1. Maryland Public Service Commission 2006 Summer Reliability Status Conference May 16, 2006 Baltimore, MD

2. 2 Issues for Discussion Status of : –Generation resources available to meet peak load –Transmission system –Distribution system Summer storm readiness measures Active load management programs Special projects that will be launched in the 2 nd and 3 rd quarters of this year.

3. 3 Allegheny Power Service Area Forecasted 2006 Summer Demand –8,075 MW –Based upon a 50/50 probable weather –2006 Demand Lower than 2005 by 590 MW due to sale of Ohio Assets and Closing of Eastalco 2005 Summer Demand –8,823 MW –July 26, 2005 @ 5:00 PM –All Time High Demand

4. 4 Generation Resources to Meet Peak Load Allegheny Power (AP) is a member of the ReliabilityFirst regional reliability organization. –AP previously member of the former ECAR regional reliability organization. –Purpose of ReliabilityFirst is to maintain area-wide reliability through the coordination of ReliabilityFirst members’ planning and operation of their generation and transmission facilities. –ReliabilityFirst is preparing its first Assessment of Demand and Resources Report to provide ReliabilityFirst Members with expected Resource Adequacy within Regional Area for upcoming peak season.

5. 5 Generation Resources to Meet Peak Load Allegheny Power (AP) is a member of the ReliabilityFirst regional reliability organization. –Assessment is based on the expected retail demand and the generating capacity on the electric system that supplies that demand. –Final Report of assessment not approved as of May 5, 2006. –Draft Report indicates Reserve Margins appear to be satisfactory for Summer 2006.

6. 6 Allegheny Power is a member of the PJM RTO and resides in the PJM Control Area. –It is through the PJM Market, owned generating assets and bilateral power purchase agreements that Allegheny Power will be capable of meeting its forecasted summer peak load. –PJM reported it expects to have a 25.8% Reserve Margin and sufficient generation to meet customers’ forecasted peak usage this summer. Generation Resources to Meet Peak Load

7. 7 Transmission System Performance –ReliabilityFirst Staff and former ECAR Transmission System Performance Working Group (TSPWG) assessed the legacy ECAR bulk transmission system. –Purpose of assessment is to provide insight into expected performance of the legacy ECAR bulk transmission system and to identify potential transmission constraints under wide range of system conditions for upcoming peak load season. ReliabilityFirst - Summer 2006 Transmission System Performance

8. 8 Transmission System Performance –Final Report of assessment not approved as of May 5, 2006. –Draft Report indicates no cascading events are anticipated on the legacy ECAR transmission system this summer as long as transmission limitations are identified and available operating procedures are implemented. ReliabilityFirst - Summer 2006 Transmission System Performance

9. 9 Transmission System Performance (Cont.) –Allegheny Power performed an assessment of its transmission system for the Summer of 2006 AP found no thermal overloads or voltage violations under normal system operating conditions for the cases studied. Based on the system conditions modeled, the AP Transmission system is expected to sufficiently support the forecasted peak summer loading. AP also has adequate operational procedures identified to effectively mitigate the contingency outage conditions modeled in the study. AP 2006 Summer Assessment

10. 10 Allegheny Power patrols all transmission lines annually to assess the condition of poles, structures, hardware, conductors, clearances, vegetation growth, and right-of- way encroachments. Allegheny Power has maintenance and inspection programs for transmission lines and substation equipment, such as Vegetation Management, Transformer and Circuit Breaker “Class A” Inspections and Maintenance, performed on a scheduled basis to address reliability on the transmission system. AP Transmission Assessment

11. 11 Allegheny Power has many programs, such as Annual Inspection and Maintenance, Pole Inspection, Vegetation Maintenance, etc., performed on a scheduled basis to address reliability on the distribution system. Reliability Improvement Programs address circuit reliability problems outside of these scheduled maintenance activities. AP Distribution Assessment

12. 12 Restore Service Process –Allegheny Power activates its Restore Service (RS) process for electric facilities. –The objective is to ensure that every available resource is used to safely restore service to all interrupted customers as rapidly as possible. Storm Readiness

13. 13 Restore Service Process (cont.) Allegheny Power: –Receives notification, analyzes, directs, performs and completes restoration; –Develops contingency plans for potential events; –Safely responds and restores service as quickly as possible; and –Communicates event information internally and externally to customers and Government Agencies. Storm Readiness

14. 14 Restore Service Process (cont.) –2004 Allegheny Power implemented an Incident Management System (IMS) as part of the overall RS process. IMS is a recognized system with a predetermined chain-of- command. IMS is a well proven structure. IMS provides for an organized response to a critical incident. –2006 Allegheny Power has expanded its training in IMS to encompass all emergency situations (i.e. Reliability, System Restoration, Restoration, Security, Business Continuity, Pandemic, etc) Storm Readiness

15. 15 Allegheny Power Event Preparation –Focus on Safety for employees and the public –Understand and manage customer expectations –Assign participant roles and responsibilities (IMS) RS Process Incident Management Team (IMT) Training and Staffing Levels for proactive response Conduct simulations Arrange logistical support Develop detailed emergency plan Storm Readiness

16. 16 Allegheny Power Event Preparation –Communicate outage status Update AP 911/state outage Website 2006 - Introducing a public website with outage information –Coordinate with mutual assistance groups, state agencies, and others –Monitor approaching weather events 5, 4, 3 day and 48/24 hour projections Issue storm warnings within Allegheny Power Storm Readiness

17. 17 AP’s Event Preparation –Contact other utilities and evaluate storm impact All weather threats information is shared for comparison and determine risk of impact –Resource preparation steps Staffing Staffing Level Plan for Crew transfers Additional resources (lines, tree, equipment, material, support) IMT and Situation Room activation Storm Readiness

18. 18 Event Preparation (cont.) –Regional conference calls and communications Internal support groups SEE - Southeastern Electrical Exchange MAMA – Mid-Atlantic Mutual Assistance Regional Mutual Assistance Groups (RMAGS) interactions –6 RMAGS across the United States interacting Maryland Electric Companies State EMA’s EEI – Edison Electric Institute Corporate Communications –Document preparations (Critiquing after the event) –Safety Integrate safety process into RS events Storm Readiness

19. 19 Event – Manage and React Consistent Management Ensure lessons learned from past events are being used Correct actions Communicate Conference Calls Post Event – Review and Correct Review event (technology, management, safety, physical, operations, planning, etc.). Develop plan of action and Communicate Circle of Process Development Pre-Event – Prepare/Initiate Emergency Plans - Revise IMS - Roles/Responsibilities Alliances (relationships) Resource Information Training/Review Testing/Simulation Conference Calls Allegheny Power Storm Readiness

20. 20 AP Demand Side Response Generation Buy-Back –Allegheny Power has implemented the Generation Buy-Back program Implemented when wholesale generation market prices reach a level that generation buy-back is economically feasible for both the customer and AP. Contracted customers share in the economic benefits of curtailing their usage during high-cost periods Participation is voluntary There are currently 77 MWs in the program

21. 21 AP Demand Side Response Active Load Management (ALM) –Allegheny Power has one customer with 8.4 MWs of load participating in PJM’s ALM program. –Participation is mandatory. –AP receives ICAP credit for customers enrolled in ALM program. –PJM initiates curtailments.

22. 22 Allegheny Power upgraded the cooler on a 500/345 kV transformer at Wylie Ridge Substation to increase its loadability. Allegheny Power replaced #1 500/230 kV Transformer at Doubs Substation. Both Projects were recommended by PJM as part of its Regional Transmission Expansion Plan (RTEP). Allegheny Power Special Projects