Transmission Congestion on the Transmission Congestion on the Delmarva PeninsulaDelmarva Peninsula

December 17, 2003December 17, 2003

PA03-12-000PA03-12-000

Map of PJMMap of PJM

Delmarva Peninsula and LMPDelmarva Peninsula and LMP

Since 1998 PJM has used LMP to manage Since 1998 PJM has used LMP to manage congestioncongestion

Under LMP prices are higher in areas that Under LMP prices are higher in areas that do not have low cost generation and a do not have low cost generation and a transmission infrastructure that restricts transmission infrastructure that restricts imports imports

Delmarva Peninsula has experienced Delmarva Peninsula has experienced higher congestion costs due to these higher congestion costs due to these limitations on generation and import limitations on generation and import capabilitycapability

FERC Cases on Congestion FERC Cases on Congestion

Congestion on Delmarva Peninsula has Congestion on Delmarva Peninsula has been an issue in several PJM proceedings been an issue in several PJM proceedings includingincluding Complaint filed by ODEC requesting relief Complaint filed by ODEC requesting relief

from congestion chargesfrom congestion charges Transmission planning process for economic Transmission planning process for economic

expansions expansions Allocation of Financial Transmission RightsAllocation of Financial Transmission Rights Local market power mitigation measuresLocal market power mitigation measures

Fact-Finding ProceedingFact-Finding Proceeding

May 12, 2003May 12, 2003 -- Commission established -- Commission established a fact finding proceeding concerning a fact finding proceeding concerning congestion on the Delmarva Peninsula.congestion on the Delmarva Peninsula. Explore causes, extent, costs, and possible Explore causes, extent, costs, and possible

solutions to such congestion.solutions to such congestion.

October 10, 2003October 10, 2003 -- the ALJ issued a -- the ALJ issued a decision with proposed findings of fact and decision with proposed findings of fact and recommendationsrecommendations

Summary of ALJ Findings Summary of ALJ Findings

Congestion on Delmarva Peninsula is a pricing Congestion on Delmarva Peninsula is a pricing issue, not a reliability issueissue, not a reliability issue

LMP reveals congestion, rather than causes LMP reveals congestion, rather than causes congestioncongestion

Congestion highest in 2000 and 2001 due to Congestion highest in 2000 and 2001 due to temporary outages due to construction of temporary outages due to construction of transmission facilities transmission facilities

Limitations on generation and transmission Limitations on generation and transmission contribute to congestion costscontribute to congestion costs

Summary of ALJ RecommendationsSummary of ALJ Recommendations

PJM should consider changes for PJM should consider changes for Scheduling transmission outagesScheduling transmission outages Effect of transmission construction on LMPEffect of transmission construction on LMP Post contingency operationsPost contingency operations

PJM should expedite transmission PJM should expedite transmission planning for the Delmarva Peninsulaplanning for the Delmarva Peninsula

PJM should periodically conduct auctions PJM should periodically conduct auctions for demand resources and generationfor demand resources and generation

ALJ Findings on Market PowerALJ Findings on Market Power

Record does not support allegation that Record does not support allegation that market power increased congestion costsmarket power increased congestion costs

PJM’s mitigation measures and active PJM’s mitigation measures and active monitoring limited opportunities for monitoring limited opportunities for exercise of market powerexercise of market power

ALJ recommended that OMOI review the ALJ recommended that OMOI review the record for evidence of the existence and record for evidence of the existence and extent of market power on the Delmarva extent of market power on the Delmarva PeninsulaPeninsula

PJM and ODEC AgreementPJM and ODEC Agreement

November 6 - Agreement on Process to November 6 - Agreement on Process to Address CongestionAddress Congestion Stakeholder process to review potential Stakeholder process to review potential

changes to PJM market ruleschanges to PJM market rules

PJM will file to implement its independent PJM will file to implement its independent recommendations by May 3, 2004recommendations by May 3, 2004 PJM may file changes not approved through PJM may file changes not approved through

stakeholder processstakeholder process

ConclusionConclusion

Congestion has been reduced on Congestion has been reduced on Delmarva PeninsulaDelmarva Peninsula

More infrastructure - generation, More infrastructure - generation, transmission, and demand response - transmission, and demand response - would reduce congestionwould reduce congestion

Need cooperation with states and PJM to Need cooperation with states and PJM to place infrastructure in place place infrastructure in place