**METROPOLITAN      EDISON COMPANY**

**2006      ANNUAL      REPORT TO STOCKHOLDERS**

| **Contents**                                                                          | **Page** |
|---------------------------------------------------------------------------------------|----------|
|                                                                                  |     |
| Glossary                of                Terms                                       | i-ii     |
| Report                of                Independent Registered Public Accounting Firm | 1        |
| Selected                Financial Data                                                | 2        |
| Management's                Discussion and Analysis                                   | 3-14     |
| Consolidated                Statements of Income                                      | 15       |
| Consolidated                Balance Sheets                                            | 16       |
| Consolidated                Statements of Capitalization                              | 17       |
| Consolidated                Statements of Common Stockholder's Equity                 | 18       |
| Consolidated                Statements of Cash Flows                                  | 19       |
| Consolidated                Statements of Taxes                                       | 20       |
| Notes                to                Consolidated Financial Statements              | 21-37    |

----

**GLOSSARY      OF      TERMS**

| ATSI                                                                                                                                                            | American                Transmission Systems, Inc., owns and operates transmission                facilities                                                                              |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| CEI                                                                                                                                                             | The                Cleveland                Electric Illuminating Company, an affiliated Ohio electric                utility                                                             |
| Companies                                                                                                                                                       | OE,                CEI, TE,                Penn, JCP&L, Met-Ed and Penelec                                                                                                            |
| FES                                                                                                                                                             | FirstEnergy                Solutions Corp., provides energy-related products and                services                                                                                  |
| FESC                                                                                                                                                            | FirstEnergy                Service Company, provides legal, financial, and other corporate support                services                                                                |
| FirstEnergy                                                                                                                                                     | FirstEnergy                Corp., a public utility holding company                                                                                                                        |
| GPU                                                                                                                                                             | GPU,                Inc.,                former parent of JCP&L, Met-Ed and Penelec, which merged with                FirstEnergy onNovember 7,                2001              |
| JCP&L                                                                                                                                                       | Jersey                Central                Power & Light Company, an affiliated New Jersey electric                utility                                                          |
| Met-Ed                                                                                                                                                          | Metropolitan                Edison Company                                                                                                                                                |
| NGC                                                                                                                                                             | FirstEnergy                Nuclear Generation Corp., owns nuclear generating                facilities                                                                                    |
| OE                                                                                                                                                              | Ohio                Edison                Company, an affiliated Ohio electric utility                                                                                                    |
| Penelec                                                                                                                                                         | Pennsylvania                Electric Company, an affiliated Pennsylvania electric                utility                                                                                  |
| Penn                                                                                                                                                            | Pennsylvania                Power Company, an affiliated Pennsylvania electric                utility                                                                                     |
| TE                                                                                                                                                              | The                Toledo                Edison Company, an affiliated Ohio electric utility                                                                                              |
|                                                                                                                                                            |                                                                                                                                                                                      |   |
| The                following                abbreviations and acronyms are used to identify frequently used terms                in                this report: |
|                                                                                                                                                            |                                                                                                                                                                                      |   |
| ALJ                                                                                                                                                             | Administrative                Law Judge                                                                                                                                                   |
| AOCL                                                                                                                                                            | Accumulated                Other Comprehensive Loss                                                                                                                                       |
| ARO                                                                                                                                                             | Asset                Retirement Obligation                                                                                                                                                |
| CBP                                                                                                                                                             | Competitive                Bid Process                                                                                                                                                    |
| CTC                                                                                                                                                             | Competitive                Transition Charge                                                                                                                                              |
| ECAR                                                                                                                                                            | East                Central                Area Reliability Coordination Agreement                                                                                                        |
| EPACT                                                                                                                                                           | Energy                Policy                Act of 2005                                                                                                                                   |
| FASB                                                                                                                                                            | Financial                Accounting Standards Board                                                                                                                                       |
| FERC                                                                                                                                                            | Federal                Energy                Regulatory Commission                                                                                                                        |
| FIN                                                                                                                                                             | FASB                Interpretation                                                                                                                                                        |
| FIN                46R                                                                                                                                          | FIN                46                (revised December 2003), "Consolidation of Variable Interest                Entities"                                                                |
| FIN                47                                                                                                                                           | FIN                47,                "Accounting for Conditional Asset Retirement Obligations - an                interpretation of FASB Statement No. 143"                              |
| FIN                48                                                                                                                                           | FIN                48,                "Accounting for Uncertainty in Income Taxes-an interpretation of                FASB                Statement No. 109"                              |
| Fitch                                                                                                                                                           | Fitch                Ratings,                Ltd.                                                                                                                                         |
| FMB                                                                                                                                                             | First                Mortgage                Bonds                                                                                                                                        |
| FSP                                                                                                                                                             | FASB                Staff                Position                                                                                                                                         |
| FSP                SFAS 115-1                and SFAS                124-1                                                                                      | FASB                Staff                Position No. 115-1 and SFAS 124-1, "The Meaning of Other-Than-Temporary                Impairment and its Application to Certain Investments"    |
| FSP                FIN                46(R)-6                                                                                                                   | FASB                Staff                Position No. FIN 46(R)-6, "Determining the Variability to Be Considered                in                Applying FASB interpretation No. 46(R)" |
| GAAP                                                                                                                                                            | Accounting                Principles Generally Accepted in the United States                                                                                                              |
| KWH                                                                                                                                                             | Kilowatt-hours                                                                                                                                                                            |
| MISO                                                                                                                                                            | Midwest                Independent Transmission System Operator, Inc.                                                                                                                     |
| Moody's                                                                                                                                                         | Moody's                Investors Service                                                                                                                                                  |
| NERC                                                                                                                                                            | North                American                Electric Reliability Corporation                                                                                                             |
| NOPR                                                                                                                                                            | Notice                of                Proposed Rulemaking                                                                                                                               |
| NUG                                                                                                                                                             | Non-Utility                Generation                                                                                                                                                     |
| OCI                                                                                                                                                             | Other                Comprehensive Income                                                                                                                                                 |
| OPEB                                                                                                                                                            | Other                Post-Employment Benefits                                                                                                                                             |
| PJM                                                                                                                                                             | PJM                Interconnection LLC                                                                                                                                                    |
| PLR                                                                                                                                                             | Provider                of                Last Resort                                                                                                                                     |
| PPUC                                                                                                                                                            | Pennsylvania                Public Utility Commission                                                                                                                                     |
| PRP                                                                                                                                                             | Potentially                Responsible Party                                                                                                                                              |
| PUCO                                                                                                                                                            | Public                Utilities Commission of Ohio                                                                                                                                        |
| RFP                                                                                                                                                             | Request                For                Proposal                                                                                                                                        |
| RTOR                                                                                                                                                            | Regional                Through and Out Rates                                                                                                                                             |
| S&P                                                                                                                                                         | Standard&                Poor's Ratings Service                                                                                                                                       |
| SEC                                                                                                                                                             | United                States                Securities and Exchange Commission                                                                                                            |
| SFAC                                                                                                                                                            | Statement                of                Financial Accounting Concepts                                                                                                                  |
| SFAC                7                                                                                                                                           | SFAC                No. 7,                "Using Cash Flow Information and Present Value in Accounting                Measurements"                                                       |

----

**GLOSSARY      OF TERMS,      Cont'd.**

** **

| SFAS                    | Statement                of                Financial Accounting Standards                                                                                                                                                              |
|-------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| SFAS                71  | SFAS                No. 71,                "Accounting for the Effects of Certain Types of                Regulation"                                                                                                                  |
| SFAS                87  | SFAS                No. 87,                "Employers' Accounting for Pensions"                                                                                                                                                        |
| SFAS                101 | SFAS                No. 101,                "Accounting for Discontinuation of Application of SFAS                71"                                                                                                                  |
| SFAS                106 | SFAS                No. 106,                "Employers' Accounting for Postretirement Benefits Other Than                Pensions"                                                                                                     |
| SFAS                107 | SFAS                No. 107,                "Disclosures about Fair Value of Financial Instruments"                                                                                                                                    |
| SFAS                115 | SFAS                No. 115,                "Accounting for Certain Investments in Debt and Equity                Securities"                                                                                                          |
| SFAS                133 | SFAS                No. 133,                "Accounting for Derivative Instruments and Hedging                Activities"                                                                                                              |
| SFAS                142 | SFAS                No. 142,                "Goodwill and Other Intangible Assets"                                                                                                                                                     |
| SFAS                143 | SFAS                No. 143,                "Accounting for Asset Retirement Obligations"                                                                                                                                              |
| SFAS                144 | SFAS                No. 144,                "Accounting for the Impairment or Disposal of Long-Lived                Assets"                                                                                                            |
| SFAS                157 | SFAS                No. 157,                "Fair Value Measurements"                                                                                                                                                                  |
| SFAS                158 | SFAS                No. 158,                "Employers' Accounting for Defined Benefit Pension and Other                PostretirementPlans-an                amendment of FASB Statements No. 87, 88, 106, and                132(R)" |
| SFAS                159 | SFAS                No. 159,                "The Fair Value Option for Financial Assets and Financial Liabilities                -                Including an amendment                of                FASB Statement No. 115"      |
| TMI-1                   | Three                Mile                Island Unit 1                                                                                                                                                                                 |
| TMI-2                   | Three                Mile                Island Unit 2                                                                                                                                                                                 |
| VIE                     | Variable                Interest Entity                                                                                                                                                                                                |

----

**Report      of      Independent Registered Public Accounting Firm**

----

| **METROPOLITAN                  EDISON COMPANY**                                                           |   |
|------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **SELECTED                  FINANCIAL DATA**                                                               |   |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  **For                the Years Ended December 31,**                                                  |   | **2006** |   | **2005** |   | **2004** |   | **2003** |   | **2002** |   |
| ***(Dollars                  in thousands)***                                                              |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **GENERAL                  FINANCIAL INFORMATION:**                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                  Revenues                                                                        | $      | 1,243,058 |   | $ | 1,176,418 |   | $ | 1,070,847 |   | $ | 969,788 |   | $ | 986,608 |   |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                  Income (Loss)                                                                   | $      | (158,945 | ) | $ | 75,422 |   | $ | 108,165 |   | $ | 83,938 |   | $ | 91,271 |   |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  (Loss)                  Before Cumulative Effect of a                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Change                  in                  Accounting Principles                                          |   | $ | (240,195 | ) | $ | 45,919 |   | $ | 66,955 |   | $ | 60,953 |   | $ | 63,224 |   |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  Income                  (Loss)                                                        | $      | (240,195 | ) | $ | 45,609 |   | $ | 66,955 |   | $ | 61,170 |   | $ | 63,224 |   |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  Assets                                                                              | $      | 2,614,279 |   | $ | 2,917,687 |   | $ | 3,243,546 |   | $ | 3,472,709 |   | $ | 3,564,716 |   |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **CAPITALIZATION                  AS OF DECEMBER 31:**                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common                  Stockholder's Equity                                                               |   | $ | 1,014,939 |   | $ | 1,316,099 |   | $ | 1,285,419 |   | $ | 1,292,667 |   | $ | 1,315,586 |   |
| Company-Obligated                  Mandatorily                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Preferred                  Securities                                                                      |   |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 92,409 |   |
| Long-Term                  Debt                  and Other Long-Term Obligations                           |   |   | 542,009 |   |   | 591,888 |   |   | 701,736 |   |   | 636,301 |   |   | 538,790 |   |
| Total                  Capitalization                                                                      |   |   | $ | 1,556,948 |   | $ | 1,907,987 |   | $ | 1,987,155 |   | $ | 1,928,968 |   | $ | 1,946,785 |   |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **CAPITALIZATION                  RATIOS:**                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common                  Stockholder's Equity                                                               |   |   | 65.2 | % |   | 69.0 | % |   | 64.7 | % |   | 67.0 | % |   | 67.6 | % |
| Company-Obligated                  Mandatorily                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Preferred                  Securities                                                                      |   | - |   |   | - |   |   | - |   |   | - |   |   | 4.7 |   |
| Long-Term                  Debt                  and Other Long-Term Obligations                           |   |   | 34.8 |   |   | 31.0 |   |   | 35.3 |   |   | 33.0 |   |   | 27.7 |   |
| Total                  Capitalization                                                                      |   |   |   | 100.0 | % |   | 100.0 | % |   | 100.0 | % |   | 100.0 | % |   | 100.0 | % |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **DISTRIBUTION                  KWH DELIVERIES (Millions):**                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                                                |   |   | 5,287 |   |   | 5,399 |   |   | 5,071 |   |   | 4,900 |   |   | 4,738 |   |
| Commercial                                                                                                 |   |   | 4,509 |   |   | 4,491 |   |   | 4,251 |   |   | 4,034 |   |   | 3,991 |   |
| Industrial                                                                                                 |   |   | 4,008 |   |   | 4,083 |   |   | 4,042 |   |   | 4,047 |   |   | 3,972 |   |
| Other                                                                                                      |   |   | 35 |   |   | 36 |   |   | 33 |   |   | 36 |   |   | 35 |   |
| Total                                                                                                      |   |   | 13,839 |   |   | 14,009 |   |   | 13,397 |   |   | 13,017 |   |   | 12,736 |   |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **CUSTOMERS                  SERVED:**                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                                                |   |   | 477,690 |   |   | 471,333 |   |   | 464,287 |   |   | 455,073 |   |   | 448,334 |   |
| Commercial                                                                                                 |   |   | 61,381 |   |   | 60,413 |   |   | 59,495 |   |   | 58,825 |   |   | 58,010 |   |
| Industrial                                                                                                 |   |   | 1,827 |   |   | 1,859 |   |   | 1,868 |   |   | 1,906 |   |   | 1,936 |   |
| Other                                                                                                      |   |   | 782 |   |   | 721 |   |   | 730 |   |   | 732 |   |   | 728 |   |
| Total                                                                                                      |   |   | 541,680 |   |   | 534,326 |   |   | 526,380 |   |   | 516,536 |   |   | 509,008 |   |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **NUMBER                  OF EMPLOYEES:**                                                                  |   | 701 |   |   | 678 |   |   | 651 |   |   | 659 |   |   | * |   |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *                   Met-Ed's                  employees were employed by GPU Service Company in 2002. |   |

----

**METROPOLITAN      EDISON COMPANY**

**Management's      Discussion and Analysis of**

**Results      of      Operations and Financial Condition**

***Forward-Looking      Statements:***
*      This discussion      includes forward-looking statements based on information currently available      to      management. Such statements are subject to certain risks and uncertainties.      These statements typically contain, but are not limited to, the terms      "anticipate," "potential," "expect," "believe," "estimate" and similar words.      Actual results may differ materially due to the speed and nature of increased      competition and deregulation in the electric utility industry, economic or      weather conditions affecting future sales and margins, changes in markets for      energy services, changing energy and commodity market prices, replacement power      costs being higher than anticipated or inadequately hedged, the continued      ability to collect transition and other charges or to recover increased      transmission costs, maintenance costs being higher than anticipated, legislative      and regulatory changes (including revised environmental requirements), and      the      legal and regulatory changes resulting from the implementation of the Energy      Policy Act of 2005 (including, but not limited to, the repeal of the Public      Utility Holding Company Act of 1935), the uncertainty of the timing and amounts      of the capital expenditures, adverse regulatory or legal decisions and outcomes      (including, but not limited to, the revocation of necessary licenses or      operating permits, fines or other enforcement actions and remedies) of      governmental investigations and oversight, including by the Securities and      Exchange Commission, the Nuclear Regulatory Commission and the Pennsylvania      Public Utility Commission, including the transition rate plan filings for Met-Ed      and Penelec, the continuing availability and operation of generating units,      the      inability to accomplish or realize anticipated benefits from strategic goals      (including employee workforce initiatives), the anticipated benefits from      voluntary pension plan contributions, the ability to improve electric commodity      margins and to experience growth in the distribution business, the ability      to      access the public securities and other capital markets and the cost of such      capital, the outcome, cost and other effects of present and potential legal      and      administrative proceedings and claims related to the August 14, 2003      regional power outage, the risks and other factors discussed from time to time      in our Securities and Exchange Commission filings, and other similar factors.      Also, a credit rating should not be viewed as a recommendation to buy, sell      or      hold securities and may be revised or withdrawn by a rating agency at any time.      We expressly disclaim any current intention to update any forward-looking      statements contained herein as a result of new information, future events,      or      otherwise.*

**Reclassifications**

**Results      of Operations **

*Revenues*

----

| **Changes                in KWH Sales**            |   | **2006** |     | **2005**    |   |
|----------------------------------------------------|--------|----------|----------|-------------|--------|
| ***Increase                (Decrease)***           |   |     |     |        |   |
| Retail                Electric Generation:         |   |     |     |        |   |
| Residential                                        |   |     | (1.9     | )%          |   | 6.5 | % |
| Commercial                                         |   |     | 1.2      | %           |   | 6.5 | % |
| Industrial                                         |   |     | 9.5      | %           |   | 15.5 | % |
| **Total                Electric Generation Sales** |   |     | **2.2**  |  **%** |   | **8.8** | **%** |
| Distribution                Deliveries:            |   |     |     |        |   |   |   |
| Residential                                        |   |     | (2.1     | )%          |   | 6.5 | % |
| Commercial                                         |   |     | 0.4      | %           |   | 5.6 | % |
| Industrial                                         |   |     | (1.8     | )%          |   | 1.0 | % |
| **Total                Distribution Deliveries**   |   |     | **(1.2** | **)%**      |   | **4.6** | **%** |

*Expenses*

| **Expenses                - Changes**                           |   | **2006**                           |    | **2005** |   |
|-----------------------------------------------------------------|--------|------------------------------------|---------|----------|--------|
| **Increase                (Decrease)**                          |   | ***(In                millions)*** |
| Purchased                power costs                            |   | $                                  | 14      |     | $      | 66 |   |
| Other                operating costs                            |   |                               | 53      |     |   | 61 |   |
| Provision                for                depreciation        |   |                               | (1      | )        |   | 1 |   |
| Amortization                of regulatory assets                |   |                               | 4       |     |   | 6 |   |
| Deferral                of                new regulatory assets |   |                               | (127    | )        |   | - |   |
| Goodwill                impairment                              |   |                               | 355     |     |   | - |   |
| General                taxes                                    |   |                               | 3       |     |   | 4 |   |
| **Net                increase in expenses**                     |   | **$**                              | **301** |     | **$**  | **138** |   |

*Other      Income      (Expense)*

----

*Cumulative      Effect of a Change in Accounting Principle*

**Capital      Resources and Liquidity**

*Changes      in Cash      Position*

*Cash      Flows From      Operating Activities*

| **Operating                Cash Flows**                                   |   | **2006**                           |   | **2005** |   | **2004** |   |
|---------------------------------------------------------------------------|--------|------------------------------------|--------|----------|--------|----------|--------|
|                                                                      |   | ***(In                millions)*** |   |
| Net                Income(1)                                              |   | $                                  | (240   | )        | $      | 46       |   | $ | 67 |   |
| Net                non-cash                charges(1)                     |   |                               | 347    |     |   | 79       |   |   | 50 |   |
| Pension                trust                contributions(2)              |   |                               | 3      |     |   | (25      | )      |   | (23 | ) |
| Working                capital                                            |   |                               | 112    |     |   | 25       |   |   | (20 | ) |
| Net                cash                provided from operating activities |   | $                                  | 222    |     | $      | 125      |   | $ | 74 |   |

|  (1)               | Includes              goodwill              impairment of $355 million in 2006.                                                                                                                                                                                                                                                                                |
|-------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                (2) | Pension              trust              contributions in 2005 and 2004 are net of $11 million and              $16 million of income tax benefits,   respectively. The $3              million cash inflow in 2006 represents reduced income taxes paid in              2006              relating to a January 2007 pension contribution. |
|                    |                                                                                                                                                                                                                                                                                                                                                           |

----

*    Cash      Flows From      Financing Activities*

| **Securities                Issued or Redeemed** |   | **2006**                           |   | **2005** |   | **2004** |   |
|--------------------------------------------------|--------|------------------------------------|--------|----------|--------|----------|--------|
|                                             |   | ***(In                millions)*** |   |
| New                Issues:                       |   |                               |   |     |   |     |   |   |   |   |
| Pollution                control notes           |   | $                                  | -      |     | $      | 29       |   | $ | - |   |
| Unsecured                notes                   |   |                               | -      |     |   | -        |   |   | 247 |   |
|                                             |   | $                                  | -      |     | $      | 29       |   | $ | 247 |   |
| Redemptions:                                     |   |                               |   |     |   |     |   |   |   |   |
| FMB                                              |   | $                                  | 100    |     | $      | 66       |   | $ | 90 |   |
| Subordinated                debentures           |   |                               | -      |     |   | -        |   |   | 100 |   |
| Other                                            |   |                               | -      |     |   | -        |   |   | 6 |   |
|                                             |   | $                                  | 100    |     | $      | 66       |   | $ | 196 |   |
|                                             |   |                               |   |     |   |     |   |   |   |   |
| Short-term                Borrowings, net        |   | $                                  | 1      |     | $      | 60       |   | $ | 15 |   |

----

|                **Ratings                of Securities** |   |                **Securities**  |   |                **S&P** |   |                   **Moody's** |   |   **Fitch** |
|--------------------------------------------------------------|--------|-------------------------------------|--------|---------------------------------|--------|-----------------------------------------|--------|-----------------------|
|                                                         |   |                                |   |                            |   |                                    |   |                  |
|  **FirstEnergy**                                        |   |  Senior              unsecured |   |  BBB-                      |   |  Baa3                              |   |  BBB             |
|                                                         |   |                                |   |                            |   |                                    |   |                  |
|  **Met-Ed**                                             |   |  Senior              unsecured |   |  BBB                       |   |  Baa2                              |   |  BBB             |

*    Cash      Flows From      Investing Activities*

**Contractual      Obligations**

|                                                     |   |                                     |   |     |   |                  **2008-** |   |                  **2010-** |   |           |   |
|----------------------------------------------------------|--------|------------------------------------------|--------|----------|--------|---------------------------------|--------|---------------------------------|--------|----------------|--------|
| **Contractual                Obligations**               |   | **Total**                                |   | **2007** |   | **2009**                        |   | **2011**                        |   | **Thereafter** |   |
|                                                     |   | ***(In                millions)***  |   |
| Long-term                debt                (1)         |   | $                                        | 592    |     | $      | 50                              |   | $                               | -      |           | $      | 100 |   | $ | 442 |   |
| Short-term                borrowings                     |   |                                     | 142    |     |   | 142                             |   |                            | -      |           |   | - |   |   | - |   |
| Operating                leases (2)                      |   |                                     | 65     |     |   | 4                               |   |                            | 8      |           |   | 7 |   |   | 46 |   |
| Interest                on                long-term debt |   |                                     | 188    |     |   | 27                              |   |                            | 52     |           |   | 45 |   |   | 64 |   |
| Pension                funding (3)                       |   |                                     | 11     |     |   | 11                              |   |                            | -      |           |   | - |   |   | - |   |
| Purchases                (4)                             |   |                                     | 2,609  |     |   | 517                             |   |                            | 929    |           |   | 573 |   |   | 590 |   |
| Total                                                    |   | $                                        | 3,607  |     | $      | 751                             |   | $                               | 989    |           | $      | 725 |   | $ | 1,142 |   |

|  (1) |  Amounts              reflected do not include interest on long-term debt.                                                                                              |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  (2) |  Operating              lease payments are net of reimbursements from subleases (see Note 5              -              Leases).                                        |
|  (3) |  We                estimate that no further pension contributions will be required during                the                2008-2011 period to maintain                |
|      |  our              defined              benefit pension plan's funding at a minimum required level as determined              by government                              |
|      |  regulations.               We are unable to estimate projected contributions beyond 2011. See              Note 3 to the consolidated                        |
|      |  financial              statements.                                                                                                                                     |
|  (4) |  Power              purchases under contracts              with              fixed or              minimum              quantities and              approximate timing. |

**Market      Risk Information**

----

*Commodity      Price      Risk *

| **Increase                (Decrease) in the Fair Value of Derivative                Contracts** |   | **Non-Hedge**                      |   | **Hedge** |   | **Total** |   |
|-------------------------------------------------------------------------------------------------|--------|------------------------------------|--------|-----------|--------|-----------|--------|
|                                                                                            |   | ***(In                millions)*** |   |
| Change                in the                fair value of commodity derivative contracts        |   |                               |   |      |   |      |   |
| Outstanding                net liability as of January 1, 2006                                  |   | $                                  | 27     |      | $      | -         |   | $ | 27 |   |
| New                contract                value when entered                                   |   |                               | -      |      |   | -         |   |   | - |   |
| Additions/Changes                in value of existing contracts                                 |   |                               | 4      |      |   | -         |   |   | 4 |   |
| Change                in                techniques/assumptions                                  |   |                               | -      |      |   | -         |   |   | - |   |
| Settled                contracts                                                                |   |                               | (9     | )         |   | -         |   |   | (9 | ) |
| Other                                                                                           |   |                               | 1      |      |   | -         |   |   | 1 |   |
| **Net                Assets - Derivatives Contracts as of December 31,                2006**(1) |   | **$**                              | 23     |      | **$**  | -         |   | **$** | 23 |   |
|                                                                                            |   |                               |   |      |   |      |   |   |   |   |
| **Impact                of Changes in Commodity Derivative Contracts**(2)                       |   |                               |   |      |   |      |   |   |   |   |
| Income                Statement Effects (Pre-Tax)                                               |   | $                                  | (2     | )         | $      | -         |   | $ | (2 | ) |
| Balance                Sheet                Effects:                                            |   |                               |   |      |   |      |   |   |   |   |
| OCI                (Pre-Tax)                                                                    |   | $                                  | -      |      | $      | -         |   | $ | - |   |
| Regulatory                Asset (net)                                                           |   | $                                  | 3      |      | $      | -         |   | $ | 3 |   |

|  (1)         | Includes              $23              million from an embedded option that is offset by a regulatory              liability and does not affect earnings.    |
|-----------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  (2)                                                 | Represents              the              change in value of existing contracts, settled contracts and changes              in              techniques/assumptions. |
|                                                      |                                                                                                                                                               |

|                                                 |   | **Non-Hedge**                      |   | **Hedge** |   | **Total** |   |
|------------------------------------------------------|--------|------------------------------------|--------|-----------|--------|-----------|--------|
|                                                 |   | ***(In                millions)*** |   |
| **Non-Current-**                                     |   |                               |   |      |   |      |   |   |   |   |
| Other                Deferred                Charges |   | $                                  | 23     |      | $      | -         |   | $ | 23 |   |
| Other                noncurrent liabilities          |   |                               | -      |      |   | -         |   |   | - |   |
|                                                 |   |                               |   |      |   |      |   |   |   |   |
| **Net                assets**                        |   | **$**                              | 23     |      | **$**  | -         |   | **$** | 23 |   |

| **Source                of Information**                        |   |                               |   |     |   |     |   |     |   |     |   |           |   |      |   |
|-----------------------------------------------------------------|--------|------------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------------|--------|-----------|--------|
| **-                Fair                Value by Contract Year** |   | **2007**                           |   | **2008** |   | **2009** |   | **2010** |   | **2011** |   | **Thereafter** |   | **Total** |   |
|                                                            |   | ***(In                millions)*** |   |
| Other                external                sources(1)         |   | $                                  | 5      |     | $      | 5        |   | $        | 5      |     | $      | 4              |   |  $   | -      |   | $ | - |   | $ | 19 |   |
| Prices                based                on models            |   |                               | -      |     |   | -        |   |     | -      |     |   | -              |   |      | 4      |   |   | - |   |   | 4 |   |
| **Total****(2)**                                                |   | $                                  | 5      |     | $      | 5        |   | $        | 5      |     | $      | 4              |   | $         | 4      |   | $ | - |   | $ | 23 |   |

|  (1) |   |  Broker              quote              sheets.                                                                                                             |
|-----------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  (2) |   |  Includes              $23              million from an embedded option that is offset by a regulatory liability              and does not affect earnings. |
|      |   |                                                                                                                                                             |

----

*Interest      Rate      Risk*

**Comparison      of Carrying Value to Fair Value**

|                                                                                          |   |                                       |   |     |   |     |   |     |   |     |   | **There-** |   |      |   | **Fair**  |   |
|-----------------------------------------------------------------------------------------------|--------|--------------------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|------------|--------|-----------|--------|-----------|--------|
| **Year                of Maturity**                                                           |   | **2007**                                   |   | **2008** |   | **2009** |   | **2010** |   | **2011** |   | **after**  |   | **Total** |   | **Value** |   |
|                                                                                          |   | ***(Dollars                in millions)*** |   |
| Assets                                                                                        |   |                                       |   |     |   |     |   |     |   |     |   |       |   |      |   |      |   |
| Investments                Other Than Cashand                Cash                Equivalents- |   |                                       |   |
| Fixed                Income                                                                   |   |                                       |   |     |   |     |   |     |   |     |   |       |   |      |   |      | $      | 105 |   | **$** | 105 |   | **$** | 106 |   |
| Average                interest rate                                                          |   |                                       |   |     |   |     |   |     |   |     |   |       |   |      |   |      |   | 4.9 | % |   | 4.9 | % |   |   |   |
|                                                                                          |
|                                                                                          |   |                                       |   |     |   |     |   |     |   |     |   |       |   |      |   |      |   |   |   |   |   |   |   |   |   |
| Liabilities                                                                                   |   |                                       |   |     |   |     |   |     |   |     |   |       |   |      |   |      |   |   |   |   |   |   |   |   |   |
| Long-term                Debt:                                                                |   |                                       |
| Fixed                rate                                                                     |   | $                                          | 50     |     |   |     |   |     |   |     | $      | 100        |   |      |   |      | $      | 414 |   | **$** | 564 |   | **$** | 543 |   |
| Average                interest rate                                                          |   |                                       | 5.9    | %        |   |     |   |     |   |     |   | 4.5        | %      |      |   |      |   | 4.9 | % |   | 4.9 | % |   |   |   |
| Variable                rate                                                                  |   |                                       |   |     |   |     |   |     |   |     |   |       |   |      |   |      | $      | 28 |   | **$** | 28 |   | **$** | 29 |   |
| Average                interest rate                                                          |   |                                       |   |     |   |     |   |     |   |     |   |       |   |      |   |      |   | 3.8 | % |   | 3.8 | % |   |   |   |
| Short-term                Borrowings                                                          |   | $                                          | 142    |     |   |     |   |     |   |     |   |       |   |      |   |      |   |   |   | **$** | 142 |   | **$** | 142 |   |
| Average                interest rate                                                          |   |                                       | 5.6    | %        |   |     |   |     |   |     |   |       |   |      |   |      |   |   |   |   | 5.6 | % |   |   |   |

*Equity      Price      Risk*

**Regulatory      Matters**

----

----

**Environmental      Matters**

**Legal      Matters**

**Critical      Accounting Policies**

----

*    Goodwill      *

*Revenue      Recognition *

*Regulatory      Accounting *

*Pension      and      Other Postretirement Benefits Accounting *

----

| **Increase                in Costs from Adverse Changes in Key Assumptions** |   |
|------------------------------------------------------------------------------|--------|
|                                                                         |   |   |   |   |   |   |   |   |   |
| **Assumption**                                                               |   | **Adverse                Change** |   | **Pension** |   | **OPEB** |   | **Total** |   |
|                                                                         |   |   |   | ***(In                millions)*** |   |
| Discount                rate                                                 |   |   | Decrease                by                0.25 | % | $ | 0.9 |   | $ | 0.2 |   | $ | 1.1 |   |
| Long-term                return on assets                                    |   |   | Decrease                by                0.25 | % | $ | 1.1 |   | $ | 0.2 |   | $ | 1.3 |   |
| Health                care                trend rate                         |   |   | Increase                by                1 | % |   | na |   | $ | 0.5 |   | $ | 0.5 |   |

*    Long-Lived      Assets*

* *

*Asset      Retirement      Obligations *

----

**New      Accounting Standards and Interpretations Adopted **

|  *SFAS                159 -                The Fair Value Option for Financial Assets and Financial Liabilities                -                Including an amendment of FASB Statement No. 115* |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                   |   |

*Fair      Value      Measurements, *
*Disclosures      about Fair Value of Financial Instruments. *

|   |  *SFAS                157 -                "Fair Value Measurements"* |
|--------|----------------------------------------------------------------------------|
|   |                                                                       |

|  *FSP              FIN 46(R)-6 - "Determining the Variability to Be Considered in Applying              FASB interpretation No. 46(R)"* |
|----------------------------------------------------------------------------------------------------------------------------------------------|
| * *                                                                                                                                     |   |

| Step                1: | Analyze                the                nature of the risks in the entity                                                                                                                                                  |
|------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Step                2: | Determine                the                purpose(s) for which the entity was created and determine the variability                the entity is designed to create and pass along to its interest                holders. |

*                      FIN 48 - "Accounting for Uncertainty in Income Taxes - an interpretation of      FASB      Statement No. 109"*

----

| **METROPOLITAN                    EDISON COMPANY**                                                                                                             |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                           |   |    |   |    |   |    |   |
| **CONSOLIDATED                    STATEMENTS OF INCOME**                                                                                                       |   |
|                                                                                                                                                           |   |    |   |    |   |    |   |
|                                                                                                                                                           |   |    |   |    |   |    |   |
| **For                    the Years Ended December 31,**                                                                                                        |   | **2006** |   | **2005** |   | **2004** |   |
|                                                                                                                                                           |   | ***(In                    thousands)*** |   |
| **REVENUES:**                                                                                                                                                  |   |    |   |    |   |    |   |
| Electric                    sales                                                                                                                              |   |  $ | 1,175,655 |   |  $ | 1,113,228 |   |  $ | 1,011,947 |   |
| Gross                    receipts                    tax collections                                                                                           |   |   | 67,403 |   |   | 63,190 |   |   | 58,900 |   |
|                                                                                                                                                                |   |   | 1,243,058 |   |   | 1,176,418 |   |   | 1,070,847 |   |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| **EXPENSES:**                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |
| Purchased                    power (Note 2(I))                                                                                                                 |   |   | 634,433 |   |   | 620,764 |   |   | 554,949 |   |
| Other                    operating costs (Note 2(I))                                                                                                           |   |   | 304,243 |   |   | 251,442 |   |   | 190,440 |   |
| Provision                    for                    depreciation                                                                                               |   |   | 41,715 |   |   | 42,684 |   |   | 41,161 |   |
| Amortization                    of regulatory assets                                                                                                           |   |   | 115,672 |   |   | 112,117 |   |   | 105,675 |   |
| Deferral                    of                    new regulatory assets                                                                                        |   |   | (126,571 | ) |   | - |   |   | - |   |
| Goodwill                    impairment (Note 2(E))                                                                                                             |   |   | 355,100 |   |   | - |   |   | - |   |
| General                    taxes                                                                                                                               |   |   | 77,411 |   |   | 73,989 |   |   | 70,457 |   |
| Total                    expenses                                                                                                                              |   |   | 1,402,003 |   |   | 1,100,996 |   |   | 962,682 |   |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| **OPERATING                    INCOME (LOSS)**                                                                                                                 |   |   | (158,945 | ) |   | 75,422 |   |   | 108,165 |   |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| **OTHER                    INCOME (EXPENSE):**                                                                                                                 |   |   |   |   |   |   |   |   |   |   |
| Interest                    income                                                                                                                             |   |   | 34,402 |   |   | 36,500 |   |   | 36,140 |   |
| Miscellaneous                    income                                                                                                                        |   |   | 8,042 |   |   | 8,366 |   |   | 5,646 |   |
| Interest                    expense                                                                                                                            |   |   | (47,385 | ) |   | (44,655 | ) |   | (45,057 | ) |
| Capitalized                    interest                                                                                                                        |   |   | 1,017 |   |   | 370 |   |   | 278 |   |
| Total                    other                    income (expense)                                                                                             |   |   | (3,924 | ) |   | 581 |   |   | (2,993 | ) |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| **INCOME                    (LOSS) BEFORE INCOME TAXES**                                                                                                       |   |   | (162,869 | ) |   | 76,003 |   |   | 105,172 |   |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| **INCOME                    TAXES**                                                                                                                            |   |   | 77,326 |   |   | 30,084 |   |   | 38,217 |   |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| **INCOME                    (LOSS) BEFORE CUMULATIVE EFFECT**                                                                                                  |   |   |   |   |   |   |   |   |   |   |
| **OF                    A                    CHANGE IN ACCOUNTING PRINCIPLE**                                                                                  |   |   | (240,195 | ) |   | 45,919 |   |   | 66,955 |   |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| Cumulative                    effect of a change in accounting principle (net of income tax                                                                    |   |   |   |   |   |   |   |   |   |   |
| benefit                    of                    $220,000) (Note 2(G))                                                                                         |   |   | - |   |   | (310 | ) |   | - |   |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| **NET                    INCOME (LOSS)**                                                                                                                       |   | $ | (240,195 | ) | $ | 45,609 |   | $ | 66,955 |   |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| The                    accompanying Notes to Consolidated Financial Statements are an                    integral                    part of these statements. |   |   |   |

----

| **METROPOLITAN                    EDISON COMPANY**                                                                                                                 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                               |   |    |   |    |   |
| **CONSOLIDATED                    BALANCE SHEETS**                                                                                                                 |   |
|                                                                                                                                                               |   |    |   |    |   |
|                                                                                                                                                               |   |    |   |    |   |
| **As                    of                    December 31,**                                                                                                       |   | **2006** |   | **2005** |   |
|                                                                                                                                                               |   | ***(In                    thousands)*** |   |
| **ASSETS**                                                                                                                                                         |   |    |   |    |   |
| **CURRENT                    ASSETS:**                                                                                                                             |   |    |   |    |   |
| Cash                    and cash                    equivalents                                                                                                    |   | $ | 130 |   | $ | 120 |   |
| Receivables-                                                                                                                                                       |   |   |   |   |   |   |   |
| Customers                    (less accumulated provisions of $4,153,000 and $4,352,000,                                                                            |   |   |   |   |   |   |   |
| respectively,                    for uncollectible accounts)                                                                                                       |   |   | 127,084 |   |   | 129,854 |   |
| Associated                    companies                                                                                                                            |   |   | 3,604 |   |   | 37,267 |   |
| Other                                                                                                                                                              |   |   | 8,107 |   |   | 8,780 |   |
| Notes                    receivable from associated companies                                                                                                      |   |   | 31,109 |   |   | 27,867 |   |
| Prepayments                    and other                                                                                                                           |   |   | 14,957 |   |   | 7,912 |   |
|                                                                                                                                                               |   |   | 184,991 |   |   | 211,800 |   |
| **UTILITY                    PLANT:**                                                                                                                              |   |   |   |   |   |   |   |
| In                    service                                                                                                                                      |   |   | 1,920,563 |   |   | 1,856,425 |   |
| Less                    -                    Accumulated provision for depreciation                                                                                |   |   | 739,719 |   |   | 721,566 |   |
|                                                                                                                                                               |   |   | 1,180,844 |   |   | 1,134,859 |   |
| Construction                    work in progress                                                                                                                   |   |   | 18,466 |   |   | 20,437 |   |
|                                                                                                                                                               |   |   | 1,199,310 |   |   | 1,155,296 |   |
| **OTHER                    PROPERTY AND INVESTMENTS:**                                                                                                             |   |   |   |   |   |   |   |
| Nuclear                    plant                    decommissioning trusts                                                                                         |   |   | 269,777 |   |   | 234,854 |   |
| Other                                                                                                                                                              |   |   | 1,362 |   |   | 1,453 |   |
|                                                                                                                                                               |   |   | 271,139 |   |   | 236,307 |   |
| **DEFERRED                    CHARGES AND OTHER ASSETS:**                                                                                                          |   |   |   |   |   |   |   |
| Goodwill                                                                                                                                                           |   |   | 496,129 |   |   | 864,438 |   |
| Regulatory                    assets                                                                                                                               |   |   | 409,095 |   |   | 309,556 |   |
| Prepaid                    pension costs                                                                                                                           |   |   | 7,261 |   |   | 89,005 |   |
| Other                                                                                                                                                              |   |   | 46,354 |   |   | 51,285 |   |
|                                                                                                                                                               |   |   | 958,839 |   |   | 1,314,284 |   |
|                                                                                                                                                               |   | $ | 2,614,279 |   | $ | 2,917,687 |   |
| **LIABILITIES                    AND CAPITALIZATION**                                                                                                              |   |   |   |   |   |   |   |
| **CURRENT                    LIABILITIES:**                                                                                                                        |   |   |   |   |   |   |   |
| Currently                    payable long-term debt                                                                                                                |   | $ | 50,000 |   | $ | 100,000 |   |
| Short-term                    borrowings-                                                                                                                          |   |   |   |   |   |   |   |
| Associated                    companies                                                                                                                            |   |   | 141,501 |   |   | 140,240 |   |
| Accounts                    payable-                                                                                                                               |   |   |   |   |   |   |   |
| Associated                    companies                                                                                                                            |   |   | 100,232 |   |   | 37,220 |   |
| Other                                                                                                                                                              |   |   | 59,077 |   |   | 27,507 |   |
| Accrued                    taxes                                                                                                                                   |   |   | 11,300 |   |   | 17,911 |   |
| Accrued                    interest                                                                                                                                |   |   | 7,496 |   |   | 9,438 |   |
| Other                                                                                                                                                              |   |   | 22,825 |   |   | 24,274 |   |
|                                                                                                                                                               |   |   | 392,431 |   |   | 356,590 |   |
| **CAPITALIZATION**(See                    Consolidated Statements of Capitalization)**:**                                                                          |   |   |   |   |   |   |   |
| Common                    stockholder's equity                                                                                                                     |   |   | 1,014,939 |   |   | 1,316,099 |   |
| Long-term                    debt                    and other long-term obligations                                                                               |   |   | 542,009 |   |   | 591,888 |   |
|                                                                                                                                                               |   |   | 1,556,948 |   |   | 1,907,987 |   |
| **NONCURRENT                    LIABILITIES:**                                                                                                                     |   |   |   |   |   |   |   |
| Accumulated                    deferred income taxes                                                                                                               |   |   | 387,456 |   |   | 344,929 |   |
| Accumulated                    deferred investment tax credits                                                                                                     |   |   | 9,244 |   |   | 10,043 |   |
| Nuclear                    fuel                    disposal costs                                                                                                  |   |   | 41,459 |   |   | 39,567 |   |
| Asset                    retirement obligations                                                                                                                    |   |   | 151,107 |   |   | 142,020 |   |
| Retirement                    benefits                                                                                                                             |   |   | 19,599 |   |   | 57,809 |   |
| Other                                                                                                                                                              |   |   | 56,035 |   |   | 58,742 |   |
|                                                                                                                                                               |   |   | 664,900 |   |   | 653,110 |   |
| **COMMITMENTS                    AND CONTINGENCIES (Notes 5 and 11)**                                                                                              |   |   |   |   |   |   |   |
|                                                                                                                                                               |   | $ | 2,614,279 |   | $ | 2,917,687 |   |
|                                                                                                                                                               |   |   |   |   |   |   |   |
| The                    accompanying Notes to Consolidated Financial Statements are an                    integral                    part of these balance sheets. |

----

| **METROPOLITAN                    EDISON COMPANY**** **                                                                                              |         |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|
|                                                                                                                                                 |         |
| **CONSOLIDATED                    STATEMENTS OF CAPITALIZATION**                                                                                               |         |
|                                                                                                                                                           |         |   |   |   |   |    |   |   |   |
| **As                    of                    December 31,**                                                                                                   |         |  **2006** |   | **2005** |   |
| ***(Dollars                    in thousands)***                                                                                                                |         |
| **COMMON                    STOCKHOLDER'S EQUITY:**                                                                                                            |         |    |   |   |   |
|    Common                  stock,                  without par value, 900,000 shares authorized                                                 |    |   |   |   |
| 859,500                    shares                    outstanding                                                                                               | $            | 1,276,075 |   | $ | 1,287,093 |   |
| Accumulated                    other comprehensive loss (Note 2(F))                                                                                            |         | (26,516 | ) |   | (1,569 | ) |
| Retained                    earnings (Accumulated deficit) (Note 8(A))                                                                                         |         | (234,620 | ) |   | 30,575 |   |
| Total                                                                                                                                                          |         | 1,014,939 |   |   | 1,316,099 |   |
|                                                                                                                                                           |         |   |   |   |   |   |
|                                                                                                                                                           |         |   |   |   |   |   |
|                                                                                                                                                           |         |   |   |   |   |   |
| **LONG-TERM                    DEBT (Note 8(C)):**                                                                                                             |         |   |   |   |   |   |
| First                    mortgage                    bonds-                                                                                                    |         |   |   |   |   |   |
| 5.950%                    due                    2027                                                                                                          |         | 13,690 |   |   | 13,690 |   |
| Total                                                                                                                                                          |         | 13,690 |   |   | 13,690 |   |
|                                                                                                                                                           |         |   |   |   |   |   |
| Unsecured                    notes-                                                                                                                            |         |   |   |   |   |   |
| 5.720%                    due                    2006                                                                                                          |         | - |   |   | 100,000 |   |
| 5.930%                    due                    2007                                                                                                          |         | 50,000 |   |   | 50,000 |   |
| 4.450%                    due                    2010                                                                                                          |         | 100,000 |   |   | 100,000 |   |
| 4.950%                    due                    2013                                                                                                          |         | 150,000 |   |   | 150,000 |   |
| 4.875%                    due                    2014                                                                                                          |         | 250,000 |   |   | 250,000 |   |
| *                      3.800%                    due 2021                                                                                            |         | 28,500 |   |   | 28,500 |   |
| Total                                                                                                                                                          |         | 578,500 |   |   | 678,500 |   |
|                                                                                                                                                           |         |   |   |   |   |   |
|                                                                                                                                                           |         |   |   |   |   |   |
| Net                    unamortized discount on debt                                                                                                            |         | (181 | ) |   | (302 | ) |
| Long-term                    debt                    due within one year                                                                                       |         | (50,000 | ) |   | (100,000 | ) |
| Total                    long-term debt                                                                                                                        |         | 542,009 |   |   | 591,888 |   |
| **TOTAL                    CAPITALIZATION**                                                                                                                    | $            | 1,556,948 |   | $ | 1,907,987 |   |
|                                                                                                                                                           |         |   |   |   |   |   |
|                                                                                                                                                           |         |   |   |   |   |   |
| *                    Denotes                    variable rate issue with applicable year-end interest rate                    shown.                           |         |   |   |   |   |   |
|                                                                                                                                                           |         |   |   |   |   |   |
| The                    accompanying Notes to Consolidated Financial Statements are an                    integral                    part of these statements. |         |   |   |

----

| **METROPOLITAN                    EDISON COMPANY**                                                                                                             |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |
| **CONSOLIDATED                    STATEMENTS OF COMMON STOCKHOLDER'S EQUITY**                                                                                  |   |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                           |   |   |   |   |   |   |   | **Accumulated** |   | **Retained** |   |
|                                                                                                                                                           |   |   |   | **Common                    Stock** |   | **Other** |   | **Earnings** |   |
|                                                                                                                                                           |   | **Comprehensive** |   | **Number** |   | **Carrying** |   | **Comprehensive** |   | **(Accumulated** |   |
|                                                                                                                                                           |   | **Income                    (Loss)** |   | **of                    Shares** |   | **Value** |   | **Income                    (Loss)** |   | **Deficit)** |   |
|                                                                                                                                                           |   | ***(Dollars                    in thousands)*** |   |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |
| Balance,                    January 1, 2004                                                                                                                    |   |   |   |   |   | 859,500 |   | $ | 1,298,130 |   | $ | (32,474 | ) | $ | 27,011 |   |
| Net                    income                                                                                                                                  |   | $ | 66,955 |   |   |   |   |   |   |   |   |   |   |   | 66,955 |   |
| Net                    unrealized                    loss on investments                                                                                       |   |   | (26 | ) |   |   |   |   |   |   |   | (26 | ) |   |   |   |
| Net                    unrealized                    loss on derivative instruments, net of                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $1,279,000                    of                    income tax benefits                                                                                        |   |   | (1,819 | ) |   |   |   |   |   |   |   | (1,819 | ) |   |   |   |
| Minimum                    liability for unfunded retirement benefits,                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| net                    of                    $6,502,000 of income tax benefits                                                                                 |   |   | (9,171 | ) |   |   |   |   |   |   |   | (9,171 | ) |   |   |   |
| Comprehensive                    income                                                                                                                        |   | $ | 55,939 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                    dividends                    on common stock                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (55,000 | ) |
| Purchase                    accounting fair value adjustment                                                                                                   |   |   |   |   |   |   |   |   | (8,187 | ) |   |   |   |   |   |   |
| Balance,                    December 31, 2004                                                                                                                  |   |   |   |   |   | 859,500 |   |   | 1,289,943 |   |   | (43,490 | ) |   | 38,966 |   |
| Net                    income                                                                                                                                  |   | $ | 45,609 |   |   |   |   |   |   |   |   |   |   |   | 45,609 |   |
| Net                    unrealized                    gain on investments,                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| net                    of $27,000                    of income taxes                                                                                           |   |   | 39 |   |   |   |   |   |   |   |   | 39 |   |   |   |   |
| Net                    unrealized                    gain on derivative instruments,                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| net                    of                    $140,000 of income taxes                                                                                          |   |   | 196 |   |   |   |   |   |   |   |   | 196 |   |   |   |   |
| Minimum                    liability for unfunded retirement benefits,                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| net                    of                    $29,564,000 of income taxes                                                                                       |   |   | 41,686 |   |   |   |   |   |   |   |   | 41,686 |   |   |   |   |
| Comprehensive                    income                                                                                                                        |   | $ | 87,530 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Restricted                    stock units                                                                                                                      |   |   |   |   |   |   |   |   | 28 |   |   |   |   |   |   |   |
| Cash                    dividends                    on common stock                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (54,000 | ) |
| Purchase                    accounting fair value adjustment                                                                                                   |   |   |   |   |   |   |   |   | (2,878 | ) |   |    |   |   |    |   |
| Balance,                    December 31, 2005                                                                                                                  |   |   |  |   |   | 859,500 |   |   | 1,287,093 |   |   | (1,569 | ) |   | 30,575 |   |
| Net                    loss                                                                                                                                    |   | $ | (240,195 | ) |   |   |   |   |   |   |   |   |   |   | (240,195 | ) |
| Net                    unrealized                    gain on derivative instruments,                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| net                    of                    $139,000 of income taxes                                                                                          |   |   | 196 |   |   |   |   |   |   |   |   | 196 |   |   |   |   |
| Comprehensive                    loss                                                                                                                          |   | $ | (239,999 | ) |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    liability                    for unfunded retirement benefits                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| due                    to the                    implementation of SFAS 158, net                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| of                    $26,715,000                    of income tax benefits                                                                                    |   |   |   |   |   |   |   |   |   |   |   | (25,143 | ) |   |   |   |
| Restricted                    stock units                                                                                                                      |   |   |   |   |   |   |   |   | 50 |   |   |   |   |   |   |   |
| Stock                    based                    compensation                                                                                                 |   |   |   |   |   |   |   |   | 38 |   |   |   |   |   |   |   |
| Cash                    dividends                    on common stock                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (25,000 | ) |
| Purchase                    accounting fair value adjustment                                                                                                   |   |   |   |   |   |   |   |   | (11,106 | ) |   |   |   |   |   |   |
| Balance,                    December 31, 2006                                                                                                                  |   |   |   |   |   | 859,500 |   | $ | 1,276,075 |   | $ | (26,516 | ) | $ | (234,620 | ) |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The                    accompanying Notes to Consolidated Financial Statements are an                    integral                    part of these statements. |   |   |   |   |   |   |

----

| **METROPOLITAN                    EDISON COMPANY**                                                                                                             |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                           |   |    |   |    |   |    |   |
| **CONSOLIDATED                    STATEMENTS OF CASH FLOWS**                                                                                                   |   |
|                                                                                                                                                           |   |    |   |
|                                                                                                                                                           |   |    |   |    |   |    |   |
|                                                                                                                                                           |   |   |   |    |   |
|                                                                                                                                                           |   |   |   |    |   |
| **For                    the Years Ended December 31,**                                                                                                        |   | **2006** |   | **2005** |   | **2004** |   |
|                                                                                                                                                           |   | ***(In                    thousands)*** |   |
|                                                                                                                                                           |   |    |   |    |   |    |   |
| **CASH                    FLOWS FROM OPERATING ACTIVITIES:**                                                                                                   |   |    |   |    |   |    |   |
| Net                    income                    (loss)                                                                                                        |   | $ | (240,195 | ) | $ | 45,609 |   | $ | 66,955 |   |
| Adjustments                    to                    reconcile net income (loss) to net cash from operating                    activities-                     |   |   |   |   |   |   |   |   |   |   |
| Provision                    for                    depreciation                                                                                               |   |   | 41,715 |   |   | 42,684 |   |   | 41,161 |   |
| Amortization                    of regulatory assets                                                                                                           |   |   | 115,672 |   |   | 112,117 |   |   | 105,675 |   |
| Deferred                    costs                    recoverable as regulatory assets                                                                          |   |   | (82,674 | ) |   | (67,763 | ) |   | (99,987 | ) |
| Deferral                    of                    new regulatory assets                                                                                        |   |   | (126,571 | ) |   | - |   |   | - |   |
| Deferred                    income taxes and investment tax credits, net                                                                                       |   |   | 50,278 |   |   | (2,157 | ) |   | 18,495 |   |
| Accrued                    compensation and retirement benefits                                                                                                |   |   | (6,876 | ) |   | (5,378 | ) |   | 398 |   |
| Goodwill                    impairment                                                                                                                         |   |   | 355,100 |   |   | - |   |   | - |   |
| Cash                    collateral to suppliers                                                                                                                |   |   | (1,580 | ) |   | - |   |   | - |   |
| Cumulative                    effect of a change in accounting principle                                                                                       |   |   | - |   |   | 310 |   |   | - |   |
| Pension                    trust                    contributions                                                                                              |   |   | - |   |   | (35,789 | ) |   | (38,823 | ) |
| Decrease                    (increase) in operating assets-                                                                                                    |   |   |   |   |   |   |   |   |   |   |
| Receivables                                                                                                                                                    |   |   | 37,107 |   |   | 77,981 |   |   | (65,979 | ) |
| Prepayments                    and other current assets                                                                                                        |   |   | (4,385 | ) |   | 3,145 |   |   | (4,457 | ) |
| Increase                    (decrease) in operating liabilities-                                                                                               |   |   |   |   |   |   |   |   |   |   |
| Accounts                    payable                                                                                                                            |   |   | 94,582 |   |   | (50,249 | ) |   | 35,639 |   |
| Accrued                    taxes                                                                                                                               |   |   | (5,647 | ) |   | 5,954 |   |   | 3,195 |   |
| Accrued                    interest                                                                                                                            |   |   | (1,804 | ) |   | (2,180 | ) |   | (230 | ) |
| Other                                                                                                                                                          |   |   | (2,633 | ) |   | 893 |   |   | 11,784 |   |
|  Net                    cash                    provided from operating activities                                                                        |   |   | 222,089 |   |   | 125,177 |   |   | 73,826 |   |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| **CASH                    FLOWS FROM FINANCING ACTIVITIES:**                                                                                                   |   |   |   |   |   |   |   |   |   |   |
| New                    Financing-                                                                                                                              |   |   |   |   |   |   |   |   |   |   |
| Long-term                    debt                                                                                                                              |   |   | - |   |   | 28,500 |   |   | 247,606 |   |
| Short-term                    borrowings, net                                                                                                                  |   |   | 1,253 |   |   | 60,150 |   |   | 14,755 |   |
| Redemptions                    and Repayments-                                                                                                                 |   |   |   |   |   |   |   |   |   |   |
| Long-term                    debt                                                                                                                              |   |   | (100,000 | ) |   | (66,330 | ) |   | (196,371 | ) |
| Dividend                    Payments-                                                                                                                          |   |   |   |   |   |   |   |   |   |   |
| Common                    stock                                                                                                                                |   |   | (25,000 | ) |   | (54,000 | ) |   | (55,000 | ) |
|  Net                    cash                    provided from (used for) financing activities                                                             |   |   | (123,747 | ) |   | (31,680 | ) |   | 10,990 |   |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| **CASH                    FLOWS FROM INVESTING ACTIVITIES:**                                                                                                   |   |   |   |   |   |   |   |   |   |   |
| Property                    additions                                                                                                                          |   |   | (84,817 | ) |   | (85,627 | ) |   | (52,979 | ) |
| Proceeds                    from                    nuclear decommissioning trust fund sales                                                                   |   |   | 182,694 |   |   | 172,018 |   |   | 86,220 |   |
| Investments                    in                    nuclear decommissioning trust funds                                                                       |   |   | (192,177 | ) |   | (181,501 | ) |   | (95,703 | ) |
| Loan                    repayments from (loans to) associated companies, net                                                                                   |   |   | (3,242 | ) |   | 1,355 |   |   | (8,863 | ) |
| Other                                                                                                                                                          |   |   | (790 | ) |   | 258 |   |   | (13,492 | ) |
|  Net                    cash used                    for investing activities                                                                             |   |   | (98,332 | ) |   | (93,497 | ) |   | (84,817 | ) |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| Net                    change in                    cash and cash equivalents                                                                                  |   |   | 10 |   |   | - |   |   | (1 | ) |
| Cash                    and cash                    equivalents at beginning of year                                                                           |   |   | 120 |   |   | 120 |   |   | 121 |   |
| Cash                    and cash                    equivalents at end of year                                                                                 |   | $ | 130 |   | $ | 120 |   | $ | 120 |   |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| **SUPPLEMENTAL                    CASH FLOW INFORMATION:**                                                                                                     |   |   |   |   |   |   |   |   |   |   |
| Cash                    Paid                    During the Year-                                                                                               |   |   |   |   |   |   |   |   |   |   |
| Interest                    (net                    of amounts capitalized)                                                                                    |   | $ | 44,597 |   | $ | 43,266 |   | $ | 43,733 |   |
| Income                    taxes                    (refund)                                                                                                    |   | $ | 42,173 |   | $ | (11,961 | ) | $ | 33,693 |   |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| The                    accompanying Notes to Consolidated Financial Statements are an                    integral                    part of these statements. |   |   |   |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |

----

| **METROPOLITAN                    EDISON COMPANY**                                                                                                                                              |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |
| **CONSOLIDATED                    STATEMENTS OF TAXES**                                                                                                                                         |   |
|                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |
| **For                    the Years Ended December 31,**                                                                                                                                         |   | **2006** |   | **2005** |   | **2004** |   |
|                                                                                                                                                                                            |   |   |   | ***(In                    thousands)*** |   |
| **GENERAL                    TAXES:**                                                                                                                                                           |   |   |   |   |   |   |   |
| State                    gross                    receipts *                                                                                                                                    | $      | 67,403 |   | $ | 63,190 |   | $ | 58,900 |   |
| Real                    and                    personal property                                                                                                                                |   | 1,893 |   |   | 1,764 |   |   | 1,490 |   |
| Social                    security and unemployment                                                                                                                                             |   | 4,135 |   |   | 4,022 |   |   | 3,800 |   |
| State                    capital                    stock                                                                                                                                       |   | 3,946 |   |   | 4,938 |   |   | 6,130 |   |
| Other                                                                                                                                                                                           |   | 34 |   |   | 75 |   |   | 137 |   |
| Total                    general                    taxes                                                                                                                                       | $      | 77,411 |   | $ | 73,989 |   | $ | 70,457 |   |
|                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |
| **PROVISION                    FOR INCOME TAXES:**                                                                                                                                              |   |   |   |   |   |   |   |   |   |
| Currently                    payable-                                                                                                                                                           |   |   |   |   |   |   |   |   |   |
| Federal                                                                                                                                                                                         | $      | 21,046 |   | $ | 24,358 |   | $ | 12,679 |   |
| State                                                                                                                                                                                           |   | 6,002 |   |   | 7,883 |   |   | 7,043 |   |
|                                                                                                                                                                                            |   | 27,048 |   |   | 32,241 |   |   | 19,722 |   |
| Deferred,                    net-                                                                                                                                                               |   |   |   |   |   |   |   |   |   |
| Federal                                                                                                                                                                                         |   |   |   |   |   | 40,075 |   |   | 2,306 |   |   | 20,599 |   |
| State                                                                                                                                                                                           |   | 11,002 |   |   | (3,637 | ) |   | (1,276 | ) |
|                                                                                                                                                                                            |   | 51,077 |   |   | (1,331 | ) |   | 19,323 |   |
| Investment                    tax                    credit amortization                                                                                                                        |   | (799 | ) |   | (826 | ) |   | (828 | ) |
| Total                    provision for income taxes                                                                                                                                             | $      | 77,326 |   | $ | 30,084 |   | $ | 38,217 |   |
|                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **RECONCILIATION                    OF FEDERAL INCOME TAX**                                                                                                                                     |   |   |   |   |   |   |   |   |   |
| **EXPENSE                    AT STATUTORY RATE TO TOTAL**                                                                                                                                       |   |   |   |   |   |   |   |   |   |
| **PROVISION                    FOR INCOME TAXES:**                                                                                                                                              |   |   |   |   |   |   |   |   |   |
| Book                    income                    (loss) before provision for income taxes                                                                                                      | $      | (162,,869 | ) | $ | 76,003 |   | $ | 105,172 |   |
| Federal                    income                    tax expense (benefit) at statutory rate                                                                                                    | $      | (57,004 | ) | $ | 26,601 |   | $ | 36,810 |   |
| Increases                    (reductions) in taxes resulting from-                                                                                                                              |   |   |   |   |   |   |   |   |   |
| Goodwill                    impairment                                                                                                                                                          |   |   |   |   |   | 124,285 |   |   | - |   |   | - |   |
| Amortization                    of investment tax credits                                                                                                                                       |   |   |   |   |   | (799 | ) |   | (826 | ) |   | (828 | ) |
| Depreciation                                                                                                                                                                                    |   |   |   |   |   | 3,321 |   |   | 2,203 |   |   | 2,662 |   |
| State                    income                    taxes, net of federal income tax benefit                                                                                                     |   | 11,053 |   |   | 2,760 |   |   | 3,749 |   |
| Other,                    net                                                                                                                                                                   |   | (3,530 | ) |   | (654 | ) |   | (4,176 | ) |
| Total                    provision for income taxes                                                                                                                                             | $      | 77,326 |   | $ | 30,084 |   | $ | 38,217 |   |
|                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |
| **ACCUMULATED                    DEFERRED INCOME TAXES AS OF**                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| **DECEMBER                    31:**                                                                                                                                                             |   |   |   |   |   |   |   |   |   |
| Property                    basis                    differences                                                                                                                                | $      | 276,898 |   | $ | 261,171 |   | $ | 250,643 |   |
| Deferred                    sale                    and leaseback costs                                                                                                                         |   | (11,220 | ) |   | (11,185 | ) |   | (11,149 | ) |
| Non-utility                    generation costs                                                                                                                                                 |   | 1,113 |   |   | 1,238 |   |   | 7,475 |   |
| Purchase                    accounting basis difference                                                                                                                                         |   | (642 | ) |   | (642 | ) |   | (642 | ) |
| Sale                    of                    generation assets                                                                                                                                 |   | (1,420 | ) |   | (1,420 | ) |   | (1,420 | ) |
| Nuclear                    decommissioning                                                                                                                                                      |   | (41,911 | ) |   | (37,511 | ) |   | (32,180 | ) |
| PJM                    transmission costs                                                                                                                                                       |   | 52,519 |   |   | - |   |   | - |   |
| Regulatory                    transition charge                                                                                                                                                 |   | 81,924 |   |   | 88,998 |   |   | 95,056 |   |
| Asset                    retirement obligations                                                                                                                                                 |   | (237 | ) |   | (199 | ) |   | - |   |
| Customer                    receivables for future income taxes                                                                                                                                 |   | 43,960 |   |   | 37,832 |   |   | 40,636 |   |
| Other                    comprehensive income                                                                                                                                                   |   | (27,793 | ) |   | (1,112 | ) |   | (30,850 | ) |
| Employee                    benefits                                                                                                                                                            |   | 12,303 |   |   | 9,328 |   |   | (5,289 | ) |
| Other                                                                                                                                                                                           |   | 1,962 |   |   | (1,569 | ) |   | (6,891 | ) |
| Net                    deferred                    income tax liability                                                                                                                         | $      | 387,456 |   | $ | 344,929 |   | $ | 305,389 |   |
|                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *Collected                    from                    customers through regulated rates and included in revenue in                    the                    Consolidated Statements of Income. |
|                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The                    accompanying Notes to Consolidated Financial Statements are an                    integral                    part of these statements.                                  |   |   |   |

----

**NOTES      TO      CONSOLIDATED FINANCIAL STATEMENTS**

**1.**
**ORGANIZATION      AND BASIS OF PRESENTATION:**

**2.**
**SUMMARY      OF      SIGNIFICANT ACCOUNTING POLICIES:**

**(A)**
**ACCOUNTING      FOR THE EFFECTS OF REGULATION-**

| - |  are              established by a third-party regulator with the authority to set rates              that bind customers; |
|---|---------------------------------------------------------------------------------------------------------------------------------|
| - |  are              cost-based; and                                                                                     |
| - |  can              be charged              to and collected from customers.                                            |

*Regulatory      Assets-*

|                                                           |   | **2006**                           |    | **2005** |   |
|----------------------------------------------------------------|--------|------------------------------------|---------|----------|--------|
|                                                           |   | ***(In                millions)*** |    |
| Regulatory                transition costs                     |   | $                                  | 285     |     | $      | 308 |   |
| Customer                receivables for future income taxes    |   |                               | 116     |     |   | 100 |   |
| Nuclear                decommissioning costs                   |   |                               | (144    | )        |   | (125 | ) |
| Employee                postretirement benefit costs           |   |                               | 12      |     |   | 14 |   |
| PJM                Transmission Costs                          |   |                               | 127     |     |   | - |   |
| Loss                on                reaquired debt and other |   |                               | 13      |     |   | 13 |   |
| Total                                                          |   | **$**                              | **409** |     | **$**  | **310** |   |

----

**(B)**
**CASH      AND      SHORT-TERM FINANCIAL INSTRUMENTS-**

**(C)**
**REVENUES      AND      RECEIVABLES-**

**(D)**
**PROPERTY,      PLANT AND EQUIPMENT-**

**(E)**
**ASSET      IMPAIRMENTS-**

*Long-Lived      Assets*

----

*Goodwill*

*Investments*

**(F)**
**COMPREHENSIVE        INCOME-**

**(G)**
**CUMULATIVE      EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE-**

**(H)**
**INCOME      TAXES-**

----

**(I)**
**TRANSACTIONS      WITH AFFILIATED COMPANIES-**

|                                            |   | **2006**                           |   | **2005** |   | **2004** |   |
|-------------------------------------------------|--------|------------------------------------|--------|----------|--------|----------|--------|
|                                            |   | ***(In                millions)*** |   |
| **Expenses:**                                   |   |                               |   |     |   |     |   |   |   |   |
| Power                purchased from FES         |   | $                                  | 178    |     | $      | 348      |   | $ | 434 |   |
| Service                Company support services |   |                               | 51     |     |   | 45       |   |   | 46 |   |

**3.**
**PENSION      AND      OTHER POSTRETIREMENT BENEFIT PLANS**

----

| **Obligations                and Funded Status**                               |   | **Pension                Benefits** |   | **Other                Benefits** |   |
|--------------------------------------------------------------------------------|--------|-------------------------------------|--------|-----------------------------------|--------|
| **As                of                December 31**                            |   | **2006**                            |   | **2005**                          |   | **2006** |   | **2005** |   |
|                                                                           |   | ***(In                millions)***  |   |
| **Change                in benefit obligation**                                |   |                                |   |                              |   |   |   |   |   |
| Benefit                obligation as of January 1                              |   | $                                   | 4,750  |                              | $      | 4,364 |   | $ | 1,884 |   | $ | 1,930 |   |
| Service                cost                                                    |   |                                | 83     |                              |   | 77 |   |   | 34 |   |   | 40 |   |
| Interest                cost                                                   |   |                                | 266    |                              |   | 254 |   |   | 105 |   |   | 111 |   |
| Plan                participants' contributions                                |   |                                | -      |                              |   | - |   |   | 20 |   |   | 18 |   |
| Plan                amendments                                                 |   |                                | 3      |                              |   | 15 |   |   | (620 | ) |   | (312 | ) |
| Medicare                retiree drug subsidy                                   |   |                                | -      |                              |   | - |   |   | 6 |   |   | - |   |
| Actuarial                (gain) loss                                           |   |                                | 33     |                              |   | 310 |   |   | (119 | ) |   | 197 |   |
| Benefits                paid                                                   |   |                                | (274   | )                                 |   | (270 | ) |   | (109 | ) |   | (100 | ) |
| Benefit                obligation as of December 31                            |   | $                                   | 4,861  |                              | $      | 4,750 |   | $ | 1,201 |   | $ | 1,884 |   |
|                                                                           |   |                                |   |                              |   |   |   |   |   |   |   |   |   |
| **Change                in fair value of plan assets**                         |   |                                |   |                              |   |   |   |   |   |   |   |   |   |
| Fair                value of                plan assets as of January 1        |   | $                                   | 4,524  |                              | $      | 3,969 |   | $ | 573 |   | $ | 564 |   |
| Actual                return                on plan assets                     |   |                                | 567    |                              |   | 325 |   |   | 69 |   |   | 33 |   |
| Company                contribution                                            |   |                                | -      |                              |   | 500 |   |   | 54 |   |   | 58 |   |
| Plan                participants' contribution                                 |   |                                | -      |                              |   | - |   |   | 20 |   |   | 18 |   |
| Benefits                paid                                                   |   |                                | (273   | )                                 |   | (270 | ) |   | (109 | ) |   | (100 | ) |
| Fair                value of                plan assets as of December 31      |   | $                                   | 4,818  |                              | $      | 4,524 |   | $ | 607 |   | $ | 573 |   |
|                                                                           |   |                                |   |                              |   |   |   |   |   |   |   |   |   |
| **Funded                status**                                               |   | $                                   | (43    | )                                 | $      | (226 | ) | $ | (594 | ) | $ | (1,311 | ) |
|                                                                           |   |                                |   |                              |   |   |   |   |   |   |   |   |   |
| **Accumulated                benefit obligation**                              |   | $                                   | 4,447  |                              | $      | 4,327 |   |   |   |   |   |   |   |
|                                                                           |   |                                |   |                              |   |   |   |   |   |   |   |   |   |
| **Amounts                Recognized in the Statement of**                      |   |                                |   |                              |   |   |   |   |   |   |   |   |   |
| **Financial                Position**                                          |   |                                |   |                              |   |   |   |   |   |   |   |   |   |
| Noncurrent                assets                                               |   | $                                   | -      |                              | $      | 1,023 |   | $ | - |   | $ | - |   |
| Current                liabilities                                             |   |                                | -      |                              |   | - |   |   | - |   |   | - |   |
| Noncurrent                liabilities                                          |   |                                | (43    | )                                 |   | - |   |   | (594 | ) |   | (1,057 | ) |
| Net                pension                asset (liability) at end of year     |   | $                                   | (43    | )                                 | $      | 1,023 |   | $ | (594 | ) | $ | (1,057 | ) |
| Company's                share of net pension asset (liability) at end of year |   | $                                   | 7      |                              | $      | 89 |   | $ | (19 | ) | $ | (57 | ) |
|                                                                           |   |                                |   |                              |   |   |   |   |   |   |   |   |   |
| **Amounts                Recognized in**                                       |   |                                |   |                              |   |   |   |   |   |   |   |   |   |
| **Accumulated                Other Comprehensive Income**                      |   |                                |   |                              |   |   |   |   |   |   |   |   |   |
|                                                                           |   |                                |   |                              |   |   |   |   |   |   |   |   |   |
| Prior                service                cost (credit)                      |   | $                                   | 63     |                              | $      | - |   | $ | (1,190 | ) | $ | - |   |
| Actuarial                (gain) loss                                           |   |                                | 982    |                              |   | - |   |   | 702 |   |   | - |   |
| Net                amount                recognized                            |   | $                                   | 1,045  |                              | $      | - |   | $ | (488 | ) | $ | - |   |
|                                                                           |   |                                |   |                              |   |   |   |   |   |   |   |   |   |
| **Assumptions                Used to Determine**                               |   |                                |   |                              |   |   |   |   |   |   |   |   |   |
| **Benefit                Obligations As of December 31**                       |   |                                |   |                              |   |   |   |   |   |   |   |   |   |
|                                                                           |   |                                |   |                              |   |   |   |   |   |   |   |   |   |
| Discount                rate                                                   |   |                                | 6.00   | %                                 |   | 5.75 | % |   | 6.00 | % |   | 5.75 | % |
| Rate                of                compensation increase                    |   |                                | 3.50   | %                                 |   | 3.50 | % |   |   |   |   |   |   |
|                                                                           |   |                                |   |                              |   |   |   |   |   |   |   |   |   |
| **Allocation                of Plan Assets**                                   |   |                                |   |                              |   |   |   |   |   |   |   |   |   |
| **As                of                December 31**                            |   |                                |   |                              |   |   |   |   |   |   |   |   |   |
| Asset                Category                                                  |   |                                |   |                              |   |   |   |   |   |   |   |   |   |
| Equity                securities                                               |   |                                | 64     | %                                 |   | 63 | % |   | 72 | % |   | 71 | % |
| Debt                securities                                                 |   |                                | 29     |                              |   | 33 |   |   | 26 |   |   | 27 |   |
| Real                estate                                                     |   |                                | 5      |                              |   | 2 |   |   | 1 |   |   | - |   |
| Private                equities                                                |   |                                | 1      |                              |   | - |   |   | - |   |   | - |   |
| Cash                                                                           |   |                                | 1      |                              |   | 2 |   |   | 1 |   |   | 2 |   |
| Total                                                                          |   |                                | 100    | %                                 |   | 100 | % |   | 100 | % |   | 100 | % |

----

|  **Estimated                Items to Be Amortized in 2007 Net** |   |   |         |   |         |   |
|----------------------------------------------------------------------|--------|--------|--------------|--------|--------------|--------|
| **Periodic                Pension Cost from Accumulated**            |   |   | **Pension**  |   | **Other**    |   |
| **Other                Comprehensive Income**                        |   |   | **Benefits** |   | **Benefits** |   |
| Prior                service                cost (credit)            |   | $      | 10           | $      | (149)        |   |
| Actuarial                (gain) loss                                 |   | $      | 41           | $      | 45           |

|                                                        |   | **Pension                Benefits** |                              | **Other                Benefits** |   |
|-------------------------------------------------------------|--------|-------------------------------------|-----------------------------------|-----------------------------------|--------|
| **Components                of Net Periodic Benefit Costs** |   | **2006**                            |                              | **2005**                          |   | **2004** |   | **2006** |   | **2005** |   | **2004** |   |
|                                                        |   | ***(In                millions)***  |                              |
| Service                cost                                 |   | $                                   | 83                                |                              | $      | 77 |   | $ | 77 |   | $ | 34 |   | $ | 40 |   | $ | 36 |   |
| Interest                cost                                |   |                                | 266                               |                              |   | 254 |   |   | 252 |   |   | 105 |   |   | 111 |   |   | 112 |   |
| Expected                return on plan assets               |   |                                | (396                              | )                                 |   | (345 | ) |   | (286 | ) |   | (46 | ) |   | (45 | ) |   | (44 | ) |
| Amortization                of prior service cost           |   |                                | 10                                |                              |   | 8 |   |   | 9 |   |   | (76 | ) |   | (45 | ) |   | (40 | ) |
| Amortization                of transition obligation        |   |                                | -                                 |                              |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Recognized                net                actuarial loss |   |                                | 58                                |                              |   | 36 |   |   | 39 |   |   | 56 |   |   | 40 |   |   | 39 |   |
| Net                periodic                cost             |   | $                                   | 21                                |                              | $      | 30 |   | $ | 91 |   | $ | 73 |   | $ | 101 |   | $ | 103 |   |
| Company's                share of net periodic cost         |   | $                                   | (7                                | )                                 | $      | (4 | ) | $ | - |   | $ | 3 |   | $ | 2 |   | $ | 3 |   |
|                                                        |   |                                |                              |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Weighted-Average                Assumptions Used**        |   |                                |                              |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **to                Determine Net Periodic Benefit Cost**   |   | **Pension                Benefits** | **Other                Benefits** |
| **for                Years Ended December 31**              |   |                                | **2006**                          |                              |   | **2005** |   |   | **2004** |   |   | **2006** |   |   | **2005** |   |   | **2004** |   |
| Discount                rate                                |   |                                | 5.75                              | %                                 |   | 6.00 | % |   | 6.25 | % |   | 5.75 | % |   | 6.00 | % |   | 6.25 | % |
| Expected                long-term return on plan assets     |   |                                | 9.00                              | %                                 |   | 9.00 | % |   | 9.00 | % |   | 9.00 | % |   | 9.00 | % |   | 9.00 | % |
| Rate                of                compensation increase |   |                                | 3.50                              | %                                 |   | 3.50 | % |   | 3.50 | % |   |   |   |   |   |   |   |   |   |

| **Assumed                Health Care Cost Trend Rates**                       |   |     |      |     |   |
|-------------------------------------------------------------------------------|--------|----------|-----------|----------|--------|
| **As                of                December 31**                           |   | **2006** |      | **2005** |   |
| Health                care                cost trend rate assumed for next    |   |     |      |     |   |
| year                (pre/post-Medicare)                                       |   |     | 9-11      | %        |   | 9-11 | % |
| Rate                to which                the cost trend rate is assumed to |   |     |      |     |   |   |   |
| decline                (the                ultimate trend rate)               |   |     | 5         | %        |   | 5 | % |
| Year                that the                rate reaches the ultimate trend   |   |     |      |     |   |   |   |
| rate                (pre/post-Medicare)                                       |   |     | 2011-2013 |     |   | 2010-2012 |   |

|                                                                                  |   | **1-Percentage-**                  |   | **1-Percentage-**                 |   |
|---------------------------------------------------------------------------------------|--------|------------------------------------|--------|-----------------------------------|--------|
|                                                                                  |   | **Point                Increase**  |   | **Point                Decrease** |   |
|                                                                                  |   | ***(In                millions)*** |   |
| Effect                on                total of service and interest cost            |   | $                                  | 6      |                              | $      | (5 | ) |
| Effect                on                accumulated postretirement benefit obligation |   | $                                  | 33     |                              | $      | (29 | ) |

----

|                                           | **Pension**                        |   | **Other**    |
|------------------------------------------------|------------------------------------|--------|--------------|
|                                           | **Benefits**                       |   | **Benefits** |
|                                           | ***(In                millions)*** |
| 2007                                           | $                                  | 247    |         | $ | 91 |
| 2008                                           |                               | 249    |         |   | 91 |
| 2009                                           |                               | 256    |         |   | 94 |
| 2010                                           |                               | 269    |         |   | 98 |
| 2011                                           |                               | 280    |         |   | 101 |
| Years                2012-                2016 |                               | 1,606  |         |   | 537 |

**4.**
**FAIR      VALUE      OF FINANCIAL INSTRUMENTS:**

**(A)**
**LONG-TERM      DEBT-**

|                          |   | **2006**                           |   | **2005**  |   |
|-------------------------------|--------|------------------------------------|--------|-----------|--------|
|                          |   | **Carrying**                       |   | **Fair**  |   | **Carrying** |   | **Fair** |   |
|                          |   | **Value**                          |   | **Value** |   | **Value** |   | **Value** |   |
|                          |   | ***(In                millions)*** |   |
| Long-term                debt |   | $                                  | 592    |      | $      | 572 |   | $ | 692 |   | $ | 683 |   |

**(B)**
**NUCLEAR      DECOMMISSIONING TRUSTS-**

|                                            |   | **2006**                           |   | **2005** |
|-------------------------------------------------|--------|------------------------------------|--------|----------|
|                                            |   | ***(In                millions)*** |
| Debt                securities                  |   |                               |   |     |   |   |
| −Government                Obligations    |   | $                                  | 97     |     | $ | 87 |
| −Corporate                debt securities |   |                               | 9      |     |   | 6 |
|                                            |   |                               | 106    |     |   | 93 |
| Equity                securities                |   |                               | 164    |     |   | 142 |
|                                            |   | $                                  | 270    |     | $ | 235 |

----

|                             |   | **2006**                           |   | **2005**       |   |
|----------------------------------|--------|------------------------------------|--------|----------------|--------|
|                             |   | **Cost**                           |   | **Unrealized** |   | **Unrealized** |   | **Fair** |   | **Cost** |   | **Unrealized** |   | **Unrealized** |   | **Fair** |   |
|                             |   | **Basis**                          |   | **Gains**      |   | **Losses** |   | **Value** |   | **Basis** |   | **Gains** |   | **Losses** |   | **Value** |   |
|                             |   | ***(In                millions)*** |
| Debt                securities   |   | $                                  | 105    |           | $      | 1 |   | $ | - |   | $ | 106 |   | $ | 92 |   | $ | 2 |   | $ | 1 |   | $ | 93 |   |
| Equity                securities |   |                               | 114    |           |   | 50 |   |   | - |   |   | 164 |   |   | 113 |   |   | 30 |   |   | 1 |   |   | 142 |   |
|                             |   | $                                  | 219    |           | $      | 51 |   | $ | - |   | $ | 270 |   | $ | 205 |   | $ | 32 |   | $ | 2 |   | $ | 235 |   |

|                                                       |   | **2006**                           |   | **2005** |   | **2004** |   |
|------------------------------------------------------------|--------|------------------------------------|--------|----------|--------|----------|--------|
|                                                       |   | ***(In                millions)*** |   |
| Proceeds                from                sales          |   | $                                  | 170    |     | $      | 138      |   | $ | 179 |   |
| Gross                realized                gains         |   |                               | 1      |     |   | 6        |   |   | 30 |   |
| Gross                realized                losses        |   |                               | 4      |     |   | 7        |   |   | 1 |   |
| Interest                and                dividend income |   |                               | 7      |     |   | 6        |   |   | 6 |   |

**5.**
**LEASES:**

|                            |   | **2006**                           |   | **2005** |   | **2004** |
|---------------------------------|--------|------------------------------------|--------|----------|--------|----------|
|                            |   | ***(In                millions)*** |
| Operating                leases |   |                               |   |     |   |     |
| Interest                element |   | $                                  | 2.0    |     | $      | 1.9      |   | $ | 1.8 |
| Other                           |   |                               | 1.5    |     |   | 1.0      |   |   | 1.1 |
| Total                rentals    |   | $                                  | 3.5    |     | $      | 2.9      |   | $ | 2.9 |

|                                                       |   | **Operating                Leases** |
|------------------------------------------------------------|--------|-------------------------------------|
|                                                       |   | ***(In                millions)***  |
| 2007                                                       |   | $                                   | 4.0 |
| 2008                                                       |   |                                | 3.9 |
| 2009                                                       |   |                                | 4.2 |
| 2010                                                       |   |                                | 4.0 |
| 2011                                                       |   |                                | 3.6 |
| Years                thereafter                            |   |                                | 45.8 |
| Total                minimum                lease payments |   | $                                   | 65.5 |

----

**6.**
**VARIABLE      INTEREST ENTITIES:**

**7.      **
**REGULATORY      MATTERS:**

----

*First*
*First*
*First*

----

----

*** ***
*** ***

----

**8.**
**CAPITALIZATION:**

**(A)**
**ACCUMULATED      DEFICIT-**

**(B)**
**PREFERRED      AND PREFERENCE STOCK-**

**(C)**
**LONG-TERM      DEBT-**

|   |   | ***(In                millions)*** |   |
|--------|--------|------------------------------------|--------|
| 2007   |   | $                                  | 50     |   |
| 2008   |   |                               | -      |   |
| 2009   |   |                               | -      |   |
| 2010   |   |                               | 100    |   |
| 2011   |   |                               | -      |   |

| **9.** | **ASSET                RETIREMENT OBLIGATIONS** |
|--------|-------------------------------------------------|

----

** **
** **

|                                                       |   | **2006**                           |   | **2005** |   |
|------------------------------------------------------------|--------|------------------------------------|--------|----------|--------|
| **ARO                Reconciliation**                      |   | ***(In                millions)*** |   |
| Balance                at                beginning of year |   | $                                  | 142    |     | $      | 133 |   |
| Accretion                                                  |   |                               | 9      |     |   | 8 |   |
| FIN                47 ARO                upon adoption     |   |                               | -      |     |   | 1 |   |
| Balance                at end                of year       |   | $                                  | 151    |     | $      | 142 |   |

**10.**
**SHORT-TERM      BORROWINGS:**

**11.**
**COMMITMENTS,      GUARANTEES AND CONTINGENCIES:**

**(A)**
**NUCLEAR      INSURANCE-**

----

**(B)**
**ENVIRONMENTAL      MATTERS-**

**(C)**
**OTHER      LEGAL      PROCEEDINGS-**

*Power      Outages      and Related Litigation*

*Legal      Matters*

----

**12.**
**NEW      ACCOUNTING STANDARDS AND INTERPRETATIONS: **

|   | *SFAS                159 -                The Fair Value Option for Financial Assets and Financial Liabilities                -                Including an amendment of FASB Statement No.                115* |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Fair      Value      Measurements, *
*Disclosures      about Fair Value of Financial Instruments. *

*SFAS      157 - "Fair      Value Measurements"*

|   | *FSP                FIN                46(R)-6 - "Determining the Variability to Be Considered in Applying                FASB                interpretation No. 46(R)"* |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Step                1: | Analyze                the                nature of the risks in the entity                                                                                                                                                  |
|------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Step                2: | Determine                the                purpose(s) for which the entity was created and determine the variability                the entity is designed to create and pass along to its interest                holders. |

*FIN      48 -      "Accounting for Uncertainty in Income Taxes - an interpretation of FASB      Statement No. 109"*

----

**13.**
**SUMMARY      OF      QUARTERLY FINANCIAL DATA (UNAUDITED):**

| **Three                Months Ended**                                                      |   | **March                31,****2006** |   | **June                30,****2006** |   | **September                30, 2006** |   | **December                31, 2006** |   |
|--------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|-------------------------------------|--------|---------------------------------------|--------|--------------------------------------|--------|
|                                                                                       |   | ***(In                millions)***   |   |
| Revenues                                                                                   |   | $                                    | 311.2  |                                | $      | 282.2                                 |   | $                                    | 356.2  |   | $ | 293.5 |   |
| Expenses                                                                                   |   |                                 | 282.5  |                                |   | 211.6                                 |   |                                 | 314.2  |   |   | 593.7 |   |
| Operating                Income (Loss)                                                     |   |                                 | 28.7   |                                |   | 70.6                                  |   |                                 | 42.0   |   |   | (300.2 | ) |
| Other                Income                (Expense)                                       |   |                                 | 0.5    |                                |   | (1.0                                  | )      |                                 | (2.4   | ) |   | (1.0 | ) |
| Income                (Loss)                from Continuing Operations Before Income Taxes |   |                                 | 29.2   |                                |   | 69.6                                  |   |                                 | 39.6   |   |   | (301.2 | ) |
| Income                Taxes                                                                |   |                                 | 11.3   |                                |   | 29.5                                  |   |                                 | 14.6   |   |   | 22.0 |   |
| Net                Income                (Loss)                                            |   | $                                    | 17.9   |                                | $      | 40.1                                  |   | $                                    | 25.0   |   | $ | (323.2 | ) |

| **Three                Months Ended**                                                                                                |   | **March                31,****2005** |   | **June                30,****2005** |   | **September                30, 2005** |   | **December                31, 2005** |   |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|-------------------------------------|--------|---------------------------------------|--------|--------------------------------------|--------|
|                                                                                                                                 |   | ***(In                millions)***   |   |
| Revenues                                                                                                                             |   | $                                    | 295.8  |                                | $      | 263.1                                 |   | $                                    | 333.2  |   | $ | 284.3 |   |
| Expenses                                                                                                                             |   |                                 | 268.0  |                                |   | 238.0                                 |   |                                 | 330.0  |   |   | 265.0 |   |
| Operating                Income                                                                                                      |   |                                 | 27.8   |                                |   | 25.1                                  |   |                                 | 3.2    |   |   | 19.3 |   |
| Other                Income                (Expense)                                                                                 |   |                                 | (0.9   | )                                   |   | 1.4                                   |   |                                 | 0.7    |   |   | (0.6 | ) |
| Income                from                Continuing Operations Before Income Taxes                                                  |   |                                 | 26.9   |                                |   | 26.5                                  |   |                                 | 3.9    |   |   | 18.7 |   |
| Income                Taxes                                                                                                          |   |                                 | 10.4   |                                |   | 10.8                                  |   |                                 | 2.9    |   |   | 6.0 |   |
| Income                Before                Cumulative Effect of a Change in Accounting Principle                                    |   |                                 | 16.5   |                                |   | 15.7                                  |   |                                 | 1.0    |   |   | 12.7 |   |
| Cumulative                Effect of a Change in Accounting Principle(Net                of Income                Taxes) (Note 2 (G)) |   |                                 | -      |                                |   | -                                     |   |                                 | -      |   |   | (0.3 | ) |
| Net                Income                                                                                                            |   | $                                    | 16.5   |                                | $      | 15.7                                  |   | $                                    | 1.0    |   | $ | 12.4 |   |

----