Agreement and Separate Service Agreement, as they relate to the Utility Subsidiaries that are subject to regulation by those commissions

² These services include: (i) energy supply management of the bulk power and natural gas supply, fuel procurement, coordination of gas and electric systems, maintenance, construction and engineering work; (ii) customer billing; (iii) materials management; (iv) facilities management; (v) human resources; (vi) finance; (vii) accounting; (viii) internal auditing; (ix) information systems; (x) corporate planning and research; (xi) public affairs; (xii) legal; (xiii) environmental matters; and (xiv) executive services.

³ Applicants state that the SAP is an Enterprise Resource Planning system that links and coordinates business processes. It will replace existing systems in human resources, finance, supply chain, distribution and fossil/nuclear areas, and will be used to manage work, share information, track customer accounts, and meet other business needs.

⁴ Applicants have filed with the Commission as exhibits in this file, the proposed ServCo policies and procedures, ServCo Service Agreement, and the Separate Service Agreement

⁵ This $ 1.27 billion represents Current Investments only. As of June 30, 2002, FirstEnergy had no Genco Investments.

http://www.sec.gov/divisions/investment/opur/filing/35-27647.htm