Irene Prezelj - VP, IR Charles Jones - President, CEO & Director Steven Strah - SVP & CFO

Julien Dumoulin-Smith - Bank of America Merrill Lynch Stephen Byrd - Morgan Stanley Steven Fleishman - Wolfe Research Jonathan Arnold - Deutsche Bank Gregory Gordon - Evercore ISI Praful Mehta - Citigroup Michael Lapides - Goldman Sachs Group Charles Fishman - Morningstar Inc. Andrew Weisel - Scotia Howard Weil Paul Fremont - Mizuho Securities

Greetings, and welcome to the FirstEnergy Corp. Third Quarter 2018 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Irene Prezelj, Vice President, Investor Relations for FirstEnergy Corp. Thank you. Ms. Prezelj, you may begin.

Thanks, Melissa. Welcome to our Third Quarter Earnings Call. Today, we will make various forward-looking statements regarding revenues, earnings, performance, strategies and prospects. 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 such 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 can be found on the FirstEnergy Investor Relations website along with the presentation, which supports today's discussion. Participants in today's call include Chuck Jones, President and Chief Executive Officer; Steve Strah, Senior Vice President and Chief Financial Officer; and several other executives in the room, who are available to participate in the Q&A session. Now I'll turn the call over to Chuck.

Thank you, Irene, and good morning, everyone. We had a great quarter, and I'm pleased to have this chance to speak with you about our results and our progress on key initiatives. Since our last call in August, we have successfully carried out several of the critical steps necessary to complete our transition to a fully regulated utility. As I'm sure you know, on September 25, the bankruptcy court approved our definitive settlement agreement in the Chapter 11 proceedings of FirstEnergy Solutions, its subsidiaries and FENOC. This very positive development marks perhaps the most important milestone in our exit from competitive generation. While you may occasionally see news about the progress of FES, FENOC and their affiliates, as they work with the bankruptcy court. To be clear, we expect that none of this will impact our ability to execute our regulated strategy. We're also in the final stages of implementing our FE Tomorrow initiative, which will align our cost structure and shared services workforce to efficiently and effectively support our regulated businesses going forward. In total, 960 positions in our shared service organization were impacted by this effort. In addition to the nearly 500 employees, who accepted our voluntary enhanced retirement package, we eliminated nearly 230 open positions, transition some employees into opportunities in our utility business and created a flatter, leaner management structure by reducing layers and increasing spans of control. As part of this streamlining effort, there are nearly 45% fewer leadership positions in our shared services organization, including 46 Director, Executive Director and Vice President positions and 163 supervisory and manager level positions. The majority of these organizational changes went into effect during the third quarter. As part of the FE Tomorrow effort, our teams identified opportunities that will eliminate the $300 million of cost that were associated with our competitive operations. In addition, we expect to fully offset the $30 million of depreciation, associated with common systems shared with FES. We also identified an additional $20 million of O&M and interest, and $35 million in capital reductions for total incremental cash savings of $85 million. The expected savings include reductions in labor costs and less reliance on contractor work and will be reflected in the 2019 earnings guidance, we will provide at EEI next month. The FE Tomorrow initiative has been an outstanding effort by our teams across our corporate functions. In fact, a level of projected operating expenses associated with our shared services organization, benchmark solely within the top quartile of our industry. And we are confident that we have the proper organization and cost structure to support our fully regulated business. Past two years and this year, in particular, have been a period of rapid change in our company. I'm extremely proud of our employees' ability to remain focused on the execution of our objectives. As you saw in the results we posted last night, our regulated businesses continue to perform very well. We reported strong third quarter results and exceeded our guidance, largely due to the hot summer weather that is lingered through the end of September. We will discuss our earnings drivers in more detail, but we were very pleased that in addition to the benefits from the heat, we saw a second consecutive quarter of growth in residential weather adjusted usage. And at the same time, industrial usage was up 2.5% compared to the third quarter of 2017, marking the ninth quarter of growth in that class. On the regulatory front, we continue to execute on our plans. In August, we filed the first base rate case for Potomac Edison in Maryland in nearly 25 years. And this week, we supplemented the filing to update the partially forecasted test year with the full 12 months of actual data. The $19.7 million request addresses recovery of the investments we have made in our Maryland distribution system to ensure continued, safe and reliable service. The request is net of $7.3 million in customer savings related to federal tax reform. The Maryland Public Service Commission provided a procedural schedule that includes evidentiary hearings beginning on January 22, we expect a final order by March 23. In Ohio, our application for our $450 million distribution platform modernization plan is pending at the PUCO. The three year plan would focus on distribution, automation, voltage control and preparing for the grid of the future. Now that the commission's powered forward initiative is complete, we believe the PUCO will be able to focus on the distribution platform, modernization proceeding and grid modernization issues. In New Jersey, our four year $400 million JCP&L Reliability Plus infrastructure investment plan is pending at the BPU. As we discussed last quarter, this plan is designed to enhance the safety, reliability and resiliency of the distribution system for the benefit of our customers in New Jersey. We are hopeful that we will receive a procedural schedule soon to facilitate timely approval by the BPU. Finally, we continue to execute our energizing the future transmission plans across our footprint, and we remain on track to invest $1.1 billion in our system this year. Consistent with our eastward expansion this initiative, this summer, we completed the $51 million East Towanda-South Troy line rebuild project in Bradford County Pennsylvania. This project was as part of our mid-Atlantic interstate transmission subsidiary, involve rebuilding an existing 19.6-mile, 115-kilovolt transmission line using 230-kilovolt construction standards. The rebuild line was designed to allow further construction of the second 230-kilovolts circuit when needed in the future. Also in May, earlier this year, we finished rebuilding a 7.2-mile section of a 115-kilovolt line on an existing right away in Bradford County and South Central Pennsylvania. This will connect to a new 10.6-mile span of line that stretches into neighboring Somerset County. When this $50 million reliability project is complete in 2019, it will connect several substations and address the risk of thermal overloads and low-voltage conditions that could impact service reliability in that region. We've updated our full year 2018 GAAP earnings forecast to $1.68 to $2.60 per share, which reflects that deconsolidation and court-approved bankruptcy settlement with FES and FENOC and an estimate for the annual pension and OPEB mark-to-market adjustments. With our strong performance and the impact of favorable weather through the first nine months of the year, we're raising and nearing our full year 2018 operating earnings guidance range to $2.50 to $2.60 per share from the previous range of $2.25 to $2.55 per share. We're also reaffirming our longer-term operating earnings growth projection of 6% to 8% through 2021. Now Steve will provide a review of our strong third quarter results and our financial developments.

Thanks, Chuck, and good morning, everyone. It's great to speak with you today. Our results are very straightforward for this quarter. So this will be a quick discussion with plenty of time for your questions. Starting with our GAAP results, yesterday, we reported a third quarter GAAP loss of $1.02 per share. This is due to a pretax charge of $1.2 billion, representing the expected obligations under our current agreement with FES and FENOC bankruptcy cases. And with the court's approval of that settlement, we moved the Pleasants Plant to discontinued operations to reflect its upcoming transfer to FES and excluded the plant from operating earnings starting in the third quarter. Before I move on to the discussion of operating earnings drivers, I'll remind you that we continue presenting operating earnings and projections on a fully diluted basis. This allows us to show preferred shares as fully converted and it eliminates the impact of conversion timing. For your reference about 56% of preferred shares had been converted as of September 30. In accordance with the terms of the equity issuance, we expect the majority of the remaining preferred shares to be converted by the end of July, 2019. As always, we provide reconciliations and detailed information about the quarter and our consolidated report to the investment community, which is posted on our website. Our third quarter operating earnings of $0.80 per share surpassed the top end of our guidance with weather driving the bulk of the $0.17 per share increase compared to the third quarter of 2017. Results in our distribution business benefited by higher deliveries along with lower expenses, lower financing cost and higher regulated commodity margin. These factors more than offset related - cost related to increased vegetation management work in Pennsylvania, higher depreciation expense and general taxes. Total distribution deliveries across all customer segments increased 6.3% compared to the third quarter of 2017. This was largely due to cooling degree days that were 28% higher than last year and 29% above normal. Sales to residential customers increased 12.9%, while commercial deliveries were up 2.7%. On a weather adjusted basis, deliveries to commercial customers were down 0.7% compared to last year. The decrease primarily reflects the continued impact of energy efficiency measures in that sector. However, as Chuck said we continue to see positive developments in our residential customer class where third quarter weather adjusted sales increased 1.7%. This is the second consecutive quarter where we have seen a meaningful uptick in weather-adjusted residential load. Paired with the continued modest increases in our residential customer count, we are cautiously optimistic that these promising metrics will form a trend. In the industrial sector, total deliveries increased 2.5% compared to the third quarter of 2017 for nine straight quarters of improvement over the prior year period. The increase in demand primarily came from our customers in the shale gas and steel industries, but we also saw higher usage of hospitals and universities, which was weather-related. Moving on to our transmission business, third quarter earnings increased $0.02 per share compared to last year. This reflects the higher rate base that are made in ATSI subsidiaries as well as higher revenues at JCP&L. And then our customer segment, our results reflected higher operating expenses and the impact of lower federal tax rate compared to the same period in 2017. Finally, I want to give you a quick update on our liquidity facilities. As a fully regulated company with stable, predictable earnings and cash flow, we have a much improved risk profile that comes with lower liquidity requirements. On October 19, we reduced aggregate commitments under our revolving credit facilities to $3.5 billion from $5 billion and extended their maturity dates to December 2022. We also entered into two new term loans totaling $1.75 billion to refinance our revolver borrowings. These credit facility changes reduced interest expense in connection with our FE Tomorrow initiative. We had an excellent quarter with strong financial result. We also achieved very important milestones in our corporate transformation, including an upgrade to investment grade by S&P. We remain focused on execution, and we are committed to positioning FirstEnergy for stable, predictable and customer service oriented growth to benefit our shareholders, customers and employees. Thank you for your time and your interest in FirstEnergy. Now let's take your questions.

[Operator Instructions]. Our first question comes from the line of Julien Dumoulin-Smith from Bank of America Merrill Lynch. Julien Dumoulin-Smith: So maybe to just follow up here, what are the ramifications of the cost savings here? Is potential additional latitude from a balance sheet perspective? Can you talk about how you're thinking through the additional FFO to debt latitude? What kind of metrics you want to be targeting? And ultimately given perhaps the litany of opportunities, you already described on the call, where you're trending within your own Capex budget? And if you would see yourself being in a position to increase that Capex budget, whether because of the additional FFO to debt latitude or simply because you wanted to pursue external financing to raise external funds to finance some of the additional CapEx?

All right. So that's like five questions in one there Julien, but I will try to take them all on. So first, FE Tomorrow, the obvious first objective was to deal with the $300 million of shared services cost, which has been supporting the competitive business throughout basically the history of our company. In a way, where none of that become a drag on our ability to execute our regulated plan, we accomplished that. Second was to deal with the $30 million of depreciation associated with common systems that we shared with FES, we accomplished that. On top of that, then $20 million of O&M and interest and $35 million of capital, that isn't going to be substantial in terms of moving our credit metrics. It will be down in the third decimal place. So it's not going to make a big difference. Where we're targeting is 12% to 13%, which keeps us above the Moody's 12% guideline, in the S&P 9% guideline, and we expect to be there for the foreseeable future. And did I get them all? Julien Dumoulin-Smith: Well, what about just the pursuing external financing? I know a few months ago, you all committed to perhaps staying away from the capital markets and living within your means if you will with respect to hitting your CapEx. But obviously, there's a lot of different opportunities than many continue to materialize here. Is there any chance that you all are looking at or would contemplate raising your CapEx budget to reflect some of these beyond the ranges that you've already articulated?

Okay. So first of all, we've said, we don't contemplate any new equities through 2021, and we'll evaluate it at that point. Between now and then, we'll invest $7.5 billion in infrastructure at FirstEnergy. And at some point, equity might be unnecessary component, but not through 2021. As far as that CapEx planned today, I do not see increasing it. The plan we have generates 6% to 8% per year combined growth for our company. I don't see any reason to take it above that, and I think that's an appropriate number for FirstEnergy at this time. Julien Dumoulin-Smith: Got it. And if I can clarify quickly. Just with respect to the cost savings identified, '19 run rate or how do you think about that flowing into '20 onwards, right? As you think about the various pieces there, annualized and year-over-year if you will, it's more of a timing question.

We'll see it in '19 and beyond. Julien Dumoulin-Smith: The full year '19, to be clear?

Yes.

And Julien, this is Steve Strah. And I would also just say, those savings are in support and blended in within our 6% to 8% growth rate. Julien Dumoulin-Smith: Right. But there's not an annual - annualizing factor such that perhaps that's a more of a '20 figure than a '19 figure or to the extent which that you - okay, great. I will....

No.

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

Could you give a little more color on what you're seeing in terms of the local economy and the weather normalized sales and how looks for next year to right now?

Well, the good news is, we are seeing some positive developments when we adjust out the warm weather that we had this summer. 1.7% growth in the residential segment is probably the most positive. We did add 35,000 new residential customers between the third quarter of 2017 and today. So that's contributing to the growth in the past as we were adding customers. We were seeing that kind of eroded by energy efficiency and fuel switching to natural gas and other things. But I think 35,000 new customers and 1.7% growth, and it's the second quarter in a row where we've seen some growth is a good thing. 2.5% growth in the industrial sector, that's now, as I said in my opening remarks, nine quarters where we've seen growth in that sectors. So I think what we're seeing is some of the growth in the natural - national economy is starting to move into the FirstEnergy footprint.

Okay. And then just any thoughts on the Ohio tax reform order earlier this week, and that seems to get flexibility in addressing, any thoughts on it?

Yes. I'll give you my thoughts. Obviously, tax reform is an issue we've been dealing with across the board. We're done in Pennsylvania. We're done in West Virginia. We're done in New Jersey. We'll be done in Maryland with the resolve of the rate case there. In transmission, the formula rates adjust automatically. We filed a case for the AYE stated rates to make the appropriate adjustments there as FERC requested. That only leaves Ohio left to deal with, and we have frozen rates for several more years in Ohio. But despite that, I expect, we'll be able to sit down and work with the Public Utilities Commission on some type of a settlement that makes sense for them for us and all the interested parties.

Great. And then just lastly, I might miss this at the beginning, just at the upcoming Addison conference, the - what if any equipment or disclosures are you providing?

Anything on the plate right now is 2019 guidance.

Our next question comes from the line of Stephen Byrd with Morgan Stanley.

I wanted to step back and talk about changes to the generation mix in Ohio. I guess, you have a number of moving pieces, you have numerous potential shutdowns as well as, I guess, there's a possibility of legislation that it could increase the amount of renewables in Ohio. So I'm thinking about this from an opportunity set in terms of both additional changes to the grid overtime that would be needed. If there is a number of shutdowns, possibility of a FirstEnergy directly investing in renewables, if the target renewables amount goes up. Just generally, it's a longer term, but I'd like to see some of your thinking around what that might require in terms of incremental spending, incremental changes to the grid or involvement of the renewables, anything else on Ohio that you might comment on?

Right now, in Ohio, FirstEnergy is a fully regulated transmission and distribution company. We have no generation, regulated or competitive any longer, and we're focused on what it - the needs of customers are from a T&D perspective. Should there be additional closures in Ohio, there's a process within PJM to review those closures and identify any changes in the transmission networking capability to handle those. Those would be dealt with through the ARTEP process and of course we would make those changes on our transmission system as necessary. At this point in time, under Ohio law, regulatory utilities aren't allowed to invest in generations. So I'm not spending any time worrying about generation in Ohio at this point in time. We're worried about the T&D infrastructure and serving our customers the right way there.

Understood. And then just switching over to your cost cutting and making great progress there. I was curious as part of that cost-cutting effort, did you do any kind of a benchmarking, your cost structure relative to neighboring or peer utilities just in terms of how your cost structure looks? And just curious if there's any commentary could provide on pro forma, what your cost structure looks like relative to peers?

Yes. We did, and we used Accenture to help us with this process, Steven. And they brought a number of benchmarks to the table to assist us, including benchmarkings of cost at a high level with our peers. But also things like, layers of management between me and the people doing the work in the corporate office, spans of control for our leadership in the corporate office. That's what drove the entire reduction. As I said in my opening remarks, now that it's all done, our corporate structure cost are in the top quartile within our industry.

Understood. And Chuck, just at the utility level, are there any of your units that are noticeably high in terms of the cost, whether it be just because of lack of scale or any other drivers? Just - I appreciated at the current level you've got in your cost down pretty massively. Just curious if sort of any of the subsidiary stand out as having a cost structure that's quite a bit higher than peers?

No. In fact, there - it's just the opposite. Our utility cost structure is generally benchmarked in the top quartile and top decile for both capital and O&M, even at our current CapEx levels.

Our next question comes the line of Jonathan Arnold with Deutsche Bank.

Could I just in terms of the EEI question. If not the EEI, when would be reasonable for us to expect you to think about rolling forward your current outlook, but if I'm not wrong goes through 2021?

I don't think you'll see anything at EEI this year that goes beyond 2021.

And is that something you think, Chuck, you would do sort of with your year-end call or more sort of later in the year next year. This is going to....

I think it'll be sometime later in 2019.

Okay. And if I can, what are you particularly waiting to see before adding another year to the outlook let's say?

Well, there's a number of things we're waiting to see. First of all, we've got a lot of things to focus on now that we're fully regulated. I want to see whether two months make a trend in terms of load growth in our territory or not. I think, that could be a big factor. And beyond that I just think given four years out, what I like to do is give you plans that I know that we have nailed down, and we can execute on. And four years out is a little bit outside of the planning window that I think has proven for us to go to.

Okay. And then just on transmission, do you - any comments on the recent FERC order, I realize you have rates that have settled. As you look at the sort of potential shift to the new model. Can you just give us some context of how do you think that would set versus where you're earnings are?

Well, here's how I look at it. Our formula rate - rates of return are fairly new right now. The MAIT 1 was just set recently. I think, that bodes well for those rates going forward. I think, longer term, if there's much done to change FERC ROEs, it's going to compress them with the state ROEs, and it's going to work against what FERC is trying to do to stimulate transmission investment because it's going to shift money not just in our case but probably in many other cases, down towards this recent system and away from transmission. So I think that is going to kind of be a control rod in the process. But even if they decide to move forward, here's how I think about it. 0.5% change in the ROE is about a $15 million impact on the FirstEnergy's earnings. That is not significant, and it's something we can make up within the rest of our plan and not something that will take us off track from a 6% to 8% growth rate in any way.

Our next question comes from the line of Greg Gordon with Evercore ISI.

I think maybe we should all just email our questions to Julien and just actually ask them all. Sorry, Julien, couldn't help myself, talk to you later. So just to rebase go back and rebase the conversation around earnings. If I recall correctly, your 6% to 8% growth target is based off of a 2017, you know, $2.15 number. Is that - am I remembering correctly?

The 2018 fully diluted number ex DMR.

Right. It's a 2018 number?

Yes.

Okay, just wanted to make sure I had - that's right, 2018 number. So if I look at that then where within the guidance - that 6% to 8% guidance range or maybe you don't want to comment on this. Would you sort of feel like you were trending now that you've got the CapEx plan sort of solidified, there're cost cutting in the books, FES exiting. And if these types of load growth numbers were to be consistent, would you be confident in your ability to be sort of at the midpoint or towards the upper end of that range at this point? Or are you - is it too early for you to discuss that?

So number one, I'm not going to give 2019 guidance until EEI. So that number, you'll hear in a few weeks. And beyond that, we give a 6% to 8% range. We expect to be within that range, and we don't guide right now to the bottom or the top of that range. So I think you're going to assume that we should be somewhere within that range. And a lot of factors can affect that. As I said earlier, if two months of residential growth becomes a trend that will drive more to the top end of that range. If something happens with FERC ROEs that might move us a little bit down. There's going to be puts and takes throughout that. But I'm confident and we've reaffirmed that, that 6% to 8% growth range over the next three years is something you can count on.

Great. And you guys just paid the dividend at the same rate that you paid it since it was cut several years back.

Yes.

Can you give us some guidance as to when you think it's appropriate to go to the board to recommend a policy that's more comparable to your peers both in terms of payout ratio and growth?

Yes. So we've been a fully regulated company now for all of about a month since the filing was approved.

So what's keeping you?

So I've said all along, if we expect to be treated in the market like our regulated peers at some point in time, we're going to need to have a dividend policy. In the immediate future what's keeping me is, our yield on our dividend is nothing to be ashamed of. It's in the 3.8% to 4% range depending on where the stock price is moving. We began discussions internally with the leadership team to see what we might recommend to the board, and I think just be patient, it will come, and I know we need to do it.

Our next question comes from the line of Praful Mehta with Citigroup.

So just maybe following up on the earnings side, thinking about the DMR and the extension to the DMR. How do you see that positioned, and if that doesn't come through in terms of an extension, what kind of EPS drop-off do you see with DMR going away?

So all of our earnings projections that we've given you exclude DMR. So there would be no drop-off whatsoever regardless. If we expect to file a case for extension of the DMR early next year, or hopeful that the commission will roll on it by the end of next year, and we'll have the answer about what happens with those last two years at that point in time. But it can only be positive, it cannot be negative.

Yes, I know, fair enough. And that's I guess where I was going which is, If you do get it, let's put it the other way then what is the upside that you see for the DMR going forward?

Well, if you can calculate what two years of it will be worth. I wouldn't see us taking that money and doing anything with it, that would take us off track long term that we can't continue. That's why we've taken it out of the numbers that we're sharing with you now.

Got you. Fair enough. And I guess moving on to the credit side and the total debt. I was looking at Slide 31, which had your balance sheet debt and the whole core debt has gone up to about $7 billion. Just wanted to understand, is there a target of like what whole core debt you would like to have as you go through this restructuring process. I noted there was a term loan that was taken as well. So just wanted to get a little more context on the whole core debt and where do you see that going as a percentage of total debt as well.

No higher than the $7 billion that it's at right now.

Got you. And is there any target in terms of what proportion it'll be of total debt going forward? Or will that only reduce as your rest of the balance sheet, I guess, grows with the growth of the utility side?

Praful, this is Steve. So right now, holding company debt as a percentage of total debt will be around 35% to 40%. Over time, we expect it to go down to about 30%.

Got you. And just to clarify. On Slide 31, it says it does not include the term loans that you have recently taken. Is that not included with the $7 billion or is it within the $7 billion?

So basically, our holding company debt over time will average to be about $7 billion. So it's going to be a little give-and-take, so it does include the term loans.

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

I'll ask for them in orders. First of all, going back to Slide 4 on the FE Tomorrow, the $300 million of costs associated with competitive ops. Who does that actually accrued to? Meaning, does that come back and benefit FE, the new FE, the regulated FE? Does that benefit kind of FES on the way out and prep for emergence? I'm just trying to make sure I understand what's happening there, and whether that's capital O&M or something else?

It doesn't benefit anybody, Michael. It is the actual shared services costs that we've incurred in the past to support the FES and FENOC part of our company that have been traditionally shared with them through our shared services allocations. If we did not deal with it, it would have been a drag on our ability to execute our regulated strategy. So the goal was as FES ultimately says, we don't want these shared services anymore. We needed to make them go away. So it's basically a dollar-for-dollar elimination of the costs that were previously built to FES, so that there's no drag on our ability to move forward.

Got it. A follow-up on related question. Chuck, you talked a little bit about the yield where your stock trades, and we recognize that maybe on a valuation perspective it trades a little bit differently than some of the other kind of pure-play regulated utilities. Are there strategic thoughts you and the board are having or discussions of whether there are other changes to the corporate structure that maybe possible? Meaning, you've got a great transmission company, if you think the market doesn't value the transmission assets correctly. Are there ways to monetize parts of that or to highlight or accentuate the value of that to the market? How are you guys thinking about the kind of the value inherent within FE and the FE business family?

Well, how I think about it as it's much more valuable than a lot of you think it is. Based on a 6% to 8% growth rate and a dividend on top of that. But having said that, as I said, we're about one month into now being finally a fully regulated company. And me as the CEO, being able to focus on a fully regulated company, probably 2/3 of my focus over the first four years in this job has been on the competitive business, and what we were going to do about it, and how we were going to exit it, and the entire exit process. Now I'm able to focus on the fully regulated side of our company. A company with 6% to 8% growth isn't something that I think we want to - that we need to necessarily do anything with at this point in time. Strategically, to restructure our company, I think it's perfectly structured. We have regulated distribution utilities across five states. We've got now three investment regimes in transmission that are under formula rates, down the road, if it makes sense for the Allegheny transmission system, we move to a formula rate, we'll look at that. But it's all going to be driven about how do we maximize investment for customers and subsequent growth for shareholders out of what we have.

Our next question comes from the line of Charles Fishman with Morningstar Research.

I just had a quick housekeeping thing. When you initiated the 6% to 8% of the $2.15 base, you talked about shares growing to 545 million in '21. Now you're talking fully diluted 538 million in no equity. Should we just assume we're 538 million flat through 2021 for our modeling?

This is Steve Strah. No, we have a DRIP program that we issue shares under each year. So it's about $75 million to $100 million of equity value. So you can do your calculation based on that.

Our next question comes from the line of Andrew Weisel with Howard Scotia Weil.

One of the topics you have been drilled into pretty deeply. So I just have a couple - more details I wanted to dig into. First, on O&Ms, just a quick one on timing, given the favorable weather this summer, were you able to accelerate some O&Ms from 2019 into 2018 that might support the guidance?

No. There was none of that and in fact, because of some reliability issues, we spent a little extra O&M in one operating company, Penelec than what the original budget has. But when you get nine months into a year and you start trying to move money around within a budget, it takes people and contractors to execute what we do in this regulated business. It's a very complex maneuver. And I just want to keep the team focus on executing the plans that we have in front of them. So there was none of that done.

Okay. Fair enough. Then two questions on Capex. First of all, how would you describe the conversations with regulators, interveners around the IIP New Jersey and the DPM and potential extension of DMR in Ohio?

So IIP in New Jersey, we're having discussions with both the staff and interveners. We're waiting on commission to issue a procedural schedule. I think, those discussions will go on throughout the first part of next year and will be able to give you a little more guidance on where it stands. I think, in general, the reaction to the IIP has been favorable in New Jersey. And obviously, the commission used it favorably or they never put in place. So I think that one bodes well, but it will get clarity early into next year. On the DMP, as I said, the commission in Ohio spent a lot of time on their PowerForward initiative this year now that, that's done I think they're going to have time to focus on our filing, and we're hopeful that we can get that to a conclusion. So - and on the DMR, we'll make our filing in early next year and will see where that goes. Obviously, we expect to make a case for why the last two years should be continued, but we haven't built any of that into our 6% to 8% growth.

Okay.[indiscernible] and then if I heard you correctly [indiscernible] plan. My understanding is that [indiscernible] that anything would be incremental. So if they are approved, should we think about that?

Ask the question again, your voice was garbled and maybe you get closer to your phone.

Sorry, apologies. If I heard you correctly you said that the current Capex spend does not really have upside potential [indiscernible].

I think you should think of the current CapEx plan as the CapEx plan for the next three years, and if we decide to make any changes to it beyond that, we'll let you know then. But I think you can count on it being what it is for the next three years.

[Operator Instructions]. Our next question comes from the line of Paul Fremont with Mizuho.

Just a quick point of clarification I guess on PowerForward. Do they need to make determinations under that proceeding that seems to kick off in early December before they're able to actually act on your request, which looks like it would be sort of covered under the general topic that they're looking at?

No. They're free to act on our request at any time.

Okay. And so you would expect then that yours will move forward independently from that proceeding? How - when would you expect the scheduling work?

Paul, as I said, I think commission now has time to focus on it. We're having active discussions with the staff on it. I can't give you a date as when I expect an order, but I'm optimistic that we can get something done on it in the not-too-distant future.

Ladies and gentlemen, we have come to the end of our time allowed for questions. I'll turn the floor back to Mr. Jones for any final comments.

Okay. Well, I'd like to thank you all for your support of FirstEnergy. We look forward to seeing you at the EEI in a few weeks. Take care.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.