Transmission Congestion on the Delmarva Peninsula December 17, 2003 PA

Map of PJM

Delmarva Peninsula and LMP Since 1998 PJM has used LMP to manage congestion Under LMP prices are higher in areas that do not have low cost generation and a transmission infrastructure that restricts imports Delmarva Peninsula has experienced higher congestion costs due to these limitations on generation and import capability

FERC Cases on Congestion Congestion on Delmarva Peninsula has been an issue in several PJM proceedings including Complaint filed by ODEC requesting relief from congestion charges Complaint filed by ODEC requesting relief from congestion charges Transmission planning process for economic expansions Transmission planning process for economic expansions Allocation of Financial Transmission Rights Allocation of Financial Transmission Rights Local market power mitigation measures Local market power mitigation measures

Fact-Finding Proceeding May 12, Commission established a fact finding proceeding concerning congestion on the Delmarva Peninsula. Explore causes, extent, costs, and possible solutions to such congestion. Explore causes, extent, costs, and possible solutions to such congestion. October 10, the ALJ issued a decision with proposed findings of fact and recommendations

Summary of ALJ Findings Congestion on Delmarva Peninsula is a pricing issue, not a reliability issue LMP reveals congestion, rather than causes congestion Congestion highest in 2000 and 2001 due to temporary outages due to construction of transmission facilities Limitations on generation and transmission contribute to congestion costs

Summary of ALJ Recommendations PJM should consider changes for Scheduling transmission outages Scheduling transmission outages Effect of transmission construction on LMP Effect of transmission construction on LMP Post contingency operations Post contingency operations PJM should expedite transmission planning for the Delmarva Peninsula PJM should periodically conduct auctions for demand resources and generation

ALJ Findings on Market Power Record does not support allegation that market power increased congestion costs PJM’s mitigation measures and active monitoring limited opportunities for exercise of market power ALJ recommended that OMOI review the record for evidence of the existence and extent of market power on the Delmarva Peninsula

PJM and ODEC Agreement November 6 - Agreement on Process to Address Congestion Stakeholder process to review potential changes to PJM market rules Stakeholder process to review potential changes to PJM market rules PJM will file to implement its independent recommendations by May 3, 2004 PJM may file changes not approved through stakeholder process PJM may file changes not approved through stakeholder process

Conclusion Congestion has been reduced on Delmarva Peninsula More infrastructure - generation, transmission, and demand response - would reduce congestion Need cooperation with states and PJM to place infrastructure in place