Jon Taylor
Senior Vice President, Chief Financial Officer, Strategy at FirstEnergy
Thanks, John, and good morning, everyone. Thank you for joining us.
I joined John in thanking our employees for their incredible work this past year. Their perseverance and commitment made it possible for us to navigate challenging conditions and make important progress on our goals. We have a busy year ahead of us as we continue driving towards our aspirations and laying additional groundwork for our future success.
I'll start my remarks with a review of our top regulatory and business priorities. Then we'll move to a discussion of 2022 financial results and 2023 expectations. We have an active regulatory calendar this year. Later this quarter, we'll file for new distribution rates in New Jersey and Maryland and file an application to consolidate our Pennsylvania legal entities. Then by midyear, we plan to file a rate case in West Virginia, an electric security plan in Ohio and an infrastructure investment program, or IIP in New Jersey.
Broadly speaking, the rate cases will address the significant customer-focused investments we've made since our last rate cases in each of the states and provide an opportunity to bring our distribution equity returns in line with the industry average allowed returns. At the end of 2022, our weighted average ROE was 7.7% while authorized ROEs ranged from 9.6% to 10.5%. Our current residential rates are 10% to 40% below our peers in the states we serve and we are sensitive to the pressures of the current inflationary environment on our customers. Our rate cases this year will ensure we maintain our affordability position while enhancing the customer experience, provide further support for low-income customers and support the critical investments for a more reliable, resilient and smarter electric grid. Each filing will address unique elements to better serve customers in that state. For example, the Maryland and New Jersey rate cases will highlight our plans to improve distribution reliability through incremental investments. In Maryland, we plan to file concurrently with the rate case for continuation of the electric distribution investment surcharge. And in New Jersey, our rate case will highlight our plan to file an infrastructure investment program by the middle of this year.
These programs will focus on investments such as circuit resiliency and reliability, feeder sectionalization and distribution automation and substation upgrades. In West Virginia, the rate case will reflect our recently filed proposal with the commission to update depreciation rates associated with Mon Power's II coal-fired generation assets, which based on the depreciation study, would have retirement dates of 2035 and 2040. Any increase in depreciation rates would not take effect until conclusion of the upcoming base rate case.
Turning to consolidation of our four Pennsylvania utilities, this is an important step to align with our new state operating model, simplify our legal entity structure and increase the flexibility and efficiency of our financing strategy. This consolidation won't represent any changes in current electric rates for our Pennsylvania customers. Those will be combined as appropriate over time through future rate case activity.
In Ohio, our ESP V will adjust generation procurement for non-shopping customers after the current ESP expires in May of next year. In addition, this filing will address other regulatory programs and mechanisms such as continuation of existing capital writers such as the DCR and AMI. And as we extend our commitment to have a broad stakeholder dialogue, we are considering programs that support energy efficiency, low income and additional customer-related initiatives.
We also look forward to advancing the $626 million Ohio grid mod Phase 2 capital investment plan, which was filed last July. If approved by the commission, grid mod 2 will continue our work to enhance the delivery of safe, reliable power, offer modern customer experiences and support emerging technologies. As we make each major regulatory filing, we'll post a convenient and comprehensive summary to our IR website. You'll find this information on the Investor Materials page of the site and a new section named regulatory corner.
Turning to financial matters. Our recent agreement with Brookfield represents an exciting milestone in our progress to be a premier utility with a strong financial position and sustainable long-term growth. The $3.5 billion transaction will deliver highly attractive, efficient equity financing. The transaction is structured with a $1.75 billion due at closing and aligned with our investment and financing plans an 18-month $1.75 billion note at 5.75% interest. Once the transaction closes, we intend to deploy the proceeds to further improve our credit metrics and our balance sheet targeting FFO to debt metrics of 14% to 15%. The proceeds also supported more than 10% increase in our 2024 and 2025 capital investment plans. We're inusing nearly $1 billion into the capex plan, bringing our target to approximately $18 billion over the 2021 to '25 period. Through this plan, we're targeting 75% formula rate investments and more than 7% average annual rate base growth beginning in 2024.
We will use NOLs and existing tax credits to offset most of the taxable gain on the transaction, resulting in an expected cash taxes of approximately $50 million. Beginning in 2023 and moving forward, we expect to be a federal cash taxpayer at approximately $200 million annually.
Our agreement to sell an additional 30% interest in FET triggered a deferred gain on the prior 19.9% sale that was completed in 2022. As a result, we recognized a $752 million non-cash charge in our fourth quarter '22 GAAP results.
Operating earnings were $0.50 per share for the fourth quarter of 2022 and on an adjusted basis, excluding unique drivers this year, which include the impact of accounting changes, rate credits provided to Ohio customers and equity financing transactions. Fourth quarter operating earnings increased $0.09 per share or 22% compared to the same period in 2021.
In our distribution business, fourth quarter results benefited from weather-related demand, along with the impact of our capital investment programs. These results nearly offset higher operating expenses, primarily associated with accelerating certain planned maintenance work, incremental reliability activities and higher material and storm costs.
Total distribution deliveries increased 2%, resulting from weather that was closer to historic norms compared to the very mild fourth quarter of 2021 and increased demand from industrial customers. Residential sales increased 3% from the fourth quarter of 2021, but decreased slightly on a weather-adjusted basis. Consistent with our observations on the October call, sales to residential customers remain about 3% higher than pre-pandemic levels. In the commercial sector, fourth quarter deliveries were up slightly from the prior year due to weather and decreased almost 2% on a weather-adjusted basis.
While sales to commercial customers increased slightly overall in 2022, they continue to lag 2019 levels by more than 4%. Finally, sales to industrial customers increased nearly 2% compared to the fourth quarter of 2021, led by continued recovery in the automotive, mining, fabricated metals and steel sectors. Overall, industrial sales are trending closer to pre-pandemic levels with full year 2022 sales less than 1% below 2019 and fourth quarter 2022 sales flat to 2019 levels. In our transmission business, fourth quarter results benefited from continued formula rate base growth of 9% year-over-year associated with our Energizing the Future investment program as well as lower financing costs.
I want to take a quick second to recognize our transmission, supply chain and materials operations teams, who overcame significant supply chain and other issues in 2022, investing nearly $1.4 billion in projects to improve grid reliability and resiliency. For example, we successfully completed the first segment of a 64-mile transmission line rebuild that will enhance service reliability for customers in Eastern Ohio.
And in Central New Jersey, construction is underway on two projects that will upgrade 19 miles of transmission lines and benefit 50,000 customers. In 2023, our transmission investment plan is $1.7 billion, and we have a long project pipeline ahead of us in this premium business. And finally, our corporate segment benefited from higher investment earnings from the Signal Peak mining operation and lower financing costs associated with the holding company debt redemptions earlier this year.
For the full year, we reported GAAP earnings of $0.71 per share, largely reflecting the non-cash tax charge I mentioned earlier. Full year 2022 operating earnings were $2.41 per share, slightly above the midpoint of our guidance. Again, on an adjusted basis, excluding the accounting changes, Ohio rate credits and equity transactions, we achieved a $0.26 improvement in operating earnings compared to 2021, which represents 12% year-over-year growth.
Our solid financial performance resulted in $2.7 billion in cash from operations last year, which is in line with our expectations, and we made more than $3.2 billion in customer-focused regulated investments and plan to execute our 2023 capital investment plan of $3.4 billion. And we met our 2022 FFO to debt target, executed our financing plan and achieved investment-grade credit ratings with Fitch and just recently received a positive outlook from S&P. The materials posted to our website yesterday afternoon contain an updated financial outlook through 2025, including our capital plan, load forecast and financing plan. It's our expectation that we will extend our outlook beyond 2025 later this year.
As John mentioned, our 2023 earnings guidance of USD2.44 to USD2.64 per share reflects overcoming the enormous challenge we face related to the pension, which year-over-year was a $0.38 impact to our 2023 plan. The combination of accelerating O&M into 2022 together with lower interest expense resulting from debt reductions and earnings from Signal Peak support our projection for 6% growth year-over-year at the guidance midpoint.
Our focus is executing on our plan to drive strong regulated earnings growth, resulting in our long-term 6% to 8% growth outlook, anchored by increasing transmission and distribution utility investments. While pension and the positive offset provided in the near term by Signal Peak have complicated our earnings story, we are laser-focused as a management team to improve the earnings quality over time by replacing earnings from the Signal Peak and pension with high-quality core T&D earnings growth and the significant benefits associated with improving our balance sheet.
In terms of other 2023 drivers, our expectation is for the continued strong growth from the investments we're making for our 6 million customers in our distribution and transmission businesses and an improvement in our cost structure, driven in part by the work we accelerated into 2022, but this is certainly an area we will need to keep an eye on with respect to inflationary pressures.
And ending on another positive note, we are fresh off a recent Board meeting, where we discuss the importance of the dividend to our investors. The Board approved a new dividend policy that raises our targeted payout ratio to 60% to 70% up from 55% to 65% previously. And we also expect to resume dividend growth subject to Board approval for dividends payable late this year. Our new payout ratio is more in line with our peers, and reflects the steps we've taken to improve our credit profile and our commitment to enhancing value for investors.
And as I mentioned on Friday, S&P moved FirstEnergy to a positive outlook based on the announcement of the asset sale and our strategy to use those proceeds in a credit supportive manner. We're pleased with this action, which recognize our work to deliver on our commitments. I'm excited about our plans for this year and for the future. We've taken significant steps over the past few years in a broad range of areas to move the company forward from the cultural changes, the improvement of our financial and credit profile and the execution on our regulatory strategy focused on benefiting our customers. We feel like we have great momentum for the future focused on delivering value for our customers, shareholders and all of our stakeholders. As always, thank you for your time and your interest in FirstEnergy.
Before we take your questions, I'm going to turn the call back over to John.
