<TABLE>
                                         OHIO EDISON COMPANY

                                       SELECTED FINANCIAL DATA
<CAPTION>
                                                  1998       1997       1996         1995       1994  
------------------------------------------------------------------------------------------------------
                                                                   (In thousands)
<S>                                           <C>         <C>         <C>         <C>         <C>
Operating Revenues                            $2,519,662  $2,473,582  $2,469,785  $2,465,846  $2,368,191
                                              ----------------------------------------------------------
Operating Income                              $  486,920  $  488,568  $  530,069  $  566,618  $  557,254
                                              ----------------------------------------------------------
Income Before Extraordinary Item              $  301,320  $  293,194  $  315,170  $  317,241  $  303,531
                                              ----------------------------------------------------------
Net Income                                    $  270,798  $  293,194  $  315,170  $  317,241  $  303,531
                                              ----------------------------------------------------------
Earnings on Common Stock                      $  258,828  $  280,802  $  302,673  $  294,747  $  281,852
                                              ----------------------------------------------------------
Total Assets                                  $8,733,151  $8,977,455  $9,054,457  $8,892,088  $9,045,255
                                              ----------------------------------------------------------

Capitalization at December 31:
  Common Stockholders' Equity                 $2,681,873  $2,724,319  $2,503,359  $2,407,871  $2,317,197
  Preferred Stock:
    Not Subject to Mandatory Redemption          211,870     211,870     211,870     211,870     328,240
    Subject to Mandatory Redemption              145,000     150,000     155,000     160,000      40,000
  Long-Term Debt                               2,215,042   2,569,802   2,712,760   2,786,256   3,166,593
                                              ----------------------------------------------------------
    Total Capitalization                      $5,253,785  $5,655,991  $5,582,989  $5,565,997  $5,852,030
                                              ----------------------------------------------------------

Capitalization Ratios:
  Common Stockholders' Equity                       51.0%       48.2%       44.8%       43.3%       39.6%
  Preferred Stock:
    Not Subject to Mandatory Redemption              4.0         3.7         3.8         3.8         5.6
    Subject to Mandatory Redemption                  2.8         2.7         2.8         2.9         0.7
  Long-Term Debt                                    42.2        45.4        48.6        50.0        54.1
                                              ----------------------------------------------------------
    Total Capitalization                           100.0%      100.0%      100.0%      100.0%      100.0%
                                              ----------------------------------------------------------

Kilowatt-Hour Sales (Millions):
  Residential                                      8,773       8,631       8,704       8,546       8,201
  Commercial                                       7,590       7,335       7,246       7,151       6,885
  Industrial                                      10,803      11,202      11,089      10,513       9,841
  Other                                              150         150         147         146         144
                                              ----------------------------------------------------------
  Total Retail                                    27,316      27,318      27,186      26,356      25,071
  Total Wholesale                                  5,706       5,241       7,076       6,920       5,879
                                              ----------------------------------------------------------
  Total                                           33,022      32,559      34,262      33,276      30,950
                                              ----------------------------------------------------------
Customers Served:
  Residential                                  1,004,552     995,605     988,179     978,118     968,483
  Commercial                                     113,820     111,189     113,795     111,978     109,832
  Industrial                                       4,598       4,568       4,590       4,268       3,786
  Other                                            1,476       1,415       1,331       1,308       1,226
                                              ----------------------------------------------------------
  Total                                        1,124,446   1,112,777   1,107,895   1,095,672   1,083,327
                                              ----------------------------------------------------------
Average Annual Residential kWh Usage               8,780       8,720       8,861       8,787       8,524
Cost of Fuel per Million Btu                       $1.15       $1.10       $1.13       $1.18       $1.21
Peak Load-Megawatts                                6,840       6,225       6,027       6,332       5,744
Number of Employees                                1,944       4,215       4,273       4,812       5,166



                  PRICE RANGE OF COMMON STOCK

          The Company's Common Stock became wholly owned by FirstEnergy
Corp. effective with the November 8, 1997 merger date. Prices shown below
are for the period through November 7, 1997.

                                    1997  
  -----------------------------------------------
<S>                           <C>       <C>
  First Quarter High-Low      23-7/8    20-7/8
                            ---------------------
  Second Quarter High-Low     22        19-1/4
                            ---------------------
  Third Quarter High-Low      23-5/8    21-3/4
                            ---------------------
  Fourth Quarter High-Low       --        --
                            ---------------------
  Yearly High-Low               --        --
                            ---------------------

<FN>

Prices are based on reports published in The Wall Street Journal for New York Stock Exchange Composite 
Transactions.

</TABLE>
<PAGE>

                          OHIO EDISON COMPANY

                      MANAGEMENT'S DISCUSSION AND
                  ANALYSIS OF RESULTS OF OPERATIONS
                      AND FINANCIAL CONDITION


          This discussion includes forward-looking statements based on 
information currently available to management that 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 market prices, legislative and 
regulatory changes, and the availability and cost of capital and other 
similar factors.

Results of Operations

          We continued to take steps in 1998 to better position our 
Company as competition continues to expand in the electric utility 
industry. Investments were made in new information systems with 
enhanced functionality which also address Year 2000 application 
deficiencies. We also contributed to 1998 cash savings of FirstEnergy 
Corp. (FirstEnergy) totaling $173 million which were captured from 
initiatives implemented during the year in connection with our November 
1997 merger with Centerior Energy Corporation to form FirstEnergy.

          Earnings on common stock were $258.8 million in 1998 compared 
to $280.8 million in 1997. Results for 1998 were adversely affect by a 
one-time, extraordinary charge of $30.5 million after taxes, related to 
Penn's discontinued application of Statement of Financial Accounting 
Standards No. 71 (SFAS 71), "Accounting for the Effects of Certain 
Types of Regulation", to its generation business, as discussed later in 
this report. Additionally, sharp increases in the spot market price for 
electricity occasioned by a constrained power supply and heavy customer 
demand in the latter part of June 1998, combined with unscheduled 
generating unit outages, resulted in spot market purchases of power at 
prices which substantially exceeded amounts recovered from retail 
customers. Earnings on common stock for 1997 were affected by net 
nonrecurring charges, resulting from merger-related staffing 
reductions, amounting to $26.4 million, and an increase in accelerated 
depreciation and amortization of nuclear and regulatory assets under 
our rate plans, totaling $20 million after taxes.

          For the fourth consecutive year, we achieved record operating 
revenues. The following table summarizes the sources of increases in 
operating revenues for 1998 and 1997 as compared to the previous year:


<TABLE>
<CAPTION>
                                         1998        1997
                                         ----        ----
                                           (In millions)
<S>                                    <C>           <C>
Increase in average retail price       $27.0         $ 13.3
Change in retail kilowatt-hour sales    (0.1)           7.8
Wholesale sales                         13.3          (27.3)
Other                                    5.9           10.0
-----------------------------------------------------------
Net Increase                           $46.1         $  3.8
===========================================================

</TABLE>

          Retail kilowatt-hour sales were approximately the same as the 
previous year at 27.3 billion kilowatt-hours after setting a new record 
in 1997. Residential and commercial kilowatt-hour sales increased 1.7% 
and 3.5%, respectively from 1997, offset by a 3.6% decrease in 
industrial sales. Residential and commercial kilowatt-hour sales 
benefited from continued growth in the retail customer base, with over 
11,000 new retail customers added in 1998 compared to approximately 
4,900 new retail customers in 1997. The closure of an electric arc 
furnace by a large steel customer in the latter part of 1997 and a 
general decline in electricity demand by steel manufacturers due to 
intense foreign competition contributed to the lower industrial sales. 
Sales to wholesale customers increased 8.9% contributing to an increase 
in total kilowatt-hour sales of 1.4%. In 1997, commercial and 
industrial kilowatt-hour sales increased 1.2% and 1.0%, respectively, 
from 1996, partially offset by an 0.8% decrease in residential sales 
resulting in a 0.5% increase in retail kilowatt-hour sales. A decrease 
in kilowatt-hour sales to wholesale customers contributed to a 5.0% 
decline in total kilowatt-hour sales in 1997 compared to 1996.

          Operation and maintenance expenses increased in 1998 compared 
to the prior year due to increased fuel and purchased power costs. Most 
of the increase occurred in the second quarter and resulted from a 
combination of factors. In late June 1998, the midwestern and southern 
regions of the United States experienced electricity shortages caused 
mainly by record temperatures and humidity and unscheduled generating 
unit outages. Due in part to unscheduled outages at the Beaver Valley 
Plant at that time, our production capabilities were reduced to the 
point that we purchased significant amounts of power at unusually high 
spot market prices, causing the increase in purchased power costs. In 
1997, fuel and purchased power costs were down from the previous year 
due to lower total kilowatt-hour sales. Nuclear operating costs 
increased in 1998 and in 1997 reflecting higher costs at the Beaver 
Valley Plant. Other operating costs decreased in 1998 from the previous 
year due primarily to the absence of expenses related to a 1997 
voluntary retirement program and estimated severance costs which 
increased other operating costs for that year.

          Depreciation and amortization decreased in 1998 compared to 
the prior year due primarily to the net effect of our rate plans. Total 
accelerated depreciation and amortization of our nuclear and regulatory 
assets under our rate plans was $173 million in 1998; down from $190 
million the previous year. In 1997, the increase in depreciation and 
amortization resulted from accelerations under the regulatory plans. 
General taxes increased in 1998 compared to 1997 in part because of 
gross receipts taxes on increased operating revenue. This followed a 
decrease in 1997 due to lower property taxes and an adjustment in the 
second quarter of that year which reduced the liabilities for gross 
receipts taxes.

          Interest on long-term debt continued to trend downward due to 
refinancings and redemptions of long-term debt. Other interest expense 
increased as a result of increased short-term borrowings.

Capital Resources and Liquidity

          We have significantly improved our financial position over 
the past five years. Excluding nonrecurring charges, our fixed charge 
coverage ratios continue to improve. Our corporate indenture ratio, 
which is used to measure our ability to issue first mortgage bonds, 
improved from 4.13 at the end of 1993 to 6.17 at the end of 1998. Over 
the same period, our charter ratio, a measure of our ability to issue 
preferred stock, improved from 2.02 to 2.49 and our common 
stockholders' equity percentage of capitalization rose from 
approximately 40% at the end of 1993 to 51% at the end of 1998. Our 
improving financial position reflects ongoing efforts to increase 
competitiveness. We continue to streamline our operations as evidenced 
by the 50% increase in FirstEnergy's customer/employee ratio, which has 
increased from 165 at the end of 1993 to 247 as of December 31, 1998. 
Merger-related savings achieved through consolidation of activities 
have contributed to these results. Also, net debt redemptions and 
refinancings have lowered our average cost of long-term debt over the 
last five years from 8.27% in 1993 to 7.55% at the end of 1998.

          We had about $33.2 million of cash and temporary investments 
and $338.2 million of short-term indebtedness as of December 31, 1998. 
Our unused borrowing capability included $46.5 million under revolving 
lines of credit and a $2.0 million bank facility that provides for 
borrowings on a short-term basis at the bank's discretion.

          Our cash requirements in 1999 for operating expenses, 
construction expenditures and scheduled debt maturities are expected to 
be met without issuing new securities. During 1998, we reduced our 
total debt by approximately $69 million. We have cash requirements of 
approximately $1.2 billion for the 1999-2003 period to meet scheduled 
maturities of long-term debt and preferred stock. Of that amount, 
approximately $417 million applies to 1999.

          Our capital spending for the period 1999-2003 is expected to 
be about $1.0 billion (excluding nuclear fuel), of which approximately 
$169 million applies to 1999. Investments for additional nuclear fuel 
during the 1999-2003 period are estimated to be approximately $167 
million, of which about $23 million applies to 1999. During the same 
periods, our nuclear fuel investments are expected to be reduced by 
approximately $169 million and $35 million, respectively, as the 
nuclear fuel is consumed. Also, we have operating lease commitments, 
net of PNBV Capital Trust cash receipts, of approximately $365 million 
for the 1999-2003 period, of which approximately $82 million relates to 
1999.

          FirstEnergy signed an agreement in principle with Duquesne 
Light Company (Duquesne) that would result in the transfer of 1,436 
megawatts owned by Duquesne at five generating plants in exchange for 
1,328 megawatts at three plants owned by FirstEnergy's electric utility 
operating companies (see "Common Ownership of Generating Facilities" in 
Note 1). A final agreement on the exchange of assets, which will be 
structured as a tax-free transaction to the extent possible, is being 
negotiated. The transaction benefits the FirstEnergy's utility 
operating companies by providing exclusive ownership and operating 
control of all generating assets that are now jointly owned and 
operated under the Central Area Power Coordination Group agreement.

Interest Rate Risk

          Our exposure to fluctuations in market interest rates is 
mitigated since a significant portion of our debt has fixed interest 
rates, as noted in the table below. We are subject to the inherent 
interest rate risks related to refinancing maturing debt by issuing new 
debt securities. As discussed in Note 2, our investment in the PNBV 
Capital Trust effectively reduces future lease obligations, also 
reducing interest rate risk. Changes in the market value of our nuclear 
decommissioning trust funds are recognized by making a corresponding 
change to the decommissioning liability, as described in Note 1.

          The table below presents principal amounts and related 
weighted average interest rates by year of maturity for our investment 
portfolio, debt obligations and preferred stock with mandatory 
redemption provisions.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
                                                                      There-          Fair
                                        1999  2000  2001  2002  2003  after   Total   Value
                                               (Dollars in Millions) 
--------------------------------------------------------------------------------------------- 
<S>                                    <C>    <C>    <C>  <C>   <C>   <C>     <C>     <C>
Investments other than Cash and
Cash Equivalents:
Fixed Income                           $  6   $ 17   $23  $ 26  $ 30  $  724  $  826  $  912
  Average interest rate                 5.5%   7.3%  7.7%  7.8%  7.9%    7.9%    7.9%
----------------------------------------------------------------------------------------------
Liabilities                
----------------------------------------------------------------------------------------------
Long-term Debt:
Fixed rate                             $164   $118   $17  $326  $246  $1,179  $2,050  $2,196
  Average interest rate                 7.0%   6.5%  8.0%  7.8%  8.2%    7.2%    7.4%
Variable rate                          $250                           $  327  $  577  $  579
  Average interest rate                 6.0%                             4.1%    4.9%
Short-term Borrowings                  $338                                   $  338  $  338
  Average interest rate                 5.6%                                     5.6%
----------------------------------------------------------------------------------------------
Preferred Stock                        $  5   $  5   $ 5  $  1  $  1  $  133  $  150  $  155
  Average dividend rate                 8.5%   8.5%  8.5%  7.6%  7.6%    8.9%    8.8%
----------------------------------------------------------------------------------------------

</TABLE>


Outlook

          We face many competitive challenges in the years ahead 
as the electric utility industry undergoes significant changes, 
including changing regulation and the entrance of more energy 
suppliers into the marketplace. Retail wheeling, which has begun 
in our Pennsylvania service area, allows retail customers to 
purchase electricity from other energy producers. Our regulatory 
plans have provided a solid foundation to position us to meet the 
challenges we are facing by significantly reducing fixed costs 
and lowering rates to a more competitive level.

          Our Rate Reduction and Economic Development Plan was 
approved by the Public Utilities Commission of Ohio (PUCO) in 
1995. This plan maintains our base electric rates through 
December 31, 2005 and revises our fuel cost recovery method. 
Penn's Rate Stability and Economic Development Plan, which was 
approved by the PPUC in the second quarter of 1996, ended in 1998 
with the PPUC's authorization of Penn's rate restructuring plan.

          As part of our regulatory plan, transition rate credits 
were implemented for customers, which are expected to reduce 
operating revenues by approximately $600 million during the 
regulatory plan period, which is to be followed by a base rate 
reduction of approximately $300 million in 2006.

          The PUCO has authorized additional capital recovery 
related to our generating assets (which is reflected as 
additional depreciation expense) and additional amortization of 
regulatory assets during the regulatory plan period of at least 
$2 billion more than the amount that would have been recognized 
if the regulatory plan was not in effect. This additional amount 
is being recovered through current rates.

          Based on the current regulatory environment and our 
regulatory plan, we believe we will continue to be able to bill 
and collect cost-based rates. As a result, we will continue the 
application of SFAS 71. However, changes in the regulatory 
environment appear to be on the horizon for electric utilities in 
Ohio. As further discussed below, the Ohio legislature is in the 
discussion stages of restructuring the State's electric utility 
industry. Although we believe that regulatory changes are 
possible in 1999, we cannot currently estimate the ultimate 
impact.

          For Penn, application of SFAS 71 was discontinued for 
the generation portion of its business in June 1998 following 
PPUC approval of the rate restructuring plan. Customer choice 
will be phased in over two years with 66% of each customer class 
able to choose alternative suppliers of generation on January 2, 
1999, and all remaining customers having choice as of January 2, 
2000. Under the plan, Penn continues to deliver power to homes 
and businesses through its transmission and distribution system, 
which remains regulated. However, Penn's rates have been 
restructured to establish separate charges for transmission and 
distribution; generation, which is subject to competition; and 
stranded cost recovery. In the event customers obtain power from 
an alternative source, the generation portion of Penn's rates 
will be excluded from their bill and the customers will receive a 
generation charge from the alternative supplier. The stranded 
cost recovery portion of rates provides for recovery of certain 
amounts not otherwise considered recoverable in a competitive 
generation market, including regulatory assets. Penn is entitled 
to recover $234 million of stranded costs through a competitive 
transition charge that starts in 1999 and ends in 2005.

          We continue to actively pursue the enactment of fair 
legislation calling for deregulation of Ohio's investor-owned 
electric utility industry. In early 1998, a deregulation proposal 
was introduced, leading to the creation of a working group to 
recommend legislation. As requested by legislative leadership, 
investor-owned utilities introduced a deregulation plan with 
objectives to (1) treat all major stakeholders in Ohio's electric 
system fairly; (2) protect public schools and local governments 
from revenue loss; and (3) allow utilities an opportunity to 
recover costs of government-mandated investments. The utilities 
have submitted proposals which incorporate these objectives and 
also recognize the complexity of restructuring the industry. The 
overlying objective is to do the job right the first time. 
Currently, the working group, comprised of legislative leaders, 
representatives of the electric utility companies and other 
interested stakeholders are meeting to discuss and mold these 
proposals. Most recently, placeholder bills containing statements 
of principle (that will be replaced by specific proposals as they 
are agreed upon) have been introduced. Legislative leaders have 
placed a high priority on enacting a deregulation bill by mid-
year.

         The Clean Air Act Amendments of 1990, discussed in Note 
5, require additional emission reductions by 2000. We are 
pursuing cost-effective compliance strategies for meeting these 
reduction requirements.

          On September 24, 1998, the Federal Environmental 
Protection Agency issued a final rule establishing tighter 
nitrogen oxide emission requirements for fossil fuel-fired 
utility boilers in Ohio, Pennsylvania and twenty other eastern 
states, including the District of Columbia (see "Environmental 
Matters" in Note 5). Controls must be in place by May 2003, with 
required reductions achieved during the five-month summer ozone 
season (May through September). The new rule is expected to 
increase the cost of producing electricity; however, we believe 
that we are in a better position than a number of other utilities 
to achieve compliance due to our nuclear generation capacity.
          In connection with our regulatory plans to reduce fixed 
costs and lower rates, we continue to take steps to restructure 
our operations. FirstEnergy announced plans to transfer the 
Companies' transmission assets into a new subsidiary, American 
Transmission Systems, Inc., with the transfer expected to be 
finalized in 1999. The new subsidiary represents a first step 
toward the goal of establishing or becoming part of a larger 
independent transmission company (TransCo). We believe that a 
TransCo better addresses the Federal Energy Regulatory 
Commission's (FERC) stated transmission objectives of providing 
non-discriminatory service, while providing for streamlined and 
cost-efficient operation. In working toward the goal of forming a 
larger regional transmission entity, FirstEnergy, American 
Electric Power, Virginia Power and Consumers Energy announced in 
November 1998 that they would prepare a FERC filing during 1999 
for such a regional transmission entity. The entity would be 
designed to meet the goals of reducing transmission costs that 
result when transferring power over several transmission systems, 
ensuring transmission reliability and providing non-
discriminatory access to the transmission grid.

Year 2000 Readiness

          The Year 2000 issue is the result of computer programs 
being written using two digits rather than four to identify the 
applicable year. Any of our programs that have date-sensitive 
software may recognize a date using "00" as the year 1900 rather 
than the year 2000. Because so many of our computer functions are 
date sensitive, this could cause far-reaching problems, such as 
system-wide computer failures and miscalculations, if no remedial 
action is taken.

          We have developed a multi-phase program for Year 2000 
compliance that consists of an assessment of our systems and 
operations that could be affected by the Year 2000 problem; 
remediation or replacement of noncompliant systems and 
components; and testing of systems and components following such 
remediation or replacement. We have focused our Year 2000 review 
on three areas: centralized system applications, noncentralized 
systems and relationships with third parties (including suppliers 
as well as end-use customers). Our review of system readiness 
extends to systems involving customer service, safety, 
shareholder needs and regulatory obligations.

          We are committed to taking appropriate actions to 
eliminate or lessen negative effects of the Year 2000 issue on 
our operations. We have completed an inventory of all computer 
systems and hardware including equipment with embedded computer 
chips and have determined which systems need to be converted or 
replaced to become Year 2000-ready and are in the process of 
remediating them. Based on our timetable, we expect to have all 
identified repairs, replacements and upgrades completed to 
achieve Year 2000 readiness by September 1999.

          Most of our Year 2000 issues will be resolved through 
system replacement. Of our major centralized systems, the general 
ledger system and inventory management, procurement and accounts 
payable systems were replaced at the end of 1998. Our payroll 
system was enhanced to be Year 2000 compliant in July 1998. The 
customer service system is due to be replaced in mid-1999.

          We have completed formal communications with most of 
our key suppliers to determine the extent to which we are 
vulnerable to those third parties' failure to resolve their own 
Year 2000 problems. For suppliers having potential compliance 
problems, we are developing alternate sources and services in the 
event such noncompliance occurs. We are also identifying areas 
requiring higher inventory levels based on compliance 
uncertainties. There can be no guarantee that the failure of 
companies to resolve their own Year 2000 issue will not have a 
material adverse effect on our business, financial condition and 
results of operations.

          We are using both internal and external resources to 
reprogram and/or replace and test our software for Year 2000 
modifications. Of the $43 million total project cost, 
approximately $34 million will be capitalized since those costs 
are attributable to the purchase of new software for total system 
replacements because the Year 2000 solution comprises only a 
portion of the benefits resulting from the system replacements. 
The remaining $9 million will be expensed as incurred. As of 
December 31, 1998, we have spent $24 million for Year 2000 
capital projects and had expensed approximately $4 million for 
Year 2000-related maintenance activities. Our total Year 2000 
project cost, as well as our estimates of the time needed to 
complete remedial efforts, are based on currently available 
information and do not include the estimated costs and time 
associated with the impact of third party Year 2000 issues.

          We believe we are managing the Year 2000 issue in such 
a way that our customers will not experience any interruption of 
service. We believe the most likely worst-case scenario from the 
Year 2000 issue will be disruption in power plant monitoring 
systems, thereby producing inaccurate data and potential failures 
in electronic switching mechanisms at transmission junctions. 
This would prolong localized outages, as technicians would have 
to manually activate switches. Such an event could have a 
material, but currently undeterminable, effect on our financial 
results. We are developing contingency plans to address the 
effects of any delay in becoming Year 2000 compliant and expect 
to have contingency plans completed by June 1999.

          The costs of the project and the dates on which we plan 
to complete the Year 2000 modifications are based on management's 
best estimates, which were derived from numerous assumptions of 
future events including the continued availability of certain 
resources, and other factors. However, there can be no guarantee 
that this project will be completed as planned and actual results 
could differ materially from the estimates. Specific factors that 
might cause material differences include but are not limited to, 
the availability and cost of trained personnel, the ability to 
locate and correct all relevant computer code, and similar 
uncertainties.


<TABLE>
<PAGE>
                                           OHIO EDISON COMPANY

                                   CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
For the Years Ended December 31,                                   1998         1997         1996
----------------------------------------------------------------------------------------------------
                                                                           (In thousands)
<S>                                                             <C>          <C>          <C>
OPERATING REVENUES                                              $2,519,662   $2,473,582   $2,469,785
                                                                ----------   ----------   ----------
OPERATING EXPENSES AND TAXES:
  Fuel and purchased power                                         511,645      437,223      456,629
  Nuclear operating costs                                          279,917      267,681      247,708
  Other operating costs                                            411,985      446,778      420,523
                                                                ----------   ----------   ----------
    Total operation and maintenance expenses                     1,203,547    1,151,682    1,124,860
  Provision for depreciation and amortization                      415,715      429,941      383,441
  General taxes                                                    242,524      234,964      241,998
  Income taxes                                                     170,956      168,427      189,417
                                                                ----------   ----------   ----------
    Total operating expenses and taxes                           2,032,742    1,985,014    1,939,716
                                                                ----------   ----------   ----------

OPERATING INCOME                                                   486,920      488,568      530,069

OTHER INCOME                                                        47,621       52,847       37,537
                                                                ----------   ----------   ----------
INCOME BEFORE NET INTEREST CHARGES                                 534,541      541,415      567,606
                                                                ----------   ----------   ----------
NET INTEREST CHARGES:
  Interest on long-term debt                                       173,781      204,285      211,935
  Allowance for borrowed funds used during
    construction and capitalized interest                           (2,096)      (2,699)      (3,136)
  Other interest expense                                            46,110       31,209       28,211
  Subsidiaries' preferred stock dividend requirements               15,426       15,426       15,426
                                                                ----------   ----------   ----------
    Net interest charges                                           233,221      248,221      252,436
                                                                ----------   ----------   ----------

INCOME BEFORE EXTRAORDINARY ITEM                                   301,320      293,194      315,170

EXTRAORDINARY ITEM (NET OF INCOME TAXES) (Note 1)                  (30,522)          --           --
                                                                ----------   ----------   ----------

NET INCOME                                                         270,798      293,194      315,170

PREFERRED STOCK DIVIDEND REQUIREMENTS                               11,970       12,392       12,497
                                                                ----------   ----------   ----------

EARNINGS ON COMMON STOCK                                        $  258,828   $  280,802   $  302,673
                                                                ==========   ==========   ==========

<FN>

The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.

</TABLE>
<PAGE>

<TABLE>
                                          OHIO EDISON COMPANY

                                      CONSOLIDATED BALANCE SHEETS
<CAPTION>
At December 31,                                                            1998            1997  
---------------------------------------------------------------------------------------------------
(In thousands)
<S>                                                                     <C>             <C>
                            ASSETS
UTILITY PLANT:
  In service                                                            $8,158,763      $8,666,272
  Less--Accumulated provision for depreciation                           3,610,155       3,546,594
                                                                        ----------      ----------
                                                                         4,548,608       5,119,678
                                                                        ----------      ----------
  Construction work in progress--
    Electric plant                                                         174,418          99,158
    Nuclear fuel                                                            17,003          21,360
                                                                        ----------      ----------
                                                                           191,421         120,518
                                                                        ----------      ----------
                                                                         4,740,029       5,240,196
                                                                        ----------      ----------
OTHER PROPERTY AND INVESTMENTS:
  PNBV Capital Trust (Note 2)                                              475,087         482,220
  Letter of credit collateralization (Note 2)                              277,763         277,763
  Other (Note 3B)                                                          538,411         529,408
                                                                        ----------      ----------
                                                                         1,291,261       1,289,391
                                                                        ----------      ----------
CURRENT ASSETS:
  Cash and cash equivalents                                                 33,213           4,680
  Receivables--
    Customers (less accumulated provisions of $6,397,000 and
      $5,618,000, respectively, for uncollectible accounts)                215,257         235,332
    Associated companies                                                   229,854          25,348
    Other                                                                   47,684          87,566
  Materials and supplies, at average cost--
    Owned                                                                   76,756          75,580
    Under consignment                                                       48,341          47,890
  Prepayments and other                                                     78,618          78,348
                                                                        ----------      ----------
                                                                           729,723         554,744
                                                                        ----------      ----------
DEFERRED CHARGES:
  Regulatory assets                                                      1,723,133       1,601,709
  Unamortized sale and leaseback costs                                      90,098          95,096
  Property taxes                                                           101,360         100,043
  Other                                                                     57,547          96,276
                                                                        ----------      ----------
                                                                         1,972,138       1,893,124
                                                                        ----------      ----------
                                                                        $8,733,151      $8,977,455
                                                                        ==========      ==========
                 CAPITALIZATION AND LIABILITIES

CAPITALIZATION (See Consolidated Statements of Capitalization):
  Common stockholders' equity                                           $2,681,873      $2,724,319
  Preferred stock--
    Not subject to mandatory redemption                                    160,965         160,965
    Subject to mandatory redemption                                         10,000          15,000
  Preferred stock of consolidated subsidiary--
    Not subject to mandatory redemption                                     50,905          50,905
    Subject to mandatory redemption                                         15,000          15,000
  Company obligated mandatorily redeemable preferred securities of
    subsidiary trust holding solely Company subordinated debentures        120,000         120,000
  Long-term debt                                                         2,215,042       2,569,802
                                                                        ----------      ----------
                                                                         5,253,785       5,655,991
                                                                        ----------      ----------
CURRENT LIABILITIES:
  Currently payable long-term debt and preferred stock                     528,792         278,492
  Short-term borrowings (Note 4)--
    Associated companies                                                    88,732              --
    Other                                                                  249,451         302,229
  Accounts payable                                                          99,659         115,836
  Accrued taxes                                                            188,295         157,095
  Accrued interest                                                          45,221          53,165
  Other                                                                    114,162         115,256
                                                                        ----------      ----------
                                                                         1,314,312       1,022,073
                                                                        ----------      ----------
DEFERRED CREDITS:
  Accumulated deferred income taxes                                      1,601,887       1,698,354
  Accumulated deferred investment tax credits                              154,538         184,804
  Pensions and other postretirement benefits                               136,856         158,038
  Other                                                                    271,773         258,195
                                                                        ----------      ----------
                                                                         2,165,054       2,299,391
                                                                        ----------      ----------
COMMITMENTS, GUARANTEES AND CONTINGENCIES
  (Notes 2 and 5 )                                                      ----------      ----------
                                                                        $8,733,151      $8,977,455
                                                                        ==========      ==========

<FN>

The accompanying Notes to Consolidated Financial Statements are an integral
part of these balance sheets.

</TABLE>
<PAGE>

<TABLE>
                                                        OHIO EDISON COMPANY

                                              CONSOLIDATED STATEMENTS OF CAPITALIZATION

<CAPTION>
At December 31,                                                                                             1998          1997
-----------------------------------------------------------------------------------------------------------------------------
                                           (Dollars in thousands, except per share amounts)
<S>                                                                                                       <C>         <C>
COMMON STOCKHOLDERS' EQUITY:
  Common stock, $9 par value, authorized 175,000,000 shares-100 shares outstanding                        $        1  $        1
  Other paid-in capital                                                                                    2,098,728   2,103,259
  Accumulated other comprehensive income (Note 3C)                                                                --        (615)
  Retained earnings (Note 3A)                                                                                583,144     621,674
                                                                                                          ----------  ----------
      Total common stockholders' equity                                                                    2,681,873   2,724,319
                                                                                                          ----------  ----------
                                                               Number of Shares          Optional
                                                                 Outstanding          Redemption Price
                                                               ----------------    ---------------------
                                                               1998        1997    Per Share   Aggregate
                                                               ----        ----    ---------   ---------
<S>                                                          <C>         <C>         <C>         <C>
PREFERRED STOCK (Note 3D):
Cumulative, $100 par value-
Authorized 6,000,000 shares
  Not Subject to Mandatory Redemption:
    3.90%                                                    152,510     152,510     $103.63     $15,804      15,251      15,251
    4.40%                                                    176,280     176,280      108.00      19,038      17,628      17,628
    4.44%                                                    136,560     136,560      103.50      14,134      13,656      13,656
    4.56%                                                    144,300     144,300      103.38      14,917      14,430      14,430
                                                           ---------   ---------                 -------  ----------  ----------
                                                             609,650     609,650                  63,893      60,965      60,965
Cumulative, $25 par value-
Authorized 8,000,000 shares
  Not Subject to Mandatory Redemption:
    7.75%                                                  4,000,000   4,000,000                             100,000     100,000
                                                           ---------   ---------                 -------  ----------  ----------
      Total not subject to
        mandatory redemption                               4,609,650   4,609,650                 $63,893     160,965     160,965
                                                           =========   =========                 =======  ----------  ----------
Cumulative, $100 par value-
  Subject to Mandatory Redemption (Note 3E):
    8.45%                                                    150,000     200,000                              15,000      20,000
    Redemption within one year                                                                                (5,000)     (5,000)
                                                           ---------   ---------                          ----------  ----------
  
      Total subject to mandatory redemption                  150,000     200,000                              10,000      15,000
                                                           =========   =========                          ----------  ----------

PREFERRED STOCK OF CONSOLIDATED
SUBSIDIARY (Note 3D):
Pennsylvania Power Company-
Cumulative, $100 par value-
Authorized 1,200,000 shares
  Not Subject to Mandatory Redemption:
    4.24%                                                     40,000      40,000     $103.13     $ 4,125       4,000       4,000
    4.25%                                                     41,049      41,049      105.00       4,310       4,105       4,105
    4.64%                                                     60,000      60,000      102.98       6,179       6,000       6,000
    7.64%                                                     60,000      60,000      101.42       6,085       6,000       6,000
    7.75%                                                    250,000     250,000          --          --      25,000      25,000
    8.00%                                                     58,000      58,000      102.07       5,920       5,800       5,800
                                                           ---------   ---------                 -------  ----------  ----------
      Total not subject to mandatory
        redemption                                           509,049     509,049                 $26,619      50,905      50,905
                                                           =========   =========                 =======  ----------  ----------
  Subject to Mandatory Redemption (Note 3E):
    7.625%                                                   150,000     150,000      106.86     $16,029      15,000      15,000
                                                           =========   =========                 =======  ----------  ----------
COMPANY OBLIGATED MANDATORILY REDEEMABLE
PREFERRED SECURITIES OF SUBSIDIARY TRUST
HOLDING SOLELY COMPANY SUBORDINATED
DEBENTURES (Note 3F):
Cumulative, $25 par value-
Authorized 4,800,000 shares
  Subject to Mandatory Redemption:
    9.00%                                                  4,800,000   4,800,000                             120,000     120,000
                                                           =========   =========                          ----------  ----------

</TABLE>






<TABLE>
                                                      OHIO EDISON COMPANY

                                     CONSOLIDATED STATEMENTS OF CAPITALIZATION (Cont.)
<CAPTION>
At December 31,            1998          1997                                  1998           1997          1998          1997  
--------------------------------------------------------------------------------------------------------------------------------
                                                        (In thousands)
<S>                      <C>            <C>                                   <C>            <C>          <C>         <C>
LONG-TERM DEBT (Note 3G):
First mortgage bonds:
  Ohio Edison Company-                            Pennsylvania Power Company-
    8.750%  due 1998          --        150,000    9.740%  due 1999-2019      20,000         20,000
    6.875%  due 1999     150,000        150,000    7.500%  due 2003           40,000         40,000
    6.375%  due 2000      80,000         80,000    6.375%  due 2004           20,500         20,500
    7.375%  due 2002     120,000        120,000    6.625%  due 2004           14,000         14,000
    7.500%  due 2002      34,265         34,265    8.500%  due 2022           27,250         27,250
    8.250%  due 2002     125,000        125,000    7.625%  due 2023            6,500          6,500
    8.625%  due 2003     150,000        150,000                              -------        -------
    6.875%  due 2005      80,000         80,000
    8.750%  due 2022      50,960         50,960
    7.625%  due 2023      75,000         75,000
    7.875%  due 2023     100,000        100,000
                         -------      ---------
Total first mortgage
 bonds.                  965,225      1,115,225                              128,250        128,250        1,093,475   1,243,475
                         -------      ---------                              -------        -------       ----------  ----------
Secured notes:
  Ohio Edison Company-                            Pennsylvania Power Company-
    7.930%  due 2002      39,936         50,646    4.750%  due 1998               --            850
    7.680%  due 2005     200,000        200,000    6.080%  due 2000           23,000         23,000
    6.750%  due 2015      40,000         40,000    5.400%  due 2013            1,000          1,000
    7.450%  due 2016      47,725         47,725    5.400%  due 2017           10,600         10,600
    7.100%  due 2018      26,000         26,000    7.150%  due 2017           17,925         17,925
    7.050%  due 2020      60,000         60,000    5.900%  due 2018           16,800         16,800
    7.000%  due 2021      69,500         69,500    8.100%  due 2020            5,200          5,200
    7.150%  due 2021         443            443    7.150%  due 2021           14,482         14,482
    7.625%  due 2023      50,000         50,000    6.150%  due 2023           12,700         12,700
    8.100%  due 2023      30,000         30,000   *4.150%  due 2027           10,300         10,300
    7.750%  due 2024     108,000        108,000    6.450%  due 2027           14,500         14,500
    5.375%  due 2028      13,522             --    5.375%  due 2028            1,734             --
    5.625%  due 2029      50,000         50,000    5.450%  due 2028            6,950          6,950
    5.950%  due 2029      56,212         56,212    6.000%  due 2028           14,250         14,250
    5.450%  due 2033      14,800         14,800    5.950%  due 2029              238            238
                                                                             -------        -------
  Limited Partnerships-
   7.87% weighted 
   average interest
   rate due 1999-2007     11,320             --
                         -------      ---------
                         817,458        803,326                              149,679        148,795          967,137     952,121
                         -------      ---------                              -------        -------       ----------  ----------
  OES Fuel-
  5.97% weighted average
   interest rate                                                                                              79,524      80,755
                                                                                                          ----------  ----------
Total secured notes                                                                                        1,046,661   1,032,876
                                                                                                          ----------  ----------
Unsecured notes:
  Ohio Edison Company-
    5.963%  due 1999                                                                                         115,000          --
    6.025%  due 1999                                                                                          85,000          --
    6.088%  due 1999                                                                                          50,000          --
    6.338%  due 1999                                                                                              --      40,000
    6.400%  due 1999                                                                                              --     175,000
   *4.300%  due 2012                                                                                          50,000      50,000
   *3.950%  due 2014                                                                                          50,000      50,000
   *3.650%  due 2015                                                                                          50,000      50,000
   *4.200%  due 2018                                                                                          57,100      57,100
   *4.200%  due 2018                                                                                          56,000      56,000
   *4.050%  due 2032                                                                                          53,400      53,400
                                                                                                          ----------  ----------
Total unsecured notes                                                                                        566,500     531,500
                                                                                                          ----------  ----------
Capital lease obligations (Note 2)                                                                            36,891      40,614
                                                                                                          ----------  ----------
Net unamortized discount on debt                                                                              (4,693)     (5,171)
                                                                                                          ----------  ----------
Long-term debt due within one year                                                                          (523,792)   (273,492)
                                                                                                          ----------  ----------
Total long-term debt                                                                                       2,215,042   2,569,802
                                                                                                          ----------  ----------
TOTAL CAPITALIZATION                                                                                      $5,253,785  $5,655,991
                                                                                                          ==========  ==========


<FN>
*  Denotes variable rate issue with December 31, 1998 interest rate shown.

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

</TABLE>
<PAGE>

<TABLE>
                                                       OHIO EDISON COMPANY

                                     CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
<CAPTION>
                                                                                         Accumulated
                                                                                            Other                 Unallocated
                                      Comprehensive                             Other    Comprehensive               ESOP
                                         Income        Number       Par        Paid-In      Income      Retained    Common
                                        (Note 3C)    of Shares     Value       Capital     (Note 3C)    Earnings    Stock 
                                     --------------  ---------   ----------   --------- -------------- --------  ------------
                                                                        (Dollars in thousands)
<S>                                      <C>        <C>          <C>          <C>            <C>         <C>         <C>
Balance, January 1, 1996                           152,569,437  $ 1,373,125  $  726,915    $(608)      $ 471,095   $(162,656)
  Net income                            $315,170                                                         315,170
  Minimum liability for unfunded
    retirement benefits, net of
    $27,000 of income taxes                  (51)                                            (51)
                                        --------
  Comprehensive income                  $315,119
                                        ========
  Allocation of ESOP shares                                                       1,346                                7,646
  Cash dividends on preferred stock                                                                      (12,497)
  Cash dividends on common stock                                                                        (216,126)
------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996                         152,569,437    1,373,125     728,261     (659)        557,642    (155,010)
  Net income                            $293,194                                                         293,194
  Minimum liability for unfunded
    retirement benefits, net of
    $26,000 of income taxes                   44                                              44
                                        --------
  Comprehensive income                  $293,238
                                        ========
  FirstEnergy merger                              (152,569,337)  (1,373,124)  1,373,124                              146,977
  Allocation of ESOP shares                                                       1,874                                8,033
  Cash dividends on preferred stock                                                                      (12,392)
  Cash dividends on common stock                                                                        (216,770)
-----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997                                 100            1   2,103,259     (615)        621,674          --
  Net income                            $270,798                                                         270,798
  Transfer of minimum liability for
    unfunded retirement benefits
    to parent                                615                                             615
                                        --------
  Comprehensive income                  $271,413
                                        ========
  Transfer of ESOP premium to parent                                             (4,531)
  Cash dividends on preferred stock                                                                      (11,952)
  Cash dividends on common stock                                                                        (297,376)
------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998                                 100  $         1  $2,098,728    $  --       $ 583,144   $      --  
=================================================================================================================================



                               CONSOLIDATED STATEMENTS OF PREFERRED STOCK


             <CAPTION>
                                                      Not Subject to             Subject to
                                                   Mandatory Redemption      Mandatory Redemption
                                                  ---------------------      --------------------
                                                                Par or                    Par or
                                                   Number       Stated        Number      Stated
                                                 of Shares       Value       of Shares     Value
                                                 ---------      -------      ---------    -------
                                                                (Dollars in thousands)
           <S>                                   <C>           <C>           <C>          <C>
           Balance, January 1, 1996              5,118,699     $211,870      5,200,000    $160,000
           -------------------------------------------------------------------------------------
           Balance, December 31, 1996            5,118,699      211,870      5,200,000     160,000
             Redemptions--
               8.45% Series                                                    (50,000)     (5,000)
           --------------------------------------------------------------------------------------
           Balance, December 31, 1997            5,118,699      211,870      5,150,000     155,000
             Redemptions--
               8.45% Series                                                    (50,000)     (5,000)
           --------------------------------------------------------------------------------------
           Balance, December 31, 1998            5,118,699     $211,870      5,100,000    $150,000
           ======================================================================================
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.

</TABLE>
<PAGE>

<TABLE>
                                           OHIO EDISON COMPANY

                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the Years Ended December 31,                                          1998        1997        1996
--------------------------------------------------------------------------------------------------------
                                                                                (In thousands)
<S>                                                                    <C>          <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income                                                             $ 270,798    $293,194    $315,170
Adjustments to reconcile net income to net cash from
  operating activities:
    Provision for depreciation and amortization                          415,715     429,941     383,441
    Nuclear fuel and lease amortization                                   35,086      49,251      52,784
    Deferred income taxes, net                                           (59,553)    (40,478)     41,365
    Investment tax credits, net                                          (14,290)    (15,031)    (14,041)
    Extraordinary item                                                    51,730          --          --
    Receivables                                                         (144,549)    (23,887)     24,326
    Materials and supplies                                                (1,627)    (10,557)       (736)
    Accounts payable                                                      (8,455)     32,531         962
    Other                                                                 64,552      21,756     (42,954)
                                                                       ---------    --------    --------
      Net cash provided from operating activities                        609,407     736,720     760,317
                                                                       ---------    --------    --------


CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
    Long-term debt                                                       117,265      89,773     306,313
    Short-term borrowings, net                                            35,954          --     229,515
Redemptions and Repayments-
    Preferred stock                                                        5,000       5,000       1,016
    Long-term debt                                                       225,241     292,409     438,916
    Short-term borrowings, net                                                --      47,251          --
Dividend Payments-
    Common stock                                                         297,746     237,848     218,656
    Preferred stock                                                       11,865      12,559      12,560
                                                                       ---------    --------    --------
      Net cash used for financing activities                             386,633     505,294     135,320
                                                                       ---------    --------    --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions                                                       186,139     179,328     148,189
PNBV capital trust investment                                                 --          --     487,979
Other                                                                      8,102      52,671      13,406
                                                                       ---------    --------    --------
      Net cash used for investing activities                             194,241     231,999     649,574
                                                                       ---------    --------    --------
Net increase (decrease) in cash and cash equivalents                      28,533        (573)    (24,577)
Cash and cash equivalents at beginning of year                             4,680       5,253      29,830
                                                                       ---------    --------    --------
Cash and cash equivalents at end of year                               $  33,213    $  4,680    $  5,253
                                                                       =========    ========    ========


SUPPLEMENTAL CASH FLOWS INFORMATION:
Cash Paid During the Year-
  Interest (net of amounts capitalized)                                $ 201,064    $212,987    $224,541
                                                                       =========    ========    ========
  Income taxes                                                         $ 219,226    $228,399    $157,477
                                                                       =========    ========    ========


<FN>

The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.

</TABLE>
<PAGE>

<TABLE>
                                        OHIO EDISON COMPANY

                                 CONSOLIDATED STATEMENTS OF TAXES
<CAPTION>
For the Years Ended December 31,                                     1998        1997        1996   
---------------------------------------------------------------------------------------------------  
                                                                             (In thousands)
<S>                                                               <C>         <C>         <C>
GENERAL TAXES:
Real and personal property                                        $  116,868  $  114,111  $  115,443
State gross receipts                                                 104,175      99,262     104,158
Social security and unemployment                                      12,701      14,113      14,602
Other                                                                  8,780       7,478       7,795
                                                                  ----------  ----------  ----------
    Total general taxes                                           $  242,524  $  234,964  $  241,998
                                                                  ==========  ==========  ==========

PROVISION FOR INCOME TAXES:
Currently payable-
  Federal                                                         $  229,164  $  225,529  $  164,132
  State                                                               14,732      17,784       9,839
                                                                  ----------  ----------  ----------
                                                                     243,896     243,313     173,971
                                                                  ----------  ----------  ----------
Deferred, net-
  Federal                                                            (53,943)    (34,429)     37,277
  State                                                               (5,610)     (6,048)      4,088
                                                                  ----------  ----------  ----------
                                                                     (59,553)    (40,477)     41,365
                                                                  ----------  ----------  ----------
Investment tax credit amortization                                   (14,290)    (15,031)    (14,041)
                                                                  ----------  ----------  ----------
    Total provision for income taxes                              $  170,053  $  187,805  $  201,295
                                                                  ==========  ==========  ==========
INCOME STATEMENT CLASSIFICATION
OF PROVISION FOR INCOME TAXES:
Operating income                                                  $  170,956  $  168,427  $  189,417
Other income                                                          20,305      19,378      11,878
Extraordinary item                                                   (21,208)         --          --
                                                                  ----------  ----------  ----------
    Total provision for income taxes                              $  170,053  $  187,805  $  201,295
                                                                  ==========  ==========  ==========

RECONCILIATION OF FEDERAL INCOME TAX EXPENSE AT
STATUTORY RATE TO TOTAL PROVISION FOR INCOME TAXES:
Book income before provision for income taxes                     $  440,851  $  480,999  $  516,465
                                                                  ==========  ==========  ==========
Federal income tax expense at statutory rate                      $  154,298  $  168,350  $  180,763
Increases (reductions) in taxes resulting from-
  Amortization of investment tax credits                             (14,290)    (15,031)    (14,041)
  State income taxes net of federal income tax benefit                 5,929       7,628       9,053
  Amortization of tax regulatory assets                               27,599      28,277      26,945
  Other, net                                                          (3,483)     (1,419)     (1,425)
                                                                  ----------  ----------  ----------
    Total provision for income taxes                              $  170,053  $  187,805  $  201,295
                                                                  ==========  ==========  ==========

ACCUMULATED DEFERRED INCOME TAXES AT DECEMBER 31:
Property basis differences                                        $  880,645  $1,019,952  $1,086,533
Allowance for equity funds used during construction                  169,780     210,136     233,345
Deferred nuclear expense                                             237,602     252,946     262,123
Competitive transition charge                                        135,730          --          --
Customer receivables for future income taxes                         164,618     204,643     219,932
Deferred sale and leaseback costs                                     45,521      47,796      50,212
Unamortized investment tax credits                                   (55,495)    (67,208)    (72,663)
Other                                                                 23,486      30,089      (2,396)
                                                                  ----------  ----------  ----------
    Net deferred income tax liability                             $1,601,887  $1,698,354  $1,777,086
                                                                  ==========  ==========  ==========

<FN>

The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.

</TABLE>
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

          The consolidated financial statements include Ohio Edison 
Company (Company), and its wholly owned subsidiaries. Pennsylvania 
Power Company (Penn) is the Company's principal operating subsidiary. 
All significant intercompany transactions have been eliminated. The 
Company became a wholly owned subsidiary of FirstEnergy Corp. 
(FirstEnergy) on November 8, 1997. FirstEnergy was formed on that date 
by the merger of the Company and Centerior Energy Corporation 
(Centerior). FirstEnergy holds directly all of the issued and 
outstanding common shares of the Company and all of the issued and 
outstanding common shares of Centerior's former direct subsidiaries, 
which include, among others, The Cleveland Electric Illuminating 
Company (CEI) and The Toledo Edison Company (TE). The Company and Penn 
(Companies) follow the accounting policies and practices prescribed by 
the Public Utilities Commission of Ohio (PUCO), the Pennsylvania Public 
Utility Commission (PPUC) and the Federal Energy Regulatory Commission 
(FERC). The preparation of financial statements in conformity with 
generally accepted accounting principles requires management to make 
periodic estimates and assumptions that affect the reported amounts of 
assets, liabilities, revenues and expenses. Certain prior year amounts 
have been reclassified to conform with the current year presentation.

REVENUES-

          The Companies' principal business is providing electric 
service to customers in central and northeastern Ohio and western 
Pennsylvania. The Companies' retail customers are metered on a cycle 
basis. Revenue is recognized for unbilled electric service through the 
end of the year.

          Receivables from customers include sales to residential, 
commercial and industrial customers located in the Companies' service 
area and sales to wholesale customers. There was no material 
concentration of receivables at December 31, 1998 or 1997, with respect 
to any particular segment of the Companies' customers.

REGULATORY PLANS-

          The PUCO approved the Company's Rate Reduction and Economic 
Development Plan in 1995. This regulatory plan initially maintains 
current base electric rates for the Company through December 31, 2005. 
At the end of the regulatory plan period, the Company's base rates will 
be reduced by $300 million (approximately 20 percent below current 
levels).The plan also revised the Company's fuel cost recovery method. 
The Company formerly recovered fuel-related costs not otherwise 
included in base rates from retail customers through separate energy 
rates. In accordance with the regulatory plan, the Company's fuel rates 
will be frozen through the regulatory plan period, subject to limited 
periodic adjustments. As part of the Company's regulatory plan, 
transition rate credits were implemented for customers, which are 
expected to reduce operating revenues for the Company by approximately 
$600 million.

          In June 1998, the PPUC authorized a rate restructuring plan 
for Penn, which superseded the regulatory plan which had been in place 
for Penn since 1996 and essentially resulted in the deregulation of 
Penn's generation business as of June 30, 1998. Penn was required to 
remove from its balance sheet all regulatory assets and liabilities 
related to its generation business and assess all other assets for 
impairment. The Securities and Exchange Commission (SEC) issued 
interpretive guidance regarding asset impairment measurement which 
concluded that any supplemental regulated cash flows such as a 
competitive transition charge (CTC) should be excluded from the cash 
flows of assets in a portion of the business not subject to regulatory 
accounting practices. If those assets are impaired, a regulatory asset 
should be established if the costs are recoverable through regulatory 
cash flows. Consistent with the SEC guidance, Penn reduced its nuclear 
generating unit investments by approximately $305 million, of which 
approximately $227 million was recognized as a regulatory asset to be 
recovered through a CTC over a seven-year transition period; the 
remaining net amount of $78 million was written off. The charge of $51.7 
million ($30.5 million after income taxes) for discontinuing the 
application of Statement of Financial Accounting Standards (SFAS) No. 
71, "Accounting for the Effects of Certain Types of Regulation" (SFAS 
71), to Penn's generation business was recorded as an extraordinary item 
on the Consolidated Statement of Income. Penn's net assets included in 
utility plant relating to the operations for which the application of 
SFAS 71 was discontinued and Penn's total assets as of December 31, 1998 
were $146 million and $978 million, respectively.

          All of the Companies' regulatory assets are being recovered 
under provisions of the regulatory plans. In addition, the PUCO has 
authorized the Company to recognize additional capital recovery related 
to its generating assets (which is reflected as additional depreciation 
expense) and additional amortization of regulatory assets during the 
regulatory plan period of at least $2 billion, and the PPUC had 
authorized Penn to accelerate at least $358 million, more than the 
amounts that would have been recognized if the regulatory plans were not 
in effect. These additional amounts are being recovered through current 
rates. As of December 31, 1998, the Companies' cumulative additional 
capital recovery and regulatory asset amortization amounted to $696 
million (including Penn's impairment discussed above).

UTILITY PLANT AND DEPRECIATION-

          Utility plant reflects the original cost of construction, 
(except for Penn's nuclear generating units which were adjusted to fair 
value as discussed above), including payroll and related costs such as 
taxes, employee benefits, administrative and general costs, and interest 
costs.

          The Companies provide for depreciation on a straight-line 
basis at various rates over the estimated lives of property included in 
plant in service. The annual composite rate for electric plant was 
approximately 3.0% in 1998, 1997, and 1996. In addition to the 
straight-line depreciation recognized in 1998, 1997 and 1996, the 
Companies recognized additional capital recovery of $141 million 
(excluding Penn's impairment), $172 million and $144 million, 
respectively, as additional depreciation expense in accordance with 
their regulatory plans. Such additional charges in the accumulated 
provision for depreciation were $422 million and $343 million as of 
December 31, 1998 and 1997, respectively.

          Annual depreciation expense includes approximately $9.4 
million for future decommissioning costs applicable to the Companies' 
ownership and leasehold interests in three nuclear generating units. The 
Companies' share of the future obligation to decommission these units is 
approximately $511 million in current dollars and (using a 4.0% 
escalation rate) approximately $1.4 billion in future dollars. The 
estimated obligation and the escalation rate were developed based on 
site specific studies. Payments for decommissioning are expected to 
begin in 2016, when actual decommissioning work begins. The Companies 
have recovered approximately $83 million for decommissioning through 
their electric rates from customers through December 31, 1998. If the 
actual costs of decommissioning the units exceed the funds accumulated 
from investing amounts recovered from customers, the Companies expect 
that additional amount to be recoverable from their customers. The 
Companies have approximately $130.6 million invested in external 
decommissioning trust funds as of December 31, 1998. Earnings on these 
funds are reinvested with a corresponding increase to the 
decommissioning liability. The Companies have also recognized an 
estimated liability of approximately $13.7 million related to 
decontamination and decommissioning of nuclear enrichment facilities 
operated by the United States Department of Energy (DOE), as required by 
the Energy Policy Act of 1992.

          The Financial Accounting Standards Board (FASB) issued a 
proposed accounting standard for nuclear decommissioning costs in 1996. 
If the standard is adopted as proposed: (1) annual provisions for 
decommissioning could increase; (2) the net present value of estimated 
decommissioning costs could be recorded as a liability; and (3) income 
from the external decommissioning trusts could be reported as investment 
income. The FASB subsequently expanded the scope of the proposed 
standard to include other closure and removal obligations related to 
long-lived assets. A revised proposal may be issued by the FASB in 1999.

COMMON OWNERSHIP OF GENERATING FACILITIES-

          The Companies, together with the other FirstEnergy utilities, 
CEI and TE, and Duquesne Light Company (Duquesne) constitute the Central 
Area Power Coordination Group (CAPCO). The CAPCO companies own and/or 
lease, as tenants in common, various power generating facilities. Each 
of the companies is obligated to pay a share of the costs associated 
with any jointly owned facility in the same proportion as its interest. 
The Companies' portions of operating expenses associated with jointly 
owned facilities are included in the corresponding operating expenses on 
the Consolidated Statements of Income. The amounts reflected on the 
Consolidated Balance Sheet under utility plant at December 31, 1998, 
include the following:

<TABLE>
<CAPTION>
                                                          Companies'
                       Utility   Accumulated  Construction  Ownership/
                        Plant   Provision for   Work in    Leasehold
Generating Units     in Service  Depreciation  Progress     Interest
---------------------------------------------------------------------
                                       (In millions)
<S>                  <C>         <C>             <C>         <C>
W.H. Sammis #7       $  303.3    $  101.3        $ 2.0       68.80%
Bruce Mansfield #1,
  #2 and #3             791.9       399.7          8.3       50.68%
Beaver Valley
  #1 and #2           1,653.0       599.9         10.1       47.11%
Perry                 1,295.4       748.8          7.5       35.24%
------------------------------------------------------------------
  Total              $4,043.6    $1,849.7        $27.9
===================================================================  

</TABLE>

          On October 15, 1998, FirstEnergy announced that it signed an 
agreement in principle with Duquesne that would result in the transfer 
of 1,436 megawatts owned by Duquesne at eight CAPCO generating units in 
exchange for 1,328 megawatts at three non-CAPCO power plants owned by 
the Company, Penn and CEI. As part of this exchange, the Companies will 
transfer their 246-megawatt Niles Plant and 339-megawatt New Castle 
Plant to Duquesne. A definitive agreement on the exchange of assets, 
which will be structured as a tax-free transaction to the extent 
possible, will provide FirstEnergy's utility operating companies with 
exclusive ownership and operating control of all CAPCO generating units. 
Duquesne will fund decommissioning costs equal to its percentage 
interest in the three nuclear generating units to be transferred. The 
asset transfer is expected to take twelve to eighteen months to close.

NUCLEAR FUEL-

          Nuclear fuel is recorded at original cost, which includes 
material, enrichment, fabrication and interest costs incurred prior to 
reactor load. The Companies amortize the cost of nuclear fuel based on 
the rate of consumption. The Companies' electric rates include amounts 
for the future disposal of spent nuclear fuel based upon the formula 
used to compute payments to the DOE.

INCOME TAXES-

          Details of the total provision for income taxes are shown on 
the Consolidated Statements of Taxes. Deferred income taxes result from 
timing differences in the recognition of revenues and expenses for tax 
and accounting purposes. Investment tax credits, which were deferred 
when utilized, are being amortized over the recovery period of the 
related property. The liability method is used to account for deferred 
income taxes. Deferred income tax liabilities related to tax and 
accounting basis differences are recognized at the statutory income tax 
rates in effect when the liabilities are expected to be paid. Since 
November 8, 1997, the Companies are included in FirstEnergy's 
consolidated federal income tax return. The consolidated tax liability 
is allocated on a "stand-alone" company basis, with the Companies 
recognizing any tax losses or credits they contributed to the 
consolidated return.

RETIREMENT BENEFITS-

          The Companies' trusteed, noncontributory defined benefit 
pension plans cover almost all full-time employees. Upon retirement, 
employees receive a monthly pension based on length of service and 
compensation. In 1998, the Companies' pension plans and the Centerior 
pension plan were merged into the FirstEnergy pension plans. The 
Companies use the projected unit credit method for funding purposes and 
were not required to make pension contributions during the three years 
ended December 31, 1998. The assets of the pension plans consist 
primarily of common stocks, United States government bonds and 
corporate bonds.

          The Companies provide a minimum amount of noncontributory life 
insurance to retired employees in addition to optional contributory 
insurance. Health care benefits, which include certain employee 
deductibles and copayments, are also available to retired employees, 
their dependents and, under certain circumstances, their survivors. The 
Companies pay insurance premiums to cover a portion of these benefits in 
excess of set limits; all amounts up to the limits are paid by the 
Companies. The Companies recognize the expected cost of providing other 
postretirement benefits to employees and their beneficiaries and covered 
dependents from the time employees are hired until they become eligible 
to receive those benefits.

          The following sets forth the funded status of the FirstEnergy 
plans in 1998 and the Companies' plans in 1997 on the Consolidated 
Balance Sheets as of December 31 (which includes the Companies' share of 
the FirstEnergy 1998 plans' net prepaid pension cost and accrued other 
postretirement benefits cost of $175.9 million and $132.8 million, 
respectively):

<TABLE>
<OPTION>
                                                                             Other
                                             Pension Benefits       Postretirement Benefits
                                         ----------------------    -----------------------
                                             1998      1997           1998        1997
------------------------------------------------------------------------------------------
                                                           (In millions)
<S>                                        <C>       <C>            <C>         <C>
Change in benefit obligation:
Benefit obligation as of January 1*        $1,327.5  $  688.5       $ 534.1     $ 241.1
Service cost                                   25.0      12.9           7.5         4.1
Interest cost                                  92.5      49.8          37.6        17.6
Plan amendments                                44.3       3.0          40.1          --
Early retirement program expense                 --      31.5            --         1.9
Actuarial loss                                101.6      62.9          10.7        17.0
Benefits paid                                 (90.8)    (54.5)        (28.7)      (14.1)
----------------------------------------------------------------------------------------
Benefit obligation as of December 31        1,500.1     794.1         601.3       267.6
----------------------------------------------------------------------------------------

Change in plan assets:
Fair value of plan assets as of
 January 1*                                 1,542.5     946.3           2.8         2.0
Actual return on plan assets                  231.3     188.8           0.7         0.5
Company contribution                             --        --           0.4         0.3
Benefits paid                                 (90.8)    (54.5)           --          -- 
----------------------------------------------------------------------------------------
Fair value of plan assets as of
 December 31                                1,683.0   1,080.6           3.9         2.8
----------------------------------------------------------------------------------------

Funded status of plan*                        182.9     286.5        (597.4)     (264.8)
Unrecognized actuarial loss (gain)           (110.8)   (139.5)         30.6        24.0
Unrecognized prior service cost                63.0      21.0          27.4       (13.5)
Unrecognized net transition obligation
 (asset)                                      (18.0)    (25.9)        129.3       138.6
----------------------------------------------------------------------------------------
Prepaid (accrued) benefit cost             $  117.1  $  142.1       $(410.1)    $(115.7)
========================================================================================

Assumptions used as of December 31:
Discount rate                                  7.00%     7.25%         7.00%       7.25%
Expected long-term return on plan assets      10.25%    10.00%        10.25%      10.00%
Rate of compensation increase                  4.00%     4.00%         4.00%       4.00%

<FN>
  *  1998 beginning balances reflect 1998 merger of the Companies'
     and Centerior plans into FirstEnergy plans.

</TABLE>


          Net pension and other postretirement benefit costs for the 
three years ended December 31, 1998 (including the Companies' share 
of FirstEnergy plans' 1998 pension benefits costs and other 
postretirement benefit costs of $(39.7) million and $31.2 million, 
respectively) were computed as follows:

<TABLE>
<CAPTION>
                                                                                  Other
                                                 Pension Benefits        Postretirement Benefits
                                             ----------------------     -----------------------
                                             1998    1997    1996        1998    1997    1996 
------------------------------------------------------------------------------------------------
                                                              (In millions)
<S>                                        <C>      <C>     <C>         <C>     <C>     <C>
Service cost                               $  25.0  $ 12.9  $ 14.2      $ 7.5   $ 4.1   $ 4.3
Interest cost                                 92.5    49.8    49.3       37.6    17.6    17.4
Expected return on plan assets              (152.7)  (91.9)  (83.2)      (0.3)   (0.2)   (0.1)
Amortization of transition obligation
 (asset)                                      (8.0)   (8.0)   (8.0)       9.2     8.2    10.1
Amortization of prior service cost             2.3     2.1     2.3       (0.8)    0.3    (1.2)
Recognized net actuarial loss (gain)          (2.6)   (0.9)     --         --      --     0.1
Voluntary early retirement program
 expense                                        --    31.5    12.5         --     1.9     0.5
Plan curtailment loss (gain)                    --      --   (12.8)        --      --    13.1
-----------------------------------------------------------------------------------------------
Net benefit cost                           $ (43.5) $ (4.5) $(25.7)     $53.2   $31.9   $44.2
===============================================================================================

</TABLE>

          In accordance with SFAS 88 "Employers' Accounting for 
Settlements and Curtailments of Defined Benefit Pension Plans and for 
Termination Benefits," the 1996 net pension costs and postretirement 
benefit costs shown above included curtailment effects (significant 
changes in projected plan assumptions) relating to the pension and 
postretirement benefit plans. The employee terminations reflected in 
the Companies' 1996 voluntary early retirement program represented a 
plan curtailment that significantly reduced the expected future 
employee service years and the related accrual of defined pension and  
postretirement benefits. In the pension plan, the reduction in the 
benefit obligation increased the net pension asset and was shown as a 
plan curtailment gain. In the postretirement benefit plan, the 
unrecognized prior service cost associated with service years no 
longer expected to be rendered as a result of the terminations, was 
shown as a plan curtailment loss.

          The FirstEnergy's plans' health care trend rate assumption 
is 5.5% in the first year gradually decreasing to 4.0% for the year 
2008 and later. Assumed health care cost trend rates have a 
significant effect on the amounts reported for the health care plan. 
An increase in the health care trend rate assumption by one 
percentage point would increase the total service and interest cost 
components by $4.0 million and the postretirement benefit obligation 
by $68.1 million. A decrease in the same assumption by one percentage 
point would decrease the total service and interest cost components 
by $3.2 million and the postretirement benefit obligation by $55.2 
million.

TRANSACTIONS WITH AFFILIATED COMPANIES-

          Operating revenues and operating expenses include amounts 
for affiliated transactions with CEI and TE since the November 8, 
1997 merger date. The Companies' transactions with CEI and TE from 
the merger date were primarily for electric sales. The amounts 
related to CEI and TE were $17.8 million and $12.7 million, 
respectively, for 1998 and $4.3 million and $0.4 million, 
respectively, for the November 8-December 31, 1997 period.

SUPPLEMENTAL CASH FLOWS INFORMATION-

          All temporary cash investments purchased with an initial 
maturity of three months or less are reported as cash equivalents on 
the Consolidated Balance Sheets. The Companies reflect temporary cash 
investments at cost, which approximates their market value. Noncash 
financing and investing activities included capital lease transactions 
amounting to $1.6 million, $3.0 million and $2.0 million for the years 
1998, 1997 and 1996, respectively. Commercial paper transactions of 
OES Fuel, Incorporated (OES Fuel) (a wholly owned subsidiary of the 
Company) that have initial maturity periods of three months or less 
are reported net within financing activities under long-term debt and 
are reflected as long-term debt on the Consolidated Balance Sheets 
(see Note 3G).

          All borrowings with initial maturities of less than one year 
are defined as financial instruments under generally accepted 
accounting principles and are reported on the Consolidated Balance 
Sheets at cost, which approximates their fair market value. The 
following sets forth the approximate fair value and related carrying 
amounts of all other long-term debt, preferred stock subject to 
mandatory redemption and investments other than cash and cash 
equivalents as of December 31:

<TABLE>
<CAPTION>

                                          1998             1997  
--------------------------------------------------------------------
                                    Carrying  Fair   Carrying  Fair
                                      Value   Value    Value   Value 
--------------------------------------------------------------------
                                               (In millions)
<S>                                <C>      <C>      <C>      <C>
Long-term debt                      $2,627   $2,775   $2,727   $2,835
Preferred stock                     $  150   $  155   $  155   $  161
Investments other than cash
 and cash equivalents:
  Debt securities
   - Maturity (5-10 years)          $  481   $  520   $  486   $  512
   - Maturity (more than 10 years)     258      305      259      294
  Equity securities                     14       14       14       14
  All other                            170      179      145      147
---------------------------------------------------------------------
                                    $  923   $1,018   $  904   $  967
======================================================================

</TABLE>


          The fair values of long-term debt and preferred stock 
reflect the present value of the cash outflows relating to those 
securities based on the current call price, the yield to maturity or 
the yield to call, as deemed appropriate at the end of each 
respective year. The yields assumed were based on securities with 
similar characteristics offered by a corporation with credit ratings 
similar to the Companies' ratings.

          The fair value of investments other than cash and cash 
equivalents represent cost (which approximates fair value) or the 
present value of the cash inflows based on the yield to maturity. The 
yields assumed were based on financial instruments with similar 
characteristics and terms. Investments other than cash and cash 
equivalents include decommissioning trust investments. Unrealized 
gains and losses applicable to the decommissioning trust have been 
recognized in the trust investment with a corresponding change to the 
decommissioning liability. The other debt and equity securities 
referred to above are in the held-to-maturity category. The Companies 
have no securities held for trading purposes.

REGULATORY ASSETS-

          The Companies recognize, as regulatory assets, costs which 
the FERC, PUCO and PPUC have authorized for recovery from customers 
in future periods. Without such authorization, the costs would have 
been charged to income as incurred. All regulatory assets are being 
recovered from customers under the Companies' respective regulatory 
plans. Based on those regulatory plans, at this time, the Companies 
believe they will continue to be able to bill and collect cost-based 
rates relating to all of the Company's operations and Penn's 
nongeneration operations; accordingly, it is appropriate that the 
Companies continue the application of SFAS 71 to these respective 
operations. The Companies also recognized additional cost recovery of 
$50 million, $39 million and $34 million in 1998, 1997 and 1996, 
respectively, as additional regulatory asset amortization in 
accordance with their regulatory plans. 

          Regulatory assets on the Consolidated Balance Sheets are 
comprised of the following:

<TABLE>
<CAPTION>
                                                    1998       1997 
----------------------------------------------------------------------
                                                       (In millions)
<S>                                               <C>        <C>
Nuclear unit expenses                             $  666.7   $  707.7
Customer receivables for future income taxes         458.3      560.7
Competitive transition charge                        331.0         --
Sale and leaseback costs                             127.7      134.3
Loss on reacquired debt                               81.9       89.1
Employee postretirement benefit costs                 28.9       25.9
Uncollectible customer accounts                        6.8       18.9
Perry Unit 2 termination                                --       36.7
DOE decommissioning and decontamination costs         12.2       16.5
Other                                                  9.6       11.9
---------------------------------------------------------------------
    Total                                         $1,723.1   $1,601.7
=====================================================================

</TABLE>


2.  LEASES:

          The Companies lease certain generating facilities, certain 
transmission facilities, office space and other property and 
equipment under cancelable and noncancelable leases.

          The Company sold portions of its ownership interests in 
Perry Unit 1 and Beaver Valley Unit 2 and entered into operating 
leases on the portions sold for basic lease terms of approximately 29 
years. During the terms of the leases, the Company continues to be 
responsible, to the extent of its individual combined ownership and 
leasehold interests, for costs associated with the units including 
construction expenditures, operation and maintenance expenses, 
insurance, nuclear fuel, property taxes and decommissioning. The 
Company has the right, at the end of the respective basic lease terms, 
to renew the leases for up to two years. The Company also has the 
right to purchase the facilities at the expiration of the basic lease 
term or renewal term (if elected) at a price equal to the fair market 
value of the facilities. The basic rental payments are adjusted when 
applicable federal tax law changes.

          OES Finance, Incorporated (OES Finance), a wholly owned 
subsidiary of the Company, maintains deposits pledged as collateral to 
secure reimbursement obligations relating to certain letters of credit 
supporting the Company's obligations to lessors under the Beaver 
Valley Unit 2 sale and leaseback arrangements. The deposits pledged to 
the financial institution providing those letters of credit are the 
sole property of OES Finance. In the event of liquidation, OES 
Finance, as a separate corporate entity, would have to satisfy its 
obligations to creditors before any of its assets could be made 
available to the Company as sole owner of OES Finance common stock.

          Consistent with the regulatory treatment, the rentals for 
capital and operating leases are charged to operating expenses on the 
Consolidated Statements of Income. Such costs for the three years 
ended December 31, 1998, are summarized as follows:

<TABLE>
<CAPTION>

                          1998       1997        1996  
------------------------------------------------------
                               (In millions)
<S>                      <C>       <C>         <C>
Operating leases
  Interest element       $110.0    $111.3      $107.6
  Other                    28.9      23.2        18.3
Capital leases
  Interest element          5.3       6.1         6.5
  Other                     4.8       6.0         6.3
-----------------------------------------------------
  Total rentals          $149.0    $146.6      $138.7
=====================================================

</TABLE>


          The future minimum lease payments as of December 31, 1998, 
are:

<TABLE>
<CAPTION>

                                            Operating Leases  
                                       ----------------------------
                              Capital   Lease   PNBV Capital 
                              Leases   Payments    Trust      Net
-------------------------------------------------------------------
                                        (In millions)
<S>                          <C>       <C>         <C>      <C>
1999                         $ 12.0    $  125.8    $ 44.0   $   81.8
2000                           10.4       125.0      54.6       70.4
2001                            9.3       127.6      59.5       68.1
2002                            8.8       130.8      61.0       69.8
2003                            8.6       137.3      62.6       74.7
Years thereafter               69.8     1,842.4     589.2    1,253.2
--------------------------------------------------------------------
Total minimum lease
 payments                     118.9    $2,488.9    $870.9   $1,618.0
                                       ========    ======   ========
Executory costs                29.5
-----------------------------------
Net minimum lease payments     89.4
Interest portion               52.5
-----------------------------------
Present value of net minimum
  lease payments               36.9
Less current portion            4.0
-----------------------------------
Noncurrent portion           $ 32.9
===================================

</TABLE>


          The Company invested in the PNBV Capital Trust, which was 
established to purchase a portion of the lease obligation bonds issued 
on behalf of lessors in the Company's Perry Unit 1 and Beaver Valley 
Unit 2 sale and leaseback transactions. The PNBV capital trust 
arrangement effectively reduces lease costs related to those 
transactions.

3.  CAPITALIZATION:

   (A)  RETAINED EARNINGS-

          Under the Company's first mortgage indenture, the Company's 
consolidated retained earnings unrestricted for payment of cash 
dividends on the Company's common stock were $516.3 million at 
December 31, 1998.

   (B)  EMPLOYEE STOCK OWNERSHIP PLAN-

          The Companies were funding the matching contribution for 
their 401(k) savings plan through an ESOP Trust. All full-time 
employees eligible for participation in the 401(k) savings plan are 
covered by the ESOP. The ESOP borrowed $200 million from the Company 
and acquired 10,654,114 shares of the Company's common stock through 
market purchases; the shares were converted into FirstEnergy's common 
stock in connection with the merger. The ESOP loan is included in 
Other Property and Investments on the Consolidated Balance Sheet as 
of December 31, 1998 and 1997 as an investment with FirstEnergy 
related to the FirstEnergy savings plan. Dividends on ESOP shares are 
used to service the debt. Shares are released from the ESOP on a pro 
rata basis as debt service payments are made. In 1997 and 1996, 
429,515 and 404,522 shares, respectively, were allocated to the 
Companies' employees with the corresponding expense recognized based 
on the shares allocated method. Total ESOP-related compensation 
expense reflected on the 1997 and 1996 Consolidated Statements of 
Income was calculated as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------
                                       1997        1996  
--------------------------------------------------------
                                        (In millions)
<S>                                  <C>          <C>
Base compensation                    $ 9.9        $ 9.0
Dividends on common stock
  held by the ESOP and used to 
  service debt                        (3.4)        (2.9)
---------------------------------------------------------
         Net expense                 $ 6.5        $ 6.1
=========================================================

</TABLE>


   (C)  COMPREHENSIVE INCOME-

          In 1998, the Companies adopted SFAS 130, "Reporting 
Comprehensive Income," and applied the standard to all periods 
presented in the Consolidated Statements of Common Stockholders' 
Equity. Comprehensive income includes net income as reported on the 
Consolidated Statements of Income and all other changes in common 
stockholders' equity except dividends to stockholders.

   (D)  PREFERRED AND PREFERENCE STOCK-

          Penn's 7.75% series of preferred stock has a restriction 
which prevents early redemption prior to July 2003. The Company's 
8.45% series of preferred stock has no optional redemption provision. 
All other preferred stock may be redeemed by the Companies in whole, 
or in part, with 30-60 days' notice.

          Preference stock authorized for the Company is 8,000,000 
shares without par value. No preference shares are currently 
outstanding.

   (E)  PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION-

          The Company's 8.45% series of preferred stock has an annual 
sinking fund requirement for 50,000 shares that began on September 16, 
1997. Penn's 7.625% series has an annual sinking fund requirement for 
7,500 shares beginning on October 1, 2002.

          The Companies' preferred shares are retired at $100 per 
share plus accrued dividends. Annual sinking fund requirements are $5 
million in each year 1999-2001 and $1 million in each year 2002-2003.

   (F)  COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED 
        SECURITIES OF SUBSIDIARY TRUST HOLDING SOLELY COMPANY 
        SUBORDINATED DEBENTURES-

          Ohio Edison Financing Trust, a wholly owned subsidiary of 
the Company, has issued $120 million of 9% Cumulative Trust Preferred 
Capital Securities. The Company purchased all of the Trust's Common 
Securities and simultaneously issued to the Trust $123.7 million 
principal amount of 9% Junior Subordinated Debentures due 2025 in 
exchange for the proceeds that the Trust received from its sale of 
Preferred and Common Securities. The sole assets of the Trust are the 
Subordinated Debentures whose interest and other payment dates 
coincide with the distribution and other payment dates on the Trust 
Securities. Under certain circumstances the Subordinated Debentures 
could be distributed to the holders of the outstanding Trust 
Securities in the event the Trust is liquidated. The Subordinated 
Debentures may be optionally redeemed by the Company beginning 
December 31, 2000, at a redemption price of $25 per Subordinated 
Debenture plus accrued interest, in which event the Trust Securities 
will be redeemed on a pro rata basis at $25 per share plus 
accumulated distributions. The Company's obligations under the 
Subordinated Debentures along with the related Indenture, amended and 
restated Trust Agreement, Guarantee Agreement and the Agreement for 
expenses and liabilities, constitute a full and unconditional 
guarantee by the Company of payments due on the Preferred Securities.

   (G)  LONG-TERM DEBT-

          The first mortgage indentures and their supplements, which 
secure all of the Companies' first mortgage bonds, serve as direct 
first mortgage liens on substantially all property and franchises, 
other than specifically excepted property, owned by the Companies.

          Based on the amount of bonds authenticated by the Trustee 
through December 31, 1998, the Company's annual sinking and 
improvement fund requirement for all bonds issued under the mortgage 
amounts to $30 million. The Company expects to deposit funds in 1999 
that will be withdrawn upon the surrender for cancellation of a like 
principal amount of bonds, which are specifically authenticated for 
such purposes against unfunded property additions or against 
previously retired bonds. This method can result in minor increases 
in the amount of the annual sinking fund requirement.

          Sinking fund requirements for first mortgage bonds and 
maturing long-term debt (excluding capital leases) for the next five 
years are:

<TABLE>
<CAPTION>

                   (In millions)
--------------------------------
<S>                      <C>
1999                     $519.8
2000                      328.8
2001                       96.0
2002                      326.4
2003                      246.0
-------------------------------

</TABLE>

          The Companies' obligations to repay certain pollution 
control revenue bonds are secured by several series of first mortgage 
bonds and, in some cases, by subordinate liens on the related 
pollution control facilities. Certain pollution control revenue bonds 
are entitled to the benefit of irrevocable bank letters of credit of 
$338.8 million. To the extent that drawings are made under those 
letters of credit to pay principal of, or interest on, the pollution 
control revenue bonds, the Company is entitled to a credit against 
their obligation to repay those bonds. The Company pays annual fees 
of 0.43% to 0.75% of the amounts of the letters of credit to the 
issuing banks and are obligated to reimburse the banks for any 
drawings thereunder.

          The Company had unsecured borrowings of $250 million at 
December 31, 1998, which are supported by a $250 million long-term 
revolving credit facility agreement which expires December 30, 1999. 
The Company must pay an annual facility fee of 0.20% on the total 
credit facility amount. In addition, the credit agreement provides 
that the Company maintain unused first mortgage bond capability for 
the full credit agreement amount under the Company's indenture as 
potential security for the unsecured borrowings.

          Nuclear fuel purchases are financed through the issuance of 
OES Fuel commercial paper and loans, both of which are supported by a 
$180.5 million long-term bank credit agreement which expires March 31, 
2001. Accordingly, the commercial paper and loans are reflected as 
long-term debt on the Consolidated Balance Sheets. OES Fuel must pay 
an annual facility fee of 0.20% on the total line of credit and an 
annual commitment fee of 0.0625% on any unused amount.

4.  SHORT-TERM BORROWINGS AND BANK LINES OF CREDIT:

          Short-term borrowings outstanding at December 31, 1998, 
consisted of $129.5 million of bank borrowings and $120.0 million of 
OES Capital, Incorporated (OES Capital) commercial paper. OES Capital 
is a wholly owned subsidiary of the Company whose borrowings are 
secured by customer accounts receivable. OES Capital can borrow up to 
$120 million under a receivables financing agreement at rates based on 
certain bank commercial paper and is required to pay an annual fee of 
0.26% on the amount of the entire finance limit. The receivables 
financing agreement expires in 1999. At December 31, 1998, the Company 
also had total short-term borrowings of $88.7 million from its 
affiliates.

          The Company has a line of credit with a domestic bank that 
provides for borrowings of up to $75 million under various interest 
rate options. Short-term borrowings may be made under this line of 
credit on its unsecured notes. To assure the availability of this 
line, the Company is required to pay an annual commitment fee of 
0.20%. This line expires in May 1999. The weighted average interest 
rates on short-term borrowings outstanding at December 31, 1998 and 
1997, were 5.61% and 6.02%, respectively.

5.  COMMITMENTS, GUARANTEES AND CONTINGENCIES:

CAPITAL EXPENDITURES-

          The Companies' current forecasts reflect expenditures of 
approximately $1 billion for property additions and improvements from 
1999-2003, of which approximately $169 million is applicable to 1999. 
Investments for additional nuclear fuel during the 1999-2003 period 
are estimated to be approximately $167 million, of which approximately 
$23 million applies to 1999. During the same periods, the Companies' 
nuclear fuel investments are expected to be reduced by approximately 
$169 million and $35 million, respectively, as the nuclear fuel is 
consumed.

NUCLEAR INSURANCE-

          The Price-Anderson Act limits the public liability relative 
to a single incident at a nuclear power plant to $9.7 billion. The 
amount is covered by a combination of private insurance and an 
industry retrospective rating plan. Based on their present ownership 
and leasehold interests in the Beaver Valley Station and the Perry 
Plant, the Companies' maximum potential assessment under the industry 
retrospective rating plan (assuming the other co-owners contribute 
their proportionate shares of any assessments under the retrospective 
rating plan) would be $114.2 million per incident but not more than 
$13 million in any one year for each incident.

          The Companies are also insured as to their respective 
interests in the Beaver Valley Station and the Perry Plant under 
policies issued to the operating company for each plant. Under these 
policies, up to $2.75 billion is provided for property damage and 
decontamination and decommissioning costs. The Companies have also 
obtained approximately $308.1 million of insurance coverage for 
replacement power costs for their respective interests in Perry and 
Beaver Valley. Under these policies, the Companies can be assessed a 
maximum of approximately $15.4 million for incidents at any covered 
nuclear facility occurring during a policy year which are in excess 
of accumulated funds available to the insurer for paying losses.

          The Companies intend to maintain insurance against nuclear 
risks as described above as long as it is available. To the extent 
that replacement power, property damage, decontamination, 
decommissioning, repair and replacement costs and other such costs 
arising from a nuclear incident at any of the Companies' plants exceed 
the policy limits of the insurance in effect with respect to that 
plant, to the extent a nuclear incident is determined not to be 
covered by the Companies' insurance policies, or to the extent such 
insurance becomes unavailable in the future, the Companies would 
remain at risk for such costs.

GUARANTEES-

          The CAPCO companies have each severally guaranteed certain 
debt and lease obligations in connection with a coal supply contract 
for the Bruce Mansfield Plant. As of December 31, 1998, the Companies' 
shares of the guarantees (which approximate fair market value) were 
$28.4 million. The price under the coal supply contract, which 
includes certain minimum payments, has been determined to be 
sufficient to satisfy the debt and lease obligations. The Companies' 
total payments under the coal supply contract were $134.7 million, 
$119.5 million and $113.8 million during 1998, 1997 and 1996, 
respectively. The Companies' minimum payment for 1999 is approximately 
$35 million. The contract expires December 31, 1999.

ENVIRONMENTAL MATTERS-

          Various federal, state and local authorities regulate the 
Companies with regard to air and water quality and other 
environmental matters. The Companies estimate additional capital 
expenditures for environmental compliance of approximately $260 
million, which is included in the construction forecast provided 
under "Capital Expenditures" for 1999 through 2003.

          The Companies are in compliance with the current sulfur 
dioxide (SO2) and nitrogen oxides (NOx) reduction requirements under 
the Clean Air Act Amendments of 1990. SO2 reductions in 1999 will be 
achieved by burning lower-sulfur fuel, generating more electricity 
from lower-emitting plants, and/or purchasing emission allowances. 
Plans for complying with reductions required for the year 2000 and 
thereafter have not been finalized. In September 1998, the 
Environmental Protection Agency (EPA) finalized regulations requiring 
additional NOx reductions from the Companies' Ohio and Pennsylvania 
facilities by May 2003. The EPA's NOx Transport Rule imposes uniform 
reductions of NOx emissions across a region of twenty-two states and 
the District of Columbia, including Ohio and Pennsylvania, based on a 
conclusion that such NOx emissions are contributing significantly to 
ozone pollution in the eastern United States. By September 1999, each 
of the twenty-two states are required to submit revised State 
Implementation Plans (SIP) which comply with individual state NOx 
budgets established by the EPA. These state NOx budgets contemplate an 
85% reduction in utility plant NOx emissions from 1990 emissions. A 
proposed Federal Implementation Plan accompanied the NOx Transport 
Rule and may be implemented by the EPA in states which fail to revise 
their SIP. In another separate but related action, eight states filed 
petitions with EPA under Section 126 of the Clean Air Act seeking 
reductions of NOx emissions which are alleged to contribute to ozone 
pollution in the eight petitioning states. The EPA suggests that the 
Section 126 petitions will be adequately addressed by the NOx 
Transport Program, but a September 1998 proposed rulemaking 
established an alternative program which would require nearly 
identical 85% NOx reductions at the Companies' Ohio and Pennsylvania 
plants by May 2003 in the event implementation of the NOx Transport 
Rule is delayed. FirstEnergy continues to evaluate its compliance 
plans and other compliance options and currently estimates its 
additional capital expenditures for NOx reductions may reach $500 
million.

          The Companies are required to meet federally approved SO2 
regulations. Violations of such regulations can result in shutdown of 
the generating unit involved and/or civil or criminal penalties of up 
to $25,000 for each day the unit is in violation. The EPA has an 
interim enforcement policy for SO2 regulations in Ohio that allows for 
compliance based on a 30-day averaging period. The Companies cannot 
predict what action the EPA may take in the future with respect to the 
interim enforcement policy.

          In July 1997, the EPA promulgated changes in the National 
Ambient Air Quality Standard (NAAQS) for ozone and proposed a new 
NAAQS for previously unregulated ultra-fine particulate matter. The 
cost of compliance with these regulations may be substantial and 
depends on the manner in which they are implemented by the states in 
which the Companies operate affected facilities.

          Legislative, administrative and judicial actions will 
continue to change the way that the Companies must operate in order to 
comply with environmental laws and regulations. With respect to any 
such changes and to the environmental matters described above, the 
Company expects that while it remains regulated, any resulting 
additional capital costs which may be required, as well as any 
required increase in operating costs, would ultimately be recovered 
from its customers.

6.  SUMMARY OF QUARTERLY FINANCIAL DATA (UNAUDITED):

          The following summarizes certain consolidated operating 
results by quarter for 1998 and 1997.


<TABLE>
<CAPTION>

                                             March 31,  June 30,  September 30,  December 31,
     Three Months Ended                        1998       1998        1998          1998  
--------------------------------------------------------------------------------------------
                                                             (In millions)
<S>                                           <C>       <C>          <C>            <C>
Operating Revenues                            $597.8    $618.5       $696.2         $607.0
Operating Expenses and Taxes                   486.7     524.9        555.5          465.5
------------------------------------------------------------------------------------------
Operating Income                               111.1      93.6        140.7          141.5
Other Income                                    12.5      11.8         12.6           10.7
Net Interest Charges                            59.3      59.1         58.6           56.2
------------------------------------------------------------------------------------------
Income Before Extraordinary Item                64.3      46.3         94.7           96.0
Extraordinary Item (Net of Income Taxes)
 (Note 1)                                         --     (30.5)          --             --
------------------------------------------------------------------------------------------
Net Income                                    $ 64.3    $ 15.8       $ 94.7         $ 96.0
==========================================================================================
Earnings on Common Stock                      $ 61.3    $ 12.8       $ 91.7         $ 93.0
==========================================================================================

</TABLE>


<TABLE>
<CAPTION>

                                             March 31,  June 30,  September 30,  December 31,
     Three Months Ended                        1997       1997        1997          1997  
--------------------------------------------------------------------------------------------
                                                             (In millions)
<S>                                           <C>      <C>         <C>           <C>
Operating Revenues                            $604.8   $593.3      $652.7        $622.9
Operating Expenses and Taxes                   478.5    467.3       511.6         527.7
------------------------------------------------------------------------------------------
Operating Income                               126.3    126.0       141.1          95.2
Other Income                                    13.5     14.1        12.0          13.3
Net Interest Charges                            63.8     63.2        61.3          60.0
------------------------------------------------------------------------------------------
Net Income                                    $ 76.0   $ 76.9      $ 91.8        $ 48.5
==========================================================================================
Earnings on Common Stock                      $ 72.9   $ 73.8      $ 88.7        $ 45.4
==========================================================================================

</TABLE>



Report of Independent Public Accountants

To the Stockholders and Board of Directors of Ohio Edison Company:

We have audited the accompanying consolidated balance sheets and 
consolidated statements of capitalization of Ohio Edison Company (an 
Ohio corporation and wholly owned subsidiary of FirstEnergy Corp.) 
and subsidiaries as of December 31, 1998 and 1997, and the related 
consolidated statements of income, common stockholders' equity, 
preferred stock, cash flows and taxes for each of the three years in 
the period ended December 31, 1998. These financial statements are 
the responsibility of the Company's management. Our responsibility is 
to express an opinion on these financial statements based on our 
audits.

We conducted our audits in accordance with generally accepted 
auditing standards. Those standards require that we plan and perform 
the audit to obtain reasonable assurance about whether the financial 
statements are free of material misstatement. An audit includes 
examining, on a test basis, evidence supporting the amounts and 
disclosures in the financial statements. An audit also includes 
assessing the accounting principles used and significant estimates 
made by management, as well as evaluating the overall financial 
statement presentation. We believe that our audits provide a 
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present 
fairly, in all material respects, the financial position of Ohio 
Edison Company and subsidiaries as of December 31, 1998 and 1997, and 
the results of their operations and their cash flows for each of the 
three years in the period ended December 31, 1998, in conformity with 
generally accepted accounting principles.







                                   ARTHUR ANDERSEN LLP

Cleveland, Ohio
February 12, 1999