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RGGI WORKSHOP

June 15, 2006

Gary Ferenz

Topics Presented

Bethlehem – 1,092 MW’s

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Overview of Conectiv Energy Supply, Inc. (CESI) business

CESI Renewable Energy Portfolio

Reporting Renewable Energy - Use of PJM-EIS GATS

Reporting Fuel Mix - Disclosure Label

Reporting Emissions

PJM Basics – Objective, Gen Dispatch, Power Flow

Commercial Perspective on RGGI “Leakage”

Contact Information

Conectiv Energy (CESI) - Overview

Bethlehem – 1,092 MW’s

Unregulated subsidiary of PEPCO Holdings, Inc. located in Newark, DE

Serve wholesale load and control 3,600 MW of generation primarily in eastern PJM

Generation fleet fueled by natural gas, oil, coal, and landfill gas

Involved in a variety of transactions – Load Auctions, Municipal Supply, Generation Tolls, Fuel Procurement, Hedging, Swaps, etc.

Flow power into and out of PJM

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CESI Renewable Portfolio

Renewable Energy obligations from serving load in NJ, MD, and DE under State Renewable Portfolio Standards (RPS)

Trade Renewable Energy Credits (RECs) short and long-term

Produce RECs qualified in several states

Active in Renewable regulatory process and PJM Generation Attribute Tracking System (GATS)

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DE RPS Highlights

• Comparable to surrounding states RPS except one class/tier

• Effective June 1, 2007 (banking starts 6/1/06)

• Planning Year requirements of 1% - 10% (2020) of retail load supplied

• Maximum of 1% from pre-1998 generation facilities

• Solar, wind, ocean tidal/thermal, fuel cells, small hydro, sustainable biomass, anaerobic digestion and landfill gas

• 3-Year shelf life for RECs

• Alternate Compliance Payments (ACP) of $25 - $45

• Co-firing allowed – proportional basis

• Behind-the-meter must be located in DE

• Requires PJM GATS for compliance reporting5

Records creation, sale and retirement of RECs (except NJ Solar) and load served by state

For Renewable generation, there is a monthly allocation of Fuel Mix based on proportional MMBtu utilization or different fuels

Periodic assignment of load responsibility to state accounts fro RPS Obligation calculation

Currently do not use GATS for Emissions Reporting or Disclosure Label

CURRENT USE OF PJM GATS

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Provides Fuel Mix of a company’s total MWhs of load served

Provided to LSE Customers on a state-by state basis

Reporting Requirements usually handled by Electric Delivery Company (EDC/LSE)

Utilizes aggregated data from Suppliers usually based on PJM averages with Renewable additions

Currently GATS not required for reporting

Disclosure Label

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Disclosure Label Example

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BGS Supplier Conectiv Energy Services, Inc. Phone (302) 451-5225 Contact Gary Ferenz Fax (302) 451-5266 Email Gary.ferenz@conectiv.com

Emission Table Jan - Dec 2005 July 04 – June 05 June 04 – Dec 04 June 04 2003 PJM

Kilowatt hours transmitted to Atlantic City Electric: January 1, 2005 – December 31, 2005

9,999,999,999 (Jan05 – Dec 05)

999,999,999 9,999,999 99,999 999,999,999

Annual NOx Emissions Rate (lbs/ MWh) 2.60 2.9 2.9 3.0 3.0 Annual SO2 Emissions Rate (lbs/ MWh) 8.49 8.5 8.5 11.1 11.1 Annual CO2 Emissions Rate (lbs/ MWh) 1,293 1195 1,195 1,268 1,268

Fuel Source

Jan - Dec 2005 July 04 – June 05 June – Dec 04 June 04 2003 PJM Non-Renewable Sources 95.8% 96.7% 96.7% 96.7%

Coal 55.8% 50.2% 50.2% 53.5% 53.5% Gas 5.3% 6.9% 6.9% 8.4% 8.4% Hydroelectric (large) 1.4% 1.4% Nuclear 33.2% 37.2% 37.2% 32.9% 32.9% Oil 1.5% 1.1% 1.1% 2.0% 2.0%

CLASS I RENEWABLE ENERGY: (minimum of 0.75% ) Captured Methane Gas 0.11% 0.7% 0.7% 0.8% 0.2% Fuel Cells Geothermal Hydroelectric (small) 0.91% 2.1% Solar Solid Waste Wind 0.07% 0.1% 0.1% 0.1% Wood or other Biomass 0.11% 0.1%

CLASS II RENEWABLE ENERGY: (minimum of 2.5% ) Captured Methane Gas Fuel Cells Geothermal Hydroelectric (small) Solar Solid Waste 3.1% 2.5% 2.5% 2.5% 0.8% Wind Wood or other Biomass

TOTAL 100% 100% 100% 100.0%

Signature ____________________________

Title ____________________________

Data collected by Continuous Emission Monitors (CEMS) and internal systems

Currently report NOx, SO2 and state emissions factors

Electronic Data Reports (EDR) to EPA and states on a quarterly, seasonal, and annual basis

Delay between reporting and release of data to public and for use by GATS

CESI Emissions Reporting

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GATS currently not used for ER

GATS would be a Duplication of current reporting efforts

GATS has Outdated default emissions rates

GATS Requires monthly manual input to match EDR

Potential timing and adjustment issues

GATS could be used in the future IF REQUIRED

Emissions Reporting

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Objective is Reliability at the Lowest Cost

Economic Dispatch Model – Lowest cost available generation is called on first to serve load

Transmission system supports transport of power from where it is generated to where it is needed to serve load

Locational Marginal Pricing (LMP) – provides intended incentive to flow cheapest power to load

Significant investments in additional transmission pathways and coal generation are planned which will flow more cheap coal power from low-cost west to east

Low-cost coal generation located in non-RGGI states, load located in RGGI states

PJM Power Pool Operations

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Congestion Map Illustrating Areas of Highest Congestion and Price

Mid-Atlantic Power Pathway

Note: Map information is based on PJM data for a single day at peak demand 12

Low Cost Non-RGGI Western Generation

Eastern RGGI Load in NJ, DE & MD

American Electric Power (AEP) and Allegheny Power (AP) are individually proposing major high-voltage transmission projects by 2014; PHI has proposed a separate and complementary power pathway

Future Transmission Investments

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PHI has proposed a major transmission project to PJM:

• 230 mile, 500 kV line originating in northern Virginia, crossing Maryland, traveling up the Delmarva Peninsula and into southern New Jersey

• Significant 230 kV lines that support Maryland, Delaware and New Jersey

PJM design and significant pending investments are powerful forces which encourage transport of power (mostly coal) from the non-RGGI West to Eastern RGGI states

May result in less RGGI-state generation but more non-RGGI generation as PJM dispatches lowest-cost source – “leakage”

Critical Issue: Cost and availability of CO2 allowances/credits - If significant, raises costs of generators located in RGGI states

Diminished financial returns of RGGI-state generation may discourage investment and/or bring faster retirement of RGGI generation – Reliability Issue for PJM

Additional Multi-pollutant state initiatives will add incremental costs to RGGI state generators

Resulting Issues With RGGI

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Suggested Considerations

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Delay until all states in PJM join so there is no issue with “leakage” or economic harm to RGGI-state generators

CO2 Offsets should be geographically unrestricted to bring about the most economical solution to lower CO2 and minimize any conflict with the PJM power pool system

Further consideration and investigation of using a load serving requirement similar to RPS methodology whereby a load-serving entity would be required to have a limit on the CO2/MWh of power used to serve load in a RGGI state

Gary Ferenz

Conectiv Energy Supply, Inc.

gary.ferenz@conectiv.com

302-451-5225

Additional Contact:

Gary Helm

302-451-5077

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Contact Information