K. Jon Taylor
Senior Vice President, Chief Financial Officer and Strategy at FirstEnergy
Thanks, Steve. And good morning, everyone. Thanks for being here. I'll start with an additional perspective on the pension, then we'll move into a discussion of our earnings and other financial matters. To put this all in context, the impact of the pandemic, the war in Ukraine and other macroeconomic factors has resulted in an extreme inflation and market volatility that we haven't seen in over 40 years. And so, we recognize that this is a topic that has a lot of attention today, but we don't consider this an issue that impacts the long-term value proposition of the company.
Through the first half of this year, interest rates have increased significantly with the discount rate that measures our pension obligation, increasing from 3% at the end of 2021 to approximately 4.8% as of the end of June. Likewise, equity markets across the globe are down significantly with asset performance in our pension trust down approximately 15% through June. Although this results in an estimated earnings headwind of approximately $0.30 per share beginning in 2023, which reduces the non-cash benefit from the pension from $0.40 per share in 2022 to an estimated $0.10 per share in 2023. The funded status of our qualified pension plan has improved from 82% at the end of 2021, to 84% at the end of June. Although, we believe the earnings impact associated with the pension will normalize over time, we recognize that the historic market environment presents a challenge in the near term from an earnings perspective.
And so, let me take a minute to address this. First, our regulated strategy and capital investment program continues to be strong, as we transition more of our capital investments to formula rates with real time returns, while working to lower our base operating expenses. Our base plan includes formula rate investments of approximately $2.4 billion in 2023 and $2.6 billion dollars in 2024 that earned solid returns.
In addition, as Steve mentioned, the outlook for 2022 is very strong, given the successful tender offer completed in June at our holding company and higher than anticipated income from legacy, commodity based investments. And our FE Forward program continues to be part of our plan, allowing us to optimize our cost structure and be more strategic with our operating costs. In combination, these items allow us to accelerate future planned maintenance work into 2022 that will provide flexibility with operating expenses in future years, while meeting our financial commitments for this year.
We've also identified a number of other steps to address the pension headwind. These include accelerating additional capital investments and optimizing our financing plans, which includes moving $1 billion of planned debt financings from 2023 to future years, reducing corporate costs in our real estate footprint as well as anticipated benefits from continued improvements we are seeing in customer arrears. From a regulatory perspective, we are exploring proposed changes to rate treatment for our pension to moderate impacts of market volatility between rate cases, but this will take some time and will likely be executed as we file base rate cases in each jurisdiction over the next few years.
And so, I'll conclude the pension discussion to say this, we realize this is complicated and recognize the potential near-term earnings impact to the company. But we do believe there is a clear silver lining. As markets became volatile and interest rates increased, we were able to take advantage of the situation by retiring high coupon debt and amounts well above our original plan. At the same time rising interest rates reduced our pension liability by $550 million.
And as a result, as Steve mentioned earlier, we made significant progress through the first half of this year to improve our balance sheet and strengthen the credit profile of First Energy. Utilizing the proceeds from the Brookfield and Blackstone transactions, we eliminated approximately $2.4 billion of HoldCo debt in the first six months of the year, which equates to $125 million in saved interest cost on an annual basis. This includes the early retirement of an $850 million FE Corp note in January, a $500 million FE Corp note in June and the repurchase of $1 billion in high coupon FE notes through our successful tender offer last month. This surpasses our original plan for holding company debt reduction and brings First Energy HoldCo debt as a percentage of total debt to 26% from 33% at the end of 2021.
And based on our current forecast with these enhancements, we are tracking just under 12% FFO to debt in 2022 and plan to be at 13% FFO to debt in 2023 a year ahead of what we initially targeted. Last week, Fitch upgraded First Energy and FET to investment grade and upgraded our utilities to a BBB flat rating reflecting the successful completion of our equity transactions, use of those proceeds to pay down company debt and we expect to strengthening of our credit metrics, our settlement to address key Ohio regulatory issues and are meaningful improvements on governance matters.
We are proud of the progress we made. And as we saw with the FET transaction, premium valuations of our businesses in the private sector give us significant optionality to further improve the balance sheet and increase value for shareholders.
And now, let's turn to a discussion of our financial performance for the quarter. Second quarter GAAP earnings were $0.33 per share and operating earnings were $0.53 per share and within the upper end of our earnings guidance range. The $0.20 of special items in the quarter included a charge of $0.17 per share associated with the redemption and early retirement of FE Corp notes that we discussed earlier.
On a pro forma basis, excluding the impact of accounting changes, rate credits provided to how customers and equity financing transactions, operating earnings increased by $0.06 per share or 13% compared to the second quarter of 2021. On a year-to-date basis, we reported GAAP earnings of $0.83 per share and operating earnings of $1.12 per share. Again, adjusting for the impacts of accounting policy changes Ohio rate credits and dilution, this represents a $0.06 improvement versus our operating earnings for the first half of 2021 or approximately 6% year-over-year growth.
Results for the quarter in our distribution business decreased slightly compared to the second quarter of 2021, but remain consistent with our expectations. The positive impact of our investment programs in Pennsylvania, Ohio and New Jersey was offset by slightly lower residential customer demand as I'll discuss in a moment, and higher planned operating expenses including planned maintenance outages at our generation facilities, as well as the impact of accelerated maintenance work we mentioned earlier.
I do want to note, despite the inflationary conditions, our year-to-date base O&M expenses are consistent with our operating plan, reflecting strong financial discipline. Total and weather-adjusted distribution deliveries increased approximately 1% compared to the second quarter of 2021 as a result of stronger demand from commercial and industrial customers, reflecting improving conditions versus last year.
Residential sales decreased 1.6% on a year-over-year basis due primarily to milder weather compared to the second quarter of 2021. On a weather-adjusted basis, residential usage decreased slightly due to a continued shift to more normal work and social activities albeit sales in this class continue to be elevated as compared to pre-pandemic levels. Deliveries to commercial customers increased 1.5% or 1.9% on a weather adjusted basis and sales to industrial customers increased 2.4% versus last year. And for the first time industrial sales were higher than pre-pandemic levels by close to 1% reflecting strong recovery and growth in many sectors including steel, fabricated metals, automotive and food manufacturing.
In our transmission business second quarter results benefited from strong rate base growth associated with our ongoing investments in the Energizing the Future program to improve reliability for our customers. We currently have more than 1,000 transmission projects underway across our footprint, and we've been successful working through acute supply chain challenges to remain on track with our plan, to invest $1.5 billion in our system this year.
And finally, in our corporate segment. Our results improved by $0.09 per share compared to the second quarter of 2021, largely impacted by higher profits from our legacy investment in a mining operation in Montana, as well as lower interest costs from our efforts around the balance sheet I mentioned earlier. The legacy investment is from the late 2000s where we are a minority investor with a 33% share in the facility. Historically, it has not been a significant driver of our results. However, given higher commodity prices, the mine is outperforming our expectations for 2022 with both earnings and cash distributions, which as I mentioned before, provides a significant flexibility to accelerate reliability and maintenance work in our distribution business.
Although, earnings from this investment may continue in the future years, our original plan did not include any earnings contribution, beyond 2022. We're off to a solid start for the first half of the year with a strong outlook for the second half. As Steve mentioned, we are confirming our 2022 operating earnings guidance range of $2.30 to $2.50 per share and are also providing third quarter earnings guidance of $0.70 to $0.80 per share. While we're disappointed in our relative stock price performance since our first quarter call, given the progress we have made over the last years on many fronts, we're confident that our superior assets and clear strategy place us on strong footing to perform well in the future.
With that, we'll go ahead and open the line for your questions. As always, thank you for your time and your interest in First Energy.
