This month's Inside Lines informs PJM's stakeholders of various committee actions, upcoming training and other activities. PJM would like to highlight the following:

New Study Confirms Electricity Markets Savings
A new study shows that consumers are saving money on their electric bills as a result of organized electricity markets.

The implementation of coordinated markets in two regional transmission organizations is producing rate reductions that are saving consumers between $430 million and $1.3 billion per year, concludes a new study by three LECG consultants.
(more)

PJM Named Energy Transporter of the Year
For the second year in a row, PJM was recognized with top honors at the Platts Global Energy Awards hosted in New York City.

PJM received the Energy Transporter of the Year award, a new category created in 2006, which follows on the heels of the CEO of the Year award received in 2005. PJM was among 11 finalists for the energy transporter award, including the California ISO, American Electric Power, TXU Energy Delivery and Williams.
(more)

New Stated Rate Plan Begins in January
Beginning Jan. 1, 2007, PJM will implement reduced administrative fees as designed in its stated-rate plan approved by the Federal Energy Regulatory Commission (FERC) which provides members with price predictability and transparency, while increasing the RTO’s accountability to the members.

In June 2006, PJM became the only RTO to operate under a system of stated rates to recover the costs of its operations from its members. PJM’s ability to perform effectively within such a system of stated rates reflects the success of its cost-control and productivity initiatives and its ability to manage its costs.
(more)

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What's Inside:

Committees Report
Highlights
Regulatory Reports

January
01.09.2007– 01.10.2007 PJM 101: The Basics
01.16.2007 Generation 101
01.17.2007 Generation 201
01.18.2007 Generation 301
01.19.2007 Operations 101
01.29.2007 – 02.06.2007 Initial Training Program - Generation
01.29.2007 – 02.09.2007 Initial Training Program - Standard

February
02.12.2007 Workshop on PJM ARR and FTR Market
02.13.2007 PJM Marginal Losses Training
02.14.2007 – 02.15.2007 Reliability Pricing Model
02.19.2007 – 03.01.2007 Initial Training Program - Standard
02.20.2007 Workshop on PJM ARR and FTR Market
02.21.2007 PJM Marginal Losses Training
02.22.2007 Reliability Pricing Model
02.26.2007 – 03.01.2007 Initial Training Program - Generation
02.26.2007 Workshop on PJM ARR and FTR Market
02.27.2007 PJM Marginal Losses Training
02.28.2007 Reliability Pricing Model

Committee Meetings:

• Demand Side Response Working Group / Metering Issues Subcommittee – 12.21.2006 – Topic: Report of the Metering Issues Subcommittee (MIS) to the Demand Side Response Working Group (DSRWG).
• Market Implementation Committee – 12.20.2006 – Topics: ARR/FTR Credit Policy Revisions, MMU Analysis of Combined Regulation Market, Synchronized Reserve Market Consolidation, MMU/PJM Interface Analysis, Allocation of Transmission Rights Resulting from RTEP Transmission Upgrade, 180-Day Stakeholder Process Working Group Report, eMarket User Interface, eDart Enhancement.
• Market Settlements Working Group – 12.19.2006 – Topics: Marginal Losses Implementation, Market Settlements Replacement Project, FERC EQR Reporting.
• Operating Committee – 12.19.2006 – Topics: Voltage Schedule Working Group, Review of Operations, PJM Strategic Initiative, Manual Updates, New Market Initiatives Stakeholder Training, NERC Update, RFC Update.
• Audit Advisory Committee – 12.19.2006 – Topic: SAS70 Audit Review.
• RPM Stakeholders – 12.18.2006 – Topics: Variable Resource Requirement Curve, RPM Prototype Simulations, Nested LDA.
• Transmission Owners Agreement-Administrative Committee – 12.18.2006 – Topics: Administrative Items, RFC and NERC, 500-230 kV Transformer Review Initiative, Long-Term Rate Design Working Group Update, PJM Issues Update, TOA-AC Work Plan Update.
• Regional Planning Process Working Group – 12.15.06 – Topics: Review Scope of Monitoring Plan for 2007.
• Nuclear Generation Owners/Operators User Group – 12.14.06 – Topic: NRC Generic Letter 2006-02 RAI.
• Long-Term FTR Working Group – 12.14.06 – Topics: Full-Funding Issue, Preservation of ARR Capability.
• System Information Subcommittee – 12.13.2006 – Topics: Member Company Roundtable, PJM Operations, eSUITE Update, PJM Net, Electric Utility Security Issues, Communication and System Issues, Metrics, Review Action Item List.
• System Operations Subcommittee – 12.13.2006 – Topics: Review of Operations, eDART User Group Update, Dispatcher Training Task Force Update, Data Management Working Group Update, System Operator Certification, Winter Emergency Procedures Drill, AC2 Project Update, Marginal Losses Project Update, Daylight Savings Time, Fuel Inventory Reporting, Electric and Gas Market Coordination, Modeling Generator Interconnection Facilities, Reactive Issues, PJM Manual Changes, Future Agenda Items.
• Credit Working Group – 12.12.2006 – Topic: FTR Credit Calculations.
• Governance Working Group – 12.11.2006 – Topics: Review and Endorsement of Draft Committee Handbook Revisions, Sector Definitions and Qualifications for Membership, Future Agenda Items.
• Market Monitoring Advisory Committee – 12.08.2006 – Topic: Review Scope of Monitoring Plan for 2007.
• Inter-Regional Planning Stakeholder Advisory Committee – 12.07.2006 – Topics: Review of MISO-PJM Coordinated System Plan Generator Deliverability and Baseline Reliability Analysis, Review of Market Performance Analysis, Timeline for Remainder of Discussion and Report, Future Work.
• Inter-Regional Planning Stakeholder Advisory Committee – 12.07.2006
• Planning Committee – 12.06.2006 – Topics: IRM and Associated Parameters for 2008/09 and 209/10, 2007 IRM Study, Load Forecast Model Enhancements, RFC Update, NERC Update, PC Parking Lot Issues.
• eDART User Group – 12.06.2006 – Topics: Transmission – New Network Model Application, Future Transmission Planning Enhancements for eDART, January 2007 Enhancements Release, Generation – Options for Resolution of the Ambient Air Ticket Issue with Gen Checkout, Additional Enhancements for January 2007.
• Regional Planning Process Working Group – 12.01.2006 – Topics: At Risk Generation White Paper, Upgrade Beneficiary Cost Allocation Examples.

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New Study Confirms Electricity Markets Savings

A new study shows that consumers are saving money on their electric bills as a result of organized electricity markets. The implementation of coordinated markets in two regional transmission organizations is producing rate reductions that are saving consumers between $430 million and $1.3 billion per year, concludes a new study by three LECG consultants. Although electricity retail prices have increased since 1998, the authors point out that these increases have occurred throughout the country, regardless of market structure, as a result of rising fuel costs.

The rate reductions project over the current PJM Interconnection and New York ISO footprints to savings of $430 million to $1.3 billion per year compared to consumer charges under a traditional market structure, regardless of whether the regions studied were dependent on costly natural gas. The study by the LECG consultants examined markets in Pennsylvania, New Jersey, Maryland, Delaware and New York, as well as the District of Columbia, during the period 1998 – 2004.

“The study adds to the growing body of work reaffirming that organized wholesale competitive markets bring real savings to consumers,” noted PJM Executive Vice President and Chief Operating Officer Audrey Zibelman. “It also highlights the effectiveness of the independent marketplace in reflecting economic efficiency.”

The study, commissioned by PJM, also showed a decline in gas-fired generation in New York and eastern Pennsylvania at the same time that annual nuclear plant output was on the rise during the period following implementation of coordinated power markets. Nuclear generation output in PJM and New York, in fact, rose 28 percent between 1997 and 2004 even though no new nuclear plants were placed in operation during this period.

The study examines the retail rates of a large set of municipal and cooperative utilities located in both transmission organizations and in the traditional market states of Florida, Georgia, North Carolina, South Carolina, Alabama and Arkansas. The study controlled for a variety of factors that affect retail electricity prices, such as fuel mix, retail access and different market structures.

The municipal and cooperative utilities were chosen as a study group because they have retained the obligation to provide generation service to their customers and were not subject to retail access. This factor renders municipal and cooperative utilities comparable across utilities in traditional market structure states and those located within coordinated markets, providing the basis for an “apples to apples” study. In addition, because the study analyzes retail rates, which include charges for recovery of regional transmission organization costs, the estimated savings take into account the costs of operating the two regional transmission organizations.

LECG is a consulting company with headquarters in Emeryville, Calif.

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PJM Named Energy Transporter of the Year

For the second year in a row, PJM was recognized with top honors at the Platts Global Energy Awards hosted in New York City.

PJM received the Energy Transporter of the Year award, a new category created in 2006, which follows on the heels of the CEO of the Year award received in 2005. PJM was among 11 finalists for the energy transporter award, including the California ISO, American Electric Power, TXU Energy Delivery and Williams.

Representing PJM were Senior Vice President Karl Pfirrmann and Terry Williamson, chief communications officer. Williamson accepted the award on behalf of PJM employees, President and CEO Phil Harris, who received last year’s award on behalf of the company, and Executive Vice President and Chief Operating Officer Audrey Zibelman.

PJM was recognized by the international judges for its “capacity for innovation, its spectacular expansion in recent years and its ability to handle seemingly ever-increasing system load.” The award is given to the company recognized for “excellence in the movement of energy – whether electricity, or the physical transportation of natural gas, coal or oil.” Platts is an international energy information provider and includes a number of trade publications that cover PJM.

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New Stated Rate Plan Begins in January

Beginning Jan. 1, 2007, PJM will implement reduced administrative fees as designed in its stated-rate plan approved by the Federal Energy Regulatory Commission (FERC) which provides members with price predictability and transparency, while increasing the RTO’s accountability to the members

In June 2006, PJM became the only RTO to operate under a system of stated rates to recover the costs of its operations from its members. PJM’s ability to perform effectively within such a system of stated rates reflects the success of its cost-control and productivity initiatives and its ability to manage its costs.

Under the stated-rate system, PJM recovers its administrative costs–the costs of operating the electric system and its wholesale markets–through fixed rates billed to members based on their activity levels.

The stated-rate plan approved by the FERC also mandates a series of reductions in those fixed rates totaling at least 10 percent over the next five years.

Previously, PJM recovered its administrative costs through formula rates, which varied from month to month, depending on expenses. Under stated rates, costs will be managed within the rates.

PJM’s composite administrative rates declined from 48 cents per megawatt-hour in 2003 to 33 cents in 2006 under stated rates, and will continue to decline. The stated-rate plan implements a four-step structure of rate reductions, which provides members with the benefits of the cost efficiencies PJM achieves. A typical residential consumer pays only about $3 a year for the services PJM provides.

In January, the composite rate is 32 cents per megawatt hour (MWh); beginning Jan.1, 2008, 31 cents per MWh; and beginning Jan. 1, 2011, 30 cents per MWh. In 2010, PJM management and the member-elected PJM Finance Committee will discuss whether the rate level in the fourth step needs to be adjusted to collect PJM’s costs and continue to fund a financial reserve.

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FERC Orders

December

• 12.14.2006 Docket Nos. ER06-1218-000, 001 (PDF)
  On December 14, 2006, an Order was issued by the Commission's Chief Administrative Law Judge shortening the time for answers to motions to intervene out-of-time in Docket Nos. ER06-1218-000, 001.
• 12.14.2006 Docket Nos. ER06-1271-003, ER06-954-004, ER06-880-005, ER06-456-008 (PDF)
  On December 14, 2006, the Commission issued an order granting rehearing for further consideration in Docket Nos. ER06-1271-003, et al.
• 12.14.2006 Docket Nos. ER07-20-000, 001 (PDF)
  The Commission issued an Order accepting PJM's OASIS timing Tariff revisions on December 14, 2006. PJM filed to revise the PJM Tariff to amend the timing requirements for Short Term Firm Transmission Service, Non-Firm Transmission Service and Secondary Network Service requests as a Midwest ISO joint and common market initiative. The effective date of these Tariff changes is December 6, 2006, as requested.
• 12.13.2006 Docket Nos. ER06-1218-000, 001 (PDF)
  On December 13, 2006, Karen V. Johnson, Commission Settlement Judge, issued an order scheduling a settlement conference to convene on December 21, 2006 in Docket Nos. ER06-1218-000 and ER06-1218-001.
• 12.08.2006 Docket No. EL06-67-000 (PDF)
  On December 8, 2006, the Commission issued a Notice granting an extension of time for PJM to made a compliance filing to comply with the Commission's September 8, 2006 Order.
• 12.04.2006 Docket No. ER06-765-001 (PDF)
  On December 4, 2006, Chief Administrative Law Judge Wagner issued an order continuing the procedural schedule in suspension until December 22, 2006 in Docket No. ER06-765-001. The extra time is granted to allow the parties, H-P Energy Resources and PJM, to finalize the settlement papers and file them with the Commission.

November

• 11.30.2006 Docket Nos. ER06-1218-000, 001 (PDF)
  On december 30, 2006, the Commission issued an Order of the Chief Judge Appointing a Settlement Judge, Karen V. Johnson, as mutually agreed to by all parties and Scheduling a Settlement Conference for December 13, 2006.
• 11.30.2006 Docket Nos. ER05-6, EL04-135, EL02-111, EL03-212 (PDF)
  On december 30, 2006, the Commission issued a Notice that (1) established a period for filing responses on or before December 15, 2006 to the RTOs' december 20, 2006 motion, and (2) provided an extension of time for filing the cross-border cost allocation proposal for economic transmission projects, as required by the december 2005 Order, that is subject to future action establishing the date for the RTOs to submit this required filing after the period for filing responses to the RTOs' motion has closed.
• 11.30.2006 Docket No. ER07-19-000 (PDF)
  On december 30, 2006, the Commission issued a letter order accepting PJM's submittal of the new Schedule 9 - FINCON in Docket No. ER07-19-000. The Schedule authorizes the PJM Finance Committee to hire outside consultants, specifies the manner in which PJM collects the revenues to pay such consultants, and imposes annual limits on the amount that can be expensed for this purpose.

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December

• 12.18.2006 Docket Nos. ER07-xxx-000, EL06-67-000 (PDF)
  On December 18, 2006, PJM Interconnection, L.L.C. submitted for filing with FERC revised tariff sheets containing revisions to the PJM Open Access Transmission Tariff ("PJM Tariff"). The proposed tariff changes consist of: (1) revisions to Parts I, II, III, and IV and Attachments A, N, N-1, N-2, N-3, O, O-1, P, and S of the PJM Tariff; and (2) a new Part VI and new Attachments EE, FF, and GG. The purpose of these revisions is: (a) to reorganize existing terms and procedures of the PJM Tariff, and (b) to consolidate to the fullest extent feasible in a single, new part of the tariff, the just-mentioned Part VI, all provisions regarding the studies, agreements, and rights that pertain to the various customer-initiated projects and service requests that may result in participant-funded upgrades to the PJM transmission system.
• 12.15.2006 Docket No. ER07-xxx-000 (PDF)
  On December 15, 2006, Wisconsin Electric Power Company ("Wisconsin Electric") and PJM jointly filed a Balancing Authority Operations Coordination Agreement between Wisconsin Electric and PJM. The Agreement is designated as Wisconsin Electric's Rate Schedule FERC No. 117 and PJM's Rate Schedule FERC No. 43. An effective date of February 15, 2007 was requested.
• 12.13.2006 Docket No. RM06-10-001 (PDF)
  On December 13, 2006, in Docket No. RM06-10-001, PJM filed a Motion for Leave to Answer and Answer to the Request of the Electricity Consumers Resource Council for rehearing of the Commission's final rule on PURPA reform issued on October 20, 2006 (Order No. 688). PJM seeks to put in proper context certain statements of PJM at the Commission's workshop on transparency earlier this year that were cited in a request for rehearing.
• 12.13.2006 Docket No. ER06-826-003 (PDF)
  On December 13, 2006, in Docket No. ER06-826-003, PJM submitted a filing in compliance with the Commission's December 5, 2006 order. PJM submitted First Revised Sheet No. 448B as requested and indicated that the sheet did not contain any changes from the sheet initially filed.
• 12.08.2006 Docket No. ER06-1177-000 (PDF)
  On December 8, 2006, in Docket No. ER06-1177-000, in compliance with the Commission's November 9, 2006 Order (117 FERC ? 61, 179), PJM filed revisions to the Option to Build provisions of the PJM Tariff. In accordance with the November 9, 2005 Order, the effective date for these PJM Tariff revisions is August 29, 2006.
• 12.06.2006 Docket No. ER05-6-044 (PDF)
  On December 6, 2006, PJM filed its slides used for the testimony given at the FERC December 6, 2006 technical conference in the PJM/MISO cross border cost allocation proceeding, Docket Nos. ER05-6-044 et al.
• 12.05.2006 Docket Nos. ER06-456-006, ER06-954-002, ER06-1271-001, ER06-880-003 (PDF)
  On December 5, 2006 in Docket Nos. ER06-456-006, ER06-954-002, ER06-1271-001, and ER06-880-003, PJM filed an answer to Commission Trial Staff's Motion for Determination of Scope of the Hearing. This proceeding concerns PJM's RTEP cost allocation filings.
• 12.05.2006 Docket No. ER07-295-000 (PDF)
  On December 5, 2006, PJM filed amendments to Schedule 12 of the Operating Agreement to update the PJM Member List to include new members, delete withdrawn members, and reflect member corporate name changes.
• 12.05.2006 Docket No. ER07-293-000 (PDF)
  On December 05, 2006, PJM Interconnection, L.L.C. ("PJM") submitted for filing, proposed revisions to its Open Access Transmission Tariff ("OATT"). The revision provides that small generation interconnections for generator facilities with a maximum generating capacity of 20 MW or less shall be subject to certain technical requirements and standards which shall be posted on PJM's website and provided in PJM's Manual 14B.
• 12.05.2006 Docket No. ER07-294-000 (PDF)
  On December 5, 2007, PJM filed to revise the Tariff to include Schedule 10-NERC and Schedule 10-RFC, amendments that would permit PJM to collect charges that support the operations of the North American Electric Reliability Corporation and the ReliabilityFirst Corporation. PJM requested waiver of the Commission's 60-day notice requirement to permit these schedules to become effective on January 1, 2007.
• 12.05.2006 Docket Nos. ER05-6-044, EL04-135, EL02-111, EL03-212, ER06-18, ER06-954, ER06-456, ER06-1271 (PDF)
  On December 5, 2005, PJM filed the Statement of Steven R. Herling to support the oral testimony provided at the FERC's December 5, 2006 technical Conference in the PJM/MISO cross border cost allocation proceeding in Docket Nos. ER05-6-044, et al.
• 12.05.2006 Docket No. ER07-246-000 (PDF)
  On December 4, 2006, PJM filed a Motion to Intervene in Docket No. ER07-246, a proceeding which concerns American Electric Power Service Corporation's revisions to the Annual Transmission Rate-AEP East Operating Companies for Network Integration Transmission Service, Attachment H-14 of PJM's Open-Access Transmission Tariff, filed November 22, 2006. The revisions relate to PJM's procedures for allocating certain charges and credits.

November

• 11.30.2006 Docket No. ER06-1343-001 (PDF)
  On November 29, 2006, PJM filed with the Commission a special letter, regarding the Wholesale Market Participation Agreement ("WMPA") 1533 by and among PJM, Masonic Villages of PA and PPL Electric Utilities Corporation ("PPL EU"). The filing updates the previous WMPA filing of August 03, 2006, corrects typographical errors and provides further discussion of jurisdictional matters.

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