First Energy’s business segments
First Energy Corporation (FE) is involved in all aspects of the power business, including electricity generation, transmission and distribution (or T&D) of electricity, and the competitive sale of electricity.
First Energy generates a major part of its revenue from its regulated T&D segment. According to the latest quarter ended September 30, 2014, revenues from the company’s T&D segment forms 61.5% of First Energy’s total revenues.
First Energy’s T&D business charges a nominal fee from customers to deliver electricity. This fee depends on the amount of electricity delivered and is set by government regulators. So the earnings from T&D are stable in nature.
On the other hand, competitive electricity sales involve higher risks, as electricity prices are determined by the market forces of supply and demand. Earnings from the unregulated segment are volatile.
First Energy’s service area
First Energy operates in six northeastern U.S. states. This translates to a service territory of 65,000 square miles. These states are allowed deregulation of electricity, and consumers have a choice to choose their electricity provider. However, the T&D network remains regulated and the same for all users.
American Electric Power (AEP), PPL Corporation (PPL), and Public Service Enterprise Group (PEG) are key competitors of First Energy in these regions. All these companies are part of the Standard & Poors depositary receipt (or SPDR) Utilities Select Sector (XLU).
First Energy provides electricity to six million customers in these regions through ten distribution subsidiaries. In addition to these, there are three generation subsidiaries and one transmission subsidiary through which First Energy operates.