The New Jersey Clean Energy Conference September 26 ...©2005 PJM©2003 PJM 1 The New Jersey Clean Energy Conference September 26, 2005 PJM Overview Kenneth W. Laughlin VP Markets

©2003 PJM©2005 PJM 1

The New Jersey Clean Energy ConferenceSeptember 26, 2005

PJM Overview

Kenneth W. LaughlinVP Markets Coordination

PJM

©2003 PJM©2005 PJM 2

PJM as Part of the Eastern Interconnection

KEY STATISTICSPJM member companies 350+millions of people served 51peak load in megawatts 131,330MWs of generating capacity 165,738miles of transmission lines 56,070GWh of annual energy 700,000generation sources 1,082square miles of territory 164,260area served 13 states + DC

©2003 PJM©2005 PJM 3

Real Time

Real Information

Real Requirements

Owners, Users (i.e. the public)

Government

Physics

Real Relationships

©2003 PJM©2005 PJM 4

The Economics Of Power In Balance

Meet the Demand

By Supply side

Meet the Demand at Any Price

Supply and Demand Respond to Price

©2003 PJM©2005 PJM 5

Providing Data to the Market

©2003 PJM©2005 PJM 6

©2003 PJM©2005 PJM 7

Interface Prices

• On average, PJM and MISO interface prices are tracking very closely.

• Correlation of interface prices has been increasing month-to-month.

• Day-ahead prices have been more highly correlated than Real-time.

• Off-peak prices have been more highly correlated than on-peak.

PJM/MISO Real -T ime Inter face Pr ices Average for 4 /01 - 8 /28, 2005

-20

-10

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

0 1 2 3 4 5 6 7 8 9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

H o u r E n d i n g

LM

P (

$)

PJM's In ter face for MISO-RT MISO's In ter face for PJM-RT Hr. Di f f . Average-RT

P J M / M I S O D a y - A h e a d I n t e r f a c e P r i c e s A v e r a g e f o r 4 / 0 1 - 8 / 2 8 , 2 0 0 5

- 2 0

- 1 0

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

H o u r E n d i n g

LM

P ($

)

P J M ' s I n t e r f a c e f o r M I S O - D A M I S O ' s I n t e r f a c e f o r P J M - D A H r . D i f f . A v e r a g e

©2003 PJM©2005 PJM 8

Retail Price Change (1995-2004) RTO and Non-RTO

Eastern Interconnection, US

7.1%

14.1%

8.9%

10.5%

7.7%

10.4%

3.0%

9.4%10.4%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Residential Commercial IndustrialRTO Average Non-RTO Average Average

*DOE Energy Information AdministrationElectric Power Monthly (April 1996, March 2005)

©2003 PJM©2005 PJM 9

PJM’s Operational Markets

• Day-Ahead Energy Market

• Real-Time Energy Market

• Capacity

• Financial Transmission Rights

• Ancillary Services Markets– Regulation– Spinning Reserve Market– Black Start Services– Reactive Services

©2003 PJM©2005 PJM 10

©2003 PJM©2005 PJM 11

NYMEX Natural Gas Futures Near-Month Contract Settlement Price, West Texas Intermediate Crude Oil Spot Price, and

Henry Hub Natural Gas Spot Price

6/28/2005 7/27/2005 8/29/2005$0

$2

$4

$6

$8

$10

$12

$14

$16

5/27

/200

5

6/3/

2005

6/10

/200

5

6/17

/200

5

6/24

/200

5

7/1/

2005

7/8/

2005

7/15

/200

5

7/22

/200

5

7/29

/200

5

8/5/

2005

8/12

/200

5

8/19

/200

5

8/26

/200

5

9/2/

2005

9/9/

2005

9/16

/200

5

Dol

lars

per

Mill

ion

Btu

NYMEX Natural Gas Settlement PriceWTI Spot PriceHenry Hub Spot Price

Note:The West Texas Intermediate crude oil price, in dollars per barrel, is converted to $/MMBtuusing a conversion factor of 5.80 MMBtu per barrel. The dates marked by vertical lines are theNYMEX near-month contract settlement dates. Source: NGI's Daily Gas Price Index (http://Intelligencepress.com)

Nymex Closing Dates

©2003 PJM©2005 PJM 12

©2003 PJM©2005 PJM 13

NYMEX Forward Contract Prices (September 22, 2005)

$-

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

Sep-0

5

Nov-05

Jan-0

6

Mar-06

May-06

Jul-0

6

Sep-0

6

Nov-06

Jan-0

7Mar-

07

May-07

Jul-0

7

Sep-0

7

Nov-07

Jan-0

8

Mar-08

May-08

Jul-0

8

Sep-0

8

Nov-08

Forward Month

PJM NYISO-A NYISO G NYISO-J

©2003 PJM©2005 PJM 14

NYMEX PJM Western Hub Contract Open Interest Value

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

4/11/2

003

4/25/2

003

5/9/20

03

5/23/2

003

6/6/20

03

6/20/2

003

7/4/20

03

7/18/2

003

8/1/20

03

8/15/2

003

8/29/2

003

9/12/2

003

9/26/2

003

10/10

/2003

10/24

/2003

11/7/2

003

11/21

/2003

12/5/

2003

12/19

/2003

1/2/20

04

1/16/2

004

1/30/2

004

2/13/2

004

2/27/2

004

3/12/2

004

3/26/2

004

4/9/20

04

4/23/2

004

5/7/20

04

5/21/2

004

6/4/20

04

6/18/2

004

Mill

ion

$

Using Average value of $35/MWH

©2003 PJM©2005 PJM 15

CoalGas

NuclearOil

HydroOther

Capacity

Energy0%

10%

20%

30%

40%

50%

60%

PJM Fuel Sources (2004)

©2003 PJM©2005 PJM 16

©2003 PJM©2005 PJM 17

PJM Installed Reserve Requirement

22.0%

15.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

24.0%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

©2003 PJM©2005 PJM 18

Figure 4-13 - Trends in PJM equivalent demand forced outage rate (EFORd):

Calendar years 1994 to 2004

©2003 PJM©2005 PJM 19

PJM Generation Additions

0

1,000

2,000

3,000

4,000

5,000

6,000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

MW

0

5,000

10,000

15,000

20,000

25,000

Cu

mu

lativ

e M

W

GASWindOilWaste CoalTotal

©2003 PJM©2005 PJM 20

Liquidity at U.S. Hubs2004

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

PJM-W

Hub**

Mid Colu

mbia*

Palo

Verde

*

Cinergy

*CO

B*

Four

Corners

*

Mead/M

arketp

lace*

GW

H

* Dow Jones Electricity Index** PJM Settlements Data

January 2005

©2003 PJM©2005 PJM 21

©2003 PJM©2005 PJM 22

CoalGas

NuclearOil

HydroOther

Capacity

Energy-

50,000

100,000

150,000

200,000

250,000

Cap

acit

y (M

W),

En

erg

y (G

WH

)

PJM Fuel Sources (2004)

©2003 PJM©2005 PJM 23

2004 PJM Energy Market

Self-Supplied4%

Net Imports5%

Spot Market38%

Bilateral Transactions

53%

Capacity by Fuel Type

©2003 PJM©2005 PJM 24

NYMEX Forward Contract Prices (September 17, 2005)

$-

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

$180.00

$200.00

Sep-0

5

Nov-05

Jan-0

6

Mar-06

May-06

Jul-0

6

Sep-0

6

Nov-06

Jan-0

7

Mar-07

May-07

Jul-0

7

Sep-0

7

Nov-07

Jan-0

8

Mar-08

May-08

Jul-0

8

Sep-0

8

Nov-08

Forward Month

PJM NYISO A NYISO G NYISO J

©2003 PJM©2005 PJM 25

Generation By Fuel Source 2003(312,000 GWH)

Coal53%

Gas9%

Hydro2%

Nuclear33%

Oil2%

Solid Waste1%

©2003 PJM©2005 PJM 26

PJM generation by fuel source (GWh): Calendar year 2004

Nuclear, 165,128 ,

36.9%

Gas, 31,411 , 7.0% Oil, 4,738 ,

1.1%

Wind, 379 , 0.1%

Hydro, 10,303 , 2.3%

Solid Waste, 2,781 , 0.6%

Coal, 233,217 , 52.1%

©2003 PJM©2005 PJM 27

Joint and Common Market Initiatives

Cross Border FTRs in the allocations

$4,000,000

Cross border FTRs in auctions $8,000,000

2Price Rationalization and

Convergence at the Border

PJM implementation of marginal losses

(Note: All PJM costs) $600,000 Alternative Border Pricing Point

Calculation $200,000

3 Reduce Hurdle Rate

Alignment of PJM Operating Reserves and MISO Revenue

Sufficiency Guarantee(Note: All MISO cost)

$600,000

Depancaking of PTP ancillary services (Control Area Services, T.O. Control

Center Services, Reactive, Black Start) $400,000

Existing MISO & PJM Websites Linking of sites $500,000

Standard Data Exchange (Web Services) LMPs, Contingencies, Loads, Dispatch

Signals, Outages, Emergency Event/Notifications

$3,000,000

Implementation of single MISO & PJM Website

(Websites for individual RTOs go away)

$750,000

Common Search Capabilities Data Available at Both Sites (LMPs, Tie Flows, Loads)

$200,000

New Joint Websiteto Host Joint meeting and Events Calendar, Joint Documents and

Reports

$600,000

5 Increased Market Opportunities Moving JOUs between markets $100,000 Shared Regulation Market $8,000,000

Common Long Term Transmission Queue $200,000

Common Time Zones (Note: All PJM cost) $5,000,000

Single Resource Adequacy Solution $8,000,000

MISO Ramp Viewer(under way)

Central location to view both ramp viewers $100,000 Common Ramp Portal $750,000

Alignment of OASIS Business Practices

$500,000 Reserve Sharing $8,000,000

Coordinated OASIS $1,200,000

Single OASIS $8,000,000

7 Single MarketYear 1 - Rule Alignment & Market

Portal Design $15,000,000Year 2 - Initial Market Portal

Implementation $40,000,000Year 3-5 - Implementation of

Single Market $50,000,000

1 Emergency Energy Agreement

Alignment of Agreements and Practices $100,000

Pla

n

1Joint Expansion Planning

and Common Deliverability Studies

Alignment of Agreements and Practices $120,000

2006 $4,320,000 2007 $600,000 2008 $750,000

2008

Broader Price Transparency and

Common Reporting

Rel

iabi

lity

FTR Market Convergence1

Standard Data Visualization and Reporting Portal

Create a single MISO & PJM Data and Report Portal

$8,500,000

Common Treatment of Dynamic Schedules/Pseudo-Ties $200,000

Black Start and Restoration2 Alignment of Agreements and Practices $500,000

Total

4

2006 2007C

omm

erci

al

Operational Consistancy6

Alignment of FTR Timelines and Products

(Note: All MISO cost)$600,000

©2003 PJM©2005 PJM 28

Supported by Thriving Wholesale

Markets

§ Regional Scope

§ Many Buyers and Sellers

§ Participant Choices:

§ Futures Contract

§ Financial Hedge

§ Self-Schedule Resources

§ Long Term Contracts

§ Day Ahead Market

§ Real-Time Market

§ Retail Adjustments

Consumer Goals

§ Reliable Supply of Power

§ Fair Price for Electricity

§ Customer Choice

Enabled by PJM

§ Reliability Assurance

§ Collaborative Stakeholder Process for Improvement

§ Independence and Neutrality

§ Infrastructure for Business

§11 eTools

Retail Market Wholesale Market Market Information

Public Benefits of PJM