©2004 PJMwww.pjm.com 1 PJM's Perspective on Reliability – Summer 2004 and Beyond Karl Pfirrmann President -- PJM Western Region FERC Summer Reliability Workshop Cleveland, Ohio July 15, 2004

©2004 PJMwww.pjm.com 2 PJM Profile Summer 2004 Summer transmission system performance anticipated to meet MAAC, ECAR and MAIN criteria Given normal weather and generation performance, assistance from neighboring regions should not be required. As per industry agreements, assistance is available from ECAR, MAIN, MAAC and SERC. Although a record PJM summer peak is anticipated, projected capacity resources have increased by 1465 MW since 6/1/03. - Reservations for bulk power sales out of PJM below historical averages - Load response resources available for 2.9% of total demand

©2004 PJMwww.pjm.com 3 August 14, PJM Lessons Learned Internal assessment process and incorporation of recommendations from NERC, MAAC Outage Review Team, ECAR Outage Review Team and US-Canadian Final Report Development of incident response program - Emphasis on interregional response - Multiple levels of communication within PJM and with adjacent neighbors Enhancements to reliability coordinator function - Assigned an operations engineer or power dispatcher as the reliability coordinator - Accelerated incorporation of reliability coordinator areas into PJM energy management system model (continued on next slide)

©2004 PJMwww.pjm.com 4 August 14, PJM Lessons Learned Visualization Tools - Accelerated installation of dynamic map boards in Valley Forge and Greensburg control rooms - Increased visibility of neighboring systems Ongoing coordination with MISO and neighboring regions to enhance communications and systems, visualizations, and monitoring/control

©2004 PJMwww.pjm.com 5 ComEd and AEP Integrations Enhance Reliability in Eastern Interconnection Larger RTOs provide broad perspective and cadre of reliability tools to mitigate potential for cascading electrical disturbances PJM's LMP-based congestion management system allows for redispatching of generation to relieve constraints - superior to a TLR regimen - PJM's energy market is the fundamental tool used in maintaining reliability In the longer term, PJM's planning processes provide for reliability- driven system improvements

©2004 PJMwww.pjm.com 6 PJM/MISO Joint Operating Agreement and Reliability Plans improve Reliability at the Seams Assure that actions taken in one region only reinforce reliability or market operations in adjoining region Improved interregional communications through defined protocols Continuous information exchange about conditions in adjoining regions which may affect reliability Timely exchange of detailed data and information (continued on next slide)

©2004 PJMwww.pjm.com 7 PJM/MISO Joint Operating Agreement and Reliability Plans improve Reliability at the Seams Simultaneous coordination among PJM/MISO/affected operating company to implement emergency procedures and operating guides Coordinated TLR Level 6 management at PJM/MISO interface Redispatch of generation to alleviate congestion on other entity's grid Respecting limits on both reciprocal and coordinated flowgates

©2004 PJMwww.pjm.com 8 Phased Implementation of Joint and Common Market (JCM) JOA coordination procedures phase in as PJM and MISO markets develop together First phase provides for coordination with MISO operations to ensure appropriate congestion management Second phase coordinates day-ahead and real time constraint management once MISO market is operating Third phase implements enhanced market portal to provide common access and information for both RTOs Fourth phase integrates dispatch between two systems to manage congestion as if they were one system

©2004 PJMwww.pjm.com 9 Full Implementation of JCM will further enhance reliability in the Midwest PJM/MISO JOA is addressing reliability concerns by creating "work arounds" at seams to assure that separate markets work to bolster reliability Joint and common market contemplates coordinated single transparent energy market to eliminate seams Functioning of PJM's and MISO's state estimator models, along with day-ahead and real-time wholesale electricity markets data, produces pricing information necessary to induce generation to meet the reliability needs of the grid