**JERSEY      CENTRAL POWER & LIGHT 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                                   | 3-15     |
| Consolidated                Statements of Income                                      | 16       |
| Consolidated                Balance Sheets                                            | 17       |
| Consolidated                Statements of Capitalization                              | 18       |
| Consolidated                Statements of Common Stockholder's Equity                 | 19       |
| Consolidated                Statements of Preferred Stock                             | 19       |
| Consolidated                Statements of Cash Flows                                  | 20       |
| Consolidated                Statements of Taxes                                       | 21       |
| Notes                to                Consolidated Financial Statements              | 22-40    |

----

**GLOSSARY      OF      TERMS**

| ATSI                                                                                                                                                            | American                Transmission Systems, Inc., owns and operates transmission                facilities                                                                                            |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| BGS                                                                                                                                                             | Basic                Generation Service                                                                                                                                                                 |
| CEI                                                                                                                                                             | The                Cleveland                Electric Illuminating Company, an affiliated Ohio electric                utility                                                                           |
| Companies                                                                                                                                                       | OE,                CEI, TE,                Penn, JCP&L, Met-Ed and Penelec                                                                                                                          |
| DRA                                                                                                                                                             | Division                of                Ratepayer Advocate                                                                                                                                            |
| 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                                                                                                                                  |
| JCP&L                TransitionFunding                                                                                                                      | JCP&L                Transition Funding LLC, a Delaware limited liability company and                issuer of                transitionbonds                                                       |
| JCP&L                TransitionFunding                II                                                                                                    | JCP&L                Transition Funding II LLC, a Delaware limited liability company and                issuer                of transitionbonds                                                    |
| Met-Ed                                                                                                                                                          | Metropolitan                Edison Company, an affiliated Pennsylvania electric                utility                                                                                                  |
| 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                                                                                                                                                              |
| 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                                                                                                                                                      |
| FRP                                                                                                                                                             | Forked                River                Power LLC                                                                                                                                                    |
| 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                ApplyingFASB                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                                                                                                                                                                |
|  MOU                                                                                                                                                       | Memorandum              of              Understanding                                                                                                                                                   |
|  MTC                                                                                                                                                       | Market              Transition Charge                                                                                                                                                              |
|  NERC                                                                                                                                  |  North              American              Electric Reliability Corporation                                                                                                                         |
|  NJBPU                                                                                                                                                     |  New              Jersey              Board of Public Utilities                                                                                                                                    |
|  NOPR                                                                                                                                                      |  Notice              of              Proposed Rulemaking                                                                                                                                           |
|  NUG                                                                                                                                                       |  Non-Utility              Generation                                                                                                                                                               |
|  OCI                                                                                                                                                       |  Other              Comprehensive Income                                                                                                                                                           |
|  OPEB                                                                                                                                                      |  Other              Post-Employment Benefits                                                                                                                                                       |

----

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

| PJM                     | PJM                Interconnection                LLC                                                                                                                                                                                  |
|-------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| PRP                     | Potentially                Responsible Party                                                                                                                                                                                           |
| PUCO                    | Public                Utilities Commission of Ohio                                                                                                                                                                                     |
| PUHCA                   | Public                Utility                Holding Company Act of 1935                                                                                                                                                               |
| RTOR                    | Regional                Through and Out Rates                                                                                                                                                                                          |
| S&P                 | Standard&                Poor's Ratings Service                                                                                                                                                                                    |
| SBC                     | Societal                Benefits Charge                                                                                                                                                                                                |
| SEC                     | United                States                Securities and Exchange Commission                                                                                                                                                         |
| 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 anAmendment                of                FASB Statement No. 115"       |
| SRM                     | Special                Reliability Master                                                                                                                                                                                              |
| TBC                     | Transition                Bond Charge                                                                                                                                                                                                  |
| TMI-2                   | Three                Mile                Island Unit 2                                                                                                                                                                                 |
| VIE                     | Variable                Interest Entity                                                                                                                                                                                                |

----

**Report      of      Independent Registered Public Accounting Firm**

----

**JERSEY        CENTRAL POWER & LIGHT COMPANY**

**SELECTED        FINANCIAL DATA**

|                                                                             |   |                                                                            |      |     |   |      |   |     |   |     |      |     |   |
|----------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|-----------|----------|--------|-----------|--------|----------|--------|----------|-----------|----------|--------|
| **For                  the Years Ended December 31,**                            |   | **2006**                                                                        |      | **2005** |   |      |   | **2004** |   | **2003** |      | **2002** |   |
| **GENERAL                  FINANCIAL INFORMATION:**                              |   |       **(Dollars                  in thousands)** |
| Operating                  Revenues                                              |   | $                                                                               | 2,667,645 |     | $      | 2,602,234 |   |     |   | $        | 2,206,987 |     | $      | 2,359,646 |   | $ | 2,328,415 |   |
|                                                                             |   |                                                                            |      |     |   |      |   |     |   |     |      |     |   |   |   |   |   |   |
| Operating                  Income                                                |   | $                                                                               | 403,668   |     | $      | 388,377   |   |     |   | $        | 273,334   |     | $      | 144,606 |   | $ | 332,953 |   |
|                                                                             |   |                                                                            |      |     |   |      |   |     |   |     |      |     |   |   |   |   |   |   |
| Net                  Income                                                      |   | $                                                                               | 190,607   |     | $      | 182,927   |   |     |   | $        | 107,626   |     | $      | 64,277 |   | $ | 248,357 |   |
|                                                                             |   |                                                                            |      |     |   |      |   |     |   |     |      |     |   |   |   |   |   |   |
| Earnings                  on                  Common Stock                       |   | $                                                                               | 189,589   |     | $      | 182,427   |   |     |   | $        | 107,126   |     | $      | 64,389 |   | $ | 249,821 |   |
|                                                                             |   |                                                                            |      |     |   |      |   |     |   |     |      |     |   |   |   |   |   |   |
| Total                  Assets                                                    |   | $                                                                               | 7,482,565 |     | $      | 7,584,106 |   |     |   | $        | 7,296,532 |     | $      | 7,583,361 |   | $ | 8,062,148 |   |
|                                                                             |   |                                                                            |      |     |   |      |   |     |   |     |      |     |   |   |   |   |   |   |
| **CAPITALIZATION                  AS OF DECEMBER 31:**                           |   |                                                                            |      |     |   |      |   |     |   |     |      |     |   |   |   |   |   |   |
| Common                  Stockholder's Equity                                     |   | $                                                                               | 3,159,598 |     | $      | 3,210,763 |   |     |   | $        | 3,143,554 |     | $      | 3,146,180 |   | $ | 3,270,014 |   |
| Preferred                  Stock-                                                |   |                                                                            |      |     |   |      |   |     |   |     |      |     |   |   |   |   |   |   |
| Not                  Subject to                  Mandatory Redemption            |   |                                                                            | -         |     |   | 12,649    |   |     |   |     | 12,649    |     |   | 12,649 |   |   | 12,649 |   |
| Company-Obligated                  Mandatorily                                   |   |                                                                            |      |     |   |      |   |     |   |     |      |     |   |   |   |   |   |   |
| Redeemable                  Preferred Securities                                 |   |                                                                            | -         |     |   | -         |   |     |   |     | -         |     |   | - |   |   | 125,244 |   |
| Long-Term                  Debt                  and Other Long-Term Obligations |   |                                                                            | 1,320,341 |     |   | 972,061   |   |     |   |     | 1,238,984 |     |   | 1,095,991 |   |   | 1,210,446 |   |
| Total                  Capitalization                                            |   | $                                                                               | 4,479,939 |     | $      | 4,195,473 |   |     |   | $        | 4,395,187 |     | $      | 4,254,820 |   | $ | 4,618,353 |   |
|                                                                             |   |                                                                            |      |     |   |      |   |     |   |     |      |     |   |   |   |   |   |   |
| **CAPITALIZATION                  RATIOS:**                                      |   |                                                                            |      |     |   |      |   |     |   |     |      |     |   |   |   |   |   |   |
| Common                  Stockholder's Equity                                     |   |                                                                            | 70.5      | %        |   | 76.5      | %      |     |   |     | 71.5      | %        |   | 73.9 | % |   | 70.8 |   |
| Preferred                  Stock-                                                |   |                                                                            |      |     |   |      |   |     |   |     |      |     |   |   |   |   |   |   |
| Not                  Subject to                  Mandatory Redemption            |   |                                                                            | -         |     |   | 0.3       |   |     |   |     | 0.3       |     |   | 0.3 |   |   | 0.3 |   |
| Company-Obligated                  Mandatorily                                   |   |                                                                            |      |     |   |      |   |     |   |     |      |     |   |   |   |   |   |   |
| Redeemable                  Preferred Securities                                 |   |                                                                            | -         |     |   | -         |   |     |   |     | -         |     |   | - |   |   | 2.7 |   |
| Long-Term                  Debt                  and Other Long-Term Obligations |   |                                                                            | 29.5      |     |   | 23.2      |   |     |   |     | 28.2      |     |   | 25.8 |   |   | 26.2 |   |
| Total                  Capitalization                                            |   |                                                                            | 100.0     | %        |   | 100.0     | %      |     |   |     | 100.0     | %        |   | 100.0 | % |   | 100.0 |   |
|                                                                             |   |                                                                            |      |     |   |      |   |     |   |     |      |     |   |   |   |   |   |   |
| **DISTRIBUTION                  KWH DELIVERIES (Millions):**                     |   |                                                                            |      |     |   |      |   |     |   |     |      |     |   |   |   |   |   |   |
| Residential                                                                      |   |                                                                            | 9,548     |     |   | 10,107    |   |     |   |     | 9,355     |     |   | 9,104 |   |   | 8,976 |   |
| Commercial                                                                       |   |                                                                            | 9,450     |     |   | 9,432     |   |     |   |     | 8,877     |     |   | 8,620 |   |   | 8,509 |   |
| Industrial                                                                       |   |                                                                            | 2,831     |     |   | 3,074     |   |     |   |     | 3,070     |     |   | 3,046 |   |   | 3,171 |   |
| Other                                                                            |   |                                                                            | 86        |     |   | 86        |   |     |   |     | 73        |     |   | 89 |   |   | 81 |   |
| Total                                                                            |   |                                                                            | 21,915    |     |   | 22,699    |   |     |   |     | 21,375    |     |   | 20,859 |   |   | 20,737 |   |
|                                                                             |   |                                                                            |      |     |   |      |   |     |   |     |      |     |   |   |   |   |   |   |
| **CUSTOMERS                  SERVED:**                                           |   |                                                                            |      |     |   |      |   |     |   |     |      |     |   |   |   |   |   |   |
| Residential                                                                      |   |                                                                            | 958,986   |     |   | 950,622   |   |     |   |     | 941,917   |     |   | 931,227 |   |   | 921,716 |   |
| Commercial                                                                       |   |                                                                            | 118,636   |     |   | 117,365   |   |     |   |     | 115,861   |     |   | 114,270 |   |   | 112,385 |   |
| Industrial                                                                       |   |                                                                            | 2,592     |     |   | 2,640     |   |     |   |     | 2,666     |     |   | 2,705 |   |   | 2,759 |   |
| Other                                                                            |   |                                                                            | 1,689     |     |   | 1,601     |   |     |   |     | 1,320     |     |   | 1,345 |   |   | 1,393 |   |
| Total                                                                            |   |                                                                            | 1,081,903 |     |   | 1,072,228 |   |     |   |     | 1,061,764 |     |   | 1,049,547 |   |   | 1,038,253 |   |
|                                                                             |   |                                                                            |      |     |   |      |   |     |   |     |      |     |   |   |   |   |   |   |
| **NUMBER                  OF EMPLOYEES:**                                        |   |                                                                            | 1,448     |     |   | 1,416     |   |     |   |     | 1,444     |     |   | 1,557 |   |   | ***** |   |
|                                                                             |   |                                                                            |      |     |   |      |   |     |   |     |      |     |   |   |   |   |   |   |

|  *JCP&L's                employees were employed by GPU Service Company in                2002. |
|----------------------------------------------------------------------------------------------------------|

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**JERSEY      CENTRAL POWER & LIGHT 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 New Jersey Board      of Public Utilities, 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)***           |   |     |     |     |   |
| Electric                Generation:                |   |     |     |     |   |
| Retail                                             |   |     | (2.8     | )%       |   | 12.8 | % |
| Wholesale                                          |   |     | (2.0     | )%       |   | (5.1 | )% |
| **Total                Electric Generation Sales** |   |     | **(2.6** | **)**%   |   | **8.6** | % |
| Distribution                Deliveries:            |   |     |     |     |   |   |   |
| Residential                                        |   |     | (5.5     | )%       |   | 8.0 | % |
| Commercial                                         |   |     | 0.2      | %        |   | 6.3 | % |
| Industrial                                         |   |     | (7.9     | )%       |   | 0.1 | % |
| **Total                Distribution Deliveries**   |   |     | **(3.5** | **)**%   |   | **6.2** | ** **% |

*Expenses      *

| **Operating                Expenses - Changes**                 |   | **2006**                           |   | **2005** |   |
|-----------------------------------------------------------------|--------|------------------------------------|--------|----------|--------|
| ***Increase                (Decrease)***                        |   | ***(In                millions)*** |   |
| Purchased                power costs                            |   | $                                  | 91     |     | $      | 263 |   |
| Other                operating costs                            |   |                               | (54    | )        |   | 25 |   |
| Provision                for                depreciation        |   |                               | 3      |     |   | 5 |   |
| Amortization                of regulatory assets                |   |                               | (18    | )        |   | 14 |   |
| Deferral                of                new regulatory assets |   |                               | 29     |     |   | (29 | ) |
| General                taxes                                    |   |                               | (1     | )        |   | 2 |   |
| **Net                increase in expenses**                     |   | **$**                              | **50** |     | **$**  | **280** |   |

----

*Net      Interest      Charges *

**Capital      Resources and Liquidity**

*Changes      in Cash      Position*

*Cash      Flows From      Operating Activities*

| **Operating                Cash Flows**                                   |   | **2006**                           |   | **2005** |   | **2004** |   |
|---------------------------------------------------------------------------|--------|------------------------------------|--------|----------|--------|----------|--------|
|                                                                      |   | ***(In                millions)*** |   |
| Net                income                                                 |   | $                                  | 191    |     | $      | 183      |   | $ | 108 |   |
| Net                non-cash                charges                        |   |                               | 108    |     |   | 112      |   |   | 118 |   |
| Pension                trust                contribution*                 |   |                               | 5      |     |   | (54      | )      |   | (37 | ) |
| Cash                collateral from (returned to) suppliers               |   |                               | (109   | )        |   | 135      |   |   | 7 |   |
| Working                capital and other                                  |   |                               | (5     | )        |   | 131      |   |   | 67 |   |
|                                                                      |   |                               |   |     |   |     |   |   |   |   |
| Net                cash                provided from operating activities |   | $                                  | 190    |     | $      | 507      |   | $ | 263 |   |

| *Pension                trust                contributions in 2005 and 2004 were each net of $25 million of income                tax benefits.                The                $5 million cash inflow in 2006 represents reduced income taxes paid                in 2006 relating to aJanuary                2007                pension contribution. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Cash      Flows From      Financing Activities*

| **Securities                Issued or Redeemed in** |   | **2006**                           |   | **2005** |   | **2004** |   |
|-----------------------------------------------------|--------|------------------------------------|--------|----------|--------|----------|--------|
|                                                |   | ***(In                millions)*** |   |
| New                Issues:                          |   |                               |   |     |   |     |   |
| Secured                notes                        |   | $                                  | 382    |     | $      | -        |   | $ | 300 |   |
|                                                |   |                               |   |     |   |     |   |   |   |   |
| Redemptions**:**                                    |   |                               |   |     |   |     |   |   |   |   |
| FMB                                                 |   | $                                  | 40     |     | $      | 56       |   | $ | 290 |   |
| Secured                notes                        |   |                               | 150    |     |   | -        |   |   | - |   |
| Common                stock                         |   |                               | 77     |     |   |     |   |   |   |   |
| Preferred                stock                      |   |                               | 13     |     |   | -        |   |   | - |   |
| Transition                bonds                     |   |                               | 17     |     |   | 17       |   |   | 16 |   |
| Other                                               |   |                               | -      |     |   | -        |   |   | 3 |   |
| Total                redemptions                    |   | $                                  | 297    |     | $      | 73       |   | $ | 309 |   |
| Short-term                borrowings, net           |   | $                                  | 5      |     | $      | (67      | )      | $ | 18 |   |

----

| **Issuer**      |   | **Securities**                    |   | **S&P** |   | **Moody's** | **Fitch** |
|-----------------|--------|-----------------------------------|--------|-------------|--------|-------------|-----------|
|            |   |                              |   |        |   |        |      |
| **FirstEnergy** |   | Senior                  unsecured |   | BBB-        |   | Baa3        | BBB       |
|            |   |                              |   |        |   |        |      |
| **JCP&L**   |   | Senior                  secured   |   | BBB+        |   | Baa1        | A-        |
|            |   |                              |   |        |   |        |      |

*Cash      Flows From      Investing Activities*

**Contractual      Obligations**

|                                                     |   |                                     |   |     |   |                  **2008-** |   |                  **2010-** |   |           |   |
|----------------------------------------------------------|--------|------------------------------------------|--------|----------|--------|---------------------------------|--------|---------------------------------|--------|----------------|--------|
| **Contractual                Obligations**               |   | **Total**                                |   | **2007** |   | **2009**                        |   | **2011**                        |   | **Thereafter** |   |
|                                                     |   | ***(In                millions)***  |   |
| Long-term                debt                (1)         |   | $                                        | 1,366  |     | $      | 33                              |   | $                               | 56     |           | $      | 63 |   | $ | 1,214 |   |
| Short-term                borrowings                     |   |                                     | 187    |     |   | 187                             |   |                            | -      |           |   | - |   |   | - |   |
| Interest                on                long-term debt |   |                                     | 1,144  |     |   | 81                              |   |                            | 157    |           |   | 151 |   |   | 755 |   |
| Operating                leases (2)                      |   |                                     | 102    |     |   | 8                               |   |                            | 17     |           |   | 15 |   |   | 62 |   |
| Pension                funding (3)                       |   |                                     | 18     |     |   | 18                              |   |                            | -      |           |   | - |   |   | - |   |
| Purchases                (4)                             |   |                                     | 2,692  |     |   | 574                             |   |                            | 1,010  |           |   | 732 |   |   | 376 |   |
| Total                                                    |   | $                                        | 5,509  |     | $      | 901                             |   | $                               | 1,240  |           | $      | 961 |   | $ | 2,407 |   |

**Market      Risk Information**

----

*Commodity      Price      Risk*

| **De****crease                in the Fair Value of Derivative Contracts**                            |   | **Non-Hedge**                      |   | **Hedge** |   | **Total** |   |
|------------------------------------------------------------------------------------------------------|--------|------------------------------------|--------|-----------|--------|-----------|--------|
|                                                                                                 |   | ***(In                millions)*** |   |
| **Change                in the fair value of commodity derivative                contracts:**        |   |                               |   |      |   |      |   |
| Outstanding                net liabilities as of January 1, 2006                                     |   | $                                  | (1,223 | )         | $      | -         |   | $ | (1,223 | ) |
| New                contract                value when entered                                        |   |                               | -      |      |   | -         |   |   | - |   |
| Additions/Changes                in value of existing contracts                                      |   |                               | (239   | )         |   | -         |   |   | (239 | ) |
| Change                in                techniques/assumptions                                       |   |                               | -      |      |   | -         |   |   | - |   |
| Settled                contracts                                                                     |   |                               | 291    |      |   | -         |   |   | 291 |   |
|                                                                                                 |   |                               |   |      |   |      |   |   |   |   |
| **Net                Liabilities - Derivatives Contracts as of December 31,                2006**(1) |   | **$**                              | (1,171 | )         | **$**  | **-**     |   | **$** | (1,171 | ) |
|                                                                                                 |   |                               |   |      |   |      |   |   |   |   |
| **Impact                of Changes in Commodity Derivative Contracts**(2)                            |   |                               |   |      |   |      |   |   |   |   |
| Income                Statement Effects (Pre-Tax)                                                    |   | $                                  | (1     | )         | $      | -         |   | $ | (1 | ) |
| Balance                Sheet                Effects:                                                 |   |                               |   |      |   |      |   |   |   |   |
| OCI                (Pre-Tax)                                                                         |   | $                                  | -      |      | $      | -         |   | $ | - |   |
| Regulatory                Asset (Net)                                                                |   | $                                  | (53    | )         | $      | -         |   | $ | (53 | ) |

|   | (1) | Includes                $1,171 million in non-hedge commodity derivative contracts (primarily                with NUGs), which are offset by a regulatory asset and does not affect                earnings. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Represents                the                change in value of existing contracts, settled contracts and changes                in                techniques/ assumptions. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Balance              Sheet              Classification                          |   | **Non-Hedge**                      |         | **Hedge** |    | **Total** |   |
|---------------------------------------------------------------------------------|--------|------------------------------------|--------------|-----------|---------|-----------|--------|
|                                                                            |   | ***(In                millions)*** |         |
|                                                                                 |   |                               |         |      |    |      |   |
| **Current-**                                                                    |   |                               |         |      |    |      |   |   |   |   |
|                 Other              assets                             |   |  $                            | -            |      |  $ | -         |   |  $ | - |   |
|                    Other              liabilities      |   |                               | -            |      |    | -         |   |   | - |   |
|                                                                            |   |                               |         |      |    |      |   |   |   |   |
| **Non-Current                -**                                                |   |                               |         |      |    | -         |   |   |   |   |
|                    Other              deferred charges |   |                               |  12     |      |    |  -   |   |   |  12 |   |
| **     **Other                noncurrent liabilities   |   | **$**                              | (1183        | )         | $       | -         |   | $ | (1,183 | ) |
| **Net              liabilities**                                                |   |  $                            |  (1,171 | )    |  $ |  -   |   |  $ |  (1,171 |  ) |

----

| **Source                  of Information**                          |   |                                 |   |     |   |     |    |     |    |     |   |           |    |      |   |
|---------------------------------------------------------------------|--------|--------------------------------------|--------|----------|--------|----------|---------|----------|---------|----------|--------|----------------|---------|-----------|--------|
| **-                  Fair                  Value by Contract Year** |   | **2007**                             |   | **2008** |   | **2009** |    | **2010** |    | **2011** |   | **Thereafter** |    | **Total** |   |
|                                                                |   | ***(In                  millions)*** |   |
| Other                  external                  sources(1)         |   | $                                    | (314   | )   | $      | (257     | )  | $        | (199    | )   | $      | (191           | )  | $         | -      |   | $ | - |   | $ | (961 | )  |
| Prices                  based                  on models            |   |                                 | -      |     |   | -        |    |     |  - |     |   |  -        |    |      | (111   | )  |   | (99 | )  |   | (210 | )  |
| **Total****(2)**                                                    |   | $                                    | (314   | )        | $      | (257     | )  | $        | (199    | )   | $      | (191           | )  | $         | (111   | )  | $ | (99 | )  | $ | (1,171 | )  |

**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                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 236 |   | $ | 236 |   | $ | 234 |   |
| Average                interest rate                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 4.8 | % |   | 4.8 | % |   |   |   |
|                                                                                          |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                                                                                   |
| Long-term                Debt:                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fixed                rate                                                                     |   | $ | 33 |   | $ | 27 |   | $ | 29 |   | $ | 31 |   | $ | 32 |   | $ | 1,214 |   | **$** | 1,366 |   | **$** | 1,388 |   |
| Average                interest rate                                                          |   |   | 4.7 | % |   | 5.3 | % |   | 5.3 | % |   | 5.4 | % |   | 5.6 | % |   | 6.0 | % |   | 6.0% |   |   |   |   |
| Short-term                Borrowings                                                          |   | $ | 187 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | **$** | 187 |   | **$** | 187 |   |
| Average                interest rate                                                          |   |   | 5.6 | % |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 5.6 | % |   |   |   |

**Equity      Price Risk**

**Outlook**

----

*Regulatory        Matters*

| ·   | Reduce                the                total projected electricity demand by 20% by                2020; |
|--------------------|------------------------------------------------------------------------------------------------------------|

| ·   | Meet                22.5% of                the State's electricity needs with renewable energy resources by                that                date; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·  | Reduce                  air                  pollution related to energy use; |
|--------------|-------------------------------------------------------------------------------|

| ·   | Encourage                  and                  maintain economic growth and development; |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | Achieve                  a 20%                  reduction in both Customer Average Interruption Duration Index                  and System                  Average Interruption Frequency Index by                  2020; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Unit                  prices                  for electricity should remain no more than +5% of the regional                  average                  price (region includes New York, New Jersey, Pennsylvania, Delaware,                  Maryland and the District of Columbia);                  and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Eliminate                  transmission congestion by 2020. |
|--------------------|-------------------------------------------------------------|

*Environmental      Matters*

*Legal      Matters*

----

**Critical        Accounting Policies**

*Regulatory        Accounting *

*  Revenue      Recognition*

*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% |   | $ | 1.7 |   | $ | 0.3 |   | $ | 2.0 |   |
| Long-term                return on assets                                    |   |   | Decrease                by                0.25% |   | $ | 1.8 |   | $ | 0.4 |   | $ | 2.2 |   |
| Health                care                trend rate                         |   |   | Increase                by                1% |   |   | na |   | $ | 0.7 |   | $ | 0.7 |   |

*Long-Lived      Assets *

*Asset      Retirement      Obligations *

----

*Goodwill        *

**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"*

----

**JERSEY        CENTRAL POWER & LIGHT COMPANY**

**CONSOLIDATED        STATEMENTS OF INCOME**

|                                                                                                                                      |   |     |      |                                       |   |      |   |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|-----------|-------------------------------------------------|--------|----------------|--------|
|  **For                the                Years Ended December 31,**                                                                  |   | **2006** |      |  **2005**                                  |   |  **2004** |   |
|                                                                                                                                      |   |     |      |   ***(In                thousands)*** |   |      |   |
|  **REVENUES                (Note 2(H)):**                                                                                            |   |     |      |                                       |   |      |   |
| Electric                  sales                                                                                                           |   | $        | 2,617,390 |                                            | $      | 2,550,208      |   | $ | 2,157,532 |   |
| Excise                  tax                  collections                                                                                  |   |     | 50,255    |                                            |   | 52,026         |   |   | 49,455 |   |
|                                                                                                                                      |   |     | 2,667,645 |                                            |   | 2,602,234      |   |   | 2,206,987 |   |
|                                                                                                                                      |   |     |      |                                            |   |           |   |   |   |   |
| **EXPENSES:**                                                                                                                             |   |     |      |                                            |   |           |   |   |   |   |
| Purchased                  power (Note 2(H))                                                                                              |   |     | 1,521,329 |                                            |   | 1,429,998      |   |   | 1,166,430 |   |
| Other                  operating costs (Note 2(H))                                                                                        |   |     | 320,847   |                                            |   | 375,502        |   |   | 350,709 |   |
| Provision                  for                  depreciation                                                                              |   |     | 83,172    |                                            |   | 80,013         |   |   | 75,163 |   |
| Amortization                  of regulatory assets                                                                                        |   |     | 274,704   |                                            |   | 292,668        |   |   | 278,559 |   |
| Deferral                  of                  new regulatory assets                                                                       |   |     | -         |                                            |   | (28,862        | )      |   | - |   |
| General                  taxes                                                                                                            |   |     | 63,925    |                                            |   | 64,538         |   |   | 62,792 |   |
| Total                  expenses                                                                                                           |   |     | 2,263,977 |                                            |   | 2,213,857      |   |   | 1,933,653 |   |
|                                                                                                                                      |   |     |      |                                            |   |           |   |   |   |   |
| **OPERATING                  INCOME**                                                                                                     |   |     | 403,668   |                                            |   | 388,377        |   |   | 273,334 |   |
|                                                                                                                                      |   |     |      |                                            |   |           |   |   |   |   |
| **OTHER                  INCOME (EXPENSE):**                                                                                              |   |     |      |                                            |   |           |   |   |   |   |
| Miscellaneous                  income                                                                                                     |   |     | 13,323    |                                            |   | 10,084         |   |   | 13,449 |   |
| Interest                  expense                                                                                                         |   |     | (83,411   | )                                               |   | (81,428        | )      |   | (82,567 | ) |
| Capitalized                  interest                                                                                                     |   |     | 3,758     |                                            |   | 1,740          |   |   | 615 |   |
| Total                  other                  expense                                                                                     |   |     | (66,330   | )                                               |   | (69,604        | )      |   | (68,503 | ) |
|                                                                                                                                      |   |     |      |                                            |   |           |   |   |   |   |
| **INCOME                  BEFORE INCOME TAXES**                                                                                           |   |     | 337,338   |                                            |   | 318,773        |   |   | 204,831 |   |
|                                                                                                                                      |   |     |      |                                            |   |           |   |   |   |   |
| **INCOME                  TAXES**                                                                                                         |   |     | 146,731   |                                            |   | 135,846        |   |   | 97,205 |   |
|                                                                                                                                      |   |     |      |                                            |   |           |   |   |   |   |
| **NET                  INCOME**                                                                                                           |   |     | 190,607   |                                            |   | 182,927        |   |   | 107,626 |   |
|                                                                                                                                      |   |     |      |                                            |   |           |   |   |   |   |
| **PREFERRED                  STOCK DIVIDEND REQUIREMENTS**                                                                                |   |     | 1,018     |                                            |   | 500            |   |   | 500 |   |
|                                                                                                                                      |   |     |      |                                            |   |           |   |   |   |   |
| **EARNINGS                  ON COMMON STOCK**                                                                                             |   | $        | 189,589   |                                            | $      | 182,427        |   | $ | 107,126 |   |
|                                                                                                                                      |   |     |      |                                            |   |           |   |   |   |   |
|  The                accompanying Notes to Consolidated Financial Statements are an integral                part of these statements. |   |     |      |                                            |   |           |   |   |   |

----

**JERSEY        CENTRAL POWER & LIGHT COMPANY**

**CONSOLIDATED        BALANCE SHEETS**

|  **As                of                December 31,**                                                                                    |   |                    **2006** |      |   **2005** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|-----------|----------------------|--------|
|                                                                                                                                          |   | ***(In                  thousands)***      |      |
| **ASSETS**                                                                                                                                    |   |                                       |      |                 |   |
| **CURRENT                  ASSETS:**                                                                                                          |   |                                  |      |            |   |
| Cash                  and cash                  equivalents                                                                                   |   | $                                          | 41        |                 | $      | 102 |   |
| Receivables-                                                                                                                                  |   |                                       |      |                 |   |   |   |
| Customers                  (less accumulated provisions of $3,524,000 and $3,830,000,                                                         |   |                                       |      |                 |   |   |   |
| respectively,                  for uncollectible accounts)                                                                                    |   |                                       | 254,046   |                 |   | 258,077 |   |
| Associated                  companies                                                                                                         |   |                                       | 11,574    |                 |   | 203 |   |
| Other                  (less                  accumulated provision of $204,000                                                               |   |                                       |      |                 |   |   |   |
| in                  2005, for                  uncollectible accounts)                                                                        |   |                                       | 40,023    |                 |   | 41,456 |   |
| Notes                  receivable - associated companies                                                                                      |   |                                       | 24,456    |                 |   | 18,419 |   |
| Materials                  and                  supplies, at average cost                                                                     |   |                                       | 2,043     |                 |   | 2,104 |   |
| Prepaid                  taxes                                                                                                                |   |                                       | 13,333    |                 |   | 10,137 |   |
| Other                                                                                                                                         |   |                                       | 18,076    |                 |   | 6,928 |   |
|                                                                                                                                          |   |                                       | 363,592   |                 |   | 337,426 |   |
| **UTILITY                  PLANT:**                                                                                                           |   |                                       |      |                 |   |   |   |
| In                  service                                                                                                                   |   |                                       | 4,029,070 |                 |   | 3,902,684 |   |
| Less                  -                  Accumulated provision for depreciation                                                               |   |                                       | 1,473,159 |                 |   | 1,445,718 |   |
|                                                                                                                                          |   |                                       | 2,555,911 |                 |   | 2,456,966 |   |
| Construction                  work in progress                                                                                                |   |                                       | 78,728    |                 |   | 98,720 |   |
|                                                                                                                                          |   |                                       | 2,634,639 |                 |   | 2,555,686 |   |
| **OTHER                  PROPERTY AND INVESTMENTS:**                                                                                          |   |                                       |      |                 |   |   |   |
| Nuclear                  fuel                  disposal trust                                                                                 |   |                                       | 171,045   |                 |   | 164,203 |   |
| Nuclear                  plant                  decommissioning trusts                                                                        |   |                                       | 164,108   |                 |   | 145,975 |   |
| Other                                                                                                                                         |   |                                       | 2,047     |                 |   | 2,580 |   |
|                                                                                                                                          |   |                                       | 337,200   |                 |   | 312,758 |   |
| **DEFERRED                  CHARGES AND OTHER ASSETS:**                                                                                       |   |                                       |      |                 |   |   |   |
| Regulatory                  assets                                                                                                            |   |                                       | 2,152,332 |                 |   | 2,226,591 |   |
| Goodwill                                                                                                                                      |   |                                       | 1,962,361 |                 |   | 1,985,858 |   |
| Prepaid                  pension costs                                                                                                        |   |                                       | 14,660    |                 |   | 148,054 |   |
| Other                                                                                                                                         |   |                                       | 17,781    |                 |   | 17,733 |   |
|                                                                                                                                          |   |                                       | 4,147,134 |                 |   | 4,378,236 |   |
|                                                                                                                                          |   | $                                          | 7,482,565 |                 | $      | 7,584,106 |   |
| **LIABILITIES                  AND CAPITALIZATION**                                                                                           |   |                                       |      |                 |   |   |   |
| **CURRENT                  LIABILITIES:**                                                                                                     |   |                                       |      |                 |   |   |   |
| Currently                  payable long-term debt                                                                                             |   | $                                          | 32,683    |                 | $      | 207,231 |   |
| Short-term                  borrowings-                                                                                                       |   |                                       |      |                 |   |   |   |
| Associated                  companies                                                                                                         |   |                                       | 186,540   |                 |   | 181,346 |   |
| Accounts                  payable-                                                                                                            |   |                                       |      |                 |   |   |   |
| Associated                  companies                                                                                                         |   |                                       | 80,426    |                 |   | 37,955 |   |
| Other                                                                                                                                         |   |                                       | 160,359   |                 |   | 149,501 |   |
| Accrued                  taxes                                                                                                                |   |                                       | 1,451     |                 |   | 54,356 |   |
| Accrued                  interest                                                                                                             |   |                                       | 14,458    |                 |   | 19,916 |   |
| Cash                  collateral from suppliers                                                                                               |   |                                       | 32,300    |                 |   | 141,225 |   |
| Other                                                                                                                                         |   |                                       | 96,150    |                 |   | 86,884 |   |
|                                                                                                                                          |   |                                       | 604,367   |                 |   | 878,414 |   |
| **CAPITALIZATION**(See                  Consolidated Statements of Capitalization):                                                           |   |                                       |      |                 |   |   |   |
| Common                  stockholder's equity                                                                                                  |   |                                       | 3,159,598 |                 |   | 3,210,763 |   |
| Preferred                  stock                                                                                                              |   |                                       | -         |                 |   | 12,649 |   |
| Long-term                  debt                  and other long-term obligations                                                              |   |                                       | 1,320,341 |                 |   | 972,061 |   |
|                                                                                                                                          |   |                                       | 4,479,939 |                 |   | 4,195,473 |   |
| **NONCURRENT                  LIABILITIES:**                                                                                                  |   |                                       |      |                 |   |   |   |
| Power                  purchase                  contract loss liability                                                                      |   |                                       | 1,182,108 |                 |   | 1,237,249 |   |
| Accumulated                  deferred income taxes                                                                                            |   |                                       | 803,944   |                 |   | 812,034 |   |
| Nuclear                  fuel                  disposal costs                                                                                 |   |                                       | 183,533   |                 |   | 175,156 |   |
| Asset                  retirement obligations                                                                                                 |   |                                       | 84,446    |                 |   | 79,527 |   |
| Retirement                  benefits                                                                                                          |   |                                       | 10,207    |                 |   | 72,454 |   |
| Other                                                                                                                                         |   |                                       | 134,021   |                 |   | 133,799 |   |
|                                                                                                                                          |   |                                       | 2,398,259 |                 |   | 2,510,219 |   |
| **COMMITMENTS                  AND CONTINGENCIES (Notes 5 and 11)**                                                                           |   |                                       |           |                 |   |  |   |
|                                                                                                                                          |   | $                                          | 7,482,565 |                 | $      | 7,584,106 |   |
|                                                                                                                                          |   |                                       |      |                 |   |   |   |
|  The                accompanying Notes to Consolidated Financial Statements are an integral                part of these balance sheets. |   |                                       |      |                 |   |   |   |

----

**JERSEY        CENTRAL POWER & LIGHT COMPANY**

**CONSOLIDATED        STATEMENTS OF CAPITALIZATION**

|                                                                                                   |   |  **Shares                  Outstanding** |       |  **Dollars                  in Thousands** |   |
|--------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|------------|-------------------------------------------------|--------|
| **As                  of                  December 31,**                                               |   | **2006**                                      |       | **2005**                                        |   | **2006** |   | **2005** |   |
|                                                                                                   |   |                                          |       |                                            |   |   |   |   |   |
| **COMMON                  STOCKHOLDER'S EQUITY:**                                                      |   |                                          |       |                                            |   |   |   |   |   |
| Common                  stock,                  $10 par value, 16,000,000 shares authorized            |   |                                          | 15,009,335 |                                            |   | 15,371,270 |   | $ | 150,093 |   | $ | 153,713 |   |
| Other                  paid-in                  capital                                                |   |                                          |       |                                            |   |   |   |   | 2,908,279 |   |   | 3,003,190 |   |
| Accumulated                  other comprehensive loss (Note 2(F))                                      |   |                                          |       |                                            |   |   |   |   | (44,254 | ) |   | (2,030 | ) |
| Retained                  earnings (Note 8(A))                                                         |   |                                          |       |                                            |   |   |   |   | 145,480 |   |   | 55,890 |   |
| Total                                                                                                  |   |                                          |       |                                            |   |   |   |   | 3,159,598 |   |   | 3,210,763 |   |
| **PREFERRED                  STOCK NOT SUBJECT TO MANDATORY REDEMPTION (Note                  8(B)):** |   |                                          |       |                                            |   |   |   |   |   |   |   |   |   |
|                                                                                                   |   |                                          |       |                                            |   |   |   |   |   |   |   |   |   |
| Cumulative,                  without par value, 15,600,000 shares authorized                           |   |                                          |       |                                            |   |   |   |   |   |   |   |   |   |
| 4.00%                  Series                                                                          |   |                                          | -          |                                            |   | 125,000 |   |   | - |   |   | 12,649 |   |
|                                                                                                   |   |                                          |       |                                            |   |   |   |   |   |   |   |   |   |
|                                                                                                   |   |                                          |       |                                            |   |   |   |   |   |   |   |   |   |
| **LONG-TERM                  DEBT (Note 8(C)):**                                                       |   |                                          |       |                                            |   |   |   |   |   |   |   |   |   |
| First                  mortgage                  bonds-                                                |   |                                          |       |                                            |   |   |   |   |   |   |   |   |   |
| 6.850%                  due                  2006                                                      |   |                                          |       |                                            |   |   |   |   | - |   |   | 40,000 |   |
| 7.100%                  due                  2015                                                      |   |                                          |       |                                            |   |   |   |   | 12,200 |   |   | 12,200 |   |
| 7.500%                  due                  2023                                                      |   |                                          |       |                                            |   |   |   |   | 125,000 |   |   | 125,000 |   |
| 6.750%                  due                  2025                                                      |   |                                          |       |                                            |   |   |   |   | 150,000 |   |   | 150,000 |   |
| Total                                                                                                  |   |                                          |       |                                            |   |   |   |   | 287,200 |   |   | 327,200 |   |
|                                                                                                   |   |                                          |       |                                            |   |   |   |   |   |   |   |   |   |
| Secured                  notes-                                                                        |   |                                          |       |                                            |   |   |   |   |   |   |   |   |   |
| 6.450%                  due                  2006                                                      |   |                                          |       |                                            |   |   |   |   | - |   |   | 150,000 |   |
| 4.190%                  due                  2006-2007                                                 |   |                                          |       |                                            |   |   |   |   | 17,942 |   |   | 35,172 |   |
| 5.390%                  due                  2007-2010                                                 |   |                                          |       |                                            |   |   |   |   | 52,297 |   |   | 52,297 |   |
| 5.250%                  due                  2007-2012                                                 |   |                                          |       |                                            |   |   |   |   | 56,348 |   |   | - |   |
| 5.810%                  due                  2010-2013                                                 |   |                                          |       |                                            |   |   |   |   | 77,075 |   |   | 77,075 |   |
| 5.410%                  due                  2014                                                      |   |                                          |       |                                            |   |   |   |   | 25,693 |   |   | - |   |
| 5.520%                  due                  2014-2018                                                 |   |                                          |       |                                            |   |   |   |   | 49,220 |   |   | - |   |
| 5.625%                  due                  2016                                                      |   |                                          |       |                                            |   |   |   |   | 300,000 |   |   | 300,000 |   |
| 6.160%                  due                  2013-2017                                                 |   |                                          |       |                                            |   |   |   |   | 99,517 |   |   | 99,517 |   |
| 4.800%                  due                  2018                                                      |   |                                          |       |                                            |   |   |   |   | 150,000 |   |   | 150,000 |   |
| 5.610%                  due                  2021                                                      |   |                                          |       |                                            |   |   |   |   | 51,139 |   |   | - |   |
| 6.400%                  due                  2036                                                      |   |                                          |       |                                            |   |   |   |   | 200,000 |   |   | - |   |
| Total                                                                                                  |   |                                          |       |                                            |   |   |   |   | 1,079,231 |   |   | 864,061 |   |
|                                                                                                   |   |                                          |       |                                            |   |   |   |   |   |   |   |   |   |
|                                                                                                   |   |                                          |       |                                            |   |   |   |   |   |   |   |   |   |
| Net                  unamortized discount on debt                                                      |   |                                          |       |                                            |   |   |   |   | (13,407 | ) |   | (11,969 | ) |
| Long-term                  debt                  due within one year                                   |   |                                          |       |                                            |   |   |   |   | (32,683 | ) |   | (207,231 | ) |
| Total                  long-term debt                                                                  |   |                                          |       |                                            |   |   |   |   | 1,320,341 |   |   | 972,061 |   |
| **TOTAL                  CAPITALIZATION**                                                              |   |                                          |       |                                            |   |   |   | $ | 4,479,939 |   | $ | 4,195,473 |   |
|                                                                                                   |   |                                          |       |                                            |   |   |   |   |   |   |   |   |   |

----

**JERSEY        CENTRAL POWER & LIGHT COMPANY**

**CONSOLIDATED        STATEMENTS OF COMMON STOCKHOLDER'S EQUITY**

|                                                                                 |   |              |               |                                                      |         |                       |         |                         |               |                               |         |                      |   |
|--------------------------------------------------------------------------------------|--------|-------------------|--------------------|-----------------------------------------------------------|--------------|----------------------------|--------------|------------------------------|--------------------|------------------------------------|--------------|---------------------------|--------|
|                                                                                 |   |              |               |                                                      |         |                       |         |                         |               | **Accumulated**                    |         |                      |   |
|                                                                                 |   |              |               |  **Common                  Stock**                   |         | **Other**                  |         | **Other**                    |               |                               |         |
|                                                                                 |   | **Comprehensive** |               | **Number**                                                |         | **Par**                    |         | **Paid-In**                  |               | **Comprehensive**                  |         | **Retained**              |   |
|                                                                                 |   | **Income**        |               | **of                  Shares**                            |         | **Value**                  |         | **Capital**                  |               | **Income                  (Loss)** |         | **Earnings**              |   |
|                                                                                 |   |              |               |   ***(Dollars                  in thousands)*** |         |                       |         |
| Balance,                  January 1, 2004                                            |   |              |               | 15,371,270                                                |         | $                  153,713 |         | $                  3,029,894 |               | $                  (51,765)        |         | $                  14,337 |   |
| Net                  income                                                          |   | $                 | 107,626            |                                                      |         |                       |         |                         |               |                               |         |                      |   |   |   |   |   | 107,626 |   |
| Net                  unrealized                  loss on investments                 |   |              | (5                 | )                                                         |         |                       |         |                         |               |                               |         |                      |   |   | (5 | ) |   |   |   |
| Net                  unrealized                  gain on derivative instruments,     |   |              |               |                                                      |         |                       |         |                         |               |                               |         |                      |   |   |   |   |   |   |   |
| net                  of                  $1,583,000 of income taxes                  |   |              | 1,697              |                                                      |         |                       |         |                         |               |                               |         |                      |   |   | 1,697 |   |   |   |   |
| Minimum                  liability for unfunded retirement                           |   |              |               |                                                      |         |                       |         |                         |               |                               |         |                      |   |   |   |   |   |   |   |
| benefits,                  net                  of $3,772,000 of income tax benefits |   |              | (5,461             | )                                                         |         |                       |         |                         |               |                               |         |                      |   |   | (5,461 | ) |   |   |   |
| Comprehensive                  income                                                |   | $                 | 103,857            |                                                      |         |                       |         |                         |               |                               |         |                      |   |   |   |   |   |   |   |
| Cash                  dividends                  on preferred stock                  |   |              |               |                                                      |         |                       |         |                         |               |                               |         |                      |   |   |   |   |   | (500 | ) |
| Cash                  dividends                  on common stock                     |   |              |               |                                                      |         |                       |         |                         |               |                               |         |                      |   |   |   |   |   | (90,000 | ) |
|  Purchase                  accounting fair value adjustment                |   |              |     |                                                 |         |                  |         |                    |          |                               |    | (15,982                   | )      |   |   |   |   |    |   |
| Balance,                  December 31, 2004                                          |   |              |               |                                                      |         | 15,371,270                 |         |                         | 153,713            |                               |         | 3,013,912                 |   |   | (55,534 | ) |   | 31,463 |   |
| Net                  income                                                          |   | $                 | 182,927            |                                                      |         |                       |         |                         |               |                               |         |                      |   |   |   |   |   | 182,927 |   |
| Net                  unrealized                  gain on derivative instruments,     |   |              |               |                                                      |         |                       |         |                         |               |                               |         |                      |   |   |   |   |   |   |   |
| net                  of                  $113,000 of income taxes                    |   |              | 163                |                                                      |         |                       |         |                         |               |                               |         |                      |   |   | 163 |   |   |   |   |
| Minimum                  liability for unfunded retirement                           |   |              |               |                                                      |         |                       |         |                         |               |                               |         |                      |   |   |   |   |   |   |   |
| benefits,                  net                  of $36,838,000 of income taxes       |   |              | 53,341             |                                                      |         |                       |         |                         |               |                               |         |                      |   |   | 53,341 |   |   |   |   |
| Comprehensive                  income                                                |   | $                 | 236,431            |                                                      |         |                       |         |                         |               |                               |         |                      |   |   |   |   |   |   |   |
| Cash                  dividends                  on preferred stock                  |   |              |               |                                                      |         |                       |         |                         |               |                               |         |                      |   |   |   |   |   | (500 | ) |
| Cash                  dividends                  on common stock                     |   |              |               |                                                      |         |                       |         |                         |               |                               |         |                      |   |   |   |   |   | (158,000 | ) |
| Purchase                  accounting fair value adjustment                      |   |              |     |                                                      |    |             |    |                         |     |                               |    |  (10,722             | )      |   |     |   |    |     |   |
| Balance,                  December 31, 2005                                          |   |              |               |                                                      |         | 15,371,270                 |         |                         | 153,713            |                               |         | 3,003,190                 |   |   | (2,030 | ) |   | 55,890 |   |
| Net                  income                                                          |   | $                 | 190,607            |                                                      |         |                       |         |                         |               |                               |         |                      |   |   |   |   |   | 190,607 |   |
| Net                  unrealized                  gain on derivative instruments,     |   |              |               |                                                      |         |                       |         |                         |               |                               |         |                      |   |   |   |   |   |   |   |
| net                  of                  $101,000 of income taxes                    |   |              | 147                |                                                      |         |                       |         |                         |               |                               |         |                      |   |   | 147 |   |   |   |   |
| Comprehensive                  income                                                |   | $                 | 190,754            |                                                      |         |                       |         |                         |               |                               |         |                      |   |   |   |   |   |   |   |
| Net                  liability                  for unfunded retirement benefits     |   |              |               |                                                      |         |                       |         |                         |               |                               |         |                      |   |   |   |   |   |   |   |
| due                  to the                  implementation of SFAS 158, net         |   |              |               |                                                      |         |                       |         |                         |               |                               |         |                      |   |   |   |   |   |   |   |
| of                  $42,233,000                  of income tax benefits              |   |              |               |                                                      |         |                       |         |                         |               |                               |         |                      |   |   | (42,371 | ) |   |   |   |
| Repurchase                  of                  common stock                         |   |              |               |                                                      |         | (361,935                   | )            |                         | (3,620             | )                                  |         | (73,381                   | )      |   |   |   |   |   |   |
| Preferred                  stock redemption premium                                  |   |              |               |                                                      |         |                       |         |                         |               |                               |         |                      |   |   |   |   |   | (663 | ) |
| Restricted                  stock units                                              |   |              |               |                                                      |         |                       |         |                         |               |                               |         | 101                       |   |   |   |   |   |   |   |
| Stock                  based                  compensation                           |   |              |               |                                                      |         |                       |         |                         |               |                               |         | 48                        |   |   |   |   |   |   |   |
| Cash                  dividends                  on preferred stock                  |   |              |               |                                                      |         |                       |         |                         |               |                               |         |                      |   |   |   |   |   | (354 | ) |
| Cash                  dividends                  on common stock                     |   |              |               |                                                      |         |                       |         |                         |               |                               |         |                      |   |   |   |   |   | (100,000 | ) |
| Purchase                  accounting fair value adjustment                           |   |              |     |                                                      |         |             |         |                         |     |                               |         | (21,679                   | )      |   |     |   |   |    |   |
| Balance,                  December 31, 2006                                          |   |              |          |                                                      |         | 15,009,335                 |         | $                            | 150,093            |                               | $            | 2,908,279                 |   | $ | (44,254 | ) | $ | 145,480 |   |

**CONSOLIDATED        STATEMENTS OF PREFERRED STOCK**

|                                                                                                                                      |   | **Not                  Subject to****Mandatory                  Redemption**  |     |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------|----------|
|                                                                                                                                      |   | **Number**                                                                         |     | **Carrying** |   |
|                                                                                                                                      |   | **of                  Shares**                                                     |     | **Value** |   |
|                                                                                                                                      |   | ***(Dollars                  in thousands)***                                      |     |
| Balance,                  January 1, 2004                                                                                            |   |                                                                               | 125,000  |   | $ | 12,649 |   |
| Balance,                  December 31, 2004                                                                                               |   |                                                                               | 125,000  |   |   | 12,649 |   |
| Balance,                  December 31, 2005                                                                                               |   |                                                                               | 125,000  |   |   | 12,649 |   |
| Redemptions-                                                                                                                              |   |                                                                               |     |   |   |   |   |
|  4.00%                  Series                                                                                                  |   |                                                                               | (125,000 | ) |   | (12,649 | ) |
| Balance,                  December 31, 2006                                                                                               |   |                                                                               | -        |   | $ | - |   |
|                                                                                                                                      |   |                                                                               |     |   |   |   |   |
|  The                accompanying Notes to Consolidated Financial Statements are an integral                part of these statements. |   |
|                                                                                                                                      |   |                                                                               |     |   |   |   |   |

----

|  **JERSEY                  CENTRAL POWER & LIGHT COMPANY**                                                                                            |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                           |
|  **CONSOLIDATED                  STATEMENTS OF CASH FLOWS**                                                                                               |
|                                                                                                                                       |
|                                                                                                                                       |
|  **For                the Years Ended December 31,**                                                                                                      |   |  **2006** |   |  **2005** |   |  **2004** |   |
|                                                                                                                                                           |   |     ***(In                  thousands)*** |   |
| **CASH                  FLOWS FROM OPERATING ACTIVITIES:**                                                                                                     |   |    |   |    |   |   |   |
| Net                  income                                                                                                                                    |   | $ | 190,607 |   | $ | 182,927 |   | $ | 107,626 |   |
| Adjustments                  to                  reconcile net income to net cash from operating                  activities-                                  |   |   |   |   |   |   |   |   |   |   |
|                          Provision for depreciation                                                                         |   |   | 83,172 |   |   | 80,013 |   |   | 75,163 |   |
|                          Amortization of regulatory assets                                                                  |   |   | 274,704 |   |   | 292,668 |   |   | 278,559 |   |
|                          Deferral of new regulatory assets                                                                  |   |   | - |   |   | (28,862 | ) |   | - |   |
|         Deferred                  purchased power and other costs                                                      |   |   | (281,498 | ) |   | (257,418 | ) |   | (263,257 | ) |
|                          Deferred income taxes and investment tax credits, net                                              |   |   | 43,896 |   |   | 36,125 |   |   | 54,887 |   |
|                          Accrued compensation and retirement benefits                                                       |   |   | (12,670 | ) |   | (10,431 | ) |   | (1,972 | ) |
|                          NUG power contract restructuring                                                                   |   |   | - |   |   | - |   |   | 52,800 |   |
|                          Cash collateral from (returned to) suppliers                                                       |   |   | (109,108 | ) |   | 134,563 |   |   | 6,662 |   |
|                          Pension trust contribution                                                                         |   |   | - |   |   | (79,120 | ) |   | (62,499 | ) |
|                          Accrued liability from arbitration decision                                                        |   |   | - |   |   | 16,141 |   |   | - |   |
|                          Decrease (increase) in operating assets-                                                           |   |   |   |   |   |   |   |   |   |   |
|                              Receivables                                                                |   |   | 1,103 |   |   | 28,108 |   |   | (13,360 | ) |
|                              Materials and supplies                                                     |   |   | 61 |   |   | 331 |   |   | 45 |   |
|                              Prepaid taxes                                                              |   |   | 5,385 |   |   | 15,514 |   |   | 14,203 |   |
|                             Other current assets                                                             |   |   | (2,134 | ) |   | (1,090 | ) |   | 3,667 |   |
|                           Increase (decrease) in operating liabilities-                                                |   |   |   |   |   |   |   |   |   |   |
|                             Accounts payable                                                                 |   |   | 53,330 |   |   | 42,118 |   |   | (2,887 | ) |
|            Accrued                  taxes                                                               |   |   | (52,905 | ) |   | 34,448 |   |   | 3,800 |   |
|                             Accrued interest                                                                 |   |   | (5,458 | ) |   | 1,717 |   |   | (2,564 | ) |
|                          Other                                                                                              |   |   | 1,272 |   |   | 18,970 |   |   | 11,780 |   |
|                                  Net cash provided from operating activities        |   |   | 189,757 |   |   | 506,722 |   |   | 262,653 |   |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| **CASH                  FLOWS FROM FINANCING ACTIVITIES:**                                                                                                     |   |   |   |   |   |   |   |   |   |   |
|                           New Financing-                                                                               |   |   |   |   |   |   |   |   |   |   |
|            Long-term                  debt                                                              |   |   | 382,400 |   |   | - |   |   | 300,000 |   |
|            Short-term                  borrowings, net                                                  |   |   | 5,194 |   |   | - |   |   | 17,547 |   |
|                          Redemptions and Repayments-                                                                        |   |   |   |   |   |   |   |   |   |   |
|            Long-term                  debt                                                              |   |   | (207,231 | ) |   | (72,536 | ) |   | (308,872 | ) |
|            Short-term                  borrowings, net                                                  |   |   | - |   |   | (67,187 | ) |   | - |   |
|            Common                  stock                                                                |   |   | (77,000 | ) |   | - |   |   | - |   |
|            Preferred                  stock                                                             |   |   | (13,312 | ) |   | - |   |   | - |   |
|                          Dividend Payments-                                                                                 |   |   |   |   |   |   |   |   |   |   |
|            Common                  stock                                                                |   |   | (100,000 | ) |   | (158,000 | ) |   | (90,000 | ) |
|            Preferred                  stock                                                             |   |   | (354 | ) |   | (500 | ) |   | (500 | ) |
|            Net                  cash used for financing activities                                      |   |   | (10,303 | ) |   | (298,223 | ) |   | (81,825 | ) |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| **CASH                  FLOWS FROM INVESTING ACTIVITIES:**                                                                                                     |   |   |   |   |   |   |   |   |   |   |
|         Property                  additions                                                                            |   |   | (160,264 | ) |   | (209,118 | ) |   | (178,877 | ) |
|                          Loan repayments from (loans to) associated companies, net                                          |   |   | (6,037 | ) |   | 2,017 |   |   | (857 | ) |
|                          Proceeds from nuclear decommissioning trust fund sales                                             |   |   | 162,655 |   |   | 148,337 |   |   | 79,510 |    |
|         Investments                  in nuclear decommissioning trust funds                                            |   |   | (165,550 | ) |   | (151,232 | ) |   | (82,405 | ) |
|                          Other                                                                                              |   |   | (10,319 | ) |   | 1,437 |   |   | 1,692 |   |
|                                    Net cash used for investing activities |   |   | (179,515 | ) |   | (208,559 | ) |   | (180,937 | ) |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
|                          Net decrease in cash and cash equivalents                                                          |   |   | (61 | ) |   | (60 | ) |   | (109 | ) |
|                          Cash and cash equivalents at beginning of year                                                     |   |   | 102 |   |   | 162 |   |   | 271 |   |
|                          Cash and cash equivalents at end of year                                                           |   | $ | 41 |   | $ | 102 |   | $ | 162 |   |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| **SUPPLEMENTAL                  CASH FLOW INFORMATION:**                                                                                                       |   |   |   |   |   |   |   |   |   |   |
|                          Cash Paid During the Year-                                                                         |   |   |   |   |   |   |   |   |   |   |
|                                  Interest (net of amounts capitalized)              |   | $ | 80,101 |   | $ | 78,750 |   | $ | 83,341 |   |
|                           Income taxes                                                                                 |   | $ | 134,279 |   | $ | 12,385 |   | $ | 58,549 |   |
|                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| The                  accompanying Notes to Consolidated Financial Statements are an                  integral                  part of these statements.       |   |   |   |   |   |   |   |   |   |   |

----

|  **JERSEY                    CENTRAL POWER & LIGHT COMPANY**                                                                                                              |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                               |
|  **CONSOLIDATED                    STATEMENTS OF TAXES**                                                                                                                 |
|  **For                    the Years                    Ended December 31,**                                                                                                   |   | **2006** |   | **2005** |   | **2004** |   |
| **GENERAL                    TAXES:**                                                                                                                                              |   |   ***(In                    thousands)*** |   |
| New                    Jersey                    Transitional Energy Facilities Assessment*                                                                                        |   | $ | 50,255 |   | $ | 52,026 |   | $ | 49,455 |   |
| Social                    security and unemployment                                                                                                                                |   |   | 8,716 |   |   | 7,682 |   |   | 8,287 |   |
| Real                    and                    personal property                                                                                                                   |   |   | 4,762 |   |   | 4,567 |   |   | 4,894 |   |
| Other                                                                                                                                                                              |   |   | 192 |   |   | 263 |   |   | 156 |   |
|                                Total general taxes                                                                          |   | $ | 63,925 |   | $ | 64,538 |   | $ | 62,792 |   |
|                                                                                                                                                                               |   |   |   |   |   |   |   |   |   |   |
| **PROVISION                    FOR INCOME TAXES:**                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |
| Currently                    payable-                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |
|                                Federal                                                                                      |   | $ | 78,447 |   | $ | 77,783 |   | $ | 27,701 |   |
|                                State                                                                                        |   |   | 24,388 |   |   | 21,899 |   |   | 14,617 |   |
|                                                                                                                                                                               |   |   | 102,835 |   |   | 99,682 |   |   | 42,318 |   |
|  Deferred,                    net-                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |
|                                Federal                                                                                      |   |   | 33,870 |   |   | 27,335 |   |   | 50,817 |   |
|                                State                                                                                        |   |   | 10,918 |   |   | 10,167 |   |   | 5,657 |   |
|                                                                                                                                                                               |   |   | 44,788 |   |   | 37,502 |   |   | 56,474 |   |
| Investment                    tax                    credit amortization                                                                                                           |   |   | (892 | ) |   | (1,338 | ) |   | (1,587 | ) |
|                                Total provision for income taxes                                                             |   | $ | 146,731 |   | $ | 135,846 |   | $ | 97,205 |   |
|                                                                                                                                                                               |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                               |   |   |   |   |   |   |   |   |   |   |
| **RECONCILIATION                    OF FEDERAL INCOME TAX**                                                                                                                        |   |   |   |   |   |   |   |   |   |   |
| **EXPENSE                    AT STATUTORY RATE TO TOTAL**                                                                                                                          |   |   |   |   |   |   |   |   |   |   |
| **PROVISION                    FOR INCOME TAXES:**                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |
| Book                    income                    before provision for income taxes                                                                                                |   | $ | 337,338 |   | $ | 318,773 |   | $ | 204,831 |   |
| Federal                    income                    tax expense at statutory rate                                                                                                 |   | $ | 118,068 |   | $ | 111,571 |   | $ | 71,691 |   |
| Increases                    (reductions) in taxes resulting from-                                                                                                                 |   |   |   |   |   |   |   |   |   |   |
|                            Amortization of investment tax credits                                                                               |   |   | (892 | ) |   | (1,338 | ) |   | (1,587 | ) |
|                            State income taxes, net of federal income tax benefit                                                                |   |   | 22,948 |   |   | 20,843 |   |   | 13,178 |   |
|                            Other, net                                                                                                           |   |   | 6,607 |   |   | 4,770 |   |   | 13,923 |   |
|                                Total provision for income taxes                                                             |   | $ | 146,731 |   | $ | 135,846 |   | $ | 97,205 |   |
|                                                                                                                                                                               |   |   |   |   |   |   |   |   |   |   |
| **ACCUMULATED                    DEFERRED INCOME TAXES AS OF**                                                                                                                     |   |   |   |   |   |   |   |   |   |   |
| **DECEMBER                    31:**                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |
| Property                    basis                    differences                                                                                                                   |   | $ | 436,122 |   | $ | 416,005 |   | $ | 361,640 |   |
| Deferred                    sale                    and leaseback costs                                                                                                            |   |   | (19,825 | ) |   | (18,942 | ) |   | (17,836 | ) |
| Purchase                    accounting basis difference                                                                                                                            |   |   | (1,253 | ) |   | (1,253 | ) |   | (1,253 | ) |
| Sale                    of                    generation assets                                                                                                                    |   |   | 236 |   |   | (17,861 | ) |   | (17,861 | ) |
| Regulatory                    transition charge                                                                                                                                    |   |   | 253,626 |   |   | 227,379 |   |   | 213,665 |   |
| Customer                    receivables for future income taxes                                                                                                                    |   |   | 3,655 |   |   | 6,589 |   |   | (27,239 | ) |
| Oyster                    Creek                    securitization                                                                                                                  |   |   | 161,862 |   |   | 173,177 |   |   | 184,245 |   |
| Other                    comprehensive income                                                                                                                                      |   |   | (43,645 | ) |   | (1,402 | ) |   | (38,353 | ) |
| Nuclear                    decommissioning                                                                                                                                         |   |   | (16,204 | ) |   | (9,881 | ) |   | (11,178 | ) |
| Employee                    benefits                                                                                                                                               |   |   | 35,818 |   |   | 29,182 |   |   | 1,652 |   |
| Other                                                                                                                                                                              |   |   | (6,448 | ) |   | 9,041 |   |   | (1,741 | ) |
|                                Net deferred income tax liability                                                            |   | $ | 803,944 |   | $ | 812,034 |   | $ | 645,741 |   |
|                                                                                                                                                                               |   |   |   |   |   |   |   |   |   |   |
|  *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)*** |   |
| Non-utility                generation                       |   | $                                  | 1,399  |     | $      | 1,713 |   |
| Regulatory                transition costs                  |   |                               | 739    |     |   | 464 |   |
| Basic                generation service                     |   |                               | 69     |     |   | 52 |   |
| Societal                benefits charge                     |   |                               | 11     |     |   | 29 |   |
| Property                losses and unrecovered plant costs  |   |                               | 19     |     |   | 29 |   |
| Customer                receivables for future income taxes |   |                               | 22     |     |   | 31 |   |
| Employee                postretirement benefit costs        |   |                               | 20     |     |   | 23 |   |
| Loss                on                reacquired debt       |   |                               | 11     |     |   | 10 |   |
| Reliability                costs                            |   |                               | 14     |     |   | 23 |   |
| Component                removal costs                      |   |                               | (148   | )        |   | (148 | ) |
| Other                                                       |   |                               | (4     | )        |   | 1 |   |
| **Total**                                                   |   | **$**                              | 2,152  |     | **$**  | 2,227 |   |

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

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

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

----

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

*Long-Lived      Assets-*

*Investments-*

*Goodwill*

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

**(G)**
**INCOME      TAXES-**

----

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

|                                                    |   | **2006**                           |   | **2005** |   | **2004** |   |
|---------------------------------------------------------|--------|------------------------------------|--------|----------|--------|----------|--------|
|                                                    |   | ***(In                millions)*** |   |
| **Revenues:**                                           |   |                               |   |     |   |     |   |
| Wholesale                  sales - affiliated companies |   | $                                  | 14     |     | $      | 33       |   | $ | 49 |   |
|                                                    |   |                               |   |     |   |     |   |   |   |   |
| **Expenses:**                                           |   |                               |   |     |   |     |   |   |   |   |
| Service                  Company support services       |   |                               | 93     |     |   | 94       |   |   | 95 |   |
| Power                purchased from FES                 |   |                               | 25     |     |   | 78       |   |   | 71 |   |
|                                                    |   |                               |   |     |   |     |   |   |   |   |

**3.**
**PENSION      AND      OTHER POSTRETIREMENT BENEFITS**

----

| **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 |   | $                                   | 15     |                              | $      | 148 |   | $ | (8 | ) | $ | (70 | ) |
|                                                                           |   |                                |   |                              |   |   |   |   |   |   |   |   |   |
| **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         |   | $                                   | (5                                | )                                 | $      | (1 | ) | $ | 7 |   | $ | 2 |   | $ | 7 |   | $ | 5 |   |
|                                                        |   |                                |                              |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **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 |   | $                                  | 1,366  |      | $      | 1,388 |   | $ | 1,191 |   | $ | 1,214 |   |

**(B)**
**INVESTMENTS-**

|                                            |   | **2006**                           |   | **2005**  |   |
|-------------------------------------------------|--------|------------------------------------|--------|-----------|--------|
|                                            |   | **Carrying**                       |   | **Fair**  |   | **Carrying** |   | **Fair** |   |
|                                            |   | **Value**                          |   | **Value** |   | **Value** |   | **Value** |   |
|                                            |   | ***(In                millions)*** |   |
| Debt                securities:                 |   |                               |   |      |   |   |   |   |   |   |   |   |   |
| -Government                obligations(1)  |   |                               | 169    |      |   | 165 |   |   | 166 |   |   | 162 |   |

----

|                           |   | **2006**                           |   | **2005**       |   |
|--------------------------------|--------|------------------------------------|--------|----------------|--------|
|                           |   | **Cost**                           |   | **Unrealized** |   | **Unrealized** |   | **Fair** |   | **Cost** |   | **Unrealized** |   | **Unrealized** |   | **Fair** |   |
|                           |   | **Basis**                          |   | **Gains**      |   | **Losses** |   | **Value** |   | **Basis** |   | **Gains** |   | **Losses** |   | **Value** |   |
|                           |   | ***(In                millions)*** |   |
| Debt                securities |   | $                                  | 169    |           |   | - |   |   | 4 |   |   | 165 |   |   | 166 |   |   | - |   |   | 4 |   |   | 162 |   |

|                                                       |   | **2006**                           |   | **2005** |   | **2004** |   |
|------------------------------------------------------------|--------|------------------------------------|--------|----------|--------|----------|--------|
|                                                       |   | ***(In                millions)*** |   |
| Proceeds                from                sales          |   | $                                  | 61     |     | $      | 59       |   | $ | 204 |   |
| Realized                gains                              |   |                               | -      |     |   | -        |   |   | 4 |   |
| Realized                losses                             |   |                               | 2      |     |   | -        |   |   | - |   |
| Interest                and                dividend income |   |                               | 8      |     |   | 9        |   |   | 8 |   |

**(C)**
**NUCLEAR      DECOMMISSIONING TRUST FUND INVESTMENTS-**

|                                      |   |                                     | 2006   |   |   | 2005   |   |
|-------------------------------------------|--------|------------------------------------------|--------|--------|--------|--------|--------|
|                                      |   |  ***(In                millions)*** |   |
| Debt                securities            |   |                                     |   |   |   |   |   |
| -Government                obligations    |   | $                                        | 53     |   | $      | 51     |   |
| -Corporate                debt securities |   |                                     | 14     |   |   | 11     |   |
|                                      |   |                                     | 67     |   |   | 62     |   |
|                                      |   |                                     |   |   |   |   |   |
| Equity                securities          |   |                                     | 97     |   |   | 84     |   |
|                                      |   | $                                        | 164    |   | $      | 146    |   |

|                             |   | **2006**                           |   | **2005**       |   |
|----------------------------------|--------|------------------------------------|--------|----------------|--------|
|                             |   | **Cost**                           |   | **Unrealized** |   | **Unrealized** |   | **Fair** |   | **Cost** |   | **Unrealized** |   | **Unrealized** |   | **Fair** |   |
|                             |   | **Basis**                          |   | **Gains**      |   | **Losses** |   | **Value** |   | **Basis** |   | **Gains** |   | **Losses** |   | **Value** |   |
|                             |   | ***(In                millions)*** |   |
| Debt                securities   |   | $                                  | 65     |           | $      | 2 |   | $ | - |   | $ | 67 |   | $ | 60 |   | $ | 2 |   | $ | - |   | $ | 62 |   |
| Equity                securities |   |                               | 73     |           |   | 24 |   |   | - |   |   | 97 |   |   | 73 |   |   | 12 |   |   | 1 |   |   | 84 |   |
|                             |   | $                                  | 138    |           | $      | 26 |   | $ | - |   | $ | 164 |   | $ | 133 |   | $ | 14 |   | $ | 1 |   | $ | 146 |   |

----

|                                                       |   | **2006**                           |   | **2005** |   | **2004** |   |
|------------------------------------------------------------|--------|------------------------------------|--------|----------|--------|----------|--------|
|                                                       |   | ***(In                millions)*** |   |
| Proceeds                from                sales          |   | $                                  | 164    |     | $      | 121      |   | $ | 119 |   |
| Gross                realized                gains         |   |                               | 1      |     |   | 4        |   |   | 15 |   |
| Gross                realized                losses        |   |                               | 3      |     |   | 5        |   |   | 1 |   |
| Interest                and                dividend income |   |                               | 5      |     |   | 4        |   |   | 4 |   |

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

|                             |   | **2006**                           |   | **2005** |   | **2004** |
|----------------------------------|--------|------------------------------------|--------|----------|--------|----------|
|                             |   | ***(In                millions)*** |
| Operating                leases: |   |                               |   |     |   |     |
| Interest                element  |   | $                                  | 2.8    |     | $      | 2.6      |   | $ | 2.6 |
| Other                            |   |                               | 4.5    |     |   | 3.2      |   |   | 3.7 |
| Total                rentals     |   | $                                  | 7.3    |     | $      | 5.8      |   | $ | 6.3 |

|                                                       |   |                                 |
|------------------------------------------------------------|--------|--------------------------------------|
|                                                       |   | **Operating                Leases**  |
|                                                       |   |  ***(In millions)***  |
| 2007                                                       |   | $                                    | 8.3 |
| 2008                                                       |   |                                 | 8.5 |
| 2009                                                       |   |                                 | 8.5 |
| 2010                                                       |   |                                 | 8.0 |
| 2011                                                       |   |                                 | 7.0 |
| Years                thereafter                            |   |                                 | 62.1 |
| Total                minimum                lease payments |   | $                                    | 102.4 |

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

----

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

----

*First*
*First*
*First*

----

----

| ·   | Reduce                the                total projected electricity demand by 20% by                2020; |
|--------------------|------------------------------------------------------------------------------------------------------------|

| ·   | Meet                22.5% of                the State's electricity needs with renewable energy resources by                that                date; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Reduce                air                pollution related to energy use; |
|--------------------|---------------------------------------------------------------------------|

| ·   | Encourage                and                maintain economic growth and development; |
|--------------------|---------------------------------------------------------------------------------------|

| ·   | Achieve                a 20%                reduction in both Customer Average Interruption Duration Index and                System                Average Interruption Frequency Index by                2020; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Unit                prices                for electricity should remain no more than +5% of the regional average                price (region includes New York, New Jersey, Pennsylvania, Delaware,                Maryland and the District of Columbia);                and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Eliminate                transmission congestion by 2020. |
|--------------------|-----------------------------------------------------------|

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

----

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

**(A)**
**RETAINED      EARNINGS-**

**(B)      LONG-TERM DEBT-**

*Securitized      Transition Bonds*

*Other      Long-term      Debt*

----

|   |   | ***(In                millions)*** |   |
|--------|--------|------------------------------------|--------|
| 2007   |   | $                                  | 33     |   |
| 2008   |   |                               | 27     |   |
| 2009   |   |                               | 29     |   |
| 2010   |   |                               | 31     |   |
| 2011   |   |                               | 32     |   |

**9.**
**ASSET      RETIREMENT OBLIGATION: **

** **
** **

|                                                       |   | **2006**                           |   | **2005** |   |
|------------------------------------------------------------|--------|------------------------------------|--------|----------|--------|
| **ARO                Reconciliation**                      |   | ***(In                millions)*** |   |
| Balance                at                beginning of year |   | $                                  | 80     |     | $      | 73 |   |
| Accretion                                                  |   |                               | 4      |     |   | 5 |   |
| FIN                47 ARO                upon adoption     |   |                               | -      |     |   | 2 |   |
| Balance                at end                of year       |   | $                                  | 84     |     | $      | 80 |   |

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

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

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

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

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

*Power      Outages      and Related Litigation*

----

*Other      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."*

----

**1**
**3.**
**SUMMARY      OF      QUARTERLY FINANCIAL DATA (UNAUDITED):**

| **Three                Months Ended**                    |   | **March                31,****2006** |   | **June                30,****2006** |   | **September                30, 2006** |   | **December                31, 2006** |   |
|----------------------------------------------------------|--------|--------------------------------------|--------|-------------------------------------|--------|---------------------------------------|--------|--------------------------------------|--------|
|                                                     |   | ***(In                millions)***   |   |
| Revenues                                                 |   | $                                    | 575.8  |                                | $      | 611.5                                 |   | $                                    | 911.1  |   | $ | 569.3 |   |
| Expenses                                                 |   |                                 | 502.3  |                                |   | 515.8                                 |   |                                 | 755.1  |   |   | 490.9 |   |
| Operating                Income                          |   |                                 | 73.5   |                                |   | 95.7                                  |   |                                 | 156.0  |   |   | 78.4 |   |
| Other                Expense                             |   |                                 | (16.2  | )                                   |   | (16.8                                 | )      |                                 | (18.3  | ) |   | (15.0 | ) |
| Income                Before                Income Taxes |   |                                 | 57.3   |                                |   | 78.9                                  |   |                                 | 137.7  |   |   | 63.4 |   |
| Income                Taxes                              |   |                                 | 23.6   |                                |   | 38.6                                  |   |                                 | 58.3   |   |   | 26.2 |   |
| Net                Income                                |   | $                                    | 33.7   |                                | $      | 40.3                                  |   | $                                    | 79.4   |   | $ | 37.2 |   |
| Earnings                on                Common Stock   |   | $                                    | 33.6   |                                | $      | 40.2                                  |   | $                                    | 78.5   |   | $ | 37.3 |   |

| **Three                Months Ended**                    |   | **March                31,****2005** |   | **June                30,****2005** |   | **September                30, 2005** |   | **December                31, 2005** |   |
|----------------------------------------------------------|--------|--------------------------------------|--------|-------------------------------------|--------|---------------------------------------|--------|--------------------------------------|--------|
|                                                     |   | ***(In                millions)***   |   |
| Revenues                                                 |   | $                                    | 529.1  |                                | $      | 595.3                                 |   | $                                    | 900.3  |   | $ | 577.6 |   |
| Expenses                                                 |   |                                 | 482.2  |                                |   | 478.8                                 |   |                                 | 753.5  |   |   | 499.4 |   |
| Operating                Income                          |   |                                 | 46.9   |                                |   | 116.5                                 |   |                                 | 146.8  |   |   | 78.2 |   |
| Other                Expense                             |   |                                 | (20.2  | )                                   |   | (19.5                                 | )      |                                 | (14.7  | ) |   | (15.2 | ) |
| Income                Before                Income Taxes |   |                                 | 26.7   |                                |   | 97.0                                  |   |                                 | 132.1  |   |   | 63.0 |   |
| Income                Taxes                              |   |                                 | 13.2   |                                |   | 42.7                                  |   |                                 | 58.1   |   |   | 21.8 |   |
| Net                Income                                |   | $                                    | 13.4   |                                | $      | 54.3                                  |   | $                                    | 74.0   |   | $ | 41.2 |   |
| Earnings                on                Common Stock   |   | $                                    | 13.3   |                                | $      | 54.2                                  |   | $                                    | 73.7   |   | $ | 41.2 |   |

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