PJM©2011

PJM Planning Process Direction of Transmission Build-Out

Transmission & Distribution Summit 2011Chicago, IL

November 4, 2011Steven R. HerlingVice President, PlanningPJM Interconnection

PJM©20112

RTEP Development Drivers

PJM©20113

Approved PJM Backbone Facilities

PJM©20114

• Load Forecast– Volatility of Economy

• Generation Mix– Retirement of At-Risk Generation– Future Renewable Generation Integration

• Costs of off-shore generation versus long distance on-shore generation

– Future of nuclear generation– Development of Marcellus Shale

• Impact of Uncertainties on Transmission Build-out– Delays/Suspension of major transmission projects– Uncertainty for generation development– Uncertainty for markets

Areas of Uncertainty

PJM©20115

Bright-Line Decision Framework

Criteria Violation IdentifiedTime to Construct Upgrade

May be difficult to secure CPCN

approval

Criteria Violation IdentifiedTime to Construct Upgrade

Upgrade can not be completed in time – RMR or some operational solution required

– otherwise system will not be reliable

PJM©20116

Bright-Line Decision FrameworkThe Reality

Criteria Violation IdentifiedTime to Construct Upgrade

Reliability Risk

Uncertainty around time to construct

Uncertainty around onset of criteria

violation

PJM©20117

PJM RTO 2011 Load Forecasts

2010 Load Forecast showed opposite relationship between Moody’s and Global Insight data

2011 Global Insight

2011 Moody’s

2010 Moody’s

PJM©20118

EMAAC/MAAC Retirements Announced and Load Management

PJM©20119

Susquehanna to Roseland Project

• Due to the delays, the entire line is not expected until June 1, 2015

• Updated analysis using the 2011 RTEP assumptions show fewer violations in 2012

• Analysis of 2012 shows NERC category “C” contingency violations

• Operate to DCTL contingencies in real-time operation

• Named to the new federal inter-agency “Rapid Response Team” list of projects

PJM©201110

Composition of Capacity in PJMEmploying Once Through Cooling

PJM RTO MAAC Rest of PJM

Oil and Gas 4,271 3,070 1,201Nuclear 11,930 4,658 7,271Coal 28,167 9,498 18,669 Coal > 40 years 25,554 8,878 16,676Coal < 400 MW 17,470 6,947 10,523Coal > 40 years, < 400 MW 17,157 6,947 10,210

Source: PJM EIA-411 Submittal as of January 1, 2009 andEIA-767, 2000 and 2005, EIA-860, 2008MW of Summer Net Dependable Capacity

PJM©201111

Conceptual PJM Renewable Sourcing Zones

PJM©201112

Marcellus Shale

Marcellus

Source: Energy Information Administration based on data from various published studies.Updated: March 10, 2010

PJM©201113

Baseline Reliability Analysis

RTEP Framework

Identify Reliability Upgrades

Market Efficiency Analysis

Public Policy

Analysis

Optimize RTEP

Upgrades

Test RTEP For Compliance With NERC Standards

Cost Allocation

Construct Upgrades

PJM©201114

Baseline Reliability Analysis

RTEP Framework – Decision Points

Identify Reliability Upgrades

Market Efficiency Analysis

Public Policy

Analysis

Optimize RTEP

Upgrades

Test RTEP For Compliance With NERC Standards

Cost Allocation

Construct Upgrades

Currently based on reliability criteria and

bright line test

May be one decision point or two - Currently market efficiency is based on

production cost simulations and benefit/cost ratio defined in

Operating Agreement

PJM©201115

FYI Process

PJM Planning Process

State Sponsored Upgrades

Public Policy Upgrades

Market Efficiency Upgrades

Baseline Reliability Upgrades

Proactive Build

Approach

Input to and Review of Assumptions and Scenarios for Analysis

Review of Analysis Results

Suggestion Solution Options

Critical Mass Approach

State Agreement Approach

Review of Evaluation of Solution Options

Decision Framework

PJM©201116

Questions?