第一能源 (FE) 2008 Q1 法說會逐字稿

Good afternoon. My name is Nelson, and I'll be your conference operator today. At this time, I would like to welcome everyone to FirstEnergy Corp's first quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (OPERATOR INSTRUCTIONS). Thank you. It is now my pleasure to turn the floor over to your host, Kurt Turosky, Director of Investor Relations. Sir, you may begin your conference.

Thank you, Nelson. 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 Report to the Financial Community, which was released earlier today and is available on our website under the Earnings Release link. Reconciliations to GAAP for the non-GAAP earnings measures we will be referring to today are also contained in that report, as well as on the Investor Information section of our website at www.firstenergycorp.com\ir. 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, Vice President and Treasurer; and Ron Seeholzer, Vice President of Investor Relations. I'll now turn the call over to Rich.

Thanks, Kurt, and good afternoon, everybody. Thanks for being with us today. I'll go ahead and start our call this afternoon with an overview of our first quarter financial results and some recent regulatory activities. Then I'll turn the call over to Tony to give us an update on the legislation in Ohio and Pennsylvania. As I go through our first quarter results, it might be helpful for you to refer to our Consolidated Report to the Financial Community that we issued earlier this morning. Earnings on a GAAP basis in the first quarter were $0.91 per share compared to $0.92 per share in the same period last year. Excluding special items, normalized non-GAAP earnings were $0.88 per share. And that's unchanged from the first quarter of 2007. This year's normalized non-GAAP earnings exclude the effect of a $0.06 per share gain on the sale of non-core assets, and a $0.03 per share loss related to the impairment of securities in our Nuclear Decommissioning Trust. These results exceeded the earnings guidance we had previously provided for the first quarter provide us a good start for the year. Kilowatt hours deliveries through our distribution system were 1% higher than in the same period last year. Heating degree days were 1% below the prior year but 2% above normal. Residential and commercial deliveries both increased 2%, while industrial deliveries declined about 1%.

Key drivers of the quarter's results included a $0.23 per share increase in generation revenues, primarily resulting from higher wholesale and retail prices; a $0.02 per share increase in distribution delivery revenues due to higher residential and commercial sales volumes. $0.01 per share reduction in generation outage cost, $0.01 per share reduction in pension expense, a $0.02 per share decrease in financing cost attributable to lower interest rates and reduced short-term borrowings; and a $0.03 per share benefit related to the reduction in common shares outstanding following the accelerated repurchase of 14.4 million shares in March of last year. Partially offsetting these factors were a $0.13 per share increase in fuel cost due to a 5% increase in generation output, a higher proportion of fossil output in the generation mix and increased coal and transportation costs; a $0.06 per share increase in purchase power expense, mainly due to higher market prices; a $0.03 per share increase in energy delivery expense due to storm related restoration activities; a $0.01 per share increase in depreciation expense resulting from our growing asset base; a $0.02 per share increase in general taxes primarily due to higher payroll and property taxes, as well as higher Pennsylvania gross receipts tax; and a $0.06 per share decrease in investment income from our corporate-owned life insurance portfolio. This resulted from the unfavorable equity market conditions during the quarter as evidenced by a decline of almost 10% in the S&P 500 Index during the period.

Switching to our financing activities, at the beginning of the year we had about $530 million of tax exempt securities in the auction rate market and following the turmoil in that sector we decided to acquire and then reissue these securities. We converted all of our auction rate bonds to a weekly rate mode and purchased these securities on their conversion dates. This activity was funded through short-term borrowings. We plan to reissue these securities in either a fixed rate or variable rate mode over the balance of the year depending on market conditions. On April 22nd, we started this process by successfully remarketing $73.5 million of Med-Ed and Penelec PCRBs in a variable rate mode supported by a bank letter of credit. And in light of the disruptions in the credit markets during the first quarter I just wanted to assure you that our liquidity position remains strong as we finish the period with $1.7 billion of available undrawn capacity. Let me now touch briefly on some ongoing regulatory matters in Ohio and Pennsylvania, and I'll start with our pending distribution rate cases in Ohio, where we filed requests last June to increase rates for our three Ohio operating companies by $332 million annually. Evidentiary and public hearings, as well as the legal briefing process have been completed in these cases. We expect the Public Utilities Commission of Ohio to issue an order in the second or third quarter of this year.

During the hearings, the PUCO staff submitted testimony recommending a rate increase of $114 million to $132 million. The biggest difference between these amounts and the Company's request relate to matters that the staff suggested be addressed in separate future rate proceedings, and those items total about $115 million in annual rates.

Turning to Pennsylvania, our Penn Power utility received approval from the PPUC, for its power procurement plant for default service generation supply. This plant encompasses the period June 1st of this year to May 31st of 2011 and is the second default service period for Penn Power since transitioning to the competitive generation market at the beginning of 2007. The Commission approved the use of multiple requests for proposals to procure load following for requirement contracts for residential and small commercial customers' default service generation supply. Our large commercial and industrial customer default service generation supply will use [hourly] pricing. During the first quarter of the year, two RFPs were conducted and approved for the first 12 months top supply for this small commercial [loan]. The average price of the winning bid was $80.49 per megawatt hour, prior to line losses, administrative fees and gross receipt taxes. This represents a slight increase to the existing pricing.

The first of two RFPs for residential default service supply was completed in April and the second RFP for residential customers is scheduled for May 14, after which Penn Power expects the Commission to approve the new rates that would go into effect on June 1st. Both RFPs consist of tranches for the 12 and 24 month supply periods, and subsequent RFPs will be conducted during the remainder of the three year default service period. Also in Pennsylvania, we filed annual updates to Med-Ed and Penelec's transmission service [riders], covering the period June 1st, 2008 to May 31st, 2009. The proposed riders include collection of under recovered transmission costs incurred from January 2007 to March of 2008 and also reflect projected transmission costs for the period June 2008 through May 2009. To mitigate these impacts to customers, Med-Ed proposed a transition mechanism that would recover past costs plus carrying charges, as well as a portion of the projected cost plus carrying charges through the new transmission rider. The remanding portion of the protected cost plus carrying charges would be deferred for recovery by the end of 2010 through future transmission riders. And I will now turn the call over to Tony for an update on legislative matters.

Thanks, Rich, and good afternoon everyone. I'll start with an overview of Ohio's new energy legislation, Amended Substitute Senate Bill 221. I truly believe that through this legislation, which is expected to be signed by Governor Strickland later today, Ohio has taken a responsible approach to addressing the state's energy needs. This legislation, which is the product of the much hard work and solid leadership, offers a real hybrid approach to restructuring and enhances the PUCO's authority to implement rate stabilization plans, now called electric security plans, and provides a defined path to the competitive generation market. Under the legislation, each Ohio electric distribution utility must offer retail generation service under either an electric security plan or a market rate offer. Each utility must file an electric security plan with the commission ,which may approve it, if it finds it is more favorable for customers than the market rate offer. If agreement cannot be reached on an electric security plan, then the utility can implement a market rate option using a competitive bid process.

Now under the market rate option, for utilities that continue to own generation assets, market prices will be blended with regulated prices adjusted for certain changes that are defined in the legislation over a period of years. FirstEnergy's utilities would not be subject to this blended rate progression to market rates since they don't own generation assets. The legislation also establishes an excess earnings test applicable to the earnings of the electric distribution utility, which for FirstEnergy would not include generation margin. The bill expressly prohibits the PUCO from directly or indirectly reviewing the earnings of the parent or affiliated companies. Ohio has successfully used rate stabilization plans to avoid rate spikes as the state has moved toward a competitive generation market over the last several years. This legislation gives the PUCO more tools and clear authority to establish electric security plans, as well as to oversee a competitive bid process that would allow customers to take advantage of electricity available from competitive generation suppliers. The legislation also requires that at least 25% of generation come from renewable or advanced energy resources by 2025. Annual bench marks for renewables are established in order to encourage utilities to move towards that goal. However, if the cost to comply is more than 3% higher than the cost of otherwise producing or obtaining electricity, the bench marks can be relaxed. The legislation further requires significant improvements in energy efficiency through 2025. We hope to make our required filings during the second quarter of this year so that we will have rates and plans in effect by January 1st of 2009. We are pleased that the legislation provides a clear path to the competitive generation markets. Our generation portfolio is well positioned and our investments in enhanced performance will allow us to compete successfully.

Now if you'll let me move on to Pennsylvania. In that state, the dialogue continues on potential new energy legislation. The key components likely to be addressed include energy efficiency and demand side management, funding for clean energy initiatives, and rate mitigation measures to smooth the transition of customers to competitive generation markets. Although there are currently several individual House and Senate bills addressing these components, we expect that the bills will ultimately move forward together as a comprehensive energy package. And while I expect that Pennsylvania will enact new legislation in this session, it's difficult to predict the timing. In the meantime, we remain actively engaged in this process to ensure that the transition is managed in the best interest of our investors and customers.

Let me conclude by saying that the enactment of the Ohio restructuring legislation is a major milestone for the state's energy markets, as well as for FirstEnergy. It provides a platform for customer price stability and a defined transition to competitive generation markets.

FirstEnergy remains focused on our operational performance, and we had a good start to the year by establishing a first quarter record generation output of 20.4 million megawatt hours. This was about a 2% increase over our previous record performance in 2006. This favorable performance allowed us -- allows us, I should say, to affirm our non-GAAP earnings guidance for the year of $4.15 to $4.35 per share. As always, we appreciate your time and interest in FirstEnergy, and now I'll ask the operator to open the call to questions from Analysts.

Thank you. (OPERATOR INSTRUCTIONS). Our first question is coming from Greg Gordon from Citigroup.

A couple quick questions. First, there are reports that the governor may in fact sign the legislation today. Do you guys know if that is in fact the case or not?

Greg, this is Tony. We've heard the same thing. We heard it's later this afternoon. Presumably it can stay on that schedule. If not, I would assume it would happen over the next several days.

Second, can you talk about -- one of the big themes in earnings over the past couple of days is the reality of higher coal costs, just how much Central Appalachian and Northern Appalachian coal has moved since the beginning of the year. Can you remind us what your coal hedge position is and talk about to the extent you are open, what you are seeing in the market, how you are managing your coal position and how that would in fact factor into the filing of any SP?

Let me take a shot at that, Greg. I mean, in terms of our coal position, I'm talking coal itself exclusive of transportation right now. For 2008, essentially our positions both for volume and price are closed. Doesn't mean that prices won't be higher in 2008 than in prior periods because we do have contractual reopeners and other adjustments, but as far as uncertainty that has been bounded for 2008. For 2009, we have only a slight open position, less than 5%. For 2010, we have just a slight exposure, less than 5% again, in terms of changes under the ceiling price provisions in our contract. So for coal over that three-year period I think we are well positioned. We've certainly taken aggressive stance towards longer term contracting than some other folks. I think that is paying dividends for us now, both in terms of surety of supply and in terms of maintaining or minimizing cost increases. On the transportation side, our positions are largely closed out, albeit at higher prices than what we've seen in the past, obviously. Many of the providers are passing along fuel surcharges which gets factored into the equation as well. But overall, our position is advantageous relative to many other companies. So we are pretty happy with that. Obviously, you know prices are up meaningfully across the different markets. We have a lot of flexibility within our plans to burn different blends of fuel at different units at different times, which gives us the ability to do some things within the portfolio to minimize the overall cost. We typically bunker multiple types of fuel at each of our major units so that we have some flexibility around that as well. So no company is unaffected or not impacted, but I think we've spent a lot of time thinking about how we can minimize this impact.

And in the ESP, my reading of the legislation is that certain types of costs, including fuel costs, would be recoverable? Is that an accurate representation of the way that's written?

I think Greg, yes. If you looked at the legislation, the legislation gives the commission the tools and the parties the ability to deal fundamentally with many types of differing costs, and the flexibility to deal with them in different ways. So there's multiple ways that you can deal with fuel and other cost changes, and the legislation allows the commission and the parties to work through those issues in a way that strikes a reasonable balance.

Tony, how quickly do you think you can be in front of the commission with a plan once the governor puts pen to paper here hopefully today?

You know, in my presentation, we said we hope to file in the second quarter.

Thank you.

We are going to try to do this as quickly as we can, but there's a lot of work that needs to be done in order to prepare an appropriate filing.

Thank you.

Thanks, Greg.

Thank you. Now our next question is coming from Jonathan Arnold of Merrill Lynch.

Good afternoon, guys.

Hi Jonathan.

A couple of things. One, just following up on Greg's line on [COLI]. Have you been seeing any -- with your suppliers locked in at prices that are presumably looking below market -- any performance issues, any concerns on that front and how you are managing that risk?

Nothing of great significance at this point, Jonathan. I mean, one of the things we've done is try to make sure that we have multiple modes of transportation, multiple mines that we can source the fuel from at a given plant. Once again, getting into this idea of maintaining as much flexibility as possible. So inventory levels are rising towards normal kind of levels as we go into the summer months. So there's been no significant disruptions, nothing that has caused us any operational hiccups here this year.

Okay. And then I just have another one on Pennsylvania. Tony, I think you said that you felt confident that -- relatively good that something could happen this session. Can you just clarify what that means? Because if I remember right, they are in the special session for energy, and I can't recall just when that ends or whether it's concurrent with the existing session, or -- just a how that -- (multiple speakers) to be framed.

I have got to be honest with you. I look in terms of time frame. I'm more thinking that this should be done by the end of the year. At least that's the opportunity. Whether it's part of the special session or the regular session, I can't --

You meant end of the year with that statement?

Yes, basically. Yes.

Great. Thanks a lot.

Thanks, Jonathan.

Thank you. Our next question is coming from Hugh Wynne of Sanford Bernstein.

I have a question regarding the cost of supply to the Ohio utilities in 2009 -- the cost of supply and basic generation service in 2009 and how that would be reflected in your electricity security plan. Is it correct to think about that cost of supply as the result of a procurement process in the wholesale market, and therefore the cost of supply in essence being the cost of full requirements electricity purchased from wholesale sources and shaped for retail sale?

That's the way I would look at it, Hugh. I mean, from the standpoint of the electric distribution utility if you think about an ESP -- the Electric Security Plan -- they are going to be offering a generation price that essentially load follows and it's shaped against the loads of the service territory. In a market rate option, that will be done roughly the same way.

Exactly. So is it -- would it be useful to look at the April 14th request for proposals for residential load at Penn Power as the basis for estimating that cost of supply and if so I wonder if you can share that figure with us.

Well, I can't share it with you because I don't know it, because that is not a completed transaction yet. But my own senses is that's a different time frame. So it may overlap to a certain extent or it may not. You have to make your own judgments on that yourselves.

All right. Thank you very much.

Thanks, Hugh.

Thank you. Our next question is coming from John Kiani of Deutsche Bank.

Good morning, Rich.

Hey John.

Going back to the ESP in Ohio and how that is going to play out, I know you touched on this a little bit, Tony, in some of your comments, but can we assume that your ESP will include at least some level of deferrals; and if that is true, what do you think the likelihood is of using some type of securitization vehicle or structure to bring forward the cash?

Well, I'm not going to presume anything in terms of what our plan might look like. The legislation gives the commission, as well as the companies, the clear opportunity to propose a phase in in order to manage the price impacts of any plan, whether it's a market plan or whether it's an ESP plan. If it's an ESP, my understanding is that you can use securitization as a way to hopefully produce a lower cost to customers over time as a result of the phase in. So we'll look at all of those options as we put our plan together and utilize the tools that the general assembly and the governor signs the legislation today, then the law provides us in terms of putting together a plan that works both for our customers, our shareholders and our company overall.

Okay. Thanks that's helpful.

Thank you John.

Thank you. Our next question is coming from Paul Patterson of Glenrock Associates.

Good afternoon.

Hi.

Hi. Just to go over a few things in the quarter. What caused the pension fund to decrease the discount rate?

Two things, Paul. It's a change in the discount rate from the prior year and asset values at the year end. [You set] that item basically based on market conditions of January 1st. So that's what is driving it -- largely those two items.

The discount rate was lowered based on what -- what factor?

The discount rate was higher in 2008 than it was in 2007, which results in lower pension expense.

Sure. I guess I am wondering -- but why was it lowered I guess?

Why did the discount rate change?

Yes.

It's based on rates that exist in the market as of January 1st. It's really an external test. You look at yields and bonds and bond portfolios in the market at that point in time. So it's really a market test when you set that.

I got you. And then with the S&P 500 impact on the investment income from the [inaudible], is that just sort of -- in other words, if the market goes up again that will reverse? Is that how we should think of that?

If the market goes up, yes. And it did improve in April. So yes. It goes up and down with the market. Now we've scaled back our equity exposure there to that in the first quarter since the markets were seemingly a little crazy there, so that will help mitigate the impact for equity markets going forward.

Okay, then the Nuclear Decommissioning Trust Fund -- you mentioned something about it -- I just missed it, I'm sorry.

It's an impairment of securities in there, Paul.

Okay. And what was the impact of that?

About $0.03.

I'm sorry. And then finally, with the excess earnings test, I guess it wouldn't affect the distribution case, because it seems like that should be resolved before the end of the year, but I am just wondering going forward, does this provide an opportunity, perhaps, for getting a higher ROE at the distribution business? It would seem perhaps the test is perhaps a little bit more favorable.

I wouldn't look at it that way. I think it's a test to establish whether or not what you earn is in excess of comparability. I don't believe it will affect how the commission determines what an overall rate of return would be inside a rate proceeding.

But if -- let's say if you were able to cut costs and you were able to increase your earnings substantially, that would probably prohibit them from calling you in? Does that make sense?

Unless they're what, excessive? If it's a different test, but I don't know that I would -- I would apply this as a test not as an opportunity.

Okay. Fair enough. Okay And just in terms of the transition in Pennsylvania, what would -- I guess you guys expect that there would be a transition legislation to sort of east the transition. Without the transition right now, though -- without any legislation are you just simply going to market in Pennsylvania right now? Could you just give us a flavor for what the rate increase would be for the residential customers in the Med-Ed and Penelec area?

2011?

Yes.

No, we can't. That's a long ways away, Paul, depending on what market prices were at that point in time and how the procurement process was structured and so forth. So it's really very hypothetical for us to even attempt to do that.

Okay. Thanks a lot.

Thank you.

Thank you. Our next question is coming from Paul Ridzon of KeyBanc Capital Markets.

Can you give your view of premium over ATC that you think would be appropriate for full requirements product?

I think that's anybody's guess, Paul. I would prefer not to stake a stab at that.

And looking -- you kind of gave your view in the beginning of the year of how you saw the year shaking up from a quarterly shape, and you certainly did pretty well relative to that despite the $0.06 [COLI] hit. Were you thinking about that [COLI] hit when you gave that, or where might have you out performed?

Well, I think we had overall a good quarter. If you look at our generation margin is favorable to us. Overall, things went as expected. As you mentioned, we had that $0.06 hit from the [COLI]. We had about $0.03 on the ED side of incremental expense, much of which resulted from two storms that blew through our service territory in the first quarter. So both of those are sort of external events that we can't control; but factoring that out, I think it was a good quarter for us. We are not changing the guidance we've given on a quarterly basis, nor at this point are we changing our annual guidance -- you heard Tony say that we were affirming that. So I think overall it was a good quarter for us. Tony said we are very focused on operations, making sure that we continue to broaden the plants well and deliver the reliability that our customers expect. And if we do that ,we'll do well during the remainder of the year.

And can we look at the -- I guess the S&P moved 10% and that was a 6% move on the [COLI]. You kind of use that as a rule of thumb going forward to play with our numbers on our quarterly estimate?

Well, what you are seeing there, Paul -- I mean, the portfolio is about $250 million and at the beginning of the year it was roughly half in equities, half in traditional insurance products. In the first quarter of '07 -- remember we're comparing year-over-year first quarter -- we had a gain in the first quarter of '07. We had a loss in the first quarter of '08. So that's where you get to that [inaudible] of about $16 million year-over-year. As I've said, we've scaled back the equity exposure considerably for the time being until we decide what we want to do with that. So that will mitigate that impact going forward. So it's a little hard to -- putting those pieces together probably a little harder to project what the impacts would be going forward. But those were the drivers first quarter of '08 versus first quarter of '07.

And the $16 million swing, how much was the benefit last year and how much was it paying this year?

I think it was roughly a gain of $4 million in the first quarter of '07 versus a loss of like $12 million this year.

Okay, thank you.

Thanks.

Thank you. Our next question is coming from Paul Fremont of Jefferies & Company.

Thank you very much. Really two things. One, can you comment at all about the possibility of Reliant either not bidding into the PJM auction and what impact that might have on prices in the Midwest ISO? And also, with two bills now I guess already been passed -- one by the Senate and one by the House in Pennsylvania, does that get resolved fairly quickly at this point, or is there still a lot of potential disagreement on how to fund those programs?

First part of your question, Paul, involving Reliant, I can't speak for them. I'm not sure what their motivation or intent is there. So that's not something that I've been tracking closely, so we can't really comment on that. Tony, maybe you want to give -- take a stab at the PA issue.

I think there's enough issues between them, Paul, that they'll get resolved as they get resolved. I mean, legislation has flows and times, and hopefully they will come to whatever compromises that are necessary to move good legislation for the state of Pennsylvania.

And are you optimistic that that gets resolved fairly quickly? Because initially people had talked about, there may not be a major motivating factor to get anything done this year.

Well, I said earlier that I'm hopeful that it is done hopefully by the end of the year. If it's not -- you know, we were asked that question about Ohio. If it's not done within two weeks, what happens? Well, we'll take a look at where it's at and we'll go from that point. And I think you have to look at Pennsylvania or any legislation like that. It's complex. It involves major industry and it needs to be thoughtfully evaluated and resolved.

Thank you.

It takes a little more time to do that, so be it.

Thank you.

Thanks, Paul.

Our next question is coming from Dan Jenkins from State of Wisconsin Investment Board.

Good afternoon.

Hi, Dan.

I was wondering, the industrial sales look pretty weak and you hear a lot of comments about the economy weakening in the auto industry and so forth. I was wondering if you can give us some color on that, and then how the current quarter's industrial sales relate to what you are projecting for the rest of the year.

I'll take a stab at that, Dan. I mean, obviously Ohio is not immune to the economic conditions that exist out there. If you look at our first quarter, industrial sales year-over-year was down about a percent from the first quarter of 2007. Much of that was really concentrated in one sector which was auto, which is a small number of our customers in terms of our overall distribution. Actually, some of the industrial sectors did pretty well during the quarter. Steel was up in terms of sales about 4%; refineries were up 1% and all others were about 0.5%. So it was largely concentrated in the auto sector and obviously that's going to be what it is with the economy. But overall, the base was not bad. We are not forecasting much growth from this sector during the year, but hopefully because of the diversity in the base -- hopefully neither would we see a significant negative impact. And obviously, from an economic perspective these are our lower margin customers that have very attractive rates. From an economic impact, it doesn't -- that impact doesn't necessarily carry to the bottom line.

Then on the Ohio distribution rate case, I know you mentioned there is 150 million items that are being close to taken to separate cases. I was wondering if you could give me -- say what those are, and then I missed the amount. You said that the rate, the staff proposal was -- and how much of that is related to ROE recommendations.

Some of these were things that took place after the test period date. Deferrals, other items, things like that, Dan, that appropriately could be considered in a future case.

Dan, this is Harvey Wagner. You might recall that the Ohio Supreme Court remanded back to the PUCO the recovery of fuel costs that we had deferred since 2006 through distribution rates. So that was something that was in our originally filed case that now is being moved out and will be dealt with separately. And as Rich said, the rest of that has to do with the timing of the deferred distribution costs and whether or not they would be included through the end of the test year or beyond through the end of 2008. It does not really impact our bottom line. It's a timing of cash recovery.

And those numbers I mentioned, Dan, I mean, we had filed request for increases totaling $332 million annually. The staff came back with a recommendation of $114 million to $132 million annually, but there are about [$115] million in items that could be considered in future separate rate increases.

Okay. Then just -- you mentioned that the auction rate market kind of cautious volatility. Is that behind the increase in the short term debt, and what are your plan to finance that short-term debt in the next couple of quarters and also what are your plans related to share buy backs?

We haven't announced any plans regarding share buy back and, no, the auction rate market and our efforts around it, Dan, really didn't have any significant impact on our short-term borrowing position.

Okay. The short-term debt is up quite a bit from the end of the year, though. I was just wondering, do you plan to term some of that out, and fairly soon?

A big portion of that was the purchase of the Fremont asset, which was -- was that in April when we closed that?

March.

March. We had that in March. So that was $234 million or thereabouts, does that sound right? So that was the big driver in terms of short-term cash.

Okay. Thank you.

Thanks, Dan. Why don't we do one more call?

Thank you. Our final question is coming from David Frank from Catapult Capital Management.

Hi, David.

Hi. Good afternoon.

How are you?

Great. I just see there's -- on the tape now an official press release from the Governor's Office saying that he is signing this bill at two o'clock in the atrium of the State House. So I assume that is authentic.

A question for you guys. Do you have an update on the generation output for this year? I mean, you continue to improve on your megawatt hours. Do you have a new aspiration of what you think you can achieve?

Yes, our goal is 84.5 million-megawatt hours, which is a significant increase for us. So it reflects better operations of the plant, shorter outages.

Okay. And do you have an update on the MISO capacity market, maybe what kind of prices you are seeing in the bilateral market and do you have an update on the resource adequacy filing proposal by MISO?

As far as the MISO market, I know there's continued progress towards putting that marketplace into effect, David. I'm not really an expert on that. And I don't know if anybody -- if there's anything significant. I mean, I know there's activity moving it towards that end point, but I don't have any specific new news to give you on that. You've probably seen and heard everything we've heard about it from that perspective.

Right. And are you seeing anything in the bilateral market as far as prices and update you can give us?

Well, I think in general in PJM and in MISO, those good in theory tend to go up and down more or less in parallel or in unison. Prices for capacity seem to continue to be going up. But it's not a transparent market in MISO, as you know. It's a bilateral market, which somewhat obscures some of those price changes; but in general we believe capacity prices should continue to increase, at least over the short-term.

Last question for Tony. Why does anything need to get done in Pennsylvania? What really needs to get resolved? I thought you had a law in the books. I though utilities go to market at the end of their transition, and you have already got one in Pennsylvania selling that market right now. So there seems to be all this emphasis like something needs to get done in Pennsylvania. But I'm confused, I'm scratching my head why -- why is it that important?

Because there is a legislation pending. And the members want to deal with some of these issues in a more comprehensive or holistic way. So that creates a sense of urgency and a requirement to actively participate in the process. Just like there was a law in the state of Ohio that basically said 2009 or 2005 you went to the competitive marketplace.

True. Well, I guess all the Pennsylvania companies actually separated their generation, so --

JPU has certainly sold their generation, yes.

Yes, okay. Thanks Tony.

Okay. Thanks, David. Well, we appreciate everybody's time and interest in FirstEnergy today. Thank you for participating in our call. If there's any follow-up questions, please feel free to give our IR group a buzz, and we look forward to seeing many of you soon. Hope you have a good day. Thank you very much.

Thanks, everyone.

Thank you. This does conclude FirstEnergy Corp's first quarter earnings conference call. You may now disconnect and have a wonderful day.