K. Jon Taylor
Senior Vice President, Chief Financial Officer and Strategy at FirstEnergy
Thank you, Brian. And good morning, everyone. I also want to extend my sincere gratitude and best wishes to Chris and Irene. They have been great to work with over the years and have always been there for me and the employees of the company. I wish them every bit of happiness in their retirement.
Today, I'll review our financial performance, discuss economic and customer trends and provide an update on our regulatory and financial initiatives. Let's start by reviewing the larger special items that impacted our second quarter GAAP results. These include increased asset retirement obligations recognized in connection with the planned transfer of a legacy empowerment site to a third party and the impact from the new EPA legacy coal combustion residuals rule. Costs associated with redeeming high-cost debt using the proceeds from the FET transaction, charges connected to the anticipated resolution of the OOCIC and SEC investigations, partially offset by the receipt of insurance proceeds associated with the shareholder derivative lawsuit settlement and regulatory charges resulting from a commitment in the Ohio ESP V order.
We continue to see strong execution on our Energize365 capital investment program, solid financial discipline, and a culture of continuous improvement. And because of that, we delivered second quarter operating earnings of $0.56 per share, which is above the midpoint of our guidance and compares to $0.47 per share for the second quarter of 2023. The results primarily reflect new base rates in our integrated business, strong invested capital across all of our businesses in formula rate investment programs, and significantly higher year-over-year customer demand.
Looking at our segment results for the quarter, in our distribution business, operating earnings were $0.22 per share compared to $0.24 per share in the second quarter of last year. This reflects planned increases in operating expenses we've discussed previously, partially offset by higher customer demand and rate base growth in formula rate investment programs and a lower customer rate credit in Ohio as part of our 2021 earnings settlement.
In our Integrated segment, operating earnings were $0.21 per share versus $0.12 per share in the second quarter of last year. Results primarily reflect new base rates in Maryland, West Virginia, and New Jersey that went into effect over the past eight months, rate base growth in distribution and transmission formula rate investment programs, and the impact of higher customer demand, partially offset by a higher effective tax rate.
Operating earnings in our standalone transmission segment were $0.14 per share compared to $0.18 per share in the second quarter of 2023. Year-over-year rate base increased more than 10% as a result of our transmission investment program. But this was offset by the dilution from the 30% interest sale of FirstEnergy Transmission LLC to Brookfield, which closed in March of this year.
Finally, in our corporate segment, losses were $0.01 per share versus $0.07 per share in the second quarter of 2023. This improvement is the result of ongoing lower financing costs from the redemption of high-cost debt. More detail on our second quarter and year-to-date results can be found in the strategic and financial highlights document we posted to our IR website yesterday afternoon.
Looking ahead, we are providing guidance of $0.85 to $0.95 per share for the third quarter, which reflects the continued impacts of new base rates in our Integrated business, continued rate base growth, and higher customer demand, partially offset by a lower planned earnings contribution from Signal Peak. And as Brian mentioned earlier, we are reaffirming our 2024 guidance of $2.61 to $2.81 per share, as well as our long-term 6% to 8% annual operating earnings growth rate.
In his remarks, Brian shared a look at the trends related to data center growth in our service territory. I want to expand on that by taking a quick look at some of the broader economic and load activity in our region. Recent economic trends over the past year are positive on our region, including GDP that has averaged just over 2% for the past year and employment growth of just under 1.5% over the past 12 months. And from a customer demand perspective, we're seeing positive weather-adjusted customer demand of 1% over the last 12 months, primarily resulting from increases of 1.3% in the commercial and 1.1% in the industrial customer classes with demand in the auto and services sectors up 14% and 7% respectively. And so we believe we're in a great position to serve our customers. And our investment program will adjust as needed to ensure capacity and reliable service.
From a financing plan perspective, earlier this month, we received the remaining $1.2 billion in proceeds from the $3.5 billion, 30% FET interest sale to Brookfield. You'll recall that we received the initial proceeds of $2.3 billion when the transaction closed in March, the remaining $1.2 billion in interest-bearing notes that were extinguished with Brookfield's final payment on July 17th. We're deploying those proceeds in a credit accretive manner consistent with our plan to further transform our balance sheet and support our Energize365 grid investment program.
As we've discussed, the sale completes a series of transactions over the last 2.5 years that resulted in nearly $7 billion in equity capital at an equivalent share price of $87 a share or 36 times trailing PE multiple. In total, these proceeds were used for over $3 billion in high-cost debt redemptions at FE Corp., including the remaining $460 million of the 2031 bonds in the second quarter, nearly $2 billion in utility long-term debt redemptions, and $2 billion to pay off short-term debt that would have otherwise been financed with long-term debt at our utilities.
Following the closing of this transaction in March, our corporate credit rating was upgraded by Moody's and S&P, restoring it to investment grade at all three rating agencies. The credit ratings at our subsidiaries were also upgraded. And this momentum continued last week as S&P further upgraded FET and its subsidiaries. Going forward, our focus is on continued execution of our plan, achieving credit-supportive regulatory outcomes, moving past legacy issues, and financing our robust investment plan in a credit-supportive manner, consistent with a BBB flat credit profile.
Additionally, earlier this month, we launched a request for proposal for a second pension lift-out transaction to eliminate the remaining $700 million in non-regulated pension liability. This transaction is successful, would eliminate all non-regulated pension liability, further reduce pension volatility, and improve the quality of earnings of the company. Recall that, in December of last year, we executed the first pension lift-out transaction, removing approximately $720 million of pension liability at $0.95 on the dollar.
Turning now to recent regulatory activity. In Ohio, we filed our base rate review on May 31st. The request was for a $94 million rate adjustment on rate base of $4.3 billion, a 10.8% proposed return-on-equity, and a 55% equity capitalization ratio based on a 2024 test year. The rate adjustment supports recovery investments in the distribution system and customer experience enhancements while keeping rates affordable for customers.
The case includes recovery of investments in riders DCR and AMI, which includes the Grid Mod I capital investments in base rates and resetting those riders to zero. It also includes a request to change the recovery of pension costs from service cost only to total pension cost, including previously incurred actuarial losses as well as a request for a pension tracking mechanism to avoid volatility in the future. And it includes recovery of other costs previously incurred, including the major storm restoration costs and a program to convert streetlights to LEDs.
Today, the Ohio companies will file an update to the base rate case review filing with an updated rate request. The update is necessary to include the impacts addressed in the May 15th ESP V order and to update 2024 test year financial information through May 31 to reflect actual operating results. Our initial request represents an estimated overall bill impact for typical residential customers ranging from a rate decrease of 1.3% in Toledo Edison to a 3.5% increase in CEI or an average increase of 1.4% across Ohio.
Also, in Ohio, on May 15th, the PUCO issued an order approving our ESP V with modifications, which became effective June 1st. The order extended Rider DCR through the conclusion of the base rate case but excluded certain investments from recovery in Rider DCR. The order also provided for recovery of vegetation management expenses for the first two years of the ESP and prospective deferral of major storm expenses.
While we appreciate the support for key terms of our ESP V in the near term, the order did not provide clarity regarding these key terms of the ESP for the entire five-year period, with many directed to the base rate case for resolution. We subsequently fled an application for rehearing seeking greater certainty regarding key terms as well as proposed modifications, which included shortening the ESP V term to three years, providing full recovery of investments in the DCR through the conclusion of the base rate case, and other proposals that preserve the economic value of the order for customers.
Earlier this month, the PUCO granted the applications for rehearing filed by all parties for the purposes of further consideration. This step gives the PUCO more time to make its final decision. There is no statutory deadline for the decision. This summer, hearings were held in our Ohio Grid Mod II settlement. And we anticipate an order during the fourth quarter. In Pennsylvania, earlier this month, we filed the third phase of our long-term infrastructure improvement plan known as LTIIP III, which is part of our Energize365 investment program. LTIIP III includes a total projected investments of $1.6 billion over five years. Building on the projects completed in LTIIP I and LTIIP II, the third phase of the program supplements reliability investments and includes both grid modernization and system resiliency projects.
This includes target investments to accelerate infrastructure improvements and help enhance service reliability for the more -- for more than 2 million customers in the state, while remaining focused on affordability. Investments are recovered through a distribution system improvement charge, or DSIC, based on actual capital structure and the benchmark ROE, which is currently 9.8%. The cumulative average residential customer rate impact recovered through DSIC is $2.88 or a 2% increase. Pending PUC approval, we expect capital deployment to begin in the first-quarter of 2025 with DSIC revenues estimated to begin in the second quarter of 2026.
Also, in Pennsylvania, in mid-August, hearings will begin in our base rate review filed in April. As we discussed on last quarter's call, this is a request for a $502 million rate adjustment on rate base of $7.2 billion with an 11.3% proposed return-on-equity and a 53.8% equity capitalization ratio. The review builds on our service reliability enhancements in Pennsylvania with additional investments in a smart, modern electric grid and customer-focused programs, while keeping rates comparable to other utilities in the state.
Key components include implementing a 10-year enhanced vegetation management program to reduce tree caused outages, reduce outage restoration time, and reduce future maintenance costs. Recovery of costs associated with major storms, COVID-19, and LED streetlight conversions, changing pension recovery from average cash contributions to traditional pension expense, including previously recognized actuarial losses. The review also includes a blended federal statutory tax rate of approximately 27% but also continues to provide customer savings from previous legislative changes to federal and state tax rates.
Additionally, the application proposes a pension/OPEB normalization mechanism to track and defer differences between actual and test year expense to reduce volatility from the pension. And as Brian mentioned, we are engaging with the intervening parties in an effort to reach settlement prior to the scheduled hearings in mid-August.
Finally, in addition to the settlement discussions on our EnergizeNJ infrastructure improvement proposal, we are also engaged in settlement discussions for our New Jersey Energy Efficiency and Conservation Plan. This plan, which was filed with the BPU in December 2023 covers the period from January 1, 2025, through June 30, 2027, with a proposed budget of approximately $964 million. It consists of a portfolio of programs addressing energy efficiency, peak demand reduction, and building decarbonization with recovery of lost revenues and provides a return on the investments. The BPU suspended the procedural scheduled July 1 in light of these settlement discussions. A final BPU decision and order is required no later than October 15 of this year. So we're making good progress in 2024. We're executing well. We have a strong strategy and opportunities to continue our positive momentum and growth.
Thank you for your time today. And I'll open the call to your questions.
