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

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

Regional Transmission Organizations (RTOs) 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 Independent Electricity System Operator Midcontinent ISO Spring 2018 LLW Forum Meeting April 17, 2018 Electricity Markets, Fuel Source Diversity and Innovation to Support Grid Reliability Case Western Reserve University • September 2, 2014

Restructuring Map Spring 2018 LLW Forum Meeting April 17, 2018

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 Spring 2018 LLW Forum Meeting April 17, 2018

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

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

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 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 April 17, 2018 Meeting Name Location • Date

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

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

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% Spring 2018 LLW Forum Meeting April 17, 2018

Cash Flow | Illustrative Example ($ per MWh) 1000 MWe Plant Coal Nuclear CC Gas Revenue per MWh1 $23 $33 $30.2 Fuel 26 7 24 O&M 16 21 3 CapEx 4 5 1 Costs per MWh2 $47 $34 $28 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 Spring 2018 LLW Forum Meeting April 17, 2018 Meeting Name Location • Date

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

Nuclear Plants Are Closing Prematurely Location MW License Expiration Premature Closing Date Reason for Closure Kewaunee Wisconsin (MISO) 556 2033 2013 PPA ended, low energy and capacity prices Vermont Yankee Vermont (ISO-NE) 620 2032 2014 Low energy and capacity prices Fort Calhoun Nebraska 478 December 2016 Cheaper to purchase elsewhere FitzPatrick New York (NYISO) 838 2034 February 2017* Ginna 610 2029 March 2017 * Clinton Illinois (MISO) 1,098 2026 May 2017** Quad Cities Illinois (PJM) 1,880 May 2018** Oyster Creek New Jersey (PJM) 625 October 2018 Cost to comply water discharge rules Palisades Michigan (MISO) 800 2031 2022 Upon PPA termination; cheaper to purchase elsewhere Pilgrim Massachusetts (ISO-NE) 690 May 2019 Indian Point 2,080 2035 (renewal pending) April 2021 Low energy prices, public opposition Perry Ohio (PJM) 1,260 2026 (eligible for license renewal) May 2021 Low energy and capacity prices. On March 31, 2018 FirstEnergy Solutions, all of its subsidiaries, and FENOC voluntarily filed petitions under Chapter 11 of the Federal Bankruptcy Code. Davis-Besse 900 2037 May 2020 Beaver Valley Pennsylvania (PJM) 1,800 2036 / 2047 May/Oct 2021 Three Mile Island 1 803 September 2019 “U.S. Nuclear Plant Closures”, Power Magazine June 25, 2016 http://www.powermag.com/u-s-nuclear-power-plant-closures-slideshow/ Kewaunee, Vermont Yankee, Fort Calhoun, FitzPatrick, Clinton, Pilgrim, Quad Cities, Oyster Creek “Palisades Nuclear Plant Closing Shocks Many in South Haven Area”, Mlive December 9, 2016 http://www.mlive.com/news/kalamazoo/index.ssf/2016/12/palisades_reaction.html Palisades “Ginna Nuclear Power Plant Gets a Lifeline”, Power Magazine, February 18, 2015 http://www.powermag.com/ginna-nuclear-power-plant-gets-a-lifeline/ Ginna Entergy Press Release, January 9, 2017 http://www.entergynewsroom.com/latest-news/entergy-ny-officials-agree-indian-point-closure-2020-2021/ * 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 Spring 2018 LLW Forum Meeting April 17, 2018 Meeting Name Location • Date

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

Planning for Future Waste Management Needs 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) Spring 2018 LLW Forum Meeting April 17, 2018

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

Questions? Spring 2018 LLW Forum Meeting April 17, 2018