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October 17, 2013 Robert A. Weishaar, Jr.

On Site Energy – Interplay With pjm Demand Response Programs . October 17, 2013 Robert A. Weishaar, Jr. Harrisburg, PA – Columbus, OH – State College, PA Lancaster, PA – Washington, DC – Scranton, PA. PJM Demand Side Response.

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October 17, 2013 Robert A. Weishaar, Jr.

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  1. On Site Energy – Interplay With pjm Demand Response Programs October 17, 2013Robert A. Weishaar, Jr. Harrisburg, PA – Columbus, OH – State College, PA Lancaster, PA – Washington, DC – Scranton, PA

  2. PJM Demand Side Response • The purpose of PJM Demand Response is to enable Demand Resources under the direction and control of Curtailment Service Providers to respond to economic prices and/or emergency conditions • Demand Response can participate within the various PJM markets: • Energy • Day Ahead Market • Real Time Market • Ancillary Services • Synchronized Reserve • Regulation • Day Ahead Scheduling Reserve • Capacity • Offer into auction up to 3 years in advance

  3. ENERGY MARKETS - PJMEconomic load response program ("ELRP") • All ELRP participation defined as: • Clearing in the Day-Ahead ("DA") Market • Dispatched by PJM in the Real-Time Market • ELRP participant or CSP must submit load reduction bid offer to PJM • Curtailment must clear in the DA market or be dispatched by PJM in real-time to be eligible for settlement revenue • Load reductions eligible to be paid full LMP if LMP is at or above the Net Benefits Price (a.k.a. threshold price) • Net Benefits Price expected to correlate to energy cost of an efficient combined cycle natural gas plant • Adjusts monthly • Price has ranged from approximately $23.00-$30.00/MWh

  4. ENERGY MARKETS - PJMDefault Customer Baseline • A Customer Baseline ("CBL") is a proxy for what the load would have been absent the load reduction • All ELRP registrations require Customer Base Line ("CBL") certification • All customers must use a CBL with an error (relative root mean square error – "RRMSE") no greater than 20% • CBLs for customers with on-site generation are being determined mostly on a case-by-case basis • ELRP reduction is determined by the CBL minus the meter readings during PJM dispatched curtailment hours

  5. ENERGY MARKETS - ELRPSummary and Caution • ELRP Revenue is determined by CBL Calculation • CBL Calculation represents a moving target • Presents some risk to curtailment amount • Could be manipulated to inflate ELRP revenue • Baseline manipulation viewed by FERC as manipulation of electric energy markets • Potential penalties of $1 million per day per violation • Daily decisions when/if to participate in the ELRP program must not consider impact to future CBLs • No payment for load reduction if LMP is less than Net Benefits Price • Historically, LMP has been greater than the Net Benefits Price about 50% of the time

  6. Ancillary Services Markets • Synchronous Reserve Market • Paid for standby service • Emergency reserve that PJM can call quickly after a large generator suddenly trips off-line • Hourly payment just for being available to respond • 25 – 40 events typically occur annually • Total performance requirement of about 6 hours per year • Must reduce load/increase generation within 10 minutes when ordered by PJM • Requires 1-minute scan rate metering • Data submission within 24 hours • Consequences for non-performance

  7. Ancillary Services Markets • Synchronous Reserve Market • Hourly market participation • Hourly synchronous reserve offer must clear the market to receive payment • Not all hours require PJM to procure Synchronous Reserves from Demand Resources or result in a clearing price greater than $0

  8. Ancillary Services Markets • Regulation Market • Hourly market correcting for constantly occurring small load changes • Requires 5-minute response time • Requires both load reduction and load increase • Sub-metering permitted • Performance not measured based on change to AEP pull • Consequences for non-performance • Cannot simultaneously be participating in the Synchronized Reserves Market

  9. Ancillary Services MarketS • Day Ahead Scheduling Reserve Market ("DASR") • Reserves are additional capacity above the expected load • The purpose of the DASR market is to encourage and incent generation and demand resources to provide the flexible capability to provide 30-minute reserves • If a Resource is called-on in Real-Time, it must respond in 30 minutes • Reserves are scheduled on a day-ahead basis in order to ensure that differences in forecasted loads and forced generator outages do not negatively impact system reliability • The Day-Ahead Scheduling Reserve Requirement is calculated on an annual basis and is set at 6.91% for 2013 • The DASR market clears simultaneously with the DA Energy Market • Limited revenue potential

  10. Interaction of reserve market products • Resources can be capable of providing all three products: • Synchronized Reserve, Regulation, and Day-Ahead Scheduling Reserve • All three cannot be provided simultaneously, only two products, at most

  11. Demand resources in the Capacity Market • Demand Resources can offer curtailment capability as a forward capacity resource three years in advance of delivery year • DR providers are required to provide the cleared demand response amount as capacity during the delivery year and will receive the capacity resource clearing price for this service • Must reduce load when requested by PJM All Call system within 2 hours of notification • Must provide customer-specific compliance and verification information within 45 days after the end of the month in which Load Management event occurred • Can participate in both ELRP and Capacity DR Programs • Note: Many aspects of RPM rules are being proposed to change, particularly those relating to DR

  12. Demand Resources

  13. DR Registrations

  14. Emergency DR Events

  15. RPM Auction Clearing Prices (Annual Product)

  16. RPM Auction clearing prices (Annual Product)

  17. DR Performance Assessments (PENALTIES) • Three penalties are applicable to customers participating in RPM as Demand Resources ("DR") • RPM Commitment Compliance • Load Management Event Compliance • Load Management Test Compliance • PJM penalties applied on pro-rata basis and may result in forfeiture of expected revenue or the forfeiture of expected revenue plus a penalty • DR performance for on-site generation typically measured using Guaranteed Load Drop ("GLD") method

  18. RPM Timetable • A complete listing of RPM activities and dates can be found at: http://pjm.com/~/media/markets-ops/rpm/rpm-auction-info/rpm-auction-schedule.ashx

  19. AnyQuestions? Robert A. Weishaar, Jr. McNees Wallace & Nurick LLC Suite 401 777 N. Capitol Street, NE Washington, DC 20002-4292 202-898-5700 717-260-1765 (fax) rweishaa@mwn.com

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