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Form of

Initial Study agreement

FROM ATTACHMENT FF OF THE PJM TARIFF

Company name:

PURPOSE

An Initial Study is used to determine whether or not the Transmission System is adequate to accommodate all or part of a request for long-term firm transmission service under both Part II (POINT-TO-POINT TRANSMISSION SERVICE) or Part III (NETWORK INTEGRATION TRANSMISSION SERVICE) of the PJM Open Access Transmission Tariff (the “Tariff) (together referred to as “long-term firm transmission service”). The FERC comparability standard is applied in evaluating the impact of all requests.

SCOPE OF WORK

The Initial Study will determine if the PJM network has sufficient capability to grant the transmission service.

The Initial Study is required for all long-term firm transmission service requests. The Initial Study indicates whether or not the request for service can be granted based on expected system conditions and topology. Pursuant to Section 19.3 or Section 32.2 of the Tariff, upon completion of the Initial Study, PJM will notify the transmission customer that (a) the transmission service request is accepted, or (b) additional analysis is required. Pursuant to Part VI of the Tariff, additional analysis will only commence if the customer elects to continue to the System Impact Study within 15 days of notification.

General

Initial Studies are performed on transmission service requests in the order in which they are received. Multiple requests for overlapping periods and similar paths are evaluated until a limit is reached. Transmission service requests are held in “Study” status until requests received earlier have been confirmed or withdrawn. If the study demonstrates that the requested service can be accepted, the status of the request is changed to “Accepted” on the PJM OASIS. As soon as possible after notification of acceptance, the Transmission Customer should “Confirm” the transmission request. If accepted service is not confirmed within 15 days, the request is deemed “Withdrawn,” and other requests waiting in the queue can then be studied.

Available Transmission Capability (ATC)

ATC indicates the transfer capability that is expected to be available on the transmission system during a given period. An initial screening of ATC is required for all firm transmission service requests. This screening is used to evaluate the impact of the requested service on the transmission contingencies that limit available transfer capability. The screening is based on the latest available information regarding existing firm service.

Network Analysis and Deliverability Test

In addition to ATC screening, PJM evaluates requests for long-term firm transmission service using deliverability tests commensurate with the testing employed for evaluating generation interconnection requests. The energy from generating facilities or the energy delivered using long-term firm transmission service that is ultimately committed to meet resource requirements must be deliverable to where it is needed in the event of a system emergency. Therefore, there must be sufficient transmission network transfer capability within the control area. PJM determines the sufficiency of network transfer capability through a series of “deliverability tests.” All generator interconnections and long-term firm transmission service in PJM are subjected to the same deliverability tests. The FERC comparability standard is applied in evaluating the impact of all requests.

Rollover Rights

Pursuant to section 2.2 of the PJM Tariff, a Transmission customer who receives long term firm service (firm point to point or network service for one year or longer) may request rollover/reservation priority rights at the end of the term for long service. However, rollover rights may be limited in some cases. For instance, if the System Impact Study identifies limits caused by reliability problems (unless Direct Assignment Facilities or Network Upgrades are constructed to provide the requested service), the Transmission Customer will be notified of the limitation. The Service Agreement will include language which will reserve to PJM the right to limit rollovers in such circumstances. Therefore, the Transmission Customer may not be able to exercise reservation/rollover priority rights, in whole or in part, which it may otherwise have pursuant to Section 2.2 of the Tariff upon the initial termination date of the Transmission Service unless the Direct Assignment Facilities and/or Network Upgrades identified in the System Impact Study and/or Facilities Studies are completed pursuant to Part VI.

Reliability problems which may be identified by the System Impact Study and which may require additional Direct Assignment Facilities or Network Upgrades to provide the requested service include the following:

Limiting rollover rights for ATC.

If there is not enough ATC to accommodate rollover rights beyond the initial term PJM may explicitly state in the transmission service agreement that rollover rights for the requested service will be limited.

Limiting rollover rights for earlier queued transmission or generation interconnections.

As a part of the Initial Study, the request is tested to verify that the service can co-exist with generators whose interconnection request predates the transmission service request. If the transmission service can not co-exist with a planned generator whose interconnection request predates the transmission service request, and the original transmission service request does not conflict with the generator in service date, the request will be approved. However, the transmission customer will be notified that the service has limited rollover rights. If the customer requests to renew the transmission service, another Initial Study may be required.

Estimated Elapsed Time and Cost to Complete the Initial Study

The Initial Study analysis to determine if the request can be accommodated will take approximately 10 man-days of effort. The study is estimated to take approximately 14 calendar days to complete but may take as long as 60 days to complete. The cost to complete the Initial Study is estimated at $.

ADDITIONAL TERMS AND CONDITIONS

INITIAL STUDY AGREEMENT

FOR LONG-TERM FIRM TRANSMISSION SERVICE REQUESTS