Future Direction of the Nuclear Industry: Developing a Path Forward

1. Future Direction of the Nuclear Industry: Developing a Path Forward Paul Harden Sr VP & Chief Operating Officer FirstEnergy Nuclear Operating Company Spring 2018 LLW Forum Meeting

2. The Markets for Electricity April 17, 2018 Spring 2018 LLW Forum Meeting

3. Regional Transmission Organizations (RTOs) Independent Electricity System Operator Midcontinent ISO April 17, 2018 Spring 2018 LLW Forum Meeting • About 60% of U.S. power supply is managed by RTOs • Independent, membership-based, nonprofit organizations • Ensure transmission reliability and optimize supply and demand bids for wholesale energy and capacity markets

4. Restructuring Map April 17, 2018 Spring 2018 LLW Forum Meeting

5. U.S Electricity Generation Fuel Sources* In April 2015, natural gas overtook coal as top fuel for electricity generation for the first time ever at U.S. generating stations with 31% gas, 30% coal and 20% nuclear** • *Source: U.S. Energy Information Administration • ** Source: New York Times, July 13, 2015, with data from U.S. Dept. of Energy April 17, 2018 Spring 2018 LLW Forum Meeting

6. Available Generating Capacity Markets forecasts point to continued over supply of generation • *Source: U.S. Energy Information Administration April 17, 2018 Spring 2018 LLW Forum Meeting

7. Natural Gas Forwards (as of 1/19/18) Historical forwards always showed upward price expectations but are now relatively flat April 17, 2018 Spring 2018 LLW Forum Meeting

8. Market Conditions 2018 - 2019 2017 - 2018 2016 - 2017 2019 - 2020 2020 - 2021 2016 - 2017 Cleared capacity prices have declined from $165/MWd in 2018/2019 to $77/MWd in 2020/2021 planning years April 17, 2018 Data: Forward energy prices are the average, AD Hub around-the-clock price forwards as of each date in the periods above Spring 2018 LLW Forum Meeting

9. Market Conditions | Forward Energy Prices The forward trendline suggests that energy prices will remain at currently depressed levels through 2021 April 17, 2018 Spring 2018 LLW Forum Meeting

10. Market Effects on Nuclear Operators April 17, 2018 Spring 2018 LLW Forum Meeting

11. Domestic Nuclear’s Greatest Challenge • Nuclear facing competition from renewables, low-priced natural gas • Natural gas plants or renewables setting the market price for electricity • Renewables can be profitable at negative market prices due to tax subsidies • Flat demand growth for electricity & rising generating capacity • Suppresses electricity market prices • Reactors at risk of premature shutdown despite safe and efficient operations • Nuclear plants in competitive markets face the greatest near term risk exposure • Some nuclear plants facing challenges in regulated markets as well • Imperative to remain focused on improving performance • In the past 5 years industry average performance has improved O&M ↓ >6%, Capex ↓>38%, Fuel ↓>10%, Capacity Factor ↑>6% • During same period competitive market prices have declined more than 30% April 17, 2018 Spring 2018 LLW Forum Meeting

12. Cash Flow | Illustrative Example 1 Assuming energy and capacity prices of $27/MWh and $77/MWd with industry average capacity factors of 60% for coal, 92% for nuclear & 87% for gas 2 Average cost data from U.S. Energy Information Administration Even ignoring market impacts from renewables, gas can set an unsustainable price for coal & nuclear April 17, 2018 Spring 2018 LLW Forum Meeting

13. Nuclear Plants Closing in Restructured States Nuclear plant that has closed / announced closure Nuclear plant seeking / received assistance Operational nuclear plant Restructured state April 17, 2018 Spring 2018 LLW Forum Meeting

14. Nuclear Plants Are Closing Prematurely * FitzPatrick and Ginna closures were announced, however recent actions by the New York State Public Service Commission will provide additional compensation to the plants allowing for their continued operation ** Clinton and Quad Cities closures were announced, however the Illinois legislature passed SB 2814, providing additional compensation and allowing for their continued operation April 17, 2018 Spring 2018 LLW Forum Meeting

15. Unfavorable Outlook for Nuclear Power in U.S. • *Source: U.S. Energy Information Administration April 17, 2018 Spring 2018 LLW Forum Meeting

16. Planning for Future Waste Management Needs April 17, 2018 Spring 2018 LLW Forum Meeting • Plant closure announcements = unpredictability • Closure decision can change if financial conditions change • Many factors impact timing of decommissioning after closure • Regulated utility versus non-regulated ownership • Nuclear Decommissioning Trust Fund value • State permitting and other requirements • Number of decommissioning projects underway in parallel • Approach to spent fuel management will typically be similar • Move all spent fuel to ISFSI as expeditiously as possible following shutdown (taking 3 to 7 years)

17. What, if anything, will alter the course? Uncertain & Complex Federal Policy? State Policy? Yes - so far in Connecticut New York Illinois But waiting to see in Ohio New Jersey Others? Pennsylvania April 17, 2018 Spring 2018 LLW Forum Meeting

18. Questions? April 17, 2018 Spring 2018 LLW Forum Meeting