<TABLE>
                                         FIRSTENERGY CORP.

                                     SELECTED FINANCIAL DATA
<CAPTION>
                                            1997       1996         1995        1994      1993
----------------------------------------------------------------------------------------------------
                                                     (In thousands, except per share amounts)
<S>                                      <C>          <C>         <C>         <C>         <C>
Operating Revenues                       $ 2,821,435  $2,469,785  $2,465,846  $2,368,191  $2,369,940
                                         -----------------------------------------------------------
Net Income                               $   305,774  $  302,673  $  294,747  $  281,852  $   59,017
                                         -----------------------------------------------------------
Earnings per Share of Common Stock             $1.94       $2.10       $2.05       $1.97       $0.39
Dividends Declared per Share
 of Common Stock                               $1.50       $1.50       $1.50       $1.50       $1.50
                                         -----------------------------------------------------------
Total Assets                             $18,080,795  $9,054,457  $8,892,088  $9,045,255  $8,964,841
                                         -----------------------------------------------------------
Capitalization at December 31:
  Common Stockholders' Equity            $ 4,159,598  $2,503,359  $2,407,871  $2,317,197  $2,243,292
  Preferred Stock:
    Not Subject to Mandatory
     Redemption                              660,195     211,870     211,870     328,240     328,240
    Subject to Mandatory Redemption          334,864     155,000     160,000      40,000      45,500
  Long-Term Debt                           6,969,835   2,712,760   2,786,256   3,166,593   3,039,263
                                         -----------------------------------------------------------
    Total Capitalization                 $12,124,492  $5,582,989  $5,565,997  $5,852,030  $5,656,295
                                         ===========================================================


                                      PRICE RANGE OF COMMON STOCK

     FirstEnergy Corp.'s Common Stock is listed on the New York Stock Exchange and is traded on other
registered exchanges. Trading of the common stock began on November 10, 1997. Prices represent Ohio
Edison Company Common Stock before November 10, 1997 and FirstEnergy Corp. Common Stock beginning
November 10, 1997.

<CAPTION>
                                             1997                 1996
----------------------------------------------------------------------------
<S>                                   <C>       <C>         <C>       <C>
First Quarter High-Low                23-7/8    20-7/8      24-7/8    21-7/8
                                      --------------------------------------
Second Quarter High-Low               22        19-1/4      23        20-1/4
                                      --------------------------------------
Third Quarter High-Low                23-5/8    21-3/4      22-1/4    19-1/4
                                      --------------------------------------
Fourth Quarter High-Low               29      22-13/16      23-1/4    19-3/8
                                      --------------------------------------
Yearly High-Low                       29      19-1/4        24-7/8    19-1/4
                                      --------------------------------------

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



</TABLE>
<TABLE>

                CLASSIFICATION OF HOLDERS OF COMMON STOCK AS OF DECEMBER 31, 1997
<CAPTION>
                              Holders of Record             Shares Held
----------------------------------------------------------------------------
                              Number        %            Number         %
----------------------------------------------------------------------------
<S>                          <C>         <C>          <C>             <C>
Individuals                  179,862      82.41        61,232,003     26.60
Fiduciaries                   36,439      16.69        12,348,785      5.36
Nominees                          60       0.02       155,109,173     67.38
All Others                     1,928       0.88         1,517,180      0.66
                            -----------------------------------------------
  Total                      218,289     100.00       230,207,141    100.00
                            ===============================================

<FN>

As of January 31, 1998, there were 217,565 holders of 230,207,141
shares of the Company's Common Stock. Information regarding retained
earnings available for payment of cash dividends is given in Note 4A.

</TABLE>


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

RESULTS OF OPERATIONS

          FirstEnergy Corp. was formed when the merger of Ohio
Edison Company (OE) and Centerior Energy Corporation (Centerior)
became effective on November 8, 1997. The Federal Energy Regulatory
Commission (FERC) approved our merger on October 29, 1997, and the
Securities and Exchange Commission followed with their approval on
November 5, 1997. The merger of the companies has been accounted
for by using purchase accounting under the guidelines of Accounting
Principles Board Opinion No. 16, "Business Combinations." Under
purchase accounting, the results of operations for the combined
entity are reported from the point of consummation forward. As a
result, FirstEnergy financial statements for 1997 reflect twelve
months of operations for OE and its wholly owned subsidiary,
Pennsylvania Power Company (Penn), but include only seven weeks
(November 8, 1997 to December 31, 1997) for the former Centerior
companies, which include The Cleveland Electric Illuminating
Company (CEI) and The Toledo Edison Company (TE). Results reported
for prior periods are for OE and Penn only (OE companies).

          We continued to make significant progress in 1997 as our
companies prepare for a more competitive environment in the
electric utility industry. The most significant event during the
year was the consummation of our merger. We expect the merger to
produce a minimum of $1 billion in savings during the first ten
years of joint operations through the elimination of duplicative
activities, improved operating efficiencies, lower capital
expenditures, accelerated debt reduction, the coordination of the
Companies' work forces and enhanced purchasing opportunities.

          During 1997, we reviewed every facet of our operations to
determine best practices and opportunities for increasing
efficiency and reducing costs. On January 29, 1998, our workforce
was reduced by 310 employees to eliminate duplicative activities
resulting from the merger. Total merger-related staffing reductions
to date are 1,336, including 582 employees who recently accepted
voluntary retirement programs and 444 employees who left the
Companies in 1997 and were not replaced. These reductions are
expected to produce approximately $90 million in annual savings.

          Earnings per share of $1.94 for 1997 were adversely
affected by net nonrecurring charges, primarily related to the
staffing reductions discussed above, amounting to $.22 per share.
Excluding these charges, 1997 earnings per share were $2.16,
compared to $2.10 in 1996. The 1997 results reflect accelerated
depreciation and amortization of nuclear and regulatory assets
totaling approximately $211 million under OE's Rate Reduction and
Economic Development Plan and Penn's Rate Stability and Economic
Development Plan; results for 1996 included approximately $178
million of accelerated depreciation and amortization. The 1996
results compared favorably to earnings of $2.05 per share in 1995.

          Operating revenues were up $351.7 million in 1997,
compared to 1996. Excluding the seven weeks of former Centerior
results, we achieved record operating revenues for the third
consecutive year with an increase of $3.8 million over 1996. The OE
companies also achieved record retail sales for the fifth
consecutive year. The following table summarizes the sources of
changes in operating revenues for the OE companies for 1997 and
1996 as compared to the previous year:

                                               1997        1996
---------------------------------------------------------------
                                               (In millions)
  Increased retail kilowatt-hour sales        $  7.8     $ 58.1
  Change in average retail prices               13.3      (46.1)
  Sales to utilities                           (25.8)      (4.5)
  Other                                          8.5       (3.6)
---------------------------------------------------------------
  Net Increase                                $  3.8     $  3.9
===============================================================

          An improving local economy helped the OE companies
achieve record retail sales of 27.3 billion kilowatt-hours. Our
customer base continues to grow with approximately 4,900 new retail
customers added in 1997, after gaining more than 12,200 customers
the previous year. Residential sales decreased 0.8% in 1997,
following a 1.8% gain the previous year. Commercial sales rose 1.2%
and 1.3% in 1997 and 1996, respectively. Increased demand by rubber
and plastics and primary metal manufacturers contributed to a 1.0%
rise in industrial sales during 1997, following a 5.5% increase the
previous year.  Sales to other utilities fell 26.4% in 1997 as a
result of the December 31, 1996 expiration of a one-year contract
with another utility to supply 250 megawatts of power. This follows
a 2.7% increase the previous year. As a result of the above
factors, total kilowatt-hour sales for the OE companies dropped
5.0%, compared with sales in 1996, which were up 3.0% from 1995.

          Fuel and purchased power expenses increased $29.6 million
in 1997. Excluding the seven weeks of former Centerior results,
fuel and purchased power costs were down $19.4 million. Because of
lower total kilowatt-hour sales, the OE companies spent less for
fuel and purchased power during 1997, compared to 1996 costs, which
were also down compared to 1995. Higher nuclear expenses in 1997
reflect increased operating costs at the Beaver Valley Plant and
the seven weeks of former Centerior results. Excluding the
Centerior costs, 1997 nuclear expenses increased $20 million
compared to 1996. Nuclear operating costs were lower in 1996,
compared to 1995, due primarily to lower refueling outage cost
levels. Other operating costs in 1997 were $105.6 million higher
than in 1996. The seven weeks of Centerior results contributed $81
million to the increase. For the OE companies, the increase in
other operating costs in 1997 reflects a fourth quarter charge of
approximately $41.5 million for the voluntary retirement program
mentioned above and estimated severance expenses. These cost
increases were partially offset by gains on the sale of emission
allowances during the year. The decrease in other operating costs
in 1996, compared to 1995, reflects lower maintenance costs at our
fossil-fuel generating units.

          The changes in depreciation and regulatory asset
amortization in 1997 and 1996 reflect accelerations under the
regulatory plans discussed above. The changes between 1997 and 1996
also include $31.2 million of former Centerior depreciation, $6.2
million of former Centerior regulatory asset amortization and $7.7
million of goodwill amortization. General taxes were up $40.2
million in 1997, compared to 1996. Excluding the former Centerior's
results for the seven weeks ended December 31, 1997, general taxes
were down $7 million, compared to last year. The decrease in 1997
was due to lower property taxes and an adjustment in the second
quarter of 1997 which reduced the OE companies' liabilities for
gross receipts taxes.

          Other income rose $20.8 million in 1997. The former
Centerior's seven-week results contributed $5.6 million of the
increase. For the OE companies, the increases in other income in
1997 and 1996 were principally due to higher investment income--
primarily through our PNBV Capital Trust investment, which was
effective in the third quarter of 1996. Excluding the seven-week
results for the former Centerior, overall interest costs continue
to trend downward. For the OE companies, total interest costs were
$4.2 million lower in 1997 than in 1996. Interest on long-term debt
decreased due to our economic refinancings and redemption of
higher-cost debt totaling approximately $282 million that had been
outstanding as of December 31, 1996. Other interest expense
increased compared to 1996 due mainly to higher levels of short-
term borrowing. We also discontinued deferring nuclear unit
interest in the second half of 1995, consistent with OE's
regulatory plan.

CAPITAL RESOURCES AND LIQUIDITY

          We have significantly improved our financial position
over the past five years. For the OE companies, cash generated from
operations was nearly 25% higher in 1997 than it was in 1992 due to
higher revenues and aggressive cost controls. At the same time,
return on common equity improved from 10.8% in 1992 to 12.1% in
1997, excluding the net nonrecurring charges discussed above. By
the end of 1997, the OE companies were serving about 57,000 more
customers than they were five years ago, with approximately 2,000
fewer employees. As a result, our customer/employee ratio has
increased by 56% over the past five years, standing at 264
customers per employee at the end of 1997, compared with 169 at the
end of 1992. In addition, capital expenditures for the OE companies
have dropped substantially during that period. Expenditures in 1997
were approximately 37% lower than they were in 1992 and annual
depreciation charges have exceeded property additions since the end
of 1987.

          Over the past five years, the OE companies have
aggressively taken advantage of opportunities in the financial
markets to reduce our average capital costs. Through refinancing
activities, we have reduced the average cost of debt from 8.53% at
the end of 1992 to 7.77% at the end of 1997. Excluding the
nonrecurring charges mentioned above, our fixed charge coverage
ratios continue to improve. The indenture ratio, which is used to
determine OE's ability to issue first mortgage bonds, improved from
4.34 at the end of 1992 to 6.21 at the end of 1997. Over the same
period, the charter ratio--a measure of our ability to issue
preferred stock--improved from 1.89 to 2.35.

          At the end of 1997, FirstEnergy's common equity as a
percentage of capitalization stood at 34% compared to 40% at the
end of 1992 for OE. This decrease occurred due to the addition of
$4.4 billion of debt, $633.2 million of preferred stock and $1.6
billion of equity to our capital structure as a result of the
merger.

          Our cash requirements in 1998 for operating expenses,
construction expenditures and scheduled debt maturities are
expected to be met without issuing additional securities. During
1997, the OE companies reduced their total debt by approximately
$245 million. FirstEnergy has cash requirements of approximately
$2.4 billion for the 1998-2002 period to meet scheduled maturities
of long-term debt and preferred stock. Of that amount,
approximately $288 million applies to 1998.

          We had about $98.2 million of cash and temporary
investments and $302.2 million of short-term indebtedness on
December 31, 1997. As of December 31, 1997, we had the capability
to borrow $61 million through unused OES Fuel credit facilities. In
addition, our unused borrowing capability included $162 million
under revolving lines of credit and $26 million of bank facilities
that provide for borrowings on a short-term basis at the banks'
discretion.

          Our capital spending for the period 1998-2002 is expected
to be about $1.5 billion (excluding nuclear fuel), of which
approximately $385 million applies to 1998. These spending plans
include investing approximately $300 million during the five-year
period ($65 million in 1998) in nonregulated business ventures.
Investments for additional nuclear fuel during the 1998-2002 period
are estimated to be approximately $518 million, of which about $85
million applies to 1998. During the same periods, our nuclear fuel
investments are expected to be reduced by approximately $380
million and $112 million, respectively, as the nuclear fuel is
consumed. Also, we have operating lease commitments (net of related
trust income) of approximately $1.0 billion for the 1998-2002
period, of which approximately $189 million relates to 1998. We
recover the cost of nuclear fuel consumed and operating leases
through our electric rates.

Interest Rate Risk

          Our exposure to fluctuations in market interest rates is
mitigated by the fact that a significant portion of our debt has
fixed interest rates, as noted in the following table. As discussed
in Note 3, our investments in capital trusts effectively reduce
future lease obligations, also reducing interest rate risk. As
discussed in Note 1, changes in the market value of our
decommissioning trust funds are recognized with a corresponding
change to the decommissioning liability.

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

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
                                                                     There-               Fair
                               1998   1999    2000   2001    2002    after     Total     Value
                                            (Dollars in Millions)
-------------------------------------------------------------------------------------------------

<S>                            <C>    <C>     <C>    <C>     <C>      <C>      <C>       <C>
Investments other than Cash
and Cash Equivalents
Fixed Income                  $ 39    $ 45    $ 56   $ 55    $ 83    $1,443    $1,721   $1,796
  Average interest rate        7.3%    7.4%    7.5%   7.7%    7.7%      6.2%     6.4%
-------------------------------------------------------------------------------------------------
Liabilities
-------------------------------------------------------------------------------------------------
Long-term Debt
Fixed rate                    $267    $411    $369   $102    $745    $4,294    $6,188   $6,548
  Average interest rate        8.6%    7.6%    7.0%   8.7%    7.9%      7.8%      7.8%
Variable rate                         $215                           $  577    $  792   $  743
  Average interest rate                6.4%                             4.2%      4.8%
Short-term Borrowings         $302                                               $302   $  302
  Average interest rate        6.0%                                                6.0%
-------------------------------------------------------------------------------------------------
Preferred Stock               $ 21    $ 40    $ 39   $ 85    $ 19    $  140    $  344   $  362
  Average dividend rate        7.4%    8.9%    8.9%   8.9%    8.9%      8.8%      8.7%
-------------------------------------------------------------------------------------------------

</TABLE>



OUTLOOK

          We face many competitive challenges in the years ahead as the
electric utility industry undergoes significant changes, including
changing regulation and the entrance of more energy suppliers into the
marketplace. Retail wheeling, which would allow retail customers to
purchase electricity from other energy producers, will be one of those
challenges. Our regulatory plans provide the foundation to position us
to meet the challenges we are facing by significantly reducing fixed
costs and lowering rates to a more competitive level.

          OE's Rate Reduction and Economic Development Plan was approved
by the Public Utilities Commission of Ohio (PUCO) in 1995; Penn's Rate
Stability and Economic Development Plan was approved by the Pennsylvania
Public Utility Commission (PPUC) in the second quarter of 1996 and
FirstEnergy's Rate Reduction and Economic Development Plan for CEI and
TE was approved in January 1997. These regulatory plans initially
maintain current base electric rates for OE, CEI and TE through December
31, 2005, and Penn through June 20, 2006. The plans also revised the
Companies' fuel cost recovery methods.

          As part of OE's regulatory plan, transition rate credits were
implemented for customers, which are expected to reduce operating
revenues by approximately $600 million during the regulatory plan period
which is to be followed by a base rate reduction of approximately $300
million in 2006. The base rate freeze for CEI and TE is to be followed
by a $310 million base rate reduction in 2006; interim reductions
beginning in June 1998 of $3 per month will increase to $5 per month per
residential customer by July 1, 2001. Total savings of $391 million are
anticipated over the term of the plan for CEI's and TE's customers. CEI
and TE have also committed $105 million for economic development and
energy efficiency programs.

          All of the Companies' regulatory assets are being recovered
under provisions of the regulatory plans. In addition, the PUCO and PPUC
have authorized OE and Penn to recognize additional capital recovery
related to their generating assets (which is reflected as additional
depreciation expense) and additional amortization of regulatory assets
during the regulatory plan periods of at least $2 billion and $358
million, respectively, more than the amounts that would have been
recognized if the regulatory plans were not in effect. These additional
amounts are being recovered through current rates.

          Based on the regulatory environment we operate in today and
the regulatory plans, we believe we will continue to be able to bill and
collect cost-based rates relating to CEI's and TE's nonnuclear
operations and all of OE's and Penn's operations; accordingly, it is
appropriate that we continue the application of Statement of Financial
Accounting Standards No. 71 "Accounting for the Effects of Certain Types
of Regulation" (SFAS 71). However, as discussed below, changes in the
regulatory environment are on the horizon. With respect to Penn, we
expect to discontinue the application of SFAS 71 for the generation
portion of that business, possibly as early as 1998. We do not expect
the impact of Penn discontinuing SFAS 71 to be material.  As further
discussed below, the Ohio legislature is in the discussion stages of
restructuring the electric utility industry within the State. We do not
expect any changes in regulation to be effective within the next two
years and we cannot assess what the ultimate impact may be.

          The PUCO has authorized CEI and TE to recognize additional
capital recovery related to their generating assets and additional
amortization of regulatory assets during the regulatory plan period of
at least $2 billion more than the amounts that would have been
recognized if the regulatory plans were not in effect. For regulatory
purposes, these additional charges will be reflected over the rate plan
period. The FirstEnergy regulatory plan does not provide for full
recovery of CEI's and TE's nuclear operations. Accordingly, regulatory
assets representing customer receivables for future income taxes related
to nuclear assets of $794 million were written off prior to consummation
of the merger since CEI and TE ceased application of SFAS 71 for their
nuclear operations when implementation of the FirstEnergy regulatory
plan became probable. At the consummation of the merger in November
1997, CEI and TE recognized a fair value purchase accounting adjustment
which decreased the carrying value of their nuclear assets by
approximately $2.55 billion. The fair value adjustment recognized for
financial reporting purposes will ultimately satisfy the $2 billion
asset reduction commitment contained in the CEI and TE regulatory plan
over the regulatory plan period.

          On September 30, 1997, Penn filed a restructuring plan with
the PPUC. The plan describes how Penn will restructure its rates and
provide customers with direct access to alternative electricity
suppliers; customer choice is to be phased in over three years beginning
in 1999, after completion of a two-year pilot program. Penn will
continue to deliver power to homes and businesses through its
transmission and distribution system, which remains regulated by the
PPUC. Penn also plans to sell electricity and energy-related services in
its own territory and throughout Pennsylvania as an alternative supplier
through its nonregulated subsidiary, Penn Power Energy. Through the
restructuring plan, Penn is seeking recovery of $293 million of stranded
costs through a competitive transition charge starting in 1999 and
ending in 2005, which is consistent with Penn's Rate Stability and
Economic Development Plan currently in effect. The PPUC plans to hold
public hearings on Penn's restructuring plan early in 1998.

          On January 6, 1998, the co-chairs of the Ohio General
Assembly's Joint Select Committee on Electric Industry Deregulation
released their draft report of a plan which proposes to give customers a
choice from whom they buy electricity beginning January 1, 2000. No
consensus has been reached by the full Committee; in the meantime,
legislation consistent with the co-chairs' draft report may be
introduced into the General Assembly by one or both of the co-chairs. We
cannot predict when or if this legislation will be introduced and if it
will be passed into law. We continue to study the potential effects that
such legislation would have on our financial position and results of
operations.

          The Financial Accounting Standards Board (FASB) issued a
proposed accounting standard for nuclear decommissioning costs in
February 1996. If the standard is adopted as proposed: (1) annual
provisions for decommissioning could increase; (2) the net present value
of estimated decommissioning costs could be recorded as a liability; and
(3) income from the external decommissioning trusts could be reported as
investment income. The FASB reported in October 1997 that it plans to
continue working on the proposal in 1998.

          The Clean Air Act Amendments of 1990, discussed in Note 6,
require additional emission reductions by 2000. We are pursuing cost-
effective compliance strategies for meeting the reduction requirements
that begin in 2000.

          CEI and TE have been named as "potentially responsible
parties" (PRPs) for three sites listed on the Superfund National
Priorities List and are aware of their potential involvement in the
cleanup of several other sites. Allegations that CEI and TE disposed of
hazardous waste at these sites, and the amount involved are often
unsubstantiated and subject to dispute. Federal law provides that all
PRPs for a particular site be held liable on a joint and several basis.
If CEI and TE were held liable for 100% of the cleanup costs of all the
sites referred to above, the cost could be as high as $313 million.
However, we believe that the actual cleanup costs will be substantially
lower than $313 million, that CEI's and TE's share of any cleanup costs
will be substantially less than 100% and that most of the other PRPs are
financially able to contribute their share. CEI and TE have accrued a
$5.9 million liability as of December 31, 1997, based on estimates of
the costs of cleanup and their proportionate responsibility for such
cost. We believe that the ultimate outcome of these matters will not
have a material adverse effect on our financial condition, cash flows or
results of operations.

Impact of the Year 2000 Issue

          The Year 2000 Issue is the result of computer programs being
written using two digits rather than four to identify the applicable
year. Any of our programs that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the Year 2000.
This could result in system failures or miscalculations.

          We currently believe that with modifications to existing
software and conversions to new software, the Year 2000 Issue will pose
no significant operational problems for our computer systems as so
modified and converted. If these modifications and conversions are not
made, or are not completed on a timely basis, the Year 2000 Issue could
have a material impact on our operations.

          We have initiated formal communications with many of our major
suppliers to determine the extent to which we are vulnerable to those
third parties' failure to resolve their own Year 2000 problems. Our
total Year 2000 project cost and estimates to complete are based on
currently available information and do not include the estimated costs
and time associated with the impact of a third party's Year 2000 Issue.
There can be no guarantee that the failure of other companies to resolve
their own Year 2000 issues will not have material adverse effect on us.

          We are utilizing both internal and external resources to
reprogram and/or replace and test the software for Year 2000
modifications. Most of our Year 2000 problems will be resolved through
system replacements. The different phases of our Year 2000 project will
be completed at various dates, most of which occur in 1999. We plan to
complete the entire Year 2000 project by mid-December 1999. Of the total
project cost, approximately $64 million will be capitalized since those
costs are attributable to the purchase of new software for total system
replacements, (i.e., the year 2000 solution comprises only a portion of
the benefit resulting from the system replacements). The remaining $8
million will be expensed as incurred over the next two years. To date,
we have incurred and expensed approximately $1 million related to the
assessment of, and preliminary efforts in connection with, our Year 2000
project and the development of a remediation plan.

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


<TABLE>
                                             FIRSTENERGY CORP.

                                   CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>

For the Years Ended December 31,                                1997         1996         1995
--------------------------------------------------------------------------------------------------
                                                        (In thousands, except per share amounts)
<S>                                                         <C>           <C>           <C>
OPERATING REVENUES                                          $2,821,435    $2,469,785    $2,465,846
                                                            ----------    ----------    ----------
OPERATING EXPENSES AND TAXES:
  Fuel and purchased power                                     486,267       456,629       465,483
  Nuclear operating costs                                      312,123       247,708       289,717
  Other operating costs                                        526,072       420,523       446,967
                                                            ----------    ----------    -----------
    Total operation and maintenance expenses                 1,324,462     1,124,860     1,202,167
  Provision for depreciation and amortization                  431,431       355,780       256,085
  Amortization of net regulatory assets                         43,621        27,661         5,825
  General taxes                                                282,163       241,998       243,179
  Income taxes                                                 183,798       189,417       191,972
                                                            ----------    ----------    ----------
    Total operating expenses and taxes                       2,265,475     1,939,716     1,899,228
                                                            ----------    ----------    ----------
OPERATING INCOME                                               555,960       530,069       566,618

OTHER INCOME                                                    58,343        37,537        14,424
                                                            ----------    ----------    ----------

INCOME BEFORE NET INTEREST CHARGES                             614,303       567,606       581,042
                                                            ----------    ----------    ----------

NET INTEREST CHARGES:
  Interest on long-term debt                                   252,815       211,935       243,570
  Deferred nuclear unit interest                                     -             -        (4,250)
  Allowance for borrowed funds used during
    construction and capitalized interest                       (3,469)       (3,136)       (5,668)
  Other interest expense                                        31,365        28,211        22,944
  Subsidiaries' preferred stock dividend requirements           27,818        27,923        29,699
                                                            ----------    ----------    ----------

    Net interest charges                                       308,529       264,933       286,295
                                                            ----------    ----------    ----------

NET INCOME                                                    $305,774      $302,673      $294,747
                                                              ========      ========      ========

WEIGHTED AVERAGE NUMBER OF COMMON
 SHARES OUTSTANDING                                            157,464       144,095       143,692
                                                               =======       =======       =======
EARNINGS PER SHARE OF COMMON STOCK (Note 4c)                     $1.94         $2.10         $2.05
                                                                 =====         =====         =====
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK                     $1.50         $1.50         $1.50
                                                                 =====         =====         =====

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

</TABLE>


<TABLE>
                                            FIRSTENERGY CORP.

                                       CONSOLIDATED BALANCE SHEETS
<CAPTION>
At December 31,                                                    1997          1996
----------------------------------------------------------------------------------------
                                                                    (In thousands)
<S>                                                            <C>            <C>
    ASSETS
UTILITY PLANT:
  In service                                                   $15,008,448    $8,634,030
  Less--Accumulated provision for depreciation                   5,635,900     3,226,259
                                                               -----------    ----------
                                                                 9,372,548     5,407,771
                                                               -----------    ----------
  Construction work in progress--
    Electric plant                                                 165,837        93,413
    Nuclear fuel                                                    34,825         5,786
                                                               -----------    ----------
                                                                   200,662        99,199
                                                               -----------    ----------
                                                                 9,573,210     5,506,970
                                                               -----------    ----------
OTHER PROPERTY AND INVESTMENTS:
  Capital trust investments (Note 3)                             1,370,177       487,979
  Letter of credit collateralization (Note 3)                      277,763       277,763
  Other                                                            659,162       323,316
                                                               -----------    ----------
                                                                 2,307,102     1,089,058
                                                               -----------    ----------
CURRENT ASSETS:
  Cash and cash equivalents                                         98,237         5,253
  Receivables--
    Customers (less accumulated provisions of
     $5,618,000 and $2,306,000, respectively,
     for uncollectible accounts)                                   284,162       247,027
    Other                                                          219,106        58,327
  Materials and supplies, at average cost--
    Owned                                                          154,961        66,177
    Under consignment                                               82,839        44,468
  Prepayments and other                                            163,686        75,681
                                                               -----------    ----------
                                                                 1,002,991       496,933
                                                               -----------    ----------
DEFERRED CHARGES:
  Regulatory assets                                              2,624,144     1,703,111
  Goodwill                                                       2,107,795             -
  Unamortized sale and leaseback costs                              95,096       100,066
  Property taxes                                                   270,585       100,802
  Other                                                             99,872        57,517
                                                               -----------    ----------
                                                                 5,197,492     1,961,496
                                                               -----------    ----------

                                                               $18,080,795    $9,054,457
                                                               ===========    ==========
    CAPITALIZATION AND LIABILITIES

CAPITALIZATION (See Consolidated Statements of
 Capitalization):
  Common stockholders' equity                                  $ 4,159,598    $2,503,359
  Preferred stock of consolidated subsidiaries--
    Not subject to mandatory redemption                            660,195       211,870
    Subject to mandatory redemption                                214,864        35,000
  Ohio Edison obligated mandatorily redeemable
   preferred securities of subsidiary trust holding
   solely Ohio Edison subordinated debentures                      120,000       120,000
  Long-term debt                                                 6,969,835     2,712,760
                                                               -----------    ----------
                                                                12,124,492     5,582,989
                                                               -----------    ----------
CURRENT LIABILITIES:
  Currently payable long-term debt and preferred stock             470,436       333,667
  Short-term borrowings (Note 5)                                   302,229       349,480
  Accounts payable                                                 312,690        93,509
  Accrued taxes                                                    381,937       142,909
  Accrued interest                                                 147,694        52,855
  Other                                                            193,850       131,275
                                                               -----------    ----------
                                                                 1,808,836     1,103,695
                                                               -----------    ----------
DEFERRED CREDITS:
  Accumulated deferred income taxes                              2,304,305     1,777,086
  Accumulated deferred investment tax credits                      324,200       199,835
  Pensions and other postretirement benefits                       492,425       123,446
  Other                                                          1,026,537       267,406
                                                               -----------    ----------
                                                                 4,147,467     2,367,773
                                                               -----------    ----------
COMMITMENTS, GUARANTEES AND CONTINGENCIES
  (Notes 3 and 6 )                                             $18,080,795    $9,054,457
                                                               ===========    ==========

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

</TABLE>

<TABLE>
                                           FIRSTENERGY CORP.

                                CONSOLIDATED STATEMENTS OF CAPITALIZATION
<CAPTION>
At December 31,                                                                 1997      1996
----------------------------------------------------------------------------------------------------
                                                          (In thousands, except per share amounts)
<S>                                                                         <C>         <C>
COMMON STOCKHOLDERS' EQUITY:
 Common stock, $.10 par value, and $9 par value, respectively -
  authorized 300,000,000 shares--230,207,141 and 152,569,437
  shares outstanding, respectively                                          $   23,021   $1,373,125
 Other paid-in capital                                                       3,636,908      727,602
 Retained earnings (Note 4A)                                                   646,646      557,642
 Unallocated employee stock ownership plan common stock-
  7,829,538 and 8,259,053 shares, respectively (Note 4B)                      (146,977)    (155,010)
                                                                            ----------   ----------
    Total common stockholders' equity                                        4,159,598    2,503,359
                                                                            ----------   ----------
                                  Number of Shares         Optional
                                    Outstanding        Redemption Price
                                 -----------------  -----------------------
                                  1997       1996   Per Share     Aggregate
                                  ----       ----   ---------     ---------
<S>                              <C>       <C>       <C>          <C>
PREFERRED STOCK OF CONSOLIDATED
SUBSIDIARIES (Note 4D)
Ohio Edison Company (OE)
Cumulative, $100 par value-
Authorized 6,000,000 shares
  Not Subject to Mandatory
   Redemption:
   3.90%                        152,510    152,510    $103.63      $15,804      15,251       15,251
   4.40%                        176,280    176,280     108.00       19,038      17,628       17,628
   4.44%                        136,560    136,560     103.50       14,134      13,656       13,656
   4.56%                        144,300    144,300     103.38       14,917      14,430       14,430
                              ---------  ---------                 -------  ----------   ----------
                                609,650    609,650                  63,893      60,965       60,965
Cumulative, $25 par value-
Authorized 8,000,000 shares
  Not Subject to Mandatory
   Redemption:
   7.75%                      4,000,000  4,000,000                             100,000      100,000
                              ---------  ---------                 -------  ----------   ----------
     Total not subject to
      mandatory redemption    4,609,650  4,609,650                 $63,893     160,965      160,965
                              =========  =========                 =======  ==========   ==========
Cumulative, $100 par value-
  Subject to Mandatory
   Redemption (Note 4E):
   8.45%                        200,000    250,000                              20,000       25,000
   Redemption within one year                                                   (5,000)      (5,000)
                             ----------  ---------                          ----------   ----------
                                200,000    250,000                              15,000       20,000
                             ==========  =========                          ----------   ----------
Pennsylvania Power Company
Cumulative, $100 par value-
Authorized 1,200,000 shares
  Not Subject to Mandatory
   Redemption:
   4.24%                         40,000     40,000    $103.13      $ 4,125       4,000        4,000
   4.25%                         41,049     41,049     105.00        4,310       4,105        4,105
   4.64%                         60,000     60,000     102.98        6,179       6,000        6,000
   7.64%                         60,000     60,000     101.42        6,085       6,000        6,000
   7.75%                        250,000    250,000          -            -      25,000       25,000
   8.00%                         58,000     58,000     102.07        5,920       5,800        5,800
                             ----------  ---------                 -------  ----------   ----------
     Total not subject to
      mandatory redemption      509,049    509,049                 $26,619      50,905       50,905
                             ==========  =========                 =======  ----------   ----------
  Subject to Mandatory
   Redemption (Note 4E):
   7.625%                       150,000    150,000                              15,000       15,000
                             ==========  =========                          ----------   ----------
OE OBLIGATED MANDATORILY
 REDEEMABLE PREFERRED
 SECURITIES OF SUBSIDIARY
 TRUST HOLDING SOLELY OE
 SUBORDINATED DEBENTURES
 (Note 4F):
Cumulative, $25 par value-
Authorized 4,800,000 shares
  Subject to Mandatory
   Redemption:
   9.00%                     4,800,000   4,800,000                             120,000      120,000
                             =========   =========                          ----------   ----------

</TABLE>





<TABLE>
                                         FIRSTENERGY CORP.

                         CONSOLIDATED STATEMENTS OF CAPITALIZATION (Cont.)
<CAPTION>
At December 31,                                                                 1997      1996
-----------------------------------------------------------------------------------------------
                                                      (In thousands, except per share amounts)

                                  Number of Shares         Optional
                                    Outstanding        Redemption Price
                                 -----------------  -----------------------
                                  1997       1996   Per Share     Aggregate
                                  ----       ----   ---------     ---------
<S>                              <C>       <C>       <C>          <C>          <C>        <C>
PREFERRED STOCK OF CONSOLIDATED
SUBSIDIARIES (Cont.)
Cleveland Electric
 Illuminating Company
Cumulative, Without Par Value--
Authorized 4,000,000 shares
  Not Subject to Mandatory
   Redemption:
   $ 7.40  Series A            500,000                $101.00      $  50,500   $   50,000
   $ 7.56  Series B            450,000                 102.26         46,017       45,071
Adjustable Series L            474,000                 100.00         47,400       46,404
   $42.40  Series T            200,000                 500.00        100,000       96,850
                             ---------                             ---------   ----------
     Total Not Subject to
     Mandatory Redemption    1,624,000                             $ 243,917      238,325
                             =========                             =========   ----------
  Subject to Mandatory
   Redemption:
   $ 7.35  Series C            110,000                 101.00       $ 11,110       11,110
   $88.00  Series E              9,000               1,007.65          9,069        9,000
   $91.50  Series Q             42,858               1,000.00         42,858       42,858
   $88.00  Series R             50,000                      -              -       55,000
   $90.00  Series S             74,000                      -              -       79,920
                            ----------                              --------   ----------
                               285,858                                63,037      197,888
  Redemption Within One
   Year                                                                           (14,714)
                            ----------                              --------   ----------
     Total Subject to
     Mandatory Redemption      285,858                              $ 63,037      183,174
                            ==========                              ========   ----------

Toledo Edison Company
Cumulative, $100 Par Value-
Authorized 3,000,000 shares
  Not Subject to Mandatory
  Redemption:
  $ 4.25                       160,000                 104.63       $ 16,740       16,000
  $ 4.56                        50,000                 101.00          5,050        5,000
  $ 4.25                       100,000                 102.00         10,200       10,000
  $ 8.32                       100,000                 102.46         10,246       10,000
  $ 7.76                       150,000                 102.44         15,366       15,000
  $ 7.80                       150,000                 101.65         15,248       15,000
  $10.00                       190,000                 101.00         19,190       19,000
                            ----------                              --------   ----------
                               900,000                                92,040       90,000
                            ----------                              --------   ----------
Cumulative, $25 Par Value-
Authorized 12,000,000 shares
  Not Subject to Mandatory
   Redemption:
   $ 2.21                    1,000,000                  25.25         25,250       25,000
   $ 2.365                   1,400,000                  27.75         38,850       35,000
   Adjustable Series A       1,200,000                  25.00         30,000       30,000
   Adjustable Series B       1,200,000                  25.00         30,000       30,000
                             ---------                              --------   ----------
                             4,800,000                               124,100      120,000
                             ---------                              --------   ----------
     Total Not Subject to
     Mandatory Redemption    5,700,000                              $216,140      210,000
                             =========                              ========   ----------
Cumulative, $100 par value-
  Subject to Mandatory
   Redemption:
   $ 9.375                      33,550                 100.49       $  3,371        3,355
  Redemption Within One Year                                                       (1,665)
                             ---------                              --------   ----------
     Total Subject to
     Mandatory Redemption       33,550                              $  3,371        1,690
                             =========                              ========   ----------

</TABLE>

<TABLE>
                                         FIRSTENERGY CORP.

                         CONSOLIDATED STATEMENTS OF CAPITALIZATION (Cont.)

<CAPTION>
LONG-TERM DEBT (Note 4G) (Interest rates reflect weighted average rates)                                  (In thousands)
--------------------------------------------------------------------------------------------------------------------------
                        FIRST MORTGAGE BONDS            SECURED NOTES             UNSECURED NOTES           TOTAL
--------------------------------------------------------------------------------------------------------------------------
At December 31,           1997       1996              1997       1996             1997     1996        1997       1996
                          ----       ----             ----        ----             ----     ----        ----       ----
<S>              <C>    <C>       <C>         <C>    <C>       <C>        <C>    <C>      <C>         <C>         <C>
Ohio Edison Co.-
  Due 1997-2002  7.63% $  659,265 $  659,265  7.45% $   92,442 $  102,263  5.51% $531,500 $691,500
  Due 2003-2007  8.02%    230,000    230,000  7.68%    158,204    158,204     -         -        -
  Due 2008-2012     -           -          -     -           -          -     -         -        -
  Due 2013-2017     -           -          -  7.13%     87,725     87,725     -         -        -
  Due 2018-2022  8.75%     50,960     50,960  7.04%    155,943    155,943     -         -        -
  Due 2023-2027  7.77%    175,000    175,000  7.77%    188,000    188,000     -         -        -
  Due 2028-2032     -           -          -  5.80%    106,212    106,212     -         -        -
  Due 2033-2037     -           -          -  5.45%     14,800     14,800     -         -        -
                       ---------- ----------        ---------- ----------        -------- -------- -----------  ----------
Total-Ohio Edison       1,115,225  1,115,225           803,326    813,147         531,500  691,500 $ 2,450,051  $2,619,872
                       ---------- ----------        ---------- ----------        -------- -------- -----------  ----------
Cleveland Elec-
tric Illumin-
ating Co.-
  Due 1997-2002  7.63%    195,000             8.01%    475,150             6.24%    5,050
  Due 2003-2007  8.93%    475,000             7.52%    415,150             6.46%   22,550
  Due 2008-2012  8.38%    200,000             7.36%    158,960             6.10%   19,000
  Due 2013-2017     -           -             7.51%    419,820                -         -
  Due 2018-2022     -           -             5.25%    310,855                -         -
  Due 2023-2027  9.00%    150,000             7.68%    246,650                -         -
  Due 2028-2032     -           -                -           -                -         -
  Due 2033-2037     -           -                -           -                -         -
                       ----------                   ----------                   --------          -----------
Total-Cleveland
 Electric               1,020,000                    2,026,585                     46,600            3,093,185
                       ----------                   ----------                   --------          -----------
Toledo Edison
 Co. -
  Due 1997-2002  7.31%    111,000             8.13%    190,750             8.65%  137,490
  Due 2003-2007  7.90%    180,725             7.63%    162,400             6.14%    1,650
  Due 2008-2012      -          -             3.80%     31,250            10.00%      760
  Due 2013-2017      -          -                -           -                -         -
  Due 2018-2022      -          -             8.00%    227,200                -         -
  Due 2023-2027      -          -             7.50%    116,900                -         -
  Due 2028-2032      -          -                -           -                -         -
  Due 2033-2037      -          -                -           -                -         -
                       ----------                    ---------                   -------- -------- -----------
Total-Toledo
 Edison                   291,725                      728,500                    139,900            1,160,125
                       ----------                    ---------                   --------          -----------
Pennsylvania
 Power Co.-
  Due 1997-2002  9.74%      3,409      3,409  6.03%     23,850     23,850     -         -        -
  Due 2003-2007  7.19%     79,370    101,870     -           -          -     -         -        -
  Due 2008-2012  9.74%      4,870      4,870     -           -          -     -         -        -
  Due 2013-2017  9.74%      4,870      4,870  6.46%     29,525     29,525     -         -        -
  Due 2018-2022  8.58%     29,231     29,231  6.71%     36,482     46,782     -         -        -
  Due 2023-2027  7.63%      6,500      6,500  5.65%     37,500     27,200     -         -        -
  Due 2028-2032     -           -          -  5.82%     21,438     21,438     -         -        -
  Due 2033-2037     -           -          -     -           -          -     -         -        -
                       ----------  ---------         ---------  ---------        -------- -------- -----------  ----------
Total-Penn Power          128,250    150,750           148,795    148,795               -        -     277,045     299,545
                       ----------  ---------         ---------  ---------        -------- -------- -----------  ----------
OES Fuel                                      6.19%     80,755     84,000                               80,755      84,000
                                                     ---------  ---------                          -----------  ----------

Total                  $2,555,200 $1,265,975        $3,787,961 $1,045,942        $718,000 $691,500   7,061,161   3,003,417
                       ========== ==========        ========== ==========        ======== ======== -----------  ----------
Capital lease obligations                                                                              204,213      43,775
                                                                                                   -----------  ----------
Net unamortized premium (discount) on debt                                                             153,518      (5,765)
                                                                                                   -----------  ----------
Long-term debt due within one year                                                                    (449,057)   (328,667)
                                                                                                   -----------  ----------
Total long-term debt                                                                                 6,969,835   2,712,760
                                                                                                   -----------  ----------
TOTAL CAPITALIZATION                                                                               $12,124,492  $5,582,989
--------------------------------------------------------------------------------------------------------------------------
</TABLE>


<TABLE>
                                        FIRSTENERGY CORP.

                           CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<CAPTION>

For the Years Ended December 31,                                  1997        1996         1995
--------------------------------------------------------------------------------------------------
                                                                           (In thousands)
<S>                                                              <C>         <C>         <C>
Balance at beginning of year                                     $557,642    $471,095    $389,600
Net income                                                        305,774     302,673     294,747
                                                                 --------    --------    --------
                                                                  863,416     773,768     684,347
-------------------------------------------------------------------------------------------------
Cash dividends on common stock                                    216,770     216,126     215,512
Preferred stock redemption adjustments                                  -           -      (2,260)
                                                                 --------    --------    --------
                                                                  216,770     216,126     213,252
                                                                 --------    --------    --------
Balance at end of year (Note 4A)                                 $646,646    $557,642    $471,095
-------------------------------------------------------------------------------------------------

<TABLE

     CONSOLIDATED STATEMENTS OF CAPITAL STOCK AND OTHER PAID-IN CAPITAL
<CAPTION>

                                                                                              Preferred Stock
                                                                                  -------------------------------------------
                                                                                      Not Subject to          Subject to
                                             Common Stock             Unallocated  Mandatory Redemption  Mandatory Redemption
                                  ----------------------------------              ---------------------  --------------------
                                                               Other      ESOP                   Par or               Par or
                                    Number          Par       Paid-In    Common       Number     Stated     Number    Stated
                                  of Shares        Value      Capital     Stock     of Shares     Value   of Shares    Value
                                  ---------       -------    ---------  ---------  -----------  --------  ---------- ---------
                                                            (Dollars in thousands)
<S>                               <C>           <C>          <C>        <C>          <C>         <C>         <C>      <C>
Balance, January 1, 1995          152,569,437   $1,373,125   $724,848   $(170,376)   6,282,399   $328,240    400,000  $40,000
  Minimum liability for unfunded
  retirement benefits                                           2,446
  Allocation of ESOP Shares                                     1,274      7,720
  Sale of 9% Preferred Stock                                                                               4,800,000  120,000
  Redemptions--
    7.24%  Series                                                (720)                (363,700)   (36,370)
    7.36%  Series                                                (609)                (350,000)   (35,000)
    8.20%  Series                                                (932)                (450,000)   (45,000)
-----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995        152,569,437    1,373,125     726,307   (162,656)   5,118,699    211,870  5,200,000  160,000
  Minimum liability for unfunded
   retirement benefits                                             (51)
  Allocation of ESOP Shares                                      1,346      7,646
------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996        152,569,437    1,373,125     727,602   (155,010)   5,118,699    211,870  5,200,000  160,000
  Centerior acquisition            77,637,704   (1,350,104)  2,907,387               7,324,000    448,325    319,408  201,243
  Minimum liability for unfunded
    retirement benefits                                             45
  Allocation of ESOP Shares                                      1,874      8,033
  Redemptions--
    8.45%  Series                                                                                            (50,000)  (5,000)
------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997        230,207,141      $23,021  $3,636,908  $(146,977)  12,442,699   $660,195  5,469,408 $356,243
==============================================================================================================================

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

</TABLE>

<TABLE>
                                           FIRSTENERGY CORP.

                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the Years Ended December 31,                              1997         1996         1995
---------------------------------------------------------------------------------------------
                                                                      (In thousands)
(S)                                                        <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income                                                 $  305,774   $  302,673   $  294,747
Adjustments to reconcile net income to net
  cash from operating activities:
  Provision for depreciation and amortization                 431,431      355,780      256,085
  Nuclear fuel and lease amortization                          61,960       52,784       70,849
  Other amortization, net                                      42,434       25,961        5,885
  Deferred income taxes, net                                  (29,642)      41,365       53,395
  Investment tax credits, net                                 (16,252)     (14,041)      (9,951)
  Allowance for equity funds used during construction            (201)           -            -
  Receivables                                                  21,846       24,326      (20,452)
  Materials and supplies                                      (18,909)        (736)      12,428
  Accounts payable                                             57,807          962        3,545
  Other                                                           909      (41,317)      66,060
                                                           ----------     --------    ---------
  Net cash provided from operating activities                 856,437      747,757      732,591
                                                           ----------     --------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
  Common stock                                              1,558,237            -            -
  Preferred stock                                                   -            -      120,000
  Long-term debt                                               89,773      306,313      254,365
  Short-term borrowings, net                                        -      229,515            -
Redemptions and Repayments-
  Preferred stock                                               5,000        1,016      117,528
  Long-term debt                                              335,909      438,916      499,276
  Short-term borrowings, net                                   47,251            -       54,677
Common Stock Dividend Payments                                237,848      218,656      217,192
                                                           ----------     --------    ---------
  Net cash provided from (used for) financing
   activities                                               1,022,002     (122,760)    (514,308)
                                                           ----------     --------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Centerior acquisition                                       1,582,459            -            -
Property additions                                            203,839      148,189      198,103
Capital trust investments                                       8,934      487,979            -
Other                                                          62,237       13,406       13,641
                                                           ----------     --------    ---------
  Net cash used for investing activities                    1,857,469      649,574      211,744
                                                           ----------     --------    ---------
Net increase (decrease) in cash and cash equivalents           20,970      (24,577)       6,539
Cash and cash equivalents at beginning of period*              77,267       29,830       23,291
                                                           ----------     --------    ---------
Cash and cash equivalents at end of year                   $   98,237     $  5,253    $  29,830
                                                           ==========     ========    =========
SUPPLEMENTAL CASH FLOWS INFORMATION:
Cash Paid During the Year-
  Interest (net of amounts capitalized)                    $  281,670   $  224,541   $  254,789
  Income taxes                                             $  265,615   $  157,477   $   78,643

<FN>

* 1997 beginning balance includes Centerior cash and cash
  equivalents as of the November 8, 1997 acquisition date.

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

</TABLE>


<TABLE>
                                         FIRSTENERGY CORP.

                                    CONSOLIDATED STATEMENTS OF TAXES
<CAPTION>
For the Years Ended December 31,                                 1997        1996       1995
---------------------------------------------------------------------------------------------
                                                                       (In thousands)
<S>                                                          <C>        <C>          <C>
GENERAL TAXES:
Real and personal property                                   $137,816   $  115,443   $  118,707
State gross receipts                                          118,390      104,158      100,591
Social security and unemployment                               16,551       14,602       15,787
Other                                                           9,406        7,795        8,094
                                                             --------   ----------   ----------
    Total general taxes                                      $282,163   $  241,998   $  243,179
                                                             ========   ==========   ==========
PROVISION FOR INCOME TAXES:
Currently payable-
  Federal                                                   $235,728    $  164,132   $  145,511
  State                                                       18,152         9,839       10,352
                                                            --------    ----------   ----------
                                                             253,880       173,971      155,863
                                                            --------    ----------   ----------
Deferred, net-
  Federal                                                    (23,716)       37,277       50,631
  State                                                       (5,926)        4,088        2,764
                                                            --------    ----------   ----------
                                                             (29,642)       41,365       53,395
                                                            --------    ----------   ----------
Investment tax credit amortization                           (16,252)      (14,041)      (9,951)
                                                            --------    ----------   ----------
    Total provision for income taxes                        $207,986    $  201,295   $  199,307
                                                            ========    ==========   ==========
INCOME STATEMENT CLASSIFICATION
OF PROVISION FOR INCOME TAXES:
Operating income                                            $183,798    $  189,417   $  191,972
Other income                                                  24,188        11,878        7,335
                                                            --------    ----------   ----------
    Total provision for income taxes                        $207,986    $  201,295   $  199,307
                                                            ========    ==========   ==========
RECONCILIATION OF FEDERAL INCOME TAX EXPENSE AT
STATUTORY RATE TO TOTAL PROVISION FOR INCOME TAXES:
Book income before provision for income taxes               $513,760    $  503,968   $  494,054
                                                            ========    ==========   ==========
Federal income tax expense at statutory rate                $179,816    $  176,389   $  172,919
Increases (reductions) in taxes resulting from-
  Amortization of investment tax credits                     (16,252)      (14,041)      (9,951)
  State income taxes net of federal income tax benefit         7,947         9,053        8,525
  Amortization of tax regulatory assets                       30,402        26,945       19,690
  Other, net                                                   6,073         2,949        8,124
                                                          ----------    ----------   ----------
    Total provision for income taxes                      $  207,986    $  201,295   $  199,307
                                                          ==========    ==========   ==========
ACCUMULATED DEFERRED INCOME TAXES AT DECEMBER 31:
Property basis differences                                $2,091,207    $1,319,878   $1,310,852
Deferred nuclear expense                                     454,902       262,123      271,114
Customer receivables for future income taxes                 262,428       191,537      204,978
Deferred sale and leaseback costs                           (121,974)       78,607       82,381
Unamortized investment tax credits                          (116,593)      (72,663)     (77,777)
Unused alternative minimum tax credits                      (243,039)            -            -
Other                                                        (22,626)       (2,396)     (19,114)
                                                          ----------    ----------   ----------
    Net deferred income tax liability                     $2,304,305    $1,777,086   $1,772,434
                                                          ==========    ==========   ==========

<FN>

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

</TABLE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

          The consolidated financial statements include
FirstEnergy Corp. (Company) and its principal electric utility
operating subsidiaries, Ohio Edison Company (OE), The Cleveland
Electric Illuminating Company (CEI), Pennsylvania Power Company
(Penn) and The Toledo Edison Company (TE). The Company and its
utility subsidiaries are referred to throughout as "Companies."
The Company's 1997 results of operations include the results of
CEI and TE for the period November 8, 1997 through December 31,
1997. All significant intercompany transactions have been
eliminated. The Companies follow the accounting policies and
practices prescribed by the Public Utilities Commission of Ohio
(PUCO), the Pennsylvania Public Utility Commission (PPUC) and the
Federal Energy Regulatory Commission (FERC). The preparation of
financial statements in conformity with generally accepted
accounting principles requires management to make periodic
estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses. Certain prior year
amounts have been reclassified to conform with the current year
presentation.

  REVENUES-

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

          Receivables from customers include sales to
residential, commercial and industrial customers located in the
Companies' service area and sales to wholesale customers. There
was no material concentration of receivables at December 31, 1997
or 1996, with respect to any particular segment of the Companies'
customers.

          CEI and TE sell substantially all of their retail
customer accounts receivable to Centerior Funding Corp. under an
asset-backed securitization agreement which expires in 2001.
Centerior Funding completed a public sale of $150 million of
receivables-backed investor certificates in a transaction that
qualified for sale accounting treatment.

    REGULATORY PLANS-

          OE's Rate Reduction and Economic Development Plan was
approved by the PUCO in 1995; Penn's Rate Stability and Economic
Development Plan was approved by the PPUC in the second quarter
of 1996 and FirstEnergy's Rate Reduction and Economic Development
Plan for CEI and TE was approved in January 1997. These
regulatory plans initially maintain current base electric rates
for OE, CEI and TE through December 31, 2005, and Penn through
June 20, 2006. At the end of the regulatory plan periods, OE base
rates will be reduced by $300 million (approximately 20 percent
below current levels) and CEI and TE base rates will be reduced
by a combined $310 million (approximately 15 percent below
current levels). The plans also revised the Companies' fuel cost
recovery methods. The Companies formerly recovered fuel-related
costs not otherwise included in base rates from retail customers
through separate energy rates. In accordance with the respective
regulatory plans, OE's, CEI's and TE's fuel rates will be frozen
through the regulatory plan period, subject to limited periodic
adjustments; Penn's plan provided for the roll-in to base rates
of its fuel rate. As part of OE's and FirstEnergy's regulatory
plans, transition rate credits were implemented for customers,
which are expected to reduce operating revenues for OE by
approximately $600 million and CEI and TE by approximately $391
million during the regulatory plan period.

          All of the Companies' regulatory assets are being
recovered under provisions of the regulatory plans. In addition,
the PUCO has authorized OE to recognize additional capital
recovery related to its generating assets (which is reflected as
additional depreciation expense) and additional amortization of
regulatory assets during the regulatory plan period of at least
$2 billion, and the PPUC has authorized Penn to accelerate at
least $358 million, more than the amounts that would have been
recognized if the regulatory plans were not in effect. These
additional amounts are being recovered through current rates. As
of December 31, 1997, OE's and Penn's cumulative additional
capital recovery and regulatory asset amortization amounted to
$427 million. CEI and TE recognized a fair value purchase
accounting adjustment of $2.55 billion in connection with the
FirstEnergy merger; that fair value adjustment recognized for
financial reporting purposes will ultimately satisfy the $2
billion asset reduction commitment contained in the CEI and TE
regulatory plan. For regulatory purposes, CEI and TE will
recognize the $2 billion of accelerated amortization over the
rate plan period.

UTILITY PLANT AND DEPRECIATION-

          Utility plant reflects the original cost of
construction (except for CEI's and TE's nuclear generating units
which were adjusted to fair value), including payroll and related
costs such as taxes, employee benefits, administrative and
general costs and financing costs (allowance for funds used
during construction).

          The Companies provide for depreciation on a straight-
line basis at various rates over the estimated lives of property
included in plant in service. The annual composite rate for OE's
and Penn's electric plant was approximately 3.0% in 1997, 1996,
and 1995. CEI's and TE's composite rates were both approximately
3.0% in 1997. In addition to the straight-line depreciation
recognized in 1997, 1996 and 1995, OE and Penn recognized
additional capital recovery of $172 million, $144 million and $27
million, respectively, as additional depreciation expense in
accordance with their regulatory plans. Such additional charges
in the accumulated provision for depreciation were $343 million
and $171 million as of December 31, 1997 and 1996, respectively.

          Annual depreciation expense includes approximately
$30.3 million for future decommissioning costs applicable to the
Companies' ownership and leasehold interests in four nuclear
generating units. The Companies' share of the future obligation
to decommission these units is approximately $1.2 billion in
current dollars and (using a 3.5% escalation rate) approximately
$2.9 billion in future dollars. The estimated obligation and the
escalation rate were developed based on site specific studies.
Payments for decommissioning are expected to begin in 2016, when
actual decommissioning work begins. The Companies have recovered
approximately $252 million for decommissioning through their
electric rates from customers through December 31, 1997. If the
actual costs of decommissioning the units exceed the funds
accumulated from investing amounts recovered from customers, the
Companies expect that additional amount to be recoverable from
their customers. The Companies have approximately $301.2 million
invested in external decommissioning trust funds as of
December 31, 1997. Earnings on these funds are reinvested with a
corresponding increase to the decommissioning liability. The
Companies have also recognized an estimated liability of
approximately $34.9 million related to decontamination and
decommissioning of nuclear enrichment facilities operated by the
United States Department of Energy (DOE), as required by the
Energy Policy Act of 1992.

          The Financial Accounting Standards Board (FASB) issued
a proposed accounting standard for nuclear decommissioning costs
in February 1996. If the standard is adopted as proposed: (1)
annual provisions for decommissioning could increase; (2) the net
present value of estimated  decommissioning costs could be
recorded as a liability; and (3) income from the external
decommissioning trusts could be reported as investment income.
The FASB indicated in October 1997 that it plans to continue work
on the proposal.

    COMMON OWNERSHIP OF GENERATING FACILITIES-

          The Companies and Duquesne Light Company constitute the
Central Area Power Coordination Group (CAPCO). The CAPCO
companies own and/or lease, as tenants in common, various power
generating facilities. Each of the companies is obligated to pay
a share of the costs associated with any jointly owned facility
in the same proportion as its interest. The Companies' portions
of operating expenses associated with jointly owned facilities
are included in the corresponding operating expenses on the
Consolidated Statements of Income. The amounts reflected on the
Consolidated Balance Sheet under utility plant at December 31,
1997, include the following:

<TABLE>
<CAPTION>
                                                               Companies'
                          Utility   Accumulated  Construction  Ownership/
                           Plant   Provision for   Work in     Leasehold
Generating Units        in Service  Depreciation   Progress     Interest
--------------------------------------------------------------------------
                                           (In millions)
<S>                       <C>        <C>            <C>         <C>
W.H. Sammis #7            $ 305.5    $  100.8       $  .8       68.80%
Bruce Mansfield #1,
  #2 and #3                 886.6       408.1         2.1       83.01%
Beaver Valley
  #1 and #2               2,299.9       656.3         3.9       69.46%
Davis-Besse                 400.9           -           -      100.00%
Perry                     2,674.6       720.3         3.1       86.26%
Eastlake # 5                159.9        94.6           -       68.80%
Seneca                       64.9        24.3           -       80.00%
-----------------------------------------------------------------------
  Total                  $6,792.3    $2,004.4      $  9.9
=======================================================================
</TABLE>



The Seneca Unit is jointly owned by CEI and a non-CAPCO company.

    NUCLEAR FUEL-

          OE's and Penn's nuclear fuel is recorded at original
cost, which includes material, enrichment, fabrication and
interest costs incurred prior to reactor load. CEI and TE
severally lease their respective portions of nuclear fuel and pay
for the fuel as it is consumed (see Note 3). The Companies
amortize the cost of nuclear fuel based on the rate of
consumption. The Companies' electric rates include amounts for
the future disposal of spent nuclear fuel based upon the formula
used to compute payments to the DOE.

    INCOME TAXES-

          Details of the total provision for income taxes are
shown on the Consolidated Statements of Taxes. Deferred income
taxes result from timing differences in the recognition of
revenues and expenses for tax and accounting purposes. Investment
tax credits, which were deferred when utilized, are being
amortized over the recovery period of the related property. The
liability method is used to account for deferred income taxes.
Deferred income tax liabilities related to tax and accounting
basis differences are recognized at the statutory income tax
rates in effect when the liabilities are expected to be paid.
Alternative minimum tax credits of $243 million, which may be
carried forward indefinitely, are available to reduce future
federal income taxes.

    RETIREMENT BENEFITS-

          The Companies' trusteed, noncontributory defined
benefit pension plans cover almost all full-time employees. Upon
retirement, employees receive a monthly pension based on length
of service and compensation. The Companies use the projected unit
credit method for funding purposes and were not required to make
pension contributions during the three years ended December 31,
1997.

          The following sets forth the funded status of the plans
and amounts recognized on the Consolidated Balance Sheets as of
December 31:

                                                1997       1996
-----------------------------------------------------------------
                                                   (In millions)
Actuarial present value of benefit
 obligations:
  Vested benefits                             $1,096.3   $ 562.0
  Nonvested benefits                              60.4      38.9
----------------------------------------------------------------
Accumulated benefit obligation                $1,156.7   $ 600.9
================================================================
Plan assets at fair value                     $1,542.5   $ 946.3
Actuarial present value of
 projected benefit obligation                  1,327.5     688.5
----------------------------------------------------------------
Plan assets in excess of
 projected benefit obligation                    215.0     257.8
Unrecognized net gain                           (136.5)   (106.2)
Unrecognized prior service cost                   21.0      20.1
Unrecognized net transition asset                (25.9)    (33.9)
----------------------------------------------------------------
    Net pension asset                         $   73.6   $ 137.8
================================================================

            The assets of the plans consist primarily of common
stocks, United States government bonds and corporate bonds. Net
pension costs for the three years ended December 31, 1997, were
computed as follows:
                                        1997     1996      1995
----------------------------------------------------------------
                                              (In millions)
Service cost-benefits earned
  during the period                   $  15.2   $  14.2  $  12.8
Interest on projected benefit
  obligation                             55.9      49.3     48.1
Return on plan assets                  (194.0)   (141.6)  (194.5)
Net deferral                             87.5      52.7    118.7
Voluntary early retirement
  program expense                        54.5      12.5        -
Gain on plan curtailment                    -     (12.8)       -
----------------------------------------------------------------
    Net pension cost                 $   19.1   $ (25.7)  $(14.9)
================================================================

          The assumed discount rates used in determining the
actuarial present value of the projected benefit obligation were
7.25% in 1997 and 7.5% in 1996 and 1995. The assumed rates of
increase in future compensation levels used to measure this
obligation were 4.0% in 1997 and 4.5% in 1996 and 1995. Expected
long-term rates of return on plan assets were assumed to be 10%
in 1997, 1996 and 1995.

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

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

          The following sets forth the funded status of the plans
and amounts recognized on the Consolidated Balance Sheets as of
December 31:

                                            1997        1996
--------------------------------------------------------------
                                              (In millions)
Accumulated postretirement benefit
  obligation allocation:
    Retirees                               $384.8      $155.5
    Fully eligible active plan
     participants                            25.5        10.1
    Other active plan participants          123.8        75.5
--------------------------------------------------------------
Accumulated postretirement benefit
 obligation                                 534.1       241.1
Plan assets at fair value                     2.8         2.0
--------------------------------------------------------------
Accumulated postretirement benefit
  obligation in excess of plan assets       531.3       239.1
Unrecognized transition obligation         (125.1)     (133.5)
Unrecognized net loss                       (24.0)       (7.4)
-------------------------------------------------------------
  Net postretirement benefit liability     $382.2      $ 98.2
==============================================================

          Net periodic postretirement benefit costs for the three
years ended December 31, 1997, were computed as follows:

                                           1997    1996    1995
-----------------------------------------------------------------
                                                (In millions)
Service cost-benefits
 attributed to the period                 $ 4.6   $ 4.3   $ 4.5
Interest cost on accumulated
 benefit obligation                        20.4    17.4    21.1
Amortization of transition obligation       8.3     8.8    10.2
Amortization of loss                          -      .1      .1
Voluntary early retirement program
 expense                                    1.9      .5       -
Loss on plan curtailment                     -     13.1       -
----------------------------------------------------------------
  Net periodic postretirement
   benefit cost                           $35.2   $44.2   $35.9
================================================================

          The health care trend rate assumption is 6.0% in the
first year gradually decreasing to 4.0% for the year 2008 and
later. The discount rates used to compute the accumulated
postretirement benefit obligation were  7.25% in 1997 and 7.5% in
1996 and 1995. An increase in the health care trend rate
assumption by one percentage point in all years would increase
the accumulated postretirement benefit obligation by
approximately $42.3 million and the aggregate annual service and
interest costs by approximately $3.6 million.

      SUPPLEMENTAL CASH FLOWS INFORMATION-

          All temporary cash investments purchased with an
initial maturity of three months or less are reported as cash
equivalents on the Consolidated Balance Sheets. The Companies
reflect temporary cash investments at cost, which approximates
their market value. Noncash financing and investing activities
included capital lease transactions amounting to $3.0 million,
$2.0 million and $1.0 million for the years 1997, 1996 and 1995,
respectively. Commercial paper transactions of OES Fuel (a wholly
owned subsidiary of OE) that have initial maturity periods of
three months or less are reported net within financing activities
under long-term debt and are reflected as long-term debt on the
Consolidated Balance Sheets (see Note 4G).

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

                                      1997            1996
----------------------------------------------------------------
                             Carrying    Fair   Carrying  Fair
                              Value     Value     Value   Value
---------------------------------------------------------------
                                          (In millions)
Long-term debt               $6,980    $7,334    $2,919  $2,963
Preferred stock              $  356    $  362    $  160  $  160
Investments other than
 cash and cash equivalents:
  Debt securities
    - Maturity (5-10 years)  $  487    $  512    $  364  $  364
    - Maturity (more
       than 10 years)         1,134     1,149       387     390
    Equity securities            24        24        14      14
    All other                   336       337       104     102
---------------------------------------------------------------
                             $1,981    $2,022    $  869  $  870
===============================================================

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

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

      REGULATORY ASSETS-

          The Companies recognize, as regulatory assets, costs
which the FERC, PUCO and PPUC have authorized for recovery from
customers in future periods. Without such authorization, the
costs would have been charged to income as incurred. All
regulatory assets are being recovered from customers under the
Companies' respective regulatory plans. Based on those regulatory
plans, at this time, the Companies believe they will continue to
be able to bill and collect cost-based rates (with the exception
of CEI's and TE's nuclear operations as discussed below);
accordingly, it is appropriate that the Companies continue the
application of SFAS No. 71 "Accounting for the Effects of Certain
Types of Regulation" (SFAS 71). However, based on the regulatory
environment in Pennsylvania, Penn is expected to discontinue its
application of SFAS 71 for its generation operations, possibly as
early as 1998. The impact of Penn discontinuing SFAS 71 is not
expected to be material. OE and Penn recognized additional cost
recovery of $39 million, $34 million and $11 million in 1997,
1996 and 1995, respectively, as additional regulatory asset
amortization in accordance with their regulatory plans.
FirstEnergy's regulatory plan does not provide for full recovery
of CEI's and TE's nuclear operations. As a result, in October
1997 CEI and TE discontinued application of SFAS 71 for their
nuclear operations and decreased their regulatory assets of
customer receivables for future income taxes related to the
nuclear assets by $794 million.

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

                                           1997       1996
-------------------------------------------------------------
                                                (In millions)
Nuclear unit expenses                   $1,224.2   $  733.4
Customer receivables for
 future income taxes                       724.2      523.0
Rate stabilization program deferrals       460.2          -
Sale and leaseback costs                  (141.1)     220.8
Loss on reacquired debt                    191.1       95.8
Employee postretirement benefit costs       25.9       29.2
Uncollectible customer accounts             18.9       29.8
Perry Unit 2 termination                    36.7       40.4
DOE decommissioning and
 decontamination costs                      39.3       18.0
Other                                       44.7       12.7
-----------------------------------------------------------
  Total                                 $2,624.1   $1,703.1
===========================================================

2.  MERGER

          The Company was formed on November 8, 1997, by the
merger of OE and Centerior Energy Corporation (Centerior). The
Company holds directly all of the issued and outstanding common
shares of OE and all of the issued and outstanding common shares
of Centerior's former direct subsidiaries, which include, among
others, CEI and TE. As a result of the merger, the former common
shareholders of OE and Centerior now own all of the outstanding
shares of FirstEnergy Common Stock. All other classes of capital
stock of OE and its subsidiaries and of the subsidiaries of
Centerior are unaffected by the Merger and remain outstanding.

          The merger was accounted for as a purchase of
Centerior's net assets with 77,637,704 shares of FirstEnergy
Common Stock through the conversion of each outstanding Centerior
Common Stock share into 0.525 of a share of FirstEnergy Common
Stock (fractional shares were paid in cash). Based on an imputed
value of $20.125 per share, the purchase price was approximately
$1.582 billion, which also included approximately $20 million of
merger related costs. Goodwill of approximately $2.1 billion was
recognized (to be amortized on a straight-line basis over forty
years), which represented the excess of the purchase price over
Centerior's net assets after fair value adjustments. Such amount
may be adjusted if additional information produces changed
assumptions over the twelve months following the merger as the
Company continues to integrate operations and evaluate options
with respect to its generation portfolio.

          The merger purchase accounting adjustments, which were
recorded in the records of Centerior's direct subsidiaries,
primarily consist of:  (1) revaluation of CEI's and TE's nuclear
generating units to fair value ($1.60 billion), based upon the
results of an independent appraisal and estimated discounted
future cash flows expected to be generated by their nuclear
generating units (the estimated cash flows are based upon
management's current view of the likely cost recovery associated
with the nuclear units); (2) adjusting their preferred stock
subject to mandatory redemption and long-term debt to estimated
fair value; (3) recognizing additional obligations related to
retirement benefits; (4) recognizing estimated severance and
other compensation liabilities ($80 million); and (5) adjustment
of the Beaver Valley Unit 2 deferred rent liability to reflect
remaining payments on a straight-line basis. The nuclear assets
revaluation does not include decommissioning since that
obligation is expected to be recovered with the cash flows
provided by the regulated portion of the business. Other assets
and liabilities were not adjusted since they remain subject to
rate regulation on a historical cost basis.

3.  LEASES:

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

          OE sold portions of its ownership interests in Perry
Unit 1 and Beaver Valley Unit 2 and entered into operating leases
on the portions sold for basic lease terms of approximately 29
years. CEI and TE also sold portions of their ownership interests
in Beaver Valley Unit 2 and Bruce Mansfield Units 1, 2, and 3 and
entered into similar operating leases for lease terms of
approximately 30 years. During the terms of their respective
leases OE, CEI and TE continue to be responsible, to the extent
of their individual combined ownership and leasehold interests,
for costs associated with the units including construction
expenditures, operation and maintenance expenses, insurance,
nuclear fuel, property taxes and decommissioning. They have the
right, at the end of the respective basic lease terms, to renew
their respective leases. They also have the right to purchase the
facilities at the expiration of the basic lease term or renewal
term (if elected) at a price equal to the fair market value of
the facilities. The basic rental payments are adjusted when
applicable federal tax law changes.

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

          Nuclear fuel is currently financed for CEI and TE
through leases with a special-purpose corporation. As of December
31, 1997, $157 million of nuclear fuel was financed under a lease
financing arrangement totaling $190 million ($90 million of
intermediate-term notes and $100 million from bank credit
arrangements). The notes mature from 1998 through 2000 and the
bank credit arrangements expire in October 1998. Lease rates are
based on intermediate-term note rates, bank rates and commercial
paper rates.

          Consistent with the regulatory treatment, the rentals
for capital and operating leases are charged to operating
expenses on the Consolidated Statements of Income. Such costs for
the three years ended December 31, 1997, are summarized as
follows:

                                 1997       1996       1995
-------------------------------------------------------------
                                        (In millions)
Operating leases
  Interest element            $ 149.9      $107.6     $104.6
  Other                          45.2        18.3       13.9
Capital leases
  Interest element                6.1         6.5        7.0
  Other                           6.0         6.3        6.6
------------------------------------------------------------
  Total rentals                $207.2      $138.7     $132.1
============================================================

          The future minimum lease payments as of December 31,
1997, are:

                                      Operating Leases
                               -------------------------------
                       Capital  Lease   Capital Trusts
                       Leases  Payments     Income       Net
--------------------------------------------------------------
                                       (In millions)
1998                  $ 93.0  $  290.1  $  101.0  $  189.1
1999                    67.6     301.6      98.0     203.6
2000                    42.0     296.4      94.5     201.9
2001                    24.3     307.3      90.6     216.7
2002                    16.3     315.3      85.4     229.9
Years thereafter        93.6   4,263.3     607.4   3,655.9
-----------------------------------------------------------
Total minimum
 lease payments        336.8  $5,774.0  $1,076.9  $4,697.1
                              ========  ========  ========
Executory costs         36.0
----------------------------
Net minimum lease
 payments              300.8
Interest portion        96.6
----------------------------
Present value of
 net minimum lease
 payments              204.2
Less current portion    74.6
----------------------------
Noncurrent portion  $  129.6
============================

          OE invested in the PNBV Capital Trust in the third
quarter of 1996. The Trust was established to purchase a portion
of the lease obligation bonds issued on behalf of lessors in OE's
Perry Unit 1 and Beaver Valley Unit 2 sale and leaseback
transactions. CEI and TE established the Shippingport Capital
Trust in the fourth quarter of 1997 to purchase the lease
obligation bonds issued on behalf of lessors in their Bruce
Mansfield Units 1, 2 and 3 sale and leaseback transactions. As
noted in the table on page 34, the PNBV and Shippingport Capital
Trusts' income, which is included in other income in the
Consolidated Statements of Income, effectively reduces lease
costs related to those transactions.

4.  CAPITALIZATION:

  (A)  RETAINED EARNINGS-

          There are no restrictions on retained earnings for
payment of cash dividends on the Company's common stock.

  (B)  EMPLOYEE STOCK OWNERSHIP PLAN-

          The Companies fund the matching contribution for their
401(k) savings plan through an ESOP Trust. All full-time
employees eligible for participation in the 401(k) savings plan
are covered by the ESOP. The ESOP borrowed $200 million from OE
and acquired 10,654,114 shares of OE's common stock through
market purchases; the shares were converted into the Company's
common stock in connection with the merger. Dividends on ESOP
shares are used to service the debt. Shares are released from the
ESOP on a pro-rata basis as debt service payments are made. In
1997, 1996 and 1995, 429,515 shares, 404,522 shares and 412,914
shares, respectively, were allocated to OE and Penn employees
with the corresponding expense recognized based on the shares
allocated method. The fair value of 7,829,538 shares unallocated
as of December 31, 1997, was approximately $227.1 million. Total
ESOP-related compensation expense was calculated as follows:

--------------------------------------------------------------
                                    1997       1996      1995
--------------------------------------------------------------
                                           (In millions)
Base compensation                 $ 9.9      $ 9.0      $ 9.0
Dividends on common stock
 held by the ESOP and
 used to service debt              (3.4)      (2.9)      (2.5)
-------------------------------------------------------------
  Net expense                     $ 6.5      $ 6.1      $ 6.5
-------------------------------------------------------------

  (C)  EQUITY COMPENSATION PLAN

          Under an Equity Compensation Plan adopted by Centerior
in 1994, restricted common stock and common stock options were
granted to management employees. Upon consummation of the merger,
outstanding options became exercisable for FirstEnergy common
stock with option prices and the number of shares adjusted to
reflect the merger conversion ratio. A total of 222,023 options
for FirstEnergy common stock were exercised and 68,592 shares of
restricted stock were distributed in 1997. Unexercised options
totaling 517,388 shares were outstanding as of December 31, 1997.
Computing compensation costs for the options consistent with SFAS
No. 123 "Accounting for Stock-Based Compensation" would not have
materially affected net income in 1997 and basic and diluted
earnings per common share are the same.

  (D)  PREFERRED STOCK-

          Penn's 7.75% series of preferred stock has a
restriction which prevents early redemption prior to July 2003.
OE's 8.45% series of preferred stock has no optional redemption
provision, and its 7.75% series is not redeemable before April
1998. CEI's $42.40 and $88.00 series of preferred stock are not
redeemable before June 1998 and December 2001, respectively, and
its $90.00 series has no optional redemption provision. All other
preferred stock may be redeemed by the Companies in whole, or in
part, with 30-90 days' notice.

  (E)  PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION-

          Annual sinking fund provisions for the Companies'
preferred stock are as follows:

                                Redemption
                                Price Per
            Series    Shares    Share      Date      Beginning
--------------------------------------------------------------
OE          8.45%      50,000      $100                 (i)
CEI      $  7.35 C     10,000       100                 (i)
           88.00 E      3,000     1,000                 (i)
           91.50 Q     10,714     1,000                 (i)
           90.00 S     18,750     1,000  November 1    1999
           88.00 R     50,000     1,000  December 1    2001
TE       $ 9.375       16,650       100                 (i)
Penn       7.625%       7,500       100  October 1     2002
-----------------------------------------------------------

  (i)  Sinking fund provisions are in effect.

Annual sinking fund requirements for the next five years are $21
million in 1998, $40 million in 1999, $38 million in 2000, $85
million in 2001 and $19 million in 2002. A liability of $19
million was included in the net assets acquired from CEI and TE
for preferred dividends declared attributable to the post-merger
period. Accordingly, no accruals for CEI and TE preferred
dividends are included in the Company's Statement of Consolidated
Income for the period November 8, 1997 through December 31, 1997.

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

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

  (G)  LONG-TERM DEBT-

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

          Based on the amount of bonds authenticated by the
Trustee through December 31, 1997, OE's annual sinking and
improvement fund requirement for all bonds issued under the
mortgage amounts to $30 million. OE expects to deposit funds in
1998 that will be withdrawn upon the surrender for cancellation
of a like principal amount of bonds, which are specifically
authenticated for such purposes against unfunded property
additions or against previously retired bonds. This method can
result in minor increases in the amount of the annual sinking
fund requirement.

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

                                   (In millions)
---------------------------------------------------------------
                     1998              $374.4
                     1999               866.5
                     2000               418.4
                     2001               101.6
                     2002               744.7
---------------------------------------------------------------

          The Companies' obligations to repay certain pollution
control revenue bonds are secured by several series of first
mortgage bonds and, in some cases, by subordinate liens on the
related pollution control facilities. Certain pollution control
revenue bonds are entitled to the benefit of irrevocable bank
letters of credit of $419.0 million. To the extent that drawings
are made under those letters of credit to pay principal of, or
interest on, the pollution control revenue bonds, OE, CEI and/or
TE are entitled to a credit against their obligation to repay
those bonds. The Companies pay annual fees of 0.43% to 1.875% of
the amounts of the letters of credit to the issuing banks and are
obligated to reimburse the banks for any drawings thereunder.

          OE had unsecured borrowings of $215 million at December
31, 1997, which are supported by a $250 million long-term
revolving credit facility agreement which expires December 30,
1999. OE must pay an annual facility fee of 0.20% on the total
credit facility amount. In addition, the credit agreement
provides that OE maintain unused first mortgage bond capability
for the full credit agreement amount under OE's indenture as
potential security for the unsecured borrowings.

          OE's and Penn's nuclear fuel purchases are financed
through the issuance of OES Fuel commercial paper and loans, both
of which are supported by a $225 million long-term bank credit
agreement which expires March 31, 1999. Accordingly, the
commercial paper and loans are reflected as long-term debt on the
Consolidated Balance Sheets. OES Fuel must pay an annual facility
fee of 0.1875% on the total line of credit and an annual
commitment fee of 0.0625% on any unused amount.

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

          Short-term borrowings outstanding at December 31, 1997,
consisted of $182.2 million of bank borrowings and $120.0 million
of OES Capital, Incorporated commercial paper. OES Capital is a
wholly owned subsidiary of OE whose borrowings are secured by
customer accounts receivable. OES Capital can borrow up to $120
million under a receivables financing agreement at rates based on
certain bank commercial paper and is required to pay an annual
fee of 0.26% on the amount of the entire finance limit. The
receivables financing agreement expires in 1999.

          The Companies have various credit facilities with
domestic banks that provide for borrowings of up to $202 million
under various interest rate options, including a $125 million
revolving credit facility which expires in May 1998. OE's and
Penn's short-term borrowings may be made under these lines of
credit on their unsecured notes. To assure the availability of
these lines, the Companies are required to pay annual commitment
fees that vary from 0.22% to 0.625%. These lines expire at
various times during 1998. The weighted average interest rates on
short-term borrowings outstanding at December 31, 1997 and 1996,
were 6.02% and 5.77%, respectively.

6.  COMMITMENTS, GUARANTEES AND CONTINGENCIES:

     CAPITAL EXPENDITURES-

          The Companies' current forecasts reflect expenditures
of approximately $1.2 billion for property additions and
improvements related to their regulated businesses from 1998-
2002, of which approximately $320 million is applicable to 1998.
Investments for additional nuclear fuel during the 1998-2002
period are estimated to be approximately $518 million, of which
approximately $85 million applies to 1998. During the same
periods, the Companies' nuclear fuel investments are expected to
be reduced by approximately $380 million and $112 million,
respectively, as the nuclear fuel is consumed. The Companies also
expect to invest approximately $300 million during 1998-2002 ($65
million in 1998) relating to various nonregulated business
ventures.

    NUCLEAR INSURANCE-

          The Price-Anderson Act limits the public liability
relative to a single incident at a nuclear power plant to $8.92
billion. The amount is covered by a combination of private
insurance and an industry retrospective rating plan. Based on
their present ownership and leasehold interests in the Beaver
Valley Station, Davis-Besse Plant and the Perry Plant, the
Companies' maximum potential assessment under the industry
retrospective rating plan (assuming the other co-owner
contributes its proportionate share of any assessments under the
retrospective rating plan) would be $257.7 million per incident
but not more than $32.5 million in any one year for each
incident.

          The Companies are also insured as to their respective
interests in the Beaver Valley Station, Davis-Besse Plant and the
Perry Plant under policies issued to the operating company for
each plant. Under these policies, up to $2.75 billion is provided
for property damage and decontamination and decommissioning
costs. The Companies have also obtained approximately $809
million of insurance coverage for replacement power costs for
their respective interests in Perry, Davis-Besse and Beaver
Valley. Under these policies, the Companies can be assessed a
maximum of approximately $36.6 million for incidents at any
covered nuclear facility occurring during a policy year which are
in excess of accumulated funds available to the insurer for
paying losses.

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

    GUARANTEES-

          The CAPCO companies have each severally guaranteed
certain debt and lease obligations in connection with a coal
supply contract for the Bruce Mansfield Plant. As of December 31,
1997, the Companies' shares of the guarantees (which approximate
fair market value) were $66.1 million. The price under the coal
supply contract, which includes certain minimum payments, has
been determined to be sufficient to satisfy the debt and lease
obligations. The Companies' total payments under the coal supply
contract were $135.3 million, $113.8 million and $120.0 million
during 1997, 1996 and 1995, respectively. The Companies' minimum
annual payments are approximately $58 million under the contract,
which expires December 31, 1999.

    ENVIRONMENTAL MATTERS-

          Various federal, state and local authorities regulate
the Companies with regard to air and water quality and other
environmental matters. The Companies estimate additional capital
expenditures for environmental compliance of approximately $50
million, which is included in the construction forecast for their
regulated businesses provided under "Capital Expenditures" for
1998 through 2002.

          The Companies are in compliance with the current sulfur
dioxide (SO2) and nitrogen oxides (NOX) reduction requirements
under the Clean Air Act Amendments of 1990. SO2 reductions
through the year 1999 will be achieved by burning lower-sulfur
fuel, generating more electricity from lower-emitting plants,
and/or purchasing emission allowances. Plans for complying with
reductions required for the year 2000 and thereafter have not
been finalized. The Environmental Protection Agency (EPA) is
conducting additional studies which could indicate the need for
additional NOX reductions from the Companies' Pennsylvania
facilities by the year 2003. In addition, the EPA is also
considering the need for additional NOX reductions from the
Companies' Ohio facilities. On November 7, 1997, the EPA proposed
uniform reductions of NOX emissions across a region of twenty-two
states, including Ohio and the District of Columbia (NOX
Transport Rule) after determining that such NOX emissions are
contributing significantly to ozone pollution in the eastern
United States. In a separate but related action, eight states
filed petitions with the EPA under Section 126 of the Clean Air
Act seeking reductions of NOX emissions which are alleged to
contribute to ozone pollution in the eight petitioning states. A
December 1997 EPA Memorandum of Agreement proposes to finalize
the NOX Transport Rule by September 30, 1998, and establishes a
schedule for EPA action on the Section 126 petitions. The cost of
NOX reductions, if required, may be substantial. The Companies
continue to evaluate their compliance plans and other compliance
options.

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

          CEI and TE have been named as "potentially responsible
parties" (PRPs) for three sites listed on the Federal Superfund
National Priorities List and several other sites. Federal
environmental regulations provide that PRPs for specific sites
would be held liable on a joint and several basis. CEI and TE
have accrued a liability of $5.9 million based on estimates of
their share of potential cleanup costs.

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

7.  SUMMARY OF QUARTERLY FINANCIAL DATA (UNAUDITED):

          The following summarizes certain consolidated operating
results by quarter for 1997 and 1996.

<TABLE>
<CAPTION>
                                   March 31,    June 30,  September 30,  December 31,
   Three Months Ended                1997        1997         1997           1997
------------------------------------------------------------------------------------
                                         (In millions, except per share amounts)
<S>                                <C>          <C>          <C>           <C>
Operating Revenues                 $604.8       $593.3       $652.7        $970.8
Operating Expenses and Taxes        478.5        467.3        511.6         808.2
---------------------------------------------------------------------------------
Operating Income                    126.3        126.0        141.1         162.6
Other Income                         13.5         14.1         12.0          18.7
Net Interest Charges                 66.9         66.3         64.4         110.9
---------------------------------------------------------------------------------
Net Income                         $ 72.9       $ 73.8       $ 88.7        $ 70.4
=================================================================================
Earnings per Share of Common
 Stock                             $  .51       $  .51       $  .61        $  .36
==================================================================================


                                   March 31,    June 30,  September 30,  December 31,
   Three Months Ended                1996        1996         1996           1996
------------------------------------------------------------------------------------
                                         (In millions, except per share amounts)

Operating Revenues                 $611.6       $599.3       $646.9        $611.9
Operating Expenses and Taxes        481.1        471.7        500.0         486.8
---------------------------------------------------------------------------------
Operating Income                    130.5        127.6        146.9         125.1
Other Income                          7.0         10.7          7.1          12.7
Net Interest Charges                 67.2         64.8         64.6          68.3
---------------------------------------------------------------------------------
Net Income                         $ 70.3       $ 73.5       $ 89.4        $ 69.5
=================================================================================
Earnings per Share of Common
 Stock                            $   .49       $  .51       $  .62        $  .48
=================================================================================

</TABLE>



          Results for CEI and TE are included from the November
8, 1997 acquisition date through December 31, 1997.

8.  PRO FORMA COMBINED CONDENSED FIRSTENERGY FINANCIAL STATEMENTS
     (UNAUDITED):

          The pro forma statements of income of FirstEnergy give
effect to the Merger as if it had been consummated on January 1,
1996, with the purchase accounting adjustments actually
recognized in the business combination.

                                      Year Ended December 31,
                                      ------------------------
                                         1997        1996
--------------------------------------------------------------
                      (In millions, except per share amounts)

Operating revenues                     $4,975      $5,006
Operating expenses                      3,966       3,941
-------------------------------------------------------------
Operating income                        1,009       1,065
Other income                               61          37
Net interest                              643         634
------------------------------------------------------------
Net income                             $  427      $  468
============================================================
Earnings per share of common stock     $ 1.92      $ 2.11
============================================================

          Pro forma adjustments reflected above include: (1)
adjusting CEI and TE nuclear generating units to fair value based
upon independent appraisals and estimated discounted future cash
flows based on management's current view of cost recovery; (2)
goodwill recognized representing the excess of the purchase price
over Centerior's adjusted net assets; (3) elimination of revenue
and expense transactions between OE and Centerior; (4)
amortization of the fair value adjustment of long-term debt; and
(5) adjustments for estimated tax effects of the above
adjustments.


Report of Independent Public Accountants

To the Stockholders and Board of Directors of FirstEnergy Corp.:

          We have audited the accompanying consolidated balance sheets and
consolidated statements of capitalization of FirstEnergy Corp.
(an Ohio corporation) and subsidiaries as of December 31, 1997 and 1996,
and the related consolidated statements of income, retained earnings,
capital stock and other paid-in capital, cash flows and taxes for each
of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.

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

          In our opinion, the financial statements referred to
above present fairly, in all material respects, the financial position
of FirstEnergy Corp. and subsidiaries as of December 31, 1997 and
1996, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1997,
in conformity with generally accepted accounting principles.




                                ARTHUR ANDERSEN LLP

Cleveland, Ohio
February 13, 1998