1. August 2003 Blackout Review Brant Eldridge Executive Manager - ECAR

2. Presentation Topics ECAR Overview Blackout Review 2

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4. Current ECAR Members (22) Allegheny Power American Electric Power Big Rivers Electric Corporation Cinergy Corporation Consumers Energy Dayton Power & Light Company DTE Energy Duke Energy North America Duquesne Light Company East Kentucky Power Cooperative, Inc. FirstEnergy Grid America Hoosier Energy Rural Electric Cooperative, Inc. Indianapolis Power & Light Company International Transmission Company LGE Energy Michigan Electric Transmission Company, LLC Midwest Independent System Operator Northern Indiana Public Service Company Ohio Valley Electric Corporation PJM Interconnection LLC Vectren Energy Delivery of Indiana 4

5. Current Associate Members (16)  American Municipal Power-Ohio, Inc.  Buckeye Power, Inc.  Municipal Cooperative Coordinated Pool  Wabash Valley Power Association, Inc.  Indiana Municipal Power Agency  Independent Electricity Market Operator  Commonwealth Edison  Tennessee Valley Authority  Cargill Power Markets, LLC  Mirant Americas, LLP  Constellation Power Source, Inc.  Conective Energy Supply, Inc.  FirstEnergy Solutions, Inc.  CMS Energy Resource Management Company  Edison Mission Marketing and Trading  PSEG Power, LLC 5

6. Blackout Review 6

7. Previous Major Outages November 9, 1965  30 Million People Affected  20,800 MW Load Dropped  13 Hours to Restore  New York, New England, Pennsylvania, Ontario July 13, 1977  9 Million People  6,000 MW  26 Hours  New York City 7

8. Previous Major Outages August 10, 1996  7.5 Million People  28,000 MW  9 Hours  12 Western States 8 July 2, 1996  2 Million People  11,850 MW  Several Hours  14 Western States, 2 Canadian Provinces, Baja Mexico

9. August 14, 2003 Outage Largest Cascading Blackout Ever  50 Million People  61,800 MW  45 Hours  Ohio, Michigan, Ontario, Quebec, Northern New Jersey, Massachusetts, Connecticut, New York City 9

10. 4:13 PM – Cascading sequence essentially complete 10

11. Principal Investigations of August 14, 2003 Blackout U. S – Canada Power System Outage Task Force  Interim Report issued November 2003  Final Report issued April 2004 North American Electric Reliability Council (NERC)  Provided significant technical input to U.S. – Canada investigation  Initial Report issued February 2004  Final Report issued July 2004 ECAR  Two Reports issued February 2004  “Technical Report” and “Recommendations Report” 11

12. Key Findings  U.S. – Canada Task Force Investigation Initiation of blackout occurred in FirstEnergy’s system in northern Ohio Blackout could have been prevented Blackout caused by deficiencies in specific practices, equipment, and human decisions by various organizations Four basic causes of blackout  Inadequate system understanding  Inadequate situational awareness  Inadequate tree trimming  Inadequate Reliability Coordinator diagnostic support Final Report available on DOE and NERC websites 12

13. Key Findings  NERC Investigation Violations of existing NERC reliability standards contributed to blackout FE’s system in northeast Ohio was being operated with insufficient reactive margins Relay protection and controls could be used more effectively to slow or minimize spread of a cascading outage Key contributing factors from previous blackouts were repeated  “Three T’s” Final Report available on NERC website 13

14. Common Elements Of Major Outages  Trees  Vegetation Management  Tools  For system operators to monitor and assess wide area to evaluate what actions are needed to arrest a potential major outage  Training  Simulators, structured programs, drills to assure that operators are prepared to take appropriate actions 14 “Three T’s”

15. Key Findings  ECAR Investigation Two primary factors led to the disturbance  Tripping of lines below their emergency ratings  Insufficient intervention to relieve line overloads Absence of either primary factor would probably have avoided the disturbance becoming a cascading blackout Secondary factor that caused system conditions to be worse than otherwise as outages occurred was shortage of reactive resources in initiating area  But this factor did not initiate the disturbance Final Reports available on ECAR website 15

16. Examples of Blackout Investigation Recommendations U. S. – Canada Task Force  Need for Congress to pass reliability legislation that would make compliance with reliability standards mandatory and enforceable with penalties for non-compliance  Development of regulator-approved funding mechanism for NERC/RRCs to ensure independence from parties they oversee  Evaluate and develop appropriate modifications to existing institutional framework for reliability management  Examine and clarify future role of RRCs with focus on mandate, scope, governance, responsibilities, resource requirements, geographical boundaries 16

17. Examples of Blackout Investigation Recommendations  Remedial actions by FE, MISO, and PJM by June 30, 2004 to address causes of August 14, 2003 blackout  Strengthen and implement communication protocols between Reliability Coordinators, Control Areas, and RTOs  Review, update, and train on contingency plans for loss of monitoring and control systems  Review, update, and train on emergency plans  Confirm that transmission line ROWs are clear of obstructions  Readiness audits of Control Areas and Reliability Coordinators  Re-evaluate system design, planning, and operating criteria  Develop standard for vegetation management 17 NERC

18. Examples of Blackout Investigation Recommendations  Take action regarding violations of NERC standards on August 14, 2003  Conduct “peer review” of ECAR member companies seasonal and long-term transmission assessments  Audit existing vegetation management plans and adherence to the plans  Confirm that ECAR RCs have authority to order CAs to drop firm load if deemed necessary to prevent a cascading outage, and that CAs will do so if ordered  Review reactive and voltage practices of ECAR members  Revise existing ECAR Documents/develop new ones, as needed, to address blackout investigation recommendations 18 ECA R

19. Closing Observations Since August 2003 blackout, considerable progress has been made to minimize likelihood of another blackout Demand for electricity (load) continues to grow  As does generation capacity to serve the load In last two decades, relatively little new transmission infrastructure has been built Interconnected transmission system is now being used in ways for which it wasn’t designed  Long distance transfers of large amounts of power 19

20. Closing Observations Until transmission system gets enhanced/improved, system operators have to be even more vigilant than normal and ready to deal with problem situations to avoid potential major outages 20 Transmission system is operating with less overall margin than in past  Operating closer to limits more of the time  More vulnerable to something going wrong

21. Closing Observations Enactment of reliability legislation to make compliance with reliability standards mandatory and enforceable Enactment of broad policies that foster a healthier grid investment climate  New transmission lines are needed in some areas  Also need to utilize new technologies to enable existing lines to carry more capacity reliably 21 Two key things need to happen to improve the current situation

22. QUESTIONS ? 22