Exhibit 10(l)



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Amended and Restated

Operating Agreement

of

PJM Interconnection, L.L.C.

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Includes FERC-Approved Revisions As Of February 25, 2002.

OPERATING AGREEMENT

Table of Contents

|1. DEFINITIONS                                                                        | 15                                                                                                            
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|                                                                                      | 1.1 Act.                                                                                                      
|                                                                                      | 1.2 Affiliate.                                                                                                
|                                                                                      | 1.3 Agreement.                                                                                                
|                                                                                      | 1.4 Annual Meeting of the Members.                                                                            
|                                                                                      | 1.5 Board Member.                                                                                             
|                                                                                      | 1.6 Capacity Resource.                                                                                        
|                                                                                      | 1.7 Control Area.                                                                                             
|                                                                                      | 1.8 Electric Distributor.                                                                                     
|                                                                                      | 1.9 Effective Date.                                                                                           
|                                                                                      | 1.10 Emergency.                                                                                               
|                                                                                      | 1.11 End-Use Customer.                                                                                        
|                                                                                      | 1.12 FERC.                                                                                                    
|                                                                                      | 1.13 Finance Committee.                                                                                       
|                                                                                      | 1.14 Generation Owner.                                                                                        
|                                                                                      | 1.15 Good Utility Practice.                                                                                   
|                                                                                      | 1.16 Interconnection.                                                                                         
|                                                                                      | 1.17 LLC.                                                                                                     
|                                                                                      | 1.18 Load Serving Entity.                                                                                     
|                                                                                      | 1.19 Locational Marginal Price.                                                                               
|                                                                                      | 1.20 MAAC.                                                                                                    
|                                                                                      | 1.21 Market Buyer.                                                                                            
|                                                                                      | 1.22 Market Participant.                                                                                      
|                                                                                      | 1.23 Market Seller.                                                                                           
|                                                                                      | 1.24 Member.                                                                                                  
|                                                                                      | 1.25 Members Committee.                                                                                       
|                                                                                      | 1.26 NERC.                                                                                                    
|                                                                                      | 1.27 Office of the Interconnection.                                                                           
|                                                                                      | 1.28 Operating Reserve.                                                                                       
|                                                                                      | 1.29 Original PJM Agreement.                                                                                  
|                                                                                      | 1.30 Other Supplier.                                                                                          
|                                                                                      | 1.31 PJM Board.                                                                                               
|                                                                                      | 1.32 PJM Control Area.                                                                                        
|                                                                                      | 1.33 PJM Dispute Resolution Procedures                                                                        
|                                                                                      | 1.34 PJM Interchange Energy Market.                                                                           
|                                                                                      | 1.35 PJM Manuals.                                                                                             
|                                                                                      | 1.36 PJM Tariff.                                                                                              
|                                                                                      | 1.37 Planning Period.                                                                                         
|                                                                                      | 1.38 President.                                                                                               
|                                                                                      | 1.39 Related Parties.                                                                                         
|                                                                                      | 1.40 Reliability Assurance Agreement                                                                          
|                                                                                      | 1.41 Sector Votes.                                                                                            
|                                                                                      | 1.42 State.                                                                                                   
|                                                                                      | 1.43 System.                                                                                                  
|                                                                                      | 1.44 Transmission Facilities.                                                                                 
|                                                                                      | 1.45 Transmission Owner.                                                                                      
|                                                                                      | 1.46 Transmission Owners Agreement.                                                                           
|                                                                                      | 1.47 User Group.                                                                                              
|                                                                                      | 1.48 Voting Member                                                                                            
|                                                                                      | 1.49 Weighted Interest.                                                                                       
|2. FORMATION, NAME; PLACE OF BUSINESS                                                 | 21                                                                                                            
|                                                                                      | 2.1 Formation of LLC; Certificate of Formation.                                                               
|                                                                                      | 2.2 Name of LLC.                                                                                              
|                                                                                      | 2.3 Place of Business.                                                                                        
|                                                                                      | 2.4 Registered Office and Registered Agent.                                                                   
|3. PURPOSES AND POWERS OF LLC                                                         | 22                                                                                                            
|                                                                                      | 3.1 Purposes.                                                                                                 
|                                                                                      | 3.2 Powers.                                                                                                   
|4. EFFECTIVE DATE AND TERMINATION                                                     | 23                                                                                                            
|                                                                                      | 4.1 Effective Date and Termination.                                                                           
|                                                                                      | 4.2 Governing Law.                                                                                            
|5. WORKING CAPITAL AND CAPITAL CONTRIBUTIONS                                          | 23                                                                                                            
|                                                                                      | 5.1 Funding of Working Capital and Capital Contributions.                                                     
|                                                                                      | 5.2 Contributions to Association.                                                                             
|6. TAX STATUS AND DISTRIBUTIONS                                                       | 24                                                                                                            
|                                                                                      | 6.1 Tax Status.                                                                                               
|                                                                                      | 6.2 Return of Capital Contributions.                                                                          
|                                                                                      | 6.3 Liquidating Distribution.                                                                                 
|7. PJM BOARD                                                                          | 25                                                                                                            
|                                                                                      | 7.1 Composition.                                                                                              
|                                                                                      | 7.2 Qualifications.                                                                                           
|                                                                                      | 7.3 Term of Office.                                                                                           
|                                                                                      | 7.4 Quorum.                                                                                                   
|                                                                                      | 7.5 Operating and Capital Budgets.                                                                            
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|                                                                                      | 7.6 By-laws.                                                                                                  
|                                                                                      | 7.7 Duties and Responsibilities of the PJM Board.                                                             
|8. MEMBERS COMMITTEE                                                                  | 29                                                                                                            
|                                                                                      | 8.1 Sectors.                                                                                                  
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|                                                                                      | 8.2 Representatives.                                                                                          
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|                                                                                      | 8.3 Meetings.                                                                                                 
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|                                                                                      | 8.4 Manner of Acting.                                                                                         
|                                                                                      | 8.5 Chair and Vice Chair of the Members Committee.                                                            
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|                                                                                      | 8.6 Other Committees.                                                                                         
|                                                                                      | 8.7 User Groups.                                                                                              
|                                                                                      | 8.8 Powers of the Members Committee.                                                                          
|9. OFFICERS                                                                           | 33                                                                                                            
|                                                                                      | 9.1 Election and Term.                                                                                        
|                                                                                      | 9.2 President.                                                                                                
|                                                                                      | 9.3 Secretary.                                                                                                
|                                                                                      | 9.4 Treasurer.                                                                                                
|                                                                                      | 9.5 Renewal of Officers; Vacancies.                                                                           
|                                                                                      | 9.6 Compensation.                                                                                             
|10. OFFICE OF THE INTERCONNECTION.                                                    | 35                                                                                                            
|                                                                                      | 10.1 Establishment.                                                                                           
|                                                                                      | 10.2 Processes and Organization.                                                                              
|                                                                                      | 10.3 Confidential Information.                                                                                
|                                                                                      | 10.4 Duties and Responsibilities.                                                                             
|11. MEMBERS                                                                           | 37                                                                                                            
|                                                                                      | 11.1 Management Rights.                                                                                       
|                                                                                      | 11.2 Other Activities.                                                                                        
|                                                                                      | 11.3 Member Responsibilities.                                                                                 
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|                                                                                      | 11.3.2 Facilities Planning and Operation.                                                                     
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|                                                                                      | 11.4 Regional Transmission Expansion Planning Protocol.                                                       
|                                                                                      | 11.5 Member Right to Petition.                                                                                
|                                                                                      | 11.6 Membership Requirements.                                                                                 
|12. TRANSFERS OF MEMBERSHIP INTEREST                                                  | 42                                                                                                            
|13. INTERCHANGE                                                                       | 42                                                                                                            
|                                                                                      | 13.1 Interchange Arrangements with Non-Members.                                                               
|                                                                                      | 13.2 Energy Market.                                                                                           
|14. METERING                                                                          | 43                                                                                                            
|                                                                                      | 14.1 Installation, Maintenance and Reading of Meters.                                                         
|                                                                                      | 14.2 Metering Procedures.                                                                                     
|                                                                                      | 14.3 Integrated Megawatt-Hours                                                                                
|                                                                                      | 14.4 Meter Locations.                                                                                         
|15. ENFORCEMENT OF OBLIGATIONS                                                        | 43                                                                                                            
|                                                                                      | 15.1 Failure to Meet Obligations.                                                                             
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|                                                                                      | 15.2 Enforcement of Obligations.                                                                              
|                                                                                      | 15.3 Obligations to a Member in Default.                                                                      
|                                                                                      | 15.4 Obligations of a Member in Default.                                                                      
|                                                                                      | 15.5 No Implied Waiver.                                                                                       
|16. LIABILITY AND INDEMNITY                                                           | 46                                                                                                            
|                                                                                      | 16.1 Members.                                                                                                 
|                                                                                      | 16.2 LLC Indemnified Parties.                                                                                 
|                                                                                      | 16.3 Worker's Compensation Claims.                                                                            
|                                                                                      | 16.4 Limitation of Liability.                                                                                 
|                                                                                      | 16.5 Resolution of Disputes.                                                                                  
|                                                                                      | 16.6 Gross Negligence or Willful Misconduct.                                                                  
|                                                                                      | 16.7 Insurance.                                                                                               
|17. MEMBER REPRESENTATIONS, WARRANTIES AND COVENANTS                                  | 48                                                                                                            
|                                                                                      | 17.1 Representations and Warranties.                                                                          
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|                                                                                      | 17.2 Municipal Electric Systems.                                                                              
|                                                                                      | 17.3 Survival.                                                                                                
|18. MISCELLANEOUS PROVISIONS                                                          | 50                                                                                                            
|                                                                                      | 18.1 [Reserved]                                                                                               
|                                                                                      | 18.2 Fiscal and Taxable Year.                                                                                 
|                                                                                      | 18.3 Reports.                                                                                                 
|                                                                                      | 18.4 Bank Accounts; Checks, Notes and Drafts.                                                                 
|                                                                                      | 18.5 Books and Records.                                                                                       
|                                                                                      | 18.6 Amendment.                                                                                               
|                                                                                      | 18.7 Interpretation.                                                                                          
|                                                                                      | 18.8 Severability.                                                                                            
|                                                                                      | 18.9 Force Majeure.                                                                                           
|                                                                                      | 18.10 Further Assurances.                                                                                     
|                                                                                      | 18.11 Seal.                                                                                                   
|                                                                                      | 18.12 Counterparts.                                                                                           
|                                                                                      | 18.13 Costs of Meetings.                                                                                      
|                                                                                      | 18.14 Notice.                                                                                                 
|                                                                                      | 18.15 Headings.                                                                                               
|                                                                                      | 18.16 No Third-Party Beneficiaries.                                                                           
|                                                                                      | 18.17 Confidentiality.                                                                                        
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|                                                                                      | 18.18 Termination and Withdrawal.                                                                             
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|SCHEDULE 1 - PJM INTERCHANGE ENERGY MARKET                                            | 57                                                                                                            
|1. MARKET OPERATIONS                                                                  | 57                                                                                                            
|                                                                                      | 1.1 Introduction.                                                                                             
|                                                                                      | 1.2 Cost-based Offers.                                                                                        
|                                                                                      | 1.3 Definitions.                                                                                              
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|                                                                                      | 1.3.38 Transmission Planned Outage.                                                                           
|                                                                                      | 1.4 Market Buyers.                                                                                            
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|                                                                                      | 1.6 Office of the Interconnection.                                                                            
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|                                                                                      | 1.7 General.                                                                                                  
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|                                                                                      | 1.8 Selection, Scheduling and Dispatch Procedure Adjustment Process.                                          
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|                                                                                      | 1.9 Prescheduling.                                                                                            
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|                                                                                      | 1.10 Scheduling.                                                                                              
|                                                                                      | 1.10.1 General                                                                                                
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|                                                                                      | 1.11 Dispatch.                                                                                                
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|                                                                                      | 1.12 Dynamic Scheduling                                                                                       
|2. CALCULATION OF LOCATIONAL MARGINAL PRICES                                          | 91                                                                                                            
|                                                                                      | 2.1 Introduction.                                                                                             
|                                                                                      | 2.2 General.                                                                                                  
|                                                                                      | 2.3 Determination of System Conditions Using the State Estimator.                                             
|                                                                                      | 2.4 Determination of Energy Offers Used in Calculating Real-time Prices.                                      
|                                                                                      | 2.5 Calculation of Real-time Prices.                                                                          
|                                                                                      | 2.6 Calculation of Day-ahead Prices                                                                           
|                                                                                      | 2.7 Performance Evaluation.                                                                                   
|3. ACCOUNTING AND BILLING                                                             | 94                                                                                                            
|                                                                                      | 3.1 Introduction.                                                                                             
|                                                                                      | 3.2 Market Buyers.                                                                                            
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|                                                                                      | 3.3 Market Sellers.                                                                                           
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|                                                                                      | 3.4 Transmission Customers.                                                                                   
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|                                                                                      | 3.5 Other Control Areas.                                                                                      
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|                                                                                      | 3.6 Metering Reconciliation.                                                                                  
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|4. RATE TABLE                                                                         | 107                                                                                                           
|                                                                                      | 4.1 Offered Price Rates.                                                                                      
|                                                                                      | 4.2 Transmission Losses.                                                                                      
|                                                                                      | 4.3 Emergency Energy Purchases.                                                                               
|5. CALCULATION OF TRANSMISSION CONGESTION CHARGES AND CREDITS                         | 107                                                                                                           
|                                                                                      | 5.1 Transmission Congestion Charge Calculation                                                                
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|                                                                                      | 5.2 Transmission Congestion Credit Calculation.                                                               
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|                                                                                      | 5.3 Unscheduled Transmission Service (Loop Flow)                                                              
|6. "MUST-RUN" FOR RELIABILITY GENERATION                                              | 112                                                                                                           
|                                                                                      | 6.1 Introduction                                                                                              
|                                                                                      | 6.2 Identification of Facility Outages                                                                        
|                                                                                      | 6.3 Dispatch for Local Reliability                                                                            
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|                                                                                      | 6.4 Price Caps                                                                                                
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|7. FIXED TRANSMISSION RIGHTS AUCTIONS                                                 | 114                                                                                                           
|                                                                                      | 7.1 Auctions of Fixed Transmission Rights                                                                     
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|                                                                                      | 7.2 Fixed Transmission Rights Characteristics                                                                 
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|                                                                                      | 7.3 Auction Procedures                                                                                        
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|                                                                                      | 7.4 Simultaneous Feasibility                                                                                  
|SCHEDULE 2 - COMPONENTS OF COST                                                       | 120                                                                                                           
|SCHEDULE 2 -- EXHIBIT A                                                               | 121                                                                                                           
|SCHEDULE 3 - ALLOCATION OF THE COST AND EXPENSES OF THE OFFICE OF THE INTERCONNECTION | 123                                                                                                           
|SCHEDULE 4 - STANDARD FORM OF AGREEMENT TO BECOME A MEMBER OF THE LLC                 | 124                                                                                                           
|SCHEDULE 5 - PJM DISPUTE RESOLUTION PROCEDURES                                        | 126                                                                                                           
|1. DEFINITIONS                                                                        | 126                                                                                                           
|                                                                                      | 1.1 Alternate Dispute Resolution Committee.                                                                   
|                                                                                      | 1.2 MAAC Dispute Resolution Committee.                                                                        
|                                                                                      | 1.3 Related PJM Agreements.                                                                                   
|2. PURPOSES AND OBJECTIVES                                                            | 126                                                                                                           
|                                                                                      | 2.1 Common and Uniform Procedures.                                                                            
|                                                                                      | 2.2 Interpretation.                                                                                           
|3. NEGOTIATION AND MEDIATION                                                          | 127                                                                                                           
|                                                                                      | 3.1 When Required.                                                                                            
|                                                                                      | 3.2 Procedures.                                                                                               
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|                                                                                      | 3.3 Costs.                                                                                                    
|4. ARBITRATION                                                                        | 129                                                                                                           
|                                                                                      | 4.1 When Required.                                                                                            
|                                                                                      | 4.2 Binding Decision.                                                                                         
|                                                                                      | 4.3 Initiation.                                                                                               
|                                                                                      | 4.4 Selection of Arbitrator(s).                                                                               
|                                                                                      | 4.5 Procedures.                                                                                               
|                                                                                      | 4.6 Summary Disposition and Interim Measures.                                                                 
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|                                                                                      | 4.7 Discovery of Facts.                                                                                       
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|                                                                                      | 4.8 Evidentiary Hearing.                                                                                      
|                                                                                      | 4.9 Confidentiality.                                                                                          
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|                                                                                      | 4.10 Timetable.                                                                                               
|                                                                                      | 4.11 Advisory Interpretations.                                                                                
|                                                                                      | 4.12 Decisions.                                                                                               
|                                                                                      | 4.13 Costs.                                                                                                   
|                                                                                      | 4.14 Enforcement.                                                                                             
|5. ALTERNATE DISPUTE RESOLUTION COMMITTEE                                             | 134                                                                                                           
|5.1 Membership.                                                                       | 134                                                                                                           
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|                                                                                      | 5.2 Voting Requirements.                                                                                      
|                                                                                      | 5.3 Officers.                                                                                                 
|                                                                                      | 5.4 Meetings.                                                                                                 
|                                                                                      | 5.5 Responsibilities.                                                                                         
|SCHEDULE 6 - REGIONAL TRANSMISSION EXPANSION PLANNING PROTOCOL                        | 136                                                                                                           
|1. REGIONAL TRANSMISSION EXPANSION PLANNING PROTOCOL                                  | 136                                                                                                           
|                                                                                      | 1.1 Purpose and Objectives                                                                                    
|                                                                                      | 1.2 Conformity with NERC and MAAC Criteria                                                                    
|                                                                                      | 1.3 Establishment of Committees                                                                               
|                                                                                      | 1.4 Contents of the Regional Transmission Expansion Plan                                                      
|                                                                                      | 1.5 Procedure for Development of the Regional Transmission Expansion Plan                                     
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|                                                                                      | 1.6 Approval of the Final Regional Transmission Expansion Plan                                                
|                                                                                      | 1.7 Obligation to Build                                                                                       
|                                                                                      | 1.8 Relationship to the PJM Control Area Open Access Transmission PJM Tariff                                  
|SCHEDULE 7 - UNDERFREQUENCY RELAY OBLIGATIONS AND CHARGES                             | 142                                                                                                           
|1. UNDERFREQUENCY RELAY OBLIGATION                                                    | 142                                                                                                           
|                                                                                      | 1.1 Application.                                                                                              
|                                                                                      | 1.2 Obligations.                                                                                              
|2. UNDERFREQUENCY RELAY CHARGES                                                       | 142                                                                                                           
|3. DISTRIBUTION OF UNDERFREQUENCY RELAY CHARGES                                       | 143                                                                                                           
|                                                                                      | 3.1 Share of Charges.                                                                                         
|                                                                                      | 3.2 Allocation by the Office of the Interconnection.                                                          
|SCHEDULE 8 -DELEGATION OF RELIABILITY RESPONSIBILITIES                                | 144                                                                                                           
|1. DELEGATION                                                                         | 144                                                                                                           
|2. NEW PARTIES                                                                        | 144                                                                                                           
|3. IMPLEMENTATION OF RELIABILITY ASSURANCE AGREEMENT.                                 | 144                                                                                                           
|SCHEDULE 9 - EMERGENCY PROCEDURE CHARGES                                              | 146                                                                                                           
|1. EMERGENCY PROCEDURE CHARGE                                                         | 146                                                                                                           
|2. DISTRIBUTION OF EMERGENCY PROCEDURE CHARGES                                        | 146                                                                                                           
|                                                                                      | 2.1 Complying Parties.                                                                                        
|                                                                                      | 2.2 All Parties.                                                                                              
|SCHEDULE 10 - RESERVED                                                                | 147                                                                                                           
|SCHEDULE 11 - PJM CAPACITY CREDIT MARKETS                                             | 148                                                                                                           
|1. PURPOSES AND OBJECTIVES                                                            | 148                                                                                                           
|                                                                                      | 1.1 PJM Capacity Credit Markets                                                                               
|                                                                                      | 1.2 Voluntary Use of PJM Capacity Credit Market                                                               
|                                                                                      | 1.3 Use of Capacity Credits                                                                                   
|2. DEFINITIONS                                                                        | 148                                                                                                           
|                                                                                      | 2.1 [Reserved.]                                                                                               
|                                                                                      | 2.2 Buy Bid                                                                                                   
|                                                                                      | 2.3 Capacity Credit                                                                                           
|                                                                                      | 2.4 Capacity Credit Market Implementation Date                                                                
|                                                                                      | 2.5 Capacity Resources                                                                                        
|                                                                                      | 2.6 Fixed Block                                                                                               
|                                                                                      | 2.7 Holiday                                                                                                   
|                                                                                      | 2.8 PJM Capacity Credit Market                                                                                
|                                                                                      | 2.9 PJM Daily Capacity Credit Market                                                                          
|                                                                                      | 2.10 PJM Monthly Capacity Credit Market                                                                       
|                                                                                      | 2.11 Sell Offer                                                                                               
|                                                                                      | 2.12 Unforced Capacity                                                                                        
|                                                                                      | 2.13 Up-To Block                                                                                              
|3. PARTICIPATION IN THE PJM CAPACITY CREDIT MARKET                                    | 150                                                                                                           
|                                                                                      | 3.1 Eligibility                                                                                               
|                                                                                      | 3.2 Effect of Withdrawal                                                                                      
|4. RESPONSIBILITIES OF THE OFFICE OF THE INTERCONNECTION                              | 150                                                                                                           
|                                                                                      | 4.1 Operation of the PJM Capacity Credit Market                                                               
|                                                                                      | 4.2 Records and Reports                                                                                       
|5. GENERAL PROVISIONS                                                                 | 151                                                                                                           
|                                                                                      | 5.1 Market Sellers                                                                                            
|                                                                                      | 5.2 Market Buyers                                                                                             
|                                                                                      | 5.3 Agents                                                                                                    
|                                                                                      | 5.4 General Obligations of Market Participants                                                                
|                                                                                      | 5.5 Relationship of Capacity Credits to Capacity Obligations Imposed under the Reliability Assurance Agreement
|                                                                                      | 5.6 Deficiency Charges                                                                                        
|                                                                                      | 5.7 Fixed Transmission Rights                                                                                 
|                                                                                      | 5.8 Confidentiality                                                                                           
|6. OPERATION OF THE PJM CAPACITY CREDIT MARKETS                                       | 152                                                                                                           
|                                                                                      | 6.1 Content of Sell Offers                                                                                    
|                                                                                      |                                                                                                               
|                                                                                      |                                                                                                               
|                                                                                      |                                                                                                               
|                                                                                      | 6.2 Content of Buy Bids                                                                                       
|                                                                                      | 6.3 Submission of Sell Offers and Buy Bids                                                                    
|                                                                                      | 6.4 Conduct of PJM Capacity Credit Markets                                                                    
|                                                                                      |                                                                                                               
|                                                                                      |                                                                                                               
|                                                                                      | 6.5 Market Clearing Procedures                                                                                
|                                                                                      | 6.6 Settlement Procedures                                                                                     
|                                                                                      | 6.7 Billing                                                                                                   
|                                                                                      | 6.8 Time Standard                                                                                             
|7. EFFECTIVE DATE AND TRANSITION                                                      | 157                                                                                                           
|                                                                                      | 7.1 Effective Date                                                                                            
|                                                                                      | 7.2 Transition Provisions                                                                                     
|                                                                                      | 7.3 Capacity Credit                                                                                           
|                                                                                      | 7.4 Mandatory Sell Offers and Buy Bids                                                                        





Amended and Restated

Operating Agreement

of

PJM Interconnection, L.L.C.



This Amended and Restated Operating Agreement
  of PJM Interconnection, L.L.C., dated as of this 2nd day of June,
  1997, amends and restates as of the Effective Date the Operating Agreement of
  PJM Interconnection, L.L.C. filed with the FERC on April 2, 1997, as amended.

WHEREAS, certain of the Members have
  previously entered into an agreement, originally dated September 26, 1956,
  as amended and supplemented up to and including December 31, 1996, stating
  "their respective rights and obligations with respect to the coordinated operation
  of their electric supply systems and the interchange of electric capacity and
  energy among their systems" (such agreement as amended and supplemented being
  referred to as the "Original PJM Agreement"), and which coordinated operations
  and interchange came to be known as the PJM Interconnection (the "Interconnection");
  and

WHEREAS, pursuant to a resolution
  of June 16, 1993, an unincorporated association comprised of the parties to
  the Original PJM Agreement was formed for the purpose of implementation of the
  Original PJM Agreement as it then existed and as it subsequently has been amended
  and supplemented, such association being known as the "PJM Interconnection Association";
  and

WHEREAS, because of changes in federal
  law and policy, the Original PJM Agreement, together with other documents and
  agreements, was amended, restated and submitted to FERC on December 31, 1996
  to restructure fundamental aspects of the operation of the Interconnection;
  and

WHEREAS, so that the provisions of
  the Original PJM Agreement could be placed into effect consistent with a February
  28, 1997 order of FERC, including those provisions related to the governance
  of the Interconnection, the parties to the Original PJM Agreement, along with
  the other interested parties, approved the conversion of the PJM Interconnection
  Association into the LLC pursuant to the provisions of the Delaware Limited
  Liability Company Act, as amended (the "Delaware LLC Act"), pursuant to a Certificate
  of Formation (the "Certificate of Formation") and a Certificate of Conversion
  (the "Certificate of Conversion"), each filed with the Delaware Secretary of
  State (the "Recording Office") on March 31, 1997; and

WHEREAS, the Members wish to amend
  and restate the Operating Agreement of PJM Interconnection, L.L.C. adopted in
  connection with the formation of the LLC and as in effect immediately prior
  to the Effective Date in the form set forth below; and

WHEREAS, the Members intend to form
  an Independent System Operator in accordance with the regulations of the Federal
  Energy Regulatory Commission; and

Now, therefore, in consideration of the foregoing,
  and of the covenants and agreements hereinafter set forth, the Members hereby
  agree as follows:

1.   DEFINITIONS

Unless the context otherwise specifies or
  requires, capitalized terms used in this Agreement shall have the respective
  meanings assigned herein or in the Schedules hereto for all purposes of this
  Agreement (such definitions to be equally applicable to both the singular and
  the plural forms of the terms defined). Unless otherwise specified, all references
  herein to Sections, Schedules, Exhibits or Appendices are to Sections, Schedules,
  Exhibits or Appendices of this Agreement. As used in this Agreement:

1.1   Act.

"Act" shall mean the Delaware Limited Liability
  Company Act, Title 6, §§ 18-101 to 18-1109 of the Delaware Code.

1.2   Affiliate.

"Affiliate" shall mean any two or more entities,
  one of which controls the other or that are under common control. "Control"
  shall mean the possession, directly or indirectly, of the power to direct the
  management or policies of an entity. Ownership of publicly-traded equity securities
  of another entity shall not result in control or affiliation for purposes of
  this Agreement if the securities are held as an investment, the holder owns
  (in its name or via intermediaries) less than 10 percent of the outstanding
  securities of the entity, the holder does not have representation on the entity's
  board of directors (or equivalent managing entity) or vice versa, and the holder
  does not in fact exercise influence over day-to-day management decisions. Unless
  the contrary is demonstrated to the satisfaction of the Members Committee, control
  shall be presumed to arise from the ownership of or the power to vote, directly
  or indirectly, ten percent or more of the voting securities of such entity.

1.3   Agreement.

"Agreement" shall mean this Amended and Restated
  Operating Agreement of PJM Interconnection, L.L.C., including all Schedules,
  Exhibits, Appendices, addenda or supplements hereto, as amended from time to
  time.

1.4   Annual Meeting of
  the Members.

"Annual Meeting of the Members" shall mean
  the meeting specified in Section 8.3.1 of this Agreement.

1.5   Board Member.

"Board Member" shall mean a member of the
  PJM Board.

1.6   Capacity Resource.

"CapacityResource" shall mean the
  net capacity from owned or contracted for generating facilities all of which
  (i) are accredited to a Load Serving Entity pursuant to the procedures set forth
  in the Reliability Assurance Agreement and (ii) are committed to satisfy that
  Load Serving Entity's obligations under the Reliability Assurance Agreement
  and this Agreement.

1.7   Control Area.

"Control Area" shall mean an electric power
  system or combination of electric power systems bounded by interconnection metering
  and telemetry to which a common automatic generation control scheme is applied
  in order to:

(a)   match the power output
  of the generators within the electric power system(s) and energy purchased from
  entities outside the electric power system(s), with the load within the electric
  power system(s);

(b)   maintain scheduled interchange
  with other Control Areas, within the limits of Good Utility Practice;

(c)   maintain the frequency
  of the electric power system(s) within reasonable limits in accordance with
  Good Utility Practice and the criteria of NERC and the applicable regional reliability
  council of NERC;

(d)   maintain power flows
  on transmission facilities within appropriate limits to preserve reliability;
  and

(e)   provide sufficient generating
  capacity to maintain operating reserves in accordance with Good Utility Practice.

1.8   Electric Distributor.

"Electric Distributor" shall mean a Member
  that owns or leases with rights equivalent to ownership electric distribution
  facilities that are used to provide electric distribution service to electric
  load within the PJM Control Area.

1.9   Effective Date.

"Effective Date" shall mean August 1, 1997,
  or such later date that FERC permits this Agreement to go into effect.

1.10   Emergency.

"Emergency" shall mean: (i) an abnormal system
  condition requiring manual or automatic action to maintain system frequency,
  or to prevent loss of firm load, equipment damage, or tripping of system elements
  that could adversely affect the reliability of an electric system or the safety
  of persons or property; or (ii) a fuel shortage requiring departure from normal
  operating procedures in order to minimize the use of such scarce fuel; or (iii)
  a condition that requires implementation of emergency procedures as defined
  in the PJM Manuals.

1.11   End-Use Customer.

"End-Use Customer" shall mean a Member that
  is a retail end-user of electricity within the PJM Control Area.

1.12   FERC.

"FERC" shall mean the Federal Energy Regulatory
  Commission or any successor federal agency, commission or department exercising
  jurisdiction over this Agreement.

1.13   Finance Committee.

"Finance Committee" shall mean the body formed
  pursuant to Section 7.5.1 of this Agreement.

1.14   Generation Owner.

"Generation Owner" shall mean a Member that
  owns or leases with rights equivalent to ownership facilities for the generation
  of electric energy that are located within the PJM Control Area. Purchasing
  all or a portion of the output of a generation facility shall not be sufficient
  to qualify a Member as a Generation Owner.

1.15   Good Utility Practice.

"Good Utility Practice" shall mean any of
  the practices, methods and acts engaged in or approved by a significant portion
  of the electric utility industry during the relevant time period, or any of
  the practices, methods and acts which, in the exercise of reasonable judgment
  in light of the facts known at the time the decision was made, could have been
  expected to accomplish the desired result at a reasonable cost consistent with
  good business practices, reliability, safety and expedition. Good Utility Practice
  is not intended to be limited to the optimum practice, method, or act to the
  exclusion of all others, but rather is intended to include acceptable practices,
  methods, or acts generally accepted in the region.

1.16   Interconnection.

"Interconnection" shall mean the coordinated
  operations and interchange resulting from the Original PJM Agreement as continued
  in this Agreement.

1.17   LLC.

"LLC" shall mean PJM Interconnection, L.L.C.,
  a Delaware limited liability company.

1.18   Load Serving Entity.

"Load Serving Entity" shall mean an entity,
  including a load aggregator or power marketer, (1) serving end-users within
  the PJM Control Area, and (2) that has been granted the authority or has an
  obligation pursuant to state or local law, regulation or franchise to sell electric
  energy to end-users located within the PJM Control Area, or the duly designated
  agent of such an entity.

1.19   Locational Marginal
  Price.

"Locational Marginal Price" shall mean the
  hourly integrated market clearing marginal price for energy at the location
  the energy is delivered or received, calculated as specified in Section 2 of
  Schedule 1 of this Agreement.

1.20   MAAC.

"MAAC" shall mean the Mid-Atlantic Area Council,
  a reliability council under §  202 of the Federal Power Act established pursuant
  to the MAAC Agreement dated August 1, 1994, or any successor thereto.

1.21   Market Buyer.

"Market Buyer" shall mean a Member that has
  met reasonable creditworthiness standards established by the Office of the Interconnection
  and that is otherwise able to make purchases in the PJM Interchange Energy Market
  or PJM Capacity Credit Market.

1.22   Market Participant.

"Market Participant" shall mean a Market
  Buyer or a Market Seller, or both.

1.23   Market Seller.

"Market Seller" shall mean a Member that
  has met reasonable creditworthiness standards established by the Office of the
  Interconnection and that is otherwise able to make sales in the PJM Interchange
  Energy Market or PJM Capacity Credit Market.

1.24   Member.

"Member" shall mean an entity that satisfies
  the requirements of Section 11.6 of this Agreement and that (i) is a member
  of the LLC immediately prior to the Effective Date, or (ii) has executed an
  Additional Member Agreement in the form set forth in Schedule 4 hereof.

1.25   Members Committee.

"Members Committee" shall mean the committee
  specified in Section 8 of this Agreement composed of representatives of all
  the Members.

1.26   NERC.

"NERC" shall mean the North American Electric
  Reliability Council, or any successor thereto.

1.27   Office of the Interconnection.

"Office of the Interconnection" shall mean
  the employees and agents of the LLC engaged in implementation of this Agreement
  and administration of the PJM Tariff, subject to the supervision and oversight
  of the PJM Board acting pursuant to this Agreement.

1.28   Operating Reserve.

"Operating Reserve" shall mean the amount
  of generating capacity scheduled to be available for a specified period of an
  Operating Day to ensure the reliable operation of the PJM Control Area, as specified
  in the PJM Manuals.

1.29   Original PJM Agreement.

"Original PJM Agreement" shall mean that
  certain agreement between certain of the Members, originally dated September
  26, 1956, and as amended and supplemented up to and including December 31, 1996,
  relating to the coordinated operation of their electric supply systems and the
  interchange of electric capacity and energy among their systems.

1.30   Other Supplier.

"Other Supplier" shall mean a Member that
  is (i) engaged in buying, selling or transmitting electric energy in or through
  the Interconnection or has a good faith intent to do so, and (ii) is not a Generation
  Owner, Electric Distributor, Transmission Owner or End-Use Customer.

1.31   PJM Board.

"PJM Board" shall mean the Board of Managers
  of the LLC, acting pursuant to this Agreement.

1.32   PJM Control Area.

"PJM Control Area" shall mean the Control
  Area recognized by NERC as the PJM Control Area.

1.33   PJM Dispute Resolution
  Procedures.

"PJM Dispute Resolution Procedures" shall
  mean the procedures for the resolution of disputes set forth in Schedule 5 of
  this Agreement.

1.34   PJM Interchange
  Energy Market.

"PJM Interchange Energy Market" shall mean
  the regional competitive market administered by the Office of the Interconnection
  for the purchase and sale of spot electric energy at wholesale in interstate
  commerce and related services established pursuant to Schedule 1 to this Agreement.

1.35   PJM Manuals.

"PJM Manuals" shall mean the instructions,
  rules, procedures and guidelines established by the Office of the Interconnection
  for the operation, planning, and accounting requirements of the PJM Control
  Area and the PJM Interchange Energy Market.

1.36   PJM Tariff.

"PJM Tariff" shall mean the PJM Open Access
  Transmission Tariff providing transmission service within the PJM Control Area,
  including any schedules, appendices, or exhibits attached thereto, as in effect
  from time to time.

1.37   Planning Period.

"Planning Period" shall initially mean the
  12 months beginning June 1 and extending through May 31 of the following year,
  or such other period established by the Reliability Committee established under
  the Reliability Assurance Agreement.

1.38   President.

"President" shall have the meaning specified
  in Section 9.2.

1.39   Related Parties.

"Related Parties" shall mean, solely for
  purposes of the governance provisions of this Agreement: (i) any generation
  and transmission cooperative and one of its distribution cooperative members;
  and (ii) any joint municipal agency and one of its members. For purposes of
  this Agreement, representatives of state or federal government agencies shall
  not be deemed Related Parties with respect to each other, and a public body's
  regulatory authority, if any, over a Member shall not be deemed to make it a
  Related Party with respect to that Member.

1.40   Reliability Assurance
  Agreement.

"Reliability Assurance Agreement" shall mean
  that certain agreement, dated June 2, 1997 and as amended from time to time,
  establishing obligations, standards and procedures for maintaining the reliable
  operation of the PJM Control Area.

1.41   Sector Votes.

"Sector Votes" shall mean the affirmative
  and negative votes of each sector on the Members Committee, as specified in
  Section 8.4.

1.42   State.

"State" shall mean the District of Columbia
  and any State or Commonwealth of the United States.

1.42A   State Consumer
  Advocate.

"State Consumer Advocate" shall mean a legislatively
  created office from any State, all or any part of the territory of which is
  within the PJM Control Area, and the District of Columbia established, inter
  alia, for the purpose of representing the interests of energy consumers before
  the utility regulatory commissions of such states and the District of Columbia
  and the FERC.

1.43   System.

"System" shall mean
  the interconnected electric supply system of a Member and its interconnected
  subsidiaries exclusive of facilities which it may own or control outside of
  the PJM Control Area. Each Member may include in its system the electric supply
  systems of any party or parties other than Members which are within the PJM
  Control Area, provided its interconnection agreements with such other party
  or parties do not conflict with such inclusion.

1.44   Transmission Facilities.

"Transmission Facilities" shall mean facilities
  that: (i) are within the PJM Control Area; (ii) meet the definition of transmission
  facilities pursuant to FERC's Uniform System of Accounts or have been classified
  as transmission facilities in a ruling by FERC addressing such facilities; and
  (iii) have been demonstrated to the satisfaction of the Office of the Interconnection
  to be integrated with the PJM Control Area transmission system and integrated
  into the planning and operation of the PJM Control Area to serve all of the
  power and transmission customers within the PJM Control Area.

1.45   Transmission Owner.

"Transmission Owner" shall mean a Member
  that owns or leases with rights equivalent to ownership Transmission Facilities.
  Taking transmission service shall not be sufficient to qualify a Member as a
  Transmission Owner.

1.46   Transmission Owners
  Agreement.

"Transmission Owners Agreement" shall mean
  that certain agreement, dated June 2, 1997 and as amended from time to time,
  by and among Transmission Owners in the PJM Control Area providing for an open-access
  transmission tariff in the PJM Control Area, and for other purposes.

1.47   User Group.

"User Group" shall mean a group formed pursuant
  to Section 8.7 of this Agreement.

1.48   Voting Member.

"Voting Member" shall mean (i) a Member as
  to which no other Member is an Affiliate or Related Party, or (ii) a Member
  together with any other Members as to which it is an Affiliate or Related Party.

1.49   Weighted Interest.

"Weighted Interest" shall be equal to (0.1(1/N)
  + 0.5(B/C) + 0.2(D/E) + 0.2(F/G)), where:

N =   the
  total number of Members excluding ex officio Members and State Consumer
  Advocates (which, for purposes of section 15.2 of this agreement, shall be calculated
  as of five o'clock p.m. Eastern Time on the date PJM declares a Member in default)

B =   the Member's internal peak demand used
  to calculate Accounted For Obligation as determined by the Office of the Interconnection
  pursuant to Schedule 7 of the Reliability Assurance Agreement averaged over
  the previous calendar year

C =   the
  sum of factor B for all Members

D =    the
  Member's generating capability from Capacity Resources located in the PJM Control
  Area as of January 1 of the current calendar year, determined by the Office
  of the Interconnection pursuant to Schedule 9 of the Reliability Assurance Agreement

E =   the
  sum of factor D for all Members

F =   the
  sum of the Member's circuit miles of transmission facilities multiplied by the
  respective operating voltage for facilities 100 kV and above as of January 1
  of the current calendar year

G =   the
  sum of factor F for all Members

2.   FORMATION, NAME; PLACE OF BUSINESS

2.1   Formation of LLC; Certificate
  of Formation.

The Members of the LLC hereby:

(a)   acknowledge the conversion
  of the PJM Interconnection Association into the LLC, a limited liability company
  pursuant to the Act, by virtue of the filing of both the Certificate of Formation
  and the Certificate of Conversion with the Recording Office, effective as of
  March 31, 1997;

(b)   confirm and agree to
  their status as Members of the LLC;

(c)   enter into this Agreement
  for the purpose of amending and restating the rights, duties, and relationship
  of the Members; and

(d)   agree that if the laws
  of any jurisdiction in which the LLC transacts business so require, the PJM
  Board also shall file, with the appropriate office in that jurisdiction, any
  documents necessary for the LLC to qualify to transact business under such laws;
  and (ii) agree and obligate themselves to execute, acknowledge, and cause
  to be filed for record, in the place or places and manner prescribed by law,
  any amendments to the Certificate of Formation as may be required, either by
  the Act, by the laws of any jurisdiction in which the LLC transacts business,
  or by this Agreement, to reflect changes in the information contained therein
  or otherwise to comply with the requirements of law for the continuation, preservation,
  and operation of the LLC as a limited liability company under the Act.

2.2   Name of LLC.

The name under which the LLC shall conduct
  its business is "PJM Interconnection, L.L.C."

2.3   Place of Business.

The location of the principal place of business
  of the LLC shall be 955 Jefferson Avenue, Valley Forge Corporate Center,
  Norristown, Pennsylvania 19403-2497. The LLC may also have offices at such other
  places both within and without the State of Delaware as the PJM Board may from
  time to time determine or the business of the LLC may require.

2.4   Registered Office
  and Registered Agent.

The street address of the initial registered
  office of the LLC shall be 1209 Orange Street, Wilmington, Delaware 19801, and
  the LLC's registered agent at such address shall be The Corporation Trust Company.
  The registered office and registered agent may be changed by resolution of the
  PJM Board.

3.   PURPOSES AND POWERS OF LLC

3.1   Purposes.

The purposes of the LLC shall be:

(a)   to operate in accordance
  with FERC requirements as an Independent System Operator, comprised of the PJM
  Board, the Office of the Interconnection, and the Members Committee, with the
  authorities and responsibilities set forth in this Agreement;

(b)   as necessary for the
  operation of the Interconnection as specified above: (i) to acquire and obtain
  licenses, permits and approvals, (ii) to own or lease property, equipment
  and facilities, and (iii) to contract with third parties to obtain goods
  and services, provided that, the L.L.C. may procure goods and services from
  a Member only after open and competitive bidding; and

(c)   to engage in any lawful
  business permitted by the Act or the laws of any jurisdiction in which the LLC
  may do business and to enter into any lawful transaction and engage in any lawful
  activities in furtherance of the foregoing purposes and as may be necessary,
  incidental or convenient to carry out the business of the LLC as contemplated
  by this Agreement.

3.2   Powers.

The LLC shall have the power to do any and
  all acts and things necessary, appropriate, advisable, or convenient for the
  furtherance and accomplishment of the purposes of the LLC, including, without
  limitation, to engage in any kind of activity and to enter into and perform
  obligations of any kind necessary to or in connection with, or incidental to,
  the accomplishment of the purposes of the LLC, so long as said activities and
  obligations may be lawfully engaged in or performed by a limited liability company
  under the Act.

4.   EFFECTIVE DATE AND TERMINATION

4.1   Effective
  Date and Termination.

(a)   The existence of the
  LLC commenced on March 31, 1997, as provided in the Certificate of Formation
  and Certificate of Conversion which were filed with the Recording Office on
  March 31, 1997. This Agreement shall amend and restate the Operating Agreement
  of PJM Interconnection, L.L.C. as of the Effective Date.

(b)   The LLC shall continue
  in existence until terminated in accordance with the terms of this Agreement.
  The withdrawal or termination of any Member is subject to the provisions of
  Section 18.18 of this Agreement.

(c)   Any termination of this
  Agreement or withdrawal of any Member from the Agreement shall be filed with
  the FERC and shall become effective only upon the FERC's approval.

4.2   Governing Law.

This Agreement and all questions with respect
  to the rights and obligations of the Members, the construction, enforcement
  and interpretation hereof, and the formation, administration and termination
  of the LLC shall be governed by the provisions of the Act and other applicable
  laws of the State of Delaware, and the Federal Power Act.

5.   WORKING CAPITAL AND CAPITAL CONTRIBUTIONS

5.1   Funding of Working Capital
  and Capital Contributions.

(a)   The Office of the Interconnection
  shall attempt to obtain financing of up to twenty-five percent (25%) of the
  approved annual operating budget of the LLC adopted by the PJM Board pursuant
  to Section 7.5.2 of this Agreement to meet the working capital needs of the
  LLC, which shall be limited to such working capital needs that arise from timing
  in cash flows from interchange accounting, tariff administration and payment
  of the operating costs of the Office of the Interconnection. Such financing,
  which shall be non-recourse to the Members of the LLC and which shall be for
  a stated term without penalty for prepayment, may be obtained by borrowing the
  amount required at market-based interest rates, negotiated on an arm's length
  basis, (i) from a Member or Members or (ii) from a commercial lender, supported,
  if necessary, by credit enhancements provided by a Member or Members; provided,
  however, no Member shall be obligated to provide such financing or credit
  enhancements. The LLC shall make such filings and seek such approvals as necessary
  in order for the principal, interest and fees related to any such borrowing
  to be repaid through charges under the PJM Tariff as appropriate under Schedule
  3 of this Agreement.

(b)   In the event financing
  of the working capital needs of the Office of the Interconnection is unavailable
  on commercially reasonable terms, the PJM Board may require the Members to contribute
  capital in the aggregate up to five million two hundred thousand dollars ($5,200,000)
  for the working capital needs that could not be financed; provided that in such
  event each Member's obligation to contribute additional capital shall be in
  proportion to its Weighted Interest, multiplied by the amount so requested by
  the PJM Board. Each Member that contributes such capital shall be entitled to
  earn a return on the contribution to the extent such contribution has not been
  repaid, which return shall be at a fair market rate as determined by the PJM
  Board but in no event less than the current interest rate established pursuant
  to 18 C.F.R. §  35.19a(a)(2)(iii); provided further, that any Member not
  wanting to contribute the requested capital contribution may withdraw from the
  LLC upon 90 days written notice as provided in Section 18.18.2 of this
  Agreement.

(c)   Authority to borrow
  capital for LLC Operations. Nothing in Section 5.1(a) and (b) shall be construed
  to restrict the authority of the PJM Board to authorize the LLC to borrow or
  raise capital in excess of twenty-five percent of the approved annual operating
  budget of the LLC, for working capital or otherwise, as the PJM Board deems
  appropriate to fund the operations of the LLC, in accordance with the general
  powers of the LLC under Section 3.2 to enter into obligations of any kind to
  accomplish the purposes of the LLC. Nor shall anything in Section 5.1(a) and
  (b) in any way restrict the authority of the PJM Board to authorize the LLC
  to grant to lenders such security interests or other rights in assets or revenues
  received under the PJM Tariff with respect to the costs of operating the LLC
  and the Office of the Interconnection and to take such other actions as it deems
  necessary and appropriate to obtain such financing in accordance with such general
  powers of the LLC under Section 3.2.

5.2   Contributions to
  Association.

All contributions prior to the Effective
  Date of the original Operating Agreement of PJM Interconnection, L.L.C. of cash
  or other assets to the PJM Interconnection Association by persons who are now
  or in the future may become Members of the LLC shall be deemed contributions
  by such Members to the LLC.

6.   TAX STATUS AND DISTRIBUTIONS



6.1   Tax Status.

The LLC shall make all necessary filings
  under the applicable Treasury Regulations to have the LLC taxed as a corporation.

6.2   Return of Capital
  Contributions.

(a)   In the event Members
  are required to contribute capital to the LLC in accordance with Section 5.1
  herein, the LLC shall request the Transmission Owners to recover such working
  capital through charges under the PJM Tariff as provided in Schedule 3
  of this Agreement. In the event all or a portion of the working capital is recovered
  pursuant to the PJM Tariff, such amount(s) shall be returned to the Members
  in accordance with their actual contributions.

(b)   Except for return of
  capital contributions and liquidating distributions as provided in the foregoing
  section and Section 6.3 herein, respectively, the LLC does not intend to
  make any distributions of cash or other assets to its Members.

6.3   Liquidating Distribution.

Upon termination or liquidation of the LLC,
  the cash or other assets of the LLC shall be distributed as follows:

(a)   first, in the event
  the LLC has any liabilities at the time of its termination or dissolution, the
  LLC shall liquidate such of its assets as is necessary to satisfy such liabilities;

(b)   second, any capital
  contribution in cash or in kind by any Member of the PJM Interconnection Association
  prior to the Effective Date shall be distributed by the LLC back to such Member
  in the form received by the PJM Interconnection Association; and

(c)   third, any remaining
  assets of the LLC shall be distributed to the Members in proportion to their
  Weighted Interests.

7.   PJM BOARD

7.1   Composition.

There shall be an LLC Board of Managers,
  referred to herein as the "PJM Board," composed of seven voting members, with
  the President as a non-voting member. The seven voting Board Members shall be
  elected by the Members Committee from a slate of candidates for the then-existing
  vacancies or expiring terms on the PJM Board. An independent consultant, retained
  by the Office of the Interconnection upon consideration of the advice and recommendations
  of the Members Committee, shall be directed to prepare a list of persons qualified
  and willing to serve on the PJM Board. Not later than 30 days prior to each
  Annual Meeting of the Members, the Office of the Interconnection shall distribute
  to the representatives on the Members Committee a slate from among the list
  proposed by the independent consultant, along with information on the background
  and experience of the persons on the slate appropriate to evaluating their fitness
  for service on the PJM Board. Elections for the PJM Board shall be held at each
  Annual Meeting of the Members, for the purpose of selecting the initial PJM
  Board in accordance with the provisions of Section 7.3(a), or selecting a person
  to fill the seat of a Board Member whose term is expiring. Should the Members
  Committee fail to elect a full PJM Board from the slate proposed by the independent
  consultant, the Office of the Interconnection shall direct the independent consultant,
  or a replacement consultant selected by the Office of the Interconnection, to
  propose a list for a slate of nominees for any vacancies on the PJM Board for
  consideration by the Members at the next regular meeting of the Members Committee.

7.2   Qualifications.

A Board Member shall not be, and shall not
  have been at any time within five years of election to the PJM Board, a director,
  officer or employee of a Member or of an Affiliate or Related Party of a Member.
  Except as provided in the LLC's Standards of Conduct filed with the FERC, at
  any time while serving on the PJM Board, a Board Member shall have no direct
  business relationship or other affiliation with any Member or its Affiliates
  or Related Parties. Of the seven Board Members, four shall have expertise and
  experience in the areas of corporate leadership at the senior management or
  board of directors level, or in the professional disciplines of finance or accounting,
  engineering, or utility laws and regulation. Of the other three Board Members,
  one shall have expertise and experience in the operation or concerns of transmission
  dependent utilities, one shall have expertise and experience in the operation
  or planning of transmission systems, and one shall have expertise and experience
  in the area of commercial markets and trading and associated risk management.

7.3   Term of Office.

(a)   The persons serving
  as the Board of Managers of the LLC immediately prior to the Effective Date
  shall continue in office until the first Annual Meeting of the Members. At the
  first Annual Meeting of the Members, the then current members of the PJM Board
  who desire to continue in office shall be elected by the Members to serve until
  the second Annual Meeting of the Members or until their successors are elected,
  along with such additional persons as necessary to meet the composition requirements
  of Section 7.1 and the qualification requirements of Section 7.2.

(b)   A Board Member shall
  serve for a term of three years commencing with the Annual Meeting of the Members
  at which the Board Member was elected; provided, however, that two of the Board
  Members elected at the first Annual Meeting of the Members following the Effective
  Date shall be chosen by lot to serve a term of one year, three of such Board
  Members shall be chosen by lot to serve a term of two years and the final two
  such Board Members shall serve a term of three years.

(c)   Vacancies on the PJM
  Board occurring between Annual Meetings of the Members shall be filled by vote
  of the then remaining Board Members; a Board Member so selected shall serve
  until the next Annual Meeting at which time a person shall be elected to serve
  the balance of the term of the vacant Board Seat. Removal of a Board Member
  shall require the approval of the Members Committee.

7.4   Quorum.

The presence in person or by telephone or
  other authorized electronic means of a majority of the voting Board Members
  shall constitute a quorum at all meetings of the PJM Board for the transaction
  of business except as otherwise provided by statute. If a quorum shall not be
  present, the Board Members then present shall have the power to adjourn the
  meeting from time to time, until a quorum shall be present. Provided a quorum
  is present at a meeting, the PJM Board shall act by majority vote of the Board
  Members present.

7.5   Operating and Capital
  Budgets.

7.5.1   Finance
  Committee.

Not later than February
  1 of each year, the entities specified below shall select the members of a Finance
  Committee. The Finance Committee shall be composed of one representative of
  the parties to the Reliability Assurance Agreement chosen by the parties to
  that agreement, one representative of the parties to the Transmission Owners
  Agreement chosen by the parties to that agreement, three representatives of
  the Members Committee chosen by the Members Committee and that are not representatives
  of an entity that is a party to the Transmission Owners Agreement or an Affiliate
  or Related Party of such an entity, one representative of the Office of the
  Interconnection selected by the President, and two Board Members selected by
  the PJM Board. The Members Committee shall endeavor to elect members of the
  Finance Committee that are broadly representative of the diversity of interests
  among the Members. The Office of the Interconnection shall prepare annual budgets
  in accordance with processes and procedures established by the PJM Board, and
  shall timely submit its budgets to the Finance Committee for review. The Finance
  Committee shall submit its analysis of and recommendations on the budgets to
  the PJM Board, with copies to the Members Committee. The Finance Committee shall
  also review and comment upon any additional or amended budgets prepared by the
  Office of the Interconnection at the request of the PJM Board or the Members
  Committee.

7.5.2   Adoption
  of Budgets.

The PJM Board shall adopt,
  upon consideration of the advice and recommendations of the Finance Committee,
  operating and capital budgets for the LLC, and shall distribute to the Members
  for their information final annual budgets for the following fiscal year not
  later than 60 days prior to the beginning of each fiscal year of the LLC.

7.6   By-laws.

To the extent not inconsistent with any provision
  of this Agreement, the PJM Board shall adopt such by-laws establishing procedures
  for the implementation of this Agreement as it may deem appropriate, including
  but not limited to by-laws governing the scheduling, noticing and conduct of
  meetings of the PJM Board, selection of a Chair and Vice Chair of the PJM Board,
  action by the PJM Board without a meeting, and the organization and responsibilities
  of standing and special committees of the PJM Board. Such by-laws shall not
  modify or be inconsistent with any of the rights or obligations established
  by this Agreement.

7.7   Duties and Responsibilities
  of the PJM Board.

In accordance with this Agreement, the PJM
  Board shall supervise and oversee all matters pertaining to the Interconnection
  and the LLC, and carry out such other duties as are herein specified, including
  but not limited to the following duties and responsibilities:

i)   As
  its primary responsibility, ensure that the President, the other officers of
  the LLC, and Office of the Interconnection perform the duties and responsibilities
  set forth in this Agreement, including but not limited to those set forth in
  Sections 9.2 through 9.4 and Section 10.4 in a manner consistent with (A) the
  safe and reliable operation of the Interconnection, (B) the creation and operation
  of a robust, competitive, and non-discriminatory electric power market in the
  PJM Control Area, and (C) the principle that a Member or group of Members shall
  not have undue influence over the operation of the Interconnection;

ii)   Select
  the Officers of the LLC;

iii)   Adopt
  budgets for the LLC;

iv)   Approve
  the Regional Transmission Expansion Plan in accordance with the provisions of
  the Regional Transmission Expansion Planning Protocol set forth in Schedule
  6 of this Agreement;

v)   On
  its own initiative or at the request of a User Group as specified herein, submit
  to the Members Committee such proposed amendments to this Agreement or any Schedule
  hereto, or a proposed new Schedule, as it may deem appropriate;

vi)   Petition
  FERC to modify any provision of this Agreement or any Schedule or practice hereunder
  that the PJM Board believes to be unjust, unreasonable, or unduly discriminatory
  under Section 206 of the Federal Power Act, subject to the right of any
  Member or the Members to intervene in any resulting proceedings;

vii)   Review
  for consistency with the creation and operation of a robust, competitive and
  non-discriminatory electric power market in the PJM Control Area any change
  to rate design or to non-rate terms and conditions proposed by Transmission
  Owners for filing under Section 205 of the Federal Power Act;

viii)   If
  and to the extent it shall deem appropriate, intervene in any proceeding at
  FERC initiated by the Members in accordance with Section 11.5(b), and participate
  in other state and federal regulatory proceedings relating to the interests
  of the LLC;

ix)   Review,
  in accordance with Section 15.1.3, determinations of the Office of the Interconnection
  with respect to events of default;

x)   Assess
  against the other Members in proportion to their Weighted Interest an amount
  equal to any payment to the Office of the Interconnection, including interest
  thereon, as to which a Member is in default;

xi)   Establish
  reasonable sanctions for failure of a Member to comply with its obligations
  under this Agreement;

xii)   Direct
  the Office of the Interconnection on behalf of the LLC to take appropriate legal
  or regulatory action against a Member (A) to recover any unpaid amounts due
  from the Member to the Office of the Interconnection under this Agreement and
  to make whole any Members subject to an assessment as a result of such unpaid
  amount, or (B) as may otherwise be necessary to enforce the obligations of this
  Agreement;

xiii)   Resolve
  claims by a Member that the Reliability Committee established by the Reliability
  Assurance Agreement has exercised its responsibilities in a manner inconsistent
  with the creation and operation of a robust, competitive and non-discriminatory
  electric power market in the PJM Control Area, upon due consideration of the
  views of the Member and of the Reliability Committee, and of the need to preserve
  the reliability of electric service in the PJM Control Area;

xiv)   Solicit
  the views of Members on, and commission from time to time as it shall deem appropriate
  independent reviews of, (a) the performance of the PJM Interchange Energy Market,
  (b) compliance by Market Participants with the rules and requirements of the
  PJM Interchange Energy Market, and (c) the performance of the Office of the
  Interconnection under performance criteria proposed by the Members Committee
  and approved by the PJM Board; and

xv)   Terminate
  a Member as may be appropriate under the terms of this Agreement.

8.   MEMBERS COMMITTEE



8.1   Sectors.

8.1.1   Designation.

Voting on the Members Committee
  shall be by sectors. The Members Committee shall be composed of five sectors,
  one for Generation Owners, one for Other Suppliers, one for Transmission Owners,
  one for Electric Distributors, and one for End-Use Customers, provided that
  there are at least five Members in each Sector. Except as specified in Section
  8.1.2, each Voting Member shall have one vote. Each Voting Member shall, within
  thirty (30) days after the Effective Date or, if later, thirty (30) days after
  becoming a Member, and thereafter not later than 10 days prior to the Annual
  Meeting of the Members for each annual period beginning with the Annual Meeting
  of the Members, submit to the President a sealed notice of the sector in which
  it is qualified to vote or, if qualified to participate in more than one sector,
  its rank order preference of the sectors in which it wishes to vote, and shall
  be assigned to its highest-ranked sector that has the minimum number of Members
  specified above. If a Member is assigned to a sector other than its highest-ranked
  sector in accordance with the preceding sentence, its higher sector preference
  or preferences shall be honored as soon as a higher-ranked sector has five or
  more Members. A Voting Member may designate as its voting sector any sector
  for which it or its Affiliate or Related Party Members is qualified. The sector
  designations of the Voting Members shall be announced by the President at the
  Annual Meeting.

8.1.2   Related
  Parties.

The Members in a group
  of Related Parties shall each be entitled to a vote, provided that all the Members
  in a group of Related Parties that chooses to exercise such rights shall be
  assigned to the Electric Distributor sector.

8.2   Representatives.

8.2.1   Appointment.

Each Member may appoint
  a representative to serve on the Members Committee, with authority to act for
  that Member with respect to actions or decisions by the Members Committee. Each
  Member may appoint an alternate representative to act for that Member at meetings
  of the Members Committee in the absence of the representative. A Member participating
  in the PJM Interchange Energy Market through an agent may be represented on
  the Members Committee by that agent. A Member shall appoint its representative
  by giving written notice identifying its representative and alternate representative
  to the Office of the Interconnection. Members that are Affiliates or Related
  Parties may each appoint a representative and alternate representative to the
  Members Committee, but shall vote as specified in Section 8.1.

8.2.2   Regulatory
  Authorities.

FERC and any other federal
  agency with regulatory authority over a Member and each State electric utility
  regulatory commission with regulatory jurisdiction within the PJM Control Area
  may nominate one representative to serve as an ex officio non-voting
  member of the Members Committee.

8.2.3   State
  Offices of Consumer Advocate.

(a)   Each
  State Consumer Advocate may nominate one representative to serve as an ex
  officio member of the Members Committee. Upon a written request by a State
  Consumer Advocate to the Office of the Interconnection, and upon the payment
  of the fee prescribed by section (b) of Schedule 3 to this Agreement, a State
  Consumer Advocate may designate a representative to the Members Committee who,
  subject to subparagraph b, shall be entitled to cast one (1) non-divisible vote
  in the End-Use Customer Sector. As an ex officio member, a State Consumer
  Advocate shall have no liability under this Agreement, other than the annual
  fee required by Schedule 3. The State Consumer Advocates shall not be entitled
  to indemnification by the other Members under any provision of this Agreement.
  Additionally, the State Consumer Advocates shall not be eligible to participate
  in any markets managed by PJM under the terms contained in this Agreement.

(b)   Each
  State Consumer Advocate shall be entitled to cast only one (1) vote in the Members
  Committee per State or the District of Columbia. If more than one representative
  from a given state has been nominated to be a voting member of the Members Committee,
  all State Offices of Consumer Advocate from such state that have nominated representatives
  to vote at the Members Committee shall designate to the Office of the Interconnection
  one (1) representative who shall be entitled to vote on all of their behalf's,
  prior to being permitted to vote at any Members Committee meetings.

8.2.4   Initial
  Representatives.

Initial representatives
  to the Members Committee shall be appointed no later than 30 days after the
  Effective Date; provided, however, that each representative to the Management
  Committee under the Operating Agreement of PJM Interconnection, L.L.C. as in
  effect immediately prior to the Effective Date shall automatically become a
  representative to the Members Committee on the Effective Date unless replaced
  as specified in Section 8.2.4. An entity becoming a Member shall appoint a representative
  to the Members Committee no later than 30 days after becoming a Member.

8.2.5   Change
  of or Substitution for a Representative.

Any Member may change its
  representative or alternate on the Members Committee at any time by providing
  written notice to the Office of the Interconnection identifying its replacement
  representative or alternate. Any representative to the Members Committee may,
  by written notice to the Chair, designate a substitute representative from that
  Member to act for him or her with respect to any matter specified in such notice.

8.3   Meetings.

8.3.1   Regular
  and Special Meetings.

The Members Committee shall
  hold regular meetings, no less frequently than once each calendar quarter at
  such time and at such place as shall be fixed by the Chair. The Members Committee
  shall hold an Annual Meeting of the Members each calendar year at such time
  and place as shall be specified by the Chair. At the Annual Meeting of the Members,
  Board Members as necessary, officers of the Members Committee, and representatives
  to the Finance Committee shall be elected. The Members Committee may hold special
  meetings for one or more designated purposes within the scope of the authority
  of the Members Committee when called by the Chair on the Chair's own initiative,
  or at the request of five or more representatives on the Members Committee.
  The notice of a regular or special meeting shall be distributed to the representatives
  as specified in Section 18.14 of this Agreement not later than seven days prior
  to the meeting, shall state the time and place of the meeting, and shall include
  an agenda sufficient to notify the representatives of the substance of matters
  to be considered at the meeting; provided, however, that meetings may be called
  on shorter notice at the discretion of the Chair as the Chair shall deem necessary
  to deal with an emergency or to meet a deadline for action.

8.3.2   Attendance.

Regular and special meetings
  may be conducted in person or by telephone, or other electronic means as authorized
  by the Members Committee. The attendance in person or by telephone or other
  electronic means of a representative or a duly designated substitute shall be
  required in order to vote.

8.3.3   Quorum.

The attendance as specified
  in Section 8.3.2 of a majority of the Voting Members from each of at least three
  sectors that each have at least five Members shall constitute a quorum, however,
  a quorum shall only require one-third of the Voting Members, but not less than
  ten, from any sector that has more than 20 Voting Members. No action may be
  taken by the Members Committee at a meeting unless a quorum is present; provided,
  however, that if a quorum is not present, the Voting Members then present shall
  have the power to adjourn the meeting from time to time until a quorum shall
  be present.

8.4   Manner of Acting.

(a)   All matters brought
  up for a vote or approval by the Members Committee shall be stated in the form
  of a motion, which must be seconded. Only one motion may be pending at one time.

(b)   Each Sector shall be
  entitled to cast one and zero one-hundredths (1.00) Sector Votes. Each Voting
  Member shall be entitled to cast one (1) non-divisible vote in its sector. In
  the case of a Voting Member comprised of Affiliates or Related Parties, any
  representative, alternate or substitute of any of the Affiliated or Related
  Parties may cast the vote of the Voting Member. The Sector Vote of each sector
  shall be split into an affirmative component based on votes for the pending
  motion, and a negative component based on votes against the pending motion,
  in direct proportion to the votes cast within the sector for and against the
  pending motion, rounded to two decimal places.

(c)   The sum of affirmative
  Sector Votes necessary to pass the pending motion shall be greater than (but
  not merely equal to) the product of .667 multiplied by the number of sectors
  that have at least five Members and that participated in the vote.

(d)   Voting Members not in
  attendance at the meeting as specified in Section 8.3.2 of this Agreement or
  abstaining shall not be counted as affirmative or negative votes.

8.5   Chair and Vice Chair
  of the Members Committee.

8.5.1   Selection
  and Term.

The representatives or
  their alternates or substitutes on the Members Committee shall elect from among
  the representatives a Chair and a Vice Chair. The offices of Chair and Vice
  Chair shall be held for a term of one year and until succession to the office
  occurs as specified herein. Except as specified below, at each Annual Meeting
  of the Members the Vice Chair shall succeed to the office of Chair, and a new
  Vice Chair shall be elected. If the office of Chair becomes vacant, or the Chair
  leaves the employment of the Member for whom the Chair is the representative,
  or the Chair is no longer the representative of such Member, the Vice Chair
  shall succeed to the office of Chair, and a new Vice Chair shall be elected
  at the next regular or special meeting of the Members Committee, both such officers
  to serve until the second Annual Meeting of the Members following such succession
  or election to a vacant office. If the office of Vice Chair becomes vacant,
  or the Vice Chair leaves the employment of the Member for whom the Vice Chair
  is the representative, or the Vice Chair is no longer the representative of
  such Member, a new Vice Chair shall be elected at the next regular or special
  meeting of the Members Committee.

8.5.2   Duties.

The Chair shall call and
  preside at meetings of the Members Committee, and shall carry out such other
  responsibilities as the Members Committee shall assign. The Chair shall cause
  minutes of each meeting of the Members Committee to be taken and maintained,
  and shall cause notices of meetings of the Members Committee to be distributed.
  The Vice Chair shall preside at meetings of the Members Committee in the absence
  of the Chair, and shall otherwise act for the Chair at the Chair's request.

8.6   Other Committees.

(a)   The Members Committee
  may form, select the membership, and oversee the activities, of an Operating
  Committee, a Planning Committee, and an Energy Market Committee as standing
  committees, and such other committees, subcommittees, task forces, working groups
  or other bodies as it shall deem appropriate, to provide advice and recommendations
  to the Members Committee or to the Office of the Interconnection
  as directed by the Members Committee.

(b)   The Members Committee
  shall elect representatives to the Alternate Dispute Resolution Committee as
  specified in the PJM Dispute Resolution Procedures.

8.7   User Groups.

(a)   Any five or more Members
  sharing a common interest may form a User Group, and may invite such other Members
  to join the User Group as the User Group shall deem appropriate. Notification
  of the formation of a User Group shall be provided to all members of the Members
  Committee.

(b)   The Members Committee
  shall create a User Group composed of representatives of bona fide public
  interest and environmental organizations that are interested in the activities
  of the LLC and are willing and able to participate in such a User Group.

Meetings of User Groups shall be open to
  all Members and the Office of the Interconnection. Notices and agendas of meetings
  of a User Group shall be provided to all Members that ask to receive them.

(d)   Any recommendation or
  proposal for action adopted by affirmative vote of three-fourths or more of
  the members of a User Group shall be circulated by the Office of the Interconnection
  to the representatives on the Members Committee and shall be considered by the
  Members Committee at its next regular meeting occurring not earlier than 30
  days after the circulation of such notice.

(e)   If the Members Committee
  does not adopt a recommendation or proposal submitted to it by a User Group,
  upon vote of nine-tenths or more of the members of the User Group the recommendation
  or proposal may be submitted to the PJM Board for its consideration in accordance
  with Section 7.7(v).

8.8   Powers of the Members
  Committee.

The Members Committee, acting by adoption
  of a motion as specified in Section 8.4, shall have the power to take the actions
  specified in this Agreement, including:

i)   Elect
  the members of the PJM Board;

ii)   In
  accordance with the provisions of Section 18.6 of this Agreement, amend any
  portion of this Agreement, including the Schedules hereto, or create new Schedules,
  and file any such amendments or new Schedules with FERC or other regulatory
  body of competent jurisdiction;

iii)   Terminate
  this Agreement; and

iv)   Provide
  advice and recommendations to the PJM Board and the Office of the Interconnection.

9.   OFFICERS

9.1   Election and Term.

The officers of the LLC shall consist of
  a President, a Secretary and a Treasurer. The PJM Board may elect such other
  officers as it deems necessary to carry out the business of the LLC. All officers
  shall be elected by the PJM Board and shall hold office until the next annual
  meeting of the PJM Board and until their successors are elected. Any number
  of offices may be held by the same person, except that the offices of the President
  and Treasurer may not be held by the same person.

9.2   President.

The PJM Board shall appoint a President and
  Chief Executive Officer of the LLC (the "President"). The President shall direct
  and supervise the day-to-day operation of the LLC, and shall report to the PJM
  Board. The President shall be responsible for directing and supervising the
  Office of the Interconnection in the performance of the duties and responsibilities
  specified in Section 10.4. The President shall execute bonds, mortgages and
  other contracts requiring a seal, under the seal of the LLC, except where required
  or permitted by law to be otherwise signed and executed and except where the
  signing and execution thereof shall be expressly delegated by the board to some
  other officer or agent of the LLC. In the absence of the President or in the
  event of his or her inability or refusal to act, and if a vice president has
  been appointed by the PJM Board, the Vice President (or in the event there be
  more than one Vice President, the Vice Presidents in the order designated by
  the PJM Board in its Minutes) shall perform the duties of the President, and
  when so acting, shall have all the powers of and be subject to all the restrictions
  upon the President. The Vice President shall perform such other duties and have
  such other powers as the PJM Board may from time to time prescribe.

9.3   Secretary.

The Secretary shall attend all meetings of
  the PJM Board and record all the proceedings of the meetings of the PJM Board
  in a minute book to be kept for that purpose and shall perform like duties for
  the standing committees or special committees when required. He or she shall
  give, or cause to be given, notice of all special meetings of the PJM Board,
  and shall perform such other duties as may be prescribed by the PJM Board or
  President, under whose supervision he or she shall be. He or she shall have
  custody of the corporate seal of the LLC, and he or she, or an assistant secretary,
  shall have authority to affix the same to any instrument requiring it and, when
  so affixed, it may be attested by his or her signature or by the signature of
  such assistant secretary. The PJM Board may give general authority to any other
  officer to affix the seal of the LLC and to attest the affixing by his or her
  signature.

9.4   Treasurer.

The Treasurer shall have or arrange for the
  custody of the LLC's funds and securities and shall keep full and accurate accounts
  of receipts and disbursements in books belongings to the LLC and shall deposit
  all moneys and other valuable effects in the name and to the credit of the LLC
  in such depositories as may be designated by the PJM Board. The Treasurer shall
  disburse the funds of the LLC as may be ordered by the PJM Board, taking proper
  vouchers for such disbursements, and shall render to the President and PJM Board
  at its regular meetings, or when the PJM Board so requires, an account of his
  or her transactions as Treasurer and of the financial condition of the LLC.
  If required by the Board, the Treasurer shall give the LLC a bond (which shall
  be renewed periodically) in such sum and with such surety or sureties as shall
  be satisfactory to the PJM Board for the faithful performance of the duties
  of his office and of the restoration to the LLC, in case of his or her death,
  resignation, retirement or removal from office, of all books, papers, vouchers,
  money and other property of whatever kind in his or her possession or under
  his or her control belonging to the LLC.

9.5   Renewal of Officers;
  Vacancies.

Any officer elected or appointed by the PJM
  Board may be removed at any time by the affirmative vote of a majority of the
  PJM Board eligible to vote. Any vacancy occurring in any office of the LLC shall
  be filled by the PJM Board.

9.6   Compensation.

The salaries of all officers and agents of
  the LLC, and the reasonable compensation of the PJM Board, shall be fixed by
  the PJM Board.

10.   OFFICE OF THE INTERCONNECTION.

10.1   Establishment.

The
  Office of the Interconnection shall implement this Agreement, administer the
  PJM Tariff, and undertake such other responsibilities as set forth herein. All
  personnel of the Office of the Interconnection shall be employees of the LLC
  or under contract thereto. The cost of the Office of the Interconnection and
  expenses associated therewith, including salaries and expenses of said personnel,
  space and any necessary facilities or other capital expenditures, shall be recovered
  in accordance with Schedule 3. The Office of the Interconnection shall
  adopt, publish and comply with standards of conduct that satisfy the regulations
  of FERC.

10.2   Processes and Organization.

In order to carry out the responsibilities
  of the Office of the Interconnection for the safe and reliable operation of
  the Interconnection, the President may establish processes and organization
  for operating personnel and facilities as the President shall deem appropriate,
  and shall request such Members as the President shall deem appropriate to participate
  in such processes and organization. All such processes and organization shall
  be carried out in accordance with all applicable code of conduct or other functional
  separation requirements of FERC.

10.3   Confidential Information.

The Office of the Interconnection shall comply
  with the requirements of Section 18.17 with respect to any proprietary or confidential
  information received from or about any Member.

10.4   Duties and Responsibilities.

The Office of the Interconnection, under
  the direction of the President as supervised and overseen by the PJM Board,
  shall carry out the following duties and responsibilities, in accordance with
  the provisions of this Agreement:

i)   Administer
  and implement this Agreement;

ii)   Perform
  such functions in furtherance of this Agreement as the PJM Board, acting within
  the scope of its duties and responsibilities under this Agreement, may direct;

iii)   Prepare,
  maintain, update and disseminate the PJM Manuals;

iv)   Comply
  with MAAC and NERC operation and planning standards, principles and guidelines;

v)   Maintain
  an appropriately trained workforce, and such equipment and facilities, including
  computer hardware and software and backup power supplies, as necessary or appropriate
  to implement or administer this Agreement;

vi)   Direct
  the operation and coordinate the maintenance of the facilities of the Interconnection
  used for both load and reactive supply, so as to maintain reliability of service
  and obtain the benefits of pooling and interchange consistent with this Agreement
  and the Reliability Assurance Agreement;

vii)   Direct
  the operation and coordinate the maintenance of the bulk power supply facilities
  of the Interconnection with such facilities and systems of others not party
  to this Agreement in accordance with agreements between the LLC and such other
  systems to secure reliability and continuity of service and other advantages
  of pooling on a regional basis;

viii)   Perform
  interchange accounting and maintain records pertaining to the operation of the
  PJM Interchange Energy Market and the Interconnection;

ix)   Notify
  the Members of the receipt of any application to become a Member, and of the
  action of the Office of the Interconnection on such application, including but
  not limited to the completion of integration of a new Member's system into the
  PJM Control Area as specified in Section 11.6(f);

x)   Calculate
  the Weighted Interest of each Member;

xi)   Maintain
  accurate records of the sectors in which each Voting Member is entitled to vote,
  and calculate the results of any vote taken in the Members Committee;

xii)   Furnish
  appropriate information and reports as are required to keep the Members regularly
  informed of the outlook for, the functioning of, and results achieved by the
  Interconnection;

xiii)   File
  with FERC on behalf of the Members any amendments to this Agreement or the Schedules
  hereto, any new Schedules hereto, and make any other regulatory filings on behalf
  of the Members or the LLC necessary to implement this Agreement;

xiv)   At
  the direction of the PJM Board, submit comments to regulatory authorities on
  matters pertinent to the Interconnection;

xv)   Consult
  with the standing or other committees established pursuant to Section 8.6(a)
  on matters within the responsibility of the committee;

xvi)   Perform
  operating studies of the bulk power supply facilities of the Interconnection
  and make such recommendations and initiate such actions as may be necessary
  to maintain reliable operation of the Interconnection;

xvii)   Accept,
  on behalf of the Members, notices served under this Agreement;

xviii)   Perform
  those functions and undertake those responsibilities transferred to it under
  the Transmission Owners Agreement, including (A) direct the operation of the
  transmission facilities of the parties to the Transmission Owners Agreement,
  (B) administer the PJM Tariff, and (C) administer the Regional Transmission
  Expansion Planning Protocol set forth as Schedule 6 to this Agreement;

xix)   Perform
  those functions and undertake those responsibilities transferred to it under
  the Reliability Assurance Agreement, as specified in Schedule 8 of this Agreement;

xx)   Monitor
  the operation of the PJM Control Area, ensure that appropriate Emergency plans
  are in place and appropriate Emergency drills are conducted, declare the existence
  of an Emergency, and direct the operations of the Members as necessary to manage,
  alleviate or end an Emergency;

xxi)   Incorporate
  the grid reliability requirements applicable to nuclear generating units in
  the PJM Control Area planning and operating principles and practices; and

xxii)   Initiate
  such legal or regulatory proceedings as directed by the PJM Board to enforce
  the obligations of this Agreement.

11.   MEMBERS

11.1   Management Rights.

The Members or any of them shall not take
  part in the management of the business of, and shall not transact any business
  for, the LLC in their capacity as Members, nor shall they have power to sign
  for or to bind the LLC.

11.2   Other Activities.

Except as otherwise expressly provided herein,
  any Member may engage in or possess any interest in another business or venture
  of any nature and description, independently or with others, even if such activities
  compete directly with the business of the LLC, and neither the LLC nor any Member
  hereof shall have any rights in or to any such independent ventures or the income
  or profits derived therefrom.

11.3   Member
  Responsibilities.

11.3.1   General.

To facilitate and provide
  for the work of the Office of the Interconnection and of the several committees
  appointed by the Members Committee, each Member shall, to the extent applicable;

(a)   Maintain
  adequate records and, subject to the provisions of this Agreement for the protection
  of the confidentiality of proprietary or commercially sensitive information,
  provide data required for (i) coordination of operations, (ii)  accounting
  for all interchange transactions, (iii) preparation of required reports, (iv) coordination
  of planning, including those data required for capacity accounting, (v) preparation
  of maintenance schedules, (vi) analysis of system disturbances, and (vii) such
  other purposes, including those set forth in Schedule 2, as will contribute
  to the reliable and economic operation of the Interconnection;

(b)   Provide
  such recording, telemetering, communication and control facilities as are required
  for the coordination of its operations with the Office of the Interconnection
  and those of the other Members and to enable the Office of the Interconnection
  to operate the PJM Control Area and otherwise implement and administer this
  Agreement, including equipment required in normal and Emergency operations and
  for the recording and analysis of system disturbances;

(c)   Provide
  adequate and properly trained personnel to (i) permit participation in
  the coordinated operation of the Interconnection, (ii) meet its obligation
  on a timely basis for supply of records and data, (iii) serve on committees
  and participate in their investigations, and (iv) share in the representation
  of the Interconnection in inter-regional and national reliability activities;

(d)   Share
  in the costs of committee activities and investigations (including costs of
  consultants, computer time and other appropriate items), communication facilities
  used by all the Members (in addition to those provided in the Office of the
  Interconnection), and such other expenses as are approved for payment by the
  PJM Board, such costs to be recovered as provided in Schedule 3;

(e)   Comply
  with the requirements of the PJM Manuals and all directives of the Office of
  the Interconnection to take any action for the purpose of managing, alleviating
  or ending an Emergency, and authorize the Office of the Interconnection to direct
  the transfer or interruption of the delivery of energy on their behalf to meet
  an Emergency and to implement agreements with other Control Areas interconnected
  with the PJM Control Area for the mutual provision of service to meet an Emergency,
  and be subject to the emergency procedure charges specified in Schedule 9 of
  this Agreement for any failure to follow the Emergency instructions of the Office
  of the Interconnection.

11.3.2   Facilities
  Planning and Operation.

Consistent with and subject
  to the requirements of this Agreement, the PJM Tariff, the MAAC Agreement, the
  Reliability Assurance Agreement, the Transmission Owners Agreement, and the
  PJM Manuals, each Member shall cooperate with the other Members in the coordinated
  planning and operation of the facilities of its System within the PJM Control
  Area so as to obtain the greatest practicable degree of reliability, compatible
  economy and other advantages from such coordinated planning and operation. In
  furtherance of such cooperation each Member shall, as applicable:

(a)   Consult
  with the other Members and the Office of the Interconnection, and coordinate
  the installation of its electric generation and Transmission Facilities with
  those of such other Members so as to maintain reliable service in the PJM Control
  Area;

(b)   Coordinate
  with the other Members, the Office of the Interconnection and with others in
  the planning and operation of the regional facilities to secure a high level
  of reliability and continuity of service and other advantages;

(c)   Cooperate
  with the other Members and the Office of the Interconnection in the implementation
  of all policies and procedures established pursuant to this Agreement for dealing
  with Emergencies, including but not limited to policies and procedures for maintaining
  or arranging for a portion of a Member's Capacity Resources at least equal to
  the level established pursuant to the Reliability Assurance Agreement to have
  the ability to go from a shutdown condition to an operating condition and start
  delivering power without assistance from the power system;

(d)   Cooperate
  with the members of MAAC to augment the reliability of the bulk power supply
  facilities of the region and comply with MAAC and NERC operating and planning
  standards, principles and guidelines and the PJM Manuals;

(e)   Obtain
  or arrange for transmission service as appropriate to carry out this Agreement;

(f)   Cooperate
  with the Office of the Interconnection's coordination of the operating and maintenance
  schedules of the Member's generating and Transmission Facilities with the facilities
  of other Members to maintain reliable service to its own customers and those
  of the other Members and to obtain economic efficiencies consistent therewith;

(g)   Cooperate
  with the other Members and the Office of the Interconnection in the analysis,
  formulation and implementation of plans to prevent or eliminate conditions that
  impair the reliability of the Interconnection; and

(h)   Adopt
  and apply standards adopted pursuant to this Agreement and conforming to MAAC
  and NERC standards, principles and guidelines and the PJM Manuals, for system
  design, equipment ratings, operating practices and maintenance practices.

11.3.3   Electric
  Distributors.

In addition to any of the
  foregoing responsibilities that may be applicable, each Member that is an Electric
  Distributor, whether or not that Member votes in the Members Committee in the
  Electric Distributor sector or meets the eligibility requirements for any other
  sector of the Members Committee, shall:

(a)   Accept,
  comply with or be compatible with all standards applicable within the PJM Control
  Area with respect to system design, equipment ratings, operating practices and
  maintenance practices as set forth in the PJM Manuals, or be subject to an interconnected
  Member's requirements relating to the foregoing, so that sufficient electrical
  equipment, control capability, information and communication are available to
  the Office of the Interconnection for planning and operation of the PJM Control
  Area;

(b)   Assure
  the continued compatibility of its local system energy management system monitoring
  and telecommunications systems to satisfy the technical requirements of interacting
  automatically or manually with the Office of the Interconnection as it directs
  the operation of the PJM Control Area;

(c)   Maintain
  or arrange for a portion of its connected load to be subject to control by automatic
  underfrequency, under-voltage, or other load-shedding devices at least equal
  to the levels established pursuant to the Reliability Assurance Agreement, or
  be subject to another Member's control for these purposes;

(d)   Provide
  or arrange for sufficient reactive capability and voltage control facilities
  to conform to Good Utility Practice and (i) to meet the reactive requirements
  of its system and customers and (ii) to maintain adequate voltage levels and
  the stability required by the bulk power supply facilities of the Interconnection;

(e)   Shed
  connected load, share Capacity Resources, initiate active load management programs,
  and take such other coordination actions as may be necessary in accordance with
  the directions of the Office of the Interconnection in Emergencies;

(f)   Maintain
  or arrange for a portion of its Capacity Resources at least equal to the level
  established pursuant to the Reliability Assurance Agreement to have the ability
  to go from a shutdown condition to an operating condition and start delivering
  power without assistance from the power system;

(g)   Provide
  or arrange through another Member for the services of a 24-hour local control
  center to coordinate with the Office of the Interconnection, each such control
  center to be furnished with appropriate telemetry equipment as specified in
  the PJM Manuals, and to be staffed by system operators trained and delegated
  sufficient authority to take any action necessary to assure that the system
  for which the operator is responsible is operated in a stable and reliable manner;

(h)   Provide
  to the Office of the Interconnection all System, accounting, customer tracking,
  load forecasting (including all load to be served from its System) and other
  data necessary or appropriate to implement or administer this Agreement or the
  Reliability Assurance Agreement; and

(i)   Comply
  with the underfrequency relay obligations and charges specified in Schedule
  7 of this Agreement.

11.3.4   Reports
  to the Office of the Interconnection.

Each Member shall report
  as promptly as possible to the Office of the Interconnection any changes in
  its operating practices and procedures relating to the reliability of the bulk
  power supply facilities of the Interconnection. The Office of the Interconnection
  shall review such reports, and if any change in an operating practice or procedure
  of the Member is not in accord with the established operating principles, practices
  and procedures for the Interconnection and such change adversely affects the
  Interconnection and regional reliability, it shall so inform such Member, and
  the other Members through their representative on the Operating Committee, and
  shall direct that such change be modified to conform to the established operating
  principles, practices and procedures.

11.4   Regional Transmission
  Expansion Planning Protocol.

The Members shall participate in regional
  transmission expansion planning in accordance with the Regional Transmission
  Expansion Planning Protocol set forth in Schedule 6 to this Agreement.

11.5   Member Right to
  Petition.

(a)   Nothing herein shall
  deprive any Member of the right to petition FERC to modify any provision of
  this Agreement or any Schedule or practice hereunder that the petitioning Member
  believes to be unjust, unreasonable, or unduly discriminatory under Section 206
  of the Federal Power Act, subject to the right of any other Member (a) to oppose
  said proposal, or (b) to withdraw from the LLC pursuant to Section 4.1.

(b)   Nothing herein shall
  be construed as affecting in any way the right of the Members, acting pursuant
  to a vote of the Members Committee as specified in Section 8.4, unilaterally
  to make an application to FERC for a change in any rate, charge, classification,
  tariff or service, or any rule or regulation related thereto, under section
  205 of the Federal Power Act and pursuant to the rules and regulations promulgated
  by FERC thereunder, subject to the right of any Member that voted against such
  change in any rate, charge, classification, tariff
  or service, or any rule or regulation related thereto, in intervene in opposition
  to any such application.

(c)   Nothing in this Agreement
  shall preclude those Members joining in the proposal to utilize Locational Marginal
  Prices to deal with transmission congestion from (i) filing amendments to the
  Agreement necessary to implement the use of Locational Marginal Prices in the
  PJM Control Area in accordance with such orders or other directives as may be
  issued by FERC relating thereto, or (ii) implementing the provisions of Sections
  1.7.21 and 5.2.2(d) of Schedule 1 to this Agreement,
  without further authorization or approval by the Members Committee.

11.6   Membership Requirements.

(a)   To qualify as a Member,
  an entity shall:

i)   Be
  a Transmission Owner a Generation Owner, an Other Supplier, an Electric Distributor,
  or an End-Use Customer; and

ii)   Accept
  the obligations set forth in this Agreement.

(b)   Certain
  Members that are Load Serving Entities are parties to the Reliability Assurance
  Agreement. Upon becoming a Member, any entity that is a Load Serving Entity
  and that wishes to become a Market Buyer shall also simultaneously execute the
  Reliability Assurance Agreement.

(c)   An
  entity that wishes to become a party to this Agreement shall apply, in writing,
  to the President setting forth its request, its qualifications for membership,
  its agreement to supply data as specified in this Agreement, its agreement to
  pay all costs and expenses in accordance with Schedule 3, and providing
  all information specified pursuant to the Schedules to this Agreement for entities
  that wish to become Market Participants. Any such application that meets all
  applicable requirements shall be approved by the President within sixty (60)
  days.

(d)   Nothing in this Section
  11 is intended to remove, in any respect, the choice of participation by other
  utility companies or organizations in the operation of the Interconnection through
  inclusion in the System of a Member.

(e)   An
  entity whose application is accepted by the President pursuant to Section 11.6(c) shall
  execute a supplement to this Agreement in substantially the form prescribed
  in Schedule 4, which supplement shall be countersigned by the President
  and tendered for filing with FERC by the President. The entity shall become
  a Member effective on the date specified by FERC when accepting the supplement
  for filing.

(f)   Entities whose applications
  contemplate expansion or rearrangement of the PJM Control Area may become Members
  promptly as described in Sections 11.6(c) and 11.6(e) above, but the
  integration of the applicant's system into all of the operation and accounting
  provisions of this Agreement and the Reliability Assurance Agreement shall occur
  only after completion of all required installations and modifications of metering,
  communications, computer programming, and other necessary and appropriate facilities
  and procedures, as determined by the Office of the Interconnection. The Office
  of the Interconnection shall notify the other Members when such integration
  has occurred.

(g)   In accordance with the
  MAAC Agreement, a Member shall be a member of MAAC.

12.   TRANSFERS OF MEMBERSHIP INTEREST

The rights and obligations created by this
  Agreement shall inure to and bind the successors and assigns of such Member;
  provided, however, that the rights and obligations of any Member hereunder shall
  not be assigned without the approval of the Members Committee except as to a
  successor in operation of a Member's electric operating properties by reason
  of a merger, consolidation, reorganization, sale, spinoff, or foreclosure, as
  a result of which substantially all such electric operating properties are acquired
  by such a successor, and such successor becomes a Member.

13.   INTERCHANGE

13.1   Interchange Arrangements
  with Non-Members.

Any Member may enter into interchange arrangements
  with others who are not Members with respect to the delivery or receipt of capacity
  and energy to fulfill its obligations hereunder or for any other purpose, subject
  to the standards and requirements established in or pursuant to this Agreement.

13.2   Energy Market.

The Office of the Interconnection shall administer
  an efficient energy market within the Interconnection, to be known as the PJM
  Interchange Energy Market, in which Members may buy and sell energy. The Office
  of the Interconnection will schedule in advance and dispatch generation on the
  basis of least-cost, security-constrained dispatch and the prices and operating
  characteristics offered by sellers within and into the Interconnection, continuing
  until sufficient generation is dispatched to serve the energy purchase requirements
  of the Interconnection and buyers out of the Interconnection, as well as the
  requirements of the Interconnection for ancillary services provided by such
  generation. Scheduling and dispatch shall be conducted in accordance with applicable
  schedules to the PJM Tariff and the Schedules to this Agreement.

14.   METERING

14.1   Installation, Maintenance
  and Reading of Meters.

The quantities of electric energy involved
  in determination of the amounts of the billing rendered hereunder shall be ascertained
  by means of meters installed, maintained and read either at the expense of the
  party on whose premises the meters are located or as otherwise provided for
  by agreement between the parties concerned.

14.2   Metering Procedures.

Procedures with respect to maintenance, testing,
  calibrating, correction and registration records, and precision tolerance of
  all metering equipment shall be in accordance with Good Utility Practice. The
  expense of testing any meter shall be borne by the party owning such meter,
  except that when a meter tested upon request of another party is found to register
  within the established tolerance the party making the request shall bear the
  expense of such test.

14.3   Integrated Megawatt-Hours.

All metering of energy required herein shall
  be the integration of megawatt hours in the clock hour, and the quantities thus
  obtained shall constitute the megawatt load for such clock hour; provided, however,
  that adjustment shall be made for other contractual obligations of any Member
  as may be required to determine the quantity to be accounted for hereunder,
  and for transmission losses.

14.4   Meter Locations.

The meter locations to be used by the Members
  in determining their energy transactions on the Interconnection shall be as
  reasonably determined from time to time by the Member or the Office of the Interconnection.

15.   ENFORCEMENT OF OBLIGATIONS

15.1   Failure to Meet
  Obligations.

15.1.1   Termination
  of Market Buyer Rights.

The Office of the Interconnection
  shall terminate a Market Buyer's right to make purchases from the PJM Interchange
  Energy Market, the PJM Capacity Credit Market, or any other market operated
  by PJM if it determines that the Market Buyer does not continue to meet the
  obligations set forth in this Agreement, including but not limited to the obligation
  to be in compliance with PJM's creditworthiness requirements and the obligation
  to make timely payment, provided that the Office of the Interconnection has
  notified the Market Buyer of any such deficiency and afforded the Market Buyer
  a reasonable opportunity to cure pursuant to section 15.1.3. The Office of the
  Interconnection shall reinstate a Market Buyer's right to make purchases from
  the PJM Interchange Energy Market and PJM Capacity Credit Market upon demonstration
  by the Market Buyer that it has come into compliance with the obligations set
  forth in this Agreement.

15.1.2   Termination
  of Market Seller Rights.

The Office of the Interconnection
  shall not accept offers from a Market Seller that has not complied with the
  prices, terms, or operating characteristics of any of its prior scheduled transactions
  in the PJM Interchange Energy Market, unless such Market Seller has taken appropriate
  measures to the satisfaction of the Office of the Interconnection to ensure
  future compliance.

15.1.3   Payment
  of Bills.

(a)   A
  Member shall make full and timely payment, in accordance with the terms specified
  by the Office of the Interconnection, of all bills rendered in connection with
  or arising under or from this Agreement, any service or rate schedule, any tariff,
  or any services performed by the Office of the Interconnection, notwithstanding
  any disputed amount, but any such payment shall not be deemed a waiver of any
  right with respect to such dispute. With respect to any payment that the LLC
  is required to make to a Member in connection with or arising under this Agreement,
  any service or rate schedule, or any tariff, the LLC shall have a right of setoff
  equal to any amount that the Member is required to pay the LLC in connection
  with or arising under or from this Agreement, any service or rate schedule,
  any tariff, or any services performed by the Office of the Interconnection.
  Any Member that fails to make full and timely payment to the LLC, or otherwise
  fails to meet its financial or other obligations to a Member, the Office of
  the Interconnection or the LLC under this Agreement, shall, in addition to any
  requirement set forth in sections 15.1.1 and 15.1.2 and upon expiration of the
  3-day period specified below be in default. If the Office of the Interconnection
  concludes, upon its own initiative or the recommendation of or complaint by
  the Members Committee or any Member, that a Member is in breach of any obligation
  under this Agreement, including, but not limited to, the obligation to make
  timely payment and the obligation to meet PJM's creditworthiness standards and
  to otherwise comply with PJM's credit policies, the Office of the Interconnection
  shall so notify such Member and inform all other Members. The notified Member
  may remedy such asserted breach by: (i) paying all amounts assertedly due, along
  with interest on such amounts calculated in accordance with the methodology
  specified for interest on refunds in FERC's regulations at 18 C.F.R.  § 35.19a(a)(2)(iii);
  and (ii) demonstration to the satisfaction of the Office of the Interconnection
  that the Member has taken appropriate measures to meet any other obligation
  of which it was deemed to be in breach; provided, however, that any such payment
  or demonstration may be subject to a reservation of rights, if any, to subject
  such matter to the PJM Dispute Resolution Procedures; and provided, further,
  that any such determination by the Office of the Interconnection may be subject
  to review by the PJM Board upon request of the Member involved or the Office
  of the Interconnection. If a Member has not remedied a breach by the 3rd business
  day following receipt of the Office of the Interconnection's notice, or receipt
  of the PJM Board's decision on review, if applicable, then the Member shall
  be in default and, in addition to such other remedies as may be available to
  the LLC:

i)   A defaulting
  Market Participant shall be precluded from buying or selling in the PJM Interchange
  Energy Market, the PJM Capacity Credit Market, or any other market operated
  by PJM until the default is remedied as set forth above;

ii)   A
  defaulting Member shall not be entitled to participate in the activities of
  any committee or other body established by the Members Committee or the Office
  of the Interconnection; and

iii)   A
  defaulting Member shall not be entitled to vote on the Members Committee or
  any other committee or other body established pursuant to this Agreement.

15.2   Enforcement of Obligations.

If the Office of the Interconnection sends
  a notice to the PJM Board that a Member has failed to perform an obligation
  under this Agreement, the PJM Board shall initiate such action against such
  Member to enforce such obligation as the PJM Board shall deem appropriate. Subject
  to the procedures specified in Section 15.1, a Member's failure to perform such
  obligation shall be deemed to be a default under this Agreement. In order to
  remedy a default, but without limiting any rights the LLC may have against the
  defaulting Member, the PJM Board may assess against, and collect from, the Members
  not in default, in proportion to their Weighted Interest, an amount equal to
  the amount that the defaulting Member has failed to pay to the Office of the
  Interconnection, along with appropriate interest. Such assessment shall in no
  way relieve the defaulting Member of its obligations. A Member that has paid
  such an assessment to the LLC shall have an independent right to seek and obtain
  payment and recovery from the defaulting Member of the amount of the assessment
  Member of the amount of the assessment the Member paid to the LLC. In addition
  to any amounts in default, the defaulting Member shall be liable to the LLC
  for all reasonable costs incurred in enforcing the defaulting Member's obligations.

15.2.1   Collection
  by the Office of the Interconnection.

By vote at any Members Committee meeting,
  a majority of the Members that have paid a Weighted Interest assessment may
  request and appoint the Office of the Interconnection to act as agent on behalf
  of the Members that have paid a Weighted Interest assessment, solely for the
  purpose of pursuing and collecting any amounts so assessed; provided, however,
  that any Member that does not desire for the Office of the Interconnection to
  act on their behalf with regard to such collection shall so inform the Office
  of the Interconnection. In the event that the Office of the Interconnection
  is appointed as agent for the Members, the Office of the Interconnection shall
  be authorized to pursue collection through such actions, legal or otherwise,
  as it reasonably deems appropriate, including but not limited to the prosecution
  of legal actions and assertion of claims on behalf of the affected Members in
  the state and federal courts as well as under the United States Bankruptcy Code;
  provided, however, that the Office of the Interconnection shall take no action
  on behalf of those Members that have requested that the Office of the Interconnection
  not act on their behalf. After deducting the costs of collection, any amounts
  recovered by the Office of the Interconnection on behalf of the affected Members
  shall be distributed to the Members who have paid their Weighted Interest assessment
  in proportion to the Weighted Interest assessment paid by each Member except
  those Members who informed the Office of the Interconnection that it should
  not act as their agent.

15.3   Obligations to a
  Member in Default.

The Members have no continuing obligation
  to provide the benefits of interconnected operations to a Member in default.

15.4   Obligations of a
  Member in Default.

A Member found to be in default shall take
  all possible measures to mitigate the continued impact of the default on the
  Members not in default, including, but not limited to, loading its own generation
  to supply its own load to the maximum extent possible.

15.5   No Implied Waiver.

A failure of a Member, the PJM Board, or
  the LLC to insist upon or enforce strict performance of any of the provisions
  of this Agreement shall not be construed as a waiver or relinquishment to any
  extent of such entity's right to assert or rely upon any such provisions, rights
  and remedies in that or any other instance; rather, the same shall be and remain
  in full force and effect.

16.   LIABILITY AND INDEMNITY

16.1   Members.

(a)   As between the Members,
  except as may be otherwise agreed upon between individual Members with respect
  to specified interconnections, each Member will indemnify and hold harmless
  each of the other Members, and its directors, officers, employees, agents, or
  representatives, of and from any and all damages, losses, claims, demands, suits,
  recoveries, costs and expenses (including all court costs and reasonable attorneys'
  fees), caused by reason of bodily injury, death or damage to property of any
  third party, resulting from or attributable to the fault, negligence or willful
  misconduct of such Member, its directors, officers, employees, agents, or representatives,
  or resulting from, arising out of, or in any way connected with the performance
  of its obligations under this Agreement, excepting only, and to the extent,
  such cost, expense, damage, liability or loss may be caused by the fault, negligence
  or willful misconduct of any other Member. The duty to indemnify under this
  Agreement will continue in full force and effect notwithstanding the expiration
  or termination of this Agreement or the withdrawal of a Member from this Agreement,
  with respect to any loss, liability, damage or other expense based on facts
  or conditions which occurred prior to such termination or withdrawal.

(b)   The amount of any indemnity
  payment arising hereunder shall be reduced (including, without limitation, retroactively)
  by any insurance proceeds or other amounts actually recovered by the Member
  seeking indemnification in respect of the indemnified action, claim, demand,
  costs, damage or liability. If any Member shall have received an indemnity payment
  for an action, claim, demand, cost, damage or liability and shall subsequently
  actually receive insurance proceeds or other amounts for such action, claim,
  demand, cost, damage or liability, then such Member shall pay to the Member
  that made such indemnity payment the lesser of the amount of such insurance
  proceeds or other amounts actually received and retained or the net amount of
  the indemnity payments actually received previously.

16.2   LLC Indemnified
  Parties.

(a)   The LLC will indemnify
  and hold harmless the PJM Board, the LLC's officers, employees and agents, and
  any representatives of the Members serving on the Members Committee and any
  other committee created under Section 8 of this Agreement (all such Board Members,
  officers, employees, agents and representatives for purposes of this Section
  16 being referred to as "LLC Indemnified Parties"), of and from any and all
  actions, claims, demands, costs (including consequential or indirect damages,
  economic losses and all court costs and reasonable attorneys' fees) and liabilities
  to any third parties, arising from, or in any way connected with, the performance
  of the LLC under this Agreement, or the fact that such LLC Indemnified Party
  was serving in such capacity, except to the extent that such action, claim,
  demand, cost or liability results from the willful misconduct of any LLC Indemnified
  Party with respect to participation in the misconduct. To the extent any dispute
  arises between any Member and the LLC arising from, or in any way connected
  with, the performance of the LLC under this Agreement, the Member and the LLC
  shall follow the PJM Dispute Resolution Procedures. To the extent that any such
  action, claim, demand, cost or liability arises from a Member's contractual
  or other obligation to provide electric service directly or indirectly to said
  third party, which obligation to provide service is limited by the terms of
  any tariff, service agreement, franchise, statute, regulatory requirement, court
  decision or other limiting provision, the Member designates the LLC and each
  LLC Indemnified Party a beneficiary of said limitation.

(b)   An LLC Indemnified Party
  shall not be personally liable for monetary damages for any breach of fiduciary
  duty by such LLC Indemnified Party, except that an LLC Indemnified Party shall
  be liable to the extent provided by applicable law (i) for acts or omissions
  not in good faith or that involve intentional misconduct or a knowing violation
  of law, or (ii) for any transaction from which the LLC Indemnified Party
  derived an improper personal benefit. Notwithstanding (i) and (ii), indemnification
  shall be made in respect of any claim, issue or matter as to which such person
  shall have been adjudged to be liable to the LLC if and to the extent that the
  court in which such action or suit was brought shall determine upon application
  that, despite the adjudication of liability but in view of all the circumstances
  of the case, such person is fairly and reasonably entitled to indemnity for
  such expenses which such court shall deem proper. If applicable law is hereafter
  construed or amended to authorize the further elimination or limitation of the
  liability of LLC Indemnified Parties, then the liability of the LLC Indemnified
  Parties, in addition to the limitation on personal liability provided herein,
  shall be limited to the fullest extent permitted by law. No amendment to or
  repeal of this section shall apply to or have any effect on the liability or
  alleged liability of any LLC Indemnified Party or with respect to any acts or
  omissions occurring prior to such amendment or repeal. The termination of any
  action, suit or proceeding by judgment, order, settlement, conviction, or upon
  a plea of nolo contendere or its equivalent, shall not, of itself, create
  a presumption that the person did not act in good faith and in a manner which
  such person reasonably believed to be in or not opposed to the best interests
  of the LLC, and with respect to any criminal action or proceeding, had reasonable
  cause to believe that his or her conduct was unlawful.

(c)   The LLC may pay expenses
  incurred by an LLC Indemnified Party in defending a civil, criminal, administrative
  or investigative action, suit or proceeding in advance of the final disposition
  of such action, suit or proceeding upon receipt of an undertaking by or on behalf
  of such LLC Indemnified Party to repay such amount if it shall ultimately be
  determined that such LLC Indemnified Party is not entitled to be indemnified
  by the LLC as authorized in this Section.

(d)   In the event the LLC
  incurs liability under this Section 16.2 that is not adequately covered
  by insurance, such amounts shall be recovered pursuant to the PJM Tariff as
  provided in Schedule 3 of this Agreement.

16.3   Worker's Compensation
  Claims.

Each Member shall be solely responsible for
  all claims of its own employees, agents and servants growing out of any Worker's
  Compensation Law.

16.4   Limitation of Liability.

No Member or its directors, officers, employees,
  agents, or representatives shall be liable to any other Member or its directors,
  officers, employees, agents, or representatives, whether liability arises out
  of contract, tort (including negligence), strict liability, or any other cause
  of or form of action whatsoever, for any indirect, incidental, consequential,
  special or punitive cost, expense, damage or loss, including but not limited
  to loss of profits or revenues, cost of capital of financing, loss of goodwill
  or cost of replacement power, arising from such Member's performance or failure
  to perform any of its obligations under this Agreement or the ownership, maintenance
  or operation of its System; provided, however, that nothing herein shall be
  deemed to reduce or limit the obligations of any Member with respect to the
  claims of persons or entities that are not parties to this Agreement.

16.5   Resolution of Disputes.

To the extent any dispute arises between
  one or more Members regarding any issue covered by this Agreement, the Members
  shall follow the dispute resolution procedures set forth in the PJM Dispute
  Resolution Procedures.

16.6   Gross Negligence
  or Willful Misconduct.

Neither the LLC nor the LLC Indemnified Parties
  shall be liable to the Members or any of them for any claims, demands or costs
  arising from, or in any way connected with, the performance of the LLC under
  this Agreement other than actions, claims or demands based on gross negligence
  or willful misconduct; provided, however, that nothing herein shall limit or
  reduce the obligations of the LLC to the Members or any of them under the express
  terms of this Agreement or the PJM Tariff, including, but not limited to, those
  set forth in Sections 6.2 and 6.3 of this Agreement.

16.7   Insurance.

The PJM Board shall be authorized to procure
  insurance against the risks borne by the LLC and the LLC Indemnified Parties,
  the cost of which shall be treated as a cost and expense of the LLC.

17.   MEMBER REPRESENTATIONS, WARRANTIES AND
  COVENANTS

17.1   Representations
  and Warranties.

Each Member makes the following representations
  and warranties to the LLC and each other Member, as of the Effective Date or
  such later date as such Member shall become admitted as a Member of the LLC.

17.1.1   Organization
  and Existence.

Such Member is an entity
  duly organized, validly existing and in good standing under the laws of the
  state of its organization.

17.1.2   Power
  and Authority.

Such Member has the full
  power and authority to execute, deliver and perform this Agreement and to carry
  out the transactions contemplated hereby.

17.1.3   Authorization
  and Enforceability.

The execution and delivery
  of this Agreement by such Member and the performance of its obligations hereunder
  have been duly authorized by all requisite action on the part of the Member,
  and do not conflict with any applicable law or with any other agreement binding
  upon the Member. The Agreement has been duly executed and delivered by such
  Member and constitutes the legal, valid and binding obligation of such Member,
  enforceable against it in accordance with the terms thereof, except insofar
  as such enforceability may be limited by applicable bankruptcy, insolvency,
  reorganization, fraudulent conveyance, moratorium or other similar laws affecting
  the enforcement of creditors' rights generally, and to general principles of
  equity whether such principles are considered in proceedings in law or in equity.

17.1.4   No
  Government Consents.

No authorization, consent,
  approval or order of, notice to or registration, qualification, declaration
  or filing with, any governmental authority is required for the execution, delivery
  and performance by such Member of this Agreement or the carrying out by such
  Member of the transactions contemplated hereby other than such authorization,
  consent, approval or order of, notice to or registration, qualification, declaration
  or filing that is pending before such governmental authority.

17.1.5   No
  Conflict or Breach.

None of the execution,
  delivery and performance by such Member of this Agreement, the compliance with
  the terms and provisions hereof and the carrying out of the transactions contemplated
  hereby, conflicts or will conflict with or will result in a breach or violation
  of any of the terms, conditions or provisions of any law, governmental rule
  or regulation or the charter documents or bylaws of such Member or any applicable
  order, writ, injunction, judgment or decree of any court or governmental authority
  against such Member or by which it or any of its properties, is bound, or any
  loan agreement, indenture, mortgage, bond, note, resolution, contract or other
  agreement or instrument to which such Member is a party or by which it or any
  of its properties is bound, or constitutes or will constitute a default thereunder
  or will result in the imposition of any lien upon any of its properties.

17.1.6   No
  Proceedings.

There are no actions at
  law, suits in equity, proceedings or claims pending or, to the knowledge of
  the Member, threatened against the Member before any federal, state, foreign
  or local court, tribunal or government agency or authority that might materially
  delay, prevent or hinder the performance by the Member of its obligations hereunder.

17.2   Municipal Electric
  Systems.

Any provisions of Section 17.1 notwithstanding,
  if any Member that is a municipal electric system believes in good faith that
  the provisions of Sections 5.1(b) and 16.1 of this Agreement may not lawfully
  be applied to that Member under applicable state law governing municipal activities,
  the Member may request a waiver of the pertinent provisions of the Agreement.
  Any such request for waiver shall be supported by an opinion of counsel for
  the Member to the effect that the provision of the Agreement as to which waiver
  is sought may not lawfully be applied to the Member under applicable state law.
  The PJM Board shall have the right to have the opinion of the Member's counsel
  reviewed by counsel to the LLC. If the PJM Board concludes that either or both
  of Sections 5.1(b) and 16.1 of this Agreement may not lawfully be applied to
  a municipal electric system Member, it shall waive the application of the affected
  provision or provisions to such municipal Member. Any Member not permitted by
  law to indemnify the other Members shall not be indemnified by the other Members.

17.3   Survival.

All representations and warranties contained
  in this Section 17 shall survive the execution and delivery of this Agreement.

18.   MISCELLANEOUS PROVISIONS

18.1   [Reserved.]

18.2   Fiscal and Taxable
  Year.

The fiscal year and taxable year of the LLC
  shall be the calendar year.

18.3   Reports.

Each year prior to the Annual Meeting of
  the Members, the PJM Board shall cause to be prepared and distributed to the
  Members a report of the LLC's activities since the prior report.

18.4   Bank Accounts; Checks,
  Notes and Drafts.

(a)   Funds of the LLC shall
  be deposited in an account or accounts of a type, in form and name and in a
  bank(s) or other financial institution(s) which are participants in federal
  insurance programs as selected by the PJM Board. The PJM Board shall arrange
  for the appropriate conduct of such accounts. Funds may be withdrawn from such
  accounts only for bona fide and legitimate LLC purposes and may from
  time to time be invested in such short-term securities, money market funds,
  certificates of deposit or other liquid assets as the PJM Board deems appropriate.
  All checks or demands for money and notes of the LLC shall be signed by any
  officer or by any other person designated by the PJM Board.

(b)   The Members acknowledge
  that the PJM Board may maintain LLC funds in accounts, money market funds, certificates
  of deposit, other liquid assets in excess of the insurance provided by the Federal
  Deposit Insurance Corporation, or other depository insurance institutions and
  that the PJM Board shall not be accountable or liable for any loss of such funds
  resulting from failure or insolvency of the depository institution.

(c)   Checks, notes, drafts
  and other orders for the payment of money shall be signed by such persons as
  the PJM Board from time to time may authorize. When the PJM Board so authorizes,
  the signature of any such person may be a facsimile.

18.5   Books and Records.

(a)   At all times during
  the term of the LLC, the PJM Board shall keep, or cause to be kept, full and
  accurate books of account, records and supporting documents, which shall reflect,
  completely, accurately and in reasonable detail, each transaction of the LLC.
  The books of account shall be maintained and tax returns prepared and filed
  on the method of accounting determined by the PJM Board. The books of account,
  records and all documents and other writings of the LLC shall be kept and maintained
  at the principal office of the Interconnection.

(b)   The PJM Board shall
  cause the Office of the Interconnection to keep at its principal office the
  following:

i)   A current
  list in alphabetical order of the full name and last known business address
  of each Member, the Weighted Interest of each Member, and the Members Committee
  sector of each Voting Member;

ii)   A
  copy of the Certificate of Formation and the Certificate of Conversion, and
  all Certificates of Amendment thereto;

iii)   Copies
  of the LLC's federal, state, and local income tax returns and reports, if any,
  for the three most recent years; and

iv)   Copies
  of the Operating Agreement, as amended, and of any financial statements of the
  LLC for the three most recent years.

18.6   Amendment.

(a)   Except
  as provided by law or otherwise set forth herein, this Agreement, including
  any Schedule hereto, may be amended, or a new Schedule may be created, only
  upon: (i) submission of the proposed amendment to the PJM Board for its review
  and comments; (ii) approval of the amendment or new Schedule by the Members
  Committee, after consideration of the comments of the PJM Board, in accordance
  with Section 8.4, or written agreement to an amendment of all Members not in
  default at the time the amendment is agreed upon; and (iii) approval and/or
  acceptance for filing of the amendment by FERC and any other regulatory body
  with jurisdiction thereof as may be required by law. If and as necessary, the
  Members Committee may file with FERC or other regulatory body of competent jurisdiction
  any amendment to this Agreement or to its Schedules or a new Schedule not filed
  by the Office of the Interconnection.

(b)   Notwithstanding the
  foregoing, an applicant eligible to become a Member in accordance with the procedures
  specified in this Agreement shall become a Member by executing a counterpart
  of this Agreement without the need for amendment of this Agreement or execution
  of such counterpart by any other Member.

(c)   Each of the following
  fundamental changes to the LLC shall require or be deemed to require an amendment
  to this Agreement and shall require the prior approval of FERC:

i)   Adoption
  of any plan of merger or consolidation;

ii)   Adoption
  of any plan of sale, lease or exchange of assets relating to all, or substantially
  all, of the property and assets of the LLC;

iii)   Adoption
  of any plan of division relating to the division of the LLC into two or more
  corporations or other legal entities;

iv)   Adoption
  of any plan relating to the conversion of the LLC into a stock corporation;

v)   Adoption
  of any proposal of voluntary dissolution; or

vi)   Taking
  any action which has the purpose or effect of the adoption of any plan or proposal
  described in items (i), (ii), (iii), (iv) or (v) above.

18.7   Interpretation.

Wherever the context may require, any noun
  or pronoun used herein shall include the corresponding masculine, feminine or
  neuter forms. The singular form of nouns, pronouns and verbs shall include the
  plural and vice versa.

18.8   Severability.

Each provision of this Agreement shall be
  considered severable and if for any reason any provision is determined by a
  court or regulatory authority of competent jurisdiction to be invalid, void
  or unenforceable, the remaining provisions of this Agreement shall continue
  in full force and effect and shall in no way be affected, impaired or invalidated,
  and such invalid, void or unenforceable provision shall be replaced with valid
  and enforceable provision or provisions which otherwise give effect to the original
  intent of the invalid, void or unenforceable provision.

18.9   Force Majeure.

No Member shall be liable to any other Member
  for damages or otherwise be in breach of this Agreement to the extent and during
  the period such Member's performance is prevented by any cause or causes beyond
  such Member's control and without such Member's fault or negligence, including
  but not limited to any act, omission, or circumstance occasioned by or in consequence
  of any act of God, labor disturbance, act of the public enemy, war, insurrection,
  riot, fire, storm or flood, explosion, breakage or accident to machinery or
  equipment, or curtailment, order, regulation or restriction imposed by governmental,
  military or lawfully established civilian authorities; provided, however, that
  any such foregoing event shall not excuse any payment obligation. Upon the occurrence
  of an event considered by a Member to constitute a force majeure event, such
  Member shall use due diligence to endeavor to continue to perform its obligations
  as far as reasonably practicable and to remedy the event, provided that no Member
  shall be required by this provision to settle any strike or labor dispute.

18.10   Further Assurances.

Each Member hereby agrees that it shall hereafter
  execute and deliver such further instruments, provide all information and take
  or forbear such further acts and things as may be reasonably required or useful
  to carry out the intent and purpose of this Agreement and as are not inconsistent
  with the terms hereof.

18.11   Seal.

The seal of the LLC shall have inscribed
  thereon the name of the LLC, the year of its organization and the words "Corporate
  Seal, Delaware." The seal may be used by causing it or a facsimile thereof to
  be impressed or affixed or reproduced or otherwise.

18.12   Counterparts.

This Agreement may be executed in any number
  of counterparts, each of which shall be an original but all of which together
  will constitute one instrument, binding upon all parties hereto, notwithstanding
  that all of such parties may not have executed the same counterpart.

18.13   Costs of Meetings.

Each Member shall be responsible for all
  costs of its representative, alternate or substitute in attending any meeting.
  The Office of the Interconnection shall pay the other reasonable costs of meetings
  of the PJM Board and the Members Committee, and such other committees, subcommittees,
  task forces, working groups, User Groups or other bodies as determined to be
  appropriate by the Office of the Interconnection, which costs otherwise shall
  be paid by the Members attending. The Office of the Interconnection shall reimburse
  all Board Members for their reasonable costs of attending meetings.

18.14   Notice.

(a)   Except as otherwise
  expressly provided herein, notices required under this Agreement shall be in
  writing and shall be sent to a Member by overnight courier, hand delivery, telecopier
  or other reliable electronic means to the representative on the Members Committee
  of such Member at the address for such Member previously provided by such Member
  to the other Members or as otherwise directed by the Members Committee. Any
  such notice so sent shall be deemed to have been given (i) upon delivery if
  given by overnight couriers or hand delivery, or (ii) upon confirmation if given
  by telecopier or other reliable electronic means.

(b)   Notices, as well as
  copies of the agenda and minutes of all meetings of committees, subcommittees,
  task forces, working groups, User Groups, or other bodies formed under this
  Agreement, shall be posted in a timely fashion on and made available for downloading
  from the PJM website.

18.15   Headings.

The section headings used in this Agreement
  are for convenience only and shall not affect the construction or interpretation
  of any of the provisions of this Agreement.

18.16   No Third-Party
  Beneficiaries.

This Agreement is intended to be solely for
  the benefit of the Members and their respective successors and permitted assigns
  and, unless expressly stated herein, is not intended to and shall not confer
  any rights or benefits on any third party (other than successors and permitted
  assigns) not a signatory hereto.

18.17   Confidentiality.

18.17.1   Party
  Access.

(a)   No
  Member shall have a right hereunder to receive or review any documents, data
  or other information of another Member, including documents, data or other information
  provided to the Office of the Interconnection, to the extent such documents,
  data or information have been designated as confidential pursuant to the procedures
  adopted by the Office of the Interconnection or to the extent that they have
  been designated as confidential by such other Member; provided, however, a Member
  may receive and review any composite documents, data and other information that
  may be developed based on such confidential documents, data or information if
  the composite does not disclose any individual Member's confidential data or
  information.

(b)   Except
  as may be provided in this Agreement or in the PJM Open Access Transmission
  Tariff, the Office of the Interconnection shall not disclose to its Members
  or to third parties, any documents, data, or other information of a Member or
  entity applying for Membership, to the extent such documents, data, or other
  information has been designated confidential pursuant to the procedures adopted
  by the Office of the Interconnection or by such Member or entity applying for
  membership; provided that nothing contained herein shall prohibit the Office
  of the Interconnection from providing any such confidential information to its
  agents, representatives, or contractors to the extent that such person or entity
  is bound by an obligation to maintain such confidentiality; provided further
  that nothing contained herein shall prohibit the Office of the Interconnection
  from providing Member confidential information to the North American Electric
  Reliability Council or any of its regional reliability councils to the extent
  that (i) the Office of the Interconnection determines in its reasonable discretion
  that the exchange of such information is required to enhance and/or maintain
  reliability within MAAC and its neighboring reliability councils, (ii) such
  entity is bound by a written agreement to maintain such confidentiality, and
  (iii) the Office of the Interconnection has notified the affected party of its
  intention to release such information no less than five business days prior
  to the release. The Office of the Interconnection shall collect and use confidential
  information only in connection with its authority under this Agreement and the
  Open Access Transmission Tariff and the retention of such information shall
  be in accordance with PJM's data retention policies.

(c)   Nothing
  contained herein shall prevent the Office of the Interconnection from releasing
  a Member's confidential data or information to a third party provided that the
  Member has delivered to the Office of the Interconnection specific, written
  authorization for such release setting forth the data or information to be released,
  to whom such release is authorized, and the period of time for which such release
  shall be authorized. The Office of the Interconnection shall limit the release
  of a Member's confidential data or information to that specific authorization
  received from the Member. Nothing herein shall prohibit a Member from withdrawing
  such authorization upon written notice to the Office of the Interconnection
  who shall cease such release as soon as practicable after receipt of such withdrawal
  notice.

18.17.2   
  Required Disclosure.

(a)   Notwithstanding
  anything in the foregoing Section to the contrary, and subject to the provisions
  of Section 18.17.3, if a Member or the Office of the Interconnection is required
  by applicable law, or in the course of administrative or judicial proceedings
  other than FERC proceedings or investigations, to disclose to third parties
  other than the FERC or its staff, information that is otherwise required to
  be maintained in confidence pursuant to this Agreement, that Member or the Office
  of the Interconnection may make disclosure of such information; provided, however,
  that as soon as the Member or the Office of the Interconnection learns of the
  disclosure requirement and prior to making disclosure, that Member or the Office
  of the Interconnection shall notify the affected Member or Members of the requirement
  and the terms thereof and the affected Member or Members may direct, at their
  sole discretion and cost, any challenge to or defense against the disclosure
  requirement. The disclosing Member and the Office of the Interconnection shall
  cooperate with such affected Members to the maximum extent practicable to minimize
  the disclosure of the information consistent with applicable law. Each Member
  and the Office of the Interconnection shall cooperate with the affected Members
  to obtain proprietary or confidential treatment of such information by the person
  to whom such information is disclosed prior to any such disclosure.

(b)   Nothing
  in this Section 18.17 shall prohibit or otherwise limit the Office of the Interconnection's
  use of information covered herein if such information was: (i) previously known
  to the Office of the Interconnection without an obligation of confidentiality;
  (ii) independently developed by or for the Office of the Interconnection using
  nonconfidential information; (iii) acquired by the Office of the Interconnection
  from a third party which is not, to the Office of the Interconnection's knowledge,
  under an obligation of confidence with respect to such information; (iv) which
  is or becomes publicly available other than through a manner inconsistent with
  this Section 18.17.

(c)   The
  Office of the Interconnection shall impose on any contractors retained to provide
  technical support or otherwise to assist with the implementation or administration
  of this Agreement or of the Open Access Transmission Tariff a contractual duty
  of confidentiality consistent with this Agreement. A Member shall not be obligated
  to provide confidential or proprietary information to any contractor that does
  not assume such a duty of confidentiality, and the Office of the Interconnection
  shall not provide any such information to any such contractor without the express
  written permission of the Member providing the information.

(d)   Section
  18.17.2(a) does not apply to disclosure of information to the FERC or its staff.

18.17.3   Disclosure
  to FERC.

Notwithstanding anything
  in this Section to the contrary, if the FERC or its staff, during the course
  of an investigation or otherwise, requests information from the Office of the
  Interconnection that is otherwise required to be maintained in confidence pursuant
  to this Agreement, the Office of the Interconnection shall provide the requested
  information to the FERC or its staff, within the time provided for in the request
  for information. In providing the information to the FERC or its staff, the
  Office of the Interconnection may, consistent with 18 C.F.R.  § 388.112, request
  that the information be treated as confidential and non-public by the FERC and
  its staff and that the information be withheld from public disclosure. The Office
  of the Interconnection shall notify any affected Member(s) when it is notified
  by FERC or its staff, that a request for disclosure of, or decision to disclose,
  confidential information has been received, at which time the Office of Interconnection
  and the affected Member may respond before such information would be made public,
  pursuant to 18 C.F.R. §  388.112.

18.18   Termination and
  Withdrawal.

18.18.1   Termination.

Upon termination of this
  Agreement, final settlement for obligations under this Agreement shall include
  the accounting for the period ending with the last day of the last month for
  which the Agreement was effective.

18.18.2   Withdrawal.

Subject to the requirements
  of Section 4.1(c) of this Agreement and Section 1.4.6 of the Schedule 1 to this
  Agreement, any Member may withdraw from this Agreement upon 90 days notice to
  the Office of the Interconnection.

18.18.3   Winding
  Up.

Any provision of this Agreement
  that expressly or by implication comes into or remains in force following the
  termination or expiration of this Agreement shall survive such termination or
  expiration. The surviving provisions shall include, but shall not be limited
  to: (i) those provisions necessary to permit the orderly conclusion, or continuation
  pursuant to another agreement, of transactions entered into prior to the decision
  to terminate this Agreement, (ii) those provisions necessary to conduct final
  billing, collection, and accounting with respect to all matters arising hereunder,
  and (iii) the indemnification provisions as applicable to periods prior to such
  termination or expiration.



IN WITNESS whereof, the Members have caused this Agreement
  to be executed by their duly authorized representatives.

RESOLUTION REGARDING

ELECTION OF DIRECTORS





1.   Subject to the approval of the Federal
  Energy Regulatory Commission, the provisions of section 7.1 of the Amended and
  Restated Operating Agreement of PJM Interconnection, L.L.C. (the "Operating
  Agreement"), to the extent that such section requires that the election of members
  to the PJM Board of Managers be held at the Annual Meeting of the Members, be,
  and they hereby are, waived, solely for election to those positions on the PJM
  Board of Managers that expire in the year 2001; and

2.   An election of members of the PJM Board
  of Managers from the slate approved by the independent consultant retained by
  the Office of the Interconnection, is, and hereby shall be, authorized by the
  PJM Members Committee to occur at its meeting held on August 30, 2001; and

3.   The Office of the Interconnection is, and
  hereby shall be, authorized to file such documents and make such pleadings before
  the Federal Energy Regulatory Commission as the Office of the Interconnection
  determines to be reasonably necessary seeking such waivers and authorizations
  as may be required to assure the validity of the aforementioned election of
  members to the PJM Board of Managers.



SCHEDULE 1

PJM INTERCHANGE ENERGY MARKET

1.   MARKET OPERATIONS

1.1   Introduction.

This Schedule sets forth the scheduling,
  other procedures, and certain general provisions applicable to the operation
  of the PJM Interchange Energy Market within the PJM Control Area. This Schedule
  addresses each of the three time-frames pertinent to the daily operation of
  the PJM Interchange Energy Market: Prescheduling, Scheduling, and Dispatch.

1.2   Cost-based Offers.

Unless and until the FERC shall authorize
  the use of market-based prices in the PJM Interchange Energy Market, all offers
  for energy or other services to be sold on the PJM Interchange Energy Market
  from generating resources located within the PJM Control Area shall not exceed
  the variable cost of producing such energy or other service, as determined in
  accordance with Schedule 2 to this Agreement and applicable regulatory standards,
  requirements and determinations; provided that, a Market Seller may offer to
  the PJM Interchange Energy Market the right to call on energy from a resource
  the output of which has been sold on a bilateral basis, with the rate for such
  energy if called equal to the curtailment rate specified in the bilateral contract.

1.3   Definitions.

1.3.1   Day-ahead
  Energy Market.

"Day-ahead Energy Market"
  shall mean the schedule of commitments for the purchase or sale of energy and
  payment of Transmission Congestion Charges developed by the Office of the Interconnection
  as a result of the offers and specifications submitted in accordance with Section
  1.10 of this Schedule.

1.3.1A Day-ahead Prices.

"Day-ahead Prices" shall
  mean the Locational Marginal Prices resulting from the Day-ahead Energy Market.

1.3.1B Decrement Bid.

"Decrement Bid" shall mean
  a bid to purchase energy at a specified location in the Day-ahead Energy Market.
  An accepted Decrement Bid results in scheduled load at the specified location
  in the Day-ahead Energy Market.

1.3.1C Dispatch Rate.

"Dispatch Rate" shall mean
  the control signal, expressed in dollars per megawatt-hour, calculated and transmitted
  continuously and dynamically to direct the output level of all generation resources
  dispatched by the Office of the Interconnection in accordance with the Offer
  Data.

1.3.2   Equivalent
  Load.

"Equivalent Load" shall
  mean the sum of a Market Participant's net system requirements to serve its
  customer load in the PJM Control Area, if any, plus its net bilateral transactions.

1.3.3   External
  Market Buyer.

"External Market Buyer"
  shall mean a Market Buyer making purchases of energy from the PJM Interchange
  Energy Market for consumption by end-users outside the PJM Control Area, or
  for load in the Control Area that is not served by Network Transmission Service.

1.3.4   External
  Resource.

"External Resource" shall
  mean a generation resource located outside the metered boundaries of the PJM
  Control Area.

1.3.5   Fixed
  Transmission Right.

"Fixed Transmission Right"
  shall mean a right to receive Transmission Congestion Credits as specified in
  Section 5.2.2 of this Schedule.

1.3.6   Generating
  Market Buyer.

"Generating Market Buyer"
  shall mean an Internal Market Buyer that is a Load Serving Entity that owns
  or has contractual rights to the output of generation resources capable of serving
  the Market Buyer's load in the PJM Control Area, or of selling energy or related
  services in the PJM Interchange Energy Market or elsewhere.

1.3.7   Generator
  Forced Outage.

"Generator Forced Outage"
  shall mean an immediate reduction in output or capacity or removal from service,
  in whole or in part, of a generating unit by reason of an Emergency or threatened
  Emergency, unanticipated failure, or other cause beyond the control of the owner
  or operator of the facility, as specified in the relevant portions of the PJM
  Manuals. A reduction in output or removal from service of a generating unit
  in response to changes in market conditions shall not constitute a Generator
  Forced Outage.

1.3.8   Generator
  Maintenance Outage.

"Generator Maintenance
  Outage" shall mean the scheduled removal from service, in whole or in part,
  of a generating unit in order to perform necessary repairs on specific components
  of the facility, if removal of the facility meets the guidelines specified in
  the PJM Manuals.

1.3.9   Generator
  Planned Outage.

"Generator Planned Outage"
  shall mean the scheduled removal from service, in whole or in part, of a generating
  unit for inspection, maintenance or repair with the approval of the Office of
  the Interconnection in accordance with the PJM Manuals.

1.3.9A Increment Bid.

"Increment Bid" shall mean
  an offer to sell energy at a specified location in the Day-ahead Energy Market.
  An accepted Increment Bid results in scheduled generation at the specified location
  in the Day-ahead Energy Market.

1.3.10   Internal
  Market Buyer.

"Internal Market Buyer"
  shall mean a Market Buyer making purchases of energy from the PJM Interchange
  Energy Market for ultimate consumption by end-users inside the PJM Control Area
  that are served by Network Transmission Service.

1.3.11   Inadvertent
  Interchange.

"Inadvertent Interchange"
  shall mean the difference between net actual energy flow and net scheduled energy
  flow into or out of the PJM Control Area, as determined and allocated each hour
  by the Office of the Interconnection in accordance with the procedures set forth
  in the PJM Manuals to each Electric Distributor that reports to the Office of
  the Interconnection its hourly net energy flows from metered tie lines.

1.3.12   Market
  Operations Center.

"Market Operations Center"
  shall mean the equipment, facilities and personnel used by or on behalf of a
  Market Participant to communicate and coordinate with the Office of the Interconnection
  in connection with transactions in the PJM Interchange Energy Market or the
  operation of the PJM Control Area.

1.3.13   Maximum
  Generation Emergency.

"Maximum Generation Emergency"
  shall mean an Emergency declared by the Office of the Interconnection in which
  the Office of the Interconnection anticipates requesting one or more Capacity
  Resources to operate at its maximum net or gross electrical power output, subject
  to the equipment stress limits for such Capacity Resource, in order to manage,
  alleviate, or end the Emergency.

1.3.14   Minimum
  Generation Emergency.

"Minimum Generation Emergency"
  shall mean an Emergency declared by the Office of the Interconnection in which
  the Office of the Interconnection anticipates requesting one or more generating
  resources to operate at or below Normal Minimum Generation, in order to manage,
  alleviate, or end the Emergency.

1.3.14A NERC Interchange
  Distribution Calculator.

"NERC Interchange Distribution
  Calculator" shall mean the NERC mechanism that is in effect and being used to
  calculate the distribution of energy, over specific transmission interfaces,
  from energy transactions.

1.3.15   Network
  Resource.

"Network Resource" shall
  have the meaning specified in the PJM Tariff.

1.3.16   Network
  Service User.

"Network Service User"
  shall mean an entity using Network Transmission Service.

1.3.17   Network
  Transmission Service.

"Network Transmission Service"
  shall mean transmission service provided pursuant to the rates, terms and conditions
  set forth in Part III of the PJM Tariff, or transmission service comparable
  to such service that is provided to a Load Serving Entity that is also a Regional
  Transmission Owner as that term is defined in the PJM Tariff.

1.3.18   Normal
  Maximum Generation.

"Normal Maximum Generation"
  shall mean the highest output level of a generating resource under normal operating
  conditions.

1.3.19   Normal
  Minimum Generation.

"Normal Minimum Generation"
  shall mean the lowest output level of a generating resource under normal operating
  conditions.

1.3.20   Offer
  Data.

"Offer Data" shall mean
  the scheduling, operations planning, dispatch, new resource, and other data
  and information necessary to schedule and dispatch generation resources for
  the provision of energy and other services and the maintenance of the reliability
  and security of the transmission system in the PJM Control Area, and specified
  for submission to the PJM Interchange Energy Market for such purposes by the
  Office of the Interconnection.

1.3.21   Office
  of the Interconnection Control Center.

"Office of the Interconnection
  Control Center" shall mean the equipment, facilities and personnel used by the
  Office of the Interconnection to coordinate and direct the operation of the
  PJM Control Area and to administer the PJM Interchange Energy Market, including
  facilities and equipment used to communicate and coordinate with the Market
  Participants in connection with transactions in the PJM Interchange Energy Market
  or the operation of the PJM Control Area.

1.3.22   Operating
  Day.

"Operating Day" shall mean
  the daily 24 hour period beginning at midnight for which transactions on the
  PJM Interchange Energy Market are scheduled.

1.3.23   Operating
  Margin.

"Operating Margin" shall
  mean the incremental adjustments, measured in megawatts, required in PJM Control
  Area operations in order to accommodate, on a first contingency basis, an operating
  contingency in the PJM Control Area resulting from operations in an interconnected
  Control Area. Such adjustments may result in constraints causing Transmission
  Congestion Charges, or may result in Ancillary Services charges pursuant to
  the PJM Tariff.

1.3.24   Operating
  Margin Customer.

"Operating Margin Customer"
  shall mean a Control Area purchasing Operating Margin pursuant to an agreement
  between such other Control Area and the LLC.

1.3.25   PJM
  Interchange.

"PJM Interchange" shall
  mean the following, as determined in accordance with the Schedules to this Agreement:
  (a) for a Market Participant that is a Network Service User, the amount by which
  its hourly Equivalent Load exceeds, or is exceeded by, the sum of the hourly
  outputs of its operating generating resources; or (b) for a Market Participant
  that is not a Network Service User, the amount of its Spot Market Backup; or
  (c) the hourly scheduled deliveries of Spot Market Energy by a Market Seller
  from an External Resource; or (d) the hourly net metered output of any other
  Market Seller; or (e) the hourly scheduled deliveries of Spot Market Energy
  to an External Market Buyer; or (f) the hourly scheduled deliveries to an Internal
  Market Buyer that is not a Network Service User.

1.3.26   PJM
  Interchange Export.

"PJM Interchange Export"
  shall mean the following, as determined in accordance with the Schedules to
  this Agreement: (a) for a Market Participant that is a Network Service User,
  the amount by which its hourly Equivalent Load is exceeded by the sum of the
  hourly outputs of its operating generating resources; or (b) for a Market Participant
  that is not a Network Service User, the amount of its Spot Market Backup sales;
  or (c) the hourly scheduled deliveries of Spot Market Energy by a Market Seller
  from an External Resource; or (d) the hourly net metered output of any other
  Market Seller.

1.3.27   PJM
  Interchange Import.

"PJM Interchange Import"
  shall mean the following, as determined in accordance with the Schedules to
  this Agreement: (a) for a Market Participant that is a Network Service User,
  the amount by which its hourly Equivalent Load exceeds the sum of the hourly
  outputs of its operating generating resources; or (b) for a Market Participant
  that is not a Network Service User, the amount of its Spot Market Backup purchases;
  or (c) the hourly scheduled deliveries of Spot Market Energy to an External
  Market Buyer; or (d) the hourly scheduled deliveries to an Internal Market Buyer
  that is not a Network Service User.

1.3.28   PJM
  Open Access Same-time Information System.

"PJM Open Access Same-time
  Information System" shall mean the electronic communication system for the collection
  and dissemination of information about transmission services in the PJM Control
  Area, established and operated by the Office of the Interconnection in accordance
  with FERC standards and requirements.

1.3.29   Point-to-Point
  Transmission Service.

"Point-to-Point Transmission
  Service" shall mean transmission service provided pursuant to the rates, terms
  and conditions set forth in Part II of the PJM Tariff.

1.3.30   Ramping
  Capability.

"Ramping Capability" shall
  mean the sustained rate of change of generator output, in megawatts per minute.

1.3.30A Real-time Prices.

"Real-time Prices" shall
  mean the Locational Marginal Prices resulting from the Office of the Interconnection's
  dispatch of the PJM Interchange Energy Market in the Operating Day.

1.3.30B Real-time Energy
  Market.

"Real-time Energy Market"
  shall mean the purchase or sale of energy and payment of Transmission Congestion
  Charges for quantity deviations from the Day-ahead Energy Market in the Operating
  Day.

1.3.31   Regulation.

"Regulation" shall mean
  the capability of a specific generating unit with appropriate telecommunications,
  control and response capability to increase or decrease its output in response
  to a regulating control signal, in accordance with the specifications in the
  PJM Manuals.

1.3.32   Spot
  Market Backup.

"Spot Market Backup" shall
  mean the purchase of energy from, or the delivery of energy to, the PJM Interchange
  Energy Market in quantities sufficient to complete the delivery or receipt obligations
  of a bilateral contract that has been curtailed or interrupted for any reason.

1.3.33   Spot
  Market Energy.

"Spot Market Energy" shall
  mean energy bought or sold by Market Participants through the PJM Interchange
  Energy Market at Locational Marginal Prices determined as specified in Section
  2 of this Schedule.

1.3.33A State Estimator.

"State Estimator" shall
  mean the computer model of power flows specified in Section 2.3 of this Schedule.

1.3.33B Station Power.

"Station Power" shall mean
  energy used for operating the electric equipment on the site of a generation
  facility located in the PJM Control Area or for the heating, lighting, air-conditioning
  and office equipment needs of buildings on the site of such a generation facility
  that are used in the operation, maintenance, or repair of the facility. Station
  Power does not include any energy used to power synchronous condensers, used
  for pumping at a pumped storage facility, or used in association with restoration
  or black start service.

1.3.34   Transmission Congestion Charge.

"Transmission Congestion Charge" shall
  mean a charge attributable to the increased cost of energy delivered at a given
  load bus when the transmission system serving that load bus is operating under
  constrained conditions, which shall be calculated and allocated as specified
  in Section 5.1 of this Schedule.

1.3.35   Transmission
  Congestion Credit.

"Transmission Congestion
  Credit" shall mean the allocated share of total Transmission Congestion Charges
  credited to each holder of Fixed Transmission Rights, calculated and allocated
  as specified in Section 5.2 of this Schedule.

1.3.36   Transmission
  Customer.

"Transmission Customer"
  shall mean an entity using Point-to-Point Transmission Service.

1.3.37   Transmission
  Forced Outage.

"Transmission Forced Outage"
  shall mean an immediate removal from service of a transmission facility by reason
  of an Emergency or threatened Emergency, unanticipated failure, or other cause
  beyond the control of the owner or operator of the transmission facility, as
  specified in the relevant portions of the PJM Manuals. A removal from service
  of a transmission facility at the request of the Office of the Interconnection
  to improve transmission capability shall not constitute a Forced Transmission
  Outage.

1.3.37A Transmission
  Loading Relief.

"Transmission Loading Relief"
  shall mean NERC's procedures for preventing operating security limit violations,
  as implemented by PJM as the security coordinator responsible for maintaining
  transmission security for the PJM Control Area.

1.3.37B Transmission
  Loading Relief Customer.

"Transmission Loading Relief
  Customer" shall mean an entity that, in accordance with Section 1.10.6A, has
  elected to pay Transmission Congestion Charges during Transmission Loading Relief
  in order to continue energy schedules over contract paths outside the PJM Control
  Area that are increasing the cost of energy in the PJM Control Area.

1.3.38   Transmission
  Planned Outage.

"Transmission Planned Outage"
  shall mean any transmission outage scheduled in advance for a pre-determined
  duration and which meets the notification requirements for such outages specified
  in the PJM Manuals.

1.4   Market Buyers.

1.4.1   Qualification.

(a)   To
  become a Market Buyer, an entity shall submit an application to the Office of
  the Interconnection, in such form as shall be established by the Office of the
  Interconnection.

(b)   An
  applicant that is a Load Serving Entity or that will purchase on behalf of or
  for ultimate delivery to a Load Serving Entity shall establish to the satisfaction
  of the Office of the Interconnection that the end-users that will be served
  through energy and related services purchased in the PJM Interchange Energy
  Market, are located electrically within the PJM Control Area, or will be brought
  within the PJM Control Area prior to any purchases from the PJM Interchange
  Energy Market. Such applicant shall further demonstrate that:

i)   The
  Load Serving Entity for the end users is obligated to meet the requirements
  of the Reliability Assurance Agreement; and

ii)   The
  Load Serving Entity for the end users has arrangements in place for Network
  Transmission Service or Point-To-Point Transmission Service for all PJM Interchange
  Energy Market purchases.

(c)   An
  applicant that is not a Load Serving Entity or purchasing on behalf of or for
  ultimate delivery to a Load Serving Entity shall demonstrate that:

i)   The
  applicant has obtained or will obtain Network Transmission Service or Point-to-Point
  Transmission Service for all PJM Interchange Energy Market purchases; and

ii)   The
  applicant's PJM Interchange Energy Market purchases will ultimately be delivered
  to a load in another Control Area that is recognized by NERC and that complies
  with NERC's standards for operating and planning reliable bulk electric systems.

(d)   An
  applicant shall not be required to obtain transmission service for purchases
  from the PJM Interchange Energy Market to cover quantity deviations from its
  sales in the Day-ahead Energy Market.

(e)   All
  applicants shall demonstrate that:

i)   The
  applicant is capable of complying with all applicable metering, data storage
  and transmission, and other reliability, operation, planning and accounting
  standards and requirements for the operation of the PJM Control Area and the
  PJM Interchange Energy Market;

ii)   The
  applicant meets the creditworthiness standards established by the Office of
  the Interconnection, or has provided a letter of credit or other form of security
  acceptable to the Office of the Interconnection; and

iii)   The
  applicant has paid all applicable fees and reimbursed the Office of the Interconnection
  for all unusual or extraordinary costs of processing and evaluating its application
  to become a Market Buyer, and has agreed in its application to subject any disputes
  arising from its application to the PJM Dispute Resolution Procedures.

(f)   The
  applicant shall become a Market Buyer upon a final favorable determination on
  its application by the Office of the Interconnection as specified below, and
  execution by the applicant of counterparts of this Agreement.

1.4.2   Submission
  of Information.

The applicant shall furnish
  all information reasonably requested by the Office of the Interconnection in
  order to determine the applicant's qualification to be a Market Buyer. The Office
  of the Interconnection may waive the submission of information relating to any
  of the foregoing criteria, to the extent the information in the Office of the
  Interconnection's possession is sufficient to evaluate the application against
  such criteria.

1.4.3   Fees
  and Costs.

The Office of the Interconnection
  shall require all applicants to become a Market Buyer to pay a uniform application
  fee, initially in the amount of $1,500, to defray the ordinary costs of processing
  such applications. The application fee shall be revised from time to time as
  the Office of the Interconnection shall determine to be necessary to recover
  its ordinary costs of processing applications. Any unusual or extraordinary
  costs incurred by the Office of the Interconnection in processing an application
  shall be reimbursed by the applicant.

1.4.4   Office
  of the Interconnection Determination.

Upon submission of the
  information specified above, and such other information as shall reasonably
  be requested by the Office of the Interconnection, the Office of the Interconnection
  shall undertake an evaluation and investigation to determine whether the applicant
  meets the criteria specified above. As soon as practicable, but in any event
  not later than 60 days after submission of the foregoing information, or such
  later date as may be necessary to satisfy the requirements of the Reliability
  Assurance Agreement, the Office of the Interconnection shall notify the applicant
  and the members of the Members Committee of its determination, along with a
  written summary of the basis for the determination. The Office of the Interconnection
  shall respond promptly to any reasonable and timely request by a Member for
  additional information regarding the basis for the Office of the Interconnection's
  determination, and shall take such action as it shall deem appropriate in response
  to any request for reconsideration or other action submitted to the Office of
  the Interconnection not later than 30 days from the initial notification to
  the Members Committee.

1.4.5   Existing
  Participants.

Any entity that was qualified
  to participate as a Market Buyer in the PJM Interchange Energy Market under
  the Operating Agreement of PJM Interconnection L.L.C. in effect immediately
  prior to the Effective Date shall continue to be qualified to participate as
  a Market Buyer in the PJM Interchange Energy Market under this Agreement.

1.4.6   Withdrawal.

(a)   An
  Internal Market Buyer that is a Load Serving Entity may withdraw from this Agreement
  by giving written notice to the Office of the Interconnection specifying an
  effective date of withdrawal not earlier than the effective date of (i) its
  withdrawal from the Reliability Assurance Agreement, or (ii) the assumption
  of its obligations under the Reliability Assurance Agreement by an agent that
  is a Market Buyer.

(b)   An
  External Market Buyer or an Internal Market Buyer that is not a Load Serving
  Entity may withdraw from this Agreement by giving written notice to the Office
  of the Interconnection specifying an effective date of withdrawal at least one
  day after the date of the notice.

(c)   Withdrawal
  from this Agreement shall not relieve a Market Buyer of any obligation to pay
  for electric energy or related services purchased from the PJM Interchange Energy
  Market prior to such withdrawal, to pay its share of any fees and charges incurred
  or assessed by the Office of the Interconnection prior to the date of such withdrawal,
  or to fulfill any obligation to provide indemnification for the consequences
  of acts, omissions or events occurring prior to such withdrawal; and provided,
  further, that withdrawal from this Agreement shall not relieve any Market Buyer
  of any obligations it may have under, or constitute withdrawal from, any other
  Related PJM Agreement.

(d)   A
  Market Buyer that has withdrawn from this Agreement may reapply to become a
  Market Buyer in accordance with the provisions of this Section 1.4, provided
  it is not in default of any obligation incurred under this Agreement.

1.5   Market Sellers.

1.5.1   Qualification.

A Member that demonstrates
  to the Office of the Interconnection that the Member meets the standards for
  the issuance of an order mandating the provision of transmission service under
  section 211 of the Federal Power Act, as amended by the Energy Policy Act of
  1992, may become a Market Seller upon execution of this Agreement and submission
  to the Office of the Interconnection of the applicable Offer Data in accordance
  with the provisions of this Schedule. All Members that are Market Buyers shall
  become Market Sellers upon submission to the Office of the Interconnection of
  the applicable Offer Data in accordance with the provisions of this Schedule.

1.5.2   Withdrawal.

(a)   A
  Market Seller may withdraw from this Agreement by giving written notice to the
  Office of the Interconnection specifying an effective date of withdrawal at
  least one day after the date of the notice; provided, however, that withdrawal
  shall not relieve a Market Seller of any obligation to deliver electric energy
  or related services to the PJM Interchange Energy Market pursuant to an offer
  made prior to such withdrawal, to pay its share of any fees and charges incurred
  or assessed by the Office of the Interconnection prior to the date of such withdrawal,
  or to fulfill any obligation to provide indemnification for the consequences
  of acts, omissions, or events occurring prior to such withdrawal; and provided,
  further, that withdrawal shall not relieve any entity that is a Market Seller
  and is also a Market Buyer of any obligations it may have as a Market Buyer
  under, or constitute withdrawal as a Market Buyer from, this Agreement or any
  other Related PJM Agreement.

(b)   A
  Market Seller that has withdrawn from this Agreement may reapply to become a
  Market Seller at any time, provided it is not in default with respect to any
  obligation incurred under this Agreement.

1.6   Office of the Interconnection.

1.6.1   Operation
  of the PJM Interchange Energy Market.

The Office of the Interconnection
  shall operate the PJM Interchange Energy Market in accordance with this Agreement.

1.6.2   Scope
  of Services.

The Office of the Interconnection
  shall, on behalf of the Market Participants, perform the services pertaining
  to the PJM Interchange Energy Market specified in this Agreement, including
  but not limited to the following:

i)   Administer
  the PJM Interchange Energy Market as part of the PJM Control Area, including
  scheduling and dispatching of generation resources, accounting for transactions,
  rendering bills to the Market Participants, receiving payments from and disbursing
  payments to the Market Participants, maintaining appropriate records, and monitoring
  the compliance of Market Participants with the provisions of this Agreement,
  all in accordance with applicable provisions of the Office of the Interconnection
  Agreement, and the Schedules to this Agreement;

ii)   Review
  and evaluate the qualification of entities to be Market Buyers or Market Sellers
  under applicable provisions of this Agreement;

iii)   Coordinate,
  in accordance with applicable provisions of this Agreement, the Reliability
  Assurance Agreement, and the Transmission Owners Agreement, maintenance schedules
  for generation and transmission resources operated as part of the PJM Control
  Area;

iv)   Provide
  or coordinate the provision of ancillary services necessary for the operation
  of PJM Control Area or the PJM Interchange Energy Market;

v)   Determine
  and declare that an Emergency is expected to exist, exists, or has ceased to
  exist, in all or any part of the PJM Control Area, or in another Control Area
  interconnected directly or indirectly with the PJM Control Area, and serve as
  a primary point of contact for interested state or federal agencies;

vi)   Enter
  into (a) agreements for the transfer of energy in conditions constituting an
  Emergency in the PJM Control Area or in a Control Area interconnected with it,
  and the mutual provision of other support in such Emergency conditions with
  other Control Areas interconnected with the PJM Control Area, and (b) purchases
  of Emergency energy offered by Members from resources that are not Capacity
  Resources in conditions constituting an Emergency in the PJM Control Area;

vii)   Coordinate
  the curtailment or shedding of load, or other measures appropriate to alleviate
  an Emergency, in order to preserve reliability in accordance with NERC and MAAC
  principles, guidelines and standards, and to ensure the operation of the PJM
  Control Area in accordance with Good Utility Practice and the this Agreement;

viii)   Protect
  confidential information as specified in this Agreement; and



ix)   Send
  a representative to meetings of the Members Committee or other Committees, subcommittees,
  or working groups specified in this Agreement or formed by the Members Committee
  when requested to do so by the chair or other head of such committee or other
  group.

1.6.3   Records
  and Reports.

The Office of the Interconnection
  shall prepare and maintain such records and prepare such reports, including,
  but not limited to quarterly budget reports, as are required to document the
  performance of its obligations to the Market Participants hereunder in a form
  adopted by the Office of the Interconnection upon consideration of the advice
  and recommendations of the Members Committee. The Office of the Interconnection
  shall also produce special reports reasonably requested by the Members Committee
  and consistent with FERC's standards of conduct; provided, however, the Market
  Participants shall reimburse the Office of the Interconnection for the costs
  of producing any such report. Notwithstanding the foregoing, the Office of the
  Interconnection shall not be required to disclose confidential or commercially
  sensitive information in any such report.

1.6.4   PJM
  Manuals.

The Office of the Interconnection
  shall prepare, maintain and update the PJM Manuals consistent with this Agreement.
  The PJM Manuals shall be available for inspection by the Market Participants,
  regulatory authorities with jurisdiction over the LLC or any Member, and the
  public.

1.7   General.

1.7.1   Market
  Sellers.

Only Market Sellers shall
  be eligible to submit offers to the Office of the Interconnection for the sale
  of electric energy or related services in the PJM Interchange Energy Market.
  Market Sellers shall comply with the prices, terms, and operating characteristics
  of all Offer Data submitted to and accepted by the PJM Interchange Energy Market.

1.7.2   Market
  Buyers.

Only Market Buyers shall
  be eligible to purchase energy or related services in the PJM Interchange Energy
  Market. Market Buyers shall comply with all requirements for making purchases
  from the PJM Interchange Energy Market.

1.7.3   Agents.

A Market Participant may
  participate in the PJM Interchange Energy Market through an agent, provided
  that the Market Participant informs the Office of the Interconnection in advance
  in writing of the appointment of such agent. A Market Participant participating
  in the PJM Interchange Energy Market through an agent shall be bound by all
  of the acts or representations of such agent with respect to transactions in
  the PJM Interchange Energy Market, and shall ensure that any such agent complies
  with the requirements of this Agreement.

1.7.4   General
  Obligations of the Market Participants.

(a)   In
  performing its obligations to the Office of the Interconnection hereunder, each
  Market Participant shall at all times (i) follow Good Utility Practice, (ii)
  comply with all applicable laws and regulations, (iii) comply with the applicable
  principles, guidelines, standards and requirements of FERC, NERC and MAAC, (iv)
  comply with the procedures established for operation of the PJM Interchange
  Energy Market and PJM Control Area and (v) cooperate with the Office of the
  Interconnection as necessary for the operation of the PJM Control Area in a
  safe, reliable manner consistent with Good Utility Practice.

(b)   Market
  Participants shall undertake all operations in or affecting the PJM Interchange
  Energy Market and the PJM Control Area, including but not limited to compliance
  with all Emergency procedures, in accordance with the power and authority of
  the Office of the Interconnection with respect to the operation of the PJM Interchange
  Energy Market and the PJM Control Area as established in this Agreement, and
  as specified in the Schedules to this Agreement and the PJM Manuals. Failure
  to comply with the foregoing operational requirements shall subject a Market
  Participant to such reasonable charges or other remedies or sanctions for non-compliance
  as may be established by the PJM Board, including legal or regulatory proceedings
  as authorized by the PJM Board to enforce the obligations of this Agreement.

(c)   The
  Office of the Interconnection may establish such committees with a representative
  of each Market Participant, and the Market Participants agree to provide appropriately
  qualified personnel for such committees, as may be necessary for the Office
  of the Interconnection to perform its obligations hereunder.

(d)   All
  Market Participants shall provide to the Office of the Interconnection the scheduling
  and other information specified in the Schedules to this Agreement, and such
  other information as the Office of the Interconnection may reasonably require
  for the reliable and efficient operation of the PJM Control Area and the PJM
  Interchange Energy Market, and for compliance with applicable regulatory requirements
  for posting market and related information. Such information shall be provided
  as much in advance as possible, but in no event later than the deadlines established
  by the Schedules to this Agreement, or by the Office of the Interconnection
  in conformance with such Schedules. Such information shall include, but not
  be limited to, maintenance and other anticipated outages of generation or transmission
  facilities, scheduling and related information on bilateral transactions and
  self-scheduled resources, and implementation of active load management, interruption
  of load, and other load reduction measures. The Office of the Interconnection
  shall abide by appropriate requirements for the non-disclosure and protection
  of any confidential or proprietary information given to the Office of the Interconnection
  by a Market Participant. Each Market Participant shall maintain or cause to
  be maintained compatible information and communications systems, as specified
  by the Office of the Interconnection, required to transmit scheduling, dispatch,
  or other time-sensitive information to the Office of the Interconnection in
  a timely manner.

(e)   Each
  Market Participant shall install and operate, or shall otherwise arrange for,
  metering and related equipment capable of recording and transmitting all voice
  and data communications reasonably necessary for the Office of the Interconnection
  to perform the services specified in this Agreement. A Market Participant that
  elects to be separately billed for its PJM Interchange shall, to the extent
  necessary, be individually metered in accordance with Section 14 of this Agreement,
  or shall agree upon an allocation of PJM Interchange between it and the Market
  Participant through whose meters the unmetered Market Participant's PJM Interchange
  is delivered. The Office of the Interconnection shall be notified of the allocation
  by the foregoing Market Participants.

(f)   Each
  Market Participant shall operate, or shall cause to be operated, any generating
  resources owned or controlled by such Market Participant that are within the
  PJM Control Area or otherwise supplying energy to or through the PJM Control
  Area in a manner that is consistent with the standards, requirements or directions
  of the Office of the Interconnection and that will permit the Office of the
  Interconnection to perform its obligations under this Agreement; provided, however,
  no Market Participant shall be required to take any action that is inconsistent
  with Good Utility Practice or applicable law.

(g)   Each
  Market Participant shall follow the directions of the Office of the Interconnection
  to take actions to prevent, manage, alleviate or end an Emergency in a manner
  consistent with this Agreement and the procedures of the PJM Control Area as
  specified in the PJM Manuals.

(h)   Each
  Market Participant shall obtain and maintain all permits, licenses or approvals
  required for the Market Participant to participate in the PJM Interchange Energy
  Market in the manner contemplated by this Agreement.

1.7.5   Market
  Operations Center.

Each Market Participant
  shall maintain a Market Operations Center, or shall make appropriate arrangements
  for the performance of such services on its behalf. A Market Operations Center
  shall meet the performance, equipment, communications, staffing and training
  standards and requirements specified in this Agreement for the scheduling and
  completion of transactions in the PJM Interchange Energy Market and the maintenance
  of the reliable operation of the PJM Control Area, and shall be sufficient to
  enable (i) a Market Seller to perform all terms and conditions of its offers
  to the PJM Interchange Energy Market, and (ii) a Market Buyer to conform to
  the requirements for purchasing from the PJM Interchange Energy Market.

1.7.6   Scheduling
  and Dispatching.

(a)   The
  Office of the Interconnection shall schedule and dispatch in real-time generation
  economically on the basis of least-cost, security-constrained dispatch and the
  prices and operating characteristics offered by Market Sellers, continuing until
  sufficient generation is dispatched to serve the PJM Interchange Energy Market
  energy purchase requirements under normal system conditions of the Market Buyers,
  as well as the requirements of the PJM Control Area for ancillary services provided
  by such generation, in accordance with this Agreement. Scheduling and dispatch
  shall be conducted in accordance with this Agreement.

(b)   The
  Office of the Interconnection shall undertake to identify any conflict or incompatibility
  between the scheduling or other deadlines or specifications applicable to the
  PJM Interchange Energy Market, and any relevant procedures of another Control
  Area, or any tariff (including the PJM Tariff). Upon determining that any such
  conflict or incompatibility exists, the Office of the Interconnection shall
  propose tariff or procedural changes, and undertake such other efforts as may
  be appropriate, to resolve any such conflict or incompatibility.

1.7.7   Pricing.

The price paid for energy
  bought and sold in the PJM Interchange Energy Market will reflect the hourly
  Locational Marginal Price at each load and generation bus, determined by the
  Office of the Interconnection in accordance with this Agreement. Transmission
  Congestion Charges, which shall be determined by differences in Locational Marginal
  Prices in an hour caused by transmission constraints, shall be calculated and
  collected, and the revenues therefrom shall be disbursed, by the Office of the
  Interconnection in accordance with this Schedule.

1.7.8   Generating
  Market Buyer Resources.

A Generating Market Buyer
  may elect to self-schedule its generation resources up to that Generating Market
  Buyer's Equivalent Load, in accordance with and subject to the procedures specified
  in this Schedule, and the accounting and billing requirements specified in Section
  3 to this Schedule.

1.7.9   Delivery
  to an External Market Buyer.

A purchase of Spot Market
  Energy by an External Market Buyer shall be delivered to a bus or busses at
  the border of the PJM Control Area specified by the Office of the Interconnection,
  or to load in the Control Area that is not served by Network Transmission Service,
  using Point-to-Point Transmission Service paid for by the External Market Buyer.
  Further delivery of such energy shall be the responsibility of the External
  Market Buyer.

1.7.10   Other
  Transactions.

(a)   Market
  Participants may enter into bilateral contracts for the purchase or sale of
  electric energy to or from each other or any other entity, subject to the obligations
  of Market Participants to make Capacity Resources available for dispatch by
  the Office of the Interconnection. Bilateral arrangements that contemplate the
  physical transfer of energy to or from a Market Participant shall be reported
  to and coordinated with the Office of the Interconnection in accordance with
  this Schedule.

(b)   Market
  Participants shall have Spot Market Backup with respect to all bilateral transactions
  that are not dynamically scheduled pursuant to Section 1.12 and that are curtailed
  or interrupted for any reason (except for curtailments or interruptions through
  active load management for load located within the PJM Control Area).

(c)   To
  the extent the Office of the Interconnection dispatches a Generating Market
  Buyer's generation resources, such Generating Market Buyer may elect to net
  the output of such resources against its hourly Equivalent Load. Such a Generating
  Market Buyer shall be deemed a buyer from the PJM Interchange Energy Market
  to the extent of its PJM Interchange Imports, and shall be deemed a seller to
  the PJM Interchange Energy Market to the extent of its PJM Interchange Exports.

(d)   A
  Market Seller may self-supply Station Power for its generation facility in accordance
  with the following provisions:

(i)   A Market Seller may self-supply Station
  Power for its generation facility during any month (1) when the net output of
  such facility is positive, or (2) when the net output of such facility is negative
  and the Market Seller during the same month has available at other of its generation
  facilities positive net output in an amount at least sufficient to offset fully
  such negative net output. For purposes of this subsection (d), "net output"
  of a generation facility during any month means the facility's gross energy
  output, less the Station Power requirements of such facility, during that month.
  The determination of a generation facility's or a Market Seller's monthly net
  output under this subsection (d) will apply only to determine whether the Market
  Seller self-supplied Station Power during the month and will not affect the
  price of energy sold or consumed by the Market Seller at any bus during any
  hour during the month. For each hour when a Market Seller has positive net output
  and delivers energy into the Transmission System, it will be paid the locational
  marginal price ("LMP") at its bus for that hour for all of the energy delivered.
  Conversely, for each hour when a Market Seller has negative net output and has
  received Station Power from the Transmission System, it will pay the LMP at
  its bus for that hour for all of the energy consumed.

(ii)   Transmission Provider will determine
  the extent to which each affected Market Seller during the month self-supplied
  its Station Power requirements or obtained Station Power from third-party providers
  (including affiliates) and will incorporate that determination in its accounting
  and billing for the month. In the event that a Market Seller self-supplies Station
  Power during any month in the manner described in clause (1) of paragraph (d)(i)
  above, Market Seller will not use, and will not incur any charges for, transmission
  service. In the event, and to the extent, that a Market Seller self-supplies
  Station Power during any month in the manner described in clause (2) of paragraph
  (d)(i) above (hereafter referred to as "remote self-supply of Station Power"),
  Market Seller shall use and pay for transmission service for the transmission
  of energy in an

amount equal to the facility's negative net output from Market
  Seller's generation facility(ies) having positive net output. Unless the Market
  Seller makes other arrangements with Transmission Provider in advance, such
  transmission service shall be provided under Part II of the PJM Tariff and shall
  be charged the hourly rate under Schedule 8 of the PJM Tariff for non-firm point-to-point
  transmission service with an election to pay congestion charges, provided, however,
  that no reservation shall be necessary for such transmission service and the
  terms and charges under Schedules 1, 1A, 2 through 6, 9 and 10 of the PJM Tariff
  shall not apply to such service. The amount of energy that a Market Seller transmits
  in conjunction with remote self-supply of Station Power will not be affected
  by any other sales, purchases, or transmission of capacity or energy by or for
  such Market Seller under any other provisions of the PJM Tariff.

(iii)   A Market Seller may self-supply Station
  Power from its generation facilities located outside the PJM Control Area during
  any month only if such generation facilities in fact run during such month and
  Market Seller separately has reserved transmission service and scheduled delivery
  of the energy from such resource in advance into the PJM Control Area.

1.7.11   Emergencies.

The Office of the Interconnection,
  with the assistance of the Members' dispatchers as it may request, shall be
  responsible for monitoring the operation of the PJM Control Area, for declaring
  the existence of an Emergency, and for directing the operations of Market Participants
  as necessary to manage, alleviate or end an Emergency. The standards, policies
  and procedures of the Office of the Interconnection for declaring the existence
  of an Emergency, including but not limited to a Minimum Generation Emergency,
  and for managing, alleviating or ending an Emergency, shall apply to all Members
  on a non-discriminatory basis. Actions by the Office of the Interconnection
  and the Market Participants shall be carried out in accordance with this Agreement,
  the NERC Operating Policies, MAAC reliability principles and standards, Good
  Utility Practice, and the PJM Manuals. A declaration that an Emergency exists
  or is likely to exist by the Office of the Interconnection shall be binding
  on all Market Participants until the Office of the Interconnection announces
  that the actual or threatened Emergency no longer exists. Consistent with existing
  contracts, all Market Participants shall comply with all directions from the
  Office of the Interconnection for the purpose of managing, alleviating or ending
  an Emergency. The Market Participants shall authorize the Office of the Interconnection
  to purchase or sell energy on their behalf to meet an Emergency, and otherwise
  to implement agreements with other Control Areas interconnected with the PJM
  Control Area for the mutual provision of service to meet an Emergency, in accordance
  with this Agreement.

1.7.12   Fees
  and Charges.

Each Market Participant
  shall pay all fees and charges of the Office of the Interconnection for operation
  of the PJM Interchange Energy Market as determined by and allocated to the Market
  Participant by the Office of the Interconnection in accordance with Schedule
  3.

1.7.13   Relationship
  to PJM Control Area.

The PJM Interchange Energy
  Market operates within and subject to the requirements for the operation of
  the PJM Control Area.

1.7.14   PJM
  Manuals.

The Office of the Interconnection
  shall be responsible for maintaining, updating, and promulgating the PJM Manuals
  as they relate to the operation of the PJM Interchange Energy Market. The PJM
  Manuals, as they relate to the operation of the PJM Interchange Energy Market,
  shall conform and comply with this Agreement, NERC operating policies, and MAAC
  reliability principles, guidelines and standards, and shall be designed to facilitate
  administration of an efficient energy market within industry reliability standards
  and the physical capabilities of the PJM Control Area.

1.7.15   Corrective
  Action.

Consistent with Good Utility
  Practice, the Office of the Interconnection shall be authorized to direct or
  coordinate corrective action, whether or not specified in the PJM Manuals, as
  necessary to alleviate unusual conditions that threaten the integrity or reliability
  of the PJM Control Area or the regional power system.

1.7.16   Recording.

Subject to the requirements
  of applicable State or federal law, all voice communications with the Office
  of the Interconnection Control Center may be recorded by the Office of the Interconnection
  and any Market Participant communicating with the Office of the Interconnection
  Control Center, and each Market Participant hereby consents to such recording.

1.7.17   Operating
  Reserves.

(a)   The
  following procedures shall apply to any generation unit subject to the dispatch
  of the Office of the Interconnection for which construction commenced before
  July 9, 1996.

(b)   The
  Office of the Interconnection shall schedule to the Operating Reserve and load-following
  objectives of the PJM Control Area and the PJM Interchange Energy Market in
  scheduling resources pursuant to this Schedule. A table of Operating Reserve
  objectives is calculated seasonally for various peak load levels and eight weekly
  periods and is published in the PJM Manuals. Reserve levels are probabilistically
  determined based on the season's historical load forecasting error and expected
  generation mix (including typical Planned and Forced/Unplanned Outages). Generating
  Units with quick start capability, as specified in the PJM Manuals, that are
  dispatched to maintain reliability by providing or maintaining spinning reserves
  or providing load following capability shall receive energy payments at the
  levels specified below. The energy payments specified below shall be considered
  the offered price for Spot Market Energy for purposes of Section 3.2.3(b) of
  this Schedule. The price offered or paid for the energy of units so dispatched
  shall not be considered in determining Locational Marginal Prices.

(c)   Payments
  for energy produced by a quick start generating unit dispatched as specified
  above shall be at the higher of the applicable Locational Marginal Price or
  one of the amounts specified below, as specified in advance by the Market Seller
  for the affected unit:

(i)   The weighted average Locational Marginal
  Price at the generation bus at which energy from the capped resource was delivered
  during a specified number of hours during which the resource was dispatched
  for energy in economic merit order, the specified number of hours to be determined
  by the Office of the Interconnection and to be a number of hours sufficient
  to result in a price cap that reflects reasonably contemporaneous competitive
  market conditions for that unit;

(ii)   The incremental operating cost of the
  generation resource as determined in accordance with Schedule 2 of this Agreement
  and the PJM Manuals, plus 10% of such costs; or

(iii)   An amount determined by agreement between
  the Office of the Interconnection and the Market Seller.

1.7.18   Regulation.

(a)   Regulation
  shall be supplied from generators located within the metered electrical boundaries
  of the PJM Control Area. Generating Market Buyers, and Market Sellers offering
  Regulation, shall comply with applicable standards and requirements for Regulation
  capability and dispatch specified in the PJM Manuals.

(b)   The
  Office of the Interconnection shall obtain and maintain an amount of Regulation
  equal to the PJM Control Area Regulation objective as specified in the PJM Manuals.

(c)   The
  Regulation range of a unit shall be at least twice the amount of Regulation
  assigned.

(d)   A
  unit capable of automatic energy dispatch that is also providing Regulation
  shall have its energy dispatch range reduced by twice the amount of the Regulation
  provided. The amount of Regulation provided by a unit shall serve to redefine
  the Normal Minimum Generation and Normal Maximum Generation energy limits of
  that unit, in that the amount of Regulation shall be added to the unit's Normal
  Minimum Generation energy limit, and subtracted from its Normal Maximum Generation
  energy limit.

(e)   Qualified
  Regulation must satisfy the verification tests described in the PJM Manuals.

1.7.19   Ramping.

A generator dispatched
  by the Office of the Interconnection pursuant to a control signal appropriate
  to increase or decrease the generator's megawatt output level shall be able
  to change output at the ramping rate specified in the Offer Data submitted to
  the Office of the Interconnection for that generator.

1.7.20   Communication
  and Operating Requirements.

(a)   Market
  Participants. Each Market Participant shall have, or shall arrange to have,
  its transactions in the PJM Interchange Energy Market subject to control by
  a Market Operations Center, with staffing and communications systems capable
  of real-time communication with the Office of the Interconnection during normal
  and Emergency conditions and of control of the Market Participant's relevant
  load or facilities sufficient to meet the requirements of the Market Participant's
  transactions with the PJM Interchange Energy Market, including but not limited
  to the following requirements as applicable.

(b)   Market
  Sellers selling from resources within the PJM Control Area shall: report to
  the Office of the Interconnection sources of energy available for operation;
  supply to the Office of the Interconnection all applicable Offer Data; report
  to the Office of the Interconnection units that are self-scheduled; report to
  the Office of the Interconnection bilateral sales transactions to buyers not
  within the PJM Control Area; confirm to the Office of the Interconnection bilateral
  sales to Market Buyers within the PJM Control Area; respond to the Office of
  the Interconnection's directives to start, shutdown or change output levels
  of generation units, or change scheduled voltages or reactive output levels;
  continuously maintain all Offer Data concurrent with on-line operating information;
  and ensure that, where so equipped, generating equipment is operated with control
  equipment functioning as specified in the PJM Manuals.

(c)   Market
  Sellers selling from resources outside the PJM Control Area shall: provide to
  the Office of the Interconnection all applicable Offer Data, including offers
  specifying amounts of energy available, hours of availability and prices of
  energy and other services; respond to Office of the Interconnection directives
  to schedule delivery or change delivery schedules; and communicate delivery
  schedules to the Market Seller's Control Area.

(d)   Market
  Participants that are Load Serving Entities or purchasing on behalf of Load
  Serving Entities shall: respond to Office of the Interconnection directives
  for load management steps; report to the Office of the Interconnection Capacity
  Resources to satisfy capacity obligations that are available for pool operation;
  report to the Office of the Interconnection all bilateral purchase transactions;
  respond to other Office of the Interconnection directives such as those required
  during Emergency operation.

(e)   Market
  Participants that are not Load Serving Entities or purchasing on behalf of Load
  Serving Entities shall: provide to the Office of the Interconnection requests
  to purchase specified amounts of energy for each hour of the Operating Day during
  which it intends to purchase from the PJM Interchange Energy Market, along with
  Dispatch Rate levels above which it does not desire to purchase; respond to
  other Office of the Interconnection directives such as those required during
  Emergency operation.

1.8   Selection, Scheduling
  and Dispatch Procedure Adjustment Process.

1.8.1   PJM
  Dispute Resolution Agreement.

Subject to the condition
  specified below, any Member adversely affected by a decision of the Office of
  the Interconnection with respect to the operation of the PJM Interchange Energy
  Market, including the qualification of an entity to participate in that market
  as a buyer or seller, may seek such relief as may be appropriate under the PJM
  Dispute Resolution Procedures on the grounds that such decision does not have
  an adequate basis in fact or does not conform to the requirements of this Agreement.

1.8.2   Market
  or Control Area Hourly Operational Disputes.

(a)   Market
  Participants shall comply with all determinations of the Office of the Interconnection
  on the selection, scheduling or dispatch of resources in the PJM Interchange
  Energy Market, or to meet the operational requirements of the PJM Control Area.
  Complaints arising from or relating to such determinations shall be brought
  to the attention of the Office of the Interconnection not later than the end
  of the fifth business day after the end of the Operating Day to which the selection
  or scheduling relates, or in which the scheduling or dispatch took place, and
  shall include, if practicable, a proposed resolution of the complaint. Upon
  receiving notification of the dispute, the Office of the Interconnection and
  the Market Participant raising the dispute shall exert their best efforts to
  obtain and retain all data and other information relating to the matter in dispute,
  and to notify other Market Participants that are likely to be affected by the
  proposed resolution. Subject to confidentiality or other non-disclosure requirements,
  representatives of the Office of the Interconnection, the Market Participant
  raising the dispute, and other interested Market Participants, shall meet within
  three business days of the foregoing notification, or at such other or further
  times as the Office of the Interconnection and the Market Participants may agree,
  to review the relevant facts, and to seek agreement on a resolution of the dispute.

(b)   If
  the Office of the Interconnection determines that the matter in dispute discloses
  a defect in operating policies, practices or procedures subject to the discretion
  of the Office of the Interconnection, the Office of the Interconnection shall
  implement such changes as it deems appropriate and shall so notify the Members
  Committee. Alternatively, the Office of the Interconnection may notify the Members
  Committee of a proposed change and solicit the comments or other input of the
  Members.

(c)   If
  either the Office of the Interconnection, the Market Participant raising the
  dispute, or another affected Market Participant believes that the matter in
  dispute has not been adequately resolved, or discloses a need for changes in
  standards or policies established in or pursuant to the Operating Agreement,
  any of the foregoing parties may make a written request for review of the matter
  by the Members Committee, and shall include with the request the forwarding
  party's recommendation and such data or information (subject to confidentiality
  or other non-disclosure requirements) as would enable the Members Committee
  to assess the matter and the recommendation. The Members Committee shall take
  such action on the recommendation as it shall deem appropriate.

(d)   Subject
  to the right of a Market Participant to obtain correction of accounting or billing
  errors, the LLC or a Market Participant shall not be entitled to actual, compensatory,
  consequential or punitive damages, opportunity costs, or other form of reimbursement
  from the LLC or any other Market Participant for any loss, liability or claim,
  including any claim for lost profits, incurred as a result of a mistake, error
  or other fault by the Office of the Interconnection in the selection, scheduling
  or dispatch of resources.

1.9   Prescheduling.

The following procedures and principles shall
  govern the prescheduling activities necessary to plan for the reliable operation
  of the PJM Control Area and for the efficient operation of the PJM Interchange
  Energy Market.

1.9.1   Outage
  Scheduling.

The Office of the Interconnection
  shall be responsible for coordinating and approving requests for outages of
  generation and transmission facilities as necessary for the reliable operation
  of the PJM Control Area, in accordance with the PJM Manuals. The Office of the
  Interconnection shall maintain records of outages and outage requests of these
  facilities.

1.9.2   
  Planned Outages.

(a)   A
  Generator Planned Outage shall be included in Generator Planned Outage schedules
  established prior to the scheduled start date for the outage, in accordance
  with standards and procedures specified in the PJM Manuals.

(b)   The
  Office of the Interconnection shall conduct Generator Planned Outage scheduling
  for Capacity Resources in accordance with the Reliability Assurance Agreement
  and the PJM Manuals and in consultation with the Members owning or controlling
  the output of Capacity Resources. A Market Participant shall not be expected
  to submit offers for the sale of energy or other services, or to satisfy delivery
  obligations, from all or part of a generation resource undergoing an approved
  Generator Planned Outage. If the Office of the Interconnection determines that
  approval of a Generator Planned Outage would significantly affect the reliable
  operation of the PJM Control Area, the Office of the Interconnection may withhold
  approval or withdraw a prior approval. Approval for a Generator Planned Outage
  of a Capacity Resource shall be withheld or withdrawn only as necessary to ensure
  the adequacy of reserves or the reliability of the PJM Control Area in connection
  with anticipated implementation or avoidance of Emergency procedures. If the
  Office of the Interconnection withholds or withdraws approval, it shall coordinate
  with the Market Participant owning or controlling the resource to reschedule
  the Generator Planned Outage of the Capacity Resource at the earliest practical
  time. The Office of the Interconnection shall if possible propose alternative
  schedules with the intent of minimizing the economic impact on the Market Participant
  of a Generator Planned Outage.

(c)   The
  Office of the Interconnection shall conduct Planned Transmission Outage scheduling
  in accordance with procedures specified in the Transmission Owners Agreement
  and the PJM Manuals. If the Office of the Interconnection determines that transmission
  maintenance schedules proposed by one or more Members would significantly affect
  the efficient and reliable operation of the PJM Control Area, the Office of
  the Interconnection may propose alternative schedules, but such alternative
  shall minimize the economic impact on the Member or Members whose maintenance
  schedules the Office of the Interconnection proposes to modify.

The Office of the Interconnection
  shall coordinate resolution of outage or other planning conflicts that may give
  rise to unreliable system conditions. The Members shall comply with all maintenance
  schedules established by the Office of the Interconnection.

1.9.3   Generator
  Maintenance Outages.

A Market Participant may
  request approval for a Generator Maintenance Outage of any Capacity Resource
  from the Office of the Interconnection in accordance with the timetable and
  other procedures specified in the PJM Manuals. The Office of the Interconnection
  shall approve requests for Generator Maintenance Outages for a Capacity Resource
  unless the outage would threaten the adequacy of reserves in, or the reliability
  of, the PJM Control Area. A Market Participant shall not be expected to submit
  offers for the sale of energy or other services, or to satisfy delivery obligations,
  from a generation resource undergoing an approved full or partial Generator
  Maintenance Outage.

1.9.4   Forced
  Outages.

(a)   Each
  Market Seller that owns or controls a pool-scheduled resource, or Capacity Resource
  whether or not pool-scheduled, shall: (i) advise the Office of the Interconnection
  of a Generator Forced Outage suffered or anticipated to be suffered by any such
  resource as promptly as possible; (ii) provide the Office of the Interconnection
  with the expected date and time that the resource will be made available; and
  (iii) make a record of the events and circumstances giving rise to the Generator
  Forced Outage. A Market Seller shall not be expected to submit offers for the
  sale of energy or other services, or satisfy delivery obligations, from a generation
  resource undergoing a Generator Forced Outage. A Capacity Resource that does
  not deliver all or part of its scheduled energy shall be deemed to have experienced
  a Generator Forced Outage with respect to such undelivered energy, in accordance
  with standards and procedures for full and partial Generator Forced Outages
  specified in the Reliability Assurance Agreement and the PJM Manuals.

(b)   The
  Office of the Interconnection shall receive notification of Forced Transmission
  Outages, and information on the return to service, of Transmission Facilities
  in the PJM Control Area in accordance with standards and procedures specified
  in the Transmission Owners Agreement and the PJM Manuals.

1.9.5   Market
  Participant Responsibilities.

Each Market Participant
  making a bilateral sale covering a period greater than the following Operating
  Day from a generating resource located within the PJM Control Area for delivery
  outside the PJM Control Area shall furnish to the Office of the Interconnection,
  in the form and manner specified in the PJM Manuals, information regarding the
  source of the energy, the load sink, the energy schedule, and the amount of
  energy being delivered.

1.9.6   Internal
  Market Buyer Responsibilities.

Each Internal Market Buyer
  making a bilateral purchase covering a period greater than the following Operating
  Day shall furnish to the Office of the Interconnection, in the form an manner
  specified in the PJM Manuals, information regarding the source of the energy,
  the load sink, the energy schedule, and the amount of energy being delivered.
  Each Internal Market Buyer shall provide the Office of the Interconnection with
  details of any load management agreements with customers that allow the Office
  of the Interconnection to reduce load under specified circumstances.

1.9.7   Market
  Seller Responsibilities.

(a)   Not
  less than 30 days before a Market Seller's initial offer to sell energy from
  a given generation resource on the PJM Interchange Energy Market, the Market
  Seller shall furnish to the Office of the Interconnection the information specified
  in the Offer Data for new generation resources.

(b)   Market
  Sellers authorized and to request market-based start-up fees may choose to submit
  either market-based or cost-based start-up fees.

(i)   If a Market Seller chooses to submit market-based
  start-up and no-load fees, such Market Seller, in its Offer Data, shall submit
  a specification of such fees to the Office of the Interconnection for each generating
  unit as to which the Market Seller intends to request such fees. Any such specification
  shall be submitted on or before March 31 for the period April 1 through September
  30, and on or before September 30 for the period October 1 through March 31,
  and shall remain in effect without change throughout each such period for which
  a specification was submitted. The Office of the Interconnection shall reject
  any request for start-up and no-load fees in a Market Seller's Offer Data that
  does not conform to the Market Seller's specification on file with the Office
  of the Interconnection.

(ii)   If a Market Seller chooses to submit
  cost-based start-up fees, the start-up fee may be changed daily.

1.9.8   Office
  of the Interconnection Responsibilities.

(a)   The
  Office of the Interconnection shall perform seasonal operating studies to assess
  the forecasted adequacy of generating reserves and of the transmission system,
  in accordance with the procedures specified in the PJM Manuals.

(b)   The
  Office of the Interconnection shall maintain and update tables setting forth
  Operating Reserve and other reserve objectives as specified in the PJM Manuals.

(c)   The
  Office of the Interconnection shall receive and process requests for firm and
  non-firm transmission service in accordance with procedures specified in the
  PJM Tariff.

(d)   The
  Office of the Interconnection shall maintain such data and information relating
  to generation and transmission facilities in the PJM Control Area as may be
  necessary or appropriate to conduct the scheduling and dispatch of the PJM Interchange
  Energy Market and PJM Control Area.

(e)   The
  Office of the Interconnection shall coordinate with other interconnected Control
  Area as necessary to manage, alleviate or end an Emergency.

1.10   Scheduling.

1.10.1   General.

(a)   The
  Office of the Interconnection shall administer scheduling processes to implement
  a Day-ahead Energy Market and a Real-time Energy market.

(b)   The
  Day-ahead Energy Market shall enable Market Participants to purchase and sell
  energy through the PJM Interchange Energy Market at Day-ahead Prices and enable
  transmission customers to reserve transmission service with Transmission Congestion
  Charges based on locational differences in Day-ahead Prices. Market Participants
  whose purchases and sales, and transmission customers whose transmission uses
  are scheduled in the Day-ahead Energy Market, shall be obligated to purchase
  or sell energy, or pay Transmission Congestion Charges, at the applicable Day-ahead
  Prices for the amounts scheduled.

(c)   In
  the Real-time Energy Market, Market Participants that deviate from the amounts
  of energy purchases or sales, or transmission customers that deviate from the
  transmission uses, scheduled in the Day-ahead Energy Market shall be obligated
  to purchase or sell energy, or pay Transmission Congestion Charges, for the
  amount of the deviations at the applicable Real-time Prices or price differences,
  unless otherwise specified by this Schedule.

(d)   The
  following scheduling procedures and principles shall govern the commitment of
  resources to the Day-ahead Energy Market and the Real-time Energy Market over
  a period extending from one week to one hour prior to the real-time dispatch.
  Scheduling encompasses the day-ahead and hourly scheduling process, through
  which the Office of the Interconnection determines the Day-ahead Energy Market
  and determines, based on changing forecasts of conditions and actions by Market
  Participants and system constraints, a plan to serve the hourly energy and reserve
  requirements of the Internal Market Buyers and the purchase requests of the
  External Market Buyers in the least costly manner, subject to maintaining the
  reliability of the PJM Control Area. Scheduling shall be conducted as specified
  below, subject to the following condition. If the Office of the Interconnection's
  forecast for the next seven days projects a likelihood of Emergency conditions,
  the Office of the Interconnection may commit, for all or part of such seven
  day period, to the use of generation resources with notification or start-up
  times greater than one day as necessary in order to alleviate or mitigate such
  Emergency, in accordance with the Market Sellers' offers for such units for
  such periods and the specifications in the PJM Manuals.

1.10.1A Day-Ahead Energy
  Market Scheduling.

The following actions shall
  occur not later than 12:00 noon on the day before the Operating Day for which
  transactions are being scheduled, or such other deadline as may be specified
  by the Office of the Interconnection in order to comply with the practical requirements
  and the economic and efficiency objectives of the scheduling process specified
  in this Schedule.

(a)   Each
  Market Participant may submit to the Office of the Interconnection specifications
  of the amount and location of its customer loads and/or energy purchases to
  be included in the Day-ahead Energy Market for each hour of the next Operating
  Day, such specifications to comply with the requirements set forth in the PJM
  Manuals. Each Market Buyer shall inform the Office of the Interconnection of
  the prices, if any, at which it desires not to include its load in the Day-ahead
  Energy Market rather than pay the Day-ahead Price.



(b)   Each
  Generating Market Buyer shall submit to the Office of the Interconnection: (i) hourly
  schedules for resource increments, including hydropower units, self-scheduled
  by the Market Buyer to meet its Equivalent Load; and (ii) the Dispatch Rate
  at which each such self-scheduled resource will disconnect or reduce output,
  or confirmation of the Market Buyer's intent not to reduce output.

(c)   All
  Market Participants shall submit to the Office of the Interconnection schedules
  for any bilateral transactions involving use of generation or Transmission Facilities
  as specified below, and shall inform the Office of the Interconnection whether
  the transaction is to be included in the Day-ahead Energy market. Any Market
  Participant that elects to include a bilateral transaction in the Day-ahead
  Energy Market may specify the price (such price not to exceed the maximum price
  that may be specified in the PJM Manuals), if any, at which it will be wholly
  or partially curtailed rather than pay Transmission Congestion Charges. The
  foregoing price specification shall apply to the price difference between the
  specified bilateral transaction source and sink points in the day-ahead scheduling
  process only. Any Market Participant that elects not to include its bilateral
  transaction in the Day-ahead Energy Market shall inform the Office of the Interconnection
  if the parties to the transaction are not willing to incur Transmission Congestion
  Charges in the Real-time Energy Market in order to complete any such scheduled
  bilateral transaction. Scheduling of bilateral transactions shall be conducted
  in accordance with the specifications in the PJM Manuals and the following requirements:

i)   Internal
  Market Buyers shall submit schedules for all bilateral purchases for delivery
  within the PJM Control Area, whether from generation resources inside or outside
  the PJM Control Area;

ii)   Market
  Sellers shall submit schedules for bilateral sales to entities outside the PJM
  Control Area from generation within the PJM Control Area that is not dynamically
  scheduled to such entities pursuant to Section 1.12; and

iii)   In
  addition to the foregoing schedules for bilateral transactions, Market Participants
  shall submit confirmations of each scheduled bilateral transaction from each
  other party to the transaction in addition to the party submitting the schedule,
  or the adjacent Control Area.

(d)   Market
  Sellers wishing to sell into the Day-ahead Energy Market shall submit offers
  for the supply of energy (including energy from hydropower units), Regulation,
  Operating Reserves or other services for the following Operating Day. Offers
  shall be submitted to the Office of the Interconnection in the form specified
  by the Office of the Interconnection and shall contain the information specified
  in the Office of the Interconnection's Offer Data specification, as applicable.
  Market Sellers owning or controlling the output of a Capacity Resource that
  has not been rendered unavailable by a Generation Planned Outage, a Generator
  Maintenance Outage, or a Generation Forced Outage shall submit offers for the
  available capacity of such Capacity Resource,

including any portion that is self-scheduled by the Generating
  Market Buyer claiming the resource as a Capacity Resource. The submission of
  offers for resource increments that are not Capacity Resources shall be optional,
  but any such offers must contain the information specified in the Office of
  the Interconnection's Offer Data specification, as applicable. Energy offered
  from generation resources that are not Capacity Resources shall not be supplied
  from resources that are included in or otherwise committed to supply the Operating
  Reserves of another Control Area. The foregoing offers:

i)   Shall
  specify the generation resource and energy for each hour in the offer period;

ii)   Shall
  specify the amounts and prices for the entire Operating Day for each resource
  component offered by the Market Seller to the Office of the Interconnection;

iii)   If
  based on energy from a specific generating unit, may specify start-up and no-load
  fees equal to the specification of such fees for such unit on file with the
  Office of the Interconnection;

iv)   Shall
  set forth any special conditions upon which the Market Seller proposes to supply
  a resource increment, including any curtailment rate specified in a bilateral
  contract for the output of the resource, or any cancellation fees;

v)   May
  include a schedule of offers for prices and operating data contingent on acceptance
  by the deadline specified in this Schedule, with a second schedule applicable
  if accepted after the foregoing deadline;

vi)   Shall
  constitute an offer to submit the resource increment to the Office of the Interconnection
  for scheduling and dispatch in accordance with the terms of the offer, which
  offer shall remain open through the Operating Day for which the offer is submitted;

vii)   Shall
  be final as to the price or prices at which the Market Seller proposes to supply
  energy or other services to the PJM Interchange Energy Market, such price or
  prices being guaranteed by the Market Seller for the period extending through
  the end of the following Operating Day; and

viii)   Shall
  not exceed an energy offer price of $1,000/megawatt-hour.

(e)   A
  Market Seller that wishes to make a resource available to sell Regulation service
  shall submit an offer for Regulation that shall specify the MW of Regulation
  being offered, the price of the offer in dollars per MWh, and such other information
  specified by the Office of the Interconnection as may be necessary to evaluate
  the offer and the resource's opportunity costs. The price of the offer shall
  not exceed $100 per MWh. Qualified Regulation capability must satisfy the verification
  tests specified in the PJM Manuals.

(f)   Each
  Market Seller owning or controlling the output of a Capacity Resource shall
  submit a forecast of the availability of each such Capacity Resource for the
  next seven days. A Market Seller (i) may submit a non-binding forecast of the
  price at which it expects to offer a generation resource increment to the Office
  of the Interconnection over the next seven days, and (ii) shall submit a binding
  offer for energy, along with start-up and no-load fees, if any, for the next
  seven days or part thereof, for any generation resource with minimum notification
  or start-up requirement greater than 24 hours.

(g)   Each
  offer by a Market Seller of a Capacity Resource shall remain in effect for subsequent
  Operating Days until superseded or canceled.

(h)   The
  Office of the Interconnection shall post on the PJM Open Access Same-time Information
  System the total hourly loads scheduled in the Day-ahead Energy Market, as well
  as, its estimate of the combined hourly load of the Market Buyers for the next
  four days, and peak load forecasts for an additional three days.

(i)   All
  Market Participants may submit Increment Bids and/or Decrement Bids that apply
  to the Day-ahead Energy Market only. Such bids must comply with the requirements
  set forth in the PJM Manuals and must specify amount, location and price, if
  any, at which the Market Participant desires to purchase or sell energy in the
  Day-ahead Energy Market.

1.10.2   Pool-Scheduled
  Resources.

Pool-scheduled resources
  are those resources for which Market Participants submitted offers to sell energy
  in the Day-ahead Energy Market and which the Office of the Interconnection scheduled
  in the Day-ahead Energy Market as well as generators committed by the Office
  of the Interconnection subsequent to the Day-ahead Energy Market. Such resources
  shall be committed to provide energy in the real-time dispatch unless the schedules
  for such units are revised pursuant to Sections 1.10.9 or 1.11. Pool-scheduled
  resources shall be governed by the following principles and procedures.

(a)   Pool-scheduled
  resources shall be selected by the Office of the Interconnection on the basis
  of the prices offered for energy and related services, start-up, no-load and
  cancellation fees, and the specified operating characteristics, offered by Market
  Sellers to the Office of the Interconnection by the offer deadline specified
  in Section 1.10.1A.

(b)   A
  resource that is scheduled by a Market Participant to support a bilateral sale,
  or that is self-scheduled by a Generating Market Buyer, shall not be selected
  by the Office of the Interconnection as a pool-scheduled resource except in
  an Emergency.

(c)   Market
  Sellers offering energy from hydropower or other facilities with fuel or environmental
  limitations may submit data to the Office of the Interconnection that is sufficient
  to enable the Office of the Interconnection to determine the available operating
  hours of such facilities.



(d)   The
  Market Seller of a resource selected as a pool-scheduled resource shall receive
  payments or credits for energy or related services, or for start-up and no-load
  fees, from the Office of the Interconnection on behalf of the Market Buyers
  in accordance with Section 3 of this Schedule 1. Alternatively, the Market Seller
  shall receive, in lieu of start-up and no-load fees, its actual costs incurred,
  if any, up to a cap of the resource's start-up cost, if the Office of the Interconnection
  cancels its selection of the resource as a pool-scheduled resource and so notifies
  the Market Seller before the resource is synchronized.

(e)   Market
  Participants shall make available their pool-scheduled resources to the Office
  of the Interconnection for coordinated operation to supply the needs of the
  PJM Control Area for Operating Reserves.

1.10.3   Self-scheduled
  Resources.

Self-scheduled resources
  shall be governed by the following principles and procedures.

(a)   Each
  Generating Market Buyer shall use all reasonable efforts, consistent with Good
  Utility Practice, not to self-schedule resources in excess of its Equivalent
  Load.

(b)   The
  offered prices of resources that are self-scheduled, or otherwise not following
  the dispatch orders of the Office of the Interconnection, shall not be considered
  by the Office of the Interconnection in determining Locational Marginal Prices.

(c)   Market
  Participants shall make available their self-scheduled resources to the Office
  of the Interconnection for coordinated operation to supply the needs of the
  PJM Control Area for Operating Reserves.

(d)   A
  Market Participant self-scheduling a resource in the Day-ahead Energy Market
  that does not deliver the energy in the Real-time Energy Market, shall replace
  the energy not delivered with energy from the Real-time Energy Market and shall
  pay for such energy at the applicable Real-time Price.

1.10.4   Capacity
  Resources.

(a)   A
  Capacity Resource selected as a pool-scheduled resource shall be made available
  for scheduling and dispatch at the direction of the Office of the Interconnection.
  A Capacity Resource that does not deliver energy as scheduled shall be deemed
  to have experienced a Generator Forced Outage to the extent of such energy not
  delivered. A Market Participant offering such Capacity Resource in the Day-ahead
  Energy Market shall replace the energy not delivered with energy from the Real-time
  Energy Market and shall pay for such energy at the applicable Real-time Price.

(b)   Energy
  from a Capacity Resource that has not been scheduled in the Day-ahead Energy
  Market may be sold on a bilateral basis by the Market Seller, may be self-scheduled,
  or may be offered for dispatch during the Operating Day in accordance with the
  procedures specified in this Schedule. A Capacity Resource that has not been
  scheduled in the Day-ahead Energy Market and that has been sold on a bilateral
  basis must be made available upon request to the Office of the Interconnection
  for scheduling and dispatch during the Operating Day if the Office of the Interconnection
  declares a Maximum Generation Emergency. Any such resource so scheduled and
  dispatched shall receive the applicable Real-time Price for energy delivered.

(c)   A
  Capacity Resource that has been self-scheduled shall not receive payments or
  credits for start-up or no-load fees.

1.10.5   External
  Resources.

(a)   External
  Resources may submit offers to the PJM Interchange Energy Market, in accordance
  with the day-ahead and real-time scheduling processes specified above. An External
  Resource selected as a pool-scheduled resource shall be made available for scheduling
  and dispatch at the direction of the Office of the Interconnection, and except
  as specified below shall be compensated on the same basis as other pool-scheduled
  resources. External Resources that are not capable of dynamic dispatch shall,
  if selected by the Office of the Interconnection on the basis of the Market
  Seller's Offer Data, be block loaded on an hourly scheduled basis. Market Sellers
  shall offer External Resources to the PJM Interchange Energy Market on either
  a resource-specific or an aggregated resource basis. A Market Participant whose
  pool-scheduled resource does not deliver the energy scheduled in the Day-ahead
  Energy Market shall replace such energy not delivered as scheduled in the Day-ahead
  Energy Market shall replace such energy not delivered as scheduled in the Day-ahead
  Energy Market with energy from the PJM Real-time Energy Market and shall pay
  for such energy at the applicable Real-time Price.

(b)   Offers
  for External Resources from an aggregation of two or more generating units shall
  so indicate, and shall specify, in accordance with the Offer Data requirements
  specified by the Office of the Interconnection: (i) energy prices; (ii) hours
  of energy availability; (iii) a minimum dispatch level; (iv) a maximum dispatch
  level; and (v) unless such information has previously been made available to
  the Office of the Interconnection, sufficient information, as specified in the
  PJM Manuals, to enable the Office of the Interconnection to model the flow into
  the PJM Control Area of any energy from the External Resources scheduled in
  accordance with the Offer Data. If a Market Seller submits more than one offer
  on an aggregated resource basis, the withdrawal of any such offer shall be deemed
  a withdrawal of all higher priced offers for the same period.

(c)   Offers
  for External Resources on a resource-specific basis shall specify the resource
  being offered, along with the information specified in the Offer Data as applicable.

1.10.6   External
  Market Buyers.

(a)   Deliveries
  to an External Market Buyer not subject to dynamic dispatch by the Office of
  the Interconnection shall be delivered on a block loaded basis to the load bus
  or busses at the border of the PJM Control Area, or in the PJM Control Area
  with respect to an External Market Buyer's load within the PJM Control Area
  not served by Network Service, at which the energy is delivered to or for the
  External Market Buyer. External Market Buyers shall be charged or credited at
  either the Day-ahead Prices or Real-time Prices, whichever is applicable, for
  energy at the foregoing load bus or busses.

(b)   An
  External Market Buyer's hourly schedules for energy purchased from the PJM Interchange
  Energy Market shall conform to the ramping and other applicable requirements
  of the interconnection agreement between the PJM Control Area and the Control
  Area to which, whether as an intermediate or final point of delivery, the purchased
  energy will initially be delivered.



(c)   The
  Office of the Interconnection shall curtail deliveries to an External Market
  Buyer if necessary to maintain appropriate reserve levels for the PJM Control
  Area as defined in the PJM Manuals, or to avoid shedding load in the PJM Control
  Area.

1.10.6A
  Transmission Loading Relief Customers.

(a)   An
  entity that desires to elect to pay Transmission Congestion Charges in order
  to continue its energy schedules during an Operating Day over contract paths
  outside the PJM Control Area in the event that PJM initiates Transmission Loading
  Relief that otherwise would cause PJM to request security coordinators to curtail
  such Member's energy schedules shall:

(i)   enter its election on OASIS by 12:00 p.m.
  of the day before the Operating Day, in accordance with procedures established
  by PJM, which election shall be applicable for the entire Operating Day; and

(ii)   if PJM initiates Transmission Loading
  Relief, provide to PJM, at such time and in accordance with procedures established
  by PJM, the hourly integrated energy schedules that impacted the PJM Control
  Area (as indicated from the NERC Interchange Distribution Calculator) during
  the Transmission Loading Relief.

(b)   If
  an entity has made the election specified in Section (a), then PJM shall not
  request security coordinators to curtail such entity's energy transactions,
  except as may be necessary to respond to Emergencies.

(c)   In
  order to make elections under this Section 1.10.6A, an entity must (i) have
  met the creditworthiness standards established by the Office of the Interconnection
  or provided a letter of credit or other form of security acceptable to the Office
  of the Interconnection, and (ii) have executed either the Agreement, a Service
  Agreement under the PJM Tariff, or other agreement committing to pay all Transmission
  Congestion Charges incurred under this Section.

1.10.7   Bilateral
  Transactions.

Bilateral transactions
  as to which the parties have notified the Office of the Interconnection by the
  deadline specified in Section 1.10.1A that they elect not to be included in
  the Day-ahead Energy Market and that they are not willing to incur Transmission
  Congestion Charges in the Real-time Energy Market shall be curtailed by the
  Office of the Interconnection as necessary to reduce or alleviate transmission
  congestion. Bilateral transactions that were not included in the Day-ahead Energy
  Market and that are willing to incur congestion charges and bilateral transactions
  that were accepted in the Day-ahead Energy Market shall continue to be implemented
  during periods of congestion, except as may be necessary to respond to Emergencies.

1.10.8   Office
  of the Interconnection Responsibilities.

(a)   The
  Office of the Interconnection shall use its best efforts to determine (i) the
  least-cost means of satisfying the projected hourly requirements for energy,
  Operating Reserves, and other ancillary services of the Market Buyers, including
  the reliability requirements of the PJM Control Area, of the Day-ahead Energy
  Market, and (ii) the least-cost means of satisfying the Operating Reserve and
  other ancillary service requirements for any portion of the load forecast of
  the Office of the Interconnection for the Operating Day in excess of that scheduled
  in the Day-ahead Energy Market. In making these determinations, the Office of
  the Interconnection shall take into account: (i) the Office of the Interconnection's
  forecasts of PJM Interchange Energy Market and PJM Control Area energy requirements,
  giving due consideration to the energy requirement forecasts and purchase requests
  submitted by Market Buyers; (ii) the offers submitted by Market Sellers; (iii)
  the availability of limited energy resources; (iv) the capacity, location, and
  other relevant characteristics of self-scheduled resources; (v) the objectives
  of the PJM Control Area for Operating Reserves, as specified in the PJM Manuals;
  (vi) the requirements of the PJM Control Area for Regulation and other ancillary
  services, as specified in the PJM Manuals; (vii) the benefits of avoiding or
  minimizing transmission constraint control operations, as specified in the PJM
  Manuals; and (viii) such other factors as the Office of the Interconnection
  reasonably concludes are relevant to the foregoing determination. The Office
  of the Interconnection shall develop a Day-ahead Energy Market based on the
  foregoing determination, and shall determine the Day-ahead Prices resulting
  from such schedule. The Office of the Interconnection shall report the planned
  schedule for a hydropower resource to the operator of that resource as necessary
  for plant safety and security, and legal limitations on pond elevations.

(b)   Not
  later than 4:00 p.m. of the day before each Operating Day, or such earlier deadline
  as may be specified by the Office of the Interconnection in the PJM Manuals,
  the Office of the Interconnection shall: (i) post the aggregate Day-ahead Energy
  Market; (ii) post the Day-ahead Prices; and (iii) inform the Market Sellers
  and Market Buyers of their scheduled injections and withdrawals respectively.

(c)   Following
  posting of the information specified in Section 1.10.8(b), the Office of the
  Interconnection shall revise its schedule of generation resources to reflect
  updated projections of load, conditions affecting electric system operations
  in the PJM Control Area, the availability of and constraints on limited energy
  and other resources, transmission constraints, and other relevant factors. The
  Office of the Interconnection shall post on the PJM Open Access Same-time Information
  System at times specified in the PJM Manuals a revised forecast of the location
  and duration of any expected transmission congestion, and of the range of differences
  in Locational Marginal Prices between major subareas of the PJM Control Area
  expected to result from such transmission congestion.

(d)   Market
  Buyers shall pay and Market Sellers shall be paid for the quantities of energy
  scheduled in the Day-ahead Energy Market at the Day-ahead Prices.

1.10.9   Hourly
  Scheduling.

(a)   Following
  the initial posting by the Office of the Interconnection of the Locational Marginal
  Prices resulting from the Day-ahead Energy Market, and subject to the right
  of the Office of the Interconnection to schedule and dispatch pool-scheduled
  resources and to direct that schedules be changed in an Emergency, a generation
  rebidding period shall exist from 4:00 p.m. to 6:00 p.m. on the day before each
  Operating Day. During the rebidding period, Market Participants may submit revisions
  to generation offer data for any generation resource that was not selected as
  a pool-scheduled resource in the Day-ahead Energy Market. Adjustments to Day-ahead
  Energy Markets shall be settled at the applicable Real-time Prices, and shall
  not affect the obligation to pay or receive payment for the quantities of energy
  scheduled in the Day-ahead Energy market at the applicable Day-ahead Prices.

(b)   A
  Market Participant may adjust the schedule of a resource under its dispatch
  control on an hour-to-hour basis beginning at 10:00 p.m. of the day before each
  Operating Day, provided that the Office of the Interconnection is notified not
  later than 60 minutes prior to the hour in which the adjustment is to take effect,
  as follows:

i)   A Generating
  Market Buyer may self-schedule any of its resource increments, including hydropower
  resources, not previously designated as self-scheduled and not selected as a
  pool-scheduled resource in the Day-ahead Energy Market;

ii)   A
  Market Participant may request the scheduling of a non-firm bilateral transaction;
  or

iii)   A
  Market Participant may request the scheduling of deliveries or receipts of Spot
  Market Energy; or

iv)   A
  Generating Market Buyer may remove from service a resource increment, including
  a hydropower resource, that it had previously designated as self-scheduled,
  provided that the Office of the Interconnection shall have the option to schedule
  energy from any such resource increment that is a Capacity Resource at the price
  offered in the scheduling process, with no obligation to pay any start-up fee.

(c)   With
  respect to a pool-scheduled resource that is included in the Day-ahead Energy
  Market, a Market Seller may not change or otherwise modify its offer to sell
  energy.

(d)   An
  External Market Buyer may refuse delivery of some or all of the energy it requested
  to purchase in the Day-ahead Energy Market by notifying the Office of the Interconnection
  of the adjustment in deliveries not later than 60 minutes prior to the hour
  in which the adjustment is to take effect, but any such adjustment shall not
  affect the obligation of the External Market Buyer to pay for energy scheduled
  on its behalf in the Day-ahead Energy Market at the applicable Day-ahead Prices.

(e)   For
  each hour in the Operating Day, as soon as practicable after the deadlines specified
  in the foregoing subsection of this Section 1.10, the Office of the Interconnection
  shall provide External Market Buyers and External Market Sellers and parties
  to bilateral transactions with any revisions to their schedules for the hour.

1.11   Dispatch.

The following procedures and principles shall
  govern the dispatch of the resources available to the Office of the Interconnection.

1.11.1   Resource
  Output.

The Office of the Interconnection
  shall have the authority to direct any Market Seller to adjust the output of
  any pool-scheduled resource increment within the operating characteristics specified
  in the Market Seller's offer. The Office of the Interconnection may cancel its
  selection of, or otherwise release, pool-scheduled resources, subject to an
  obligation to pay any applicable start-up, no-load or cancellation fees. The
  Office of the Interconnection shall adjust the output of pool-scheduled resource
  increments as necessary: (a) to maintain reliability, and subject to that
  constraint, to minimize the cost of supplying the energy, reserves, and other
  services required by the Market Buyers and the operation of the PJM Control
  Area; (b) to balance load and generation, maintain scheduled tie flows, and
  provide frequency support within the PJM Control Area; and (c) to minimize
  unscheduled interchange not frequency related between the PJM Control Area and
  other Control Areas.

1.11.2   Operating
  Basis.

In carrying out the foregoing
  objectives, the Office of the Interconnection shall conduct the operation of
  the PJM Control Area in accordance with the PJM Manuals, and shall: (i) utilize
  available generating reserves and obtain required replacements; and (ii) monitor
  the availability of adequate reserves.

1.11.3   Pool-dispatched
  Resources.

(a)   The
  Office of the Interconnection shall implement the dispatch of energy from pool-scheduled
  resources with limited energy by direct request. In implementing mandatory or
  economic use of limited energy resources, the Office of the Interconnection
  shall use its best efforts to select the most economic hours of operation for
  limited energy resources, in order to make optimal use of such resources consistent
  with the dynamic load-following requirements of the PJM Control Area and the
  availability of other resources to the Office of the Interconnection.

(b)   The
  Office of the Interconnection shall implement the dispatch of energy from other
  pool-dispatched resource increments, including generation increments from Capacity
  Resources the remaining increments of which are self-scheduled, by sending appropriate
  signals and instructions to the entity controlling such resources, in accordance
  with the PJM Manuals. Each Market Seller shall ensure that the entity controlling
  a pool-dispatched resource offered or made available by that Market Seller complies
  with the energy dispatch signals and instructions transmitted by the Office
  of the Interconnection.

1.11.3A
  Maximum Generation Emergency.

If the Office of the Interconnection
  declares a Maximum Generation Emergency, all deliveries to load that is served
  by Point-to-Point Transmission Service outside the PJM Control Area from Capacity
  Resources may be interrupted in order to serve load in the PJM Control Area.

1.11.4   Regulation

(a)   A
  Market Buyer may satisfy its Regulation obligation from its own resources capable
  of performing Regulation service, by contractual arrangements with other Market
  Participants able to provide Regulation service, or by purchases from the PJM
  Interchange Energy Market at the rates set forth in Section 3.2.2.

(b)   The
  Office of the Interconnection shall obtain Regulation service from the least-cost
  alternatives available from either pool-scheduled or self-scheduled resources
  as needed to meet PJM Control Area requirements not otherwise satisfied by the
  Market Buyers. Resources offering to sell Regulation shall be selected to provide
  Regulation on the basis of each resource's regulation offer and the estimated
  opportunity cost of the resource providing regulation and in accordance with
  the Office of the Interconnection's obligation to minimize the total cost of
  energy, Operating Reserves, Regulation, and other ancillary services. Estimated
  opportunity costs shall be determined by the Office of the Interconnection on
  the basis of the expected value of the energy sales that would be foregone or
  uneconomic energy that would be produced by the resource in order to provide
  Regulation, in accordance with procedures specified in the PJM Manuals. If the
  Office of the Interconnection is not able to distinguish resources offering
  Regulation on the basis of their regulation offers and estimated opportunity
  costs, resources shall be selected on the basis of the quality of Regulation
  provided by the resource as determined by tests administered by the Office of
  the Interconnection.

(c)   The
  Office of the Interconnection shall dispatch resources for Regulation by sending
  Regulation signals and instructions to resources from which Regulation service
  has been offered by Market Sellers, in accordance with the PJM Manuals. Market
  Sellers shall comply with Regulation dispatch signals and instructions transmitted
  by the Office of the Interconnection and, in the event of conflict, Regulation
  dispatch signals and instructions shall take precedence over energy dispatch
  signals and instructions. Market Sellers shall exert all reasonable efforts
  to operate, or ensure the operation of, their resources supplying load in the
  PJM Control Area as close to desired output levels as practical, consistent
  with Good Utility Practice.

1.11.5   PJM
  Open Access Same-time Information System.

The Office of the Interconnection
  shall update the information posted on the PJM Open Access Same-time Information
  System to reflect its dispatch of generation resources.

1.12   Dynamic Scheduling.

(a)   An entity that owns
  or controls a generating resource in the PJM Control Area may electrically remove
  all or part of the generating resource's output from the PJM Control Area through
  dynamic scheduling of the output to load outside the PJM Control Area. Such
  output shall not be available for economic dispatch by the Office of the Interconnection.

(b)   An entity requesting
  dynamic scheduling shall be responsible for arranging for the provision of signal
  processing and communications from the generator to the Office of the Interconnection
  and the other participating control area and complying with any other procedures
  established by the Office of the Interconnection regarding dynamic scheduling
  as set forth in the PJM Manuals.

(c)   An entity requesting
  dynamic scheduling shall be responsible for reserving amounts of firm transmission
  service necessary to deliver the range of the dynamic transfer and any required
  ancillary services.

2.   CALCULATION OF LOCATIONAL MARGINAL PRICES



2.1   Introduction.

The Office of the Interconnection shall calculate
  the price of energy at the load busses and generation busses in the PJM Control
  Area and at the interface busses between the PJM Control Area and adjacent Control
  Areas on the basis of Locational Marginal Prices. Locational Marginal Prices
  determined in accordance with this Section shall be calculated on a day-ahead
  basis for each hour of the Day-ahead Energy Market, and every five minutes during
  the Operating Day for the Real-time Energy Market.

2.2   General.

The Office of the Interconnection shall determine
  the least cost security-constrained dispatch, which is the least costly means
  of serving load at different locations in the PJM Control Area based on actual
  operating conditions existing on the power grid and on the prices at which Market
  Sellers have offered to supply energy in the PJM Interchange Energy Market.
  Locational Marginal Prices for the generation and load busses in the PJM Control
  Area, including interconnections with other Control Areas, will be calculated
  based on the actual economic dispatch and the prices of energy offers. The process
  for the determination of Locational Marginal Prices shall be as follows:

(a)   To determine actual
  operating conditions on the power grid in the PJM Control Area, the Office of
  the Interconnection shall use a computer model of the interconnected grid that
  uses available metered inputs regarding generator output, loads, and power flows
  to model remaining flows and conditions, producing a consistent representation
  of power flows on the network. The computer model employed for this purpose,
  referred to as the State Estimator program, is a standard industry tool and
  is described in Section 2.3 below. It will be used to obtain information regarding
  the output of generation supplying energy to the PJM Control Area, loads at
  buses in the PJM Control Area, transmission losses, and power flows on binding
  transmission constraints for use in the calculation of Locational Marginal Prices.
  Additional information used in the calculation, including Dispatch Rates and
  real time schedules for external transactions between PJM and other Control
  Areas, will be obtained from the Office of the Interconnection's dispatchers.

(b)   Using the prices at
  which energy is offered by Market Sellers to the PJM Interchange Energy Market,
  the Office of the Interconnection shall determine the offers of energy that
  will be considered in the calculation of Locational Marginal Prices. As described
  in Section 2.4 below, every offer of energy by a Market Seller from a resource
  that is following economic dispatch instructions of the Office of the Interconnection
  will be utilized in the calculation of Locational Marginal Prices.

(c)   Based on the system
  conditions on the PJM power grid, determined as described in (a), and the eligible
  energy offers, determined as described in (b), the Office of the Interconnection
  shall determine the least costly means of obtaining energy to serve the next
  increment of load at each bus in the PJM Control Area, in the manner described
  in Section 2.5 below. The result of that calculation shall be a set of Locational
  Marginal Prices based on the system conditions at the time.

2.3   Determination of
  System Conditions Using the State Estimator.

Power system operations, including, but not
  limited to, the determination of the least costly means of serving load, depend
  upon the availability of a complete and consistent representation of generator
  outputs, loads, and power flows on the network. In calculating Locational Marginal
  Prices, the Office of the Interconnection shall obtain a complete and consistent
  description of conditions on the electric network in the PJM Control Area by
  using the most recent power flow solution produced by the State Estimator, which
  is also used by the Office of the Interconnection for other functions within
  power system operations. The State Estimator is a standard industry tool that
  produces a power flow model based on available real-time metering information,
  information regarding the current status of lines, generators, transformers,
  and other equipment, bus load distribution factors, and a representation of
  the electric network, to provide a complete description of system conditions,
  including conditions at busses for which real-time information is unavailable.
  The current version of the State Estimator includes over 1600 busses in the
  PJM Control Area, as well as interface busses with adjacent Control Areas. The
  Office of the Interconnection shall obtain a State Estimator solution every
  five minutes, which shall provide the megawatt output of generators and the
  loads at busses in the PJM Control Area, transmission line losses, and actual
  flows or loadings on constrained transmission facilities. External transactions
  between PJM and other Control Areas shall be included in the Locational Marginal
  Price calculation on the basis of the real time transaction schedules implemented
  by the Office of the Interconnection's dispatcher.

2.4   Determination of
  Energy Offers Used in Calculating Real-time Prices.

(a)   During the Operating
  Day, real-time Locational Marginal Prices derived in accordance with this Section
  shall be determined every five minutes and integrated hourly values of such
  determinations shall be the basis of sales and purchases of energy in the Real-time
  Energy Market and of Transmission Congestion Charges under the PJM Tariff not
  covered by the Day-ahead Energy Market.

(b)   To determine the energy
  offers submitted to the PJM Interchange Energy Market that shall be used during
  the Operating Day to calculate the Real-time Prices, the Office of the Interconnection
  shall determine which resources are following its economic dispatch instructions.
  A resource will be considered to be following economic dispatch instructions
  and shall be included in the calculation of Real-time Prices if:

i)   the
  applicable price bid by a Market Seller for energy from the resource is less
  than or equal to the Dispatch Rate for the area of the PJM Control Area in which
  the resource is located; or

ii)   the
  resource is specifically requested to operate by the Office of the Interconnection's
  dispatcher.

(c)   In determining whether
  a resource satisfies the condition described in (b), the Office of the Interconnection
  will determine the bid price associated with an energy offer by comparing the
  actual megawatt output of the resource with the Market Seller's offer price
  curve. Because of practical generator response limitations, a resource whose
  megawatt output is not ten percent more than the megawatt level specified on
  the offer price curve for the applicable Dispatch Rate shall be deemed to be
  following economic dispatch instructions, but the energy price offer used in
  the calculation of Real-time Prices shall not exceed the applicable Dispatch
  Rate. Units that must be run for local area protection shall not be considered
  in the calculation of Real-time Prices.

2.5   Calculation of Real-time
  Prices.

(a)   The Office of the Interconnection
  shall determine the least costly means of obtaining energy to serve the next
  increment of load at each bus in the PJM Control Area represented in the State
  Estimator and each interface bus between the PJM Control Area and an adjacent
  Control Area, based on the system conditions described by the most recent power
  flow solution produced by the State Estimator program and the energy offers
  that are the basis for the Day-ahead Energy Market, or that are determined to
  be eligible for consideration under Section 2.4 in connection with the real-time
  dispatch, as applicable. This calculation shall be made by applying an incremental
  linear optimization method to minimize energy costs, given actual system conditions,
  a set of energy offers, and any binding transmission constraints that may exist.
  In performing this calculation, the Office of the Interconnection shall calculate
  the cost of serving an increment of load at each bus from each resource associated
  with an eligible energy offer as the sum of: (1) the price at which the Market
  Seller has offered to supply an additional increment of energy from the resource,
  and (2) the effect on transmission congestion costs (whether positive or negative)
  associated with increasing the output of the resource, based on the effect of
  increased generation from that resource on transmission line loadings. The energy
  offer or offers that can serve an increment of load at a bus at the lowest cost,
  calculated in this manner, shall determine the Real-time Price at that bus.

(b)   During the Operating
  Day, the calculation set forth in (a) shall be performed every five minutes,
  using the Office of the Interconnection's Locational Marginal Price program,
  producing a set of Real-time Prices based on system conditions during the preceding
  interval. The prices produced at five-minute intervals during an hour will be
  integrated to determine the Real-time Prices for that hour.

2.6   Calculation of Day-ahead
  Prices.

For the Day-ahead Energy Market, day-ahead
  Locational Marginal Prices shall be determined on the basis of the least-cost,
  security-constrained dispatch, model flows and system conditions resulting from
  the load specifications, offers for generation, dispatchable load, Increment
  Bids, Decrement Bids, and bilateral transactions submitted to the Office of
  the Interconnection and scheduled in the Day-ahead Energy Market. Such prices
  shall be determined in accordance with the provisions of this Section applicable
  to the Day-ahead Energy Market and shall be the basis for purchases and sales
  of energy and Transmission Congestion Charges resulting from the Day-ahead Energy
  Market. This calculation shall be made for each hour in the Day-ahead Energy
  Market by applying a linear optimization method to minimize energy costs, given
  scheduled system conditions, scheduled transmission outages, and any transmission
  limitations that may exist. In performing this calculation, the Office of the
  Interconnection shall calculate the cost of serving an increment of load at
  each bus from each resource associated with an eligible energy offer as the
  sum of: (1) the price at which the Market Seller has offered to supply an additional
  increment of energy from the resource, and (2) the effect on transmission congestion
  costs (whether positive or negative) associated with increasing the output of
  the resource, based on the effect of increased generation from that resource
  on transmission line loadings. The energy offer or offers that can serve an
  increment of load at a bus at the lowest cost, calculated in this manner, shall
  determine the Day-ahead Price at that bus.

2.7   Performance Evaluation.

The Office of the Interconnection shall undertake
  an evaluation of the foregoing procedures for the determination of Locational
  Marginal Prices, as well as the procedures for determining and allocating Fixed
  Transmission Rights and associated Transmission Congestion Charges and Credits,
  not less often than every two years, in accordance with the PJM Manuals. To
  the extent practical, the Office of the Interconnection shall retain all data
  needed to perform comparisons and other analyses of locational marginal pricing.
  The Office of the Interconnection shall report the results of its evaluation
  to the Market Participants, along with its recommendations, if any, for changes
  in the procedures.

3.   ACCOUNTING AND BILLING

3.1   Introduction.

This schedule sets forth the accounting and
  billing principles and procedures for the purchase and sale of services on the
  PJM Interchange Energy Market and for the operation of the PJM Control Area.

3.2   Market Buyers.

3.2.1   Spot
  Market Energy.

(a)   Market
  Buyers shall be charged for all load scheduled to be served from the PJM Interchange
  Energy Market in the Day-ahead Energy Market at the Day-ahead Prices applicable
  to each relevant load bus.

(b)   Generating
  Market Buyers shall be paid for all energy scheduled to be delivered at the
  PJM Interchange Energy Market in the Day-ahead Energy Market at the Day-ahead
  Prices applicable to each relevant generation bus.

(c)   At
  the end of each hour during an Operating Day, the Office of the Interconnection
  shall calculate the load payment at each Market Buyer's load bus to be charged
  at Real-time Prices determined by the product of the hourly Real-time Price
  at the relevant bus times the Market Buyer's megawatts of load at the bus in
  the hour in excess of the load scheduled to be served at that bus in the hour
  in the Day-ahead Energy Market. To the extent that the load actually served
  at a load bus is less than the load scheduled to be served at that bus in the
  Day-ahead Energy Market, the Market Buyer shall be credited for the difference
  at the Real-time Price for the load bus at the time of the shortfall. The megawatts
  of load at each load bus shall be the sum of the megawatts of load for that
  bus of that Market Buyer as determined by the State Estimator, plus an allocated
  share of transmission losses, plus any megawatts of that Market Buyer's bilateral
  sales to purchasers outside the PJM Control Area attributable to that bus. The
  total load charge for each Market Buyer shall be the sum, for each of a Market
  Buyer's load buses, of the charges at Day-ahead Prices determined in accordance
  with the Day-ahead Energy Market as specified in Section 1.10.1a plus the charges
  at Real-time Prices determined as specified herein, net of any credits specified
  herein for each of the Market Buyer's load buses.

(d)   At
  the end of each hour during an Operating Day, the Office of the Interconnection
  shall calculate the generation revenue at each Generating Market Buyer's generation
  bus to be paid at Real-time Prices, determined by the product of the hourly
  Real-time Price at the relevant bus times the Generating Market Buyer's megawatts
  of generation at such generation bus in the hour, as determined by the State
  Estimator, in excess of the energy scheduled to be injected at that bus in that
  hour in the Day-ahead Energy Market. To the extent that the energy actually
  injected at the generation bus is less than the energy scheduled to be injected
  at that bus in the Day-ahead Energy Market, the Generating Market Buyer shall
  be debited for the difference at the Real-time Price for the generation bus
  at the time of the shortfall. The megawatts of generation at each generation
  bus shall be the sum of the megawatts of generation for that bus of that Generating
  Market Buyer as determined by the State Estimator, plus any megawatts of bilateral
  purchases of that Generating Market Buyer from sellers outside the PJM Control
  Area attributable to that bus. The total generation revenue for each Generating
  Market Buyer shall be the sum, for each of the Generating Market Buyer's generation
  busses, of the revenues at Day-ahead Prices determined in accordance with the
  Day-ahead Energy Market as specified in Section 1.10.1A plus the revenues at
  Real-time Prices determined as specified herein, net of any debits specified
  herein for each of the Market Buyer's generation buses.

(e)   At
  the end of each hour during an Operating Day, the Office of the Interconnection
  shall calculate a net bill for each Market Buyer, determined as the difference
  between its total load charges and its total generation revenue. The portions
  of the net bill attributable to net hourly PJM Interchange and to Transmission
  Congestion Charges in the Day-ahead Energy Market and the Real-time Energy Market
  shall be determined as set forth in this Section and in Section 5.1.3.



(f)   At
  the end of each hour during an Operating Day, the Office of the Interconnection
  shall calculate the total amount of net hourly PJM Interchange for each Market
  Buyer, including Generating Market Buyers, in accordance with the PJM Manuals.
  For Internal Market Buyers that are Load Serving Entities or purchasing on behalf
  of Load Serving Entities, this calculation shall include determination of the
  net energy flows from: (i) tie lines; (ii) any generation resource the output
  of which is controlled by the Market Buyer but delivered to it over another
  entity's Transmission Facilities; (iii) any generation resource the output of
  which is controlled by another entity but which is directly interconnected with
  the Market Buyer's transmission system; (iv) deliveries pursuant to bilateral
  energy sales; (v) receipts pursuant to bilateral energy purchases; (vi) the
  Market Buyer's allocated share of energy purchased from another Control Area
  in connection with a Minimum Generation Emergency in such other Control Area
  as specified in Section 3.2.6(c); and (vii) an adjustment to account for the
  day-ahead PJM Interchange, calculated as the difference between scheduled withdrawals
  and injections by that Market Buyer in the Day-ahead Energy Market. For Electric
  Distributors that report hourly net energy flows from metered tie lines, this
  calculation also shall include 500 kV transmission losses and Inadvertent Interchange
  allocated to the Electric Distributor and shall exclude the energy delivered
  to load of other Network Customers and Transmission Customers. For External
  Market Buyers and Internal Market Buyers that are not Load Serving Entities
  or purchasing on behalf of Load Serving Entities, this calculation shall determine
  the energy scheduled hourly for delivery to the Market Buyer net of the amounts
  scheduled by the External Market Buyer in the Day-ahead Energy Market.

(g)   The
  Office of the Interconnection shall calculate Locational Marginal Prices in
  the form of Day-ahead Prices and Real-time Prices for each load and generation
  bus in the PJM Control Area, in accordance with Section 2 of this Schedule.

(h)   An
  Internal Market Buyer shall be charged for Spot Market Energy purchases to the
  extent of its hourly net purchases from the PJM Interchange Energy Market, determined
  as specified in Section 3.2.1(f) above. An External Market Buyer shall be charged
  for its Spot Market Energy purchases based on the energy delivered to it, determined
  as specified in Section 3.2.1(f) above. The Office of the Interconnection shall
  calculate an hourly weighted average Real-time Price for each such Market Buyer,
  based on the hourly average of the Market Buyer's Real-time Prices at each bus
  weighted by the Market Buyer's load deviations at the bus. The total charge
  shall be determined by the product of the hourly net amount of PJM Interchange
  Purchases times the hourly weighted-average Real-time Price for that Market
  Buyer.

(i)   A
  Generating Market Buyer shall be credited as a Market Seller for sales of Spot
  Market Energy to the extent of its hourly net sales into the PJM Interchange
  Energy Market, determined as specified in Section 3.2.1(f) above. The Office
  of the Interconnection shall calculate an hourly weighted average Real-time
  Price for each such Market Seller, based on the hourly average of the Market
  Sellers Real-time Prices at each bus weighted by the Market Buyer's generation
  deviations at each bus. The total credit shall be determined by the product
  of the hourly net amount of PJM Interchange Sales times the hourly weighted
  average Real-time Price for that Market Seller.



3.2.2   Regulation.

(a)   Each
  Internal Market Buyer that is a Load Serving Entity shall have an hourly Regulation
  objective equal to its pro rata share of the PJM Control Area Regulation
  requirements for the hour, based on the Market Buyer's total load in the PJM
  Control Area for the hour. An Internal Market Buyer
  that does not meet its hourly Regulation obligation shall be charged for Regulation
  dispatched by the Office of the Interconnection to meet such obligation at the
  Regulation market-clearing price determined in accordance with paragraph (c)
  of this section, plus the amounts, if any, described in paragraph (f) of this
  section.

(b)   A
  Generating Market Buyer supplying Regulation at the direction of the Office
  of the Interconnection in excess of its hourly Regulation obligation shall be
  credited for each increment of such Regulation at the higher of (i) the Regulation
  market-clearing price or (ii) the sum of the regulation offer and the unit-specific
  opportunity cost of the resource supplying the increment of Regulation, as determined
  by the Office of the Interconnection in accordance with procedures specified
  in the PJM Manuals.

(c)   The
  Regulation market-clearing price shall be determined at a time to be determined
  by the Office of the Interconnection which shall be no earlier than the day
  before the Operating Day and the market-clearing price each hour shall be equal
  to the highest sum of a resource's Regulation offer plus its estimated unit-specific
  opportunity costs from among the resources selected to provide Regulation.

(d)   In
  determining the Regulation market-clearing price, the estimated unit-specific
  opportunity costs of a resource offering to sell Regulation each hour shall
  be equal to the product of (i) the deviation of the set point of the resource
  that is expected to be required in order to provide Regulation from the resource's
  expected output level if it had been dispatched in economic merit order times
  (ii) the absolute value of the difference between the expected Locational Marginal
  Price at the generation bus for the resource and the offer price for energy
  from the resource (at the megawatt level of the Regulation set point for the
  resource) in the PJM Interchange Energy Market.

(e)   In determining the credit under subsection
  (b) to a Generating Market Buyer selected to provide Regulation and that actively
  follows the Office of the Interconnection's Regulation signals and instructions,the unit-specific opportunity cost of a resource shall be determined for
  each hour that the Office of the Interconnection requires a resource to provide
  Regulation and shall be equal to the product of (i) the deviation of the resource's
  output necessary to follow the Office of the Interconnection's Regulation signals
  from the resource's expected output level if it had been dispatched in economic
  merit order times (ii) the absolute value of the difference between the Locational
  Marginal Price at the generation bus for the resource and the offer price for
  energy from the resource (at the megawatt level of the Regulation set point
  for the resource)in the PJM Interchange Energy Market.

(f)   Any
  amounts credited for Regulation in an hour in excess of the Regulation market-clearing
  price in that hour shall be allocated and charged to each Internal Market Buyer
  that does not meet its hourly Regulation obligation in proportion to its purchases
  of Regulation in megawatt-hours during that hour.

3.2.3   Operating
  Reserves.

(a)   A
  Market Seller's pool-scheduled resources capable of providing operating reserves
  shall be credited as specified below based on the prices offered for the operation
  of such resource, provided that the resource was available for the entire time
  specified in the Offer Data for such resource.

(b)   The
  following determination shall be made for each pool-scheduled resource that
  is scheduled in the Day-ahead Energy Market: the total offered price for start-up
  and no-load fees and Spot Market Energy, determined on the basis of the resource's
  scheduled output, shall be compared to the total value of that resource's Spot
  Market Energy as determined by the Day-ahead Energy Market and the Day-ahead
  Prices applicable to the relevant generation bus in the Day-ahead Energy Market.
  Except as provided in Section 3.2.3(n), if the total offered price summed over
  all hours exceeds the total value summed over all hours, the difference shall
  be credited to the Market Seller.

(c)   The
  sum of the foregoing credits calculated in accordance with Section 3.2.3(b)
  plus any unallocated charges from Section 3.2.3(h) and 5.1.7, shall be the cost
  of Operating Reserves in the Day-ahead Energy Market.

(d)   The
  cost of Operating Reserves in the Day-ahead Energy Market shall be allocated
  and charged to each Market Participant in proportion to the sum of its (i) scheduled
  load and accepted Decrement Bids in the Day-ahead Energy Market in megawatt-hours
  for that Operating Day; and (ii) scheduled energy sales in the Day-ahead Energy
  Market from within the PJM Control Area to load outside the PJM Control Area
  in megawatt-hours for that Operating Day, but not including its bilateral transactions
  that are dynamically scheduled to load outside the PJM Control Area pursuant
  to Section 1.12.

(e)   At
  the end of each Operating Day, the following determination shall be made for
  each synchronized pool-scheduled resource of each Market Seller that operates
  as requested by the Office of the Interconnection and that is not committed
  solely for the purpose of providing spinning reserves: the total offered price
  for start-up and no-load fees and Spot Market Energy, determined on the basis
  of the lesser of the resource's (i) hourly output as determined by the State
  Estimator, or (ii) requested output as determined by the PJM dispatch. The total
  offered price shall be compared to the total value of that resource's energy
  in the Day-ahead Energy Market plus any credit or charge for quantity deviations,
  at PJM dispatch direction, from the Day-ahead Energy Market during the Operating
  Day. Except as provided in Section 3.2.3(m), if the total offered price exceeds
  the total value, the difference less any credit as determined pursuant to Section
  3.2.3(b) and less any amounts credited for Regulation in excess of the Regulation
  offer plus the resources opportunity cost, shall be credited to the Market Seller.

(f)   A
  Market Seller's pool scheduled resource the output of which is reduced or suspended
  at the request of the Office of the Interconnection for the purpose of maintaining
  reliability within the PJM Control Area, shall be credited in an amount equal
  to (PAG - AG) x LT x (ULMP - UB) where:

PAG equals the actual generation of the unit for the five minute
  period preceding the request;

AG equals the actual generation of the unit until PJM cancels
  the request to reduce output;

LT equals the length of time that the request to reduce output
  was effective;

ULMP equals the LMP at the unit's bus;

UB equals the unit bid for that unit whose output is reduced
  or suspended; and

where ULMP - UB shall not be negative.

(g)   The
  sum of the foregoing credits, plus any cancellation fees paid in accordance
  with Section 1.10.2(d), such cancellation fees to be applied to the Operating
  Day for which the unit was scheduled, less any payments received from another
  Control Area for Operating Reserves, shall be the cost of Operating Reserves
  for the Real-time Energy Market in each Operating Day.

(h)   The
  cost of Operating Reserves for the Real-time Energy Market for each Operating
  Day shall be allocated and charged to each Market Participant in proportion
  to the sum of the absolute values of its (i) load deviations from the Day-ahead
  Energy Market in megawatt-hours during that Operating Day; (ii) generation deviations
  from the Day-ahead Energy Market for non-dispatchable generation resources,
  including External Resources, in megawatt-hours during the Operating Day; (iii)
  deviations from the Day-ahead Energy Market for bilateral transactions from
  outside the PJM Control Area for delivery within the PJM Control Area in megawatt-hours
  during the Operating Day; and (iv) deviations of energy sales from the Day-ahead
  Energy Market from within the PJM Control Area to load outside the PJM Control
  Area in megawatt-hours during that Operating Day, but not including its bilateral
  transactions that are dynamically scheduled to load outside the PJM Control
  Area pursuant to Section 1.12.

(i)   At
  the end of each Operating Day, Market Sellers shall be credited on the basis
  of their offered prices for synchronized condensing for any hydropower or combustion
  turbine units operated as synchronous condensers but producing no energy, as
  well as the credits calculated as specified in Section 3.2.3(b) for those generators
  committed solely for the purpose of providing spinning reserves, at the request
  of the Office of the Interconnection.

(j)   The
  sum of the foregoing credits as specified in Section 3.2.3(b) shall be the cost
  of Operating Reserves for synchronized condensing for the Operating Day in the
  PJM Control Area.

(k)   The
  cost of Operating Reserves for synchronized condensing for each Operating Day
  shall be allocated and charged to each Market Participant in proportion to the
  sum of its (i) deliveries of energy to load in the PJM Control Area, served
  under Network Transmission Service, in megawatt-hours during that Operating
  Day; and (ii) deliveries of energy sales from within the PJM Control Area to
  load outside the PJM Control Area in megawatt-hours during that Operating Day,
  but not including its bilateral transactions that are dynamically scheduled
  to load outside the PJM Control Area pursuant to Section 1.12.

(l)   For
  any Operating Day in either, as applicable, the Day-ahead Energy Market or the
  Real-time Energy Market for which, for all or any part of such Operating Day,
  the Office of the Interconnection: (i) declares a Maximum Generation Emergency;
  (ii) issues an alert that a Maximum Generation Emergency may be declared ("Maximum
  Generation Emergency Alert"); or (iii) schedules units based on the anticipation
  of a Maximum Generation Emergency or a Maximum Generation Emergency Alert, the
  Operating Reserves credit otherwise provided by Section 3.2.3.(b) or Section
  3.2.3(e) in connection with marked-based offers shall be limited as provided
  in paragraphs (n) or (m), respectively. The Office of the Interconnection shall
  provide timely notice on its internet site of the commencement and termination
  of any of the actions described in clause (i), (ii), or (iii) of this paragraph
  (l) (collectively referred to as "MaxGen Conditions"). Following the posting
  of notice of the commencement of a MaxGen Condition, a Market Seller may elect
  to submit a cost-based offer in accordance with Schedule 2 of the Operating
  Agreement, in which case paragraphs (m) and (n) shall not apply to such offer;
  provided, however, that such offer must be submitted in accordance with the
  deadlines in Section 1.10 for the submission of offers in the Day-ahead Energy
  Market or Real-time Energy Market, as applicable. Submission of a cost-based
  offer under such conditions shall not be precluded by Section 1.9.7(b); provided,
  however, that the Market Seller must return to compliance with Section 1.9.7(b)
  when it submits its bid for the first Operating Day after termination of the
  MaxGen Condition.

(m)   For
  the Real-time Energy Market, if the Effective Offer Price (as defined below)
  for a market-based offer is greater than $1,000/MWh, the Market Seller shall
  not receive any credit for Operating Reserves. If the Effective Offer Price
  is less than or equal to $1,000/MWh, the Market Seller shall receive credit
  for Operating Reserves determined in accordance with Section 3.2.3(e), subject
  to the limit on total compensation stated below. For purposes of this paragraph
  (m), the Effective Offer Price shall be the amount that, absent paragraphs (l)
  and (m), would have been credited for Operating Reserves for such Operating
  Day pursuant to Section 3.2.3(e) divided by the megawatthours of energy offered
  during the hours that the offer is economic, plus the offer for Spot Market
  Energy for the hours that the offer is economic. The hours that the offer is
  economic shall be the hours that the offer price for Spot Market Energy is less
  than or equal to the Real-time Price for the relevant generation bus. Notwithstanding
  any other provision in this paragraph, the total compensation to a Market Seller
  on any Operating Day that includes a MaxGen Condition shall not exceed $1,000/MWh
  during the hours that the unit is economic, where such total compensation in
  each such hour is defined as the amount that, absent paragraphs (l) or (m),
  would have been credited for Operating Reserves for such Operating Day pursuant
  to Section 3.2.3(e) divided by the number of hours that the offer is economic,
  plus the Real-time Price for such hour, and no Operating Reserves payments shall
  be made for any other hour of such Operating Day.

(n)   For
  the Day-ahead Energy Market, if notice of a MaxGen Condition is provided prior
  to 12:00 noon on the day before the Operating Day for which transactions are
  being scheduled and the Effective Offer Price is greater than $1,000/MWh, the
  Market Seller shall not receive any credit for Operating Reserves. If notice
  of a MaxGen Condition is provided after 12:00 noon on the day before the Operating
  Day for which transactions are being scheduled and the Effective Offer Price
  is greater than $1,000/MWh, the Market Seller shall receive credit for Operating
  Reserves determined in accordance with Section 3.2.3(b), subject to the limit
  on total compensation stated below. If the Effective Offer Price is less than
  or equal to $1,000/MWh, regardless of when notice of a MaxGen Condition is provided,
  the Market Seller shall receive credit for Operating Reserves determined in
  accordance with Section 3.2.3(b), subject to the limit on total compensation
  stated below. For purposes of this paragraph (n), the Effective Offer Price
  shall be the amount that, absent paragraphs (l) and (n), would have been credited
  for Operating Reserves for such Operating Day divided by the megawatt hours
  of energy offered during the Specified Hours, plus the offer for Spot Market
  Energy during such hours. The Specified Hours shall be the lesser of: (1) the
  minimum run hours stated by the Market Seller in its Offer Data; and (2) either
  (i) for steam-electric generating units and for combined-cycle units when such
  units are operating in combined-cycle mode, the six consecutive hours of highest
  Day-ahead Price during such Operating Day when such units are running or (ii)
  for combustion turbine units and for combined-cycle units when such units are
  operating in combustion turbine mode, the two consecutive hours of highest Day-ahead
  Price during such Operating Day when such units are running. Notwithstanding
  any other provision in this paragraph, the total compensation to a Market Seller
  on any Operating Day that includes a MaxGen Condition shall not exceed $1,000/MWh
  during the Specified Hours, where such total compensation in each such hour
  is defined as the amount that, absent paragraphs (l) and (n), would have been
  credited for Operating Reserves for such Operating Day pursuant to Section 3.2.3(b)
  divided by the Specified Hours, plus the Day-ahead Price for such hour, and
  no Operating Reserves payments shall be made for any other hour of such Operating
  Day.

3.2.4   Transmission
  Congestion.

Each Market Buyer shall
  be charged or credited for Transmission Congestion Charges as specified in Section
  5 of this Schedule.

3.2.5   Transmission
  Losses.

(a)   Whenever
  the Office of the Interconnection has in place appropriate computer hardware,
  software, and other necessary resources to account for marginal losses in the
  dispatch of energy and the calculation of Locational Marginal Prices, loss accounting
  shall be determined on that basis, and the provisions of this Section shall
  be revised accordingly. Until such time, the following accounting provisions
  for losses shall apply.

(b)   Each
  Internal Market Buyer that is a Load Serving Entity or purchasing on behalf
  of a Load Serving Entity shall be credited in an amount equal to its pro
  rata share of the hourly total amounts collected from Transmission Customers
  either as charges for transmission losses in the PJM Control Area as specified
  in Section 3.4.2 or for transmission losses supplied in kind in accordance with
  Section 3.4.2(c) based on the Locational Marginal Price at the interface where
  such losses were delivered. This credit shall be determined by the ratio of
  the Internal Market Buyer's total hourly load, divided by the total hourly load
  in the PJM Control Area.

(c)   PJM
  Control Area 500 kV losses shall be allocated to each Electric Distributor that
  reports hourly net energy flows from metered tie lines in proportion to its
  hourly load in the PJM Control Area.

3.2.6   Emergency
  Energy.

(a)   Internal
  Market Buyers shall be allocated a proportionate share of the net cost of Emergency
  energy purchased by the Office of the Interconnection. Such allocated share
  shall be determined in proportion to the amount of net PJM Interchange Imports
  by each Internal Market Buyer during the hour of each such energy purchase.

(b)   Net
  revenues in excess of Real-time Prices attributable to sales of energy in connection
  with Emergencies to other Control Areas shall be credited to Internal Market
  Buyers in proportion to the amount of net PJM Interchange Imports by each Internal
  Market Buyer during each hour of such energy sales.

(c)   The
  costs, revenues, and energy associated with hourly energy purchased from another
  Control Area in connection with a Minimum Generation Emergency in such other
  Control Area, shall be allocated to each Internal Market Buyer in proportion
  to its load in the PJM Control Area during the hour of such purchases.

3.2.7   Billing.

(a)   The
  Office of the Interconnection shall prepare a billing statement each billing
  cycle for each Market Buyer in accordance with the charges and credits specified
  in Sections 3.2.1 through 3.2.6 of this Schedule, and showing the net amount
  to be paid or received by the Market Buyer. Billing statements shall provide
  sufficient detail, as specified in the PJM Manuals, to allow verification of
  the billing amounts and completion of the Market Buyer's internal accounting.

(b)   If
  deliveries to a Market Buyer that has PJM Interchange meters in accordance with
  Section 14 of the Operating Agreement include amounts delivered for a Market
  Participant that does not have PJM Interchange meters separate from those of
  the metered Market Buyer, the Office of the Interconnection shall prepare a
  separate billing statement for the unmetered Market Participant based on the
  allocation of deliveries agreed upon between the Market Buyer and the unmetered
  Market Participant specified by them to the Office of the Interconnection.

3.3   Market Sellers.

Except as provided in the following sentence,
  the accounting and billing principles and procedures applicable to Generating
  Market Buyers functioning as Market Sellers shall be as set forth in Section
  3.2. This Section sets forth the accounting and billing principles and procedures
  applicable to all other Market Sellers, and to Generating Market Buyers functioning
  as Market Sellers with respect to any matters not specified in Section 3.2.

3.3.1   Spot
  Market Energy.

(a)   Market
  Sellers shall be paid for all energy scheduled to be delivered in the Day-ahead
  Energy Market at the Day-ahead Prices applicable to each relevant generation
  bus.

(b)   At
  the end of each hour during an Operating Day, the Office of the Interconnection
  shall determine the total net amount of energy delivered in the hour to the
  PJM Control Area by each of the Market Seller's resources, in accordance with
  the PJM Manuals and the calculation described in Section 3.2.1(f).

(c)   The
  Office of the Interconnection shall calculate Day-ahead and Real-time Prices
  for each generation and load bus in the PJM Control Area, including the bus
  at each point of interconnection between the PJM Control Area and each adjacent
  Control Area, in accordance with Section 2 of this Schedule.

(d)   A
  Market Seller shall be credited for Real-time sales of Spot Market Energy to
  the extent of its hourly net deliveries to the PJM Control Area of energy in
  excess of amounts scheduled in the Day-ahead Energy Market from the Market Seller's
  resources. For pool External Resources, the Office of the Interconnection shall
  model, based on an appropriate flow analysis, the hourly amounts delivered from
  each such resource to the corresponding interface point between the PJM Control
  Area and adjacent Control Areas. The total real-time generation revenues for
  each Market Seller shall be the sum of its credits determined by the product
  of (i) the hourly net amount of energy delivered to the PJM Control Area at
  the applicable generation or interface bus in excess of the amount scheduled
  to be delivered in that hour at that bus in the Day-ahead Energy Market from
  each of the Market Seller's resources, times (ii) the hourly Real-time Price
  at that bus. To the extent that the energy actually injected at a generation
  or interface bus in any hour is less than the energy scheduled to be injected
  at that bus in the Day-ahead Energy Market, the Market Seller shall be debited
  for the difference at the Real-time Price for the applicable bus at the time
  of the shortfall times the amount of the shortfall. The total generation revenue
  for each Market Seller shall be the sum, for each of the Market Seller's generation
  or interface buses, of the revenues at Day-ahead Prices determined in accordance
  with the Day-ahead Energy Market as specified in Section 3.3.1(a) plus the revenues
  at Real-time Prices determined as specified herein, net of any debits specified
  herein for each of the Market Seller's generation or interface buses.

3.3.2   Regulation.

Each Market Seller that
  is also an Internal Market Buyer shall have an hourly Regulation objective and
  shall be credited or charged in connection therewith as specified in Section
  3.2.2. All other Market Sellers supplying Regulation at the direction of the
  Office of the Interconnection shall be credited for each increment of such Regulation
  at the price specified in Section 3.2.2(b), as determined by the Office of the
  Interconnection in accordance with procedures specified in the PJM Manuals.

3.3.3   Operating
  Reserves.

A Market Seller shall be
  credited for its pool-scheduled resources based on the prices offered for the
  operation of such resource, provided that the resource was available for the
  entire time specified in the Offer Data for such resource, in accordance with
  the procedures set forth in Section 3.2.3.

3.3.4   Emergency
  Energy.

The costs and net revenues
  associated with hourly energy sales to other Control Areas in connection with
  a Minimum Generation Emergency in the PJM Control Area shall be allocated to
  Market Sellers in proportion to their sales to the PJM Interchange Energy Market
  from generation resources within the metered boundaries of the PJM Control Area
  in each hour in which such energy was sold to other Control Areas.

3.3.5   Billing.

The Office of the Interconnection
  shall prepare a billing statement each billing cycle for each Market Seller
  in accordance with the charges and credits specified in Sections 3.3.1 through
  3.3.4 of this Schedule, and showing the net amount to be paid or received by
  the Market Seller. Billing statements shall provide sufficient detail, as specified
  in the PJM Manuals, to allow verification of the billing amounts and completion
  of the Market Seller's internal accounting.

3.4   Transmission Customers.

3.4.1   Transmission
  Congestion.

Each Transmission Customer
  shall be charged and credited for Transmission Congestion Charges as specified
  in Section 5 of this Schedule.

3.4.2   Transmission
  Losses.

(a)   Whenever
  the Office of the Interconnection has in place appropriate computer hardware,
  software, and other necessary resources to account for marginal losses in the
  dispatch of energy and the calculation of Locational Marginal Prices, loss accounting
  shall be determined on that basis, and the provisions of this Section shall
  be revised accordingly. Until such time, the following accounting provisions
  for losses shall apply.

(b)   Transmission
  Customers shall be charged for transmission losses in an amount equal to the
  product of (i) the Transmission Customer's megawatt-hours of deliveries using
  Point-to-Point Transmission Service, times (ii) the appropriate loss factor
  for deliveries using Point-to-Point Transmission Service, times (iii) the weighted
  average Day-ahead or Real-time Price, as applicable, for all load busses in
  the PJM Control Area. The foregoing average hourly loss factor shall be: (i)
  determined by the Office of the Interconnection from time to time as conditions
  affecting losses shall warrant; and (ii) calculated separately for on-peak and
  off-peak hours on the basis of the average ratio of losses to load served in
  each such period.

(c)   A
  Transmission Customer may elect to pay for losses in kind, rounded off to the
  nearest whole megawatt, rather than as specified above if its total deliveries
  in an hour using Point-to-Point Transmission Service are greater than 200 megawatts.
  If it so elects, the Transmission Customer's specified source for the energy
  to be delivered using Point-to-Point Transmission Service may be scheduled to
  supply to the PJM Control Area boundary an amount of energy equal to the delivery
  schedule plus the amount of losses determined by applying the appropriate hourly
  loss factor as specified above to the delivered amount.

3.4.3   Billing.

The Office of the Interconnection
  shall prepare a billing statement each billing cycle for each Transmission Customer
  in accordance with the charges and credits specified in Sections 3.4.1 through
  3.4.2 of this Schedule, and showing the net amount to be paid or received by
  the Transmission Customer. Billing statements shall provide sufficient detail,
  as specified in the PJM Manuals, to allow verification of the billing amounts
  and completion of the Transmission Customer's internal accounting.

3.5   Other Control Areas.

3.5.1   Energy
  Sales.

To the extent appropriate
  in accordance with Good Utility Practice, the Office of the Interconnection
  may sell energy to an interconnected Control Area as necessary to alleviate
  or end an Emergency in that Control Area. Such sales shall be made (i) only
  to Control Areas that have undertaken a commitment pursuant to a written agreement
  with the LLC to sell energy on a comparable basis to the PJM Control Area, and
  (ii) only to the extent consistent with the maintenance of reliability in the
  PJM Control Area. The Office of the Interconnection may decline to make such
  sales to a Control Area that the Office of the Interconnection determines does
  not have in place and implement Emergency procedures that are comparable to
  those followed in the PJM Control Area. If the Office of the Interconnection
  sells energy to an interconnected Control Area as necessary to alleviate or
  end an Emergency in that Control Area, such energy shall be sold at 150% of
  the Real-time Price at the bus or busses at the border of the PJM Control Area
  at which such energy is delivered.

3.5.2   Operating
  Margin Sales.

The extent appropriate
  in accordance with Good Utility Practice, the Office of the Interconnection
  may sell Operating Margin to an interconnected Control Area as requested to
  alleviate an operating contingency resulting from the affect of the purchasing
  Control Area's operations on the dispatch of resources in the PJM Control Area.
  Such sales shall be made only to Control Areas that have undertaken a commitment
  pursuant to a written agreement with the Office of the Interconnection (i) to
  purchase Operating Margin whenever the purchasing Control Area's operations
  will affect the dispatch of resources in the PJM Control Area, and (ii) to sell
  Operating Margin on a comparable basis to the LLC.

3.5.3   Transmission
  Congestion.

Each Control Area purchasing
  Operating Margin shall be assessed Transmission Congestion Charges as specified
  in Section 5.1.5 of this Schedule.

3.5.4   Billing.

The Office of the Interconnection
  shall prepare a billing statement each billing cycle for each Control Area to
  which Emergency energy or Operating Margin was sold, and showing the net amount
  to be paid by such Control Area. Billing statements shall provide sufficient
  detail, as specified in the PJM Manuals, to allow verification of the billing
  amounts.

3.6   Metering Reconciliation.

3.6.1   Meter
  Correction Billing.

Metering errors and corrections
  will be reconciled at the end of each month by a meter correction charge or
  credit. The monthly meter correction charge or credit shall be determined by
  the product of the positive or negative deviation in energy amounts, times the
  weighted average Locational Marginal Price for all load busses in the PJM Control
  Area.

3.6.2   Meter
  Corrections Between Market Participants.

If a Market Participant
  or the Office of the Interconnection discovers a meter error affecting an interchange
  of energy with another Market Participant and makes the error known to such
  other Market Participant prior to the completion by the Office of the Interconnection
  of the accounting for the interchange, and if both Market Participants are willing
  to adjust hourly load records to compensate for the error and such adjustment
  does not affect other parties, an adjustment in load records may be made by
  the Market Participants in order to correct for the meter error, provided corrected
  information is furnished to the Office of the Interconnection in accordance
  with the Office of the Interconnection's accounting deadlines. No such adjustment
  may be made if the accounting for the Operating Day in which the interchange
  occurred has been completed by the Office of the Interconnection.

3.6.3   500
  kV Meter Errors.

Billing cycle accounting
  for 500 kV transmission losses shall be adjusted to account for errors in meters
  on 500 kV Transmission Facilities.

3.6.4   Meter
  Corrections Between Control Areas.

An error between accounted
  for and metered interchange between a Party in the PJM Control Area and an entity
  in another Control Area shall be corrected by adjusting the hourly meter readings.
  If this is not practical, the error shall be accounted for by a correction at
  the end of the billing cycle. The Market Participant with ties to such other
  Control Area experiencing the error shall account for the full amount of the
  discrepancy and an appropriate debit or credit shall be applied equally among
  all Market Buyers. The Office of the Interconnection will adjust the actual
  interchange between the PJM Control Area and the other Control Area to maintain
  a proper record of inadvertent energy flow. Meter corrections on the 500 kV
  system between the PJM Control Area and other Control Areas shall be accounted
  for through the internal 500 kV system meter error allocation at the end of
  the billing cycle.

3.6.5   Meter
  Correction Data.

Meter error data shall
  be submitted to the Office of the Interconnection not later than noon on the
  second working day of the Office of the Interconnection after the end of the
  billing cycle applicable to the meter correction.

3.6.6   Correction
  Limits.

A Market Participant may
  not assert a claim for an adjustment in billing as a result of a meter error
  for any error discovered more than two years after the date on which the metering
  occurred. Any claim for an adjustment in billing as a result of a meter error
  shall be limited to bills for transactions occurring in the most recent annual
  accounting period of the billing Market Participant in which the meter error
  occurred, and the prior annual accounting period.

4.   RATE TABLE

4.1   Offered Price Rates.

Spot Market Energy, Regulation, Operating
  Reserve, and Transmission Congestion are based on offers to the Office of the
  Interconnection specified in this Agreement.

4.2   Transmission Losses.

Average loss factors shall be as specified
  in the PJM Tariff.

4.3   Emergency Energy
  Purchases.

The pricing for Emergency energy purchases
  will be determined by the Office of the Interconnection and: (a) an adjacent
  Control Area, in accordance with an agreement between the Office of the Interconnection
  and such adjacent Control Area, or (b) a Member, in accordance with arrangements
  made by the Office of Interconnection to purchase energy offered by such Member
  from resources that are not Capacity Resources.

5.   CALCULATION OF TRANSMISSION CONGESTION
  CHARGES AND CREDITS

5.1   Transmission Congestion Charge Calculation.



5.1.1   Calculation by Office
  of the Interconnection.

When the transmission system
  is operating under constrained conditions, the Office of the Interconnection
  shall calculate Transmission Congestion Charges for each Network Service User,
  the PJM Interchange Energy Market, and each Transmission Customer.

5.1.2   General.

The basis for the Transmission
  Congestion Charges shall be the differences in the Locational Marginal Prices
  between points of delivery and points of receipt, as determined in accordance
  with Section 2 of this Schedule.

5.1.3   Network
  Service User Calculation.

Each Network Service User
  shall be charged for the increased cost of energy incurred by it during each
  constrained hour to deliver the output of its firm Capacity Resources or other
  owned or contracted for resources, its firm bilateral purchases, and its non-firm
  bilateral purchases as to which it has elected to pay Transmission Congestion
  Charges. The Transmission Congestion Charge for deliveries from each such source
  shall be the Network Service User's hourly net bill less its hourly net PJM
  Interchange payments or sales as determined in accordance with Section 3.2.1
  or Sections 3.3 and 3.3.1 of this Schedule.

5.1.4   Transmission
  Customer Calculation.

Each Transmission Customer
  using Firm Point-to-Point Transmission Service (as defined in the PJM Tariff),
  and each Transmission Customer using Non-Firm Point-to-Point Transmission Service
  (as defined in the PJM Tariff) that has elected to pay Transmission Congestion
  Charges, shall be charged for the increased cost of energy during constrained
  hours for the delivery of energy using Point-to-Point Transmission Service.
  Except as specified in this subsection, a Transmission Congestion Charge shall
  be assessed for transmission use scheduled in the Day-ahead Energy Market, calculated
  as the amount to be delivered multiplied by the difference between the Day-ahead
  Price at the delivery point or PJM Control Area boundary delivery interface
  and the Day-ahead Price at the source point or PJM Control Area boundary source
  interface. Transmission Congestion Charges shall be assessed for real-time transmission
  use in excess of the amounts scheduled for each hour in the Day-ahead Energy
  Market, calculated as the excess amount multiplied by the difference between
  the Real-time Price at the delivery point or PJM Control Area boundary delivery
  interface, and the Real-time Price at the source point or PJM Control Area boundary
  source interface. A Transmission Customer shall be credited for Transmission
  Congestion Charges for real-time transmission use falling below the amounts
  scheduled for each hour in the Day-ahead Energy Market, calculated as the shortfall
  amount multiplied by the difference between the Real-time Price at the delivery
  point or PJM Control Area boundary delivery interface, and the Real-time Price
  at the source point or PJM Control Area boundary source interface. Real-time
  deviations from the Point-to-Point Transmission Service scheduled in the Day-ahead
  Energy Market shall be determined by the lesser of the real-time injection or
  withdrawal associated with such transmission service. The Transmission Congestion
  Charge for Market Sellers using point-to-point transmission service for deliveries
  out of the PJM Control Area from generating resources within the PJM Control
  Area shall be the amount of its net bill less the Market Seller's net hourly
  PJM Interchange payments or sales as determined in accordance with Section 3.3
  of this Schedule.

5.1.5   Operating
  Margin Customer Calculation.

Each Control Area purchasing
  Operating Margin shall be assessed Transmission Congestion Charges for any the
  increase in the cost of energy resulting from the provision of Operating Margin.
  The Transmission Congestion Charge shall be the amount of Operating Margin purchased
  in an hour multiplied by the difference in the Real-time Price at what would
  be the delivery interface and the Real-time Price at what would be the source
  interface, if the operating contingency that was the basis for the purchase
  of Operating Margin had occurred in that hour. Operating Margin may be allocated
  among multiple source and delivery interfaces in accordance with an applicable
  load flow study.

5.1.6   Transmission
  Loading Relief Customer Calculation.

(a)   Each Transmission Loading
  Relief Customer shall be assessed Transmission Congestion Charges for any increase
  in the cost of energy in the PJM Control Area resulting from its energy schedules
  over contract paths outside the PJM Control Area during Transmission Loading
  Relief.

(b)   The Transmission Congestion
  Charge shall be the total amount of energy specified in such energy schedules

  multiplied by the difference between a Locational Marginal Price calculated
  by the Office of the Interconnection for the energy schedule source location
  specified in the NERC Interchange Distribution Calculator and a Locational Marginal
  Price calculated by the Office of the Interconnection for the energy schedule
  sink location specified in the NERC Interchange Distribution Calculator. Transmission
  Congestion Charges that are less than zero shall be set equal to zero for Transmission
  Loading Relief Customers.

(c)   The Office of the Interconnection
  will determine the Locational Marginal Prices at the energy schedule source
  and sink locations external to PJM with reference to and based solely on the
  prices of energy in the PJM Control Area and at the interface buses between
  the PJM Control Area and adjacent Control Areas and the system conditions and
  actual power flow distributions as described by the PJM State Estimator program.
  The Office of the Interconnection will determine the Locational Marginal Prices
  at the external energy schedule source and sink locations and the resulting
  Congestion Charge based on the portion of the energy schedule that flows through
  the PJM Control Area as reflected by the flow distributions from the PJM State
  Estimator program.

5.1.7   Total
  Transmission Congestion Charges.

The total Transmission
  Congestion Charges collected by the Office of the Interconnection each hour
  will be the aggregate net amounts determined as specified in this Schedule.
  The Office of the Interconnection shall collect Transmission Congestion Charges
  for each hour the transmission system operates under constrained conditions.

5.2   Transmission Congestion
  Credit Calculation.

5.2.1   Eligibility.

(a)   Except
  as provided in Section 5.2.1(b), each holder of a Fixed Transmission Right shall
  receive as a Transmission Congestion Credit a proportional share of the total
  Transmission Congestion Charges collected for each constrained hour.

(b)   If
  a holder of a Fixed Transmission Right between specified delivery and receipt
  buses acquired the Fixed Transmission Right in a Fixed Transmission Rights Auction
  (the procedures for which are set forth in Part 7 of this Schedule 1) and (i)
  had an Increment Bid and/or Decrement Bid that was accepted by the Office of
  the Interconnection for an applicable hour in the Day-ahead Energy Market for
  delivery or receipt at or near delivery or receipt buses of the Fixed Transmission
  Right; and (ii) the result of the acceptance of such Increment Bid or Decrement
  Bid is that the difference in locational marginal prices in the Day-ahead Energy
  Market between such delivery and receipt buses is greater than the difference
  in locational marginal prices between such delivery and receipt buses in the
  Real-time Energy Market, then the Market Participant shall not receive any Transmission
  Congestion Credit, associated with such Fixed Transmission Right in such hour,
  in excess of one divided by the number of hours in the applicable month multiplied
  by the amount that the Market Participant paid for the Fixed Transmission Right
  in the Fixed Transmission Rights Auction.

(c)   For
  purposes of Section 5.2.1(b) a bus shall be considered at or near the Fixed
  Transmission Right delivery or receipt bus if seventy-five percent or more of
  the energy injected or withdrawn at that bus and which is withdrawn or injected
  at any other bus is reflected in the constrained path between the subject Fixed
  Transmission Right delivery and receipt buses that were acquired in the Fixed
  Transmission Rights Auction.

5.2.2   Fixed
  Transmission Rights.

(a)   Transmission
  Congestion Credits will be calculated based upon the Fixed Transmission Rights
  held at the time of the constrained hour. Allocations of Fixed Transmission
  Rights shall be made to each Network Service User and Transmission Customer
  as specified below.

(b)   Subject
  to the provisions of Section B of Attachment K of the PJM Tariff, on an annual
  basis by such deadline established by the Office of the Interconnection, each
  Network Service User shall designate a subset of its Network Resources for which
  Fixed Transmission Rights will be assigned. Fixed Transmission Rights shall
  be assigned for each Network Resource in a number of megawatts equal to or less
  than the installed capacity summer megawatt rating of each designated Network
  Resource, determined at the PJM Control Area transmission bus at which the designated
  Network Resource is connected. Each Fixed Transmission Right shall be to the
  aggregate load busses of the Network Service User in a Zone or, with respect
  to Non-Zone Network Load, to the border of the PJM Control Area. The sum of
  each Network Service User's assigned Fixed Transmission Rights for a Zone must
  be equal to or less than the Network Service User's peak load for that Zone
  as determined under Section 34.1 of the Tariff. The sum of each Network Service
  User's Fixed Transmission Rights for Non-Zone Network Load must be equal to
  or less than the Network Service User's transmission responsibility for Non-Zone
  Network Load as determined under Section 34.1 of the Tariff.

(c)   Each
  Transmission Customer receiving firm Point-to-Point Transmission Service shall
  be assigned Fixed Transmission Rights; provided, however, that a Transmission
  Customer may notify the Office of Interconnection that it does not wish to receive
  any FTRs or wishes to receive FTRs only for certain Point or Points of Receipt
  and Point or Points of Delivery, in which event no FTRs or such reduced amount
  of FTRs shall be issued to the Transmission Customer. The Fixed Transmission
  Right for each instance of Point-to-Point Transmission Service shall be a number
  of megawatts equal to the megawatts of firm service being provided between the
  receipt and delivery points as to which the Transmission Customer has firm Point-to-Point
  Transmission Service.

(d)   A
  Fixed Transmission Right, or the right to Transmission Congestion Credits attributable
  to a Fixed Transmission Right, may be sold or otherwise transferred by agreement,
  subject to compliance with such procedures as may be established by the Office
  of the Interconnection for verification of the rights of the purchaser or transferee.

5.2.3   Target
  Allocation for Network Service Users.

A target allocation of
  Transmission Congestion Credits for each Network Service User shall be determined
  for each of its Fixed Transmission Rights. Each Fixed Transmission Right shall
  be multiplied by the percent of the Network Service User's annual peak load
  assigned to each load bus multiplied by the difference calculated as the Network
  Service User's load bus Day-ahead Price minus the generation bus Day-ahead Price

  of the Network Resource associated with the Fixed Transmission Right. The total
  target allocation for each Fixed Transmission Right is the sum of the target
  allocations for each load bus. The total target allocation for each Network
  Service User for each hour is the sum of the total target allocations for each
  of the Network Service User's Fixed Transmission Rights.

5.2.4   Target
  Allocation for other Holders.

A target allocation of
  Transmission Congestion Credits for each Transmission Customer or entity holding
  an FTR acquired by other means shall be determined for each Fixed Transmission
  Right. Each Fixed Transmission Right shall be multiplied by the Day-ahead Price
  differences for the receipt and delivery points associated with the Fixed Transmission
  Right, calculated as the Day-ahead Price at the delivery point(s) minus the
  Locational Marginal Price at the receipt point(s). The total target allocation
  for the Transmission Customer for each hour shall be the sum of the target allocations
  associated with all of the Transmission Customer's Fixed Transmission Rights.

5.2.5   Calculation
  of Transmission Congestion Credits.

(a)   The
  total of all the target allocations determined as specified above shall be compared
  to the total Transmission Congestion Charges in each hour resulting from both
  the Day-ahead Energy Market and the Real-time Energy Market. If the total of
  the target allocations is less than the total of the Transmission Congestion
  Charges, the Transmission Congestion Credit for each Network Service User and
  Transmission Customer shall be equal to its target allocation. All remaining
  Transmission Congestion Charges shall be distributed as described below in Section
  5.2.6 "Distribution of Excess Congestion Charges."

(b)   If
  the total of the target allocations is greater than the total Transmission Congestion
  Charges for the hour resulting from both the Day-ahead Energy Market and the
  Real-time Energy Market, each holder of Fixed Transmission Rights shall be assigned
  a share of the total Transmission Congestion Charges in proportion to its target
  allocations.

5.2.6   Distribution
  of Excess Congestion Charges.

(a)   Excess
  Transmission Congestion Charges accumulated in a month shall be distributed
  to each holder of Fixed Transmission Rights in proportion to, but not more than,
  any deficiency in the share of Transmission Congestion Charges received by the
  holder during that month as compared to its total target allocations for the
  month.

(b)   After
  the excess Transmission Congestion Charge distribution described in Section
  5.2.6(a) is performed, any excess Transmission Congestion Charges remaining
  at the end of a month shall be distributed to each holder of Fixed Transmission
  Rights in proportion to, but not more than, any deficiency in the share of Transmission
  Congestion Charges received by the holder during the current calendar year,
  including previously distributed excess Transmission Congestion Charges, as
  compared to its total target allocation for the calendar year.

(c)   Any
  excess Transmission Congestion Charges remaining at the end of a calendar year
  shall be distributed to Network Service Users and Transmission Customers purchasing
  Firm Point-to-Point Transmission Service in proportion to their Demand Charges
  for Network Service and their charges for Reserved Capacity for Firm Point-to-Point
  Transmission Service.

5.3   Unscheduled Transmission
  Service (Loop Flow).

(a)   When
  there are agreements between the Members (or the Office of the Interconnection
  on behalf of the Members) and others for compensation to be paid or received
  for unscheduled transmission service (loop flow) into or out of the PJM Control
  Area, the net compensation received shall be included in the total Transmission
  Congestion Charges that are distributed in accordance with Section 5.2.

(b)   With
  respect to payments by the Office of the Interconnection to the New York Power
  Pool for the installation and operation of phase angle regulating facilities
  at Ramapo to control or limit unscheduled transmission service (loop flow),
  each Transmission Owner with revenue requirements under the PJM Tariff shall
  pay a share of the charges on a transmission revenue requirements ratio share
  basis.

6.   "MUST-RUN" FOR RELIABILITY GENERATION

6.1   Introduction.

The following procedures shall apply to any
  generation resource subject to the dispatch of the Office of the Interconnection
  that (a) is a generation resource for which construction commenced before July
  9, 1996, and (b) as a result of transmission constraints, the Office of the
  Interconnection determines, in the exercise of Good Utility Practice, must be
  run in order to maintain the reliability of service in the PJM Control Area.
  The provisions of this Schedule shall otherwise apply to the scheduling, dispatch,
  operation and accounting treatment of such resources, to the extent not inconsistent
  with the provisions of this Section 6.

6.2   Identification of Facility Outages.

Not later than one hour prior to the deadline
  specified in Section 1.10.1 of this Schedule, the Office of the Interconnection
  shall identify on the PJM Open Access Same-Time Information System any facility
  outage or other system condition which it has determined may give rise to a
  transmission constraint that may require, in order to maintain system reliability,
  the dispatch of one or more generation resources that otherwise would not be
  dispatched based on the merits of their offers to the PJM Interchange Energy
  Market.

6.3   Dispatch for Local Reliability.

6.3.1   Request and Dispatch.

In addition to the dispatch of generation
  by the Office of the Interconnection to maintain reliability on transmission
  facilities directly monitored by it, a Member that owns or leases with rights
  equivalent to ownership Transmission Facilities as defined in this Agreement
  or the Transmission Owners Agreement and that operates a local control center
  in accordance with Section 11.3.3 of this Agreement or a Market Operations Center
  in accordance with Section 1.7.5 of this Schedule, may request the Office of
  the Interconnection to dispatch generation in order to maintain reliability
  on any such Transmission Facilities that are not then directly

monitored by the Office of the Interconnection, subject to
  the rules and procedures in Section 6.3.2. The Office of the Interconnection
  shall dispatch generation to maintain reliability on such Transmission Facilities
  by incorporating the facilities in the State Estimator program described in
  Section 2.3 as set forth below, unless the Office of the Interconnection determines
  that such dispatch would adversely affect reliability in the PJM Control Area
  or would otherwise not be in accordance with Good Utility Practice.

6.3.2   Designation
  of Facilities.

The following rules and
  procedures shall apply to a Member request that the Office of the Interconnection
  dispatch generation on one or more Transmission Facilities that are not then
  directly monitored by the Office of the Interconnection.

a)   The Transmission Facilities that are the
  subject of the request must be among the facilities that comprise the Transmission
  System under the PJM Tariff;

b)   The Member shall provide modeling information
  for such Transmission Facilities and provide sufficient telemetry to the Office
  of the Interconnection such that power flows are observable by the State Estimator
  program described in Section 2.3; provided, however, that if an unreliable constrained
  condition exists and time does not permit such modeling and telemetry, the Member
  and the Office of the Interconnection may agree to use a representative surrogate
  for such Transmission Facilities in order to allocate the costs of the dispatch
  of generation using Locational Marginal Prices to maintain reliability on such
  Transmission Facilities, provided further that the Member shall expeditiously
  provide the modeling data and install the necessary facilities to incorporate
  the Transmission Facilities into the State Estimator program;

c)   The request shall constitute a request
  that such Transmission Facilities become and remain monitored by the Office
  of the Interconnection and subject to its dispatch control for a period of not
  less than ninety (90) days;

d)   The Member shall comply with all other
  operating procedures established by the Office of the Interconnection regarding
  dispatch for local reliability as set forth in the PJM Manuals.

6.4   Price Caps.

6.4.1   Applicability.

(a)   Except
  as specified below, if, at any time, it is determined by the Office of the Interconnection
  in accordance with Sections 1.10.8 or 6.1 of this Schedule that any generation
  resource may be dispatched out of economic merit order to maintain system reliability
  as a result of limits on transmission capability, the prices for energy offered
  by such resource shall be capped at the levels specified below. If the Office
  of the Interconnection is able to do so, such prices shall be capped only during
  each hour when the transmission limit affects the schedule of the affected resource,
  and otherwise shall be capped for the entire Operating Day. The energy prices
  as capped shall be used to determine any Locational Marginal Price affected
  by the price of such resource.

(b)   The
  energy bid price offered by any generation resource requested to be dispatched
  in accordance with Section 6.3 of this Schedule shall be capped at the levels
  specified below. If the Office of the Interconnection is able to do so, such
  prices shall be capped only during each hour when the affected resource is so
  scheduled, and otherwise shall be capped for the entire Operating Day. The energy
  prices as capped shall be used to determine any Locational Marginal Price affected
  by the price of such resource.

(c)   Generation
  resources subject to a price cap shall be paid for energy at the applicable
  Locational Marginal Price.

(d)   Price
  caps shall not be applicable to generation resources used to relieve the Western,
  Central and Eastern reactive limits in the PJM Control Area. In addition, price
  caps shall not be applicable to generation resources used to relieve any other
  transmission limit as to which the FERC has authorized the use of market based
  rates.

6.4.2   Level.

The price cap shall be
  one of the amounts specified below, as specified in advance by the market Seller
  for the affected unit:

(i)   The weighted average Locational Marginal
  Price at the generation bus at which energy from the capped resource was delivered
  during a specified number of hours during which the resource was dispatched
  for energy in economic merit order, the specified number of hours to be determined
  by the Office of the Interconnection and to be a number of hours sufficient
  to result in a price cap that reflects reasonably contemporaneous competitive
  market conditions for that unit;

(ii)   The incremental operating cost of the
  generation resource as determined in accordance with Schedule 2 of this Agreement
  and the PJM Manuals, plus 10% of such costs; or

(iii)   An amount determined by agreement between
  the Office of the Interconnection and the Market Seller.

7.   FIXED TRANSMISSION RIGHTS AUCTIONS

7.1   Auctions of Fixed Transmission Rights.

Periodic auctions to allow Market Participants
  to acquire or sell Fixed Transmission Rights shall be conducted by the Office
  of the Interconnection in accordance with the provisions of this Section.

7.1.1   Auction
  Period and Scope of Auctions.

The period covered by an
  auction shall be the one-month period next following the date that the auction
  is conducted. The Office of the Interconnection shall offer for sale in the
  auction any remaining Fixed Transmission Rights capability for the month after
  taking into account all of the Fixed Transmission Rights already outstanding
  at the time of the auction. In addition, any holder of a Fixed Transmission
  Right for the period covered by an auction may offer such Fixed Transmission
  Right for sale in such auction. Each monthly auction will consist of a separate
  auction for on-peak Fixed Transmission Rights and a separate auction for off-peak
  Fixed Transmission Rights. Market Participants may bid for and acquire any number
  of Fixed Transmission Rights, provided that all Fixed Transmission Rights awarded
  are simultaneously feasible with each other and with all Fixed Transmission
  Rights outstanding at the time of the auction and not sold intothe auction.

7.1.2   Frequency
  and Time of Auctions.

Fixed Transmission Rights
  auctions shall be held monthly. The bid and offer period shall open at 12:00
  midnight (Eastern Prevailing Time) on the fifteenth (15th) business day preceding
  the month for which Fixed Transmission Rights are being auctioned and shall
  close at 12:00 midnight (Eastern Prevailing Time) on the tenth (10th) business
  day preceding the month for which Fixed Transmission Rights are being auctioned.

7.1.3   Duration
  of Fixed Transmission Rights.

Each Fixed Transmission
  Right acquired in a Fixed Transmission Rights auction shall entitle the holder
  to credits of Transmission Congestion Charges for the one-month period for which
  the Fixed Transmission Rights were auctioned.

7.2   Fixed Transmission
  Rights Characteristics.

7.2.1   Reconfiguration
  of Fixed Transmission Rights.

Through an appropriate
  linear programming model, the Office of the Interconnection shall reconfigure
  the Fixed Transmission Rights offered or otherwise available for sale in any
  auction to maximize the value to the bidders of the Fixed Transmission Rights
  sold, provided that any Fixed Transmission Rights acquired at auction shall
  be simultaneously feasible in combination with those Fixed Transmission Rights
  outstanding at the time of the auction and not sold in the auction. The linear
  programming model shall, while respecting transmission constraints and the maximum
  MW quantities of the bids and offers, select the set of simultaneously feasible
  Fixed Transmission Rights with the highest net total auction value as determined
  by the bids of buyers and taking into account the reservation prices of the
  sellers.

7.2.2   Specified
  Buses.

Auction bids for Fixed
  Transmission Rights may specify any combination of receipt and delivery buses
  represented in the State Estimator model for which the Office of the Interconnection
  calculates and posts Locational Marginal Prices. Auction bids may specify receipt
  and delivery points from locations outside of the PJM Control Area to locations
  inside the PJM Control Area, from locations within the PJM Control Area to locations
  outside of the PJM Control Area, or to and from locations within the PJM Control
  Area.

7.2.3   Transmission
  Congestion Charges.

Fixed Transmission Rights,
  whether acquired at auction or otherwise, shall entitle holders thereof to credits
  only for Transmission Congestion Charges, and shall not confer a right to credits
  for payments arising from or relating to transmission congestion made to any
  entity other than the Office of the Interconnection.

7.3   Auction Procedures.

7.3.1   Role
  of the Office of the Interconnection.

Fixed Transmission Rights
  auctions shall be conducted by the Office of the Interconnection in accordance
  with standards and procedures set forth in the PJM Manuals, such standards and
  procedures to be consistent with the requirements of this Schedule.

7.3.2   Notice
  of Offer.

A holder of a Fixed
  Transmission Right wishing to offer the Fixed Transmission Right for sale shall
  notify the Office of the Interconnection of any Fixed Transmission Rights to
  be offered. Each Fixed Transmission Right sold in an auction shall, at the end
  of the period for which the Fixed Transmission Rights were auctioned, revert
  to the offering holder or the entity to which the offering holder has transferred
  such Fixed Transmission Right, subject to the term of the Fixed Transmission
  Right itself and to the right of such holder or transferee to offer the Fixed
  Transmission Right in the next or any subsequent auction during the term of
  the Fixed Transmission Right.

7.3.3   Pending
  Applications for Firm Service.

(a)   Prior
  to the start of each auction bidding period, the Office of the Interconnection
  shall exert reasonable effort to complete its review of pending applications
  for Network Transmission Service and Firm Point-to-Point Transmission Service
  and to ascertain the corresponding Fixed Transmission Rights to be assigned
  to the entities receiving such service, subject to compliance with all applicable
  deadlines and other procedures by the applicant. Fixed Transmission Rights so
  assigned shall be included in the simultaneous feasibility test performed by
  the Office of the Interconnection for the auction.

(b)   Fixed
  Transmission Rights may be assigned to entities requesting Network Transmission
  Service or Firm Point-to-Point Transmission Service only if such Fixed Transmission
  Rights are simultaneously feasible with all outstanding Fixed Transmission Rights,
  including Fixed Transmission Rights effective for the then-current auction period.
  If an assignment of Fixed Transmission Rights pursuant to a pending application
  for Network Transmission Service or Firm Point-to-Point Transmission Service
  cannot be completed prior to an auction, Fixed Transmission Rights attributable
  to such transmission service shall not be assigned for the then-current auction
  period. If a Fixed Transmission Right cannot be assigned for this reason, the
  applicant may withdraw its application, or request that the Fixed Transmission
  Right be assigned effective with the start of the next auction period.

7.3.4   On-Peak
  and Off-Peak Periods.

The Office of the Interconnection
  will conduct separate auctions simultaneously for on-peak and off-peak periods.
  On-Peak Fixed Transmission Rights shall cover the periods from 7:00 a.m. up
  to the hour ending at 11:00 p.m. on Mondays through Fridays, except holidays
  as defined in the PJM Manuals. Off-Peak Fixed Transmission Rights shall cover
  the periods from 11:00 p.m. up to the hour ending 7:00 a.m. on Mondays through
  Fridays and all hours on Saturdays, Sundays, and holidays as defined in the
  PJM Manuals. Each bid shall specify whether it is for an on-peak or off-peak
  period.

7.3.5   Offers
  and Bids.

(a)   Offers
  to sell and bids to purchase Fixed Transmission Rights shall be submitted during
  the period set forth in Section 7.1.2, and shall be in the form specified by
  the Office of the Interconnection in accordance with the requirements set forth
  below.

(b)   Offers
  to sell shall identify the specific Fixed Transmission Right, by megawatt quantity
  and receipt and delivery points, offered for sale. An offer to sell a specified
  megawatt quantity of Fixed Transmission Rights shall constitute an offer to
  sell a quantity of Fixed Transmission Rights equal to or less than the specified
  quantity. An offer to sell may not specify a minimum quantity being offered.
  Each offer may specify a reservation price, below which the offeror does not
  wish to sell the Fixed Transmission Right. Offers submitted by entities holding
  rights to Fixed Transmission Rights acquired other than by assignment in connection
  with reservations of Network Transmission Service or Firm Point-to-Point Transmission
  Service shall be subject to such reasonable standards for the verification of
  the rights of the offeror as may be established by the Office of the Interconnection.
  Offers shall be subject to such reasonable standards for the creditworthiness
  of the offeror or for the posting of security for performance as the Office
  of the Interconnection shall establish.

(c)   Bids
  to purchase shall specify the megawatt quantity, price per megawatt, and receipt
  and delivery points of the Fixed Transmission Right that the bidder wishes to
  purchase. A bid to purchase a specified megawatt quantity of Fixed Transmission
  Rights shall constitute a bid to purchase a quantity of Fixed Transmission Rights
  equal to or less than the specified quantity. A bid to purchase may not specify
  a minimum quantity that the bidder wishes to purchase. A bid may specify as
  receipt or delivery points any bus for which the Office of the Interconnection
  calculates and posts Locational Marginal Prices in accordance with Section 2
  of this Schedule and may include Fixed Transmission Rights for which the associated
  Transmission Congestion Credits may have negative values. Bids shall be subject
  to such reasonable standards for the creditworthiness of the bidder or for the
  posting of security for performance as the Office of the Interconnection shall
  establish.

(d)   Bids
  and offers shall be specified to the nearest tenth of a megawatt and shall be
  greater than zero.

7.3.6   Determination
  of Winning Bids and Clearing Price.

(a)   At
  the close of the bidding period each month, the Office of the Interconnection
  will create a base Fixed Transmission Rights power flow model that includes
  all outstanding Fixed Transmission Rights that have been approved and confirmed
  for any portion of the month for which the auction was conducted and that were
  not offered for sale in the auction. The base Fixed Transmission Rights model
  also will include estimated uncompensated parallel flows into each interface
  point of the PJM Control Area and estimated scheduled transmission outages.

(b)   In
  accordance with the requirements of Section 7.4 of this Schedule and subject
  to all applicable transmission constraints and reliability requirements, the
  Office of the Interconnection shall determine the simultaneous feasibility of
  all outstanding Fixed Transmission Rights not offered for sale in the auction
  and of all Fixed Transmission Rights that could be awarded in the auction for
  which bids were submitted. The winning bids shall be determined from an appropriate
  linear programming model that, while respecting transmission constraints and
  the maximum MW quantities of the bids and offers, selects the set of simultaneously
  feasible Fixed Transmission Rights with the highest net total auction value
  as determined by the bids of buyers and taking into account the reservation
  prices of the sellers. In the event that there are two or more identical bids
  for the selected Fixed Transmission Rights and there are insufficient Fixed
  Transmission Rights to accommodate all of the identical bids, then each such
  bidder will receive a pro rata share of the Fixed Transmission Rights that can
  be awarded.

(c)   Fixed
  Transmission Rights shall be sold at the market-clearing price for Fixed Transmission
  Rights between specified pairs of receipt and delivery points, as determined
  by the bid value of the marginal Fixed Transmission Right that could not be
  awarded because it would not be simultaneously feasible. The linear programming
  model shall determine the clearing prices of all Fixed Transmission Rights paths
  based on the bid value of the marginal Fixed Transmission Rights, which are
  those Fixed Transmission Rights with the highest bid values that could not be
  awarded fully because they were not simultaneously feasible, and based on the
  flow sensitivities of each Fixed Transmission Rights path relative to the marginal
  Fixed Transmission Rights paths flow sensitivities on the binding transmission
  constraints.

7.3.7   Announcement
  of Winners and Prices.

Within two (2) business
  days after the close of an auction, the Office of the Interconnection shall
  post the winning bidders, the megawatt quantity, and the receipt and delivery
  points for each Fixed Transmission Right awarded in the auction and the price
  at which each Fixed Transmission Right was awarded. Results of the on-peak auction
  and off-peak auction will be posted separately. The Office of the Interconnection
  shall not disclose the price specified in any bid to purchase or the reservation
  price specified in any offer to sell.

7.3.8   Auction
  Settlements.

All buyers and sellers
  of Fixed Transmission Rights between the same points of receipt and delivery
  shall pay or be paid the market-clearing price, as determined in the auction,
  for such Fixed Transmission Rights.

7.3.9   Allocation
  of Auction Revenues.

All auction revenues, net
  of payments to entities selling Fixed Transmission Rights into the auction,
  shall be allocated among the Regional Transmission Owners in proportion to their
  respective transmission revenue requirements.

7.4   Simultaneous Feasibility.

The Office of the Interconnection shall make
  the simultaneous feasibility determinations specified herein using appropriate
  powerflow models of contingency-constrained dispatch. Such determinations shall
  take into account outages of both individual generation units and transmission
  facilities and shall be based on reasonable assumptions about the configuration
  and availability of transmission capability during the period covered by the
  auction that are not inconsistent with the determination of the deliverability
  of Capacity Resources under the Reliability Assurance Agreement. The goal of
  the simultaneous feasibility determination shall be to ensure that there are
  sufficient revenues from Transmission Congestion Charges to satisfy all Fixed
  Transmission Rights obligations for the auction period under expected conditions.

8.   INTERREGIONAL TRANSMISSION CONGESTION
  MANAGEMENT

PILOT PROGRAM

8.1   Introduction.

The following procedures shall govern the
  redispatch of generation to alleviate transmission congestion on selected pathways
  on the transmission systems operated by the Office of the Interconnection and
  the New York ISO ("NYISO"). The procedures shall be used solely when, in the
  exercise of Good Utility Practice, the Office of the Interconnection or NYISO
  determines that the redispatch of generation units on the other's transmission
  system would reduce or eliminate the need to resort to Transmission Loading
  Relief or other transmission-related emergency procedures.

8.2   Identification of Transmission Constraints.

(a)   On a periodic basis
  determined by the Office of the Interconnection and NYISO, the Office of the
  Interconnection and NYISO shall identify potential transmission operating constraints
  that could result in the need to use Transmission Loading Relief or other emergency
  procedures in order to alleviate the transmission constraints, the need for
  which could be reduced or eliminated by the redispatch of generation on the
  other's system.

(b)   In addition to the identification
  of such potential transmission operating constraints, the Office of the Interconnection
  and NYISO shall identify generation units on the other's system, the redispatch
  of which would alleviate the identified transmission constraints.

(c)   From the identified
  transmission constraints, the Office of the Interconnection and NYISO shall
  agree in writing on the transmission operating constraints and redispatch options
  that shall be subject to Section 8 of this Schedule until otherwise agreed.
  In reaching such agreement, the Office of the Interconnection shall endeavor
  reasonably to limit the number of transmission constraints that are subject
  to Section 8 of this Schedule so as to minimize potential cost shifting among
  market participants in the PJM Control Area and the control area of NYISO resulting
  from the redispatch of generation under Section 8 of this Schedule. The Office
  of the Interconnection shall post the transmission operating constraints that
  are subject to Section 8 of this Schedule on PJM's internet site.

8.3   Redispatch Procedures.

If (i) a transmission constraint subject
  to Section 8 of this Schedule occurs and continues or reasonably can be expected
  to continue after the exhaustion of all economic alternatives that are reasonably
  available to the transmission system on which the constraint occurs and (ii)
  the Office of the Interconnection or NYISO, as applicable, has determined that
  it must either use Transmission Loading Relief or other emergency procedures,
  then (iii) the affected entity may request the other to redispatch one or more
  of the previously identified generation units to alleviate the transmission
  constraint. Upon such request, the Office of the Interconnection or NYISO, as
  applicable, shall redispatch such generation if it is then subject to its dispatch
  control and such redispatch is consistent with Good Utility Practice.

8.4   Locational Marginal Price.

(a)   In the event that the
  Office of the Interconnection requests that NYISO redispatch generation under
  this Section 8, the Office of the Interconnection shall include the generator's
  offer price (in the NYISO energy market) in a reference price at the appropriate
  NYISO generator bus in the PJM State Estimator and in the calculation of Real-time
  Prices and shall include the cost of any applicable start-up and no-load fees
  in the cost of Operating Reserves for the Real-time Energy Market; provided,
  however, that if the energy offer price plus any applicable start-up or no-load
  fees exceeds $1000/megawatt-hour, then the entire cost of the redispatch will
  be included in the cost of Operating Reserves for the Real-time Energy Market
  and will not be included in the Real-time Prices calculation.

(b)   The redispatch of a
  generator by the Office of the Interconnection in response to a request from
  NYISO under Section 8 of this Schedule shall not be included in the determination
  of Locational Marginal Prices under Section 2 of this Schedule.

8.5   Generator Compensation.

Generators that have increased or decreased
  generation output above or below the level that would otherwise represent the
  economic dispatch level and as a result of a request made pursuant to this Section
  8 (the "MWh Adjustment") shall be compensated based on the following:

(a)   For a positive MWh Adjustment:

Payment to Generator = MWh Adjustment * (unit offer price -
  marginal price at the generator bus) + any applicable start-up or no-load costs
  not recovered by the marginal price

(b)   For a negative MWh Adjustment:

Payment to Generator = |MWh Adjustment| * (marginal price at
  the generator bus - unit offer price) + any applicable start-up or no-load costs
  not recovered by the marginal price

8.6   Settlements.

(a)   If NYISO redispatches
  generation under this Section 8, then the Office of the Interconnection shall
  include in its monthly accounting and billing a payment to NYISO for the costs
  of such redispatch as determined in accordance with Section 8.5.

(b)   If the Office of the
  Interconnection redispatches generation under this Section 8, then it shall
  include in its monthly accounting and billing a credit to each redispatched
  generator calculated in accordance with Section 8.5. The Office of the Interconnection
  shall invoice NYISO and NYISO shall collect from its market participants and
  pay to the Office of the Interconnection on behalf of such market participants
  an amount equal to all such credits to generators.

(c)   Unless there is a separate
  emergency energy transaction accompanying any generation adjustment under this
  Schedule 8, there shall be no adjustment in interchange between PJM and NYISO
  as a result of redispatch under this Schedule 8. In the event that an emergency
  energy transaction accompanies any generation adjustment, compensation for such
  transaction shall be at the rates for emergency purchases and sales which have
  been approved by the FERC, as they may be amended from time-to-time.

8.7   Effective Date.

Section 8 of this Schedule shall become effective
  only upon (a) approval or acceptance by the Federal Energy Regulatory Commission
  and (b) approval or acceptance by the Federal Energy Regulatory Commission of
  any comparable amendments to rate schedules of NYISO, if required.









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PJM 2001-2002 Load Response Pilot Program

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Table of Contents

|                                                                                                | Option 1: Emergency Load Response Program | 119D
|----------------------------------------------------------------------------------------------- | ----------------------------------------- | ----
|                                                                                                | Participant Qualifications                | 119D
|                                                                                                | Metering Requirements                     | 119F
|                                                                                                | Registration                              | 119G
|                                                                                                | Implementation                            | 119G
|                                                                                                | Verification                              | 119H
|                                                                                                | Market Settlements                        | 119I
|                                                                                                | Reporting                                 | 119I
|                                                                                                | Option 2: Economic Load Response Program  | 119J
|                                                                                                | Participant Qualifications                | 119J
|                                                                                                | Metering Requirements                     | 119K
|                                                                                                | Registration                              | 119L
|                                                                                                | Implementation/Operations                 | 119M
|                                                                                                | Verification                              | 119M
|                                                                                                | Market Settlements                        | 119N
|                                                                                                | Reporting                                 | 119O
|Special Application for PJM Membership (For Emergency Load Response Pilot
        Program ONLY) | 119P                                     
|Load Response Pilot Program Registration                                                        | 119Q                                     
|Meter Data File Format                                                                          | 119S                                     
|Load Response Examples                                                                          | 119T                                     
|                                                                                                | Example 1                                 | 119T
|                                                                                                | Example 2                                 | 119U



PJM Load Response Pilot Program

The PJM wholesale energy market has enjoyed unparalleled growth
  and activity since its inception in April of 1997. As a result of its overall
  liquidity and the flexibility provided to its participants, the PJM market is
  widely regarded as one of the more successful in existence. However, like other
  wholesale electric energy markets, when supply is short the wholesale price
  of energy in PJM can rise to extreme levels. Greater efficiency would exist
  in the PJM marketplace, and indeed the existing $1,000/MWh cap on generator
  bids might not even be necessary, if the load in PJM could respond to high prices
  and reduce demand during times of short supply.

The main obstacle to garnering price-responsive load in the
  PJM system is the fact that most end-use customers are not exposed to real time
  prices. Traditionally, Load-Serving Entities (LSEs) within the PJM control area
  have been required to provide retail electric service to their customers at
  rates approved by the applicable states' regulatory bodies. Limitation to these
  regulated retail rates continued even under wholesale deregulation and retail
  customer choice due to stranded cost agreements between existing, vertically
  integrated Investor-Owned Utilities (IOUs) and these same regulatory agencies.
  As a result of these retail price caps, LSEs may pay more for energy in the
  wholesale market than they collect from their retail customers during times
  when the wholesale energy price in the PJM market rises above the applicable
  retail rate. Savings could be realized by LSEs in the amount of the difference
  between the wholesale energy price and the capped retail rate in these instances
  if end-use customers would reduce their load. These savings could then be shared
  with the end-use customer resulting in an effective payment for the load reduction.

In the past, the only entity in a position to request a customer
  to reduce load and share any such savings was the LSE that actually served that
  customer's load. However, that LSE may not desire or be able to provide the
  necessary infrastructure (metering, communications, accounting, etc.) to accomplish
  and monitor the load reduction at a cost that makes the reduction economically
  attractive for both parties. Other parties may be able to provide such services
  though, if they were able to benefit from the associated price differentials.

The PJM Load Response Pilot Program is divided into two options.
  On any given day, a customer may choose to participate in only one of the two
  options. The first option is designed to provide a method by which end-use customers
  may be compensated for reducing load in an emergency. The second option will
  provide a mechanism by which any qualified market participant may offer end-use
  customers the opportunity to reduce the load they draw from the PJM system during
  times of high prices and share the relative savings. Neither option is intended
  to be a replacement for Active Load Management (ALM), but rather an alternate
  method by which distributed resources and customers capable of reducing load
  can participate in PJM operations and markets. This document provides a summary
  of and detailed procedures for the program.

The pilot program will be effective June 1, 2001 and expire
  on May 31, 2002.

Option
  1: Emergency Load Response Program

Participant Qualifications

Two primary types of distributed resources are candidates to
  participate in the PJM Emergency Load Response Pilot Program:

- A participant that has the ability to supply required load via local generators

These generators must be non-synchronized to the grid or synchronized to
    the grid with no net export to the grid, while serving local load. Participation
    in this program does not negate any local requirements for generators, whether
    synchronized or not.
- These generators must be non-synchronized to the grid or synchronized to
    the grid with no net export to the grid, while serving local load. Participation
    in this program does not negate any local requirements for generators, whether
    synchronized or not.
- A participant that has the ability to reduce a measurable and verifiable
    portion of its load
- PJM membership is required to participate in the Emergency Load Response
    Pilot Program. Special membership provisions have been established for pilot
    program participants, as outlined in the Attachment. Any existing PJM Member
    may act as a third party for non-members, in which case the third party will
    be referred to as the Curtailment Service Provider (CSP). All payments are
    made to the PJM Member. Participants must become signatories to the PJM Operating
    Agreement, as described in the PJM Manual for Administrative Services
    for the Operating Agreement of the PJM Interconnection, L.L.C. However,
    the $5,000 annual membership fee and the $1,500 application fee are waived,
    along with the following other modifications:
  Limited to be PJM Market sellersWaived voting privileges; waived sector designationProvisional membership ends on 8/30/02Thirty day notice for waiting period is waivedNo requirement for 24/7 control center coverageNo PJM-supported user group capability is permittedA participant, solely by virtue of its participation in the emergency
      pilot program, (i) shall have no liability under the PJM Operating Agreement
      (and shall not be included in the calculation of Weighted Interest); (ii)
      shall not be entitled to indemnification by the other Members under any
      provision of the Operating Agreement; and (iii) shall not be eligible to
      participate in any other manner in any markets managed by PJM.
- Limited to be PJM Market sellers
- Waived voting privileges; waived sector designation
- Provisional membership ends on 8/30/02
- Thirty day notice for waiting period is waived
- No requirement for 24/7 control center coverage
- No PJM-supported user group capability is permitted
- A participant, solely by virtue of its participation in the emergency
      pilot program, (i) shall have no liability under the PJM Operating Agreement
      (and shall not be included in the calculation of Weighted Interest); (ii)
      shall not be entitled to indemnification by the other Members under any
      provision of the Operating Agreement; and (iii) shall not be eligible to
      participate in any other manner in any markets managed by PJM.

To participate in the emergency pilot program, the distributed
  resource must:

- Be capable of reducing at least 100 kW of load
- Have the ability to participate for a total of at least 10 hours over the
    pilot operating period ending May 31, 2002.
- Be available any hours between 0900 and 2200 any or all days of the week
- Be capable of achieving full reduction within one hour of PJM's request
    to reduce
- Be capable of receiving PJM notification

PJM Technologies, Inc. shall not participate in the Emergency
  Load Response Pilot Program unless PJM makes a filing with the Federal Energy
  Regulatory Commission demonstrating that PJM Technologies, Inc. would not receive
  preferential treatment and should be allowed to participate.

Metering Requirements

The Load Response Pilot Program participants must have metering
  equipment that provides integrated hourly kWh values, for market settlement
  purposes, that either meets the EDC requirements for accuracy or has a maximum
  error of two percent end-to-end (including PTs and CTs). The metering requirements
  can be met using either of the following two methods:

- Metering that is capable of recording integrated hourly values for the actual
    net generation, not gross output (net of that used by the generator).
- Metering that provides actual load change by measuring actual load before
    and after the reduction request, such that there is a valid integrated hourly
    value for the hour prior to the event and each hour during the event. This
    value cannot be estimated nor can it be averaged over some historical period.

Metered load reductions will be adjusted up to consider transmission
  and distribution losses as determined by PJM.

The installed meter must be one of the following:

- EDC-owned hourly meter,
- Customer-owned meter including one provided by an independent metering service
    provider or acquired from the CSP, approved by the EDC, that is read electronically
    by PJM,
- Customer-owned meter including one provided by an independent metering service
    provider or acquired from the CSP, approved by the EDC, that is read by the
    customer (or the CSP), the readings from which are forwarded to PJM.

Nothing here changes the existence of one recognized meter
  by the state commissions as the official billing meter for recording consumption.

Registration

Participants must complete the PJM Emergency Load Response
  Pilot Program Registration Form that is posted on the PJM web site (www.pjm.com)
  and included as an attachment to this document. The following general steps
  will be followed:

1. The participant completes the PJM Emergency Load Response Pilot Program
    registration form located on the PJM web site.
  PJM reviews the application and ensures that the qualifications
    are met, including verifying that the appropriate metering exists. PJM also
    confirms with the appropriate LSE and EDC whether the load reduction is under
    other contractual obligations (e.g., LSE's ALM program). Other such obligations
    may not preclude participation in the program, but may require special consideration
    by PJM such that appropriate settlements are made within the confines of the
    existing contract. Specific procedures will exist for ALM customers as described
    in the Settlements section below. The EDC and LSE have two (2) business days
    to respond or PJM assumes acceptance.
2. PJM informs the requesting participant of the acceptance into the pilot
    program and notifies the appropriate LSE and EDC of the participant's acceptance
    into the program.
3. Any end-use customer intending to run distributed generating units in support
    of local load for the purpose of participating in this program must submit
    to PJM the applicable environmental permits for running those generators.
    In the event no environmental permitting has been obtained, written justification
    for the lack of permits must be provided to PJM.

Implementation

PJM will initiate the request for load reduction following
  the declaration of Maximum Emergency Generation and prior to the implementation
  of ALM Steps 1 and 2. (Implementation of the Emergency Load Response Pilot Program
  can be used for regional emergencies.) The purpose of Maximum Emergency Generation
  is to increase the PJM Control Area generation above the maximum economic level.
  It is implemented whenever generation is needed that is greater than the highest
  incremental cost. PJM will revise the emergency procedures to reflect the following
  steps:

1. The PJM Dispatcher issues Maximum Emergency Generation.
2. The PJM Dispatcher notifies PJM OI Management, PJM OI public information
    personnel, and Local Control Center dispatchers.
3. The PJM Dispatcher requests the need for emergency energy and contacts its
    neighboring control areas.
4. The PJM Dispatcher recalls off-system sales that are recallable (network
    resources).
5. The PJM Dispatcher begins to load Maximum Emergency Generation, requests
    load reductions from the Emergency Load Response Pilot Program participants,
    and begins to purchase emergency energy from PJM Members and from neighboring
    control areas based on economics and availability.
6. The PJM Dispatcher continues with the remaining emergency procedure steps
    (including ALM) as stated in the PJM Manual for Emergency Operations, and
    cancels them in reverse order when appropriate.
7. The PJM OI dispatcher cancels the load reduction request and then cancels
    Maximum Emergency Generation, when appropriate. The minimum duration of a
    load reduction request is two hours although the reduction request may be
    extended if necessary.

Due to the variety of conditions and the potential for the
  conditions to change rapidly, some emergency activities may not occur in this
  order. PJM posts the request for load reduction on the PJM web site, on the
  Emergency Conditions page, and on eData, and issues a burst email to
  the Emergency Load Response majordomo. A separate All-Call message is also issued.

Verification

PJM requires that the load reduction metering data be submitted
  to PJM within 45 days of the event. If the data are not received within 45 days,
  no payment for participation is provided. Meter readings must be provided for
  the hour prior to the event, as well as every hour during the event.

These data files are to be communicated to PJM either via the
  Load Response Pilot Program web site or email. Files that are emailed must be
  in the PJM-approved file format (see attachment). PJM will forward directly
  metered data to the appropriate Distribution Company immediately following an
  event for optional review. Meter data submitted after-the-fact will be forwarded
  to the EDC and LSE upon receipt, and these parties will then have five (5) business
  days to provide feedback to PJM. All load reduction data are subject to PJM
  Market Monitoring Unit audit.

Market Settlements

Reimbursement for reducing load is based on the actual kWh
  relief provided plus the adjustment for losses. The magnitude of relief provided
  can be less than, equal to, or greater than the kW amount declared on the Emergency
  Load Response Pilot Program Registration form.

PJM pays the higher of the appropriate zonal Locational Marginal
  Price (LMP) or $500/MWh to the PJM Member that nominates the load. The PJM Member
  is also assessed a $10 transaction fee per account for each event.

During emergency conditions, costs for emergency purchases
  in excess of the LMP are allocated among PJM members in proportion to their
  net purchases from the PJM energy market during the hour. Consistent with this
  pricing methodology, all charges under this pilot program are allocated to purchasers
  of energy, in proportion to their net purchases from the PJM energy market during
  the hour. If the Load Response participant is also an ALM customer and ALM is
  called for concurrent with this program, then payments will be made to the customer
  according to this program only for the time during which ALM obligations were
  not in effect. Any response in excess of the contracted ALM amount will be compensated
  under this program for the entire duration of response.

Pilot program charges and credits will appear on the PJM Members
  monthly bill, as described in the PJM Manual for Operating Agreement
  Accounting and the PJM Manual for Billing.

Reporting

Actual load reductions will be added back for the purpose of
  peak load calculations.

PJM will submit any required reports to FERC on behalf of the
  Load Response Pilot Program participants. PJM will also post this document,
  as well as any other program-related documentation on the PJM web site.

PJM will also report the names of those end-use customers who
  indicated that distributed generation would be run in support of the load reduction
  program to the EPA, together with the permitting information that was supplied
  upon registration.

At the conclusion of both the summer period and the pilot program,
  PJM will prepare a report that summarizes the pilot program and will submit
  it to the PJM Board of Managers, the Members Committee, the Reliability Committee,
  the Energy Market Committee, and the Operating Committee for review.

On or before December 28, 2001, PJM shall file with the Federal
  Energy Regulatory Commission and post on the PJM website an informational report
  that evaluates the effectiveness of the pilot program. To the extent possible,
  the informational report, among other things, shall contain the following:

- A comparison of the amount of demand-side
  reduction obtained by the PJM members' demand side management programs during
  the year prior to the initiation of the pilot program and since the initiation
  of the pilot program.
- A comparison of the amount of total demand-side
  reduction in PJM in the year prior to the initiation of the pilot program and
  since the initiation of the pilot program.
- Relevant statistical information on pilot
  program participants.
- An analysis of the impact of demand-side
  responsiveness implemented for purely economic purposes.

Option 2: Economic Load Response Program

Participant Qualifications

The same two types of distributed resources are also candidates
  to participate in the PJM Economic Load Response Pilot Program:

- A customer that has the ability to supply required load via local generators
- These generators must be either non-synchronized to the grid or synchronized
    to the grid with no net export to the grid while serving local load. Participation
    in this program does not negate any local requirements for generators, whether
    synchronized or not.
- A customer that has the ability to reduce a measurable and verifiable portion
    of its load

The Economic Option of the Load Response Pilot Program is intended
  to encourage broad participation in economic load reductions by any LSE's curtailable
  loads. LSEs arranging load reduction agreements with customers for whom they
  are the energy supplier are not required to register to participate in this
  program. These LSEs may wish to register for the program such that the load
  reduction calculations appear on their monthly bill as described in the Settlements
  section of these procedures. (In either case, data regarding expected load reductions
  is required from these LSEs, as described in the "Implementation/Operations"
  section of this document.) Only those PJM members arranging for load reductions
  with customers for whom another PJM member is the LSE are required to register
  for the program. PJM membership is required to participate, although any existing
  PJM Member may act as an agent for non-members in which case the agent will
  be referred to as the Curtailment Service Provider (CSP). All payments are made
  to the PJM Member. Participants must become signatories to the PJM Operating
  Agreement, as described in the PJM Manual for Administrative Services
  for the Operating Agreement of the PJM Interconnection, L.L.C.

To participate in the pilot program, the applicant must also
  meet the metering requirements as described in the next section.

PJM Technologies, Inc. shall not participate in the Economic
  Option of the Load Response Pilot Program unless PJM makes a filing with the
  Federal Energy Regulatory Commission demonstrating that PJM Technologies, Inc.
  would not receive preferential treatment and should be allowed to partiicpate.



Metering Requirements

The Economic Load Response Pilot Program participants must
  have metering equipment that provides integrated hourly kWh values, for market
  settlement purposes, that either meets the EDC requirements for accuracy or
  has a maximum error of two percent end-to-end (including PTs and CTs). The installed
  meter must be one of the following:

- EDC-owned hourly meter,
- Customer-owned meter including one provided by an independent metering service
    provider or acquired from the CSP, approved by the EDC, that is read electronically
    by PJM.

Nothing here changes the existence of one recognized meter
  by the state commissions as the official billing meter for recording consumption.

Note that various Internet applications now exist for transmission
  of real time metered data. Use of these applications is acceptable provided
  that PJM receives metered load reductions in a timely, reliable manner.

The metering requirements can be met using either of the following
  two methods:

- Metering that is capable of recording integrated hourly values for generation
    running to serve local load, (net of that used by the generators).
- Metering that continuously records the load drawn from a specific process
    or application and is capable of demonstrating that the process or application
    was halted for the purposes of a load reduction and not due to normal operations.

PJM may consider a metering basis other than those mentioned
  above if the method accurately represents a customer's normal load profile during
  the event. Suggestions for alternative methods by which load reductions may
  be measured may be approved by PJM for use in this program if negotiated in
  good faith and agreed to by all appropriate parties. PJM will consider such
  suggestions on a case-by-case basis and intends to study alternative measurement
  methods during the life of the pilot and report the results.

Metered load reductions will be adjusted up to consider transmission
  and distribution losses. (Exact methodology and rates to be determined.)

Registration

Participants must complete the PJM Economic Load Response Pilot
  Program Registration Form that is posted on the PJM web site (www.pjm.com) and
  included in an attachment to this document. The following general steps will
  be followed:

1. The participant completes the PJM Economic Load Response Pilot Program registration
    form located on the PJM web site. A separate registration form must be submitted
    for each customer.
2. PJM reviews the application and ensures that the qualifications are met,
    including verifying that the appropriate metering exists. PJM also confirms
    with the appropriate EDC and LSE whether the load reduction is under other
    contractual obligations (e.g., LSE's ALM program). Other such obligations
    may not preclude participation in the program, but may require special consideration
    by PJM such that appropriate settlements are made within the confines of the
    existing contract. Specific procedures will exist for ALM customers as described
    in the Settlements section below. The EDC and LSE have two (2) business days
    to respond or PJM assumes acceptance.
3. PJM informs the applicant of acceptance into the pilot program and notifies
    the appropriate LSE and EDC of the participant's acceptance into the program.
4. Any end-use customer intending to run distributed generating units in support
    of local load for the purpose of participating in this program must submit
    to PJM the applicable environmental permits for running those generators.
    In the event no environmental permitting has been obtained, written justification
    for the lack of permits must be provided to PJM.

Implementation/Operations

The Economic Load Response Pilot Program is not based on the
  declaration of emergency conditions in PJM, but rather on the economic decisions
  of the PJM market participants. That is, the participants in the Pilot Program
  are responsible for determining the conditions under which load reductions will
  actually take place and implementing the reductions should those conditions
  arise. The prime indicator of such conditions is assumed to be the Locational
  Marginal Price (LMP) of energy on the PJM system.

In order to maintain adequate system control, PJM operators
  will be required to know the amount of load expected to be reduced at varying
  price levels. These amounts may change on a daily basis. Each PJM market participant
  is therefore responsible for maintaining the load reduction information associated
  with each customer signed up for the program, including the amount and the price
  at which it will be reduced. The Load Response Pilot Program Registration/Update
  web site shall be used for this purpose. PJM will utilize the data that has
  been submitted via this site to compile daily aggregate load reductions on a
  zonal basis for use in operations.

Participants in the economic option may choose to reduce load
  whenever their zonal LMP dictates that it is economically beneficial for them
  to do so. Participants shall send an email to PJM (address to be supplied upon
  registration) concurrent with or immediately prior to accomplishing the reduction.
  Load reductions due to this program will not be eligible to set price on the
  PJM system.



Verification

For load reduction that is not metered directly by PJM (i.e.
    - is collected by the EDC), data is to be submitted to PJM within 45 days
    of the event. If the data is not received within 45 days, no payment for participation
    is provided. Meter readings must be provided for each hour during which load
    reduction was accomplished.

These data files are to be communicated to PJM either via
    the Load Response Pilot Program web site or email. Files that are emailed
    must be in the PJM-approved file format (see attachment). PJM will forward
    directly metered data to the appropriate EDC and LSE immediately following
    an event for optional review. Data files submitted after-the-fact will be
    forwarded to the EDC and LSE upon receipt. The LSE and/or EDC have five (5)
    business days after receiving the data to provide feedback to PJM. All load
    reduction data is subject to audit by PJM.

Market Settlements

In the event that the party contracting for a load reduction
    is the LSE that actually serves that customer's load and chooses not to register
    for the program, PJM will make no adjustments to the settlement process. If
    such an LSE chooses to register for the program, PJM will indicate the value
    of the load reduction on the LSE's bill as described below. If the load reduction
    is arranged by a CSP, PJM will bill the LSE serving the energy needs of the
    customer the appropriate LMP for the reduction. (NOTE: full requirements arrangements
    will be honored, provided the LSE informs PJM as to the identity of the default
    supplier.) PJM will then refund the retail generation and transmission charge
    (indicated on the registration form) that the LSE would have received from
    the customer had the load not been reduced. The difference between the zonal
    LMP billed to the LSE serving the energy needs of the customer (or alternate
    supplier) for the reduced load and the retail rate refunded to the LSE for
    the reduced load will be paid to the third party that actually contracted
    for the reduction. The magnitude of relief provided can be less than, equal
    to, or greater than the kW amount declared upon registration. If the Load
    Response participant is also an ALM customer and ALM is called for concurrent
    with this program, then payments will be made to the customer according to
    this program only for the time during which ALM obligations were not in effect.
    Any response in excess of the contracted ALM amount will be compensated under
    this program for the entire duration of response.

Pilot program credits will appear on the PJM Member's monthly
    bill, as described in the PJM Manual for Operating Agreement
    Accounting and the PJM Manual for Billing.

Reporting

Actual load reductions will be added back for the purpose
    of peak load calculations.

PJM will submit any required reports to FERC on behalf of
    the Load Response Pilot Program participants. PJM will also post this document,
    as well as any other program-related documentation on the PJM web site.

PJM will also report the names of those end-use customers
    who indicated that distributed generation would be run in support of the load
    reduction program to the EPA, together with the permitting information that
    was supplied upon registration.

At the conclusion of both the summer period and the pilot
    program, PJM will prepare a report that summarizes the pilot program and will
    submit it to the PJM Board of Managers, the Members Committee, the Reliability
    Committee, the Energy Market Committee, and the Operating Committee for review.

On or before December 28, 2001, PJM shall file with the Federal
    Energy Regulatory Commission and post on the PJM website an informational
    report that evaluates the effectiveness of the pilot program. To the extent
    possible, the informational report, among other things, shall contain the
    following:

- A comparison of the amount of demand-side
    reduction obtained by the PJM members' demand-side management programs during
    the year prior to the initiation of the pilot program and since the initiation
    of the pilot program.
- A comparison of the amount of total demand-side
    reduction in PJM in the year prior to the initiation of the pilot program
    and since the initiation of the pilot program.
- Relevant statistical information on pilot
    program participants.
- An analysis of the impact of demand-side
    responsiveness implemented for purely economic purposes.



Special Application for PJM Membership (For Emergency Load
  Response Pilot Program ONLY)

Emergency Load Response Pilot Program participants who apply for special PJM
  membership will become non-voting PJM Members. Fees for application and membership
  are waived and participants do not need to complete the Credit Application.
  Special members are not eligible to take transmission service or purchase energy
  or capacity from the markets operated by PJM.

The following Membership Application forms must be completed:

- Membership Application Form
- Eligible Customer Qualification Form (Tariff Section 1.11)
- Standard Form of Agreement (provided in triplicate)
- Billing Contact Form
- Wire Contact Form
- Load Response Designation Form

Load Response Pilot Program Registration

All those wishing to participate in either option of the Load
  Response Pilot Program must follow the following steps in order to register.

1. Obtain a UserID and password for the Registration/Update web site by submitting
    the Account Request Form. This form may be accessed via the Distributed Generation
    User Group web page at
2. Log into the Registration/Update web site (also accessed via the DGUG web
    site) and choose the Load Response Pilot Program screen.
3. Complete all required information (depending on the option in which you
    wish to enroll) and click on the "submit" button. Please direct all questions
    concerning the information required on the form to PJM Customer Relations
    and Training at (610) 666-8980 or .

A screen shot of the Registration/Update page appears below.





























Screen shot of web-based registration form will appear in this space.



Meter Data File Format

Load Response Pilot Program participants may communicate meter
  readings to PJM via file transfer to the Load Response FTP site. Each FTPed
  file will begin with a header section containing the following information:

Line 1: Customer Name

Line 2: PJM Member Name (may be the same as Customer Name)

The remainder of the file will be in CSV file format and include
  the following columns:

- Date and clock hour (ending)
- Hourly integrated load reduction (kWh)

The following is an example of how one such file might look
  appear:

ABC Corp.

DEF Energy, L.L.C.

7/1/2001 1300,20

7/1/2001 1400,45

7/1/2001 1500,44

7/1/2001 1600,46

7/1/2001 1700,22

Load Response Examples

The scenarios described below are intended to illustrate how PJM would calculate
  the payments made to participants upon implementation of PJM's Load Response
  Pilot Program. All examples assume the customers have acquired the appropriate
  form of PJM membership, completed the appropriate PJM Load Response Pilot Program
  Registration Form, and been approved for participation by PJM. The first example
  demonstrates calculation of the payments due to implementation of the emergency
  program, while the second highlights the economic program.

Example 1

The following is a typical timeline by which a load could respond to PJM emergency
  procedures:

One day Prior to Operating Day:

2230 - PJM calls Max Emergency generation into the capacity
  for the next day. This information is posted on the PJM OASIS, web site, eDATA,
  etc.

Operating Day:

1300 - PJM Issues Max Emergency Generation. This information
  is posted on the PJM OASIS, PJM's web site, eDATA, etc.

1330 - PJM begins to recall off-system sales.

1400 - PJM loads Max Emergency generation, begins to purchase
  emergency energy, and implements the Emergency Load Response Pilot Program.

1800 - PJM cancels and begins unloading Max Emergency generation,
  curtails emergency purchases, and cancels the Emergency Load Response Pilot
  Program.

Customer ABC has a typical load of 500kW. Of this load, approximately 150kW
  may be shut down within one hour during emergency conditions. At 1400, Customer
  ABC receives notification that PJM has implemented the Emergency Load Response
  Pilot Program. Customer ABC immediately begins the process of disconnecting
  the applicable load. All such load is disconnected by 1445. Customer ABC receives
  notification at 1800 that PJM has canceled implementation of the Emergency Load
  Response Pilot Program and the load is reconnected to the system at 1830.

In this example, the metered load for those hours following implementation
  of the program is compared to the hour preceding implementation to determine
  the actual reduction. The following table illustrates how the customer metering
  and associated payments might appear:



|Hour Ending | Integrated Load
        (kWh) | Delta (kWh) | Integrated Zonal LMP ($/MWh) | Payment
        ($)
|----------- | ----------------------------- | ----------- | ---------------------------- | -------------------
|1400        | 495                           | 0           | 1000                         | 0                  
|1500        | 467.5                         | 27.5        | 1000                         | 27.50              
|1600        | 345                           | 150         | 1000                         | 150.00             
|1700        | 348                           | 147         | 850                          | 124.95             
|1800        | 346                           | 149         | 400                          | 74.50              
|1900        | 420                           | 75          | 300                          | 0                  





Example 2

This example is intended to illustrate potential implementation of the Economic
  Load Response Pilot Program. The following is a typical timeline by which PJM
  prices might vary on a day when supplies are relatively tight:

1300 - Appropriate zonal LMP reaches $500.

1330 - Appropriate zonal LMP reaches $600.

1400 - Appropriate zonal LMP reaches $700.

1430 - Appropriate zonal LMP reaches $800.

1630 - Appropriate zonal LMP falls to $400.

1700 - Appropriate zonal LMP falls to $250.

1800 - Appropriate zonal LMP falls to $80.

Customer DEF has a typical load of 500kW. Of this load, approximately 150kW
  may be shut down within one hour, provided the PJM price reaches $600/MWh. At
  1330, PJM LMP reaches this point. At 1400, customer DEF begins the process of
  disconnecting the applicable load. All such load is disconnected by 1445. At
  1630, PJM LMP falls to a level at which Customer ABC wishes to reconnect the
  reduced load. All 150kW is restarted by 1715.

In this example, the metered load during the reduction is compared to a statistically
  determined profile. For simplicity's sake, this profile is assumed to be a flat
  500kW for all hours. The following table illustrates how the customer metering
  and associated payments might appear:

|Hour Ending | Integrated Load (kWh) | Delta (kWh) | Integrated Zonal LMP ($/MWh) | Retail Charges (C/kWh) | Payment
        ($)
|----------- | --------------------- | ----------- | ---------------------------- | ---------------------- | -------------------
|1400        | 500                   | 0           | 600                          | 15                     | 0                  
|1500        | 467.5                 | 32.5        | 775                          | 15                     | 20.31              
|1600        | 345                   | 155         | 800                          | 15                     | 100.75             
|1700        | 348                   | 152         | 400                          | 15                     | 38.00              
|1800        | 475                   | 25          | 250                          | 15                     | 2.50               

SCHEDULE 2

COMPONENTS OF COST

(a)   Each Market Participant
  obligated to sell operating capacity on the PJM Interchange Energy Market at
  cost-based rates shall include the following components or their equivalent
  in the determination of costs for operating capacity supplied to or from the
  Interconnection:

(1)   Boilers

Firing-up cost;

No-load cost during period
  of operation;

Peak-prepared-for maintenance
  cost;

Incremental labor cost;
  and

Other incremental operating
  costs.

(2)   Machines

Starting cost from cold
  to synchronized operation;

No-load cost during period
  of operation;

Incremental labor cost;
  and

Other incremental operating
  costs.

(b)   Each Member obligated
  to sell energy on the PJM Interchange Energy Market at cost-based rates shall
  include the following components or their equivalent in the determination of
  costs for energy supplied to the Interconnection:

Incremental fuel cost;

Incremental maintenance
  cost;

Incremental labor cost;
  and

Other incremental operating
  costs.

(c)   All fuel costs shall
  employ the marginal fuel price experienced by the Member.

(d)   The PJM Board, upon
  consideration of the advice and recommendations of the Members Committee, shall
  from time to time define in detail the method of determining the costs entering
  into the said components, and the Members shall adhere to such definitions in
  the preparation of incremental costs used on the Interconnection.



SCHEDULE 2-- EXHIBIT A

EXPLANATION OF THE TREATMENT OF THE
  COSTS OF

EMISSION ALLOWANCES

The cost of emission allowances is included
  in "Other Incremental Operating Costs" pursuant to Schedule 2. The replacement
  cost of emission allowances will be used to recover the cost of emission allowances
  consumed as a result of producing energy for the Interconnection.

Index

Consistent with definitions promulgated by
  the PJM Board upon consideration of the advice and recommendations of the Members
  Committee under Schedule 2, each Member subject to Schedule 2 will determine
  and provide to the Interconnection its replacement cost of emission allowances,
  such cost to be an amount not exceeding the market price index published by
  Cantor-Fitzgerald Environmental Brokerage Services ("EBS"), or a PJM Board approved
  index in the event that EBS should cease publication of such index. As with
  all other components of cost required for accounting under this Agreement, each
  Member subject to Schedule 2 will use the same replacement cost of emissions
  allowances, so determined, as it uses for coordinating operation of its generating
  facilities hereunder.

For each Member subject to Schedule 2, the
  cost of emissions allowances is included in the cost of energy supplied to or
  received from the Interconnection.

Payment

The Members subject to Schedule 2 waive the
  right of payment-in-kind for emission allowances for transactions wholly between
  the parties. Cash payments for emission allowances consumed in providing energy
  for the Interconnection shall be incorporated into and conducted pursuant to
  the billing procedures for energy prescribed by this Agreement.

Calculation of Emission Allowance Amount and Cost

Pursuant to the letter from the PJM Interconnection
  to FERC dated June 26, 1995, the calculation of an annual average for the
  cost of emission allowances, described below, is required due to the profile
  of the PJM physical system and PJM Energy Management software system. Approximately
  five hundred and forty generating units comprise the PJM system, of which 9
  units are Phase I units. Current real-time operational software and hardware
  tools used in the transaction of energy do not identify individual units, and
  therefore do not identify Phase I units. (The pool has contracted with a vendor
  to supply a new Energy Management System to be installed over the next several
  years.) It is currently not possible for system operators to provide actual
  individual unit emission allowance costs in real time transaction quotations.

An average emission allowance cost based
  on a standard production cost study case will be used to calculate the average
  cost of emission allowances for each pool megawatt produced. This cost for the
  current year is less than 0.2 dollars per megawatt-hour.

In summary, for the above-mentioned reasons,
  it is not practical nor cost effective to provide actual individual emission
  allowance costs in real-time transaction quotations. Therefore, the annual average
  method is proposed.

The Emission Allowances (Tons of SO2)associated
  with a transaction will be calculated by multiplying the magnitude of a transaction
  (MWhr) by an Emissions per MWHr Factor (Tons of SO2 per MWhr):

Emission      Transaction      Emissions

Allowances   =   Magnitude   x   per
  MWhr

Used                  Factor

(Tons of
S02)      (MWhr)      (Tons
  of S02 per MWhr)

The Emissions per MWHr Factor will be calculated
  by dividing the forecast annual emissions from all Phase I units (Tons of S02)
  by the Forecast Annual Total PJM Energy Production (MWhr):

Emissions

per MWhr   =   Forecast
  Annual Phase I Unit Emissions (Tons of S02)

Factor      Forecast
  Annual Total PJM Energy Production (MWhr)

(Tons of S02

per MWhr)

Likewise, the cost (Dollars) of the Emission
  Allowances for a transaction will be calculated by multiplying the transaction
  magnitude (MWhr) by a Charge per MWhr Factor (Dollars per MWHr).

Cost of
Emission      Transaction      Charge

Allowances
Used   =   Magnitude   x   per
  MWhr Factor

(Dollars)         (MWhr)         (Dollars
  per MWhr)

The Charge per MWhr Factor will be calculated
  by multiplying, for each Member subject to Schedule 2, its Forecast Annual Emissions
  (Tons of S02)by its respective Emissions Allowance Replacement
  Cost (Dollars per Ton of S02) to yield each the forecasted
  annual cost of emissions (Dollars). Then, the total of forecasted annual cost
  of emissions for each Member subject to Schedule 2 is divided by the Forecast
  Annual Total PJM Energy Production (MWhr) to determine the Charge per MWHr Factor
  (Dollars per MWHr).

Charge per

MWhr Factor   =   
  sum of (A x B)   , where:

C

A = Member's Forecasted
  Annual Emissions, (Tons of S02)

B = Emission Allowance
  Replacement Cost, (Dollars per Ton of SO2, per company)

C = Forecast Annual PJM
  Energy Production, (MWhr)



SCHEDULE 3

ALLOCATION OF THE COST AND EXPENSES

OF THE OFFICE OF THE INTERCONNECTION

(a)   Each group of Affiliates,
  each group of Related Parties, and each Member that is not in such a group shall
  pay an annual membership fee, the proceeds of which shall be used to defray
  the costs and expenses of the LLC, including the Office of the Interconnection.
  The amount of the annual fee as of the Effective Date shall be $5,000.

(b)   Each group of State
  Offices of Consumer Advocates from the same state or the District of Columbia
  and each State Consumer Advocate that nominates its representative to vote on
  the Members Committee but is not in such a group shall pay an annual fee, the
  proceeds of which shall be used to defray the costs and expenses of the LLC,
  including the Office of the Interconnection. The amount of the annual fee shall
  be $500.

(c)   The amount of the annual
  fees provided for herein shall be adjusted from time to time by the PJM Board
  to keep pace with inflation.

(d)   All remaining costs
  of the operation of the LLC and the Office of the Interconnection and the expenses,
  including, without limitation, the costs of any insurance and any claims not
  covered by insurance, associated therewith as provided in this Agreement shall
  be costs of PJM Interconnection, L.L.C. Administrative Services and shall be
  recovered as set forth in Schedule 9 to the PJM Tariff. Such costs may include
  costs associated with debt service, including the costs of funding reserve accounts
  or meeting coverage or similar requirements that financing covenants may necessitate.

(e)   An entity accepted for
  membership in the LLC shall pay all costs and expenses associated with additions
  and modifications to its own metering, communication, computer, and other appropriate
  facilities and procedures needed to effect the inclusion of the entity in the
  operation of the Interconnection.



SCHEDULE 4

STANDARD FORM OF AGREEMENT TO BECOME
  A MEMBER OF THE LLC

Any entity which wishes to become a Member
  of the LLC shall, pursuant to Section 11.6 of this Agreement, tender to the
  President an application, upon the acceptance of which it shall execute a supplement
  to this Agreement in the following form:

Additional Member Agreement

1.   This Additional Member Agreement (the "Supplemental
  Agreement"), dated as of __________________, is entered into among _____________
  and the President of the LLC acting on behalf of its Members.

2.   _____________ has demonstrated that it
  meets all of the qualifications required of a Member to the Operating Agreement.
  If expansion of the PJM Control Area is required to integrate ____________________'s
  facilities, a copy of Attachment J from the PJM Tariff marked to show changes
  in Control Area boundaries is attached hereto. ____________________ agrees to
  pay for all required metering, telemetering and hardware and software appropriate
  for it to become a member.

3.   ______________________ agrees to be bound
  by and accepts all the terms of the Operating Agreement as of the above date.

4.   _________________________ hereby gives
  notice that the name and address of its initial representative to the Members
  Committee under the Operating Agreement shall be:

__________________________________________________________________

5.   The President of the LLC is authorized
  under the Operating Agreement to execute this Supplemental Agreement on behalf
  of the Members and to file it with regulatory authorities having jurisdiction.

6.   The Operating Agreement is hereby amended
  to include ___________ as a Member of the LLC thereto, effective as of ___________________,
  _____.

IN WITNESS WHEREOF, _______________________
  and the Members of the LLC have caused this Supplemental Agreement to be executed
  by their duly authorized representatives.

Members
  of the LLC

By:

Name:

Title:   President

By:

Name:

Title:

SCHEDULE 5

PJM DISPUTE RESOLUTION PROCEDURES

1.   DEFINITIONS

1.1   Alternate Dispute
  Resolution Committee.

"Alternate Dispute Resolution Committee"
  shall mean the Committee established pursuant to Section 5 of this Schedule.

1.2   MAAC Dispute Resolution
  Committee.

"MAAC Dispute Resolution Committee" shall
  mean the committee established by the Mid-Atlantic Area Council to administer
  its industry-specific mechanism for resolving certain types of wholesale electricity
  disputes.

1.3   Related PJM Agreements.

"Related PJM Agreements" shall mean this
  Agreement, the Transmission Owners Agreement, and the Reliability Assurance
  Agreement.

2.   PURPOSES AND OBJECTIVES

2.1   Common and Uniform
  Procedures.

The PJM Dispute Resolution Procedures are
  intended to establish common and uniform procedures for resolving disputes arising
  under the Related PJM Agreements. To the extent any of the foregoing agreements
  or the PJM Tariff contain dispute resolution provisions expressly applicable
  to disputes arising thereunder, however, this Agreement shall not supplant such
  provisions, which shall apply according to their terms.

2.2   Interpretation.

To the extent permitted by applicable law,
  the PJM Dispute Resolution Procedures are to be interpreted to effectuate the
  objectives set forth in Section 2.1. To the extent permitted by these PJM Dispute
  Resolution Procedures, the Alternate Dispute Resolution Committee shall coordinate
  with the MAAC Dispute Resolution Committee, where appropriate, in order to conserve
  administrative resources and to avoid duplication of dispute resolution staffing.

3.   NEGOTIATION AND MEDIATION

3.1   When Required.

The parties to a dispute shall undertake
  good-faith negotiations to resolve any dispute as to a matter governed by one
  of the Related PJM Agreements. Each party to a dispute shall designate an executive
  with authority to resolve the matter in dispute to participate in such negotiations.
  Any dispute as to a matter governed by one of the Related PJM Agreements that
  has not been resolved through good-faith negotiation shall be subject to non-binding
  mediation prior to the initiation of arbitral, regulatory, judicial, or other
  dispute resolution proceedings as may be appropriate as provided by these PJM
  Dispute Resolution Procedures.

3.2   Procedures.

3.2.1   Initiation.

If a dispute that is subject
  to the mediation procedures specified herein has not been resolved through good-faith
  negotiation, a party to the dispute shall notify the Alternate Dispute Resolution
  Committee in writing of the existence and nature of the dispute prior to commencing
  any other form of proceeding for resolution of the dispute. The Alternate Dispute
  Resolution Committee shall have ten calendar days from the date it first receives
  notification of the existence of a dispute from any of the parties to the dispute
  in which to distribute to the parties a list of mediators.

3.2.2   Selection
  of Mediator.

The Chair of the Alternate
  Dispute Resolution Committee shall distribute to the parties by facsimile or
  other electronic means a list containing the names of seven mediators with mediation
  experience, or with technical or business experience in the electric power industry,
  or both, as it shall deem appropriate to the dispute. The Chair of the Alternate
  Dispute Resolution Committee may draw from the lists of mediators maintained
  by the MAAC Dispute Resolution Committee, as the Chair shall deem appropriate.
  The persons on the proposed list of mediators shall have no official, financial,
  or personal conflict of interest with respect to the issues in controversy,
  unless the interest is fully disclosed in writing to all participants in the
  mediation process and all such participants waive in writing any objection to
  the interest. The parties shall alternate in striking names from the list with
  the last name on the list becoming the mediator. The determination of which
  party shall have the first strike off the list shall be determined by lot. The
  parties shall have ten calendar days to complete the mediator selection process,
  unless the time is extended by mutual agreement.

3.2.3   Advisory
  Mediator.

If the Alternate Dispute
  Resolution Committee deems it appropriate, it shall distribute two lists, one
  containing the names of seven mediators with mediation experience, and one containing
  the names of seven mediators with technical or business experience in the electric
  power industry. In connection with circulating the foregoing lists, the Alternate
  Dispute Resolution Committee shall specify one of the lists as containing the
  proposed mediators, and the other as a list of proposed advisors to assist the
  mediator in resolving the dispute. The parties shall then utilize the alternative
  strike procedure set forth above until one name remains on each list, with the
  last named persons serving as the mediator and advisor.

3.2.4   Mediation
  Process.

The disputing parties shall
  attempt in good faith to resolve their dispute in accordance with procedures
  and a timetable established by the mediator. In furtherance of the mediation
  efforts, the mediator may:

(a)   Require
  the parties to meet for face-to-face discussions, with or without the mediator;

(b)   Act
  as an intermediary between the disputing parties;

(c)   Require
  the disputing parties to submit written statements of issues and positions;

(d)   If
  requested by the disputing parties at any time in the mediation process, provide
  a written recommendation on resolution of the dispute including, if requested,
  the assessment by the mediator of the merits of the principal positions being
  advanced by each of the disputing parties; and

(e)   Adopt,
  when appropriate, the Center for Public Resources Model ADR Procedures for the
  Meditation of Business Disputes (as revised from time to time) to the extent
  such Procedures are not inconsistent with any rule, standard, or procedure adopted
  by the Alternate Dispute Resolution Committee or with any provision of this
  Agreement.

3.2.5   Mediator's
  Assessment.

(a)   If
  a resolution of the dispute is not reached by the thirtieth day after the appointment
  of the mediator or such later date as may be agreed to by the parties, if not
  previously requested to do so the mediator shall promptly provide the disputing
  parties with a written, confidential, non-binding recommendation on resolution
  of the dispute, including the assessment by the mediator of the merits of the
  principal positions being advanced by each of the disputing parties. The recommendation
  may incorporate or append, if and as the mediator may deem appropriate, any
  recommendations or any assessment of the positions of the parties by the advisor,
  if any. Upon request, the mediator shall provide any additional recommendations
  or assessments the mediator shall deem appropriate.

(b)   At
  a time and place specified by the mediator after delivery of the foregoing recommendation,
  the disputing parties shall meet in a good faith attempt to resolve the dispute
  in light of the recommendation of the mediator. Each disputing party shall be
  represented at the meeting by a person with authority to settle the dispute,
  along with such other persons as each disputing party shall deem appropriate.
  If the disputing parties are unable to resolve the dispute at or in connection
  with this meeting, then: (i) any disputing party may commence such arbitral,
  judicial, regulatory or other proceedings as may be appropriate as provided
  in the PJM Dispute Resolution Procedures; and (ii) the recommendation of the
  mediator, and any statements made by any party in the mediation process, shall
  have no further force or effect, and shall not be admissible for any purpose,
  in any subsequent arbitral, administrative, judicial, or other proceeding.

3.3   Costs.

Except as specified in Section 4.13, the
  costs of the time, expenses, and other charges of the mediator and any advisor,
  and of the mediation process, shall be borne by the parties to the dispute,
  with each side in a mediated matter bearing one-half of such costs, and each
  party bearing its own costs and attorney's fees incurred in connection with
  the mediation.

4.   ARBITRATION

4.1   When Required.

Any dispute as to a matter: (i) governed
  by one of the Related PJM Agreements that has not been resolved through the
  mediation procedures specified herein, (ii) involving a claim that one or more
  of the parties owes or is owed a sum of money, and (iii) the amount in controversy
  is less than $1,000,000.00, shall be subject to binding arbitration in accordance
  with the procedures specified herein. If the parties so agree, any other disputes
  as to a matter governed by a Related PJM Agreement may be submitted to binding
  arbitration in accordance with the procedures specified herein.

4.2   Binding Decision.

Except as specified in Section 4.1, the resolution
  by arbitration of any dispute under this Agreement shall not be binding.

4.3   Initiation.

A party or parties to a dispute which is
  subject to the arbitration procedures specified herein shall send a written
  demand for arbitration to the Chair of the Alternate Dispute Resolution Committee
  with a copy to the other party or parties to the dispute. The demand for arbitration
  shall state each claim for which arbitration is being demanded, the relief being
  sought, a brief summary of the grounds for such relief and the basis for the
  claim, and shall identify all other parties to the dispute.

4.4   Selection of Arbitrator(s).

The parties to a dispute for which arbitration
  has been demanded may agree on any person to serve as a single arbitrator, or
  shall endeavor in good faith to agree on a single arbitrator from a list of
  arbitrators prepared for the dispute by the Alternate Dispute Resolution Committee
  and delivered to the parties by facsimile or other electronic means promptly
  after receipt by the Alternate Dispute Resolution Committee of a demand for
  arbitration. The Alternate Dispute Resolution Committee may draw from the lists
  of arbitrators maintained by the MAAC Dispute Resolution Committee, as the Alternate
  Dispute Resolution Committee deems appropriate. If the parties are unable to
  agree on a single arbitrator by the fourteenth day following delivery of the
  foregoing list of arbitrators or such other date as agreed to by the parties,
  then not later than the end of the seventh business day thereafter the party
  or parties demanding arbitration on the one hand, and the party or parties responding
  to the demand for arbitration on the other, shall each designate an arbitrator
  from a list for the dispute prepared by the Alternate Dispute Resolution Committee.
  The arbitrators so chosen shall then choose a third arbitrator.

4.5   Procedures.

The Alternate Dispute Resolution Committee
  shall compile and make available to the arbitrator(s) and the parties standard
  procedures for the arbitration of disputes, which procedures (i) shall include
  provision, upon good cause shown, for intervention or other participation in
  the proceeding by any party whose interests may be affected by its outcome,
  (ii) shall conform to the requirements specified in these PJM Dispute Resolution
  Procedures, and (iii) may be modified or adopted for use in a particular proceeding
  as the arbitrator(s) deem appropriate. To the extent deemed appropriate by the
  Alternate Dispute Resolution Committee, the procedures adopted by the Alternate
  Dispute Resolution Committee shall be based on the American Arbitration Association
  Rules, to the extent such Rules are not inconsistent with any rule, standard
  or procedure adopted by the Alternate Dispute Resolution Committee, or with
  any provision of these PJM Dispute Resolution Procedures. Upon selection of
  the arbitrator(s), arbitration shall go forward in accordance with applicable
  procedures.

4.6   Summary Disposition
  and Interim Measures.

4.6.1   Lack
  of Good Faith Basis.

The procedures for arbitration
  of a dispute shall provide a means for summary disposition of a demand for arbitration,
  or a response to a demand for arbitration, that in the reasoned opinion of the
  arbitrator(s) does not have a good faith basis in either law or fact. If the
  arbitrator(s) determine(s) that a demand for arbitration or response to a demand
  for arbitration does not have a good faith basis in either law or fact, the
  arbitrator(s) shall have discretion to award the costs of the time, expenses,
  and other charges of the arbitrator(s) to the prevailing party.

4.6.2   Discovery
  Limits.

The procedures for the
  arbitration of a dispute shall provide a means for summary disposition without
  discovery of facts if there is no dispute as to any material fact, or with such
  limited discovery as the arbitrator(s) shall determine is reasonably likely
  to lead to the prompt resolution of any disputed issue of material fact.

4.6.3   Interim
  Decision.

The procedures for the
  arbitration of a dispute shall permit any party to a dispute to request the
  arbitrator(s) to render a written interim decision requiring that any action
  or decision that is the subject of a dispute not be put into effect, or imposing
  such other interim measures as the arbitrator(s) deem necessary or appropriate,
  to preserve the rights and obligations secured by any of the Related PJM Agreements
  during the pendency of the arbitration proceeding. The parties shall be bound
  by such written decision pending the outcome of the arbitration proceeding.

4.7   Discovery of Facts.

4.7.1   Discovery
  Procedures.

The procedures for the
  arbitration of a dispute shall include adequate provision for the discovery
  of relevant facts, including the taking of testimony under oath, production
  of documents and other things, and inspection of land and tangible items. The
  nature and extent of such discovery shall be determined as provided herein and
  shall take into account (i) the complexity of the dispute, (ii) the extent to
  which facts are disputed, and (iii) the amount in controversy. The forms and
  methods for taking such discovery shall be as described in the Federal Rules
  of Civil Procedure, except as modified by the procedures established by the
  Alternate Dispute Resolution Committee, the arbitrator(s) or agreement of the
  parties.

4.7.2   Procedures
  Arbitrator.

The sole arbitrator, or
  the arbitrator selected by the arbitrators chosen by the parties, as the case
  may be (such arbitrator being hereafter referred to as the "Procedures Arbitrator"),
  shall be responsible for establishing the timing, amount, and means of discovery,
  and for resolving discovery and other pre-hearing disagreement. If a dispute
  involves contested issues of fact, promptly after the selection of the arbitrator(s)
  the Procedures Arbitrator shall convene a meeting of the parties for the purpose
  of establishing a schedule and plan of discovery and other pre-hearing actions.

4.8   Evidentiary Hearing.

The procedures for the arbitration of a dispute
  shall provide for an evidentiary hearing, with provision for the cross-examination
  of witnesses, unless all parties consent to the resolution of the matter on
  the basis of a written record. The forms and methods for taking evidence shall
  be as described in the Federal Rules of Evidence, except as modified by the
  procedures established by the Alternate Dispute Resolution Committee, the arbitrator(s)
  or agreement of the parties. The arbitrator(s) may require such written or other
  submissions from the parties as shall be deemed appropriate, including submission
  of the direct testimony of witnesses in written form. The arbitrator(s) may
  exclude any evidence that is irrelevant, immaterial, unduly repetitious or prejudicial,
  or privileged. Any party or parties may arrange for the preparation of a record
  of the hearing, and shall pay the costs thereof. Such party or parties shall
  have no obligation to provide or agree to the provision of a copy of the record
  of the hearing to any party that does not pay an equal share of the cost of
  the record. At the request of any party, the arbitrator(s) shall determine a
  fair and equitable allocation of the costs of the preparation of a record between
  or among the parties to the proceeding willing to share such costs.

4.9   Confidentiality.

4.9.1   Designation.

Any document or other information
  obtained in the course of an arbitral proceeding and not otherwise available
  to the receiving party, including any such information contained in documents
  or other means of recording information created during the course of the proceeding,
  may be designated "Confidential" by the producing party. The party producing
  documents or other information marked "Confidential" shall have twenty days
  from the production of such material to submit a request to the Procedures Arbitrator
  to establish such requirements for the protection of such documents or other
  information designated as "Confidential" as may be reasonable and necessary
  to protect the confidentiality and commercial value of such information and
  the rights of the parties, which requirements shall be binding on all parties
  to the dispute. Prior to the decision of the Procedures Arbitrator on a request
  for confidential treatment, documents or other information designated as "Confidential"
  shall not be used by the receiving party or parties, or the arbitrator(s), or
  anyone working for or on behalf of any of the foregoing, for any purpose other
  than the arbitration proceeding, and shall not be disclosed in any form to any
  person not involved in the arbitration proceeding without the prior written
  consent of the party producing the information or as permitted by the Procedures
  Arbitrator.

4.9.2   Compulsory
  Disclosure.

Any party receiving a request
  or demand for disclosure, whether by compulsory process, discovery request,
  or otherwise, of documents or information obtained in the course of an arbitration
  proceeding that have been designated "Confidential" and that are subject to
  a non-disclosure requirement under these PJM Dispute Resolution Procedures or
  a decision of the Procedures Arbitrator, shall immediately inform the party
  from which the information was obtained, and shall take all reasonable steps,
  short of incurring sanctions or other penalties, to afford the person or entity
  from which the information was obtained an opportunity to protect the information
  from disclosure. Any party disclosing information in violation of these PJM
  Dispute Resolution Procedures or requirements established by the Procedures
  Arbitrator shall thereby waive any right to introduce or otherwise use such
  information in any judicial, regulatory, or other legal or dispute resolution
  proceeding, including the proceeding in which the information was obtained.

4.9.3   Public
  Information.

Nothing in the Related
  PJM Agreements shall preclude the use of documents or information properly obtained
  outside of an arbitral proceeding, or otherwise public, for any legitimate purpose,
  notwithstanding that the information was also obtained in the course of the
  arbitral proceeding.

4.10   Timetable.

Promptly after the selection of the arbitrator(s),
  the arbitrator(s) shall set a date for the issuance of the arbitral decision,
  which shall be not later than eight months (or such earlier date as may be agreed
  to by the parties to the dispute) from the date of the selection of the arbitrator(s),
  with other dates, including the dates for an evidentiary hearing or other final
  submissions of evidence, set in light of this date. The date for the evidentiary
  hearing or other final submission of evidence shall not be changed absent extraordinary
  circumstances. The arbitrator(s) shall have the power to impose sanctions, including
  dismissal of the proceeding for dilatory tactics or undue delay in completing
  the arbitral proceedings.

4.11   Advisory Interpretations.

Except as to matters subject to decision
  in the arbitration proceeding, the arbitrator(s) may request as may be appropriate
  from any committee or subcommittee established under a Related PJM Agreement
  or by the Office of the Interconnection, an interpretation of any Related PJM
  Agreements, or of any standard, requirement, procedure, tariff, Schedule, principle,
  plan or other criterion or policy established by any committee or subcommittee.
  Except to the extent that the Office of the Interconnection is itself a party
  to a dispute, the arbitrator(s) may request the advice of the Office of the
  Interconnection with respect to any matter relating to a responsibility of the
  Office of the Interconnection under the Agreement or with respect to any of
  the Related PJM Agreements, or to the PJM Manuals. Any such interpretation or
  advice shall not relieve the arbitrator(s) of responsibility for resolving the
  dispute or deciding the arbitration proceeding in accordance with the standards
  specified herein.

4.12   Decisions.

The arbitrator(s) shall issue a written decision,
  including findings of fact and the legal basis for the decision. The arbitral
  decision shall be based on (i) the evidence in the record, (ii) the terms of
  the Related PJM Agreements, as applicable, (iii) applicable United States federal
  and state law, including the Federal Power Act and any applicable FERC regulations
  and decisions, and international treaties or agreements as applicable, and (iv)
  relevant decisions in previous arbitration proceedings. The arbitrator(s) shall
  have no authority to revise or alter any provision of the Related PJM Agreements.
  Any arbitral decision issued pursuant to these PJM Dispute Resolution Procedures
  that affects matters subject to the jurisdiction of FERC under Section 205 of
  the Federal Power Act shall be filed with FERC.

4.13   Costs.

Unless the arbitrator(s) shall decide otherwise,
  the costs of the time, expenses, and other charges of the arbitrator(s) shall
  be borne by the parties to the dispute, with each side on an arbitrated issue
  bearing its pro-rata share of such costs, and each party to an arbitral proceeding
  shall bear its own costs and fees. The arbitrator(s) may award all or a portion
  of the costs of the time, expenses, and other charges of the arbitrator(s),
  the costs of arbitration, attorney's fees, and the costs of mediation, if any,
  to any party that substantially prevails on an issue determined by the arbitrator(s)
  to have been raised without a substantial basis.

4.14   Enforcement.

If the decision of the arbitrator(s) is binding,
  the judgment may be entered on such arbitral award by any court having jurisdiction
  thereof; provided, however, that within one year of the issuance of the arbitral
  decision any party affected thereby may request FERC or any other federal, state,
  regulatory or judicial authority having jurisdiction to vacate, modify, or take
  such other action as may be appropriate with respect to any arbitral decision
  that is based upon an error of law, or is contrary to the statutes, rules, or
  regulations administered or applied by such authority. Any party making or responding
  to, or intervening in proceedings resulting from, any such request, shall request
  the authority to adopt the resolution, if not clearly erroneous, of any issue
  of fact expressly or necessarily decided in the arbitral proceeding, whether
  or not the party participated in the arbitral proceeding.

5.   ALTERNATE DISPUTE RESOLUTION COMMITTEE

5.1   Membership.

5.1.1   Representatives.

The Alternate Dispute Resolution
  Committee shall be composed of two representatives selected by each of the following:
  (i) the Office of the Interconnection; (ii) the Members Committee; (iii) the
  parties to the Reliability Assurance Agreement; and (iv) the parties to the
  Transmission Owners Agreement.

5.1.2   Term.

Representatives on the
  Alternate Dispute Resolution Committee shall serve for terms of three years
  and may serve additional terms.

5.2   Voting Requirements.

Approval or adoption of measures by the Alternate
  Dispute Resolution Committee shall require two-thirds of the votes of the representatives
  present and voting. Two-thirds of the representatives on the Alternate Dispute
  Resolution Committee shall constitute a quorum for the conduct of business.

5.3   Officers.

At the first meeting of the Alternate Dispute
  Resolution Committee, the representatives to the Alternate Dispute Resolution
  Committee shall choose a Chair and Vice Chair from among the representatives
  on the Committee. The Chair of the Alternate Dispute Resolution Committee shall
  preside at meetings of the Committee, and shall have the power to call meetings
  of the Committee and to exercise such other powers as are specified in this
  Agreement or are authorized by the Alternate Dispute Resolution Committee. The
  Vice Chair shall preside at meetings of the Alternate Dispute Resolution Committee
  in the absence of the Chair, and shall exercise such other powers as are delegated
  by the Chair.



5.4   Meetings.

The Alternate Dispute Resolution Committee
  shall meet at such times and places as determined by the Committee, or at the
  call of the Chair. The Chair shall call a meeting of the Alternate Dispute Resolution
  Committee upon the request of two or more representatives on the Alternate Dispute
  Resolution Committee.

5.5   Responsibilities.

The duties of the Alternate Dispute Resolution
  Committee include but are not limited to the following:

i)   Maintain
  a list of persons qualified by temperament and experience, and with technical
  or legal expertise in matters likely to be the subject of disputes, to serve
  as mediators or arbitrators under these PJM Dispute Resolution Procedures;

ii)   Determine
  the rates and other costs and charges that shall be paid to mediators, advisors
  and arbitrators for or in connection with their services;

iii)   Determine
  whether mediation is not warranted in a particular dispute;

iv)   Provide
  to disputing parties lists of mediators, advisors or arbitrators to resolve
  particular disputes;

v)   Compile
  and make available to parties to disputes, arbitrators, and other interested
  persons suggested procedures for the arbitration of disputes in accordance with
  Section 4.5;

vi)   Maintain
  and make available to parties to disputes, mediators, advisors, arbitrators,
  and other interested persons the written decisions required by Section 4.12;

vii)   Establish
  such procedures and schedules, in addition to those specified herein, as it
  shall deem appropriate to further the prompt, efficient, fair and equitable
  resolution of disputes; and

viii)   Provide
  such oversight and supervision of the dispute resolution processes and procedures
  instituted pursuant to the Related PJM Agreements as may be appropriate to facilitate
  the prompt, efficient, fair and equitable resolution of disputes.

SCHEDULE 6

REGIONAL TRANSMISSION EXPANSION PLANNING
  PROTOCOL

1.   REGIONAL TRANSMISSION EXPANSION PLANNING
  PROTOCOL

1.1   Purpose and Objectives.

This Regional Transmission
  Expansion Planning Protocol shall govern the process by which the Members shall
  rely upon the Office of the Interconnection to prepare a plan for the enhancement
  and expansion of the Transmission Facilities in order to meet the demands for
  firm transmission service in the PJM Control Area. The Regional Transmission
  Expansion Plan to be developed shall enable the transmission needs in the PJM
  Control Area to be met on a reliable, economic and environmentally acceptable
  basis.

1.2   Conformity with NERC
  and MAAC Criteria.

(a)   NERC establishes Planning
  Principles and Guides to promote the reliability and adequacy of the North American
  bulk power supply as related to the operation and planning of electric systems.

(b)   MAAC is responsible
  for ensuring the adequacy, reliability and security of the bulk electric supply
  systems in the MAAC region through coordinated operations and planning of generation
  and transmission facilities. Toward that end, it has adopted the NERC Planning
  Principles and Guides and has established detailed Reliability Principles and
  Standards for Planning the Bulk Electric Supply System of the MAAC Group.

(c)   The Regional Transmission
  Expansion Plan shall conform with the applicable reliability principles, guidelines
  and standards of NERC and MAAC in accordance with the procedures detailed in
  the PJM Manuals.

1.3   Establishment of
  Committees.

(a)   The Regional Transmission
  Owners shall supply representatives to the Planning Committee to provide the
  data, information, and analysis support necessary to perform studies as required.
  As used herein, "Regional Transmission Owner" shall be defined as it is in the
  PJM Open Access Transmission Tariff ("PJM Tariff").

(b)   The Transmission Expansion
  Advisory Committee established by the Office of the Interconnection will provide
  input to the development of the Regional Transmission Expansion Plan. The Transmission
  Expansion Advisory Committee will invite participation by: (i) all Transmission
  Customers, as that term is defined in the PJM Tariff, and applicants for transmission
  service; (ii) any other entity proposing to provide Transmission Facilities
  to be integrated into the PJM Control Area; (iii) all Members; (iv) the
  agencies and offices of consumer advocates of the States in the PJM Control
  Area exercising regulatory authority over the rates, terms or conditions of
  electric service or the planning, siting, construction or operation of electric
  facilities and (v) any other interested entities or persons.

1.4   Contents of the Regional
  Transmission Expansion Plan.

(a)   The Office of the Interconnection
  shall prepare the Regional Transmission Expansion Plan, which shall consolidate
  the transmission needs of the region into a single plan which is assessed on
  the basis of maintaining the PJM Control Area's reliability in an economic and
  environmentally acceptable manner.

(b)   The Regional Transmission
  Expansion Plan shall reflect transmission enhancements and expansions, load
  and capacity forecasts and generation additions and retirements for the ensuing
  ten years.

(c)   The Regional Transmission
  Expansion Plan shall, as a minimum, include a designation of the Regional Transmission
  Owner or Owners or other entity that will own a transmission facility and how
  all reasonably incurred costs are to be recovered.

(d)   The Regional Transmission
  Expansion Plan shall (i) avoid unnecessary duplication of facilities; (ii) avoid
  the imposition of unreasonable costs on any Regional Transmission Owner or any
  user of Transmission Facilities; (iii) take into account the legal and contractual
  rights and obligations of the Regional Transmission Owners; (iv) provide, if
  appropriate, alternative means for meeting transmission needs in the PJM Control
  Area; and (v) provide for coordination with existing transmission systems and
  with appropriate interregional and local expansion plans.

1.5   Procedure for Development
  of the Regional Transmission Expansion Plan.

1.5.1   Commencement
  of the Process.

(a)   The
  Office of the Interconnection shall initiate the enhancement and expansion study
  process if (i) required as a result of a need for transfer capability identified
  by the Office of the Interconnection in its evaluation of requests for firm
  transmission service with a term of one year or more or as a result of the Office
  of the Interconnection's on-going evaluation of transmission system adequacy
  and performance; (ii) identified as a result of the MAAC reliability assessment
  or more stringent local reliability criteria, if any; (iii) constraints
  or available transfer capability shortage are identified by the Office of the
  Interconnection as a result of generation additions or retirements, evaluation
  of load forecasts or proposals for the addition of Transmission Facilities in
  the PJM Control Area; or (iv) expansion of the transmission system is proposed
  by the Regional Transmission Owners or others.

(b)   The
  Office of the Interconnection shall notify the Transmission Expansion Advisory
  Committee of the commencement of an enhancement and expansion study. The Transmission
  Expansion Advisory Committee shall notify the Office of the Interconnection
  in writing of any additional transmission considerations to be included.

1.5.2   Development
  of Scope, Assumptions and Procedures.

Once the need for an enhancement
  and expansion study has been established, the Office of the Interconnection
  shall consult with the Transmission Expansion Advisory Committee to prepare
  the study's scope, assumptions and procedures.

1.5.3   Scope
  of Studies.

In general, enhancement
  and expansion studies shall include:

(a)   An
  identification of existing and projected electric system limitations, with accompanying
  simulations to identify the costs of controlling those limitations. Potential
  enhancements and expansions will be proposed to mitigate limitations controlled
  by non-economic means.

(b)   Evaluation
  and analysis of potential enhancements and expansions, including alternatives
  thereto, needed to mitigate such limitations.

(c)   Engineering
  studies needed to determine the effectiveness and compliance (with reliability
  criteria) of recommended enhancements and expansions.

1.5.4   Supply
  of Data.

(a)   The
  Regional Transmission Owners shall provide to the Office of the Interconnection
  on an annual basis a 10-year forecast of summer and winter load and resources
  expected to be served by, or use, their Transmission Facilities. The forecast
  shall include to the extent known or reasonably capable of forecast: (i) a description
  of the total load to be served from each substation; (ii) the amount of any
  interruptible loads included in the total load (including conditions under which
  an interruption can be implemented and any limitations on the duration and frequency
  of interruptions); and (iii) a description of all generation resources to be
  located in the geographic region encompassed by the Regional Transmission Owner's
  transmission facilities, including unit sizes, VAR capability, operating restrictions,
  and any must-run unit designations required for system reliability or contract
  reasons. The data required under this section shall be provided in the form
  and manner specified by the Office of the Interconnection.

(b)   In
  addition to the foregoing, the Regional Transmission Owners, those entities
  requesting transmission service and any other entities proposing to provide
  Transmission Facilities to be integrated into the PJM Control Area shall supply
  any other information and data reasonably required by the Office of the Interconnection
  to perform the enhancement and expansion study.

1.5.5   Coordination
  of the Regional Transmission Expansion Plan.

(a)   The
  Regional Transmission Expansion Plan shall be developed in coordination with
  the transmission systems of the surrounding regional reliability councils and
  with the local transmission providers.

(b)   The
  Regional Transmission Expansion Plan shall be developed by the Office of the
  Interconnection in consultation with the Transmission Expansion Advisory Committee
  during the enhancement and expansion study process.

1.5.6   Development
  of the Recommended Regional Transmission Expansion Plan.

(a)   Upon
  completion of its studies and analysis, the Office of the Interconnection shall
  prepare a recommended enhancement and expansion plan for review by the Transmission
  Expansion Advisory Committee. The recommended plan shall include recommendations
  for cost responsibility, except for directly assigned costs, for any enhancement
  or expansion, based on the planning analysis and other input from participants,
  including any indications of a willingness to bear cost responsibility for an
  enhancement or expansion.

(b)   For
  the purposes of Section 1.5.6(a), any allocation of costs to all of the Regional
  Transmission Owners shall be proportional to the load within the Zones. Load
  shall be measured consistent with the loads utilized to develop the rates included
  in Attachment H to the PJM Tariff.

(c)   Any
  Regional Transmission Owner and other participants on the Transmission Expansion
  Advisory Committee may offer an alternative.

(d)   If
  the Office of the Interconnection adopts the alternative, based upon its review
  of the relative costs and benefits, the ability of the alternative to supply
  the required level of transmission service, and its impact on the reliability
  of the Transmission Facilities, the Office of the Interconnection shall make
  any necessary changes to the recommended plan.

(e)   If,
  based upon its review of the relative costs and benefits, the ability of the
  alternative to supply the required level of transmission service, and the alternative's
  impact on the reliability of the Transmission Facilities, the Office of the
  Interconnection does not adopt such alternative, the Regional Transmission Owner
  or Owners whose alternative or alternatives have not been accepted or to whom
  cost responsibility has been assigned and other participants on the Transmission
  Expansion Advisory Committee may require that its or their alternative(s) be
  submitted to Alternative Dispute Resolution.

1.6   Approval of the Final
  Regional Transmission Expansion Plan.

(a)   The PJM Board shall
  approve the final Regional Transmission Expansion Plan, including any alternatives
  therein, in accordance with the requirements of this Section 1.6.

(b)   If the facilities to
  be provided in the Regional Transmission Expansion Plan are acceptable, but
  the Regional Transmission Owners and other entities who have indicated a willingness
  to bear some or all of the cost responsibility cannot unanimously agree on the
  allocation of the costs of enhancements or expansions, the cost responsibility
  shall be allocated (a) to those entities who have indicated a willingness to
  bear some or all of the cost of responsibility, and (b) among the Regional Transmission
  Owners in accordance with the following guidelines:

i)   All
  of the costs of Transmission Facilities (other than transformers) with a nominal
  operating voltage of 500 kV or higher shall be allocated to all of the Regional
  Transmission Owners;

ii)   One-half
  of the costs of Transmission Facilities (other than transformers) with a nominal
  operating voltage of 230 kV or 345 kV shall be allocated to all Regional Transmission
  Owners and one-half of the costs of such facilities shall be allocated to the
  Regional Transmission Owners in whose Zone, as that term is defined in the PJM
  Tariff, the enhancement or expansion is to be located;

iii)   All
  of the costs of Transmission Facilities (other than transformers) with a nominal
  operating voltage below 230 kV shall be allocated to the Regional Transmission
  Owner or Owners in whose Zone the enhancement or expansion is located; and

iv)   One-half
  of the costs of transformers shall be allocated in accordance with the methodology
  specified in (a), (b), or (c) above, based upon the voltage at the high side
  of the transformer and one-half of the costs shall be allocated in accordance
  with the methodology specified in (a), (b), and (c) above based upon the voltage
  at the low side of the transformer, unless the low side of the transformer is
  less than 100 kV, in which case all of the costs of the transformer shall be
  allocated to the Regional Transmission Owner or Owners in whose Zone the transformer
  is located.

If a Regional Transmission Expansion Plan
  is not approved, or if the transmission service requested by any entity is not
  included in an approved Regional Transmission Expansion Plan, nothing herein
  shall limit in any way the right of any entity to seek relief pursuant to the
  provisions of Section 211 of the Federal Power Act.

(d)   Following PJM Board
  approval, the final Regional Transmission Expansion Plan shall be submitted
  to MAAC for verification that all enhancements or expansions conform to all
  MAAC Reliability Principles and Standards.

1.7   Obligation to Build.

(a)   Subject to the requirements
  of applicable law, government regulations and approvals, including, without
  limitation, requirements to obtain any necessary state or local siting, construction
  and operating permits, to the availability of required financing, to the ability
  to acquire necessary right-of-way, and to the right to recover, pursuant to
  appropriate financial arrangements and tariffs or contracts, all reasonably
  incurred costs, plus a reasonable return on investment, Regional Transmission
  Owners designated as the appropriate entities to construct and own or finance
  enhancements or expansions specified in the Regional Transmission Expansion
  Plan shall construct and own or finance such facilities or enter into appropriate
  contracts to fulfill such obligations.

(b)   Nothing herein shall
  prohibit any Regional Transmission Owner from seeking to recover the cost of
  enhancements or expansions on an incremental cost basis or from seeking approval
  of such rate treatment from any regulatory agency with jurisdiction over such
  rates.

1.8   Relationship to the
  PJM Control Area Open Access Transmission PJM Tariff.

Nothing herein shall modify the rights and
  obligations of an Eligible Customer or a Transmission Customer, as those terms
  are defined in the PJM Tariff, with respect to required studies and completion
  of necessary enhancements or expansions. An Eligible Customer or Transmission
  Customer electing to follow the procedures in the PJM Tariff instead of the
  procedures provided herein, shall also be responsible for the related costs.
  The enhancement and expansion study process under this Protocol shall be funded
  as a part of the operating budget of the Office of the Interconnection.

SCHEDULE 7

UNDERFREQUENCY RELAY OBLIGATIONS AND
  CHARGES

1.   UNDERFREQUENCY RELAY OBLIGATION

1.1   Application.

The obligations of this Schedule apply to
  each Member that is an Electric Distributor, whether or not that Member participates
  in the Electric Distributor sector on the Members Committee or meets the eligibility
  requirements for any other sector of the Members Committee.

1.2   Obligations.

Each Electric Distributor shall install or
  contractually arrange for underfrequency relays to interrupt at least 30 percent
  of its peak load with 10 percent of the load interrupted at each of three frequency
  levels: 59.3 Hz, 58.9 Hz and 58.5 Hz. Upon the request of the Reliability Committee,
  each Electric Distributor shall document that it has complied with the requirement
  for underfrequency load shedding relays.

2.   UNDERFREQUENCY RELAY CHARGES

If an Electric Distributor is determined
  to not have the required underfrequency relays, it shall pay an underfrequency
  relay charge of:

Charge = D x R x 365



where

D = the amount, in megawatts,
  the Electric Distributor is deficient; and

R = the daily rate per megawatt, which shall
  be based on the annual carrying charges for a new combustion turbine generator,
  installed and connected to the transmission system, which daily deficiency rate
  as of the Effective Date shall be $58.400/per kilowatt-year or $160 per megawatt-day.

3.   DISTRIBUTION OF UNDERFREQUENCY RELAY
  CHARGES

3.1   Share of Charges.

Each Electric Distributor that has complied
  with the requirements for underfrequency relays imposed by this Agreement during
  a Planning Period, without incurring an underfrequency relay charge, shall share
  in any underfrequency relay charges paid by any other Electric Distributor that
  has failed to satisfy said obligation during such Planning Period. Such shares
  shall be in proportion to the number of megawatts of a Electric Distributor's
  load in the most recently completed month at the time of the peak for the PJM
  Control Area during that month rounded to the next higher whole megawatt, as
  established initially on the Effective Date and as updated at the beginning
  of each month thereafter.

3.2   Allocation by the
  Office of the Interconnection.

In the event all of the Electric Distributors
  have incurred underfrequency relay charges during a Planning Period, the underfrequency
  relay charges shall be distributed among the Electric Distributors on an equitable
  basis as determined by the Office of the Interconnection.

SCHEDULE 8



DELEGATION OF RELIABILITY RESPONSIBILITIES

1.   DELEGATION

The following responsibilities shall be delegated
  to the Office of the Interconnection by the parties to the Reliability Assurance
  Agreement.

2.   NEW PARTIES

With regard to the addition, withdrawal or
  removal of a party to the Reliability Assurance Agreement, the Office of the
  Interconnection shall:

(a)   Receive and evaluate
  the information submitted by entities that plan to serve loads within the PJM
  Control Area, including entities whose participation in the Agreement will expand
  the boundaries of the PJM Control Area, such evaluation to be conducted in accordance
  with the requirements of the Reliability Assurance Agreement; and

(b)   Evaluate the effects
  of the withdrawal or removal of a party from the Reliability Assurance Agreement.

3.   IMPLEMENTATION OF RELIABILITY ASSURANCE
  AGREEMENT

With regard to the implementation of the
  provisions of the Reliability Assurance Agreement, the Office of the Interconnection
  shall:

(a)   Receive all required
  data and forecasts from the parties to the Reliability Assurance Agreement and
  other owners of Capacity Resources;

(b)   Perform all calculations
  and analyses necessary to determine the Forecast Pool Requirement and the capacity
  obligations imposed under the Reliability Assurance Agreement, including periodic
  reviews of the capacity benefit margin for consistency with the Reliability
  Principles and Standards, as the foregoing terms are defined in the Reliability
  Assurance Agreement;

(c)   Monitor the compliance
  of each party to the Reliability Assurance Agreement with its obligations under
  the Reliability Assurance Agreement;

(d)   Keep cost records, and
  bill and collect any costs or charges due from the parties to the Reliability
  Assurance Agreement and distribute those charges in accordance with the terms
  of the Reliability Assurance Agreement;

(e)   Assist with the development
  of rules and procedures for determining and demonstrating the capability of
  Capacity Resources;

(f)   Establish the capability
  and deliverability of Capacity Resources consistent with the requirements of
  the Reliability Assurance Agreement;

(g)   Collect and maintain
  generator availability data;

(h)   Perform any other forecasts,
  studies or analyses required to administer the Reliability Assurance Agreement;

(i)   Coordinate maintenance
  schedules for generation resources operated as part of the PJM Control Area;

(j)   Determine and declare
  that an Emergency exists or has ceased to exist in all or any part of the PJM
  Control Area or announce that an Emergency exists or ceases to exist in a Control
  Area interconnected with the PJM Control Area;

(k)   Enter into agreements
  for (i) the transfer of energy in Emergencies in the PJM Control Area or in
  a Control Area interconnected with the PJM Control Area and (ii) mutual support
  in such Emergencies with other Control Areas interconnected with the PJM Control
  Area; and

(l)   Coordinate the curtailment
  or shedding of load, or other measures appropriate to alleviate an Emergency,
  to preserve reliability in accordance with FERC, NERC or MAAC principles, guidelines,
  standards and requirements and the PJM Manuals, and to ensure the operation
  of the PJM Control Area in accordance with Good Utility Practice.

SCHEDULE 9

EMERGENCY PROCEDURE CHARGES

1.   EMERGENCY PROCEDURE CHARGE

1.1   Following an
  Emergency, the compliance of each Member with the instructions of the Office
  of the Interconnection shall be evaluated by the Office of the Interconnection.
  If, based on such evaluation, it is determined that a Member failed to comply
  with the instructions of the Office of the Interconnection to implement PJM
  emergency procedures, that Member shall demonstrate that it employed its best
  efforts to comply with such instructions. In the event a Member failed to employ
  its best efforts to comply with the instructions of the Office of the Interconnection,
  that Member shall pay (unless otherwise paid by the Member under the Reliability
  Assurance Agreement) an emergency procedure charge as follows:

(a)   For each megawatt of
  voltage reduction that was not implemented as directed, the Member shall pay
  365 times the daily deficiency rate per megawatt set forth in Section A of Schedule
  11 of the Reliability Assurance Agreement;

(b)   For each megawatt of
  load that was not dropped as directed, the Member shall pay 730 times the daily
  deficiency rate per megawatt set forth in Section A of Schedule 11 of the Reliability
  Assurance Agreement; and

(c)   For each megawatt of
  ALM (as defined in the Reliability Assurance Agreement) that was not implemented
  as directed and for each megawatt of a Capacity Resource that was not made available
  as directed despite being capable of producing energy at the time, and that
  is deliverable to the PJM Control Area in the case of a Capacity Resource located
  outside of the PJM Control Area, the Party shall pay 365 times the daily deficiency
  rate per megawatt set forth in Section A of Schedule 11 of the Reliability Assurance
  Agreement.

2.   DISTRIBUTION OF EMERGENCY PROCEDURE CHARGES

2.1   Complying Parties.

Each Member that has complied with the emergency
  procedures imposed by this Agreement during an Emergency, without incurring
  an emergency procedure charge, shall share in any emergency procedure charges
  paid by any other Member that has failed to satisfy said obligation during such
  Emergency in an equitable manner to be determined by the PJM Board.

2.2   All Parties.

In the event all of the Members have incurred
  emergency procedure charges with respect to an Emergency, the emergency procedure
  charges related to that Emergency shall be distributed in an equitable manner
  as directed by the PJM Board.

SCHEDULE 10 - Reserved

































Reserved for future use.

SCHEDULE 11

PJM CAPACITY CREDIT MARKETS

1.   PURPOSES AND OBJECTIVES

1.1   PJM Capacity Credit Markets.

This Schedule sets forth the procedures applicable
  to the operation of the PJM Capacity Credit Markets. The PJM Capacity Credit
  Markets will allow Market Participants to buy and sell Capacity Credits at market
  clearing prices that are established by the PJM Capacity Credit Markets and
  made public by the Office of the Interconnection. The PJM Capacity Credit Markets
  shall be administered by the Office of Interconnection in accordance with the
  principles and procedures specified in this Schedule.

1.2   [Reserved.]

1.3   Use of Capacity Credits.

An entity may use Capacity Credits to meet
  all or part of its capacity obligations imposed under the Reliability Assurance
  Agreement. Such Capacity Credits may be used by themselves, or along with any
  other options for meeting capacity obligations imposed under the Reliability
  Assurance Agreement.

2.   DEFINITIONS

Unless the context otherwise specifies or
  requires, capitalized terms used in this Schedule shall have the respective
  meanings assigned herein or in the Agreement for all purposes of this Schedule
  (such definitions to be equally applicable to both the singular and the plural
  forms of the terms defined).

2.1   Buy Bid.

"Buy Bid" shall mean a bid to buy Capacity Credits in a PJM
  Capacity Credit Market.

2.2   Capacity Credit.

"Capacity Credit" shall, subject to the transition
  provision specified below, mean an entitlement to a specified number of megawatts
  of Unforced Capacity from a Capacity Resource for the purpose of satisfying
  capacity obligations imposed under the Reliability Assurance Agreement, such
  entitlement not to include any entitlement to the output of the Capacity Resource.

2.3   Capacity Resources.

"Capacity Resources" shall have the meaning
  specified in the Reliability Assurance Agreement.

2.4   PJM Capacity Credit Market.

"PJM Capacity Credit Market" shall mean the
  PJM Daily Capacity Credit Market and the PJM Monthly Capacity Credit Market.

2.5   PJM Daily Capacity Credit Market.

"PJM Daily Capacity Credit Market" shall
  mean a competitive market, administered by the Office of the Interconnection
  in accordance with the provisions of this Schedule, for the purchase and sale
  of Capacity Credits for the business day following the day on which the market
  is conducted and for each of any intervening weekend days or Holidays if the
  market is conducted on a Friday or the day before a Holiday.

2.6   PJM Monthly Capacity Credit Market.

"PJM Monthly Capacity Credit Market" shall
  mean a competitive market, administered by the Office of the Interconnection
  in accordance with the provisions of this Schedule, for the purchase and sale
  of Capacity Credits for each or any of the twelve months following the month
  during which the market is conducted.

2.7   Sell Offer.

"Sell Offer" shall mean an offer to sell
  Capacity Credits in a PJM Capacity Credit Market.

2.8   Unforced Capacity.

"Unforced Capacity" shall have the meaning
  specified in the Reliability Assurance Agreement.

2.9   Up-To Block.

"Up-To Block" shall mean a Sell Offer or
  Buy Bid for a quantity of Capacity Credits equal to or less than a specified
  quantity.

3.   PARTICIPATION IN THE PJM CAPACITY CREDIT
  MARKET

3.1   Eligibility.

A Member shall become eligible to participate
  in any of the PJM Capacity Credit Markets by becoming a Market Buyer or a Market
  Seller, or both as may be appropriate, in accordance with the provisions of
  Schedule 1 of the Agreement. In order to participate in any of the PJM Capacity
  Credit Markets, a Market Buyer also either must be (a) an entity that is or
  will become a Load Serving Entity in the PJM Control Area and a party to the
  Reliability Assurance Agreement, or (b) have a contractual obligation to sell
  capacity (including sales for resale) which will be used in the PJM Control
  Area. A Market Seller may participate in any PJM Capacity Credit Market only
  to the extent that it has Capacity Credits available to sell in excess of its
  capacity obligation imposed under the Reliability Assurance Agreement and other
  contractual obligations to sell capacity (including sales for resale), as determined
  in accordance with Section 6.1.3.

3.2   Effect of Withdrawal.

Withdrawal from the Agreement shall not relieve
  a Market Participant of any obligation to furnish or pay for Capacity Credits
  incurred in connection with participation in a PJM Capacity Credit Market prior
  to such withdrawal, to pay its share of any fees and charges incurred or assessed
  by the Office of the Interconnection prior to the date of such withdrawal, or
  to fulfill any obligation to provide indemnification for the consequences of
  acts, omissions or events occurring prior to such withdrawal; and provided,
  further, that withdrawal from this Agreement shall not relieve any Market Participant
  of any obligations it may have under, or constitute withdrawal from, any Related
  PJM Agreement.

4.   RESPONSIBILITIES OF THE OFFICE OF THE
  INTERCONNECTION

4.1   Operation of the PJM Capacity Credit
  Market.

The Office of the Interconnection shall operate
  the PJM Capacity Credit Markets in accordance with the provisions of this Schedule
  and applicable provisions of the Agreement and the Reliability Assurance Agreement.
  Operation of the PJM Capacity Credit Markets shall include, but not be limited
  to, provision of the following services:

i)   Determining the qualification of entities
  to become Market Participants;

ii)   Administering the PJM Capacity Credit
  Markets;

iii)   Accounting for PJM Capacity Credit Market
  transactions, including but not limited to rendering bills to, receiving payments
  from, and disbursing payments to, participants in the PJM Capacity Credit Markets;

iv)   Maintaining such records of Sell Offers
  and Buy Bids, clearing price determinations, and other aspects of PJM Capacity
  Credit Market transactions, as may be appropriate to the administration of the
  PJM Capacity Credit Markets; and

v)   Monitoring compliance of participants in
  the PJM Capacity Credit Markets with the provisions of this Schedule and the
  Agreement.

4.2   Records and Reports.

The Office of the Interconnection shall prepare
  and maintain such records as are required for the administration of the PJM
  Capacity Credit Markets. For each day of operation of the PJM Capacity Credit
  Markets, the Office of the Interconnection shall publish, as specified below:
  (i) the price, if determined, at which the PJM Capacity Credit Market cleared;
  (ii) the total volume of Capacity Credits purchased; and (iii) such other PJM
  Capacity Credit Market data as may be appropriate to the efficient and competitive
  operation of the PJM Capacity Credit Markets, consistent with preservation of
  the confidentiality of commercially sensitive or proprietary information. Publication
  of the foregoing information shall be by posting on the PJM web site. Such information
  shall remain available on the PJM web site for twelve months from the date of
  posting. The Office of the Interconnection shall not disclose commercially sensitive
  or proprietary information in any report or web site posting.

5.   GENERAL PROVISIONS

5.1   Market Sellers.

Only Market Sellers shall be eligible to
  submit Sell Offers. Market Sellers shall comply with the terms and conditions
  of all Sell Offers, as established by the Office of the Interconnection in accordance
  with this Schedule and the Agreement.

5.2   Market Buyers.

Only Market Buyers shall be eligible to submit
  Buy Bids. Market Buyers shall comply with the terms and conditions of all Buy
  Bids, as established by the Office of the Interconnection in accordance with
  this Schedule and the Agreement.

5.3   Agents.

A Market Participant may participate in the
  PJM Capacity Credit Markets through an agent, provided that the Market Participant
  informs the Office of the Interconnection in advance in writing of the appointment
  of such agent. A Market Participant participating in the PJM Capacity Credit
  Markets through an agent shall be bound by all of the acts or representations
  of such agent with respect to transactions in the PJM Capacity Credit Markets,
  and shall ensure that any such agent complies with the requirements of this
  Schedule and the Agreement.

5.4   General Obligations of Market Participants.

Each Market Participant shall comply with
  all laws and regulations applicable to the operation of the PJM Capacity Credit
  Markets and the use of Capacity Credits, and shall comply with all applicable
  provisions of this Schedule, the Agreement, and the Reliability Assurance Agreement,
  and all procedures and requirements for the operation of the PJM Capacity Credit
  Markets and the PJM Control Area established by the Office of the Interconnection
  in accordance with the foregoing.

5.5   Relationship of Capacity Credits to
  Capacity Obligations Imposed under the Reliability Assurance Agreement.

A megawatt of Capacity Credit shall satisfy
  a megawatt of capacity obligation imposed under the Reliability Assurance Agreement.
  Capacity Credits purchased from a PJM Capacity Credit Market shall not be adjusted
  for forced outages or other reasons. Because Capacity Credits are based on Capacity
  Resources, no further capability or deliverability demonstrations beyond those
  for the related Capacity Resource shall be required.

5.6   Deficiency Charges.

If the Office of the Interconnection determines
  that the first Market Seller in a PJM Capacity Credit Market of a Capacity Credit
  did not have sufficient Unforced Capacity to support the Capacity Credit transaction
  at the time for which the Capacity Credit was applicable, any such deficiency
  shall be satisfied through payment of deficiency charges by such first Market
  Seller calculated as specified in the Reliability Assurance Agreement. Any amounts
  collected from such deficiency charges shall be distributed in accordance with
  the Reliability Assurance Agreement.

5.7   Fixed Transmission Rights.

Acquisition of a Capacity Credit shall not
  entitle the holder to a Fixed Transmission Right.

5.8   Confidentiality.

The following information submitted to the
  Office of the Interconnection in connection with any PJM Capacity Credit Market
  shall be deemed confidential information for purposes of Section 18.17 of the
  Agreement: (i) the terms and conditions of all Sell Offers and Buy Bids; and
  (ii) the terms and conditions of any bilateral transactions for capacity or
  Capacity Credits.

6.   OPERATION OF THE PJM CAPACITY CREDIT
  MARKETS

6.1   Content of Sell Offers.

6.1.1   Specifications.

Sell Offers shall specify:

i)   The quantity of Capacity Credits offered,
  in increments of 0.1 megawatt;

ii)   The minimum price, in dollars and cents
  per megawatt per day, that will be accepted by the seller;

iii)   For a PJM Daily Capacity Credit Market,
  the dates on which the offered Capacity Credits may be used; and

iv)   For a PJM Monthly Capacity Credit Market,
  the month or months for which the offered Capacity Credits may be used.

6.1.2   Market-based Offers.

A Market Seller that is
  authorized by FERC to sell electric generating capacity at market-based prices,
  or that is not required to have such authorization, may submit Sell Offers to
  PJM Capacity Credit Markets that specify market-based prices.

6.1.3   Availability of Capacity Credits
  for Sale.

i)   The Office of the Interconnection shall
  determine the maximum megawatts of Capacity Credits each Market Seller may offer
  in a PJM Capacity Credit Market, through verification of the availability of
  megawatts of capacity from: (a) Capacity Resources owned by or under contract
  to the Market Seller; (b) rights obtained in bilateral transactions; (c) the
  results of prior PJM Capacity Credit Markets; and (d) such other information
  as may be available to the Office of the Interconnection. The Office of the
  Interconnection may reject Sell Offers or portions of Sell Offers for Capacity
  Credits determined by it not to be available for sale.

ii)   The Office of the Interconnection shall
  determine the maximum amount of Capacity Credits available for sale in a PJM
  Capacity Credit Market as of the beginning of the period during which Buy Bids
  and Sell Offers are accepted for each market. To enable the Office of the Interconnection
  to make this determination, no bilateral transactions for capacity or Capacity
  Credits applicable to the period covered by a PJM Capacity Credit Market will
  be processed from the beginning of the period for submission of Sell Offers
  and Buy Bids for that market until completion of the clearing determination
  for that market. Processing of such bilateral transactions will recommence once
  all sales for that market are deemed final as specified below.

iii)   In order for a bilateral transaction
  for the purchase and sale of a Capacity Credit to be processed by the Office
  of the Interconnection, both parties to the transaction must notify the Office
  of the Interconnection of the transfer of the Capacity Credit from the seller
  to the buyer in accordance with procedures established by the Office of the
  Interconnection.

6.2   Content of Buy Bids.

Buy Bids shall specify:

i)   The quantity of Capacity Credits desired,
  in increments of 0.1 megawatt;

ii)   The maximum price, in dollars and cents
  per megawatt per day, that will be paid by the buyer;

iii)   For a PJM Daily Capacity Credit Market,
  the dates for which Capacity Credits are desired; and

iv)   For a PJM Monthly Capacity Credit Market,
  the month or months for which Capacity Credits are desired.

6.3   Submission of Sell Offers and Buy Bids.

The submission of Sell Offers and Buy Bids
  shall be subject to the following requirements:

i)   A Sell Offer or Buy Bid that fails to specify
  price or quantity, or the date or months for which Capacity Credits are to be
  used if applicable, shall be rejected by the Office of the Interconnection.

ii)   All Sell Offers and Buy Bids are for an
  Up-To Block.

iii)   All Sell Offers and Buy Bids for a PJM
  Daily Capacity Market must be received by the Office of the Interconnection
  during a specified period, as determined by the Office of the Interconnection.
  A Sell Offer or Buy Bid may be withdrawn by a notification of withdrawal received
  by the Office of the Interconnection at any time during the foregoing period,
  but may not be withdrawn after that period.

iv)   Sell Offers and Buy Bids for a PJM Monthly
  Capacity Credit Market must be received by the Office of the Interconnection
  during a specified period, as determined by the Office of the Interconnection,
  on the day of each month designated by the Office of the Interconnection for
  the conduct of a PJM Monthly Capacity Credit Market. A Sell Offer or Buy Bid
  may be withdrawn by a notification of withdrawal received by the Office of the
  Interconnection at any time during the foregoing period, but may not be withdrawn
  after that period.

v)   Sell Offers and Buy Bids shall be submitted
  or withdrawn via the Internet site designated by the Office of the Interconnection;
  provided, however, that if that Internet site cannot be accessed at any time
  during the period specified in the foregoing paragraph, a Sell Offer or Buy
  Bid may be submitted or withdrawn by a facsimile transmitted to the number specified
  by the Office of the Interconnection.

6.4   Conduct of PJM Capacity Credit Markets.

6.4.1   PJM Daily Capacity Credit Markets.

Following the submission
  of Sell Offers and Buy Bids in accordance with the specified deadline for PJM
  Daily Capacity Credit Markets, a PJM Daily Capacity Credit Market will be conducted
  each day. Each such PJM Daily Capacity Credit Market will clear Sell Offers
  and Buy Bids for Capacity Credits for use the next day.

6.4.2   PJM Monthly Capacity Credit Markets.

Following the submission
  of Sell Offers and Buy Bids in accordance with the specified deadline for PJM
  Monthly Capacity Credit Markets, a PJM Monthly Capacity Credit Market will be
  conducted. Each such PJM Monthly Capacity Credit Market will clear Sell Offers
  and Buy Bids for Capacity Credits for use in each of the following twelve months.

6.5   Market Clearing Procedures.

i)   For purposes of the rank ordering and market
  clearing procedures described below, the Office of the Interconnection will:
  (a) evaluate all Sell Offers for an Up-To Block at the same price as one Sell
  Offer for an Up-to Block, with the quantity equal to the total quantity of the
  equally-priced Sell Offers; and (b) evaluate all Buy Bids for an Up-To Block
  at the same price as one Buy Bid for an Up-to Block, with the quantity equal
  to the total quantity of the equally-priced Buy Bids.

ii)   The Office of the Interconnection will
  rank order all Sell Offers and Buy Bids by price. Sell Offers will be ranked
  by lowest price first and then ranked in ascending price order. Buy Bids will
  be ranked by highest price first and then ranked in descending price order.
  In the event that a Market Participant enters one or more Buy Bids with a price
  higher than the lowest offer price of that Market Participant's Sell Offers,
  then all of the Market Participant's Buy Bids priced higher than its lowest
  priced Sell Offer shall be rejected.

iii)   The Office of the Interconnection will
  determine the largest quantity of Sell Offers and Buy Bids for which the price
  of the marginal Sell Offer is equal to or less than the price of the marginal
  Buy Bid. The market will clear at price specified in the marginal Sell Offer.

iv)   If a marginal Sell Offer or Buy Bid is
  a combination of Sell Offers or Buy Bids deemed to be a single Sell Offer or
  Buy Bid for an Up-To Block as specified above, the quantity purchased or sold
  will be allocated among the combined Sell Offers or Buy Bids in proportion to
  the quantities offered in each of the combined Sell Offers or Buy Bids.

v)   If all Sell Offers remaining in the rank
  order are at prices higher than the highest price of any Buy Bid remaining in
  the rank order, the market will be cleared with no transactions, and a market
  clearing price will not be determined.

6.6   Settlement Procedures.

Upon determination of the market clearing
  price as specified above: (a) all Sell Offers at a price equal to or less than
  the market clearing price and not removed from the rank ordering and for which
  there is sufficient Buy Bid demand at or above the market clearing price will
  be deemed sold at the market clearing price, and all Buy Bids at a price equal
  to or greater than the market clearing price and not removed from the rank ordering
  and for which there is sufficient Sell Offer supply at or below the market clearing
  price will be deemed satisfied at the market clearing price, with any Up-To
  Blocks split and pro-rated as may be appropriate; and (b) the accounts of Market
  Sellers and Market Buyers will be credited or debited accordingly. The foregoing
  determinations shall be made, and all sales and purchases shall be deemed final,
  as of specified times, as designated by the Office of the Interconnection, on
  the day on which each PJM Capacity Market is conducted.

6.7   Billing.

The Office of the Interconnection shall prepare
  a billing statement for each Market Participant in accordance with the charges
  and credits specified in this Schedule, and showing the net amount to be paid
  or received by each Market Participant. Billing statements for PJM Daily Capacity
  Markets shall be rendered following the end of each month for Capacity Credits
  bought and sold in the month just ended. Billing statements for PJM Monthly
  Capacity Credit Markets shall be rendered following the end of the month for
  which the Capacity Credit applies. Billing statements shall provide sufficient
  detail, as specified in the PJM Manuals, to allow verification of the billing
  amounts and completion of the Market Participant's internal accounting. Payment
  of statements shall be made in accordance with the Agreement.

6.8   Time Standard.

All deadlines for the submission or withdrawal
  of Sell Offers or Buy Bids, or for other purposes specified in this Schedule,
  shall be determined by the time observed in the Eastern time zone.

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