<PAGE>

                     AMENDED AND RESTATED 
                      OPERATING AGREEMENT 
                               OF 
                  PJM INTERCONNECTION, L.L.C. 
                      Dated June 2, 1997 
                 (Revised December 31, 1997) 
                       DRAFT: 12/18/97 


<PAGE>

                  OPERATING AGREEMENT 

                   TABLE OF CONTENTS 

1. DEFINITIONS 
 .......................................................... 2 
   1.1 Act................................................ 2 
   1.2 Affiliate.......................................... 2 
   1.3 Agreement.......................................... 2 
   1.4 Annual Meeting of the Members...................... 2 
   1.5 Board Member....................................... 2 
   1.6 Capacity Resource.................................. 2 
   1.7 Control Area....................................... 3 
   1.8 Electric Distributor............................... 3 
   1.9 Effective Date. ................................... 3 
   1.10 Emergency......................................... 3 
   1.11 End-Use Customer.................................. 3 
   1.12 FERC.............................................. 3 
   1.13 Finance Committee................................. 4 
   1.14 Generation Owner.................................. 4 
   1.15 Good Utility Practice............................. 4 
   1.16 Interconnection................................... 4 
   1.17 LLC............................................... 4 
   1.18 Load Serving Entity............................... 4 
   1.19 Locational Marginal Price......................... 4 
   1.20 MAAC.............................................. 4 
   1.21 Market Buyer...................................... 5 
   1.22 Market Participant................................ 5 
   1.23 Market Seller..................................... 5 
   1.24 Member............................................ 5 
   1.25 Members Committee................................. 5 
   1.26 NERC.............................................. 5 
   1.27 Office of the Interconnection..................... 5 
   1.28 Operating Reserve................................. 5 
   1.29 Original PJM Agreement............................ 5 
   1.30 Other Supplier.................................... 6 
   1.31 PJM Board......................................... 6 
   1.32 PJM Control Area.................................. 6 
   1.33 PJM Dispute Resolution Procedures................. 6 
   1.34 PJM Interchange Energy Market..................... 6 
   1.35 PJM Manuals....................................... 6 
   1.36 PJM Tariff........................................ 6 
   1.37 Planning Period................................... 6 
   1.38 President......................................... 6 
   1.39 Related Parties................................... 7 
   1.40 Reliability Assurance Agreement................... 7 
   1.41 Sector Votes...................................... 7 
   1.42 State............................................. 7 
   1.43 System............................................ 7 
   1.44 Transmission Facilities........................... 7 
   1.45 Transmission Owner................................ 7 
   1.46 Transmission Owners Agreement..................... 8 
   1.47 User Group........................................ 8 
   1.48 Voting Member..................................... 8 
   1.49 Weighted Interest................................. 8 
2. FORMATION, NAME; PLACE OF BUSINESS..................... 8 
   2.1 Formation of LLC; Certificate of Formation. ....... 8 
   2.2 Name of LLC........................................ 9 
   2.3 Place of Business.................................. 9 
   2.4 Registered Office and Registered Agent............. 9 
3. PURPOSES AND POWERS OF LLC............................. 9 
   3.1 Purposes........................................... 9 
   3.2 Powers............................................ 10 
4. EFFECTIVE DATE AND TERMINATION........................ 10 
   4.1 Effective Date and Termination.....................10 
   4.2 Governing Law..................................... 10 
5. WORKING CAPITAL AND CAPITAL CONTRIBUTIONS ............ 11 
   5.1 Funding of Working Capital and 
       Capital Contributions............................. 11 
   5.2 Contributions to Association...................... 11 
6. TAX STATUS AND DISTRIBUTIONS.......................... 11 
   6.1 Tax Status........................................ 11 
   6.2 Return of Capital Contributions................... 12 
   6.3 Liquidating Distribution.......................... 12 
7. PJM BOARD............................................. 12 
   7.1 Composition....................................... 12 
   7.2 Qualifications.................................... 13 
   7.3 Term of Office.................................... 13 
   7.4 Quorum............................................ 13 
   7.5 Operating and Capital Budgets..................... 14 
   7.5.1 Finance Committee............................... 14 
   7.5.2 Adoption of Budgets............................. 14 
   7.6 By-laws........................................... 14 
   7.7 Duties and Responsibilities of the PJM Board. .... 14 
8. MEMBERS COMMITTEE..................................... 16 
   8.1 Sectors........................................... 16 
   8.1.1 Designation..................................... 16 
   8.1.2 Related Parties................................. 17 
   8.2 Representatives................................... 17 
   8.2.1 Appointment..................................... 17 
   8.2.2 Regulatory Authorities.......................... 17 
   8.2.3 Initial Representatives......................... 17 
   8.2.4 Change of or Substitution for a Representative.. 17 
   8.3 Meetings.......................................... 18 
   8.3.1 Regular and Special Meetings.................... 18 
   8.3.2 Attendance...................................... 18 
   8.3.3 Quorum.......................................... 18 
   8.4 Manner of Acting.................................. 18 
   8.5 Chair and Vice Chair of the Members Committee..... 19 
   8.5.1 Selection and Term.............................. 19 
   8.5.2 Duties.......................................... 19 
   8.6 Other Committees.................................. 19 
   8.7 User Groups....................................... 20 
   8.8 Powers of the Members Committee................... 20 
9. OFFICERS.............................................. 21 
   9.1 Election and Term................................. 21 
   9.2 President......................................... 21 
   9.3 Secretary......................................... 21 
   9.4 Treasurer......................................... 22 
   9.5 Renewal of Officers; Vacancies.................... 22 
   9.6 Compensation...................................... 22 
10. OFFICE OF THE INTERCONNECTION........................ 22 
   10.1 Establishment.................................... 22 
   10.2 Processes and Organization....................... 23 
   10.3 Confidential Information......................... 23 
   10.4 Duties and Responsibilities...................... 25 
11. MEMBERS.............................................. 25 
   11.1 Management Rights................................ 25 
   11.2 Other Activities................................. 25 
   11.3 Member Responsibilities.......................... 25 
   11.3.1 General........................................ 25 
   11.3.2 Facilities Planning and Operation.............. 26 
   11.3.3 Electric Distributors.......................... 27 
   11.3.4 Reports to the Office of the Interconnection... 28 
   11.4 Regional Transmission Expansion Planning Protocol 28 
   11.5 Member Right to Petition......................... 28 
   11.6 Membership Requirements.......................... 29 
12. TRANSFERS OF MEMBERSHIP INTEREST..................... 30 
13. INTERCHANGE.......................................... 30 
   13.1 Interchange Arrangements with Non-Members. ...... 30 
   13.2 Energy Market.................................... 30 
14. METERING............................................. 30 
   14.1 Installation, Maintenance and Reading of Meters.. 30 
   14.2 Metering Procedures.............................. 30 
   14.3 Integrated Megawatt-Hours........................ 31 
   14.4 Meter Locations.................................. 31 
15. ENFORCEMENT OF OBLIGATIONS........................... 31 
   15.1 Failure to Meet Obligations...................... 31 
   15.1.1 Termination of Market Buyer Rights. ........... 31 
   15.1.2 Termination of Market Seller Rights. .......... 31 
   15.1.3 Payment of Bills............................... 32 
   15.2 Enforcement of Obligations....................... 33 
   15.3 Obligations to a Member in Default............... 33 
   15.4 Obligations of a Member in Default............... 33 
   15.5 No Implied Waiver................................ 33 
16. LIABILITY AND INDEMNITY.............................. 34 
   16.1 Members.......................................... 34 
   16.2 LLC Indemnified Parties.......................... 35 
   16.3 Worker' Compensation Claims...................... 36 
   16.4 Limitation of Liability.......................... 36 
   16.5 Resolution of Disputes........................... 36 
   16.6 Gross Negligence or Willful Misconduct........... 36 
   16.7 Insurance........................................ 37 
17. MEMBER REPRESENTATIONS, WARRANTIES AND COVENANT...... 37 
   17.1 Representations and Warranties................... 37 
   17.1.1 Organization and Existence..................... 37 
   17.1.2 Power and Authority............................ 37 
   17.1.3 Authorization and Enforceability............... 37 
   17.1.4 No Government Consents......................... 37 
   17.1.5 No Conflict or Breach.......................... 37 
   17.1.6 No Proceedings................................. 38 
   17.2 Municipal Electric Systems....................... 38 
   17.3 Survival......................................... 38 
18. MISCELLANEOUS PROVISIONS............................. 38 
   18.1 Transmission Owners Rights....................... 38 
   18.2 Fiscal and Taxable Year.......................... 38 
   18.3 Reports.......................................... 38 
   18.4 Bank Accounts; Checks, Notes and Drafts.......... 39 
   18.5 Books and Records................................ 39 
   18.6 Amendment........................................ 40 
   18.7 Interpretation................................... 40 
   18.8 Severability..................................... 40 
   18.9 Force Majeure.................................... 41 
   18.10 Further Assurances.............................. 41 
   18.11 Seal............................................ 41 
   18.12 Counterparts.................................... 41 
   18.13 Costs of Meetings............................... 41 
   18.14 Notice.......................................... 42 
   18.15 Headings........................................ 42 
   18.16 No Third-Party Beneficiaries.................... 42 
   18.17 Confidentiality................................. 42 
   18.17.1 Party Access.................................. 42 
   18.17.2 Required Disclosure........................... 43 
   18.18 Termination and Withdrawal...................... 43 
   18.18.1 Termination................................... 43 
   18.18.2 Withdrawal.................................... 43 
   18.18.3 Winding Up.................................... 44 
SCHEDULE 1 - PJM INTERCHANGE ENERGY MARKET ............... 1 
1. MARKET OPERATIONS...................................... 1 
   1.1 Introduction....................................... 1 
   1.2 Cost-based Offers.................................. 1 
   1.3 Definitions........................................ 1 
   1.3.1 Dispatch Rate.................................... 1 
   1.3.2 Equivalent Load.................................. 1 
   1.3.3 External Market Buyer............................ 1 
   1.3.4 External Resource................................ 2 
   1.3.5 Fixed Transmission Right......................... 2 
   1.3.6 Generating Market Buyer.......................... 2 
   1.3.7 Generator Forced Outage.......................... 2 
   1.3.8 Generator Maintenance Outage..................... 2 
   1.3.9 Generator Planned Outage......................... 2 
   1.3.10 Internal Market Buyer........................... 2 
   1.3.11 Inadvertent Interchange......................... 2 
   1.3.12 Market Operations Center........................ 3 
   1.3.13 Maximum Generation Emergency.................... 3 
   1.3.14 Minimum Generation Emergency.................... 3 
   1.3.15 Network Resource................................ 3
   1.3.16 Network Service User............................ 3 
   1.3.17 Network Transmission Service.................... 3 
   1.3.18 Normal Maximum Generation....................... 3 
   1.3.19 Normal Minimum Generation....................... 3 
   1.3.20 Offer Data...................................... 3 
   1.3.21 Office of the Interconnection Control Center.... 4 
   1.3.22 Operating Day.................................. 4 
   1.3.23 Operating Margin............................... 4 
   1.3.24 Operating Margin Customer...................... 4 
   1.3.25 PJM Interchange................................ 4 
   1.3.26 PJM Interchange Export......................... 4 
   1.3.27 PJM Interchange Import......................... 5 
   1.3.28 PJM Open Access Same-time Information System... 5 
   1.3.29 Point-to-Point Transmission Service. .......... 5 
   1.3.30 Ramping Capability............................. 5 
   1.3.31 Regulation..................................... 5 
   1.3.32 Regulation Class............................... 5 
   1.3.33 Spot Market Energy............................. 5 
   1.3.34 Transmission Congestion Charge................. 5 
   1.3.35 Transmission Congestion Credit................. 6
   1.3.36 Transmission Customer.......................... 6 
   1.3.37 Transmission Forced Outage..................... 6 
   1.3.38 Transmission Planned Outage.................... 6 
   1.4 Market Buyers..................................... 6 
   1.4.1 Qualification................................... 6 
   1.4.2 Submission of Information....................... 7 
   1.4.3 Fees and Costs.................................. 7 
   1.4.4 Office of the Interconnection Determination..... 8 
   1.4.5 Existing Participants........................... 8 
   1.4.6 Withdrawal...................................... 8 
   1.5 Market Sellers.................................... 9 
   1.5.1 Qualification................................... 9 
   1.5.2 Withdrawal...................................... 9 
   1.6 Office of the Interconnection..................... 9 
   1.6.1 Operation of the PJM Interchange Energy Market...9 
   1.6.2 Scope of Services............................... 9 
   1.6.3 Records and Reports............................ 10 
   1.6.4 PJM Manuals.................................... 11 
   1.7 General.......................................... 11 
   1.7.1 Market Sellers................................. 11 
   1.7.2 Market Buyers.................................. 11 
   1.7.3 Agents......................................... 11 
   1.7.4 General Obligations of the Market Participants. 11 
   1.7.5 Market Operations Center....................... 13 
   1.7.6 Scheduling and Dispatching..................... 13 
   1.7.7 Pricing........................................ 13 
   1.7.8 Generating Market Buyer Resources.............. 13 
   1.7.9 Delivery to an External Market Buyer........... 13 
   1.7.10 Other Transactions............................ 14 
   1.7.11 Emergencies................................... 14 
   1.7.12 Fees and Charges.............................. 14 
   1.7.13 Relationship to PJM Control Area.............. 14 
   1.7.14 PJM Manuals................................... 15 
   1.7.15 Corrective Action............................. 15 
   1.7.16 Recording..................................... 15 
   1.7.17 Operating Reserves............................ 15 
   1.7.18 Regulation.................................... 15 
   1.7.19 Ramping....................................... 16 
   1.7.20 Communication and Operating Requirements...... 16 
   1.7.21 Multi-settlement System....................... 17 


   1.8 Selection, Scheduling and Dispatch 
       Procedure Adjustment Process..................... 17 
   1.8.1 PJM Dispute Resolution Agreement............... 17 
   1.8.2 Market or Control Area Hourly 
         Operational Disputes. ......................... 17 
   1.9 Prescheduling.................................... 18 
   1.9.1 Outage Scheduling.............................. 18 
   1.9.2 Planned Outages................................ 18 
   1.9.3 Generator Maintenance Outages.................. 19 
   1.9.4 Forced Outages................................. 19 
   1.9.5 Market Participant Responsibilities............ 20 
   1.9.6 Internal Market Buyer Responsibilities......... 20 
   1.9.7 Market Seller Responsibilities................. 20 
   1.9.8 Office of the Interconnection Responsibilities. 20 
   1.10 Scheduling...................................... 21 
   1.10.1 Day-Ahead Scheduling.......................... 21 
   1.10.2 Pool-Scheduled Resources...................... 23 
   1.10.3 Self-scheduled Resources...................... 24 
   1.10.4 Capacity Resources............................ 24 
   1.10.5 External Resources............................ 25 
   1.10.6 External Market Buyers........................ 26 
   1.10.7 Bilateral Transactions........................ 26 
   1.10.8 Office of the Interconnection Responsibilities.27 
   1.10.9 Hourly Scheduling............................. 27 
   1.11 Dispatch........................................ 28 
   1.11.1 Resource Output............................... 28 
   1.11.2 Operating Basis............................... 28
   1.11.3 Pool-dispatched Resources..................... 29 
   1.11.4 Regulation.................................... 29 
   1.11.5 PJM Open Access Same-time Information System.. 29 
2. CALCULATION OF LOCATIONAL MARGINAL PRICES............ 30 
   2.1 Introduction..................................... 30 
   2.2 General.......................................... 30 
   2.3 Determination of System Conditions Using
       the State Estimator.............................. 31 
   2.4 Determination of Energy Offers Used in 
       Calculating Locational Marginal Prices........... 31 
   2.5 Calculation of Locational Marginal Prices........ 32 
   2.6 Performance Evaluation........................... 32 
3. ACCOUNTING AND BILLING............................... 33 
   3.1 Introduction..................................... 33 
   3.2 Market Buyers.................................... 33 
   3.2.1 Spot Market Energy............................. 33 
   3.2.2 Regulation..................................... 34 
   3.2.3 Operating Reserves............................. 35 
   3.2.4 Transmission Congestion........................ 35 
   3.2.5 Transmission Losses............................ 35 
   3.2.6 Emergency Energy............................... 36 
   3.2.7 Billing........................................ 36 
   3.3 Market Sellers................................... 36 
   3.3.1 Spot Market Energy............................. 37 
   3.3.2 Regulation..................................... 37 
   3.3.3 Operating Reserves............................. 37 
   3.3.4 Emergency Energy............................... 37 
   3.3.5 Billing........................................ 38 
   3.4 Transmission Customers........................... 38 
   3.4.1 Transmission Congestion........................ 38 
   3.4.2 Transmission Losses............................ 38 
   3.4.3 Billing........................................ 38 
   3.5 Other Control Areas.............................. 39 
   3.5.1 Energy Sales................................... 39 
   3.5.2 Operating Margin Sales......................... 39 
   3.5.3 Transmission Congestion........................ 39 
   3.5.4 Billing........................................ 39 
   3.6 Metering Reconciliation.......................... 39 
   3.6.1 Meter Correction Billing....................... 39 
   3.6.2 Meter Corrections Between Market Participants.. 40 
   3.6.3 500 kV Meter Errors............................ 40 
   3.6.4 Meter Corrections Between Control Areas........ 40 
   3.6.5 Meter Correction Data.......................... 40 
   3.6.6 Correction Limits.............................. 40 
4. RATE TABLE........................................... 41 
   4.1 Offered Price Rates.............................. 41 
   4.2 Transmission Losses.............................. 41 
   4.3 Emergency Energy Purchases....................... 41 
5. CALCULATION OF TRANSMISSION CONGESTION CHARGES 
    AND CREDITS......................................... 42 
   5.1 Transmission Congestion Charge Calculation ...... 42 
   5.1.1 Calculation by Office of the Interconnection... 42 
   5.1.2 General........................................ 42 
   5.1.3 Network Service User Calculation. ............. 42 
   5.1.4 Transmission Customer Calculation.............. 42 
   5.1.5 Operating Margin Customer Calculation.......... 42 
   5.1.6 Total Transmission Congestion Charges.......... 43 
   5.2 Transmission Congestion Credit Calculation....... 43 
   5.2.1 Eligibility.................................... 43 
   5.2.2 Fixed Transmission Rights...................... 43 
   5.2.3 Target Allocation for Network Service Users.... 44 
   5.2.4 Target Allocation for other Holders............ 44 
   5.2.5 Calculation of Transmission Congestion Credits. 44 
   5.2.6 Distribution of Excess Congestion Charges...... 44 
SCHEDULE 2 - COMPONENTS OF COST.......................... 1 
SCHEDULE 3 - ALLOCATION OF OI COSTS...................... 1 
SCHEDULE 4 - STANDARD MEMBERSHIP AGREEMENT............... 1 
SCHEDULE 5 - DISPUTE RESOLUTION PROCEDURE................ 1 
1. DEFINITIONS........................................... 1 
   1.1 Alternate Dispute Resolution Committee............ 1 
   1.2 MAAC Dispute Resolution Committee................. 1 
   1.3 Related PJM Agreements............................ 1 
2. PURPOSES AND OBJECTIVES............................... 1 
   2.1 Common and Uniform Procedures..................... 1 
   2.2 Interpretation.................................... 1 
3. NEGOTIATION AND MEDIATION............................. 2 
   3.1 When Required..................................... 2 
   3.2 Procedures........................................ 2 
   3.2.1 Initiation...................................... 2 
   3.2.2 Selection of Mediator........................... 2 
   3.2.3 Advisory Mediator............................... 2 
   3.2.4 Mediation Process............................... 3 
   3.2.5 Mediator's Assessment........................... 3 
   3.3 Costs............................................. 4 
4. ARBITRATION........................................... 4 
   4.1 When Required..................................... 4 
   4.2 Binding Decision.................................. 4 
   4.3 Initiation........................................ 4 
   4.4 Selection of Arbitrator(s)........................ 4 
   4.5 Procedures........................................ 5 
   4.6 Summary Disposition and Interim Measures.......... 5 
   4.6.1 Lack of Good Faith Basis........................ 5 
   4.6.2 Discovery Limits................................ 5 
   4.6.3 Interim Decision................................ 5 
   4.7 Discovery of Facts................................ 6 
   4.7.1 Discovery Procedures............................ 6 
   4.7.2 Procedures Arbitrator........................... 6 
   4.8 Evidentiary Hearing............................... 6 
   4.9 Confidentiality................................... 7 
   4.9.1 Designation..................................... 7 
   4.9.2 Compulsory Disclosure........................... 7 
   4.9.3 Public Information.............................. 7 
   4.10 Timetable........................................ 8 
   4.11 Advisory Interpretations......................... 8 
   4.12 Decisions........................................ 8 
   4.13 Costs............................................ 8 
   4.14 Enforcement...................................... 9 
5. ALTERNATE DISPUTE RESOLUTION COMMITTEE ............... 9 
   5.1 Membership........................................ 9 
   5.1.1 Representatives................................. 9 
   5.1.2 Term............................................ 9 
   5.2 Voting Requirements............................... 9 
   5.3 Officers.......................................... 9 
   5.4 Meetings......................................... 10 
   5.5 Responsibilities................................. 10 
SCHEDULE 6 - REGIONAL TRANSMISSION EXPANSION 
   PLANNING PROTOCOL..................................... 1 
1. REGIONAL TRANSMISSION EXPANSION PLANNING PROTOCOL..... 1 
   1.1 Purpose and Objectives............................ 1 
   1.2 Conformity with NERC and MAAC Criteria............ 1 
   1.3 Establishment of Committees....................... 1 
   1.4 Contents of the Regional Transmission 
       Expansion Plan.................................... 2 
   1.5 Procedure for Development of the Regional 
       Transmission Expansion Plan....................... 2 
   1.5.1 Commencement of the Process..................... 2 
   1.5.2 Development of Scope, Assumptions and 
         Procedures...................................... 3 
   1.5.3 Scope of Studies................................ 3 
   1.5.4 Supply of Data.................................. 3 
   1.5.5 Coordination of the Regional Transmission 
         Expansion Plan.................................. 3 
   1.5.6 Development of the Recommended Regional 
         Transmission Expansion Plan..................... 3 

   1.6 Approval of the Final Regional 
       Transmission Expansion Plan ...................... 4 
   1.7 Obligation to Build .............................. 5 
   1.8 Relationship to the PJM Control Area 
       Open Access Transmission PJM Tariff............... 5 
SCHEDULE 7 - UNDERFREQUENCY RELAY OBLICATIONS 
   AND CHARGES........................................... 1 
1. UNDERFREQUENCY RELAY OBLIGATION....................... 1 
   1.1 Application....................................... 1 
   1.2 Obligations....................................... 1 
2. UNDERFREQUENCY RELAY CHARGES.......................... 1 
3. DISTRIBUTION OF UNDERFREQUENCY RELAY CHARGES.......... 2 
   3.1 Share of Charges.................................. 2 
   3.2 Allocation by the Office of the Interconnection... 2 
SCHEDULE 8 -DELEGATION OF RELIABILITY RESPONSIBILITIES... 1 
1. DELEGATION............................................ 1 
2. NEW PARTIES........................................... 1 
3. IMPLEMENTATION OF RELIABILITY ASSURANCE AGREEMENT. ... 1 
SCHEDULE 9 - EMERGENCY PROCEDURE CHARGES ................ 1 
1. EMERGENCY PROCEDURE CHARGE............................ 1 
2. DISTRIBUTION OF EMERGENCY PROCEDURE CHARGES .......... 1 
   2.1 Complying Parties................................. 1 
   2.2 All Parties....................................... 1 
















<PAGE>
                       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 2 nd 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: 










<PAGE>
                           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, Section 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. 

	"Capacity Resource" 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 0 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 0 of Schedule 1 of this Agreement. 

	1.20 MAAC. 

	"MAAC" shall mean the Mid-Atlantic Area Council, a 
reliability council under Section 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. 

	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. 

	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) a seller, 
buyer or transmitter of electric capacity or energy in, from or 
through the PJM Control Area, 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. 

	1.43 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 0 
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 
	B = the Member's internal peak demand for the previous 
calendar year 
	C = the sum of factor B for all Members 
	D = the Member's net installed generating capacity located 
in the PJM Control Area as of January 1 of the current calendar 
year 
	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 
0 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. 

	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 

	1 Funding of Working Capital and Capital Contributions. 

	(a) The Office of the Interconnection shall attempt to 
obtain financing of up to five million two hundred thousand 
dollars ($5,200,000) 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. Section 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. 

	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, two 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, each State electric utility regulatory commission 
with regulatory jurisdiction within the PJM Control Area, and 
each office of consumer advocate from each State all or any part 
of the territory of which is 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 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. 

	8.2.4 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 18.13 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.  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 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 within the PJM Control Area 
or an Eligible Customer under the PJM Tariff; 

	   ii) If not a Transmission Owner, be a Generation Owner, 
an Other Supplier, an Electric Distributor, or an End-Use 
Consumer; 

	  iii) Be engaged in buying, selling or transmitting 
electric energy in or through the Interconnection or have a good 
faith intent to do so; and 

	   iv) 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. 

              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 if it determines that the Market Buyer does not continue 
to meet the obligations set forth in this Agreement, 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 it.  The Office of the 
Interconnection shall reinstate a Market Buyer's right to make 
purchases from the PJM Interchange Energy 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 
transactions in the PJM Interchange Energy Market or other 
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. 
Any Member that fails to make such payment, 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 
upon expiration of the 30 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, 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. Section 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 30th 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 energy in the PJM Interchange Energy Market 
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. 

	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, but such 
assessment shall in no way relieve the defaulting Member of its 
obligations, and shall confer upon the Members Committee the 
right to recover the assessed amounts from the defaulting Member. 
In addition to any amounts in default, the defaulting Member 
shall be liable to the LCC for reasonable costs incurred in 
enforcing the defaulting Member's obligations. 

	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 160 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' 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. 

	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. 

	18.17.2 Required Disclosure. 

	(a) Notwithstanding anything in the foregoing Section to the 
contrary, if a Member or the Office of the Interconnection is 
required by applicable law, or in the course of administrative or 
judicial proceedings, to disclose 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) The Office of the Interconnection shall endeavor to 
impose on any contractors retained to provide technical support 
or otherwise to assist with the implementation or administration 
of this Agreement 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. 

	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. 


<PAGE>
                          SCHEDULE 1 
                PJM INTERCHANGE ENERGY MARKET 
      (Revises and replaces former Schedules 7.01 and 7.03) 

	Issued:  June 2, 1997 
	Effective:  August 1, 1997 

                      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 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 an Internal Market 
Buyer's net system requirements to serve its customer load in the 
PJM Control Area, 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 number determined as 
specified in Section 0 of this Schedule. 

	1.3.6 Generating Market Buyer. 

	"Generating Market Buyer" shall mean an Internal Market 
Buyer 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. 

	1.3.10 Internal Market Buyer. 

	"Internal Market Buyer" shall mean a Market Buyer making 
purchases of energy from the PJM Interchange Energy Market for 
consumption by end-users inside the PJM Control Area. 

	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. 

	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. 

	1.3.15 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. 

	.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) the amount 
by which an Internal Market Buyer's hourly Equivalent Load 
exceeds, or is exceeded by, the sum of the hourly outputs of the 
Internal Market Buyer's operating generating resources; or (b) 
the hourly scheduled deliveries of Spot Market Energy by an 
External Market Seller; or (c) the hourly net metered output of 
any other Market Seller; or (d) the hourly scheduled deliveries 
of Spot Market Energy to an External Market Buyer. 

	1.3.26 PJM Interchange Export. 

	"PJM Interchange Export" shall mean the following, as 
determined in accordance with Schedules to this Agreement:  (a) 
the amount by which an Internal Market Buyer's hourly Equivalent 
Load is exceeded by the sum of the hourly outputs of the Internal 
Market Buyer's operating generating resources; or (b) the hourly 
scheduled deliveries of Spot Market Energy by a Market Seller 
from an External Resource; or (c) 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) the amount by which an Internal Market Buyer's hourly 
Equivalent Load exceeds the sum of the hourly outputs of the 
Internal Market Buyer's operating generating resources; or (b) 
the hourly scheduled deliveries of Spot Market Energy to an 
External Market Buyer. 

	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. 

	1.3.31 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 Regulation Class. 

	"Regulation Class" shall mean a subset of the generation 
units capable of providing Regulation to the PJM Control Area 
determined by a range of costs for providing Regulation as 
specified by the Office of the Interconnection using procedures 
specified in the PJM Manuals. 

	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. 

	1.3.34 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. 
	1.3.38 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 a Load Serving Entity shall establish to 
the satisfaction of the Office of the Interconnection that the 
end-users as to which it or its principal is the Load Serving 
Entity, and which 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 by the Load Serving Entity or 
its agent.  Such applicant shall further demonstrate that: 

	i) The foregoing Load Serving Entity (the applicant or its 
principal) is obligated to meet the requirements of the 
Reliability Assurance Agreement; and 

	ii) The foregoing Load Serving Entity 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 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) 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. 

	(e) 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 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 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 0, 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 execution of the PJM 
Dispute Resolution Agreement and 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 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, in 
accordance with the Schedules to this Agreement; 

	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 be individually metered in 
accordance with Section 0 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 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 0 to this Agreement. 

	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. 

	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 Internal Market 
Buyers 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.  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. 

	1.7.11 Emergencies. 

	he Office of the Interconnection, with the assistance of the 
Member's 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. 

	The Office of the Interconnection shall schedule to the 
Operating Reserve and load-following objectives of the PJM 
Control Area 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). 
	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) Internal Market Buyers shall: provide to the Office of 
the Interconnection forecasts of load to be served as required by 
the Office of the Interconnection; 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) External Market Buyers 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. 


	1.7.21 Multi-settlement System. 

	The PJM Interchange Energy Market shall be enhanced by an 
amendment to this Schedule, to be filed with FERC not later than 
December 31, 1997, that will provide for the implementation of a 
multi-settlement system as soon thereafter as shall be determined 
by the Office of the Interconnection to be reasonably practical. 
Such a system will provide an opportunity for Market Participants 
to commit and obtain commitments to energy prices and 
transmission congestion charges at certain specified deadlines in 
advance of the Office of the Interconnection's real-time 
dispatch.  The Members specified in Section 11.5(c) of the 
Agreement, working with the Office of the Interconnection, shall 
develop the details of the implementation of such a multi-
settlement system. 

	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, make 
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 intending to request 
market-based start-up and no-load fees in their 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. 

	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. 

	The following scheduling procedures and principles shall 
govern the commitment of resources to the PJM Interchange Energy 
Market over a period extending from one week to one day prior to 
the Operating Day that transactions are to take place.  
Scheduling encompasses the day-ahead and hourly scheduling 
process, through which the Office of the Interconnection 
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. 

	1.10.1 Day-Ahead 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. 

	(a) Each Internal Market Buyer shall submit to the Office of 
the Interconnection forecasts of its customer loads for the next 
Operating Day as required by the PJM Manuals.  If an Internal 
Market Buyer expects to curtail load at a specific Dispatch Rate, 
it should specify the Dispatch Rate and estimated load 
curtailment. 

	(b) An External Market Buyer shall submit 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, 
in accordance with the specifications set forth in the PJM 
Manuals. 

	(c) 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. 

	(d) 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 if the parties to the transaction are not willing 
to incur Transmission Congestion Charges 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; 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. 

	(e) Market Sellers wishing to sell on the PJM Interchange 
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. 

	(f) A Market Seller that wishes to sell Regulation service 
shall submit an offer for Regulation that shall specify the MW of 
Regulation being offered and the Regulation Class from which such 
Regulation is being offered.  The range of costs defining 
Regulation Classes, and the average cost for each Regulation 
Class, shall be determined periodically by the Office of the 
Interconnection on the basis of prior energy bid prices and 
appropriate fuel indices, in accordance with procedures specified 
in the PJM Manuals.  Qualified Regulation capability must satisfy 
the verification tests specified in the PJM Manuals.  

	(g) 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. 

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

	(i) The Office of the Interconnection shall post on the PJM 
Open Access Same-time Information System 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. 

	1.10.2 Pool-Scheduled Resources. 

	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 12:00 
noon offer deadline. 

	(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 Schedule 3 to this Agreement.  Alternatively, the 
Market Seller shall receive any cancellation fee reflected in the 
Market Seller's offer in lieu of start-up and no-load fees, if 
any, 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.  

	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. 

	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. 

	(b) Energy from a Capacity Resource that has not been 
selected as a pool-scheduled resource may be sold on a bilateral 
basis by the Market Seller, or may be self-scheduled.  A Capacity 
Resource that has not been selected as a pool-scheduled resource 
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 if the Office of the Interconnection 
declares a Maximum Generation Emergency.  Any such resource so 
scheduled and dispatched shall receive the applicable Locational 
Marginal 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 
scheduling process 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. 

	(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.  A 
Market Seller offering energy from External Resources on an 
aggregated basis and that does not deliver energy as scheduled by 
the Office of the Interconnection shall be assessed a non-
delivery charge as specified below. 

	(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.  A Market 
Seller offering an External Resource on a resource-specific basis 
that does not deliver energy as scheduled by the Office of the 
Interconnection shall be assessed a non-delivery charge as 
specified below, unless the resource being offered has suffered a 
Generator Forced Outage.  The burden shall be on the Market 
Seller to demonstrate to the reasonable satisfaction of the 
Office of the Interconnection that the resource being offered has 
experienced a Generator Forced Outage.  

	(d) Subject to the conditions specified in this paragraph, 
the non-delivery charge for External Resources that do not 
deliver energy as scheduled shall be calculated hourly as 
follows:  Pro-rated start-up plus hourly no-load fees specified 
in the Offer Data + [offered minimum dispatch level x (Locational 
Marginal Price - offered energy price) x 110%].  For purposes of 
the foregoing calculation:  (i) the Locational Marginal Price 
shall be the Locational Marginal Price at the buses at which the 
energy from the External Resource should have been delivered to 
the PJM Control Area; (ii) if the Locational Marginal Price less 
the offered energy price is less than zero, this difference shall 
be set to zero; and (iii) start-up and no-load fees shall be 
subject to the requirements of this Schedule. Payments or credits 
for non-delivery charges shall be used by the Office of the 
Interconnection to reduce or offset PJM Control Area costs for 
Operating Reserves.  

	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 the Locational Marginal Price 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. 

	(d) An External Market Buyer that does not take delivery of 
the amounts of energy specified in its request to purchase shall 
be assessed a non-delivery charge, or if using Point-to-Point 
service within the PJM Control Area shall pay for imbalance 
service as specified in the Tariff.  The non-delivery charge 
shall be calculated as the summation for all applicable busses of 
the product of (i) the Locational Marginal Price at each load bus 
at which delivery was not taken, times (ii) the amount of energy 
not taken each hour at such bus. The non-delivery charge shall 
not apply to deliveries curtailed by the Office of the 
Interconnection in accordance with this Schedule, or for periods 
when the Dispatch Rate exceeds the maximum value specified by the 
External Market Buyer in accordance with this Schedule. Payments 
or credits for non-delivery charges shall be used by the Office 
of the Interconnection to reduce or offset PJM Control Area costs 
for Operating Reserves. 

	1.10.7 Bilateral Transactions. 

	Bilateral transactions as to which the parties have notified 
the Office of the Interconnection by 12:00 p.m. of the day before 
the Operating Day that they are not willing to incur Transmission 
Congestion Charges shall be curtailed by the Office of the 
Interconnection as necessary to reduce or alleviate transmission 
congestion.  Bilateral transactions willing to incur congestion 
charges 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 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. In making this 
determination, 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 schedule of generation resources 
based on the foregoing determination.  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 on the PJM Open Access 
Same-time Information System its 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; and (ii) inform each Market Seller 
whether its offer or offers have been accepted. 

	(c) 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. 

	1.10.9 Hourly Scheduling 

	(a) Following the initial posting of the Office of the 
Interconnection's transmission congestion forecast, 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 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; 

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

	iii) 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. 

	(b) An External Market Buyer may refuse delivery of some or 
all of the energy it requested to purchase 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.  Any such refusal of delivery shall be subject 
to non-delivery charges in accordance with this Schedule. 

	1.11 Dispatch.

	he 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. 

	1.11.4 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. 

	(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. 

	(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.  

	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 every five 
minutes and integrated hourly values of such calculations shall 
be the basis of sales and purchases of energy in the PJM 
Interchange Energy Market and of Transmission Congestion Charges 
under the PJM Tariff. 

	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 
Locational Marginal Prices. 

	(a) To determine the energy offers submitted to the PJM 
Interchange Energy Market that shall be used to calculate the 
Locational Marginal 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 Locational Marginal Prices if: 

	i) the 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. 

	(b) In determining whether a resource satisfies the 
condition described in (a), 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 Locational Marginal 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 Locational Marginal Prices. 

	2.5 Calculation of Locational Marginal 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 
determined to be eligible for consideration under Section 2.4.  
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 Locational 
Marginal Price at that bus. 

	(b) 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 Locational 
Marginal 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 Locational Marginal 
Prices for that hour, which will determine prices in the PJM 
Interchange Energy Market and Transmission Congestion Costs under 
the PJM Tariff. 

	2.6 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) At the end of each hour during an Operating Day, the 
Office of the Interconnection shall calculate the load payment 
for each Market Buyer's load bus.  The load payment at each bus 
shall be the product of the Market Buyer's megawatts of load at 
such load bus in the hour times the Locational Marginal Price at 
the bus.  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 payment for each Market 
Buyer shall be the sum of the load payments for each of a Market 
Buyer's load busses.  

	(b) At the end of each hour during an Operating Day, the 
Office of the Interconnection shall calculate the generation 
revenue for each Generating Market Buyer's generation bus.  The 
generation revenue at each generation bus shall be the product of 
the Generating Market Buyer's megawatts of generation at such 
generation bus in the hour times the Locational Marginal Price at 
the bus.  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 of the generation 
revenues for each of the Generating Market Buyer's generation 
busses. 

	(c) 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 
payment and its total generation revenue.  The portions of the 
net bill attributable to net hourly PJM Interchange and to 
Transmission Congestion Charges shall be determined as set forth 
below. 

	(d) 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, 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) 
500 kV transmission losses; (v) deliveries pursuant to bilateral 
energy sales; (vi) receipts pursuant to bilateral energy 
purchases; (vii) Inadvertent Interchange allocated to the Market 
Buyer; and (viii) 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 0(0). For External Market Buyers, this calculation shall 
determine the energy delivered pursuant to the External Market 
Buyer's purchase request. 

	(e) The Office of the Interconnection shall calculate 
Locational Marginal Prices for each load and generation bus in 
the PJM Control Area, in accordance with Section 0 of this 
Schedule. 

	(f) An Internal Market Buyer shall be charged for Spot 
Market Energy purchases to the extent of its hourly net PJM 
Interchange Imports, determined as specified above.  An External 
Market Buyer shall be charged for its Spot Market Energy 
purchases based on the energy delivered to it, determined as 
specified above.  The Office of the Interconnection shall 
calculate an hourly weighted average Locational Marginal Price 
for each such Market Buyer, based on the Locational Marginal 
Price at each load bus and the Market Buyer's load at that bus.  
The total charge shall be the Market Buyer's total net PJM 
Interchange Imports times the weighted average Locational 
Marginal Price. 

	(g) A Generating Market Buyer shall be credited as a Market 
Seller for sales of Spot Market Energy to the extent of its 
hourly net PJM Interchange Exports, determined as specified 
above. The total credit shall be the sum of the credits 
determined by the product of (i) the hourly net amount of energy 
of PJM Interchange Exports at the applicable generation bus from 
each of the Generating Market Buyer's generation resources 
determined to be making such deliveries, times (ii) the hourly 
Locational Marginal Price at that generation bus. If the Office 
of the Interconnection dispatches energy to serve load in the PJM 
Control Area, the pool-dispatched generation resources determined 
to be making deliveries into PJM Interchange of such Generating 
Market Buyer shall be those that have the highest Locational 
Marginal Prices of the Market Seller's generation resources. 

	(h) If energy in excess of a Generating Market Buyer's 
Equivalent Load flows to the PJM Control Area from a self-
scheduled resource, the Generating Market Buyer shall receive a 
payment or credit for such excess energy at a rate equal to the 
lesser of (i) 95% of the Locational Marginal Price at the 
delivery bus for such energy, or (ii) the Locational Marginal 
Price at the delivery bus for such energy if the Locational 
Marginal Price is negative.  For purposes of the foregoing 
calculation, such excess energy shall be deemed to have been 
delivered from the Generating Market Buyer's self-scheduled 
resource or resources with the lowest Locational Marginal Price 
or Prices at the time of delivery.  Revenues attributable to the 
difference between the market clearing price in the PJM 
Interchange Energy Market and payments or credits for excess 
energy from self-scheduled resources shall be used by the Office 
of the Interconnection to reduce or offset PJM Control Area costs 
for Operating Reserves. 

	3.2.2 Regulation. 

	(a) Each Internal Market Buyer 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. 

	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 price in that hour for the Regulation 
Class from which the Regulation was supplied, as determined by 
the Office of the Interconnection in accordance with procedures 
specified in the PJM Manuals.  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 average price paid by the Office of 
the Interconnection for Regulation. 

	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) At the end of each Operating Day, the following 
determination shall be made for each synchronized pool-scheduled 
resource of each Market Seller: the total offered price for 
start-up and no-load fees and Spot Market Energy, determined on 
the basis of the resource's actual output or available and 
requested time and type of operation, shall be compared to the 
total value of that resource's Spot Market Energy. If the total 
offered price exceeds the total value, the difference shall be 
credited to the Market Seller. Market Sellers shall also be 
credited on the basis of their offered prices for synchronized 
condensing for any hydropower or combustion turbine units 
operated as synchronous condensers at the request of Office of 
the Interconnection but producing no energy. 

	(c) The sum of the foregoing credits, plus any cancellation 
fees paid in accordance with Section 1.10.2(d), less any amounts 
received in accordance with Sections 1.10.5(d), 1.10.6(d) and 
3.2.1(h) of this Schedule and payments received from another 
Control Area for Operating Reserves or from users of Point-to-
Point Transmission Service within the PJM Control Area for 
imbalance service, shall be the cost of Operating Reserves for 
the PJM Control Area for each Operating Day. 

	(d) The cost of Operating Reserves for each Operating Day 
shall be allocated and charged to each Market Buyer in proportion 
to its total load during that Operating Day in the PJM Control 
Area. 

	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 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 Internal Market Buyer 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 Locational Marginal 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) At the end of each hour during an Operating Day, the 
Office of the Interconnection shall determine the total net 
amount of hourly energy delivered to the PJM Control Area by each 
pool-scheduled or pool-dispatched resource of each Market Seller, 
in accordance with the PJM Manuals and the calculation described 
in Section 3.2.1(d). 

	(b) The Office of the Interconnection shall calculate 
Locational Marginal 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 0 of this Schedule. 

	(c) A Market Seller shall be credited for sales of Spot 
Market Energy to the extent of its hourly net deliveries of 
energy to the PJM Control Area from the Market Seller's pool-
scheduled or pool-dispatched resources.  For pool-scheduled 
resources that are 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 credit 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 from 
each of the Market Seller's pool-scheduled or pool-dispatched 
resources, times (ii) the hourly Locational Marginal Price at 
that bus. 

	(d) Market Sellers, including Generating Market Buyers, 
shall be charged for non-delivery of Spot Market Energy from 
resources that are not Capacity Resources, as specified in 
Section 1.10.5(d) of this Schedule. 

	3.3.2 Regulation. 

	Each Market Seller that is also an Internal Market Buyer 
shall have an hourly Regulation objective as specified in Section 
3.2.2(a), and shall be credited or charged in connection 
therewith as specified in Section 3.2.2(b).  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 in that hour for the Regulation Class 
from which the Regulation was supplied, 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(b). 

	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 other than entities that are also 
Internal Market Buyers 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 Locational Marginal Price 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 0 
through 0 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 Locational Marginal 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 
the affected Market Buyer. 

	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 the adjacent 
Control Area, in accordance with an agreement between the Office 
of the Interconnection and such adjacent Control Area that 
complies with this Agreement. 


  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 Locational Marginal Prices 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.  
The Transmission Congestion Charge for each such delivery shall 
be the delivery amount multiplied by the difference between the 
Locational Marginal Price at the delivery interface and the 
Locational Marginal Price at the source interface, or 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 its 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 Locational Marginal Price at what would be the 
delivery interface and the Locational Marginal 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 Total Transmission Congestion Charges. 

	The total Transmission Congestion Charges collected by the 
Office of the Interconnection each hour will be the sum of the 
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. 

	Each Transmission Customer using firm Point-to-Point 
Transmission Service and each Network Service User shall receive 
as a Transmission Congestion Credit a proportional share of the 
total Transmission Congestion Charges collected for each 
constrained hour. 

	5.2.2 Fixed Transmission Rights 

	(a) Transmission Congestion Credits will be calculated based 
upon the Fixed Transmission Rights of each Network Service User 
and Transmission Customer, determined as specified below. 

	(b) Each Network Service User shall designate a subset of 
its Network Resources for which Fixed Transmission Rights will be 
assigned.  The Fixed Transmission Right for each Network Resource 
shall be 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 to the 
aggregate load busses of the Network Service User.  The sum of 
each Network Service User's Fixed Transmission Rights must be 
equal to or less than the Network Service User's projected annual 
peak load. 

	(c) Each Transmission Customer receiving firm Point-to-Point 
Transmission Service shall be assigned Fixed Transmission Rights. 
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) The foregoing assignment of Fixed Transmission Rights 
shall be enhanced by an amendment to this Schedule, to be filed 
with FERC not later than December 31, 1997, that will provide for 
an auction of Fixed Transmission Rights over and above those FTRs 
obtained and retained by Network Service Users and Transmission 
Customers then receiving firm Point-to-Point Transmission Service 
(including firm Point-to-Point transmission service for existing 
bilateral contracts), such auction to be implemented as soon 
after December 31, 1997 as shall be determined by the Office of 
the Interconnection to be reasonably practical.  For so long as 
Fixed Transmission Rights are assigned on the basis of Network 
Transmission Service and firm Point-to-Point Transmission 
Service, any Fixed Transmission Rights awarded pursuant to an 
auction shall be simultaneously feasible with all Network 
Transmission Service and firm Point-to-Point Transmission Service 
obligations. The Members specified in Section 11.5(c) of the 
Agreement, working with the Office of the Interconnection, shall 
develop the details of the implementation of such an auction, 
including but not limited to the nature of the bidding process, 
the frequency of auctions, and the duration of the Fixed 
Transmission Rights purchased at auction. 

	5.2.4 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 Locational 
Marginal Price minus the generation bus Locational Marginal 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 
hourly Locational Marginal Price differences for the receipt and 
delivery points associated with the Fixed Transmission Right, 
calculated as the Locational Marginal 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.  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, each 
holder of Fixed Transmission Rights shall receive 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) Any excess Transmission Congestion Charges remaining at 
the end of a month 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. 



<PAGE>
                          SCHEDULE 2 

                        Revision No. 2 

                      COMPONENTS OF COST 


Issued: June 2, 1997 
Effective: August 1, 1997 

	(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. 






<PAGE>

                      SCHEDULE 2 -- EXHIBIT A 

            EXPLANATION OF THE TREATMENT OF THE COSTS OF 
                       EMISSION ALLOWANCES 


Issued:     June 2, 1997 
Effective:  August 1, 1997 


	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 S0 2 )  (MWhr)            (Tons of SO2 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 S0 2 ) 
	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      =      S (A x B) , where: 
	C 

	A = Member's Forecasted Annual Emissions, (Tons of SO2) 
	B = Emission Allowance Replacement Cost, (Dollars per Ton of 
SO2 , per company) 
	C = Forecast Annual PJM Energy Production, (MWhr) 


<PAGE>

                           SCHEDULE 3 

                         Revision No. 6 

               ALLOCATION OF THE COST AND EXPENSES 
              OF THE OFFICE OF THE INTERCONNECTION 


Issued:     June 2, 1997 
Effective:  August 1, 1997 

	(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.  The amount of the annual 
membership fee shall be adjusted from time to time by the PJM 
Board to keep pace with inflation. 

	(b) 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 Scheduling, System Control and 
Dispatching Service under the PJM Tariff and shall be recovered 
pursuant to the PJM Tariff.  

	(c) 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. 


<PAGE>

                           SCHEDULE 4 

                         Revision No. 1 

     STANDARD FORM OF AGREEMENT TO BECOME A MEMBER OF THE LLC 


Issued:     June 2, 1997 
Effective:  August 1, 1997 


	Any entity which wishes to become a Member of the LLC shall, 
pursuant to Section 0 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: 


<PAGE>
                           SCHEDULE 5 

                         Revision No. 1 

               PJM DISPUTE RESOLUTION PROCEDURES 

Issued:     June 2, 1997 
Effective:  August 1, 1997 


                        1. DEFINITIONS 

	1.1 Alternate Dispute Resolution Committee. 

	"Alternate Dispute Resolution Committee" shall mean the 
Committee established pursuant to Section 0 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. 

                    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 0, 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 0, 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. 


<PAGE>
                          SCHEDULE 6 

                         Revision No. 1 

       REGIONAL TRANSMISSION EXPANSION PLANNING PROTOCOL 


Issued:     June 2, 1997 
Effective:  August 1, 1997 


	1. REGIONAL TRANSMISSION EXPANSION PLANNING PROTOCOL 

	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 PJM 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 

	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 such 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; 

	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. 


<PAGE>

                            SCHEDULE 7 

                         Revision No. 1 

          UNDERFREQUENCY RELAY OBLICATIONS AND CHARGES 


Issued:     June 2, 1997 
Effective:  August 1, 1997 


	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. 


<PAGE>

                          SCHEDULE 8 

                       Revision No. 1 

            DELEGATION OF RELIABILITY RESPONSIBILTIES 


Issued:     June 2, 1997 
Effective:  August 1, 1997 

	                 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; 

	(b) Perform all calculations and analyses necessary to 
determine the Forecast Pool Requirement, the Forecast Zone 
Requirement and the Forecast LSE Obligation, 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 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 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. 


<PAGE>
                        SCHEDULE 9 

                      Revision No. 1 

               EMERGENCY PROCEDURE CHARGES 


Issued:     June 2, 1997 
Effective:  August 1, 1997 

	           EMERGENCY PROCEDURE CHARGE 

	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 voltage reductions or to drop load, 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 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 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; and 

	(b) For each megawatt of load that was not dropped as 
directed, the Member shall pay 730 times the daily deficiency 
rate per megawatt 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. 

	     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.