PENNSYLVANIA POWER COMPANY

                       2001 ANNUAL REPORT TO STOCKHOLDERS



           Pennsylvania Power Company, an electric utility operating company of
FirstEnergy Corp. and a wholly owned subsidiary of Ohio Edison Company, provides
electric service to approximately 153,000 customers in western Pennsylvania.






Contents                                                             Page

Selected Financial Data......................................          1
Management's Discussion and Analysis.........................         2-6
Statements of Income.........................................          7
Balance Sheets...............................................          8
Statements of Capitalization.................................          9
Statements of Common Stockholder's Equity....................         10
Statements of Preferred Stock................................         10
Statements of Cash Flows.....................................         11
Statements of Taxes..........................................         12
Notes to Financial Statements................................        13-21
Report of Independent Public Accountants.....................         22



<PAGE>


<TABLE>
<CAPTION>

                                                     PENNSYLVANIA POWER COMPANY

                                                       SELECTED FINANCIAL DATA


                                             2001       2000        1999        1998       1997
                                             ----       ----        ----        ----       ----
                                                           (Dollars in thousands)

<S>                                        <C>        <C>        <C>          <C>        <C>
Operating Revenues....................     $498,401   $383,112   $  329,234   $323,756   $  323,381
                                           ========   ========   ==========   ========   ==========

Operating Income......................     $ 55,178   $ 39,979   $   32,063   $ 58,041   $   50,736
                                           ========   ========   ==========   ========   ==========

Income Before Extraordinary Item......     $ 41,041   $ 22,847   $   12,648   $ 39,748   $   31,472
                                           ========   ========   ==========   ========   ==========

Net Income............................     $ 41,041   $ 22,847   $   12,648   $  9,226   $   31,472
                                           ========   ========   ==========   ========   ==========

Earnings on Common Stock..............     $ 37,338   $ 19,143   $    8,278   $  4,600   $   26,846
                                           ========   ========   ==========   ========   ==========

Total Assets..........................     $960,097   $988,909   $1,015,616   $977,772   $1,034,457
                                           ========   ========   ==========   ========   ==========

CAPITALIZATION AT DECEMBER 31:
Common Stockholder's Equity...........     $223,788   $213,851   $  199,608   $275,281   $  291,977
Preferred Stock-
  Not Subject to Mandatory Redemption.       39,105     39,105       39,105     50,905       50,905
  Subject to Mandatory Redemption.....       14,250     15,000       15,000     15,000       15,000
Long-Term Debt........................      262,047    270,368      274,821    287,689      289,305
                                           --------   --------   ----------   --------   ----------
Total Capitalization..................     $539,190   $538,324   $  528,534   $628,875   $  647,187
                                           ========   ========   ==========   ========   ==========

CAPITALIZATION RATIOS:
Common Stockholder's Equity...........         41.5%      39.7%        37.8%      43.8%        45.1%
Preferred Stock-
  Not Subject to Mandatory Redemption.          7.3        7.3          7.4        8.1          7.9
  Subject to Mandatory Redemption.....          2.6        2.8          2.8        2.4          2.3
Long-Term Debt........................         48.6       50.2         52.0       45.7         44.7
                                              -----      -----        -----      -----        -----
Total Capitalization..................        100.0%     100.0%       100.0%     100.0%       100.0%
                                              =====      =====        =====      =====        =====

DISTRIBUTION KILOWATT-HOUR DELIVERIES
(Millions):
Residential...........................        1,353      1,387        1,325      1,278        1,238
Commercial............................        1,121      1,198        1,105      1,069        1,013
Industrial............................        1,506      1,665        1,495      1,439        1,659
Other.................................            6          6            6          6            6
                                              -----      -----        -----      -----        -----
Total.................................        3,986      4,256        3,931      3,792        3,916
                                              =====      =====        =====      =====        =====

CUSTOMERS SERVED:
Residential...........................      134,956    121,066      117,440    124,304      129,316
Commercial............................       18,153     16,634       16,307     16,924       16,738
Industrial............................          224        177          175        206          241
Other.................................           87         87           87         86           97
                                            -------    -------      -------    -------      -------
Total.................................      153,420    137,964      134,009    141,520      146,392
                                            =======    =======      =======    =======      =======

NUMBER OF EMPLOYEES (a)...............          256        275          895        888          997
                                                ===        ===          ===        ===          ===

<FN>


(a) Reduction in 2000 reflects transfer of responsibility for generation
    operations to FirstEnergy Corp.'s competitive services unit.

</FN>

</TABLE>




<PAGE>


                           PENNSYLVANIA POWER 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 is subject to certain risks
and uncertainties. Such statements typically contain, but are not limited to,
the terms anticipate, potential, expect, believe, estimate and similar words.
Actual results may differ materially due to the speed and nature of increased
competition and deregulation in the electric utility industry, economic or
weather conditions affecting future sales and margins, changes in markets for
energy services, changing energy and commodity market prices, legislative and
regulatory changes (including revised environmental requirements), and the
availability and cost of capital.

Corporate Separation
--------------------

           In connection with FirstEnergy's Ohio transition plan, FirstEnergy
separated its businesses into three distinct units - a competitive services
unit, a regulated services unit and a corporate support services unit. Penn is
included in the regulated services unit which continues to deliver power to
homes and businesses through its existing distribution system and maintains the
"provider of last resort" (PLR) obligation under its rate plan.

           FirstEnergy's electric utility operating companies (EUOC) have
entered into power supply agreements whereby FirstEnergy Solutions Corp. (FES)
purchases all of the EUOC nuclear generation, as well as generation from leased
fossil generation facilities. FirstEnergy Generation Corp. (FGCO), a wholly
owned subsidiary of FES, leases fossil generating units owned by the EUOC. We
are a "full requirements" customer of FES to enable us to meet our PLR
responsibilities in our service area.

           The effect on our reported results of operations in 2001 from
FirstEnergy's corporate separation plan and our sale of transmission assets to
American Transmission Systems, Inc. (ATSI) in September 2000, are summarized in
the following table:

 Corporate Restructuring - 2001 Income Statement Effects
--------------------------------------------------------------------------------
 Increase (Decrease)
                                       Corporate
                                       Separation          ATSI         Total
                                       ----------          ----         -----
                                                     (In millions)
 Operating Revenues:
   Power supply agreement with FES.    $151.5           $  --          $151.5
   Generating units rent...........      20.2              --            20.2
   Ground lease with ATSI..........      --               0.6            0.6
 -----------------------------------------------------------------------------
   Total Operating Revenues Effect.    $171.7           $ 0.6          $172.3
 =============================================================================
 Operating Expenses and Taxes:
   Fossil fuel costs...............    $(32.6)(a)       $ --           $ (32.6)
   Purchased power costs...........     152.7 (b)         --             152.7
   Other operating costs...........     (21.1)(a)         4.9 (d)        (16.2)
   Provision for depreciation and
     amortization                        --              (2.2)(e)         (2.2)
   General taxes...................      (2.4)(c)        (0.3)(e)         (2.7)
   Income Taxes....................      31.1            --               31.1
 -----------------------------------------------------------------------------
   Total Operating Expenses Effect.    $127.7           $ 2.4          $ 130.1
 =============================================================================
 Other Income......................    $ --             $ 1.7 (f)      $   1.7
 =============================================================================

 (a)  Transfer of fossil operations to FGCO.
 (b)  Purchased power from power supply agreement (PSA).
 (c)  Payroll taxes related to employees transferred to FGCO.
 (d)  Transmission services received from ATSI.
 (e)  Depreciation and property taxes related to transmission assets sold to
      ATSI.
 (f)  Interest on note receivable from ATSI.


Results of Operations
---------------------

           Earnings on common stock in 2001 increased to $37.3 million from
$19.1 million in 2000. Excluding the effects shown in the table above, earnings
on common stock decreased to $6.6 million in 2001 from 2000, being adversely
affected by reduced operating revenues, which were partially offset by reduced
operating expenses and taxes and lower net interest charges. In 2000, earnings
on common stock increased to $19.1 million from $8.3 million in 1999. Results
for 2000 were favorably affected by higher operating revenues which were
partially offset by increased nuclear operating expenses and taxes.

           Excluding the effects shown in the table above, operating revenues
decreased by $57.0 million or 14.9% in 2001 from 2000 following a $53.9 million
increase in 2000 from the prior year. The decrease primarily resulted from a
$56.7 million reduction in wholesale revenues (a 93.3% decrease in wholesale
kilowatt-hour sales) from the prior year due to the substitution of PSA sales
for kilowatt-hour sales to other wholesale customers. Distribution deliveries
declined 2.3% in 2001 from the prior year reflecting the influence of a
declining national economy on our regional business activity that contributed to
lower distribution deliveries to commercial and industrial customers. Partially
offsetting the impact of a weaker economy was an increase in electric generation
revenues reflecting a return of customers previously served by alternative
generation suppliers. Retail generation sales increased in all customer
categories resulting in an overall 4.8% increase in kilowatt-hour sales from the
prior year. Electric generation services provided by other suppliers in our
service area decreased to 4.1% from 10.6% in 2000.

           In 2000, service area growth combined with the return of customers
previously served by alternative generation suppliers to increase retail sales
revenues. Sales to all retail customer groups were substantially higher in 2000,
compared to the preceding year, reflecting a stronger economy in our service
area. The transfer of ownership in Penn Power Energy, Inc. (PPE) to FES in
December 1999, offset a portion of the increased operating revenues in 2000.
Substantial growth in wholesale kilowatt-hour sales, primarily to affiliated
utilities, contributed significantly to the higher operating revenues in 2000.
These sales were possible due to additional available internal generation
resulting from increased nuclear capacity received in a December 1999 exchange
of generating assets with Duquesne Light Company.

   Changes in KWH Sales                        2001             2000
   -------------------------------------------------------------------
    Increase (Decrease)
   Electric Generation:
     Retail................................     4.8%            15.1%
     Wholesale.............................   (93.3)%*         266.0%
   ------------------------------------------------------------------
   Total Electric Generation Sales.........   (62.6)%           78.5%
   ==================================================================
   Distribution Deliveries:
     Residential...........................     0.3%             4.7%
     Commercial and industrial.............    (3.6)%           10.1%
   ------------------------------------------------------------------
   Total Distribution Deliveries...........    (2.3)%            8.3%
   ==================================================================

   * Excluding PSA kilowatt-hour sales related to restructuring.

Operating Expenses and Taxes

           Total operating expenses and taxes increased $100.1 million in 2001
and by $46.0 million in 2000 from the respective prior year. Excluding the
effects of restructuring, total 2001 operating expenses and taxes were $30.0
million lower than the prior year. The following table presents changes from the
prior year by expense category excluding the impact of restructuring.

 Operating Expenses and Taxes - Changes           2001          2000
 ---------------------------------------------------------------------
  Increase (Decrease)                                (In millions)
 Fuel and purchased power...................... $  (12.9)      $(19.0)
 Nuclear operating costs.......................      1.9         75.8
 Other operating costs.........................      1.9         (5.7)
 ---------------------------------------------------------------------
   Total operation and maintenance expenses....     (9.1)        51.1

 Provision for depreciation and amortization...      3.3         (6.2)
 General taxes.................................     (5.2)        (6.0)
 Income taxes..................................    (19.0)         7.1
 --------------------------------------------------------------------
   Total operating expenses and taxes..........  $ (30.0)      $ 46.0
 =====================================================================


           The following discussion excludes the effects shown in the preceding
table related to the impact of restructuring.

           The decrease in fuel and purchased power costs in 2001, compared to
2000, primarily reflects the transfer of fossil operations to FGCO with our
power requirements being provided under the PSA. In 2000, fuel and purchased
power costs decreased $19.0 million, compared to 1999, primarily due to an $18.6
million reduction in purchased power costs and a slight reduction in fuel
expense. The decrease in purchased power costs in 2000 resulted from a
substantial increase in available internal generation, which reduced the need
for external sources of power, as well as the transfer of ownership in PPE to
FES. Although internal generation increased 76% compared to 1999, fuel expense
was slightly lower due to the absence of a $6.8 million nonrecurring charge
related to the Duquesne asset exchange in 1999, additional nuclear generation,
the expiration of an above-market coal contract and continued improvement in
coal blending strategies.


<PAGE>


           Nuclear operating costs increased slightly in 2001 from the previous
year. In 2000, nuclear operating costs increased $75.8 million from 1999. The
increase was due to additional costs associated with refueling outages at both
Beaver Valley Plant units and increased ownership of the Beaver Valley Plant for
the entire year following the 1999 asset exchange with Duquesne, compared to
approximately one month of increased ownership in the prior year. Other
operating costs increased slightly in 2001 from the prior year. In 2000, other
operating costs decreased $5.7 million from the prior year primarily due to
increased gains realized from the sale of emission allowances, compared to 1999.

           Depreciation and amortization increased $3.3 million in 2001 from the
prior year. The increase resulted in part from the absence in 2001 of an
adjustment made in the prior year to decommissioning costs. In 2000,
depreciation and amortization decreased $6.2 million from 1999 primarily
reflecting lower accrued decommissioning costs.

           General taxes decreased by $5.2 million in 2001 from 2000 primarily
due to a one-time benefit of $3 million resulting from successfully resolving
certain pending tax issues and the effect of a reduction to the gross receipts
tax rate. In 2000, general taxes decreased by $6.0 million from 1999 primarily
due to favorable property tax law changes and the phase-out of Pennsylvania's
Capital Stock and Franchise Tax.

Net Interest Charges

           Net interest charges continued to trend lower, decreasing by $2.1
million in 2001 and by $1.4 million in 2000, compared to the prior year. We
continue to redeem and refinance our outstanding debt during 2001 -- net
redemptions and refinancing activities totaled $1.0 million and $32.9 million,
respectively, and will result in annualized savings of $872,000.

Capital Resources and Liquidity

           We had about $54.5 million of cash and temporary investments and no
short-term indebtedness as of December 31, 2001. We also had a $2 million bank
facility that provides for borrowings on a short-term basis at the bank's
discretion. At the end of 2001, we had the capability to issue $293 million of
additional first mortgage bonds on the basis of property additions and retired
bonds. Based upon applicable earnings in 2001 under the earnings coverage test
contained in our charter, we could issue $195 million of preferred stock
(assuming no additional debt was issued).

           Following approval of the merger of FirstEnergy and GPU by the New
Jersey Board of Public Utilities on September 26, 2001, Standard & Poor's
upgraded our corporate credit rating and senior secured debt rating from BB+ to
BBB. Ratings of junior securities were also upgraded to conform to typical
rating relationships.

           Our cash requirements in 2002 for operating expenses, construction
expenditures, scheduled debt maturities and preferred stock redemptions are
expected to be met without increasing our net debt and preferred stock
outstanding. Major contractual obligations for future cash payments are
summarized in the following table:


<TABLE>
<CAPTION>

Contractual Obligations
----------------------------------------------------------------------------------------------------------
                                                                                       There-
                                  2002       2003       2004       2005       2006     after     Total
----------------------------------------------------------------------------------------------------------
                                                                (In millions)
<S>                                <C>        <C>       <C>         <C>        <C>     <C>        <C>
Long-term debt................     $1         $41       $35         $1         $1      $173       $252
Mandatory preferred stock.....      1           1         1          1          1        10         15
Unconditional fuel purchases..      5          18        16          3         --        --         42
----------------------------------------------------------------------------------------------------------
Total.........................     $7         $60       $52         $5         $2      $183       $309
==========================================================================================================

</TABLE>


           Our capital spending for the period 2002-2006 is expected to be about
$177 million (excluding nuclear fuel) of which approximately $36 million applies
to 2002. Investments for additional nuclear fuel during the 2002-2006 period are
estimated to be approximately $94 million, of which about $8 million relates to
2002. During the same periods, our nuclear fuel investments are expected to be
reduced by approximately $95 million and $20 million, respectively, as the
nuclear fuel is consumed. We had no material off balance sheet obligations as of
December 31, 2001.

Interest Rate Risk
------------------

           Our exposure to fluctuations in market interest rates is reduced
since a significant portion of our debt has fixed interest rates, as noted in
the table below. We are subject to the inherent risks related to refinancing
maturing debt by issuing new debt securities. Changes in the market value of our
nuclear decommissioning trust funds are recognized by making corresponding
changes to the decommissioning liability, as described in Note 1 - Utility Plant
and Depreciation.


<PAGE>


           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>


Comparison of Carrying Value to Fair Value
--------------------------------------------------------------------------------------------------------------------
                                                                                        There-               Fair
                                  2002       2003       2004       2005       2006        after     Total     Value
--------------------------------------------------------------------------------------------------------------------
                                                                (Dollars in millions)
<S>                               <C>         <C>       <C>        <C>         <C>        <C>        <C>      <C>
Investments other than Cash
   and Cash Equivalents:
Fixed Income.................                           $ 1         $6          $1        $104       $112     $115
   Average interest rate.....                           7.8%       7.8%        7.8%        5.9%       6.0%
--------------------------------------------------------------------------------------------------------------------
Liabilities
--------------------------------------------------------------------------------------------------------------------
Long-term Debt:
Fixed rate...................      $1         $41       $35         $1          $1        $125       $204     $214
   Average interest rate ....     9.7%        7.6%      6.6%       9.7%        9.7%        7.0%       7.1%
Variable rate................                                                             $ 48       $ 48     $ 48
   Average interest rate.....                                                              2.1%       2.1%
Preferred Stock..............      $1         $ 1       $ 1         $1          $1        $ 10       $ 15     $ 15
   Average dividend rate.....     7.6%        7.6%      7.6%       7.6%        7.6%        7.6%       7.6%
-------------------------------------------------------------------------------------------------------------------

</TABLE>


Outlook
-------

           In 2001, a number of our customers previously electing to be served
by alternative energy providers returned to our system for their energy needs.
We have a continuing responsibility to provide power to those customers not
choosing to receive power from an alternative energy supplier subject to certain
limits. Adopting new approaches to regulation and experiencing new forms of
competition have created new uncertainties. We continue to deliver power to
homes and businesses through our existing distribution system, which remains
regulated.

Environmental Matters

           We are in compliance with the current sulfur dioxide (SO2) and
nitrogen oxide (NOx) reduction requirements under the Clean Air Act Amendments
of 1990. In 1998, the Environmental Protection Agency (EPA) finalized
regulations requiring additional NOx reductions in the future from our Ohio and
Pennsylvania facilities. Various regulatory and judicial actions have since
sought to further define NOx reduction requirements (see Note 5 - Environmental
Matters). We continue to evaluate our compliance plans and other compliance
options.

           Violations of federally approved SO2 regulations can result in
shutdown of the generating unit involved and/or civil or criminal penalties of
up to $27,500 for each day a 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. We cannot predict what action the EPA may take in
the future with respect to the interim enforcement policy.

           In 1999 and 2000, the EPA issued Notices of Violation (NOV) or a
Compliance Order to nine utilities covering 44 power plants, including the W.H.
Sammis Plant. In addition, the U.S. Department of Justice filed eight civil
complaints against various investor-owned utilities, which included a complaint
against us in the U.S. District Court for the Southern District of Ohio. The NOV
and complaint allege violations of the Clean Air Act (CAA) based on operation
and maintenance of the Sammis Plant dating back to 1984. The complaint against
us requests the installation of "best available control technology" as well as
civil penalties of up to $27,500 per day. Although unable to predict the outcome
of these proceedings, we believe the Sammis Plant is in full compliance with the
CAA and that the NOV and complaint are without merit. Penalties could be imposed
if the Sammis Plant continues to operate without correcting the alleged
violations and a court determines that the allegations are valid. The Sammis
Plant continues to operate while these proceedings are pending.

           In December 2000, the EPA announced it would proceed with the
development of regulations regarding hazardous air pollutants from electric
power plants. The EPA identified mercury as the hazardous air pollutant of
greatest concern. The EPA established a schedule to propose regulations by
December 2003 and issue final regulations by December 2004. The future cost of
compliance with these regulations may be substantial.

           As a result of the Resource Conservation and Recovery Act of 1976, as
amended, and the Toxic Substances Control Act of 1976, federal and state
hazardous waste regulations have been promulgated. Certain fossil-fuel
combustion waste products, such as coal ash, were exempted from hazardous waste
disposal requirements pending the EPA's evaluation of the need for future
regulation. The EPA has issued its final regulatory determination that
regulation of coal ash as a hazardous waste is unnecessary. In April 2000, the
EPA announced that it will develop national standards regulating disposal of
coal ash under its authority to regulate nonhazardous waste.


<PAGE>


Legal Matters-

           Various lawsuits, claims and proceedings related to our normal
business operations are pending against FirstEnergy and its subsidiaries. The
most significant applicable to us are described above.

Significant Accounting Policies
-------------------------------

           We prepare our consolidated financial statements in accordance with
accounting principles generally accepted in the United States. Application of
these principles often require a high degree of judgment, estimates and
assumptions that affect our financial results. All of our assets are subject to
their own specific risks and uncertainties and are continually reviewed for
impairment. Assets related to the application of the policies discussed below
are similarly reviewed with their risks and uncertainties reflecting these
specific factors. Our more significant accounting policies are described below.

Regulatory Accounting

           We are subject to regulation that sets the prices (rates) we are
permitted to charge our customers based on our costs that the regulatory
agencies determine we are permitted to recover. At times, regulators permit the
future recovery through rates of costs that would be currently charged to
expense by an unregulated company. This rate-making process results in the
recording of regulatory assets based on anticipated future cash inflows. As a
result of the changing regulatory framework in Pennsylvania, significant amounts
of regulatory assets have been recorded -- $209 million as of December 31, 2001.
We continually review these assets to assess their ultimate recoverability
within the approved regulatory guidelines. Impairment risk associated with these
assets relates to potentially adverse legislative, judicial or regulatory
actions in the future.

Revenue Recognition

           We follow the accrual method of accounting for revenues, recognizing
revenue for kilowatt-hours that have been delivered but have not yet been billed
through the end of the year. The determination of unbilled revenues requires
management to make various estimates including:

      o  Net energy generated or purchased for retail load
      o  Losses of energy over distribution lines
      o  Allocations to distribution companies within the FirstEnergy system
      o  Mix of kilowatt-hour usage by residential, commercial and industrial
         customers
      o  Kilowatt-hour usage of customers receiving electricity from alternative
         suppliers

Recently Issued Accounting Standards
------------------------------------

           In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. (SFAS) 143, "Accounting for
Asset Retirement Obligations." The new statement provides accounting standards
for retirement obligations associated with tangible long-lived assets, with
adoption required by January 1, 2003. SFAS 143 requires that the fair value of a
liability for an asset retirement obligation be recorded in the period in which
it is incurred. The associated asset retirement costs are capitalized as part of
the carrying amount of the long-lived asset. Over time the capitalized costs are
depreciated and the present value of the asset retirement liability increases
resulting in a period expense. Upon retirement, a gain or loss will be recorded
if the cost to settle the retirement obligation differs from the carrying
amount. We are currently assessing the new standard and have not yet determined
the impact on our financial statements.

           In September 2001, the FASB issued SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS 144 supersedes SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." The Statement also supersedes the accounting and reporting
provisions of Accounting Principles Board Opinion (APB) No. 30, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." Our adoption of this Statement, effective January 1, 2002, will
result in our accounting for any future impairments or disposals of long-lived
assets under the provisions of SFAS 144, but will not change the accounting
principles used in previous asset impairments or disposals. Application of SFAS
144 is not anticipated to have a major impact on our accounting for impairments
or disposal transactions compared to the prior application of SFAS 121 or APB
30.



<PAGE>




<TABLE>
<CAPTION>

                                 PENNSYLVANIA POWER COMPANY

                                     STATEMENTS OF INCOME


For the Years Ended December 31,                                  2001      2000       1999
----------------------------------------------------------------------------------------------
                                                                         (In thousands)

<S>                                                             <C>       <C>        <C>
OPERATING REVENUES...........................................   $498,401  $383,112   $329,234
                                                                --------  --------   --------


OPERATING EXPENSES AND TAXES:
  Fuel and purchased power...................................    175,257    68,099     87,128
  Nuclear operating costs....................................    114,623   112,731     36,915
  Other operating costs......................................     45,133    59,389     65,079
                                                                --------  --------   --------
    Total operation and maintenance expenses.................    335,013   240,219    189,122
  Provision for depreciation and amortization................     57,087    55,964     62,182
  General taxes..............................................     14,214    22,076     28,110
  Income taxes...............................................     36,909    24,874     17,757
                                                                --------  --------   --------

    Total operating expenses and taxes.......................    443,223   343,133    297,171
                                                                --------  --------   --------

OPERATING INCOME.............................................     55,178    39,979     32,063


OTHER INCOME.................................................      3,185     2,300      1,438
                                                                --------  --------   --------


INCOME BEFORE NET INTEREST CHARGES...........................     58,363    42,279     33,501
                                                                --------  --------   --------

NET INTEREST CHARGES:
  Interest on long-term debt.................................     16,971    18,651     19,268
  Interest on nuclear fuel obligations.......................        141       364         90
  Allowance for borrowed funds used during construction......       (850)   (1,005)      (464)
  Other interest expense.....................................      1,060     1,422      1,959
                                                                --------  --------   --------
    Net interest charges.....................................     17,322    19,432     20,853
                                                                --------  --------   --------

NET INCOME...................................................     41,041    22,847     12,648

PREFERRED STOCK DIVIDEND REQUIREMENTS........................      3,703     3,704      4,370
                                                                --------  --------   --------

EARNINGS ON COMMON STOCK.....................................   $ 37,338  $ 19,143   $  8,278
                                                                ========  ========   ========
<FN>

The accompanying Notes to Financial Statements are an integral part of these statements.
</FN>
</TABLE>





<PAGE>
<TABLE>
<CAPTION>


                                  PENNSYLVANIA POWER COMPANY

                                        BALANCE SHEETS

As of December 31,                                                        2001          2000
---------------------------------------------------------------------------------------------
                                                                           (In thousands)
                             ASSETS
UTILITY PLANT:
<S>                                                                     <C>          <C>
In service.........................................................     $664,432     $636,418
Less-Accumulated provision for depreciation........................      290,216      275,699
                                                                        --------     --------
                                                                         374,216      360,719
                                                                        --------     --------
Construction work in progress-
  Electric plant...................................................       24,141       20,800
  Nuclear fuel.....................................................        2,921        2,810
                                                                        --------     --------
                                                                          27,062       23,610
                                                                        --------     --------
                                                                         401,278      384,329
                                                                        --------     --------

OTHER PROPERTY AND INVESTMENTS:
Nuclear plant decommissioning trusts (Note 1)......................      116,634      117,453
Long-term notes receivable from associated companies...............       39,290       33,581
Other..............................................................       21,597       21,279
                                                                        --------     --------
                                                                         177,521      172,313
                                                                        --------     --------

CURRENT ASSETS:
Cash and cash equivalents..........................................           67        3,475
Notes receivable from associated companies (Note 4)................       54,411       41,264
Receivables-
  Customers (less accumulated provisions of $619,000 and $628,000,
    respectively, for uncollectible accounts)......................       40,890       40,980
  Associated companies.............................................       36,491       40,685
  Other............................................................        4,787        8,848
Materials and supplies, at average cost............................       25,598       29,595
Prepayments........................................................        5,682        2,044
                                                                        --------     --------
                                                                         167,926      166,891
                                                                        --------     --------

DEFERRED CHARGES:
Regulatory assets..................................................      208,838      260,221
Other..............................................................        4,534        5,155
                                                                        --------     --------
                                                                         213,372      265,376
                                                                        --------     --------
                                                                        $960,097     $988,909
                                                                        ========     ========

                   CAPITALIZATION AND LIABILITIES

CAPITALIZATION (See Statements of Capitalization):
Common stockholder's equity........................................     $223,788     $213,851
Preferred stock-
  Not subject to mandatory redemption..............................       39,105       39,105
  Subject to mandatory redemption..................................       14,250       15,000
Long-term debt-
  Associated companies.............................................       21,064       18,135
  Other............................................................      240,983      252,233
                                                                        --------     --------
                                                                         539,190      538,324
                                                                        --------     --------
CURRENT LIABILITIES:
Currently payable long-term debt and preferred stock-
  Associated companies.............................................       18,090       16,620
  Other............................................................       12,075        1,036
Accounts payable-
  Associated companies.............................................       50,604       42,293
  Other............................................................        1,441       21,165
Accrued taxes......................................................       18,853       19,250
Accrued interest...................................................        5,264        5,972
Other..............................................................        9,675       16,228
                                                                        --------     --------
                                                                         116,002      122,564
                                                                        --------     --------

DEFERRED CREDITS:
Accumulated deferred income taxes..................................      136,808      160,632
Accumulated deferred investment tax credits........................        4,108        4,407
Nuclear plant decommissioning costs................................      117,096      117,915
Other..............................................................       46,893       45,067
                                                                        --------     --------
                                                                         304,905      328,021
                                                                        --------     --------

COMMITMENTS AND CONTINGENCIES (Notes 2 and 5)......................     --------     --------
                                                                        $960,097     $988,909
                                                                        ========     ========
<FN>

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

</FN>
</TABLE>


<PAGE>
<TABLE>
<CAPTION>


                                  PENNSYLVANIA POWER COMPANY

                                 STATEMENTS OF CAPITALIZATION

As of December 31,                                                                             2001      2000
-----------------------------------------------------------------------------------------------------------------
                                   (Dollars in thousands, except per share amounts)
<S>                                                                                           <C>        <C>
COMMON STOCKHOLDER'S EQUITY:
  Common stock, $30 par value, 6,500,000 shares authorized, 6,290,000
   shares outstanding ..................................................................      $188,700   $188,700
  Other paid-in capital.................................................................          (310)      (310)
  Retained earnings (Note 3A)...........................................................        35,398     25,461
                                                                                              --------   --------
      Total common stockholder's equity.................................................       223,788    213,851
                                                                                              --------   --------
<CAPTION>

                                                  Number of Shares        Optional
                                                    Outstanding        Redemption Price
                                                ------------------   --------------------
                                                  2001      2000     Per Share  Aggregate
                                                  ----      ----     ---------  ---------
<S>                                             <C>       <C>         <C>        <C>
PREFERRED STOCK (Note 3C):
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
    7.75%...................................    250,000   250,000          --         --        25,000     25,000
                                                -------   -------                -------      --------   --------
      Total not subject to mandatory
        redemption..........................    391,049   391,049                $14,614        39,105     39,105
                                                =======   =======                =======      --------   --------

  Subject to Mandatory Redemption (Note 3D):
    7.625%..................................    150,000   150,000      104.58    $15,687        15,000     15,000
  Redemption Within One Year................                                                      (750)        --
                                                -------   -------                -------      --------   --------
      Total subject to mandatory redemption.    150,000   150,000                $15,687        14,250     15,000
                                                =======   =======                =======      --------   --------


LONG-TERM DEBT (Note 3E):
  First mortgage bonds-
    9.740% due 2002-2019................................................................        17,565     18,539
    7.500% due 2003.....................................................................        40,000     40,000
    6.375% due 2004.....................................................................        20,500     20,500
    6.625% due 2004.....................................................................        14,000     14,000
    8.500% due 2022.....................................................................        27,250     27,250
    7.625% due 2023.....................................................................         6,500      6,500
                                                                                              --------   --------
      Total first mortgage bonds........................................................       125,815    126,789
                                                                                              --------   --------

  Secured notes-
    5.400% due 2013.....................................................................         1,000      1,000
    5.400% due 2017.....................................................................        10,600     10,600
  * 1.550% due 2017.....................................................................        17,925         --
    7.150% due 2017.....................................................................            --     17,925
    5.900% due 2018.....................................................................        16,800     16,800
  * 1.550% due 2021.....................................................................        14,482         --
    7.150% due 2021.....................................................................            --     14,482
    6.150% due 2023.....................................................................        12,700     12,700
  * 1.750% due 2027.....................................................................        10,300     10,300
    6.450% due 2027.....................................................................        14,500     14,500
    5.375% due 2028.....................................................................         1,734      1,734
    5.450% due 2028.....................................................................         6,950      6,950
    6.000% due 2028.....................................................................        14,250     14,250
    5.950% due 2029.....................................................................           238        238
                                                                                              --------   --------
      Total secured notes...............................................................       121,479    121,479
                                                                                              --------   --------

  Unsecured notes-
  * 5.900% due 2033.....................................................................         5,200      5,200
                                                                                              --------   --------

  Other obligations-
    Nuclear fuel........................................................................        39,154     34,756
    Capital leases (Note 2).............................................................            95        170
                                                                                              --------   --------
      Total other obligations...........................................................        39,249     34,926
                                                                                              --------   --------
  Net unamortized discount on debt......................................................          (281)      (370)
                                                                                              --------   --------
  Long-term debt due within one year....................................................       (29,415)   (17,656)
                                                                                              --------   --------
      Total long-term debt..............................................................       262,047    270,368
                                                                                              --------   --------
TOTAL CAPITALIZATION....................................................................      $539,190   $538,324
                                                                                              ========   ========
<FN>

* Denotes variable rate issue with December 31, 2001 interest rate shown.

The accompanying Notes to Financial Statements are an integral part of these statements.
</FN>
</TABLE>


<PAGE>
<TABLE>
<CAPTION>


                                  PENNSYLVANIA POWER COMPANY

                          STATEMENTS OF COMMON STOCKHOLDER'S EQUITY



                                                                                   Other
                                           Comprehensive    Number       Par      Paid-In    Retained
                                              Income       of Shares     Value     Capital   Earnings
                                           -------------   ---------     -----    --------   --------
                                                                  (Dollars in thousands)

<S>                                           <C>          <C>          <C>         <C>      <C>
Balance, January 1, 1999...............                    6,290,000    $188,700    $(310)   $ 86,891
  Net income...........................       $12,648                                          12,648
                                              =======
  Transfer of Penn Power Energy
    to a FirstEnergy affiliate.........                                                         3,302
  Cash dividends on common stock.......                                                       (87,362)
  Cash dividends on preferred stock....                                                        (4,056)
  Premium on redemption of preferred
    stock..............................                                                          (205)
-----------------------------------------------------------------------------------------------------
Balance, December 31, 1999.............                    6,290,000     188,700     (310)     11,218
  Net income...........................       $22,847                                          22,847
                                              =======
  Cash dividends on common stock.......                                                        (4,900)
  Cash dividends on preferred stock....                                                        (3,704)
-----------------------------------------------------------------------------------------------------
Balance, December 31, 2000.............                    6,290,000     188,700     (310)     25,461
  Net income...........................       $41,041                                          41,041
                                              =======
  Cash dividends on common stock.......                                                       (27,400)
  Cash dividends on preferred stock....                                                        (3,704)
-----------------------------------------------------------------------------------------------------

Balance, December 31, 2001.............                    6,290,000    $188,700    $(310)   $ 35,398
=====================================================================================================
</TABLE>


<TABLE>
<CAPTION>

                                STATEMENTS OF PREFERRED STOCK

                                              Not Subject to           Subject to
                                           Mandatory Redemption   Mandatory Redemption
                                           --------------------   --------------------
                                            Number        Par       Number       Par
                                           of Shares     Value     of Shares    Value
                                           ---------     -----     ---------    -----
                                                       (Dollars in thousands)

          <S>                               <C>         <C>         <C>        <C>
          Balance, January 1, 1999....      509,049     $50,905     150,000    $15,000
          -----------------------------------------------------------------------------
           Redemptions-
             7.64% Series.............      (60,000)     (6,000)
             8.00% Series.............      (58,000)     (5,800)
          -----------------------------------------------------------------------------
          Balance, December 31, 1999..      391,049      39,105     150,000     15,000
          -----------------------------------------------------------------------------
          Balance, December 31, 2000..      391,049      39,105     150,000     15,000
          -----------------------------------------------------------------------------
          Balance, December 31, 2001..      391,049     $39,105     150,000    $15,000
          =============================================================================

<FN>

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

</FN>
</TABLE>


<PAGE>
<TABLE>
<CAPTION>


                                  PENNSYLVANIA POWER COMPANY

                                   STATEMENTS OF CASH FLOWS

For the Years Ended December 31,                               2001         2000       1999
----------------------------------------------------------------------------------------------
                                                                       (In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                         <C>          <C>         <C>
Net income...............................................   $ 41,041     $ 22,847    $ 12,648
Adjustments to reconcile net income to net cash from
 operating activities:
  Provision for depreciation and amortization............     57,087       55,964      62,182
  Nuclear fuel and lease amortization....................     17,323       18,248       8,423
  Deferred income taxes, net.............................    (11,055)      (8,620)    (16,207)
  Investment tax credits, net............................     (2,775)      (3,051)     (3,111)
  Receivables............................................      8,345       (8,484)       (390)
  Materials and supplies.................................      3,997        2,888         389
  Accounts payable.......................................    (11,413)       8,335      22,291
  Other..................................................     (9,265)      (9,651)     15,899
                                                            --------     --------    --------
    Net cash provided from operating activities..........     93,285       78,476     102,124
                                                            --------     --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
  Long-term debt.........................................     31,626           --       5,200
Redemptions and Repayments-
  Preferred stock........................................         --           --      12,005
  Long-term debt.........................................     51,351       47,796       8,675
Dividend Payments-
  Common stock...........................................     27,400        4,900      87,362
  Preferred stock........................................      3,704        3,704       4,055
                                                            --------     --------    --------
    Net cash used for financing activities...............     50,829       56,400     106,897
                                                            --------     --------    --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions.......................................     40,529       29,856      21,964
Loans to associated companies............................     19,175       59,421          --
Loan payment from parent.................................         --           --     (34,577)
Sale of assets to associated companies...................     (6,053)     (67,472)         --
Other....................................................     (7,787)       2,466       9,655
                                                            --------     --------    --------
    Net cash used for (provided from) investing
    activities...........................................     45,864       24,271      (2,958)
                                                            --------     --------    --------
Net decrease in cash and cash equivalents................      3,408        2,195       1,815
Cash and cash equivalents at beginning of year...........      3,475        5,670       7,485
                                                            --------     --------    --------
Cash and cash equivalents at end of year.................   $     67     $  3,475    $  5,670
                                                            ========     ========    ========

SUPPLEMENTAL CASH FLOWS INFORMATION:
Cash paid during the year-
  Interest (net of amounts capitalized)..................   $ 19,286     $ 18,804    $ 19,436
                                                            ========     ========    ========
  Income taxes...........................................   $ 53,527     $ 39,704    $ 33,786
                                                            ========     ========    ========
<FN>


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

</FN>
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                  PENNSYLVANIA POWER COMPANY

                                     STATEMENTS OF TAXES


For the Years Ended December 31,                              2001         2000        1999
----------------------------------------------------------------------------------------------
                                                                       (In thousands)
<S>                                                         <C>          <C>         <C>
GENERAL TAXES:

State gross receipts....................................    $ 12,776     $ 14,264    $ 13,466
Real and personal property..............................          59        4,012       8,626
State capital stock.....................................       1,081        1,598       3,067
Social security and unemployment........................         201        2,137       2,875
Other...................................................          97           65          76
                                                            --------     --------    --------
    Total general taxes.................................    $ 14,214     $ 22,076    $ 28,110
                                                            ========     ========    ========

PROVISION FOR INCOME TAXES:
Currently payable-
  Federal...............................................    $ 40,948     $ 26,712    $ 29,522
  State.................................................      12,803       11,080       8,630
                                                            --------     --------    --------
                                                              53,751       37,792      38,152
                                                            --------     --------    --------
Deferred, net-
  Federal...............................................      (8,304)      (4,273)    (12,714)
  State.................................................      (2,751)      (4,347)     (3,493)
                                                            --------     --------    --------
                                                             (11,055)      (8,620)    (16,207)
                                                            --------     --------    --------
Investment tax credit amortization......................      (2,775)      (3,051)     (3,111)
                                                            --------     --------    --------
    Total provision for income taxes....................    $ 39,921     $ 26,121    $ 18,834
                                                            ========     ========    ========

INCOME STATEMENT CLASSIFICATION OF PROVISION FOR
INCOME TAXES:
Operating expenses......................................    $ 36,909     $ 24,874    $ 17,757
Other income............................................       3,012        1,247       1,077
                                                            --------     --------    --------
    Total provision for income taxes....................    $ 39,921     $ 26,121    $ 18,834
                                                            ========     ========    ========

RECONCILIATION OF FEDERAL INCOME TAX EXPENSE AT
STATUTORY RATE TO TOTAL PROVISION FOR INCOME TAXES:
Book income before provision for income taxes...........    $ 80,962     $ 48,968    $ 31,482
                                                            ========     ========    ========
Federal income tax expense at statutory rate............    $ 28,337     $ 17,139    $ 11,019
Increases (reductions) in taxes resulting from:
  State income taxes, net of federal income tax benefit.       6,534        4,376       3,339
  Amortization of investment tax credits................      (2,775)      (3,051)     (3,111)
  Amortization of tax regulatory assets.................       6,315        6,899       7,059
  Other, net............................................       1,510          758         528
                                                            --------     --------    --------
    Total provision for income taxes....................    $ 39,921     $ 26,121    $ 18,834
                                                            ========     ========    ========

ACCUMULATED DEFERRED INCOME TAXES AT DECEMBER 31:
Competitive transition charge...........................    $ 75,686     $ 95,497    $115,277
Property basis differences..............................      65,534       64,348      73,694
Allowance for equity funds used during construction.....       2,608        4,163       5,688
Customer receivables for future income taxes............       5,640        7,016       8,354
Unamortized investment tax credits......................      (1,702)      (1,823)     (2,987)
Deferred gain for asset sale to affiliated company......       9,943        8,925          --
Other...................................................     (20,901)     (17,494)    (17,324)
                                                            --------     --------    --------
    Net deferred income tax liability...................    $136,808     $160,632    $182,702
                                                            ========     ========    ========
<FN>


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

</FN>
</TABLE>


<PAGE>


NOTES TO FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

          Pennsylvania Power Company (Company), a wholly owned subsidiary of
Ohio Edison Company (OE), follows the accounting policies and practices
prescribed by the Pennsylvania Public Utility Commission (PPUC) and the Federal
Energy Regulatory Commission (FERC). The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
(GAAP) requires management to make periodic estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses and
disclosure of contingent assets and liabilities. Actual results could differ
from these estimates.

           Results of operations for 1999 include the Company and its former
wholly owned subsidiary, Penn Power Energy, Inc. (PPE). The subsidiary was
formed to market energy products and services coincident with the commencement
of electricity generation customer choice and competition in Pennsylvania in
January 1999. All significant intercompany transactions have been eliminated.
The Company transferred its 100% ownership in PPE to a subsidiary of FirstEnergy
Corp., OE's parent company, effective December 31, 1999.

REVENUES-

           The Company's principal business is providing electric service to
customers in western Pennsylvania. The Company's 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 Company's service area and sales to
wholesale customers. There was no material concentration of receivables at
December 31, 2001 or 2000, with respect to any particular segment of the
Company's customers.

REGULATORY PLAN-

           Pennsylvania enacted "The Electricity Generation Customer Choice and
Competition Act" in 1996, which permitted customers, including the Company's
customers, to choose their electric generation supplier, while transmission and
distribution services would continue to be supplied by their current providers.
The phase in of customer choice was completed on January 1, 2001. The Company
continues to deliver power to homes and businesses through its distribution
system, which remains regulated by the PPUC. The Company'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 the Company's rates is excluded from their bill and the customers 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.

          In 1998, the PPUC authorized the Company's rate restructuring plan,
which essentially resulted in the deregulation of the Company's generation
business. The Company 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, the
Company 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 the CTC over a seven-year transition period; the
remaining net amount of $78 million was written off. The Company is entitled to
recover $236 million of stranded costs through the CTC that began in 1999 and
ends in 2006. The Company's net assets included in utility plant relating to the
operations for which the application of Statement of Financial Accounting
Standards No. 71, "Accounting for the Effects of Certain Types of Regulation"
(SFAS 71) was discontinued were $88 million as of December 31, 2001. All of the
Company's regulatory assets are expected to continue to be recovered under
provisions of the rate restructuring plan.

UTILITY PLANT AND DEPRECIATION-

           Utility plant reflects the original cost of construction (except for
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 Company provides 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 2.9% in 2001,
2.6% in 2000 and 2.5% in 1999.

<PAGE>

           Annual depreciation expense includes approximately $1.6 million for
future decommissioning costs applicable to the Company's ownership interest in
three nuclear generating units. The Company's share of the future obligation to
decommission these units is approximately $340 million in current dollars and
(using a 4.0% escalation rate) approximately $695 million 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 Company has recovered approximately
$16 million for decommissioning through its electric rates from customers
through December 31, 2001. The Company has also recognized an estimated
liability of approximately $7.0 million related to decontamination and
decommissioning of nuclear enrichment facilities operated by the United States
Department of Energy, as required by the Energy Policy Act of 1992.

           In July 2001, the Financial Accounting Standards Board issued SFAS
143, "Accounting for Asset Retirement Obligations." The new statement provides
accounting treatment for retirement obligations associated with tangible
long-lived assets with adoption required as of January 1, 2003. SFAS 143
requires the fair value of a liability for an asset retirement obligation be
recorded in the period in which it is incurred. The associated asset retirement
costs are capitalized as part of the carrying amount of the long-lived asset.
Over time the capitalized costs are depreciated and the present value of the
asset retirement liability increases, resulting in a period expense. Upon
retirement, a gain or loss will be recorded if the costs to settle the
retirement obligation differs from the carrying amount. Under the new standard,
additional assets and liabilities relating principally to nuclear
decommissioning obligations will be recorded, the pattern of expense recognition
will change and income from the external decommissioning trust will be recorded
as investment income. The Company is currently assessing the new standard and
has not yet quantified the impact on its financial statements.

COMMON OWNERSHIP OF GENERATING FACILITIES-

           The Company, together with OE and other affiliated companies, The
Cleveland Electric Illuminating Company (CEI) and The Toledo Edison Company
(TE), own, 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 Company's
portion of operating expenses associated with jointly owned facilities is
included in the corresponding operating expenses on the Statements of Income.
The amounts reflected on the Balance Sheet under utility plant at December 31,
2001 include the following:


                             Utility    Accumulated    Construction   Company's
                             Plant in   Provision for     Work in     Ownership
       Generating Units      Service    Depreciation     Progress     Interest
-------------------------------------------------------------------------------
                                       (In millions)
 W. H. Sammis #7............ $ 67.7        $ 25.7          $  --        20.80%
 Bruce Mansfield
   #1, #2 and #3............  186.0         112.8            2.5        16.38%
 Beaver Valley #1 and #2....   44.6          11.5             --        39.37%
 Perry #1...................    3.6           0.9            0.5         5.24%
 ------------------------------------------------------------------------------
     Total.................. $301.9        $150.9          $ 3.0
===============================================================================


NUCLEAR FUEL-

           OES Fuel, Incorporated, a wholly owned subsidiary of OE, is the sole
lessor for the Company's nuclear fuel requirements. OE anticipates replacing
that lease arrangement with direct ownership and nuclear fuel financing by the
Company and OE. The Company amortizes the cost of nuclear fuel based on the rate
of consumption.

INCOME TAXES-

           Details of the total provision for income taxes are shown on the
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. The Company is included in
FirstEnergy's consolidated federal income tax return. The consolidated tax
liability is allocated on a "stand-alone" company basis, with the Company
recognizing any tax losses or credits it contributed to the consolidated return.


<PAGE>


RETIREMENT BENEFITS-

           FirstEnergy's trusteed, noncontributory defined benefit pension plan
covers almost all of the Company's full-time employees. Upon retirement,
employees receive a monthly pension based on length of service and compensation.
On December 31, 2001, the FirstEnergy pension plan was merged with the pension
plans of GPU, Inc., which merged with FirstEnergy on November 7, 2001. The
Company uses the projected unit credit method for funding purposes and was not
required to make pension contributions during the three years ended December 31,
2001. The assets of the FirstEnergy pension plan consist primarily of common
stocks, United States government bonds and corporate bonds. The FirstEnergy and
GPU postretirement benefit plans are currently separately maintained; the
information shown below is aggregated as of December 31, 2001.

           The Company provides 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 Company pays insurance premiums to cover a
portion of these benefits in excess of set limits; all amounts up to the limits
are paid by the Company. The Company recognizes 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 plans and amounts
recognized on FirstEnergy's Consolidated Balance Sheets as of December 31:


<TABLE>
<CAPTION>

                                                                               Other
                                               Pension Benefits        Postretirement Benefits
                                               -----------------       -----------------------
                                               2001         2000         2001           2000
----------------------------------------------------------------------------------------------
                                                              (In millions)

 <S>                                         <C>         <C>          <C>             <C>
 Change in benefit obligation:
 Benefit obligation as of January 1......    $1,506.1    $1,394.1     $    752.0      $ 608.4
 Service cost............................        34.9        27.4           18.3         11.3
 Interest cost...........................       133.3       104.8           64.4         45.7
 Plan amendments.........................         3.6        41.3           --           --
 Actuarial loss..........................       123.1        17.3           73.3        121.7
 Voluntary early retirement program......        --          23.4            2.3         --
 GPU acquisition.........................     1,878.3        --            716.9         --
 Benefits paid...........................      (131.4)     (102.2)         (45.6)       (35.1)
 ---------------------------------------------------------------------------------------------
 Benefit obligation as of December 31....     3,547.9     1,506.1        1,581.6        752.0
 ---------------------------------------------------------------------------------------------

 Change in fair value of plan assets:
 Fair value of plan assets as of January 1    1,706.0     1,807.5           23.0          4.9
 Actual return on plan assets............         8.1         0.7           12.7         (0.2)
 Company contribution....................        --          --             43.3         18.3
 GPU acquisition.........................     1,901.0        --            462.0         --
 Benefits paid...........................      (131.4)     (102.2)          (6.0)        --
 ---------------------------------------------------------------------------------------------
 Fair value of plan assets as of December 31  3,483.7     1,706.0          535.0         23.0
 ---------------------------------------------------------------------------------------------

 Funded status of plan...................       (64.2)      199.9       (1,046.6)      (729.0)
 Unrecognized actuarial loss (gain)......       222.8       (90.9)         212.8        147.3
 Unrecognized prior service cost.........        87.9        93.1           17.7         20.9
 Unrecognized net transition obligation
  (asset)                                          --        (2.1)         101.6        110.9
 ---------------------------------------------------------------------------------------------
 Prepaid (accrued) benefit cost..........    $  246.5    $  200.0     $   (714.5)     $(449.9)
 =============================================================================================
 Company's share of prepaid (accrued)
   benefit cost..........................    $   18.1    $   17.4     $    (37.4)    $  (35.1)
==============================================================================================
 Assumptions used as of December 31:
 Discount rate...........................        7.25%       7.75%          7.25%        7.75%
 Expected long-term return on plan assets       10.25%      10.25%         10.25%       10.25%
 Rate of compensation increase...........        4.00%       4.00%          4.00%        4.00%

</TABLE>

           FirstEnergy's net pension and other postretirement benefit costs for
the three years ended December 31, 2001 were computed as follows:

<TABLE>
<CAPTION>

                                                                                           Other
                                                       Pension Benefits            Postretirement Benefits
                                                 ------------------------         -------------------------
                                                 2001      2000      1999         2001      2000     1999
     ----------------------------------------------------------------------------------------------------
                                                                         (In millions)
     <S>                                       <C>       <C>       <C>           <C>       <C>       <C>
     Service cost............................  $ 34.9    $  27.4   $  28.3       $18.3     $11.3     $ 9.3
     Interest cost...........................   133.3      104.8     102.0        64.4      45.7      40.7
     Expected return on plan assets..........  (204.8)    (181.0)   (168.1)       (9.9)     (0.5)     (0.4)
     Amortization of transition obligation
      (asset)                                    (2.1)      (7.9)     (7.9)        9.2       9.2       9.2
     Amortization of prior service cost......     8.8        5.7       5.7         3.2       3.2       3.3
     Recognized net actuarial loss (gain)....    --         (9.1)     --           4.9      --        --
     Voluntary early retirement program......     6.1       17.2      --           2.3      --        --
     ------------------------------------------------------------------------------------------------------
     Net benefit cost........................  $(23.8)   $ (42.9)  $ (40.0)      $92.4     $68.9     $62.1
     ======================================================================================================
     Company's share of net benefit cost.....  $ (0.7)   $  (3.6)  $  (4.8)      $ 4.0     $ 7.5     $ 7.5
     ------------------------------------------------------------------------------------------------------

</TABLE>

           The composite health care trend rate assumption is approximately 10%
in 2002, 9% in 2003 and 8% in 2004, trending to 4%-6% in later years. 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 $14.6 million and the postretirement benefit obligation by $151.2
million. A decrease in the same assumption by one percentage point would
decrease the total service and interest cost components by $12.7 million and the
postretirement benefit obligation by $131.3 million.

TRANSACTIONS WITH AFFILIATED COMPANIES-

           Operating revenues, operating expenses and other income include
transactions with affiliated companies, primarily OE, CEI, TE, American
Transmission Systems, Inc. (ATSI), FirstEnergy Solutions Corp. (FES) and
FirstEnergy. The Ohio transition plan resulted in the corporate separation of
FirstEnergy's regulated and unregulated operations in 2001. Unregulated
operations under FES now operate the generation businesses of the Company, OE,
CEI and TE. As a result, the Company entered into power supply agreements (PSA)
whereby FES purchases all of the Company's nuclear generation and the Company
purchases its power from FES to meet its "provider of last resort" obligations.
The 2001 reduction in revenues for Bruce Mansfield administrative and general
charges and costs for FirstEnergy support services reflects the transfer of
fossil generation operations to FES. The primary affiliated companies
transactions, including the effects of the PSA beginning in 2001, the sale and
leaseback of the Company's transmission assets to ATSI in September 2000 and
FirstEnergy's providing support services at cost, are as follows:


<PAGE>



                                          2001            2000          1999
-----------------------------------------------------------------------------
                                                 (In millions)
Operating Revenues:
PSA revenues with FES...............     $151.5         $  --          $  --
Generating units rent with FES......       20.2            --             --
Electric sales to affiliated utilities     --            57.6           12.6
Bruce Mansfield administrative and
   general charges..................       --             2.9            5.3
Ground lease with ATSI..............        1.3           0.7             --

Operating Expenses:
Nuclear fuel leased from OES Fuel...       18.7          20.3            8.8
Purchased power from affiliated
  utilities                                --             7.1           12.9
Purchased power under PSA...........      152.7            --             --
Transmission facilities rentals
   (including ATSI rents)...........        9.9           5.7            1.3
Nuclear operations administrative
 and generation charges.............       18.6          15.0            2.1
FirstEnergy support services........       10.1          27.4           28.3

Other Income:
Interest income from ATSI...........        2.6           0.9             --
Interest income from FES............        0.5            --             --
-----------------------------------------------------------------------------


<PAGE>




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 Balance Sheets at
cost, which approximates their fair market value. Noncash financing and
investing activities included capital lease transactions amounting to $21.6
million, $21.2 million and $27.1 million for the years 2001, 2000 and 1999,
respectively.

           All borrowings with initial maturities of less than one year are
defined as financial instruments under GAAP and are reported on the 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:

                                        2001                        2000
-------------------------------------------------------------------------------
                                   Carrying    Fair           Carrying    Fair
                                     Value    Value             Value    Value
-------------------------------------------------------------------------------
                                                   (In millions)
Long-term debt...................    $252     $262              $253     $263
Preferred stock..................      15       15                15       15
Investments other than cash and
 cash equivalents................     160      162               155      153
------------------------------------------------------------------------------


           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 corporations with credit
ratings similar to the Company's ratings.

<PAGE>


           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 consist primarily of decommissioning trust
investments. Unrealized gains and losses applicable to the decommissioning
trusts have been recognized in the trust investment with a corresponding change
to the decommissioning liability. The Company has no securities held for trading
purposes.

REGULATORY ASSETS-

           The Company recognizes, as regulatory assets, costs which the FERC
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 Company's rate
restructuring plan. Based on the rate restructuring plan, the Company continues
to bill and collect cost-based rates relating to the Company's nongeneration
operations and continues the application of SFAS 71 to these operations.

           Net regulatory assets on the Balance Sheets are comprised of the
following:

                                                       2001             2000
------------------------------------------------------------------------------
                                                            (In millions)
 Competitive transition charge..................      $182.7            $230.9
 Customer receivables for future income taxes...        13.6              17.0
 Loss on reacquired debt........................         6.9               6.4
 Employee postretirement benefit costs..........         3.6               4.5
 Other..........................................         2.0               1.4
 -----------------------------------------------------------------------------
      Total.....................................      $208.8            $260.2
==============================================================================

2.   LEASES

           The Company leases office space and other property and equipment
under cancelable and noncancelable leases. Consistent with the regulatory
treatment, the rentals for capital and operating leases are charged to operating
expenses on the Statements of Income. Such costs for the three years ended
December 31, 2001, are summarized as follows:

                                           2001            2000          1999
-----------------------------------------------------------------------------
                                                       (In millions)
 Operating leases
    Interest element...................   $ --             $0.3          $0.6
    Other..............................     0.1             0.8           1.6
 Capital leases
    Interest element...................     --              0.4           0.6
    Other..............................     0.1             0.3           0.5
-----------------------------------------------------------------------------
 Total rentals.........................   $ 0.2            $1.8          $3.3
============================================================================


           The future minimum lease payments as of December 31, 2001, are:


                                       Capital            Operating
                                       Leases              Leases
--------------------------------------------------------------------------------
                                               (In millions)
 2002...............................    $0.1                 $0.1
 2003...............................     0.1                  0.1
 2004...............................    --                    0.1
 2005...............................    --                    0.1
 2006...............................    --                    0.1
 Years thereafter...................    --                    0.8
 ----------------------------------------------------------------
 Total minimum lease payments.......     0.2                 $1.3
                                                             ====
 Executory costs....................     0.1
 -------------------------------------------
 Net minimum lease payments.........     0.1
 Interest portion...................    --
 -------------------------------------------
 Present value of net minimum
   lease payments...................     0.1
 Less current portion...............     0.1
 -------------------------------------------
 Noncurrent portion.................    $--
 ==========================================


<PAGE>


3.   CAPITALIZATION

     (A) RETAINED EARNINGS-

           Under the Company's Charter, the Company's retained earnings
unrestricted for payment of cash dividends on the Company's common stock were
$26.1 million as of December 31, 2001.

     (B) STOCK COMPENSATION PLANS-

           Employees of the Company participate in the FirstEnergy Executive and
Director Incentive Compensation Plan (FE Plan) administered by FirstEnergy.
Under the FE Plan, total awards cannot exceed 15 million shares of common stock
or their equivalent. Only stock options and restricted stock have been granted,
with vesting periods ranging from six months to seven years.

           Under the Executive Deferred Compensation Plan, covered employees can
direct a portion of their Annual Incentive Award and/or Long Term Incentive
Award into an unfunded FirstEnergy Stock Account to receive vested stock units.
An additional 20% premium is received in the form of stock units based on the
amount allocated to the FirstEnergy Stock Account. Dividends are calculated
quarterly on stock units outstanding and are paid in the form of additional
stock units. Upon withdrawal, stock units are converted to FirstEnergy shares.
Payout occurs three years from the date of deferral.

           The Company continues to apply APB 25, "Accounting for Stock Issued
to Employees." As required by SFAS 123, "Accounting for Stock-Based
Compensation," the Company has determined pro forma earnings as though the
Company had accounted for employee stock options under the fair value method.
The weighted average assumptions used in valuing the options and their resulting
fair values are as follows:

                                     2001           2000            1999
---------------------------------------------------------------------------
 Valuation assumptions:
   Expected option term (years)       8.3            7.6             6.4
   Expected volatility.........     23.45%         21.77%          20.03%
   Expected dividend yield.....      5.00%          6.68%           5.97%
   Risk-free interest rate.....      4.67%          5.28%           5.97%
 Fair value per option.........     $4.97          $2.86           $3.42
 --------------------------------------------------------------------------

           The following table summarizes the pro forma effect of applying fair
value accounting to the Company's stock options.

                                     2001           2000             1999
---------------------------------------------------------------------------
 Earnings on Common Stock (000)
   As Reported.................    $37,338         $19,143           $8,278
   Pro Forma...................    $37,191         $18,970           $8,228
---------------------------------------------------------------------------

     (C) PREFERRED STOCK-

           The Company's 7.75% series of preferred stock has a restriction which
prevents early redemption prior to July 2003. All other preferred stock may be
redeemed by the Company in whole, or in part, with 30-60 days' notice.


     (D) PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION-

           The Company's 7.625% series has an annual sinking fund requirement
for 7,500 shares beginning on October 1, 2002.

     (E) LONG-TERM DEBT-

           The first mortgage indenture and its supplements, which secure all of
the Company's first mortgage bonds, serve as a direct first mortgage lien on
substantially all property and franchises, other than specifically excepted
property, owned by the Company.

           Based on the amount of bonds authenticated by the Trustee through
December 31, 2001, the Company's annual sinking and improvement fund
requirements for all bonds issued under the mortgage amounts to $1.0 million.
The Company expects to deposit funds in 2002 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)
during the

<PAGE>

next five years are $11.3 million in 2002,  $41.0 million in 2003, $40.7 million
in 2004 and $1.0 million in each year 2005 and 2006.

           The Company's obligations to repay certain pollution control revenue
bonds are secured by several series of first mortgage bonds. Certain pollution
control revenue bonds are entitled to the benefit of irrevocable bank letters of
credit of $10.4 million and noncancelable municipal bond insurance policies of
$32.9 million to pay principal of, or interest on, the pollution control revenue
bonds. To the extent that drawings are made under the letters of credit, the
Company is entitled to a credit against its obligation to repay the related
bond. The Company pays an annual fee of 1.25% of the amount of the letters of
credit to the issuing bank and is obligated to reimburse the bank for any
drawings thereunder.

4.   SHORT-TERM BORROWINGS:

           The Company has a credit agreement with OE whereby either company can
borrow funds from the other by issuing unsecured notes at the prevailing prime
or similar interest rate. Under the terms of this agreement, the maximum
borrowing is limited only by the availability of funds; however, the Company's
borrowings under this agreement are currently limited by the PPUC to a total of
$50 million. Either company can terminate the agreement with six months' notice.

5.   COMMITMENTS AND CONTINGENCIES:

CAPITAL EXPENDITURES-

           The Company's current forecast reflects expenditures of approximately
$177 million for property additions and improvements from 2002-2006, of which
approximately $36 million is applicable to 2002. Investments for additional
nuclear fuel during the 2002-2006 period are estimated to be approximately $94
million, of which approximately $8 million applies to 2002. During the same
periods, the Company's nuclear fuel investments are expected to be reduced by
approximately $95 million and $20 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 $9.5 billion. The amount is covered
by a combination of private insurance and an industry retrospective rating plan.
Based on its ownership interests in the Beaver Valley Station and the Perry
Plant, the Company's maximum potential assessment under the industry
retrospective rating plan (assuming the other affiliate co-owners contribute
their proportionate shares of any assessments under the retrospective rating
plan) would be $74.0 million per incident but not more than $8.4 million in any
one year for each incident.

           The Company is also insured as to its interest in Beaver Valley and
Perry 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 Company has also obtained
approximately $222.1 million of insurance coverage for replacement power costs
for its interests in Beaver Valley and Perry. Under these policies, the Company
can be assessed a maximum of approximately $13.9 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 Company intends 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
Company's 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 Company's insurance policies, or to the extent such insurance
becomes unavailable in the future, the Company would remain at risk for such
costs.

ENVIRONMENTAL MATTERS-

           Various federal, state and local authorities regulate the Company
with regard to air and water quality and other environmental matters. Generation
operations and any related additional capital expenditures for environmental
compliance are the responsibility of FirstEnergy's competitive services business
unit.

           The Company is required to meet federally approved sulfur dioxide
(SO2) regulations. Violations of such regulations can result in shutdown of the
generating unit involved and/or civil or criminal penalties of up to $27,500 for
each day the unit is in violation. The Environmental Protection Agency (EPA) has
an interim enforcement policy for SO2 regulations in Ohio that allows for
compliance based on a 30-day averaging period. The Company cannot predict what
action the EPA may take in the future with respect to the interim enforcement
policy.

<PAGE>

           The Company is in compliance with the current SO2 and nitrogen oxides
(NOx) reduction requirements under the Clean Air Act Amendments of 1990. SO2
reductions are being achieved by burning lower-sulfur fuel, generating more
electricity from lower-emitting plants, and/or using emission allowances. NOx
reductions are being achieved through combustion controls and the generation of
more electricity at lower-emitting plants. In September 1998, the EPA finalized
regulations requiring additional NOx reductions from the Company's Pennsylvania
facilities. The EPA's NOx Transport Rule imposes uniform reductions of NOx
emissions (an approximate 85% reduction in utility plant NOx emissions from
projected 2007 emissions) across a region of nineteen 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. State Implementation Plans (SIP) must comply by May 31, 2004 with
individual state NOx budgets established by the EPA. Pennsylvania submitted a
SIP that requires compliance with the NOx budgets at the Company's Pennsylvania
facilities by May 1, 2003. FirstEnergy continues to evaluate its compliance
plans and other compliance options.

           In July 1997, the EPA promulgated changes in the National Ambient Air
Quality Standard (NAAQS) for ozone emissions and proposed a new NAAQS for
previously unregulated ultra-fine particulate matter. In May 1999, the U.S.
Court of Appeals found constitutional and other defects in the new NAAQS rules.
In February 2001, the U.S. Supreme Court upheld the new NAAQS rules regulating
ultra-fine particulates but found defects in the new NAAQS rules for ozone and
decided that the EPA must revise those rules. The future cost of compliance with
these regulations may be substantial and will depend if and how they are
ultimately implemented by the states in which the Company operates affected
facilities.

           In 1999 and 2000, the EPA issued Notices of Violation (NOV) or a
Compliance Order to nine utilities covering 44 power plants, including the W. H.
Sammis Plant. In addition, the U.S. Department of Justice filed eight civil
complaints against various investor-owned utilities, which included a complaint
against the Company and OE in the U.S. District Court for the Southern District
of Ohio. The NOV and complaint allege violations of the Clean Air Act based on
operation and maintenance of the Sammis Plant dating back to 1984. The complaint
requests permanent injunctive relief to require the installation of "best
available control technology" and civil penalties of up to $27,500 per day of
violation. Although unable to predict the outcome of these proceedings, the
Company and OE believe the Sammis Plant is in full compliance with the Clean Air
Act and the NOV and complaint are without merit. Penalties could be imposed if
the Sammis Plant continues to operate without correcting the alleged violations
and a court determines that the allegations are valid. The Sammis Plant
continues to operate while these proceedings are pending.

           In December 2000, the EPA announced it would proceed with the
development of regulations regarding hazardous air pollutants from electric
power plants. The EPA identified mercury as the hazardous air pollutant of
greatest concern. The EPA established a schedule to propose regulations by
December 2003 and issue final regulations by December 2004. The future cost of
compliance with these regulations may be substantial.

           As a result of the Resource Conservation and Recovery Act of 1976, as
amended, and the Toxic Substances Control Act of 1976, federal and state
hazardous waste regulations have been promulgated. Certain fossil-fuel
combustion waste products, such as coal ash, were exempted from hazardous waste
disposal requirements pending the EPA's evaluation of the need for future
regulation. The EPA has issued its final regulatory determination that
regulation of coal ash as a hazardous waste is unnecessary. In April 2000, the
EPA announced that it will develop national standards regulating disposal of
coal ash under its authority to regulate nonhazardous waste.

LEGAL MATTERS-

           Various lawsuits, claims and proceedings related to the Company's
normal business operations are pending against FirstEnergy and its subsidiaries.
The most significant applicable to the Company are described above.


<PAGE>

<TABLE>
<CAPTION>

6.   SUMMARY OF QUARTERLY FINANCIAL DATA (UNAUDITED):

           The following summarizes certain operating results by quarter for
2001 and 2000.

                                             March 31,           June 30,        September 30,     December 31,
Three Months Ended                              2001               2001               2001             2001
---------------------------------------------------------------------------------------------------------------
                                                                      (In millions)
<S>                                           <C>                <C>               <C>                <C>
Operating Revenues........................    $128.4             $124.7            $121.3             $124.0
Operating Expenses and Taxes..............     112.4              101.8             118.7              110.3
---------------------------------------------------------------------------------------------------------------
Operating Income..........................      16.0               22.9               2.6               13.7
Other Income..............................       0.9                0.7               1.0                0.6
Net Interest Charges......................       4.5                4.6               4.3                4.0
---------------------------------------------------------------------------------------------------------------
Net Income (Loss).........................    $ 12.4             $ 19.0            $ (0.7)            $ 10.3
===============================================================================================================
Earnings (Loss) on Common Stock...........    $ 11.5             $ 18.1            $ (1.7)            $  9.4
===============================================================================================================


</TABLE>


<TABLE>
<CAPTION>


                                             March 31,          June 30,        September 30,     December 31,
Three Months Ended                              2000             2000               2000             2000
---------------------------------------------------------------------------------------------------------------
                                                                      (In millions)
<S>                                           <C>                <C>               <C>                <C>
Operating Revenues........................    $ 83.9             $93.6             $102.8             $102.8
Operating Expenses and Taxes..............      90.3              81.0               83.0               88.9
---------------------------------------------------------------------------------------------------------------
Operating Income (Loss)...................      (6.4)             12.6               19.8               13.9
Other Income..............................       0.4               0.4                0.4                1.1
Net Interest Charges......................       4.4               5.4                5.0                4.6
---------------------------------------------------------------------------------------------------------------
Net Income (Loss).........................    $(10.4)            $ 7.6             $ 15.2             $ 10.4
===============================================================================================================
Earnings (Loss) on Common Stock...........    $(11.3)            $ 6.7             $ 14.3             $  9.5
===============================================================================================================

</TABLE>

<PAGE>


Report of Independent Public Accountants

To the Stockholders and Board of Directors of Pennsylvania Power Company:

We have audited the accompanying balance sheets and statements of capitalization
of Pennsylvania Power Company (a Pennsylvania corporation and wholly owned
subsidiary of Ohio Edison Company) as of December 31, 2001 and 2000, and the
related statements of income, common stockholder's equity, preferred stock, cash
flows and taxes for each of the three years in the period ended December 31,
2001. 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 auditing standards generally accepted
in the United States. 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 Pennsylvania Power Company as
of December 31, 2001 and 2000, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States.







ARTHUR ANDERSEN LLP


Cleveland, Ohio,
   March 18, 2002.