METROPOLITAN EDISON COMPANY - Pennsylvania Public Utility ...

December 31, 2007 to 55% as of December 31, 2009 after it paid dividends equal to102% of its 2008 net income and 130% of its 2009 net income. Penn Power’s debtpercentage increased from 20% as of December 31, 2008 to 36% as of December 31,2009 after it paid dividends equal to 249% of its 2009 net income. FirstEnergy indicatedthat Met-Ed, Penelec, and Penn Power do not match debt issues with specificexpenditures, including dividends paid. The Audit Staff attempted to determine to whatextent, if any, the FE-PA Companies borrowed money in order to facilitate the paymentof dividends to its parent, FirstEnergy. However, FirstEnergy indicated that Met-Ed,Penelec, and Penn Power do not specifically identify or track the use of funds acquiredfrom its debt issues, including dividends paid; and therefore we were unable to identifythe specific source of the funds used to pay dividends.There is no evidence which indicates that service, reliability and/or safety hasbeen affected by these past dividend practices and payouts. Nonetheless, it would be apreferred practice in the future that the FE-PA Companies provide the Commissionadvanced notice and an explanation of the circumstances which warrant annualdividend payments that exceeds 85% of net income.Staff’s Follow-up Recommendation – Submit a detailed, written explanation foreach dividend payout that has exceeded 85% of net income to the Commissionwithin 60 days after public release of this audit report, and ensure that advancenotice and explanations are submitted to the Commission when such dividendpayouts occur in the future.- 25 -