EXECUTIVE SUMMARY

Net income in the third quarter of 2008 was $471 million, or basic earnings of $1.55 per share of common stock ($1.54 diluted), compared with net income of $413 million, or basic earnings of $1.36 per share of common stock ($1.34 diluted) in the third quarter of 2007. Net income in the first nine months of 2008 was $1.01 billion, or basic earnings of $3.32 per share of common stock ($3.29 diluted), compared with net income of $1.04 billion, or basic earnings of $3.39 per share of common stock ($3.35 diluted) in the first nine months of 2007.

                                                    Three Months     Nine Months
   Change in Basic Earnings Per Share                   Ended           Ended
   From Prior Year Periods                          September 30    September 30

   Basic Earnings Per Share - 2007                   $       1.36    $       3.39
   Gain on non-core asset sales - 2008/2007                 (0.04 )          0.02
   Litigation settlement - 2008                                 -            0.03
   Saxton decommissioning regulatory asset - 2007               -           (0.05 )
   Trust securities impairment                              (0.05 )         (0.09 )
   Revenues                                                  0.57            1.36
   Fuel and purchased power                                 (0.34 )         (1.16 )
   Depreciation and amortization                            (0.02 )         (0.07 )
   Deferral of new regulatory assets                        (0.10 )         (0.23 )
   Investment Income - decommissioning trusts
    and corporate-owned life insurance                       0.04           (0.05 )
   Income tax adjustments                                    0.12            0.12
   Other expense reductions                                  0.01            0.02
   Reduced common shares outstanding                            -            0.03
   Basic Earnings Per Share - 2008                   $       1.55    $       3.32

Recent Market Developments

In response to the recent unprecedented volatility in the capital and credit markets, FirstEnergy continues to assess its exposure to counterparty credit risk, its access to funds in the capital and credit markets, and market-related changes in the value of its postretirement benefit trusts, nuclear decommissioning trusts and other investments. FirstEnergy has taken several steps to strengthen its liquidity position and provide additional flexibility to meet its anticipated obligations and those of its subsidiaries. While FirstEnergy believes its existing sources of liquidity will continue to be available to meet its anticipated obligations, management is reviewing its 2009 plans to determine what adjustments should be made to operating and capital budgets in response to the economic climate to reduce the need for external sources of capital. Although this process is not yet complete, management expects that FirstEnergy's capital expenditures will be reduced from the levels previously anticipated; however, it expects to continue to meet commitments for required capital projects and necessary operational expenditures.

Liquidity

FirstEnergy has access to more than $4 billion of liquidity, of which approximately $1.9 billion was available as of October 31, 2008. FirstEnergy and its subsidiaries have approximately $404 million available under a $2.75 billion revolving credit facility, with no one financial institution having more than 7.3% of the total commitment. An additional $1.1 billion was available through other commitments including: bank credit facilities totaling $420 million; a $300 million term loan with Credit Suisse, discussed below; and $550 million of accounts receivable financing facilities. FirstEnergy had $456 million of cash and cash equivalents as of October 31, 2008.

FirstEnergy's currently payable long-term debt includes approximately $2.1 billion of variable-rate PCRBs. The interest rates on these PCRBs are reset daily or weekly. Bondholders can tender their PCRBs for mandatory repurchase prior to their maturity with the purchase price payable from remarketing proceeds or, if the PCRBs are not successfully remarketed, by drawings under irrevocable direct pay LOCs. Prior to September 18, 2008, FirstEnergy had not experienced any unsuccessful remarketings of these variable-rate PCRBs.

Coincident with recent disruptions in the variable-rate demand bond and capital markets generally, certain of the PCRBs have been tendered by bondholders to the trustee. As of October 31, 2008, $72.5 million of the PCRBs, all of which are backed by Wachovia Bank LOCs, had been tendered and not yet successfully remarketed. Of these, draws on the applicable LOCs were made for $72.4 million, all of which Wachovia honored. The reimbursement agreements between the subsidiary obligors and Wachovia require reimbursement of outstanding LOC draws by March 2009.

As a further safeguard in the event of future draws on these LOCs, in early October 2008 FirstEnergy negotiated with the banks that have issued the LOCs to extend the term of the respective reimbursement obligations. Approximately $902 million of LOCs that previously required reimbursement of LOC draws within 30 days or less were modified to extend the reimbursement obligations to six months or June 2009, as applicable.

FirstEnergy also enhanced its liquidity position during this period of turmoil in the credit and capital markets by securing, on October 8, 2008, a $300 million secured term loan facility with Credit Suisse. Under the facility, FGCO is the borrower and FES and FirstEnergy are guarantors. Generally, the facility is available to FGCO until October 7, 2009, with a minimum borrowing amount of $100 million and with repayment due 30 days after the borrowing date subject to extension at the end of each quarter until two days after the release of results of operations. Advances under the facility are not available for re-borrowing after they are repaid.

Access to the capital markets and costs of financing are influenced by the ratings of the securities of FirstEnergy and its subsidiaries. On August 1, 2008, S&P changed its outlook for FirstEnergy and its subsidiaries from "negative" to "stable." Moody's outlook for FirstEnergy and its subsidiaries remains "stable." The credit ratings of FirstEnergy or its subsidiaries also govern the collateral provisions of certain contract guarantees. Subsequent to the occurrence of a credit rating downgrade to below investment grade or a "material adverse event," the immediate posting of cash collateral may be required. As of September 30, 2008, FirstEnergy's maximum exposure under these collateral provisions was $573 million, consisting of $64 million due to "material adverse event" contractual clauses and $509 million due to a below investment grade credit rating. Stress case conditions of a credit rating downgrade or "material adverse event" and hypothetical adverse price movements in the underlying commodity markets would increase this amount to $648 million, consisting of $58 million due to "material adverse event" contractual clauses and $590 million due to a below investment grade credit rating. FirstEnergy's revolving credit facility does not contain provisions that either restrict the ability to borrow or accelerate repayment of outstanding advances as a result of any change in these credit ratings although a change in credit rating could increase FirstEnergy's cost of borrowing. FirstEnergy does not anticipate current market conditions to result in any events that will result in posting additional collateral or that will impact its ability to remain in compliance with its debt covenants.

Long-Term Financing

On October 20, 2008, OE issued $300 million of FMBs, comprised of $275 million 8.25% Series of 2008 due 2038 and $25 million 8.25% Series of 2008 due 2018. OE will use the net proceeds from these offerings to fund capital expenditures and for other general corporate purposes. CEI, TE and Met-Ed each have regulatory authority to issue up to $300 million of long-term debt, and requests are pending before the NJBPU and PPUC for authority to issue up to an aggregate $400 million of additional utility long-term debt. FirstEnergy intends to execute these long-term financings as it deems appropriate and as market conditions permit.

Counterparty Credit Risk

FirstEnergy and its subsidiaries are subject to credit risk, which relates to the ability of counterparties to meet their contractual payment obligations or the potential non-performance of counterparties to deliver contracted commodities or services at the contracted price. FirstEnergy routinely performs counterparty risk evaluations including monitoring of credit default spreads of counterparties, monitors portfolio trends and uses collateral and contract provisions to mitigate exposure. Recent market events including, but not limited to, the default of Lehman have resulted in a more stringent approach to counterparty credit evaluations resulting in a decrease in the number of approved counterparties. FirstEnergy's subsidiaries have long-term power and coal contracts with certain counterparties that, in the event of the counterparty's default, would likely be replaced with contracts having less favorable terms that may negatively impact financial condition and results of operations. FirstEnergy has reviewed its insurance coverage and believes that the availability and cost of liability, property, nuclear risk and other forms of insurance have not been materially impacted by recent events, but will continue to monitor the events and ratings of the companies which provide insurance coverage for FirstEnergy and its subsidiaries.

Investments

Despite recent declines in the value of FirstEnergy's pension plan investments, contributions to the plan will not be required in 2009. The overall actual investment return as of October 31, 2008 was a loss of 25.4% compared to an assumed 9% positive return. Based on an 8% discount rate assumption, if the ultimate return for 2008 was to remain at a loss of 25.4%, 2009 pre-tax net periodic pension expense would be approximately $145 million, an increase of approximately $180 million compared to the year 2008. If the ultimate return for 2008 was to remain at a loss of 25.4%, FirstEnergy would also not be required to make contributions in 2010. However, if assets were to decline an additional 1% from October 31, 2008 through the end of 2008, contributions of approximately $65 million would be required in 2010.

This information does not consider any actions management may take to mitigate the impact of the asset return shortfalls, including changes in the amount and timing of future contributions. The actuarial assumptions used in the determination of pension and postretirement benefit costs are interrelated and changes in other assumptions could have the impact of offsetting all or a portion of the potential increase in benefit costs set forth above.

Nuclear decommissioning trust funds have been established to satisfy NGC's and the Utilities' nuclear decommissioning obligations. As of September 30, 2008, approximately 47% of the funds were invested in equity securities and 53% were invested in fixed income securities, with limitations related to concentration and investment grade ratings.

The decommissioning trusts of JCP&L and the Pennsylvania Companies are subject to regulatory accounting, with unrealized gains and losses 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. NGC, OE and TE recognize in earnings the unrealized losses on available-for-sale securities held in their nuclear decommissioning trusts. Nuclear decommissioning trust securities impairments totaled $63 million in the first nine months of 2008. FirstEnergy does not expect to make additional cash contributions to the nuclear decommissioning trusts in 2009, other than the required annual TMI-2 trust contribution that is collected through customer rates. However, should the trust funds continue to experience declines in market value, FirstEnergy may be required to take measures, such as providing financial guarantees through letters of credit or parental guarantees or making additional contributions to the trusts to ensure that the trusts are adequately funded and meet minimum NRC funding requirements.

In connection with the decommissioning of TMI-2, Met-Ed, Penelec and JCP&L make a combined annual contribution of approximately $13 million. In connection with the 2005 intra-system generation asset transfer, NGC is required to contribute $80 million to the trust by May 2010. See Note 15 to the Notes to Consolidated Financial Statements within FirstEnergy's 2007 Annual Report on Form 10-K for additional information regarding the intra-system generation asset transfer.

Economic and Operational Risks

Results in the third quarter of 2008 continued to reflect some adverse effects on the demand for electricity as a result of current economic conditions - particularly with respect to the automotive industry. This condition is expected to continue into 2009 with potentially wider application among the Utilities' customers. FirstEnergy expects to see the impact of slower economic growth in both sales and distribution revenues. Earlier in the year, FirstEnergy enhanced its collection processes with respect to current customer billings and customer deposits. While these efforts may have a mitigating effect, FirstEnergy expects that there could be resulting increases in uncollectible customer accounts in future periods. In addition, the margin on wholesale and retail generation sales may be reduced as a result of lower demand and the resulting downward pressure on power prices.

Regulatory Matters

Ohio Legislative Process

On July 31, 2008, the Ohio Companies filed both an ESP and MRO with the PUCO. A PUCO decision on the MRO was required by statute within 90 days of the filing and is required on the ESP within 150 days. Under the ESP, new rates would be effective for retail customers on January 1, 2009. Evidentiary hearings concluded on October 31, 2008 and no further hearings are scheduled. The parties are required to submit initial briefs by November 21, 2008, with all reply briefs due by December 12, 2008.

Under the MRO alternative, the Ohio Companies propose to procure generation supply through a CBP. The MRO would be implemented if the ESP is not approved by the PUCO or is changed and not accepted by the Ohio Companies. On September 16, 2008, the PUCO staff filed testimony and evidentiary hearings were held. The PUCO failed to act on October 29, 2008 as required under the statute. The Ohio Companies are unable to predict the outcome of this proceeding.

In July and August 2008, the PUCO staff issued three sets of proposed rules for comment to implement portions of SB221. Written comments and reply comments on the three sets of proposed rules were filed during the third quarter of 2008. Following the comment period, the PUCO considers the input from stakeholders before adopting the final rules. The rules are then subject to review by the Joint Committee on Agency Rule Review, which conducts a 65-day review process. The rules become effective 10 days following the Committee's review. On September 17, 2008, the PUCO issued a final order adopting the first set of rules. A PUCO order adopting the second set of rules was issued on November 5, 2008.

RCP Fuel Remand

On August 8, 2008, the Ohio Companies submitted a filing to suspend the procedural schedule in their application to recover their 2006-2007 deferred fuel costs and associated carrying charges, as the ESP filing contains a proposal addressing the recovery of these deferred fuel costs. On August 25, 2008, the PUCO ordered that the evidentiary hearing scheduled for September 29, 2008, would be held at a later date. A revised case schedule has yet to be issued.

Pennsylvania Legislative Process

On October 15, 2008, the Governor of Pennsylvania signed House Bill 2200 into law which becomes effective on November 14, 2008, as Act 129 of 2008. The bill addresses issues such as: energy efficiency and peak load reduction; generation procurement; time-of-use rates; and smart meters and alternative energy. Act 129 requires utilities to file with the PPUC an energy efficiency and peak load reduction plan by July 1, 2009, and a smart meter procurement and installation plan by August 14, 2009.

Major provisions of the legislation include:

· power acquired by utilities to serve customers after rate caps expire will be procured through a competitive procurement process that must include a mix of long-term and short-term contracts and spot market purchases;

· the competitive procurement process must be approved by the PPUC and may include auctions, request for proposals, and/or bilateral agreements;

· utilities must provide for the installation of smart meter technology within 15 years;

· a minimum reduction in peak demand of 4.5% by May 31, 2013;

· minimum reductions in energy consumption of 1% and 3% by May 31, 2011 and May 31, 2013, respectively; and

· an expanded definition of alternative energy to include additional types of hydroelectric and biomass facilities.

Penn's Interim Default Service Supply

On October 21, 2008, Penn held its third RFP to procure default service for residential customers for the period June 2009 through May 2010. A fourth RFP for the remainder of residential customers' load for the period June 2009 through May 2010 is scheduled for January 2009. The results of the four RFPs will be averaged and adjusted for the line losses, administrative fees and gross receipts tax, and will be reflected in Penn's new default service rates.

Met-Ed and Penelec Rate Cases

Several parties to the Met-Ed and Penelec 2006 rate case proceeding filed Petitions for Review with the Commonwealth Court of Pennsylvania in 2007, asking the Court to review the PPUC's determination on several issues including: the recovery of transmission costs (including congestion); the transmission deferral; consolidated tax savings; the requested generation increase; and recovery of universal service costs from only the residential rate class. The Commonwealth Court issued its decision on November 7, 2008, which affirmed the PPUC's January 11, 2007 order in all respects, including the deferral and recovery of transmission and congestion related costs.

Met-Ed and Penelec Prepayment Plan

On September 25, 2008, Met-Ed and Penelec filed a voluntary prepayment plan with the PPUC. The plan offers qualified residential and small business customers the option to gradually phase-in future generation price increases by making modest prepayments during the next two years, before rate caps expire at the end of 2010. Each month, customers who elect to participate would prepay an amount equal to approximately 9.6% of their electric bill. Prepayments would earn 7.5% interest and be applied to customers' billings in 2011 and 2012. Met-Ed and Penelec requested that the PPUC approve the plan by mid-December 2008.

Solar Renewable Energy

On September 30, 2008, JCP&L filed a proposal in response to an NJBPU directive addressing solar project development in the State of New Jersey. Under the proposal, JCP&L would enter into long-term agreements to buy and sell Solar Renewable Energy Certificates (SREC) to provide a stable basis for financing solar generation projects. An SREC represents the solar energy attributes of one megawatt-hour of generation from a solar generation facility that has been certified by the NJBPU Office of Clean Energy. Under this proposal JCP&L would solicit SRECs to satisfy approximately 60%, 50%, and 40% of the incremental SREC purchases needed in its service territory through 2010, 2011 and 2012, respectively, to meet the Renewable Portfolio Standards adopted by the NJBPU in 2006. A schedule for further NJBPU proceedings has not yet been set.

New Jersey Energy Master Plan

On October 22, 2008, the Governor of New Jersey released the details of New Jersey's EMP, which includes goals to reduce energy consumption by a minimum of 20% by 2020, reduce peak demand by 5,700 MW by 2020, meet 30% of the state's electricity needs with renewable energy by 2020, and examine smart grid technology. The EMP outlines a series of goals and action items to meet set targets, while also continuing to develop the clean energy industry in New Jersey. The Governor will establish a State Energy Council to implement the recommendations outlined in the plan.

Operational Matters

Record Generation Output

FirstEnergy set a new quarterly generation output record of 22.2 million megawatt-hours during the third quarter of 2008, a 3.2% increase over the previous record established in the third quarter of 2006. This generation record reflects a quarterly all-time high for the nuclear fleet.

September Windstorm

On September 14, 2008, the remnants of Hurricane Ike swept through Ohio and western Pennsylvania and produced unexpectedly high winds, reaching nearly 80 mph. More than one million customers of OE, CEI, Penn and Penelec were affected by the windstorm, which produced the largest storm-related outage in the history of any of those companies. Storm expenses totaled approximately $30 million, of which $19 million was recognized as capital and $11 million as O&M expense.

FIRSTENERGY'S BUSINESS

FirstEnergy is a diversified energy company headquartered in Akron, Ohio, that operates primarily through three core business segments (see Results of Operations).

· Energy Delivery Services transmits and distributes electricity through FirstEnergy's eight utility operating companies, serving 4.5 million customers within 36,100 square miles of Ohio, Pennsylvania and New Jersey and purchases power for its PLR and default service requirements in Pennsylvania and New Jersey. This business segment derives its revenues principally from the delivery of electricity within FirstEnergy's service areas at regulated rates, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (default service) in its Pennsylvania and New Jersey franchise areas. The segment's net income reflects the commodity costs of securing electricity from FirstEnergy's competitive energy services segment under partial requirements purchased power agreements with FES and from non-affiliated power suppliers, including, in each case, associated transmission costs.

· Competitive Energy Services supplies the electric power needs of end-use customers through retail and wholesale arrangements, including associated company power sales to meet all or a portion of the PLR and default service requirements of FirstEnergy's Ohio and Pennsylvania utility subsidiaries and competitive retail sales to customers primarily in Ohio, Pennsylvania, Maryland and Michigan. This business segment owns or leases and operates 19 generating facilities with a net demonstrated capacity of approximately 13,664 MW and also purchases electricity to meet sales obligations. The segment's net income is primarily derived from affiliated company power sales and non-affiliated electric generation sales revenues less the related costs of electricity generation, including purchased power and net transmission and ancillary costs charged by PJM and MISO to deliver energy to the segment's customers.

· Ohio Transitional Generation Services supplies the electric power needs of non-shopping customers under the default service requirements of the Ohio Companies. The segment's net income is primarily derived from electric generation sales revenues less the cost of power purchased from the competitive energy services segment through a full-requirements PSA arrangement with FES, including net transmission and ancillary costs charged by MISO to deliver energy to retail customers.

RESULTS OF OPERATIONS

The financial results discussed below include revenues and expenses from
transactions among FirstEnergy's business segments. A reconciliation of segment
financial results is provided in Note 14 to the consolidated financial
statements. Net income by major business segment was as follows:

                         Three Months Ended September 30,             Nine Months Ended September 30,
                                                    Increase                                     Increase
                       2008           2007         (Decrease)       2008           2007         (Decrease)
                                             (In millions, except per share data)
Net Income
By Business
Segment:
Energy delivery
services            $       283    $       269    $         14   $       655    $       695    $        (40 )
Competitive energy
services                    164            148              16           317            388             (71 )
Ohio transitional
generation services          19             16               3            62             69              (7 )
Other and
reconciling
adjustments*                  5            (20 )            25          (24)           (111 )            87
Total               $       471    $       413    $         58   $     1,010    $     1,041    $        (31 )

Basic Earnings Per
Share               $      1.55    $      1.36    $       0.19   $      3.32    $      3.39    $      (0.07 )
Diluted Earnings
Per Share           $      1.54    $      1.34    $       0.20   $      3.29    $      3.35    $      (0.06 )

* Consists primarily of interest expense related to holding company debt, corporate support services revenues and expenses, and elimination of intersegment transactions.