Common use of ARR Allocation Clause in Contracts

ARR Allocation. For the 2007 to 2008 planning period, the annual ARR allocation process was revised to include Long Term ARRs that would be in effect for 10 consecutive planning periods.18 Long Term ARRs can give LSEs the ability to offset their congestion costs on a long-term basis. Long Term ARR holders can self schedule their Long Term ARRs as FTRs for any planning period during the 10 planning period timeline. Each March, PJM allocates ARRs to eligible customers in a three-stage process: • Stage 1A. In the first stage of the allocation, network transmission service customers can obtain Long Term ARRs, up to their share of the zonal base load, after taking into account generation resources that historically have served load in each control zone and up to 50 percent of their historical nonzone network load. Nonzone network load is load that is located outside of the PJM footprint. Firm, point-to-point transmission service customers can obtain Long Term ARRs, based on up to 50 percent of the MW of long-term, firm, point-to-point transmission service provided between the receipt and delivery points for the historical reference year. Stage 1A ARRs cannot be prorated. If Stage 1A ARRs are found to be infeasible, transmission system upgrades must be undertaken to maintain feasibility.19 • Stage 1B. ARRs unallocated in Stage 1A are available in the Stage 1B allocation for the following planning period. Network transmission service customers can obtain ARRs, up to their share of the zonal peak load, based on generation resources that historically have served load in each control zone and up to 100 percent of their transmission responsibility for nonzone network load. Firm, point-to-point transmission service customers can obtain ARRs based on the MW of long-term, firm, point- to-point service provided between the receipt and delivery points for the historical reference year. These long-term point-to-point service agreements must also remain in effect for the planning period covered by the allocation.

ARR Allocation. For the 2007 to 2008 planning period, the annual ARR allocation process was revised to include Long Term ARRs that would be in effect for 10 consecutive planning periods.18 periods.9 Long Term ARRs can give LSEs the ability to offset their congestion costs on a long-term basis. Long Term ARR holders can self schedule their Long Term ARRs as FTRs for any planning period during the 10 planning period timeline. Each March, PJM allocates ARRs to eligible customers in a three-stage process: • Stage 1A. In the first stage of the allocation, network transmission service customers can obtain Long Term ARRs, up to their share of the zonal base load, after taking into account based on generation to load paths that reflect generation resources that historically have had served load prior to markets in each control zone and up to 50 percent of their historical nonzone network load. Nonzone network load is load that is located outside of the PJM footprint. Firm, point-to-point transmission service customers can obtain Long Term ARRs, based on up to 50 percent of the MW of long-term, firm, point-point- to-point transmission service provided between the receipt and delivery points for the historical reference year. Stage 1A ARRs cannot be prorated. If Stage 1A ARRs are found to be infeasible, transmission system upgrades must be undertaken to maintain feasibility.19 feasibility.10 While transmission upgrades are being implemented, Stage 1A ARRs, and therefore FTRs, are overallocated. • Stage 1B. ARRs unallocated in Stage 1A are available in the Stage 1B allocation for the following planning period. Network transmission service customers can obtain ARRs, up to their share of the zonal peak load, based on generation to load paths that reflect generation resources that historically have had served load prior to markets in each control zone and up to 100 percent of their transmission responsibility for nonzone network load. Firm, point-to-point transmission service customers can obtain ARRs based on the MW of long-term, firm, point- point-to-point service provided between the receipt and delivery points for the historical reference year. These long-long- term point-to-point service agreements must also remain in effect 9 See the 2006 State of the Market Report (March 8, 2007) for the rules of the annual ARR allocation process for the 2006 to 2007 and prior planning period covered by the allocationperiods.

ARR Allocation. For the 2007 to 2008 planning period, the annual ARR allocation process was revised to include Long Term ARRs that would be in effect for 10 consecutive planning periods.18 periods.46 Long Term ARRs can give LSEs the ability to offset hedge their congestion costs on a long-term basisbasis by providing price certainty throughout the 10 planning period time frame. Long Term ARR holders can self schedule their Long Term ARRs as FTRs for opt out of any planning period during the 10 planning period timelinetimeline and self schedule their Long Term ARRs as FTRs. Each March, PJM allocates ARRs to eligible customers in a three-stage process: • Stage 1A. In the first stage of the allocation, network transmission service customers can obtain Long Term ARRs, up to their share of the zonal base load, after taking into account generation resources that historically have served load in each control zone and up to 50 percent of their historical nonzone network load. Nonzone network load is load that is located outside of the PJM footprint. Firm, point-point- to-point transmission service customers can obtain Long Term ARRs, based on up to 50 percent of the MW of long-term, firm, point-to-point transmission service provided between the receipt and delivery points for the historical reference year. Stage 1A ARR holders can also opt out of any planning period during the 10-planning-period timeline and self schedule their Long Term ARRs as FTRs. Stage 1A ARRs cannot be prorated. If Stage 1A ARRs are found to be infeasible, transmission system upgrades must be undertaken to maintain feasibility.19 feasibility.47 • Stage 1B. ARRs unallocated in Stage 1A are available in the Stage 1B allocation for the following planning periodallocation. Network transmission service customers can obtain ARRs, up to their share of the zonal peak load, based on generation resources that historically have served load in each control zone and up to 100 percent of their transmission responsibility for nonzone network load. Firm, point-to-point transmission service customers can obtain ARRs based on the MW of long-term, firm, point- point-to-point service provided between the receipt and delivery points for the historical reference year. These long-term point-to-to- point service agreements must also remain in effect for the planning period covered by the allocation.

ARR Allocation. For the 2007 to 2008 planning period, the annual ARR allocation process was revised to include Long Term ARRs that would be in effect for 10 consecutive planning periods.18 periods.17 Long Term ARRs can give LSEs the ability to offset hedge their congestion costs on a long-term basis. Long Term ARR holders can self schedule their Long Term ARRs as FTRs for any planning period during the 10 planning period timeline. Each March, PJM allocates ARRs to eligible customers in a three-stage process: • Stage 1A. In the first stage of the allocation, network transmission service customers can obtain Long Term ARRs, up to their share of the zonal base load, after taking into account generation resources that historically have served load in each control zone and up to 50 percent of their historical nonzone network load. Nonzone network load is load that is located outside of the PJM footprint. Firm, point-to-point transmission service customers can obtain Long Term ARRs, based on up to 50 percent of the MW of long-term, firm, point-to-point transmission service provided between the receipt and delivery points for the historical reference year. Stage 1A ARRs cannot be prorated. If Stage 1A ARRs are found to be infeasible, transmission system upgrades must be undertaken to maintain feasibility.19 feasibility.18 • Stage 1B. ARRs unallocated in Stage 1A are available in the Stage 1B allocation for the following planning period. Network transmission service customers can obtain ARRs, up to their share of the zonal peak load, based on generation resources that historically have served load in each control zone and up to 100 percent of their transmission responsibility for nonzone network load. Firm, point-to-point transmission service customers can obtain ARRs based on the MW of long-term, firm, point- to-point service provided between the receipt and delivery points for the historical reference year. These long-term point-to-point service agreements must also remain in effect for the planning period covered by the allocation.