1. May 4, 2001 Maryland PSC Summer Reliability Assessment Allegheny Power May 4, 2001

2. 2 Issues for Discussion Assessment of 2001 Summer –Installed Capacity –Projected Peak Demand –Operating Reserve –Capacity Availability –Bulk Power Purchases and Sales –Transmission Reliability –Load Control Procedures –Assistance from Neighboring Systems –Transmission Limitations Outside of System ECAR Summer 2001 Assessment Summer Storm Readiness Measures

3. May 4, 2001 3 Terms and Definitions Allegheny Power is the entity serving regulated load in WV and VA with default service in PA, MD, and OH Allegheny Power Control Area –Includes all of Allegheny Power, plus –Load and Generation entities within Allegheny Power territory

4. May 4, 2001 4 Status of Deregulation PA – Full Customer Choice on January 2, 2000 MD – Full Customer Choice on July 1, 2000 OH – Full Customer Choice on January 1, 2001 WV – Full Customer Choice beginning mid-2002 (tentative) VA – Customer Choice phase-in 2002-04

5. May 4, 2001 5 AP Control Area Summer Demand The projected 2001 summer peak for the Allegheny Control Area is 7,945 MW –Forecast based upon 50/50 probable weather –Previous year’s summer peak for AP Control Area was 7,546 MW occurring on June 26, 2000 –All-time historical summer peak of 7,788 occurred in 1999

6. May 4, 2001 6 Demand by State Jurisdiction State Jurisdiction Control Area Forecast in MW Ohio302 Virginia505 West Virginia2,195 Maryland1,613 Pennsylvania3,414 Adjustment for Load Diversity-84 Allegheny Power7,945 AP Retail Customer Choice Load Forecasted to be 1.4% of Total Deregulated Load (OH, MD, and PA)

7. May 4, 2001 7 Projected AP Control Area Capacity The projected installed resources for the Allegheny Control Area for the summer peak period are 8,890 MW

8. May 4, 2001 8 Operating Reserve Allegheny Control Area is required by ECAR to maintain a daily 4% operating reserve –Load and Frequency Regulation Reserve - 1% –Contingency Reserve - 3% Spinning - 1.5% Supplemental 10-minute Quick-start - 1.5% Actual operating reserve is determined on a daily basis depending upon: –Short-term load projections –Available capacity –Interchange schedules

9. May 4, 2001 9 Capacity Availability Allegheny does not normally have any generating units scheduled for planned maintenance during the historical summer peak months of June, July, and August. –Planned maintenance normally scheduled during the spring and fall months –Maximize available capacity during peak periods –Risk aversion for extreme price spikes during summer

10. May 4, 2001 10 Capacity Availability Capability can be affected by any number of unforeseen events, for example: –Unplanned equipment outages –Abnormal weather –Transmission limitations –Fuel supply –Air quality restrictions

11. May 4, 2001 11 Bulk Power Imports/Exports No firm, long-term energy imports or exports are scheduled over the summer peak period. Potential short-term energy transactions are dependent upon market pricing and other conditions at that time.

12. May 4, 2001 12 Transmission Reliability Operating limits are determined from internal and external systems studies conducted with other Regional Reliability Groups. Transmission constraints will be mitigated through use of: –The NERC Transmission Loading Relief procedure (TLR)

13. May 4, 2001 13 Native Load Curtailment Allegheny, during times of extreme transmission congestion, may be forced to curtail service to our native load customers in compliance with the Open Access Transmission Tariff and NERC Transmission Loading Relief (TLR) procedures.

14. May 4, 2001 14 Load Control Procedures Emergency load control procedures are generally implemented for any of four reasons: –Sudden, unplanned shortages of generation –Anticipated generating capacity shortages –Interruption of fuel supplies –Transmission limitations

15. May 4, 2001 15 Assistance from Neighbors Allegheny may be required to purchase supplemental capacity to maintain the ECAR 4% operating reserve. Automatic Reserve Sharing (ARS) –Allegheny participates in the ECAR automated system for sharing reserves during unexpected contingencies and to prevent the loss of, or inability to serve, firm load.

16. May 4, 2001 16 Demand Side Response Interruptible Loads –Allegheny Power has approximately 335 MW of customer load that can be curtailed under certain conditions Load Modification –Allegheny Power has implemented a generation buy-back program Plan to have 138 MW of buy-back contracts in place by this summer –Contracted customers share in the economic benefits of curtailing their usage during high-cost periods

17. May 4, 2001 17 ECAR Summer Assessment The Generation Resources Panel assess the ability of the ECAR region to reliably serve its connected load. –ECAR Report 01-GRP-33, approved earlier this month, provides an assessment of the 2001 Summer Load and Capacity. –Report available online at www.ecar.org

18. May 4, 2001 18 ECAR Load Forecast The ECAR total connected demand forecast for this summer is 102,161 MW. Interruptible demand is forecasted as 3,510 MW.

19. May 4, 2001 19 ECAR Generating Capacity ECAR summer net seasonal capability is 113,136 MW. Includes 4,457 MW of new generating capacity added since last summer.

20. May 4, 2001 20 ECAR Summer Reserve Margin Generation Resources113,136 MW Net Transactions +2,243 MW Total Internal Demand-102,161 MW Interruptible Demand +3,510 MW Reserve Margin16,728 MW

21. May 4, 2001 21 ECAR Assessment ECAR region reserve margin is expected to be slightly improved over last summer. Extremely low probability (<1%) contingencies will require purchase power in excess of import capability. ECAR members recognize that extreme weather, unexpectedly low generator availability, or transmission limitations could make it necessary to interrupt customer’s load.

22. May 4, 2001 22 Restore Service Process OBJECTIVE - The objective of restoration of service activities is to insure that every available resource is used to safely restore service to all interrupted customers as rapidly as possible. Restore Service (RS) Process: –Develops Contingency Plans for Possible Events –Recognizes Forecasted RS Events –Make Necessary Preparations

23. May 4, 2001 23 Restore Service Process Allegheny Power manages its restoration of service (RS) process involving both gas and electric facilities on a continuing basis. Within AP, the RS Process is recognized to be a priority, utilizing assistance from all areas within AP. It is driven by: –Identification of Potential Events (Preparation) –Response to Events That Require An Immediate Attention –Customer Outage(s) –Network Facilities Interruption

24. May 4, 2001 24 Restoration of Service Event Modes Allegheny Power breaks an potential event into three essential parts –Pre-Storm - Preparation Mode –Storm-Event - Assessment, Restoration, Real-time Evaluation, Corrective Action –Post-Storm - Participant Assessment, Debriefing, Review of Existing Procedures

25. May 4, 2001 25 Storm Event Preparation Activities Focus on Safety – For Our Employees and The Public Understand and Manage Customer Expectations Assure Trained Employee Group – Understand the Restore Service Process –Conduct Simulations –Assess Need for Technology changes/updates Assign Participant Roles Communicate Outage Information to Customers and Commissions Arrange Logistical Support Coordinate with Others Including – EEI, SEE, MAMA and Maryland Employ Innovative Restoration Options Develop Detailed Emergency Plan

26. May 4, 2001 26 Storm Event Preparation Activities Monitor Approaching Weather Events –4 Day Projections, 3 Day Projections, 72/48/24 Hour Projections –Issue Storm Warnings within Allegheny Power Contact Other Utilities and Evaluate Storm Impact Pro-active Steps - Crew Transfers, Staffing, Acquisition of Additional Contract Crews, Use of Tree Crews, Activation of Situation Room, Etc. Regional Conference Calls (Communicate, Communicate, Communicate) –Internal Support Groups –SEE - Southeastern Electrical Exchange –MAMA – Mid-Atlantic Mutual Assistance –Maryland Electric Companies –State EMA’s –Corporate Communications Document Preparations - for critiquing after the event Safety – Integrate Safety Process in RS Events Pre-Storm

27. May 4, 2001 27 Summer Storm Projections and Readiness Professor William Grey of Colorado State University Predicts –10 Named Storms in the Atlantic Region This Year Including 6 Hurricanes Two of Which Will Be Intense –The Likelihood of One of These Hurricanes Making Landfall Along the US Coastline is 65% –Overall Storm Activity Is Forecasted To Be Intense Allegheny Power Is Prepared –Normal Spring Season Generation Maintenance Nearly Complete –Scheduled T&D Maintenance Programs On Cycle –No Abnormal System Configuration Expected –Transmission System Usage Expected At Same Levels As Previous Two Years