1. ©2005 PJM EIS Generation Attributes Tracking System Generation Certificates / Monetization of RE Benefits Presented at: Association of Power Exchanges Annual Meeting Orlando, Florida Oct. 31, 2005 Joseph J. Kerecman Vice President PJM-EIS

2. ©2005 PJM EIS 2 What is a Certificate? Power Green / Environmental Attributes Power

3. ©2005 PJM EIS 3 What’s in a Name? Green Tags Green Tickets Renewable Credits Certificates Renewable Certificates Tradable Renewable Certificates (TRC) T-RECS Renewable Energy Certificates (RECs) GATS Certificates

4. ©2005 PJM EIS 4

5. 5 The Benefits of Certificates Facilitate renewable energy markets. Creates a common form of currency. Monetizes the value of attributes. Creates liquidity in markets. Assigns emissions to each MWhr. Independent of geographic boundaries.

6. ©2005 PJM EIS 6 Applications for Certificates Substantiate compliance with RPS. Supply Green Pricing programs. Provide options for voluntary markets Provide attribute information on each MWhr. For disclosure

7. ©2005 PJM EIS 7 Certificate Tracking in North America Canada: British Columbia and Alberta are participating in WREGIS, and Manitoba is participating in the northern Midwest system. Mexico: northern Baja is participating in the WREGIS system.

8. ©2005 PJM EIS 8 Certificates and Compliance Markets 13 states with certificate-based RPS compliance mechanism -PJM States (NJ, MD, PA, DC, DE) -ME, MA, CT, RI, NV, AZ, WI, TX, CO 5 states likely to use certificates once regional tracking system is operational -CA, MN, NM, MT, IL 3 states undecided or have other methods to show compliance -NY, HI, IA

9. ©2005 PJM EIS 9 Size of the REC Market Source: NREL Energy Analysis Office The Renewable Certificate (REC) Market 2004 REC Market Size (Million MWhs) 2004 REC Market Value ($ Millions) 2010 REC Market Size (Million MWhs) 2010 REC Market Value ($ Millions) Compliance Market 8-13$14045$600 Voluntary Market 3+$15 - $4520 $100 - $300 Total11-16 $155 - $185 65 $700 - $900

10. ©2005 PJM EIS 10 Pricing on Renewable Certificates Pricing on Renewable Certificates Voluntary REC Offers (MWh) vs. Compliance Fuel TypeREC TypeLocationPrice New WindVoluntaryWA/CA$2.50 -$5.00 New SolarVoluntaryCA$25.00 ComplianceMA$48-51.00 ComplianceTexas$11.85 Class IComplianceNJ$7.50 SolarComplianceNJ$170-260.00 Source: Evolution Markets LLC www.evomarkets.com/mmu

11. ©2005 PJM EIS 11 Why the Price Disparity? Geography of low-cost renewables Supply/demand Volume of purchase Voluntary vs. compliance markets Type & vintage of renewables Regulatory (e.g. penalty levels for non- compliance with RPS) Regional markets - State specific requirements / limitations

12. ©2005 PJM EIS 12 Needs of the PJM States / Market PJM initiated the GATS project in response to state regulatory commission inquiries and effected stakeholders -Fuel Mix and Emissions Disclosure Delaware: fuel mix Pennsylvania: fuel mix Maryland: fuel mix and emissions New Jersey: fuel mix and emissions Ohio: fuel mix and emissions Virginia: fuel mix and emissions Illinois: fuel mix and emissions District of Columbia: fuel mix and emissions -Renewable Portfolio Standards New Jersey: began in 2004. Maryland: requirements go into effect in 2006 Pennsylvania: requirements go into effect in 2006 District of Columbia: requirements go into effect in 2007 Delaware: requirements go into effect in 2007 Illinois ?

13. ©2005 PJM EIS 13 PJM-EIS GATS Summary PJM Environmental Information Services, Inc. (PJM EIS) owns and administers the Generation Attribute Tracking System (GATS). PJM EIS is a wholly-owned subsidiary of PJM LLC PJM-EIS was capitalized independent of PJM LLC PJM-EIS is a non-regulated company Use of GATS is on a voluntary basis, and through subscription State regulators at their discretion may require the use of GATS certificates.

14. ©2005 PJM EIS 14 What is GATS? GATS - a regional environmental registry and information system that will track the environmental and fuel attributes of generation. The system will: assist Retail Load Servers (LSEs) in their compliance with applicable emissions and fuel disclosure requirements and with state-level Renewable Portfolio Standard (RPS) regulation or renewable policy enable voluntary bilateral markets and marketing claims for renewables. provide state agencies with reporting and verification provide renewable generators with a means to monetize their renewable attributes and qualification

15. ©2005 PJM EIS 15 GATS Design GATS is designed to: Ensure accurate accounting and reporting of generation attributes Facilitate bilateral transactions of attributes via certificates between market participants Support the current requirements of various state agencies and have the flexibility to accommodate varied and evolving state policies and programs Mitigate seams issues with adjoining markets to allow the potential of trading certificates across regions Promote a robust renewable market Leverage PJM market settlement information and environmental information from the US-EPA

16. ©2005 PJM EIS 16 Provisions of the System Banking certificates to accommodate varying certificate life spans as determined by state policy or regulation. Enabling varying state programs, and their definition of preferred attributes / resources: Wind, Solar, Biomass, etc. Waste coal, pump storage, fuel cells Moving certificates to non LSE’s, bilateral voluntary markets - direct sales to retail entities Behind the meter generation resources and Imports and exports A Bulletin Board to facilitate bilateral trades

17. ©2005 PJM EIS 17 Each MWh is given a unique electronic certificate This certificate may contain any information relevant to market participants and capable of being tracked by GATS. - Certificates’ data will be compiled using PJM generation and publicly available data from EPA and EIA. - Where data do not exist or are faulty, generators may choose to update their information based on agreed upon best practices. - Default assumptions will be developed as a last resort for generators with faulty or no data who choose not to update their information. Certificate No. 123456789 Pollutant lbs NOx 1.5 SO2 0.01 CO2 1,900 Acme Generating Station Fuel: Natural Gas Location: Example, PA PA. Class I: No PA. Class II: No 1 MWh System Functionality Overview

18. ©2005 PJM EIS GATS Certificate Creation Cycle Start of Monthly Certificate Creation Cycle Account Holder review period GATS Certificates Created 10 th Business Day Last Business Day Repeated Monthly

19. ©2005 PJM EIS 19 GATS Subscription Use of the GATS All GATS users (“Subscribers”) must enter into the GATS Terms of Use agreement to gain access to use the GATS. Subscribers will be charged an annual subscription fee and monthly volumetric fees for use of the system. Subscribers must also attest that any information they provide into the GATS database will be true and correct. Contractually commits all users to comply with all of the requirements of the GATS Operating Rules.

20. ©2005 PJM EIS 20 GATS Subscriber Group / State Agency Advisory Committee Subscriber Group Open to all Subscribers Meets at least semi-annually Objectives: Provide input into the development and maintenance of GATS Operating Rules Have access to information and training pertaining to GATS State Agency Advisory Committee Participation by representatives of state agencies whose policies are being effectuated through GATS Meetings as needed or in conjunction with Subscriber Group meetings Objectives: Provide input into the development and maintenance of GATS business rules Analyze need for future system additions and modifications given evolving state requirments

21. ©2005 PJM EIS 21 PJM-EIS Website Access the PJM-EIS website by logging onto: www.pjm-eis.com www.pjm-eis.com The PJM-EIS website The PJM-EIS website provides links to the provides links to the “GATS Operating “GATS Operating Rules” and “GATS Rules” and “GATS Terms of Use” for your Terms of Use” for your reference The PJM-EIS website The PJM-EIS website provides links to the provides links to the “GATS Operating “GATS Operating Rules” and “GATS Rules” and “GATS Terms of Use” for your Terms of Use” for your reference

22. ©2005 PJM EIS 22 GATS Reports There are three types of reports that are available: Account Holder State Agency Public Account Holder State Agency Public

23. ©2005 PJM EIS 23 GATS Reports Account Holder Reports There are ten different Account Holder Reports available in GATS. These reports provide updates and the status of current account information as well as transaction History There are ten different Account Holder Reports available in GATS. These reports provide updates and the status of current account information as well as transaction History

24. ©2005 PJM EIS 24 GATS Reports State Agency Reports There are seventeen different State Agency Reports available in GATS. These reports provide updates and the status of current account information as well emissions reporting information There are seventeen different State Agency Reports available in GATS. These reports provide updates and the status of current account information as well emissions reporting information

25. ©2005 PJM EIS 25 GATS Reports There are eight different Public Reports available in GATS. These reports provide general GATS updates and statistics. These reports are also accessible from the GATS Login Page There are eight different Public Reports available in GATS. These reports provide general GATS updates and statistics. These reports are also accessible from the GATS Login Page Public Reports

26. ©2005 PJM EIS 26 Primary Contacts If you have any questions… Primary Contacts Jaclynn Geist GATS Administrator / PJM-EIS (610) 666-2245 GATSAdmin@pjm-eis.com Joseph J. Kerecman Vice President / PJM- EIS 610 666-4772 Kerecj@pjm.com

27. ©2005 PJM EIS 27 If you have any questions… For more information on GATS: http://www.pjm-eis.com/