1. Maryland Public Service Commission 2005 Summer Reliability Status Conference May 9, 2005 Baltimore, MD

2. 2 Issues for Discussion Status of : –Generation resources available to meet peak load –Transmission system –Distribution system Summer storm readiness measures Active load management programs Special projects that will be launched in the 2 nd and 3 rd quarters of this year.

3. 3 Reliability Organizations & RTOs Allegheny Power is a member of the ECAR regional reliability organization. –The purpose of ECAR is to maintain area-wide reliability through the coordination of ECAR members’ planning and operation of their generation and transmission facilities. Allegheny Power is a member of the PJM RTO and resides in the PJM Control Area. –It is through the the PJM Market, owned generating assets and bilateral power purchase agreements that Allegheny Power will be capable of meeting its forecasted summer peak load.

4. 4 Allegheny Power Service Area Forecasted 2005 Summer Demand –8,645 MW –Based upon a 50/50 probable weather Previous 2004 Summer Demand –7,996 MW (weather-normalized => 8,348 MW) –June 9, 2004 @ 5:00 PM All Time High Demand (Summer or Winter) –8,598 MW –December 20, 2004 @ 7:00 PM

5. 5 ECAR 2005 Summer Assessment Load And Capacity –The ECAR Generation Resources Panel assess the ability of the ECAR region to reliably serve its connected load. –The assessment is based on the connected load and connected generation for the ECAR region. –The assessment is for conditions expected to prevail during the summer of 2005.

6. 6 Load And Capacity (cont.) –The capacity margin in the ECAR region is expected to be 19.4% during the peak demand this summer. Increases to 23.0% by including Direct Control Load Management, Interruptible Demand, and Additional Import Capability. –Capacity margins appear to be satisfactory. Only under a combination of extreme conditions would available capacity margins be tight. –Low probability (2%) contingencies will require purchase power in excess of import capability. ECAR 2005 Summer Assessment

7. 7 Load And Capacity (cont.) –ECAR members recognize that extreme weather, unexpectedly low generator availability, or transmission limitations could make it necessary to interrupt customer’s load. –ECAR Report 05-GRP-33 provides this assessment. ECAR 2005 Summer Assessment

8. 8 ECAR Load Forecast ECAR Total Internal Demand (TID) forecast for this summer 103,679 MW Direct Control Load Management qualified as a capacity resource (198 MW) Other interruptible demand not qualified as a capacity resource (2,310 MW) ECAR Net Internal Demand (NID) forecast for this summer 101,171 MW ECAR 2005 Summer Assessment

9. 9 ECAR Generating Capacity ECAR Total summer connected capability 126,943 MW Net increase in generating capacity since last summer 450 MW ECAR 2005 Summer Assessment

10. 10 ECAR Summer Capacity Margin Generation Resources126,943 MW Net Scheduled Receipts less Deliveries 1,757 MW Total Internal Demand (TID)(103,679 MW) Capacity Margin (TID) incl. Net Scheduled Interchange 25,021 MW Additional Import Capability2,743 MW ECAR 2005 Summer Assessment

11. 11 Allegheny Power is required by ECAR to maintain a daily operating reserve of 4% –Load and Frequency Regulation Reserve - 1% –Contingency Reserve - 3% Spinning – (1.5 to 3%) Supplemental Reserves (within 10-minutes) – (0 - 1.5%) PJM is obligated to meet this requirement for the Allegheny Power Area. Automatic Reserve Sharing (ARS) –PJM participates on Allegheny’s behalf in the ECAR ARS for sharing reserves during unexpected contingencies and to prevent the loss of, or inability to serve load. ECAR Daily Operating Reserve

12. 12 Transmission System Performance –The ECAR Transmission System Performance Panel (TSPP) assess the expected performance of the ECAR bulk transmission system. –The assessment will give a relative indication of the expected performance of the ECAR system and surrounding regions systems as compared to the previous year. –The ECAR 2005 Summer Assessment is not yet available as of April 29. ECAR Report 05-TSPP-3 will provide this assessment. ECAR 2005 Summer Assessment

13. 13 Transmission System Performance (cont.) –ECAR Transmission Owners/Operators are required to provide its 2005 Summer self- assessment to the ECAR Transmission System Performance Panel (TSPP) in accordance with the ECAR Review Process. This is scheduled for May 18 and 19. ECAR 2005 Summer Assessment

14. 14 Transmission System Performance (Cont.) –Allegheny Power performed an assessment of its transmission system for the Summer of 2005 AP found no thermal overloads or voltage violations under normal system operating conditions for the cases studied. Based on the system conditions modeled, the AP Transmission system is expected to sufficiently support the forecasted peak summer loading. AP also has adequate operational procedures identified to effectively mitigate the contingency outage conditions modeled in the study. AP installed a Special Protection Scheme (SPS) at Wylie- Ridge AP 2005 Summer Assessment

15. 15 Allegheny Power patrols all transmission lines annually to assess the condition of poles, structures, hardware, conductors, clearances, vegetation growth, and right-of-way encroachments. Allegheny Power has maintenance and inspection programs for transmission lines and substation equipment, such as Vegetation Management, Transformer and Circuit Breaker “Class A” Inspections and Maintenance, performed on a scheduled basis to address reliability on the transmission system. Transmission Assessment

16. 16 Allegheny Power has many programs, such as Annual Inspection and Maintenance, Pole Inspection, Vegetation Maintenance, etc., performed on a scheduled basis to address reliability on the distribution system. Reliability Improvement Programs address circuit reliability problems outside of these scheduled maintenance activities. Distribution Assessment

17. 17 Restore Service Process –Allegheny Power activates its Restore Service (RS) process for both gas and electric facilities. –The objective is to ensure that every available resource is used to safely restore service to all interrupted customers as rapidly as possible. Storm Readiness

18. 18 Restore Service Process (cont.) Allegheny Power: –Receives notification, analyzes, directs, performs and completes restoration; –Develops contingency plans for potential events; –Safely responds and restores service as quickly as possible; and –Communicates event information internally and externally to customers and Government Agencies. Storm Readiness

19. 19 Restore Service Process (cont.) –2004 Allegheny Power implemented an Incident Management System (IMS) as part of the overall RS process IMS is a recognized system with a predetermined chain-of-command. IMS is a well proven structure. IMS provides for an organized response to a critical incident. Storm Readiness

20. 20 Each year emergencies and disasters take their toll. The devastating effects of these critical events in terms of lives lost, injuries, property damage, and lost business can have serious consequences for organizations and communities. To effectively communicate and manage resources during a crisis situation is of vital importance. Someone must be in charge and priorities must be established. Direction and control is essential in order to avoid conflict and confusion. Incident Management System (IMS) is a recognized system with a predetermined chain-of-command, as well as a proven structure, for an organized response to a critical incident. Allegheny Power’s Introduction to Incident Management System

21. 21 Allegheny Power’s Event Preparation –Focus on Safety for employees and the public –Understand and manage customer expectations –Assign participant roles and responsibilities (IMS) Train RS Process Team Conduct simulations Arrange logistical support Develop detailed emergency plan –Communicate outage status Update AP 911/state outage Website –Coordinate with mutual assistance groups, state agencies, and others Storm Readiness

22. 22 Event Preparation (cont.) –Monitor approaching weather events 5, 4, 3 day and 48/24 hour projections Issue storm warnings within Allegheny Power –Contact other utilities and evaluate storm impact –Resource preparation steps Staffing Crew transfers Additional resources (lines, tree, equipment, material, support) Situation Room activation, institute IMS, etc. Storm Readiness

23. 23 Event Preparation (cont.) –Regional conference calls and communications Internal support groups SEE - Southeastern Electrical Exchange MAMA – Mid-Atlantic Mutual Assistance –NYMAG – MAMA group commonly interacts Maryland Electric Companies State EMA’s EEI – Edison Electric Institute Corporate Communications –Document preparations Critiquing after the event –Safety Integrate safety process into RS events Storm Readiness

24. 24 Event – Manage and React Consistent Management Ensure lessons learned from past events are being used Correct actions Communicate Post Event – Review and Correct Review event (technology, management, safety, physical, operations, planning, etc.). Develop plan of action and Communicate Circle of Process Development Pre-Event – Prepare/Initiate Emergency Plans - Revise IMS - Roles/Responsibilities Alliances (relationships) Resource Information Training/Review Testing/Simulation Storm Readiness

25. 25 Demand Side Response Generation Buy-Back –Allegheny Power has implemented the Generation Buy- Back program Implemented when wholesale generation market prices reach a level that generation buy-back is economically feasible for both the customer and AP. Contracted customers share in the economic benefits of curtailing their usage during high-cost periods Participation is voluntary There are currently 155 MWs in the program

26. 26 Demand Side Response Active Load Management (ALM) –Allegheny Power has one customer with 8.4 MWs of load participating in PJM’s ALM program. –Participation is mandatory. –AP receives ICAP credit for customers enrolled in ALM program. –PJM initiates curtailments.

27. 27 Allegheny Power installed a Special Protection Scheme (SPS) at Wylie-Ridge Substation, as recommended by PJM in its Regional Transmission Expansion Plan (RTEP) Report. Special Projects