Greetings, and welcome to the FirstEnergy Corp. Third Quarter 2021 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Irene Prezelj, Vice President, Investor Relations for FirstEnergy Corp. Thank you. Ms. Prezelj, you may begin.

Good morning, and welcome to our third quarter earnings call. Today, we will make various forward-looking statements regarding revenues, earnings, performance, strategies, prospects and other matters. These statements are based on current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from those indicated by these statements can be found on the Investors section of our website under the Earnings Information link and in our SEC filings. We will also discuss certain non-GAAP financial measures. Reconciliations between GAAP and non-GAAP financial measures, the presentation that supports today's discussion and other detailed information about the quarter can be found in the strategic and financial highlights document on the Investors section of our website. We'll begin today's call with presentations from Steve Strah, our President and Chief Executive Officer; and Jon Taylor, our Senior Vice President, Chief Financial Officer, and Strategy. Several other executives will be available for the Q&A session. Now I'll turn the call over to Steve.

Thank you, Irene. Good morning, everyone. Thanks for joining us. We had another strong quarter, and I'm excited to talk to you about our progress on many different fronts. Yesterday, we reported third quarter 2021 GAAP earnings of $0.85 per share. Our operating earnings were $0.82 per share, which is above the top end of our guidance range. Our customer-focused strategies, positive mix of weather-adjusted load, great operational performance and financial discipline continue to drive solid results. Furthermore, I'm proud of our progress to resolve important legacy issues and strengthen all aspects of our company. In Ohio, we continue to take a collaborative approach, and we're engaged in settlement discussions with a broad range of parties to resolve several of our pending cases before the PUCO. Our meetings continue to be productive, and we're making good progress. We are also making progress on the Ohio corporate separation, DMR and DCR audits. The corporate separation audit report was filed on September 13 and showed no findings of major noncompliance. The expanded DCR audit report is due by November 19. And we continue to work through the DMR audit, which is now due on December 16. Since our last earnings call, we've taken additional steps to strengthen our compliance program and instill a culture focused on ethics, integrity and accountability across our organization. These include: a new Compliance & Ethics Program Charter and policies in multiple areas; instructor-led business Code of Conduct awareness training for senior leadership and individuals with significant roles in our control environment; training on the concepts of our new internal Code of Conduct for everyone in leadership, with training for all employees planned in the first quarter of 2022; and publishing our new corporate engagement report. Additionally, we have started to develop a new integrated risk management platform to enhance our ethics and compliance, audit and risk functions. The new tool will help us streamline case management of ethics and compliance concerns, manage the life cycle of corporate policies, assess and respond to risks, and report on our compliance with internal controls and regulatory requirements across the organization. As we've discussed, over the last 12 months, our Board and management team acted quickly and decisively, adding additional independent board members, making changes in our management structure, establishing effective controls, reinforcing our culture change and building a best-in-class ethics and compliance program. Our relentless focus in these areas resulted in remediation of the material weakness in internal controls associated with our tone at the top. While this is an important step, we continue driving these cultural changes and keeping compliance and integrity at the center of everything we do. We are working every day to continue rebuilding stakeholder trust and confidence in FirstEnergy and to ensure that our employees can be proud of our company and our mission. Yesterday, we announced another key hire to enhance our leadership team. Camilo Serna will join FirstEnergy on November 8 as our new Vice President of Rates and Regulatory Affairs. Camilo brings a great depth of experience, developing and implementing state and federal regulatory strategies. His experience will be invaluable as we build a smarter electric grid and support the transition to a cleaner energy future. We continue taking steps to achieve these goals. For example, last month, JCP&L submitted a proposal to PJM and the New Jersey BPU for transmission investments that would connect clean energy generated from the state's offshore wind farms to the power grid, while minimizing the impact on the environment and communities. We expect a decision on this proposal, which supports the clean energy investments driven by the New Jersey Energy Master Plan in the second half of 2022. In West Virginia, we recognize our responsibility to operate our 2 regulated fossil plants for the benefit of our customers in the state. Later this year, we intend to file an effluent limitation guideline, or ELG plan, that calls for additional capital expenditures at the 2 plants to comply with environmental rules and to ensure that they can continue to operate beyond 2028. At the same time, we intend to begin discussing with stakeholders our plans for a timely clean energy transition. As a part of that transition, later this year, we plan to file with the West Virginia Public Service Commission for 50 megawatts of utility scale solar generation. Our wind connection and solar proposals support core components of our climate strategy, building a more climate-resilient energy system that meets our customers' changing needs, enables the transition to a carbon-neutral economy and powers a sustainable and prosperous future for our stakeholders. In the other recent regulatory activity, this month, our ATSI transmission subsidiary reached a settlement with parties to a FERC proceeding that will address legacy issues associated with ATSI's move from MISO to PJM in 2011 and provide for partial recovery of the MISO transmission project costs that will be allocated to ATSI in the future. It's an exciting time for our company. We have a robust long-term pipeline to modernize our transmission network, and we plan to continue embracing renewables. In our distribution business, we're incorporating emerging smart technologies and building a technologically advanced distribution platform. And our industry will play a key role in the infrastructure build-out for electric vehicles, battery storage and other technologies. We're pleased with our strong performance through the first 9 months of 2021. As we close out the year, we are raising and narrowing our operating earnings guidance from $2.40 to $2.60 per share to $2.55 to $2.65 per share. The midpoint of this range represents a 9% increase over 2020 operating earnings results. Finally, I can't pass the call over to Jon without acknowledging that it's been one year since I stepped into my leadership role under very sobering circumstances. It's been a challenging year on many fronts. And I want to publicly thank our employees for their hard work and unwavering dedication to our customers. I continue to be impressed by the grit and the resilience of the entire team. Together, we are building positive, sustainable momentum, and creating a new FirstEnergy that is a forward thinking and industry-leading company. Thank you for your attention this morning. Now Jon will provide a review of third quarter results and a financial update.

Thanks, Steve, and good morning, everyone. Yesterday, we announced GAAP earnings of $0.85 per share for the third quarter of 2021 and operating earnings of $0.82 per share. As Steve mentioned, this exceeded the top end of our guidance range. In our distribution business, results for the third quarter of 2021 as compared to last year reflect the absence of Ohio decoupling and lost distribution revenue, which totaled $0.04 per share as well as lower weather-related usage. These were partially offset by higher revenues from our capital investment programs, new rates from our JCP&L distribution base rate case and lower operating expenses. Consistent with the trends we've discussed over the last few quarters, total distribution deliveries increased on both an actual and weather-adjusted basis compared to the third quarter of 2020. While weather was hotter than normal in our region this summer, it was cooler in the third quarter of 2020. Weather-adjusted residential sales for the third quarter of 2021 were essentially flat compared to the third quarter of 2020 as many of our customers continue to work from home. Comparing our results to the pre-pandemic levels in the third quarter of 2019, weather-adjusted residential usage was nearly 6% higher this quarter. While the commercial and industrial classes have not yet recovered to levels we saw before the pandemic, they are starting to trend in the right direction. Weather-adjusted commercial deliveries increased 3% while industrial load was up nearly 4% compared to the third quarter of 2020. Industrial load increased in most of the sectors in our service territory this quarter, led by steel, chemical and fabricated metal. In our regulated transmission business, we continue to see benefits from higher transmission investments at our MAIT and ATSI subsidiaries as part of our Energizing the Future program. However, this was offset by higher interest from the debt issuance at FET earlier this year and a prior year formula rate true-up. And in the Corporate segment, results reflect lower O&M and benefit expenses. For the first 9 months of 2021, operating earnings were $2.10 per share compared to $2.07 per share in the first 9 months of 2020. The increase was driven by our ongoing investments in our distribution and transmission systems, higher weather-related usage and lower expenses. These items more than offset the $0.17 of decoupling and lost distribution revenues recognized in the first 9 months of 2020. Our strong results and financial discipline have resulted in year-to-date adjusted cash from operations of $2.4 billion, which represents an increase of $600 million versus last year. While we expect a few offsets in the fourth quarter, we now expect cash from operations of approximately $2.8 billion for the year, which includes approximately $300 million of investigation and other related costs, the largest of which is associated with the $230 million EPA settlement. Earlier this month, we successfully restructured our revolving credit facilities from a 2-facility model to 6, fulfilling our commitment to complete this action before the end of the year. The 2021 credit facilities provide for aggregate commitments of $4.5 billion and are available until October of 2026, with 2 separate 1-year extensions. The credit facilities and their sublimits are detailed in the strategic and financial highlights. We are also pleased that following the restructuring of these facilities, S&P issued a one notch upgrade to the 10 distribution companies and the 3 transmission companies. While we're glad to return to investment-grade ratings for these companies with all 3 rating agencies, we remain committed to improving our balance sheet and the overall credit profile at the parent company. We previously communicated that we were targeting FFO to debt in the 12% to 13% range. We're raising that target to be solidly at 13%, which will provide ample cushion to the new Moody's threshold of 12%. And we expect to set the company on a firm glide path to mid-teens. On a number of recent calls, we've communicated that we're contemplating a minority asset sale as we consider alternatives to raise equity capital. Currently, we are engaged in a process to sell a minority interest in our transmission holding company, FirstEnergy Transmission, which owns ATSI, MAIT and TrAILCo. The interest is very strong and preliminary indications are very supportive of our financial plan and targets. But given where we are in the process, we can't comment any further on the details. We continue to evaluate all options to raise equity capital in an efficient manner to support our longer-term outlook, which includes traditional rate base growth and formula rate investments, planned rate case activity, and incremental and strategic CapEx that supports the transition to a cleaner electric grid. We are optimistic that we'll be in a position to share our overall financing plan and our longer-term outlook within the next couple of weeks. In fact, you may have noticed that we've expanded the information in the appendix of our strategic and financial highlights document. Given the current status of the proposed asset sale, we recognize that the fact book will be more relevant once we can include the outcome from that transaction. During the fourth quarter, we expect to provide you with 2022 guidance and a detailed capital plan, along with the runway of our FFO-to-debt target, longer-term capital forecasts, and targeted rate base and earnings growth rates. As always, thank you for your time and your interest in FirstEnergy. I'll be happy to take your questions.

[Operator Instructions]. Our first question comes from the line of Jeremy Tonet with JPMorgan.

I just wanted to talk about kind of current results and operations here. How should we be thinking about some of these items that have come in ahead of plan this year that helped you raise the guidance? And should we think about these items as sustainable into the future? Or just trying to get a sense for how much might have been weather or other impacts.

I think that's a very good question. And as all of the U.S. and worldwide, we're still adjusting to the impacts of the pandemic. And with regard to that, the impact on our business plan, we see residential loads not only increased over the year, but we see that as an ongoing trend as we get back to whatever will be called the new normal in the U.S. So based on the impact of residential load on our earnings, we see that as promising as we kind of work through the process of getting back to normal. Our commercial and industrial loads, they're basically demand-based. And we see commercial and industrial coming back to normal slowly. But right now, we're trying to figure out whether or not they'll get to pre-pandemic levels. So that's kind of the ongoing assumptions that we're working on. And at the end, we're just going to have to see how we end up getting through the Delta variant, the pandemic and getting everybody back to work over time.

Got it. That's helpful. And then maybe diving into Ohio a little bit more here. Just wondering if you could give any more color on the Ohio settlement discussions. How are they looking at this stage? And I guess what kind of plays into your confidence in being able to provide kind of a long-term update in the near future here?

Well, thanks for that question, too. In terms of Ohio, we're very encouraged by the progress that we've made thus far. It's been a productive, constructive and collaborative approach. And that's the tone that myself and the management team wanted to set as we get about the prospects for a settlement. And we feel as though those prospects are very good right now. I want to ensure that we keep the integrity of the process together so I don't want to get too far ahead in terms of commenting on it. But we're achieving a new and different tone, which I think is resonating. And our goal is to continue to remove, where we can, investor uncertainty in Ohio and derisk some of those concerns in a way. The ongoing effort by our management team is to continue to promote stability and predictability, and that's going to start in Ohio for us. So we're going to keep working on it. We'll keep you updated in terms of our progress. And once again, I'm encouraged.

Our next question comes from the line of Steve Fleishman with Wolfe Research.

Yes. I guess on the same topic of the last question. I just wanted to clarify that you're not going to give the '22 and long-term guidance until the Ohio kind of that rate process is -- settlement talk process is resolved?

Yes, Steve. This is Jon. That's our preference, obviously. We want to try to get clarity around where we're going to be with Ohio. So we -- like Steve said, we're working as hard as we can to get to a resolution on this issue. As we talked about, the collaborative nature of the meetings and the discussions has been very productive, but we're not there yet.

Okay. And then on the issue of it, it sounds like we'll get something relatively soon on the asset sale you identified. You did mention that you continue to look for kind of all efficient ways to raise equity capital. Is there other asset sales or equity or other things that you're also considering? Or is it still -- is it mainly really focused on this asset sale process?

So Steve, I would tell you that the process for FET is going very well. We're very happy with what we're seeing. The interest is very strong. The preliminary indications on valuations are very supportive of our financial goals. And it's better than the messaging than we've talked about before. But we're not done, and we have some work to do on that process. I just think, for us, it's important that we continue to think through how to best position the company going forward and ensure we have financial flexibility to support incremental and strategic CapEx, such as formula rate CapEx. So we continue to think through different alternatives to accomplish this. And my sense is we'll be in a position sometime in the next few weeks to give you an update on that.

That sounds great. And that's great on FET. Just one other question on the new balance sheet metric targets, the 13% FFO to debt. Is there a rough sense of how long it would take to kind of get to that level?

So I think we need to work through Ohio and where we're going to be there. But my sense is we could be there by the end of '23, maybe first part of '24. But I think we need to get through a few things, and then we'll be able to provide you a better outlook on timing.

Our next question comes from the line of Julien Dumoulin-Smith with Bank of America. Julien Dumoulin-Smith: Well done on the updates. Do you expect that the minority sale of FET will satisfy all of the equity needs from '22 through, say, '25? And just to clarify from earlier, are the indicative valuations still comparable to the PE multiples that you previously discussed on prior earnings calls?

Yes. To answer that question, comparable and better. So that should hopefully give you a sense of what we're looking at. But we're still in the middle of the process, so there's still a lot of work to do there. And as I just told Steve, I think everything is on the table in terms of the go-forward plan. And so we continue to think through how to best position the company going forward. And like I said, I think we'll be able to communicate our plan in the next few weeks. Julien Dumoulin-Smith: Yes. No. I hear you. And again, kind of riffing off the last set of questions too here. If I can, with respect to the long-term guidance, is your objective to set an EPS CAGR with '22 as a base year? I would presume, yes, but I just want to clarify that. And critically, prior to the Ohio DPA, you previously characterized your EPS growth outlook as generally consistent with the industry average. Is that still a fair aspiration, both as a base year and the prospective target thereafter?

Yes. So I think we'll be in a position to give you targeted rate base and earnings growth rates. We'll give you '22 guidance. We'll give you '22 cash flow, '22 capital and then high-level capital plan for our planning horizon. So I think we'll be able to give you that kind of look in the next few weeks. And the answer to your second question is yes. I mean if you just look at our earnings year-over-year this year, it's at 9%. Recall we even backed down on some capital this year. So my sense is we'll have normal utility growth. Julien Dumoulin-Smith: Excellent. That's great. And then just to clarify, sorry, just a finer point here. In Ohio, are some of the audit proceedings gating items, if you will, for a settlement? I mean you pointed to this mid-December data point on the auto report, for instance.

Yes. I would say, Julien, I would think of our settlement discussions that we're having right now separate from the 4 audits that are ongoing. And if you'll recall, and I mentioned it in my prepared remarks, the corporate separation, the rider DMR, we look at political and charitable spending and rider DCR, each one of those audits are on their own way right now. We're working very hard and have been very open, very responsive to the work that's going on there. When you start to look at the settlement issue, that's more along the lines of the quadrennial review that we talked about in our prepared remarks and other items. So we're kind of working all the proceedings together. And once again, we're being as open and transparent as we can as we kind of walk that path with our regulators and other interested parties in Ohio.

Our next question comes from the line of Shar Pourreza with Guggenheim Partners.

Steve, I just want to -- just on Ohio. I know you obviously had some comments about removing concerns and thinking about predictability. I understand, obviously, you guys are in discussions, and it's sensitive, right? But curious if any of the discussions also entail maybe how to think about the construct on a more prospective basis, like maybe different rate mechanisms, PBRs, how to think about a future GRC or not.

I think that's a very good question. I think we have started this entire process. And our approach as a company is really starting with a listening tour, if you will. So we're listening. And we're not missing anything that we're getting in terms of our feedback from our past endeavors. And we're trying to apply some lessons into the future. So to the extent Ohio or other jurisdictions, regulators or other interested parties have new and different ways to look at the future, we are certainly open to that. So I think we've explored that entire territory presently in Ohio, and we're going to remain open to that. And I don't want to kind of open the door too far to what we're attempting to do in Columbus right now. But once again, I'm encouraged that all the parties are meeting around the common table for the common good. And for us, that's keeping the customer at the center of that equation. And we've been encouraged by that. So once again, it's around openness and just being able to think differently than what we have had in the past.

Got it. Terrific. And then just -- it sounds like your balance sheet and metrics are improving a lot. So other than the sort of the TransCo stake sale, how do you strategically think about the assets that you may be able to further optimize versus what's absolutely core? This is obviously especially in light of a recent peer announcing the deal to sell a utility in a relatively heavy coal burning state. I guess, Jon, do you see some incremental value to further simplify sell coal and redeploying to renewables, especially as those decarbonization plans come to fruition in several states, right, which may have their own kind of financing?

Yes. Well, Shar, I'll take the first cut at that. And if you don't mind, I'll turn it over to Jon. But at the end, when we look at our current opportunity, we've got all the pieces in front of us and we're evaluating all of our options. In terms of our prepared remarks and what Jon has shared, we feel as though we have the right strategic options in front of us right now. And we are not taking anything unnecessarily off the table. But at the end, we think we're in a very good place where we can propel this company forward and do that without sacrificing what I believe is a very strong footprint, a very strong business plan and a very strong strategy as being a pure-play T&D kind of regulated environment. And we feel very good about that presently in terms of what we've expressed publicly. And we're just going to continue to work our plan right now. Jon, I don't know if you have anything to add there.

Yes. Shar, I would just say, as we thought about all of our different assets before we started the process with FET, we thought about, one, making sure that we could raise equity in an efficient manner for our shareholders. I think FET is going to definitely check that box. But just as important is a business that we could attract sophisticated high-quality investors where we can align on governance and business strategy type of issues. And I think from where we are today, FET meets all those criteria for us. It's going to be a very efficient capital raise. It will be accretive to earnings. The investors that are in the mix are top-notch quality firms. And they're very supportive of the business plan and very supportive of future transmission opportunities.

Our next question comes from the line of Angie Storozynski with Seaport.

Just one follow-up on the transmission business. So one, the earnings power of this business this year is a bit lower than we expected. And I hear the explanation behind some true-up, but -- cost true-up. But if you could just give me a bit more sense into that earnings range, the updated earnings range. Also, given that you're selling a stake in that business, what happens -- is there any condition assigned to that sale in case there is a reduction in the allowed ROE for these assets in light of the RTO adder likely going away?

Yes. So Angie, I'll try to take both of those. So just in the transmission business, year-over-year, our investment program has added about $0.05 in earnings through September. Now that was offset with some additional interest expense from our revolver borrowings earlier this year as well as the long-term debt issuance at FET back in, I think, the March time frame. And then we had those, what I'll call, $0.02 of formula rate true-ups, where really -- those are accounting true-ups of a prior year forward-looking rate. We typically use projected rate base, and we true that up to actuals in the following year. And a lot of that is associated with deferred taxes and the like. So those are your primary drivers. We continue to be very optimistic about our Energizing the Future program. And it provides a lot of opportunity for us to grow this company in the future. With respect to your second question, I think that's too early to tell and some details that we probably don't want to get into at this point in time. But once we have clarity in all of that, we'll obviously provide that to you.

Yes. I think, Jon, that's right on target. I would just add that it's more than that for us as a company in terms of an investment opportunity. It's around the value the customer sees. And we've been able to demonstrate as we invest in transmission that reliability has continued to improve, and that's very important for us as it is obviously for our customers. So we try to keep that firmly in play in terms of the equation.

Okay. Just one follow-up. So you -- I mean, we -- I think we all had expected an announcement on the asset sales pretty much right now. So is there -- are you waiting to see how big a stake of FET you need to sell based on the future distribution earnings power in Ohio?

No. No, Angie. I mean, we're just working the process. I mean, we launched the process earlier this year, and it just takes some time. We're not going to make a decision on something that significant just to communicate it on an earnings call. We want to make sure that we do it right and that we have the right structure in place, and we're just following our process.

Okay. And just one last one. So I appreciate the disclosures on the -- or somewhat disclosures on the earnings growth. Can you comment about your ability to grow the dividend given this 13% FFO-to-debt target?

Yes. Well, Angie, we certainly understand the importance of the dividend, its placement within our business plan. And we know how important it really is. Currently, our approach remains unchanged. Our payout range is 55% to 65%. If you were to take a gauge of it right now, we have a potential to be within that 60% range with a 4% yield. And obviously, I don't want to get ahead of our Board of Directors. Our Board reviews this on a routine basis. And I would just say, Jon has done a very good job of talking about some of the key pieces that are in front of us right now. The clarity in Ohio that we're seeking, and that I'm confident we'll get to here, along with the potential for a minority stake sale in transmission. And it's our ongoing quest to get to that investment-grade level that we're working towards. And once again and just to reiterate, we are working towards a 13% FFO-to-debt ratio to put balance sheet concerns beyond us. So we've got some wood to chop, so to speak, and we're working our process right now. And a dividend discussion is obviously ongoing with our Board as we move ahead.

Our next question comes from the line of Durgesh Chopra with Evercore ISI.

Jon, I hate to go back to the 2022 guidance and forward-looking projections. Can you just clarify how many years' worth of CapEx guidance are you going to give us?

Yes. I think we'll probably give you a 3- to 4-year look on CapEx. So '22 to '25, something like that is probably what we're thinking.

Okay. Great. And then just in terms of your equity needs, you previously talked about $600 million a year. Is that a good sort of cadence as we sort of think about your financing needs through 2025?

Well, so I think we've talked about looking at alternatives in lieu of those equity issuances. And so that's why we've been looking at the minority interest sale at FET and considering other alternatives. So I think we'll be able to give you the longer-term look once we get some clarity on a few things. But I think what we're considering now is in lieu of those issuances in '22 and '23.

Right. Sure, sure. I'm just trying to see -- okay, so I guess another way to ask this question is, I'm trying to see how much -- what's the dollar amount of the proceeds from the sale that you reached? So I was just trying to see what are the needs in the base plan. And I was trying to sort of peg it to $600 million a year. That's sort of where I was going with this.

Yes. So I don't know if I can give you all those details right now. I think we need to probably wait until we get some clarity in Ohio. And obviously, we want to be able to articulate to our investors our plan to get to 13%. We also want to think through, ensuring that we have financial flexibility for additional CapEx, specifically formula rate CapEx. So as we think about our overall plan, we'll put all of that into the mix and provide you a longer-term outlook, including our financing plan.

Our next question comes from the line of Michael Lapides with Goldman Sachs.

Congrats on a good 9 months. I actually have a couple little unrelated to each other. First of all, New Jersey. Your data shows you're under-earning in New Jersey by a couple of hundred basis points. Can you talk with us about your efforts to improve that, to get back closer to authorized? That's question A. Question B, more longer term. When you think about capital spend opportunities, call it, next 2 to 4 years or so, somewhere in there, where do you think the greatest opportunity to deploy more capital is outside of the offshore winds related transmission across the system? Like what type of projects? What type of opportunities?

Yes. Michael, this is Steve. I'll take the second half of that question. And look, I believe that we're in a great spot as a company to not only continue our plan in terms of fortifying the transmission and distribution business that we have before us with very good classic investments, I would call it, to improve customer reliability, while maintaining very affordable rates is kind of number one. So I see that moving ahead. Beyond the offshore wind, I believe, as we seek and end up receiving greater clarity on the clean energy transition that the U.S. is going to continue to move ahead on, I think that's going to provide us great opportunities both in the T&D environment to continue to invest and embrace renewables. And we're certainly very excited about that opportunity. Beyond that, it's also taking emerging technologies that are coming towards us that are much more affordable for customers, such as smart meter and other items, in which we're going to prepare a T&D platform for renewables over time. And I think those opportunities not only exist on the transmission system, but they exist in each one of our jurisdictions. So I think it's very -- we've talked about this before. It's very important that we keep the customer in the center of that equation in which we can enrich the value we're providing them, but we keep affordability in mind. So we can get into more details over time about individual initiatives that we could pursue. But once again, I think we have a very great in that realm. Relative to JCP&L, I think I'll turn that portion of the question over to Jon.

Yes, Michael. So we started the year, if you recall, at probably around a 6.5% return on equity in New Jersey for 2020. We implemented the base distribution case 1/1 of this year. And so we've gone from 6.5% to 8.2% in terms of the ROE. And my sense is that will continue to increase as we roll on the full 12 months of the base distribution case. I think you'll always be a little bit below your allowed return on equity there just because of regulatory lag, but we should be closer to that in the fourth quarter.

Got it. And then one follow-up. Can you remind me, in Pennsylvania, are you currently benefiting from the DISC? And are there any issues with the kind of getting DISC-related revenue increases, small though they'd be, in the near term?

Yes. DISC revenue is turned on, with the exception of Penn Power, and we're working through a little bit of an issue there with some cost recovery. But for the other 3 companies, the DISC revenue is turned on.

You're getting annual rate increases tied to the DISC even though they're not really big numbers?

Correct, correct.

[Operator Instructions]. Our next question comes from the line of Andrew Weisel with Scotiabank.

I have two questions. I have two questions about the transmission CapEx. First one is, I know you trimmed it earlier this year in April. And at the time, you referenced some uncertainty about the DOJ investigation as well as the balance sheet constraints. Do you see opportunity to reverse those cuts? Or should we think of those as more permanent? And then the second question is, if you do move forward with the sale of minority interest in the business, would that impact the CapEx plans longer term? Or do you think that's unrelated to the ownership?

Yes, Andrew, I'll give you my cut at that. And the way I like to think about that is, look, our company has faced significant uncertainty in the last 18-month period. And we've done what is prudent in terms of just ensuring that we can maintain financial flexibility in the present tense and then increase it in the future tense, if you will. And I think we've done a very good job of managing that. I believe our transmission investment opportunities, while we curtailed them slightly this year, I think you'll see us continue to ramp that up incrementally just to make sure also that we stay within our sweet spot within that. In other words, we don't want to go too far in terms of burdening customers in terms of cost. But once again, we are seeing continued reliability improvement. So I think that's really important for us. When you factor in the potential for a minority stake sale within the transmission business, I think that's only going to, if executed, fortify our company moving ahead, strengthen our business platform, strengthen our balance sheet. And I think that will provide a greater opportunity to invest into the future. And once again, I think all of these pieces, while we can't be more definitive today, I think they're starting to align nicely. Not only the minority stake consideration working towards some type of settlement in Ohio that once again will help our business and relieve some level of uncertainty out in the market, I think all of these pieces are starting to work forward very nicely. Our main concern is we continue to do that is -- just to make sure that we keep our company between the guardrail, so to speak. We have to continue to execute. We've got to continue to keep our employees and the public safe, be concerned with our reliability, ensure that financially that we're performing not only for shareholders, but all stakeholders. And we feel very good about where we're at right now, even though, as I said earlier, we have work to do.

At this time, we have reached the end of the question-answer session. I'd like to turn the floor back over to Mr. Strah for closing comments.

Great. Well, thank you very much, and thanks, everyone, for joining us today. I'm very proud about the progress that we've made to transform not only our business, but our culture as a company. And that will remain front and center for me as CEO. We're continuing to achieve our financial, customer service and ESG goals. We have more work to do. But I am very confident that we're going to continue to deliver long-term value for our shareholders, employees, our customers and our communities that we serve. So we look forward to talking to many of you at EEI. And I just wish all of you and your families continued safety and great health as we continue to work through this pandemic. So with that, all the best, and thank you once again for joining us.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.