Unrealized gain (loss), Derivative Liabilities

  
The following tables set forth the recurring assets and liabilities that are accounted for at fair value by level within the fair value hierarchy:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | December 31, 2021 |  | December 31, 2020 |
|  | Level 1 |  | Level 2 |  | Level 3 |  | Total |  | Level 1 |  | Level 2 |  | Level 3 |  | Total |
| Assets | (In millions) |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Derivative assets FTRs(1) | $ | —  |  |  | $ | —  |  |  | $ | 9  |  |  | $ | 9  |  |  | $ | —  |  |  | $ | —  |  |  | $ | 3  |  |  | $ | 3  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Equity securities | 2  |  |  | —  |  |  | —  |  |  | 2  |  |  | 2  |  |  | —  |  |  | —  |  |  | 2  |  |
| U.S. state debt securities | —  |  |  | 273  |  |  | —  |  |  | 273  |  |  | —  |  |  | 276  |  |  | —  |  |  | 276  |  |
| Cash, cash equivalents and restricted cash(2) | 1,511  |  |  | —  |  |  | —  |  |  | 1,511  |  |  | 1,801  |  |  | —  |  |  | —  |  |  | 1,801  |  |
| Other(3) | —  |  |  | 42  |  |  | —  |  |  | 42  |  |  | —  |  |  | 41  |  |  | —  |  |  | 41  |  |
| Total assets | $ | 1,513  |  |  | $ | 315  |  |  | $ | 9  |  |  | $ | 1,837  |  |  | $ | 1,803  |  |  | $ | 317  |  |  | $ | 3  |  |  | $ | 2,123  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Derivative liabilities FTRs(1) | $ | —  |  |  | $ | —  |  |  | $ | (1) |  |  | $ | (1) |  |  | $ | —  |  |  | $ | —  |  |  | $ | —  |  |  | $ | —  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Total liabilities | $ | —  |  |  | $ | —  |  |  | $ | (1) |  |  | $ | (1) |  |  | $ | —  |  |  | $ | —  |  |  | $ | —  |  |  | $ | —  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Net assets (liabilities)(4) | $ | 1,513  |  |  | $ | 315  |  |  | $ | 8  |  |  | $ | 1,836  |  |  | $ | 1,803  |  |  | $ | 317  |  |  | $ | 3  |  |  | $ | 2,123  |  |

(1)Contracts are subject to regulatory accounting treatment and changes in market values do not impact earnings.(2)Restricted cash of $49 million and $67 million as of December 31, 2021 and 2020 respectively, primarily relates to cash collected from JCP&L, MP, PE and the Ohio Companies' customers that is specifically used to service debt of their respective funding companies.(3)Primarily consists of short-term investments.(4)Excludes $1 million as of December 31, 2020, of receivables, payables, taxes and accrued income associated with financial instruments reflected within the fair value table.  
Rollforward of Level 3 Measurements  
The following table provides a reconciliation of changes in the fair value of NUG contracts and FTRs that are classified as Level 3 in the fair value hierarchy for the years ended December 31, 2021 and 2020:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | NUG Contracts(1) |  |  |  | FTRs(1) |
|  | Derivative Assets |  | Derivative Liabilities |  | Net |  |  |  |  |  |  |  | Derivative Assets |  | Derivative Liabilities |  | Net |
|  | (In millions) |
| January 1, 2020 Balance | $ | —  |  |  | $ | (16) |  |  | $ | (16) |  |  |  |  |  |  |  |  | $ | 4  |  |  | $ | (1) |  |  | $ | 3  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Unrealized gain (loss) | —  |  |  | (3) |  |  | (3) |  |  |  |  |  |  |  |  | (3) |  |  | —  |  |  | (3) |  |
| Purchases | —  |  |  | —  |  |  | —  |  |  |  |  |  |  |  |  | 7  |  |  | (2) |  |  | 5  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Settlements | —  |  |  | 19  |  |  | 19  |  |  |  |  |  |  |  |  | (5) |  |  | 3  |  |  | (2) |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| December 31, 2020 Balance | $ | —  |  |  | $ | —  |  |  | $ | —  |  |  |  |  |  |  |  |  | $ | 3  |  |  | $ | —  |  |  | $ | 3  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Unrealized gain (loss) | —  |  |  | —  |  |  | —  |  |  |  |  |  |  |  |  | 7  |  |  | —  |  |  | 7  |  |
| Purchases | —  |  |  | —  |  |  | —  |  |  |  |  |  |  |  |  | 5  |  |  | (2) |  |  | 3  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Settlements | —  |  |  | —  |  |  | —  |  |  |  |  |  |  |  |  | (6) |  |  | 1  |  |  | (5) |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| December 31, 2021 Balance | $ | —  |  |  | $ | —  |  |  | $ | —  |  |  |  |  |  |  |  |  | $ | 9  |  |  | $ | (1) |  |  | $ | 8  |  |

(1)Contracts are subject to regulatory accounting treatment and changes in market values do not impact earnings.  
Level 3 Quantitative Information   
The following table provides quantitative information for FTRs contracts that are classified as Level 3 in the fair value hierarchy for the year ended December 31, 2021:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Fair Value, Net (In millions) |  | ValuationTechnique |  | Significant Input |  | Range |  | Weighted Average |  | Units |
| FTRs |  | $ | 8  |  |  | Model |  | RTO auction clearing prices |  | $1.10 | to | $4.60 |  | $1.80 |  | Dollars/MWH |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

  
INVESTMENTS  
All temporary cash investments purchased with an initial maturity of three months or less are reported as cash equivalents on the Consolidated Balance Sheets at cost, which approximates their fair market value. Investments other than cash and cash equivalents include AFS debt securities and other investments. FirstEnergy has no debt securities held for trading purposes.   
  
99
