K. Jon Taylor
Senior Vice President, Chief Financial Officer and Strategy at FirstEnergy
Thanks, John, and good morning, everyone. I'm glad you can join us for today's call. We continue to execute on our strategies as we drive strong operational and financial performance. I'll start my remarks with a review of some regulatory and business updates, then we'll move to a discussion of financial results and expectations.
Starting in Ohio, we are nearing completion of the first phase of our grid modernization program, which began in 2019 and included installing more than 700,000 smart meters with supporting communications and data management systems and voltage regulating and distribution automation equipment on over 200 circuits to help provide our customers with enhanced reliability and power quality along with greater visibility into their electric usage.
To continue this successful work, in July of this year, we filed for our grid modernization Phase 2, a four-year $626 million capital investment program, that proposes to deploy an additional 700,000 smart meters, distribution automation equipment on nearly 240 circuits and voltage-regulating equipment on nearly 220 circuits. It also includes pilot programs related to electric vehicle charging and battery storage. Together, these programs are designed to enhance the delivery of safe, reliable power while offering our customers modern experiences, emerging technologies and opportunities to help lower their bills.
In West Virginia, the Public Service Commission approved a settlement agreement for environmental compliance projects at the Fort Martin and Harris power stations to meet the U.S. EPA's current affluent limitation guidelines required to operate both plants beyond 2028 as well as a surcharge to recover the expected $142 million of capital investment along with annual operation and maintenance expenses. We currently expect to complete this construction by the end of 2025.
These projects allow us to responsibly operate these power plants for the benefit of our customers in the state through 2035 and 2040 as we continue to support a timely and clean energy transition. At the same time, we continue securing commitments from residential, commercial and industrial customers in West Virginia to purchase solar RECs from our five planned utility scale solar generation facilities totaling 50 megawatts. As part of the conditional approval by the West Virginia Public Service Commission, Mon Power is required to obtain subscriptions for at least 85% of the facilities prior to filing for final approval. The customer response has been favorable, and we expect to reach the 85% threshold before the end of the year.
Our expectation is that our first solar generation site will be in service in 2023, with others to follow by 2025 at a total investment of approximately $100 million. This progress coupled with other regulatory outcomes this year around smart meter and electric vehicle programs in New Jersey go a long way in executing on our strategy to improve the customer experience through investments that modernize the grid and support the energy transition.
As we think about the future, we are preparing for an active regulatory calendar in '23 and '24. We've planned rate case filings in New Jersey, Maryland and West Virginia, all in the first half of 2023. For JCP&L, we last filed a case in 2020, and for West Virginia and Maryland, our last base rate case was filed in 2014 and 2018, respectively. The planned rate cases will primarily address our lower equity returns, as highlighted in the presentation, which are the result of the significant capital investments we have made since our last rate case and changes in operating expenses, and include the accounting changes that we have previously discussed, such as vegetation management and corporate support costs.
In addition, the New Jersey rate case would address our smart meter and electric vehicle programs. The Maryland case would address our electric distribution infrastructure investment and EV program. And in West Virginia, we plan to file for new depreciation rates resulting from a depreciation case to be submitted later this year.
Also, as you recall, our existing Ohio Electric Security Plan expires on May 31, 2024. Thus, we plan to file a new ESP in the first half of 2023, which will include a proposal around our generation procurement plan. And ESP also provides an opportunity for provisions regarding distribution service such as capital recovery riders as well as additional programs that can provide benefits to our customers, such as energy efficiency. In the months ahead, we intend to engage Ohio stakeholders in a discussion about our proposed ESP V.
As we've mentioned on previous calls, we have been considering the potential consolidation of our Pennsylvania and Ohio operating companies into two state utilities. While we continue to evaluate our options in terms of timing for a potential Ohio consolidation, we expect to file an application in Pennsylvania within the next six months. Consolidating these utilities will align with our five-state operating model, simplify our legal entity structure and increase the flexibility and efficiency of our financing needs.
In 2024, we are required to file a base rate case for our Ohio utilities and we are beginning to explore the option of filing a rate case in Pennsylvania at some point within our current planning cycle. Finally, in these regulatory filings, we plan to address recovery of regulatory asset balances, such as deferred storm costs, which currently amount to approximately $680 million across all of our jurisdictions.
In September, Ohio Edison issued $300 million of 10-year notes at 5.5%. And we have one more transaction to complete this year at West Penn Power as we continue executing our debt financing plan. While interest rates have increased, interest expense remains manageable through 2024 as our new money requirements are minimal, and our debt maturities over this same period have higher coupons averaging near 5%. Additionally, filing for new base distribution rates in all of our jurisdictions over the near term allow us an opportunity to address the increased cost of debt.
We remain focused on improving the credit profile of the company. During the third quarter, we repurchased approximately $140 million of holding company debt in the open market, bringing our total holding company debt reduction to $2.5 billion this year, which is more than a 30% reduction from the end of 2021. Also, as John mentioned, we are pursuing the sale of additional minority stake in one of our distribution or transmission businesses. This would follow our very successful transaction with Brookfield Super-Core Infrastructure Partners for a 19.9% interest in FirstEnergy Transmission LLC that was completed in May of this year at a 40 times PE multiple or 3 times rate base for approximately $2.4 billion. While we don't have any additional details at this time regarding a proposed transaction, we remain focused on accelerating our balance sheet improvement efforts in a cost-effective manner with a goal of achieving 14% to 15% FFO to debt much sooner than originally planned.
We had a robust discussion about the pension during our second quarter call and our approach has not changed. Extreme volatility in both interest rates and global equity markets continue. The discount rate that measures our pension obligation increased from 3% at the end of 2021 to approximately 5.5% as of September 30, while asset losses and our qualified pension trust were approximately 22% through the same date.
Despite the asset performance, our net qualified pension obligation improved over $400 million from 2021 to approximately $1.6 billion at the end of the third quarter with the plan's funded status at 81%. The potential 2023 EPS headwind from the qualified pension plan has increased from $0.30 as of June to approximately $0.45 as of September 30.
As we communicated in July, we are confident in our mitigation plan to address the $0.30. This includes costs we have already begun accelerating into 2022, the benefits from our balance sheet improvement efforts, specifically the $1 billion of high coupon debt that we retired in June and the expected uplift from other corporate cost reductions and earnings from our legacy investment in the Signal Peak mining operation.
We will also continue contemplating longer-term regulatory approaches to moderate the impact of market volatility on our pension plan, and we would look for additional offsets if the outcome as of December 31 exceeds $0.30.
While an impact larger than $0.30 would affect 2023 earnings, we don't plan to pursue shortsighted gains that could take us off track for the future. Our solid and sustainable investment pipeline focused on providing reliable service to customers continues to firmly support our long-term plan for 6% to 8% growth.
Our focus remains on controlling what we can control and creating value over the long term through regulated investments, operational and financial discipline and an improved credit profile. Our financial performance this quarter speaks to the continued resiliency of our business.
Third quarter GAAP earnings were $0.58 per share and operating earnings were $0.79 per share, near the top of our guidance range. GAAP results primarily reflect a one time charge as a result of implementing recommendations from the FERC audit, which covered the period going back to 2015 and resulted in certain write-offs and expected refunds. On a proforma basis, excluding the impact of accounting changes, rate credits provided to Ohio customers and equity financing transactions, which are all unique drivers this year, our third quarter operating earnings increased $0.11 per share or 16% compared to the same period in 2021.
On a year-to-date basis, we reported GAAP earnings of $1.42 per share and operating earnings of $1.91 per share. Again, on a pro forma basis, adjusting for the accounting changes, the Ohio rate credits and equity transactions, we achieved a $0.17 improvement in operating earnings compared to the first nine months of 2021 or nearly 10% year-over-year growth.
Third quarter results in our distribution business benefited from higher weather-related demand, the positive impact of our capital investment programs and lower financing costs. These benefits offset higher operating expenses associated with accelerating future planned maintenance work from 2023 into 2022 and higher material costs. Total and weather-adjusted distribution deliveries were essentially flat compared to the third quarter of 2021. Warmer summer weather and stronger demand from industrial customers, reflecting the continued rebound in many industrial sectors within our service territory, was partially offset by lower year-over-year weather-adjusted residential usage.
Residential sales decreased 1% from the third quarter of 2021 and a little less than 2% on a weather-adjusted basis. However, sales to residential customers remain higher than pre-pandemic levels by nearly 3% on a trailing 12-month basis, reflecting a permanent structural shift in this high-margin customer class.
Deliveries to commercial customers decreased 1% or close to 2% on a weather-adjusted basis. And sales to industrial customers increased approximately 2%, led by growth in fabricated metals, automotive, food manufacturing, education services and plastic and rubber. Third quarter industrial sales were down approximately 1% compared to pre-pandemic sales.
In our transmission business, third quarter results primarily benefited from continued formula rate base growth associated with our Energizing the Future investment program and lower financing costs. Our ongoing investments in this important program have added more than $0.5 billion in additional rate base since the third quarter of 2021. Key projects currently underway include replacing more than 1,100 insulators along a 68-mile transmission line corridor in Northeast Ohio to ensure power reliability and resilience, a new substation in Ashland County, Ohio, to meet the area's future energy demands and supporting economic growth, and planning for a new high-voltage substation to support a data center campus that is under development in Frederick, Maryland.
And finally, our corporate segment benefited from higher investment earnings from the Signal Peak mining operation and lower financing costs primarily related to our holding company debt redemptions throughout the year. With our strong results so far this year and our outlook for the next two months, assuming normal weather, we expect 2022 operating earnings at the top half of our guidance range. Additionally, we are on track to meet our cash from operations target of $2.6 billion to $3 billion this year, and improve operating cash flow consistent with earnings over time.
In mid-February, along with announcing our fourth quarter and full year 2022 results, we plan to provide you with 2023 guidance, along with updated capital and other plans to support our future growth. I too am proud of our progress to revitalize our culture, optimize our performance and improve our financial profile. We are energized by our transformation and look forward to taking the next steps to become a premium utility.
Now I'll open the line to your questions. As always, I appreciate your time and your interest in FirstEnergy.