At this time I would like to welcome everyone to the FirstEnergy second quarter earnings conference call. (Operator Instructions) It is now my pleasure to turn the floor over to your host, Mr. Kurt Turosky, Director of Investor Relations. Sir, you may begin your conference.

Thank you, Jody. During this conference call, we will make various forward-looking statements within the meaning of the Safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements with respect to revenues, earnings, performance, strategies, prospects, and other aspects of the business of FirstEnergy Corp are based on current expectations that are subject to risks and uncertainties. A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements. Please read the Safe Harbor statement contained in the consolidated reports for the financial community, which was released earlier today, and is available on our website under the Earnings Release link. Reconciliations to GAAP for the various non-GAAP financial measures we will be referring to today are also contained in that report as well as on the Investor Information section of our website. Participating in today's call are Tony Alexander, President and Chief Executive Officer; Rich Marsh, Senior Vice President and Chief Financial Officer; Harvey Wagner, Vice President and Controller; Jim Pearson, Treasurer; and Ron Seeholzer, Vice President of Investor Relations. I'll now turn the call over to Rich Marsh.

Thanks, Kurt. Good afternoon, everybody. Thanks for being with us today on this busy earnings release day. I'll start the call by providing an overview of our second quarter earnings results and financial activities, then I'll turn the line over to Tony Alexander to discuss our increased earnings guidance, and also to provide updates on our operational performance and regulatory initiatives. Information regarding our second quarter results was provided earlier today in our consolidated report to the financial community and it might be helpful to refer to that during our call. Let's start with our second quarter financial results. We'll refer to earnings and cash flow results on a non-GAAP basis and reconciliations to GAAP are available in the consolidated report as well as on the Investor Information page of our website. Earnings on a GAAP in the second quarter of 2006 were $0.92 per share compared to GAAP earnings of $0.54 per share in the second quarter of 2005. Normalized non-GAAP earnings in the second quarter of this year were $0.95 per share, excluding unusual items of $0.03 per share. These unusual items included the impairment of non-core assets in our facility services group, partially offset by a gain on the sale of one of our smaller retired generating units. These results compare favorably to normalized non-GAAP earnings of $0.71 per share in the same period of last year. This improvement was driven primarily by the implementation of our Ohio rate plans, recently approved deferral accounting for PGM Transmission expenses and continued favorable operating performance. Specifically, the major contributors to earnings from the Ohio rate plans, compared to the second quarter of last year include: reduction in transition cost amortization of $0.20 per share, primarily reflecting the end of generation transition cost recovery in 2005; the deferral of $0.07…

Thanks, Rich. Good afternoon, everyone, thanks for joining us. I'm pleased that the performance in the first half of the year puts us in a position to increase our 2006 normalized non-GAAP earnings guidance by $0.20 per share over the original guidance that we provided in, I believe November of last year. Our new guidance is $3.65 to $3.85 per share. We are maintaining our non-GAAP cash generation guidance of $460 million. The increase in our earnings guidance reflects the May 2006 Pennsylvania Commission order authorizing Met-Ed and Penelec to defer incremental PJM transmission charges, partially offset by lower electric sales revenues resulting from two things: the unseasonably mild weather experienced during the first half of the year and lower wholesale market prices projected for the second half of the year. On a year-to-date basis, heating degree days were 11% below normal while cooling degree days were 17% below normal. This mild weather particularly impacted residential distribution deliveries, which on a year-to-date basis were down 3.6%, compared to the first half of 2005. The current softening in wholesale market prices appears to be a reflection of low demand due to the mild weather, coupled with the decline in natural gas prices. While, of course, no one knows how wholesale power prices in our region may change over the remainder of the year, our revised guidance does incorporate an expectation that they will average slightly below our expectations earlier in the year. Let me briefly address our operations during the quarter as well as several regulatory initiatives. Our operational performance continued on a favorable path during the period, with a new generation output record of 20.3 million megawatt hours. This is a 6.3% increase over the prior second quarter record, which was established last year. Our year-to-date generation output of 40.4…

Our first question comes from Paul Patterson - Glenrock Associates.

I wanted to just touch base on the stock repurchase. How far along you might have gotten so far, and when you think it might be completed?

If you think about it, Paul, the Board approved the repurchase on June 20. The second quarter earnings release was today, that really didn't give us any opportunity to go into the market because we're in possession of material inside information, namely, second quarter results. So we didn't have the opportunity to start that program yet, but we are very mindful of the desirability of getting that done quickly and that's our plan for the remainder of the year.

On the higher fuel and on purchase power expenses excluding JCP&L, it looks like it was pretty much offset by the deferred fuel costs in the Ohio regulatory changes. So I would assume that most of these costs occurred in Ohio? Is that correct?

Yes.

I know your rebuttal testimony is due next week in Pennsylvania. Any thoughts on what you see there? Just reactions from all of these hearings you've had, and what have you, in terms of any thoughts that you have in what you saw in terms of what it might pertain for the future, or is it too early to say?

As you mentioned, Paul, rebuttal testimony will be filed a week from today, which is August 8. I think in terms of the intervenor testimony, we didn't see anything unexpected, nothing unusual there. The response, the rate case in terms of press coverage or from the customer meetings that we've been having has been very mild. So I think things continue to be pretty much on track, and we look forward to filing our rebuttal testimony next week and moving forward with the rate case there. So I'd say so far so good.

Great, thanks a lot.

Thank you, Paul.

Our next question comes from Steve Fleishman - Merrill Lynch.

Hi, Steve.

Hi, guys. Just on the issue of particularly the lower wholesale sales, limiting the upside of the Pennsylvania deferral in your annual guidance, how much of that was really driven by the first half performance and weather? Are you assuming normal weather in the second half of the year when you put this guidance together?

We always budget for normal weather, Steve. I guess our expectation is that prices in the second half of the year might be a little softer than what we had originally assumed in the budget. That's what our guys are thinking. Also we had the situation in the first half of the year where obviously distribution throughput was down because of the mild weather. So those were really the two offsets of the positive impact of the Pennsylvania deferral.

Okay. I assume that would not have incorporated the fact that it's gotten a lot hotter and gas prices have gone back up?

No, it does not. I noticed gas prices jumped 14% or something like that, but no it doesn't encompass that thinking. The range does. Hopefully we have good weather in July and August, that will help push us towards the higher end of that range.

Given the timing of the share repurchases and such, since it's late in the year, that's not going to really impact the guidance for this year?

It's incorporated in the range, Steve. You're right, we're already in August, so it's not going to be a large contributor to earnings, but we did put that in.

Right and it doesn't sound like you're planning to do one of these broker contract transactions where you get the lower shares immediately.

We're considering all of our alternatives at this point. What makes sense based on conditions when we decide to actually move forward with the program.

And just one last question on Ohio. Maybe Tony could just discuss the process on resolving this one issue on the competitive choice. My only question, is it going to stay focused on that one issue and nothing else is likely to be brought up that kind of creates a broader change?

Well, I don't know what other people would bring up. The remand is very limited with respect to what needs to be looked at. In fact, almost every other issue with respect to the rate stabilization plan that was controversial, was appealed and the court found all of those terms acceptable. So from my perspective, really the only thing on the table is put in place a mechanism that satisfies the court's remand order. So I don't anticipate anything coming out of the case other than dealing with that issue.

Okay, thank you.

Thanks, Steve.

Our next question comes from Paul Fremont – Jefferies.

Hi, Paul. Paul Fremont - Jefferies & Co.: Hello. Congratulations on a good quarter. I guess following up on the Ohio Supreme Court decision, with respect to offering a competitive alternative, is this going to require more frequent market quotes relative to the fixed prices that you're offering in your plan? Does this potentially make extending the existing rate stabilization plan more difficult?

Paul, we filed the format of what we were proposing. My sense is that you'd go up for an RFP, you'd establish a price, that price would stay fixed for most of the period of the RFP, if I remember correctly. So I wouldn't think that this would generate any additional changes beyond that. One or two times you'd reset the price in this timeframe, between now and 2008. It would just be an alternative price based on what the market would deliver for that type of service. I don't see it having any impact at all on 2009 and beyond. Paul Fremont - Jefferies & Co.: Why would it not continue as long as the issue is still derived from the additional restructuring law that was passed by Ohio?

In 2009 and beyond we'll be looking at something totally different. So let's just assume we use an auction process. If you do that, then you have the competitive price alternative to customers as the alternative they could select. Paul Fremont - Jefferies & Co.: Thank you.

Thanks, Paul.

Our next question comes from Daniele Seitz - Dahlman Rose.

Hello. I just was wondering, you are assuming a very strong increase in retail demand and apparently because of the retail shoppers. Is it something that you see having an impact longer term? It seems that with less competition, could that attract some sort of revision from the Ohio Commission? Could you explain that?

Most of the returning customers came back to us, Daniele, in the fourth quarter of last year and that's when some of the other competitive generation suppliers exited our market. So right now shopping is at a pretty stable, albeit relatively low, level. Not really expecting that to change going forward. I don't think it's going to have much of an impact in terms of going forward position in Ohio. Certainly the market remains open for other generation suppliers who wish to come in with a competitive offer.

So there is no magic number that the commission is watching out for?

No, I don't believe so, no.

Okay, thank you.

Thanks, Daniele.

Our next question comes from Paul Ridzon – KeyBanc.

Good afternoon. I was wondering when you think the environment might be right to start thinking about what happens after the RFP? I know this is an election year, that probably creates some difficulties. But when do you think that process starts?

Well, Paul, this is Tony, I think we're thinking about that process right now. We believe that the best alternative for FirstEnergy is to move forward with the competitive market, alternatives that are consistent with the Ohio statutes.

Okay, just when this buyback is completed, how you'll use the cash flow, what you're thinking strategically, maybe where, if there's any type of assets or anything you think may fit.

We've talked about increasing capital expenditures over the next several years, that's going to be one use of cash, Paul, obviously particularly for the environmental spend. You know 2007-2009 in particular are going to be some peak years for us as far as that. We'll keep the option open for other ways to be able to return some cash to investors. We've also talked about mining our existing asset base in terms of looking for incremental opportunities to add value around the assets that we have now, which we think is a low-risk yet profitable way to be able to grow our business in the future. So I don't think our views of how we use that cash have changed. It will evolve over time, that's I think three of the areas we'll be focusing on.

Thank you, again.

Thank you, Paul.

Our next question comes from Dan Jenkins - State of Wisconsin Investments. Dan Jenkins - State of Wisconsin Investment Board: I was just curious on the debt issuance that you used at Ohio Edison. You used part of that to pay off some debt at the corporate level. Looking at your page 7, it looks like you've made that adjustment in your adjusted capitalization versus the actual balance sheet up above. I'm looking at that double asterisk note there.

What we did here, Dan, is consistent with our objective to reduce debt at the holding company, push it down into the operating companies to get them leveraged. Dan Jenkins - State of Wisconsin Investment Board: Do you anticipate that you'll be doing anymore of that in the second half? I just don't have 600 million that comes through in November?

That will be a continuing process through the remainder of this year. So you'll see more operating company issuances, raising funds to pay down the remainder of the FirstEnergy senior note that's due November 15. Dan Jenkins - State of Wisconsin Investment Board: You mentioned that you also had a securitization at JCPL of about $182 million. Was that money already used as part of this parent level debt pay down or what?

The transaction was just announced yesterday, Dan. So that's in the market at this point. Dan Jenkins - State of Wisconsin Investment Board: Okay. Do you know what your plan is for what you're going to do with those proceeds?

At least a portion of that, at least half of that will be used to pay down debt. Dan Jenkins - State of Wisconsin Investment Board: Then the other thing I was wondering about. You mentioned that you had these after-tax charges from the sale and impairment of non-core assets. Was that related to the NYR or was that something else?

The impairment was not. It was to some of the other FEC facilities. Dan Jenkins - State of Wisconsin Investment Board: Okay. So do you anticipate you'll be selling those operations?

That's our hope, Dan, and that's our plan. So hopefully we'll have more news to report on that going forward. Dan Jenkins - State of Wisconsin Investment Board: Okay. That's all I had, thank you.

Thank you.

Thank you. Your next question comes from Daniele Seitz of Dahlman Rose.

I just was wondering over the longer term, is there a system where the State actually plans on long term generation needs and is this already being worked out and are you already considering your participation?

In Ohio, the provider of last resort obligation will go away in 2009, Daniele. So at that point, we won't be responsible for providing generation for our customer base of the regulated companies. Our goal is to really mine our existing assets, look for incremental opportunities to upgrade existing facilities or to add incremental generation capacity. We've been doing that for instance at our Mansfield plant where last year we added 50 million megawatts through the installation of some new, more efficient turbines; another 50 megawatts this year, another 50 megawatts in 2007. We have some nuclear upgrades that are coming online this year in part with the remainder of 2006, 2007. So we're really looking at incremental upgrades to our existing generation capacity as opposed to tying up billions and billions of dollars and many years in terms of investing in major new generating facilities.

Thank you.

Thank you, Daniele.

We have a follow up question from Dan Jenkins of State of Wisconsin Investments. Dan Jenkins - State of Wisconsin Investment Board: Do you have what the capacity factors were for the new plants in the second quarter or the first half? Whatever you have available?

Yes, we do. That's on page 9 of the release. The nuclear is 91.9% and our fossil base load 88.9%. So the entire fleet operated very well during the period, continued to do so. Dan Jenkins - State of Wisconsin Investment Board: Could you remind me, what's the outage schedule for the second half?

We have one outage in the second half, which I believe is Beaver Valley II, which is in the fall. Dan Jenkins - State of Wisconsin Investment Board: Okay, thank you.

Thanks Dan.

Our next question comes from Margaret Jones - Citigroup.

Hi, Peggy.

Hi, Rich. I was just wondering if I could follow up on the questions about what happens in 2009 and ask about the general approach that you're taking toward what you want to have happen then.

Let me start by saying that the Statutes in the State of Ohio right now require us to go to a competitive generation market in 2009. That's what we're planning to do and we think that would be the right outcome for FirstEnergy. So I think at this point in time, that's what we're aiming towards. We have a competitive generation fleet. I think if you've tracked or performance there, you've seen those units operate better and better as we continue to get them ready for competitive generation market. That's really the trajectory that we're on. I think we have a unique situation at FirstEnergy, and that as a result of some of the rate plans that we've put into place that transition to a competitive market could be smoother for our customers than some of the situations you see in some other states, Maryland and Illinois and so forth in terms of 2009. Transition cost recovery will drop away, presumably customers will go to a market generation price when that happens. But all-in, their total bills, I don't think you'll be seeing the rate shock you see in some other areas. I think that's a positive for our customers overall as we look forward to 2009.

Thank you. So you're envisioning some sort of a competitive bidding process?

That's the laws that exist in Ohio, Peggy, so that's what we're planning for, yes.

Thank you.

Thank you.

There appears to be no further questions at this time.

Good. We appreciate everybody's time on the call today. I know this was a busy earnings release day. If there are any follow-up questions, please feel free to get a hold of Ron Seeholzer, or Kurt Turosky or Ray Jimenez, we appreciate your time today. Thank you for your continued support of FirstEnergy and everybody have a great day, thank you.

Thank you.

This concludes today's FirstEnergy conference call. You may now disconnect.