1. PJM©2014www.pjm.com State of Demand Response Stu Bresler Vice President- Market Operations PJM Interconnection 10 th OPSI Annual Meeting October 13, 2014

2. PJM©2014 2 www.pjm.com

3. PJM©2014 3 www.pjm.com A Potential Bridge to the Future Proposed path toward market clarity and confidence Fog of market uncertainty

4. PJM©2014 4 www.pjm.com TodayPJM Proposal Capacity market Supply resource (Similar to generation) Demand bid Capacity obligations Reduce load per rulesSame Who manages? Curtailment service provider/load serving entity Load-serving entity/retail service provider End-use customers All may participate subject to regulatory rules Same Energy market Economic or emergency resource; paid full LMP No direct compensation; benefits through cost-savings Ancillary service market Curtailment service provider or load-serving entity manages Same www.pjm.com Demand Response: PJM’s Proposal vs Today

5. PJM©2014 5 www.pjm.com Integration of Demand Response Bids with RPM Demand Curve Shown based on existing PJM VRR Curve. PJM has proposed an alternative demand curve as part of its triennial review process.

6. PJM©2014 6 www.pjm.com Transition Mechanism Summary PJM would: Determine demand resource commitments which are load-serving-entity-based and can be directly converted to demand response curtailment commitments Work with curtailment service providers, states and load-serving entities to explore how demand resource commitments may transition to load-serving entity-based curtailment commitments Establish procedures to release demand resources that cannot be converted from capacity commitment –no capacity credit for released commitment –no curtailment obligation in delivery year Account for released demand resources in remaining incremental auctions for three transition delivery years –if necessary, purchase additional capacity to replace released demand resources –load-serving-entity-based demand response eligible to bid into incremental auctions Preserve terms of curtailment commitment in energy market for each type of demand resource (limited, extended summer and annual) during the transition.