ORDER 2000 and PJM: A NATURAL MATCH

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Order 2000 and PJM A Natural Match

• Craig Glazer
• Manager of Regulatory Affairs
• PJM Interconnection, LLC

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• First ISO to enter service
• Effective stakeholder process
• Membership support from all stakeholder groups
• Currently operating efficient and robust
  competitive markets

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• FERC-approved congestion management mechanisms
  that rely on market forces
• PJM playing key role in implementing retail
  competition in all PJM states

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• Independence
• Independent Governance and Board Right to Amend
  PJM Tariff to promote competitive markets and
  reliability

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• Scope and Configuration
• 180 Members
• Market Transactions with a Value of 1.8 B
• 120 Million MWHR of Scheduled Energy
  Transactions
• 8,000 Miles of Transmission Lines, 8.7 of US
  Population and the Largest Energy Market in
  North America

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• Scope and Configuration
• Active committees addressing SEAMS issues with
  NY and New England --
• Progress can be tracked at
  www.isomou.com

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• Operational authority
• Short-term reliability
• Planning and expansion
• Market monitoring
• Open architecture
• No structural impediments
• The next step PJM West

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• Transmission Enhancement and Innovative Rates
  Component
• Reaffirmation of T.O.s commitment to build
• Commitment to undertake economic enhancement
  projects
• Rate Package
• Rate Moratorium
• Cost Recovery Deferral of New Projects
• Accelerated Depreciation of New Investments
• Risk Adjusted ROE for New Transmission
  Investments

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• Rate Package
• Rate Moratorium Until 12/31/04
• Deferral of Capital Costs
• Accelerated Depreciation of New Investments
• Risk-Adjusted ROE
• Continuation of Zonal Pricing
• Development of Performance Measures

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• Rate Plan Checks and Balances
• PJM RTEP process provides an open, stakeholder
  process for review of need for transmission
  projects.

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• The Next Step
• PJM West -- a template for development of a
  uniform market over a larger region
• An open architecture plan for evolution of
  ownership structures
• SEAMS issues addressed through a single market
  across a wider region Uniform Rules and Tariff
  while maintaining Zonal Prices and adjusting for
  special Regional Needs

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• Inter-RTO SEAMS Coordination
• MOU among New York, New England, PJM and Ontario

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• Inter-RTO SEAMS Coordination
• Operations Working Group
• Coordinate Documentation and Terminology
• Create Graphic Displays of Emergency Procedures
  and Coordinate Timelines for Accepting and
  Implementing Transactions

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• Inter-RTO SEAMS Coordination
• Planning Working Group
• Establish Protocols for Coordinated Planning
  Activities
• Facilitate Performance and Review of Joint
  Planning Studies
• Review Analyses of Adequacy and Reliability among
  the Three ISOs

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• Inter-RTO SEAMS Coordination
• Business Practices Working Group
• Identifying and Reviewing Existing and Planned
  Market Rules for Impacts on all Three ISOs.
• Recommending Appropriate Regulatory Filings

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• Inter-RTO SEAMS Coordination
• Information Technology Working Group
• Finding New Technology Solutions to Common
  Interface Issues

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• Inter-RTO SEAMS Coordination
• The Bigger Challenge Different Markets with
  Different Rules of the Road
• Software Solutions?
• Uniform Market Rules Solutions?
• Single Market Solutions?

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• PJM West The Single Market Concept
• One Market
• One Tariff
• One OASIS
• One Congestion Management System

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• PJM West Allowance for Regional Differences
• Multiple Control Areas
• Different Reliability Councils
• Alternatives to RAA to Meet NERC 1 Day in 10
  Years Standard

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• PJM West Maintenance of Key Market Functions In
  RTO
• Power Market Administration
• Congestion Management
• Market Monitoring

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• PJM West Maintenance of Key Market Functions In
  RTO
• Physical, operational and functional control of
  facilities
• Financial responsibility for assuring firmness of
  services sold

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