FirstEnergy Faces Coal-Heavy Generation Portfolio as It Reshapes Transmission Assets

AKRON, Ohio — FirstEnergy Corp. is navigating a transition period marked by asset sales, a shifting generation mix and a revenue profile increasingly tied to power delivery rather than production. The investor-owned utility, headquartered in Akron, operates one of the nation’s larger regulated electric systems through 10 subsidiaries, yet maintains a comparatively modest regulated generation fleet of less than 4,000 megawatts.

Company footprint and customer base

The corporation supplies electricity to more than 6 million retail customers across five states. Ohio remains its largest single market, accounting for roughly 2.3 million customers. Pennsylvania follows with 1.8 million, while West Virginia, Maryland and New Jersey collectively add another 2 million accounts. Service is provided primarily through transmission and distribution networks owned by the firm’s subsidiaries.

Revenue composition in 2024

For full-year 2024, FirstEnergy reported revenue of $13.5 billion. Distribution operations generated approximately 50 percent of that total, while 36 percent originated from integrated utility activities that bundle generation, transmission and distribution under a single regulatory framework. The remaining revenue segments include stand-alone transmission and other business lines.

Transmission strategy and recent divestitures

Although FirstEnergy historically emphasized transmission investment, the company has begun monetizing portions of that portfolio. Management states that selected asset sales are designed to strengthen the balance sheet and support future capital allocation priorities. Proceeds are expected to be redeployed toward grid modernization, customer-focused technology upgrades and debt reduction.

Industry analysts note that rebalancing the asset mix may offer flexibility, but also reduces the regulated earnings contribution that transmission historically delivered. Transmission assets typically earn formula-based returns approved by federal regulators, providing a relatively stable earnings stream compared with competitive generation.

Generation overview and coal exposure

The utility enters 2024 with roughly 3,200 megawatts of coal-fired generating capacity, representing the majority of its owned fleet. The remainder of its sub-4,000 megawatt portfolio consists of non-coal resources, including small hydroelectric and other facilities. By comparison, several peer utilities have accelerated retirements of legacy coal plants or expanded renewable additions to align with state and federal decarbonization goals.

Coal dependence can present operational and regulatory challenges. According to the U.S. Energy Information Administration, coal plants face rising maintenance costs and increasing scrutiny under emissions standards. For FirstEnergy, continued reliance on coal may influence capital spending decisions, environmental compliance expenses and long-term competitiveness against utilities with more diversified fuel mixes.

Competitive positioning

Analysts view FirstEnergy’s coal-heavy generation profile as a relative disadvantage. Utilities with greater shares of natural gas or renewable resources generally benefit from lower projected carbon liabilities and improved alignment with clean-energy mandates. While FirstEnergy’s limited generation footprint limits absolute exposure, the high percentage attributable to coal magnifies risk on a per-megawatt basis.

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The company’s emphasis on distribution and recently reduced transmission operations positions it more squarely in the regulated utility category, where earnings are set by state commissions. Nevertheless, long-term investor sentiment toward the sector increasingly incorporates environmental metrics, potentially impacting valuation multiples for companies slow to shift fuel portfolios.

Outlook and factors to monitor

Key variables for the company’s forward performance include:

• Asset sale timing: The pace and pricing of additional transmission divestitures will influence liquidity and debt metrics.
• Regulatory rulings: Rate cases in Ohio, Pennsylvania and other jurisdictions will determine allowed returns on equity for distribution investments.
• Generation strategy: Decisions on coal retirements or potential replacements with cleaner resources will shape capital expenditure requirements and environmental compliance costs.
• Grid modernization: Investments in advanced metering, resiliency and customer programs may bolster rate-base growth but require regulatory approval.

FirstEnergy’s 2024 guidance assumes steady retail demand across its service territory and continued progress on cost-control initiatives. Management reiterates a multi-year capital plan focused on enhancing system reliability and accommodating distributed energy resources. Implementation success will depend on construction execution, supply-chain stability and alignment with evolving policy mandates.

Investor considerations

With half of revenue sourced from distribution activity, FirstEnergy derives substantial earnings stability from state-regulated operations. However, the shrinking transmission segment, once a higher-margin contributor, may reduce consolidated returns. Meanwhile, the coal-centric generation fleet exposes the company to environmental policy shifts and potential future carbon pricing, factors that peers with diversified energy mixes may mitigate more readily.

Market observers will watch whether ongoing asset optimization, cost management and regulatory engagement can offset these structural headwinds. In the near term, dividend sustainability and credit-rating trends remain focal points for shareholders assessing risk-adjusted total return prospects.

Crédito da imagem: FirstEnergy Corp.