Andrew Ott, President & CEO PJM Interconnection US Association for Energy Economics (USAEE) Tomorrow’s Grid and the Challenges Ahead Andrew Ott, President & CEO PJM Interconnection www.pjm.com

PJM as Part of the Eastern Interconnection Key Statistics Member companies 1,040+ Millions of people served 65 Peak load in megawatts 165,492 MW of generating capacity 178,563 Miles of transmission lines 84,042 2017 GWh of annual energy 773,522 Generation sources 1,379 Square miles of territory 243,417 States served 13 + D.C. Hsia- Updated 2/2018 21 percent of U.S. GDP produced in PJM As of Feb. 2018

Value Proposition The value of PJM. www.pjm.com

The Value of Markets: Lower Wholesale Rates PJM’s wholesale electricity prices have declined 40 percent in the last decade. www.pjm.com

Current State of the Grid Deactivations 2017 2018 (YTD) 2,084 MW 186 MW Current State of the Grid lead into the future. (PJM Future Challenges and Opportunities) Value: New economic generation Transmission projects and upgrades 72,000 MW of new competitive generation online 2023 $16 billion in new transmission projects 13,358 MW* scheduled for future 2021 retirement *5,605 MW for end of year 2018 www.pjm.com

PJM’s energy mix is more diverse than ever. Current Energy Mix PJM’s energy mix is more diverse than ever. (% Annual Energy) www.pjm.com

Ten Years of Fuel Mix Evolution Here you see the trends throughout the past 10 years in the fuel mix. Clearly you can see the major trend shift between gas and coal. You can also note that renewables are a growing area. Fuel Security is a prominent matter that requires the upmost attention. Lead into PJM‘s Fuel Security Study. www.pjm.com

Future Challenges/Opportunities Changing Load Profiles It’s no secret that the degree of change and the pace of change in the industry are unprecedented. Physical changes (fuel mix) and Regulatory Uncertainty., Certainly, I’ve seen nothing like it in my career. These are just some of the challenges we face. <Mention each> And I’ll talk about a few of them in more detail momentarily, but the point I want to make now is . . . we have a choice: Focus on Fuel Mix, Fuel Security and Regulatory Uncertainty. These challenges can either be treated as an endless parade of obstacles, or we can look for the opportunities that are within each of them like the value of new attributes (Emission, State Renewable Initiatives) PJM is uniquely able to leverage challenges into opportunities . . . and then into value for our members and the region we serve. Changing Fuel Mix Regulatory Uncertainty Fuel Security Renewable and Distributed Energy Resource Integration Cybersecurity and System Resiliency www.pjm.com

Fuel Security www.pjm.com

Trajectory to Tomorrow’s Grid THEMES INITIATIVES MARKET DESIGN INITIATIVES – Price Formation, Valuing potentially other essential resource attributes into the future. Value resilience through markets RESILIENCE INITIATIVES – Cyber Security and Fuel Security DER – Over the past year, we have engaged over the with our stakeholders under our DER Senior Task Force to harmonize the need and concerns of DER, EDC and the impact to system operations. PJM Confidential