EPSA REGULATORY AFFAIR CONFERENCE 2006 Washington, DC October 25, 2006 Garry Brown Vice President, External Affairs New York ISO

2 NYISO Overview  NYISO was formed December 1,  Utility generation divestiture rate makes it one of the most divested markets in nation.  NYISO market volume - $11 billion in 2005 and over $40 billion since inception.  Unique challenge: New York City is one of the world’s biggest and most complex load pockets. It is also a world finance and communications capital.

3 Ontario IESO 27,005 MW* Hydro Quebec 34,850 MW* ISO - New England 28,021 MW* New York ISO 33,939 MW* PJM / PJM West 131,330 MW* PJM 144,796 MW* * = Peak load Located at a Crossroads

4 NYISO’s Markets ♦Energy: Real-Time and Day-Ahead (based on LBMP) ♦Ancillary Services: RT and DA ♦Co-optimized with energy in both RT and DA ♦Spinning and non-spinning reserves with scarcity pricing ♦Regulation ♦Installed Capacity (ICAP) – locational markets ♦Transmission Congestion Contracts (TCCs) ♦Virtual trading for both supply and demand ♦Demand Side Resources may participate in the energy and capacity markets (ancillary services under development) NYISO also offers several Cost-Based Products:  Voltage Support  Black Start

5 Megawatts of New Generation* by NYISO Zone 1999 thru 2005 * Built or Under Construction A C 33 MW D 210 MW F I J H B E G K 43 MW 7 MW 1,715 MW 2,143 MW 801 MW

6 Transmission New Transmission Lines (Proposed or Operational) Con Ed Upgrades CSC (330 MW) (660 MW) Neptune

7.... EFORd

8 Managing Higher Peaks Increased Regional Communication and Generation Availability NY Historic Peak Loads YearPeak Load (MW’s) , , , , , , , , , , ,295 forecasted ,939 actual

9 Load/Demand Response Programs Special Case Resources & Emergency Demand Response Programs Estimated performance by Zone: A – 328 MW (300 MW SCR, 28 MW EDRP) B – 60 MW ( 59 MW SCR, 1 MW EDRP) C – 94 MW ( 80 MW SCR, 14 MW EDRP) J – 429 MW (334 MW SCR, 95 MW EDRP) K – 261 MW (174 MW SCR, 87 MW EDRP) 1172 MW Total Load Reduction August 2, SCR and EDRP resources were activated in Zones J&K 1 pm to 7 pm, and Zones A, B &C 2 pm to 7 pm.

10 8/2 NYCA Load Effect of Demand Response Added Back Total 1172 MW

11 Retail ¢/kWh and Percent Coal Generation ¢ ¢ ¢ = average retail price ¢/kWh 1/06 – 7/06 % = percent coal generation 1/06 – 7/06 Source: Energy Information Administration ¢ 8.5¢39% ¢ 7.0¢55% ¢ 7.7¢64% ¢ 10.2¢36% ¢ 7.4¢87% ¢ 5.2¢95% ¢ 6.7¢57% ¢ 8.4¢41% ¢ 9.2¢24% ¢ 6.0¢93% ¢ 7.8¢72% 5.9¢61% ¢ 6.4¢45% ¢ 5.9¢94% 5.8¢4% ¢ 6.4¢41% 12.6¢ 1% 1% ¢ 5.0¢ 1% 1% 6.9¢70% ¢ 7.3¢49% ¢ 4.5¢46% ¢ 6.3¢85% ¢ 7.6¢76% 6.9¢62% ¢ 8.0¢66% ¢ 7.0¢47% ¢ 6.5¢95% ¢ 7.7¢86% 6.8¢48% ¢ 7.5¢60% ¢ 64% 7.0¢ 64% ¢ 5.3¢92% ¢ 6.9¢39% ¢ 10.4¢ 29% 29% ¢ 8.6¢55% ¢ 13.5¢ 16% 16% ¢ 10.9¢ 2% 2% ¢24% MA15.4¢24% ¢12% CT14.3¢12% ¢17% NH14.2¢17% ¢ 0% RI14.1¢ 0% ¢ 0% VT11.5¢ 0% ¢17% NJ11.3¢17% ¢60% MD 8.9¢60% ¢71% DE 8.8¢71% ¢ 8.2¢25% ¢ 5.0¢98% ¢ 8.3¢61%

12 Competitive Markets  Efficiency  Innovation  Risk Shifting