Fitch Affirms FirstEnergy, Ohio Edison, Cleveland Electric Illuminating, Toledo Edison & Penn Power

Business Wire, March 31, 2009

CHICAGO -- Fitch Ratings has affirmed the ratings of FirstEnergy Corp. (FE) and its Ohio subsidiaries, Ohio Edison (OE), Cleveland Electric Illuminating Co. (CEI), Toledo Edison (TE), and OE subsidiary, Pennsylvania Power Co. (Penn Power) as follows:

FE

--Issuer Default Rating (IDR) at 'BBB';

--Senior unsecured debt at 'BBB';

--Commercial paper at 'F2'.

OE

--IDR at 'BBB-';

--Senior secured debt at 'BBB ';

--Senior unsecured debt at 'BBB';

--Short-term IDR at 'F2'.

CEI

--IDR at 'BB ';

--Senior secured debt at 'BBB';

--Senior unsecured debt at 'BBB-'.

TE

--IDR at 'BB ';

--Senior unsecured debt at 'BBB-'.

Penn Power

--IDR at 'BBB-';

--Senior secured debt at 'BBB '.

The Rating Outlook for FE, OE and Penn Power is Stable. The Rating Outlook for CEI and TE is Positive. Approximately $7.2 billion of debt is affected by the rating action.

The ratings affirmation for FE take into consideration the company's solid credit protection measures, improved operating performance of its generating fleet, stable cash flow generation from its electric transmission and distribution (T&D) utilities, and relatively constructive regulatory environments in Ohio and New Jersey. FirstEnergy Solutions (FES), FE's competitive generation subsidiary that houses its portfolio of low-cost, primarily coal- and nuclear-fueled, also supplies power to Metropolitan Edison (Met-Ed) and Pennsylvania Electric Co. (Penelec) to meet their provider of last resort obligation through 2010, adding a measure of predictability to FES' cash flows through 2010.

FE rating concerns include higher costs associated with anticipated carbon restrictions and other environmental legislative/regulatory mandates, uncertainty regarding the post 2010 regulatory environment in Pennsylvania when subsidiaries Met-Ed and Penelec emerge from multi-year competitive transition plans.

In 2009, scheduled maturities include $251 million of regulated subsidiary debt, a $300 million revolving credit facility shared by FE and FES and a $300 million term loan at FE Generation. Fitch expects the companies will be able to successfully renew these credit agreements. However, the current banking market is more costly, and conditions are more restrictive than in the past. FE manages its regulated operating subsidiaries as a system from an organizational, operational and liquidity perspective. And as such, the ratings of the utilities are closely aligned with that of the parent.

In response to recessionary pressures and a restrictive credit environment, FE's management has reduced 2009 capital expenditures to approximately $1.6 billion from $2.1 billion in 2008. The lower capital program reflects changes in certain generating plants outage schedules, the delay in completion of the Fremont plant and adjustments to environmental programs. FE and its subsidiaries have sufficient liquidity with approximately $2.6 billion of available short-term capacity as of Jan. 31, 2009.

The rating affirmations for OE, CEI, TE and Penn Power take into account stable credit protection measures at the utilities, as well as a constructive regulatory environment in Ohio. On March 25, 2009, the PUCO approved a supplemental agreement that establishes an electric security plan (ESP) for FE's Ohio operating companies. The term of the ESP is from April 1, 2009 through May 31, 2011. Overall, Fitch expects the ESP to have a neutral impact on cash flows of the utilities as wholesale power prices have moderated along with declining energy prices.

Highlights of the ESP include: a competitive bidding process to determine retail generation rates from June 1, 2009 through May 31, 2011, an option to phase in generation prices at the discretion of the PUCO, and the elimination of approximately $216 million of regulatory transition charges that otherwise would have been recovered in CEI customer bills through 2010. In addition, FE has committed to investing at least $615 million in capital investments to their distribution systems through Dec. 31, 2011, and to contributing $25 million in corporate funds over three years to support economic development and job retention programs in their service areas.

FE will also continue its existing green resource program that allows customers to purchase renewable energy credits each month. The Ohio companies would further meet their renewable resource requirements under Ohio's new energy law by purchasing Renewable Energy Certificates (RECs) through a separate Request for Proposal process, with costs recovered through a generation rider. Earlier in the year, the PUCO granted FE's Ohio companies an increase in distribution rates in the aggregate amount of $136.6 million, with new rates effective on Jan. 23, 2009 for OE and TE customers, and May 1, 2009 for CEI customers. Distribution rates will now be frozen through Dec. 31, 2011.