January 31, 2017

Honorable Kimberly D. Bose Secretary

Federal Energy Regulatory Commission 888 First Street, N.E., Room 1A
Washington, D.C. 20426

Re: New York Independent System Operator, Inc. and PJM Interconnection, L.L.C.,
Docket No. ER17-___-000;

Proposed Revisions to Joint Operating Agreement Addressing Interchange

Scheduling and Market-to-Market Coordination on the ABC Interface and JK Interface After the 1,000 MW Wheel Concludes

Dear Ms. Bose:

Pursuant to Section 205 of the Federal Power Act,1 the New York Independent System
Operator, Inc., (“NYISO”) and PJM Interconnection, L.L.C. (“PJM”) (collectively the “RTOs”)
submit, in electronic format, proposed revisions to the Joint Operating Agreement (“JOA”)
between NYISO and PJM that is set forth in Attachment CC (Section 35) to the NYISO’s Open
Access Transmission Tariff (“NYISO OATT”).2 In addition, the NYISO submits proposed
revisions to one section of its Market Administration and Control Area Services Tariff (“NYISO
Services Tariff”). The revisions proposed in this filing primarily address interchange scheduling
and the implementation of Market-to-Market (“M2M”) coordination at the ABC Interface and JK
Interface on the border of Southeastern New York and Northern New Jersey. These interfaces
are currently utilized to wheel 1,000 MW of power from New York to New Jersey over the JK
Interface and from New Jersey into New York City over the ABC Interface. However, this
unique arrangement (referred to as the “1,000 MW Wheel”) will terminate on April 30, 2017.
Accordingly, the RTOs propose to more fully incorporate the facilities that have been used to
effectuate the 1,000 MW Wheel into their interchange scheduling and M2M practices. Without

1 16 U.S.C. §824d.

2 Order No. 714, Electronic Tariff Filings, ¶ 31,276 (2008), and Section 35.1 of the Commission’s regulations, 18 C.F.R. § 35.1(a), allow multiple public utilities that are parties to the same tariff (e.g., a joint tariff such as the JOA) to designate one of the public utilities as the designated filer of the joint tariff. The designated filer submits a single tariff filing for inclusion in its database that reflects the joint tariff, along with the requisite certificates of
concurrence from the other parties to the joint tariff. NYISO is the designated filing party for the JOA. Therefore, NYISO is submitting the JOA modifications in the instant filing along with PJM’s Certificate of Concurrence. The designation of the NYISO as the designated filer for the JOA is for administrative convenience and in no way shall limit PJM’s filing rights under the Federal Power Act as they relate to the JOA.

Honorable Kimberly D. Bose January 31, 2017

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these proposed revisions, the RTOs will have no tariff provisions governing the operation of the ABC Interface and JK Interface facilities.

I.Background

A. History of the 1,000 MW Wheel

The NYISO and PJM currently implement an Operating Protocol3 to facilitate the

planning, operation, control, and scheduling of energy between the NYISO and PJM associated with two Long-term Firm Point-to-Point Transmission Service Agreements (“2008 TSAs”) entered into by Consolidated Edison Company of New York (“Con Edison”) and PJM, dated April 18, 2008.4 The 2008 TSAs5 were executed in connection with the rollover of two
grandfathered contracts dated May 22, 1975 (as amended May 9, 1978) and May 8, 1978
between Con Edison and Public Service Electric and Gas Company (“PSEG”).

On April 22, 2008, PJM filed the 2008 TSAs along with Operating Protocol in Docket
No. ER08-858-000,6 and on April 23, 2008, NYISO filed the Operating Protocol for
informational purposes in Docket No. ER08-867-000.7 Various parties filed protests and
comments in these proceedings, objecting to the non-conforming provisions of the 2008 TSAs
and the Operating Protocol. The Commission accepted and suspended, subject to refund, the
2008 TSAs and Operating Protocol, consolidated the two dockets and set them for hearing and
settlement procedures.8 After extensive negotiations, the parties filed a settlement agreement on February 23, 2009.9 The Commission approved the settlement agreement, and found the
settlement agreement and the 2008 TSAs and Operating Protocol (revised by the settlement) just and reasonable, on September 16, 2010.10

The two 2008 TSAs, based on the rollover of the grandfathered contracts, currently

provide for Con Edison to deliver 1,000 MW of power to PJM in northern New Jersey, over the

3 See Schedule C to the JOA (NYISO OATT Section 35.22).

4 While the 2008 TSAs were dated and filed in 2008, they became effective on May 1, 2012.

5 The 2008 TSAs consist of a firm point-to-point service agreement for 400 MW designated as Original Service Agreement No. 1874 and a firm point-to-point service agreement for 600 MW designated as Original Service Agreement No. 1873.

6 Submission of PJM Interconnection, L.L.C., Docket No. ER08-858-000 (April 22, 2008).

7 Submission of NYISO, for Informational Purposes, of a New Schedule C to the Joint Operating Agreement Among and Between New York Independent System Operator, Inc. and PJM Interconnection, L.L.C., Docket No. ER08-
867-000 (April 23, 2008).

8 PJM Interconnection, L.L.C., 124 FERC ¶ 61,184, at P 1 (2008).

9Settlement and Offer of Settlement, Docket Nos. ER08-858-000, ER08-867-000 and EL02-23-000 (Feb. 23, 2009). The Settling Parties were PJM, the NYISO, Con Edison, PSEG, PSEG Energy Resources & Trade LLC and the New Jersey Board of Public Utilities.

10 PJM Interconnection, L.L.C. v. Pub. Serv. Elec. & Gas Co., 132 FERC ¶ 61,221, at P 1 (2010), order on reh’g, 135 FERC ¶ 61,018 (2011), aff’d, NRG Power Mktg., LLC v. FERC, 718 F.3d 947 (D.C. Cir. 2013).

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JK Interface,11 and for PJM to redeliver the same amount of power to Con Edison in New York City, over the ABC Interface,12 i.e., the 1,000 MW Wheel.13 The terms of the 2008 TSAs are from May 1, 2012 to April 30, 2017. On April 28, 2016, Con Edison informed PJM that it was choosing not to exercise its rollover rights pursuant to sections 2.2 and 2.3 of the PJM Open
Access Transmission Tariff and, therefore, the 2008 TSAs would terminate by their own terms on April 30, 2017.14 Thus, the 1,000 MW Wheel arrangement will come to an end and the
Operating Protocols will become obsolete.

B. Current Interchange Scheduling Process

With the 1,000 MW Wheel in place, the NYISO and PJM currently implement

interchange between NYISO and PJM by reviewing offers and scheduling transactions over the
PJM-NY AC Proxy Bus. The scheduled interchange between NYISO and PJM is expected to
flow according to the pre-set distribution of 61% over the PAR-controlled 5018 line (also
referred to as the Ramapo Interface)15 and 39% over the Western ties (which are geographically
located on New York’s border with Pennsylvania). This distribution is explicitly modeled in the
NYISO’s Day-Ahead Market and Real-Time Market. The NYISO’s market models assume that
for every MW of total interchange injected at the proxy bus in the Day-Ahead Market, and for
every MW of incremental change in interchange injected at the Proxy Bus in the Real-Time
Market, 0.61 MW is directed over the 5018 line, and the remainder is directed to flow over the
Western ties. There are some limited circumstances where scheduled interchange may occur
over the ABC Interface and JK Interface when the 5018 line is at its capacity.16

II.Discussion

A. Overview

The RTOs have worked together to develop a revised set of JOA rules to schedule

interchange and implement market-to-market coordination on the ABC Interface and JK

Interface after termination of the 1,000 MW Wheel TSAs. The ABC Interface and JK Interface
will be combined with the 5018 line17 and the Western ties18 into an aggregate PJM-NY AC

11 The transfer path comprised of the JK Ramapo-South Mahwah-Waldwick tie lines between PJM and NYISO.

12 The transfer path comprised of the A2253 Linden-Goethals, B3402 Hudson-Farragut and C3403 Marion-Farragut tie lines between PJM and NYISO.

13 To facilitate the 1,000 MW Wheel, NYISO and PJM model the 1,000 MW as flowing from NYISO to PJM over the JK Interface, and from PJM back to NYISO over the ABC Interface. The MW schedule is based on the daily MW election by Con Edison, which is communicated to the NYISO and PJM for scheduling and operation. See Schedule C to the JOA at Appendix 6 (NYISO OATT Section 35.22 at Appendix 6).

14 Letter to Andrew Ott from Milovan Blair dated April 28, 2016 attached hereto as Attachment VI.

15 See Section 7.2.1 of Schedule D to the JOA (currently, 61% of the net interchange schedule between PJM and

NYISO is expected to flow across the Ramapo PARs when both PARs are in service. If one Ramapo PAR is out of service, but not both, 46% of the net interchange schedule is expected to flow across the Ramapo Interface).

16 See Schedule C to the JOA at Appendix 3 (NYISO OATT Section 35.22 at Appendix 3).

17 This is the Hopatcong (PJM) - Ramapo (NYISO) 500 kV PAR controlled facility between PJM and NYISO.

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Proxy Bus. Employing a single PJM-NY AC Proxy Bus presents several advantages. First, the
redefined proxy bus leverages existing interchange scheduling constructs in both the NYISO and
PJM markets and can be implemented in a timeframe that accommodates the required May 1,
2017 effective date. Second, the existing PAR technology and associated devices currently
installed at the ABC Interface and JK Interface can support implementation of the proposed
redefined proxy bus on May 1, 2017. The existing PARs are capable of facilitating an aggregate
PJM-NY AC Proxy Bus interchange schedule across the ABC Interface, JK Interface, 5018 line,
and the Western ties.19 In the event of under- or over-deliveries across one of the interfaces that
comprise the proxy bus, the difference can be balanced across the other interfaces. The three
figures below show the current protocol (including interchange scheduling and the 1,000 MW
Wheel) and the proposed protocol with the ABC Interface and JK Interface included in
interchange scheduling. The proposed protocol is discussed in detail below.

Figure 1: Current Protocol - Example of Flows over the ABC Interface, JK Interface, 5018 line and the Western ties

18 The non-PAR controlled free flowing AC ties between NYISO and PJM that are geographically located on the
New York to Pennsylvania border. This interface consists of 345 kV, 230 kV and 115 kV transmission facilities.

19 The existing PARs installed at the ABC Interface and JK Interface generally provide control for NYISO and PJM operators to manage interface flows within a tolerance but cannot adequately effectuate individual interchange
schedules at each interface. In order to establish effective market signals, the actual flows need to align with
interchange schedules. The current equipment does not allow schedules to be effectively aligned with actual flows on an individual interface basis, potentially creating financial gaming opportunities.

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Figure 2: Proposed Protocol - Example of Flows over the ABC Interface, JK Interface, 5018 line and the Western ties

Figure 3: Proposed Protocol - Example of Flows over the ABC Interface, JK Interface, 5018 line and the Western ties

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The RTOs also propose to utilize the PARs at the ABC Interface and JK Interface for

Market-to-Market (“M2M”) PAR coordination to minimize congestion across both NYISO and PJM regions. NYISO and PJM already use the Ramapo PARs20 for M2M PAR coordination and propose to introduce the same type of PAR coordination using the ABC PARs21 and Waldwick
PARs22 commencing on May 1, 2017. By combining M2M PAR coordination with the
aggregate scheduling of the ABC Interface, JK Interface and 5018 line, the NYISO and PJM can effectuate aggregate interchange schedules across the PJM-NY AC Proxy Bus in a manner that
also permits the RTOs to manage regional congestion with the full set of available PARs
(referred to as the “NY-NJ PARs”).23

The proposed protocol incorporates the ABC Interface and JK Interface into interchange scheduling and M2M PAR coordination between NYISO and PJM to replace the current nonconforming 1,000 MW Wheel. There are no impacts to procedures or applications (such as Coordinated Transaction Scheduling) other than the proposed changes in this filing.

B. Proposed Interchange Scheduling Process

The RTOs propose to implement interchange by reviewing offers and scheduling

transactions over the redefined PJM-NY AC Proxy Bus. The process will remain substantially similar to today; however, the ABC Interface and JK Interface facilities will be specifically included in the proxy bus definition.24

1. Proposed Interchange Distribution

Based on the result of power flow studies jointly performed by PJM and NYISO,

scheduled interchange will be distributed across the interface facilities based on a static expected interchange distribution of 32% over the Ramapo Interface, 15% over the JK Interface, 21% over the ABC Interface, and 32% over the Western ties. The interchange percentages will then be
further broken down to each PAR-controlled facility. On the 5018 line, each Ramapo PAR will be assigned 16% of interchange. On the JK Interface, each Waldwick PAR will be assigned 5% of interchange. On the ABC Interface, each ABC PAR will be assigned 7% of interchange. If
any of the PARs on these interfaces are out of service, the percentage of interchange normally
assumed to flow over that PAR will instead be assumed to flow over the Western ties. The
proposal allows the RTOs to leverage existing market and modeling concepts over the expanded distribution of expected PJM-NY AC interchange.

20 “Ramapo PARs” refers to the 3500 PAR and 4500 PAR that control flow on the Ramapo Interface.

21 “ABC PARs” refers to the A PAR, B PAR and C PAR that control flow on the ABC Interface.

22 “Waldwick PARs” refers to the E PAR, F PAR and O PAR that control flow on the JK Interface.

23 The NY-NJ PARs consist of the Ramapo PARs, ABC PARs, and the Waldwick PARs.

24 The proposal outlined in this filing is based on the current technology that exists at the ABC Interface and JK

Interface. The NYISO and PJM could revisit this design to determine if interfaces can be individually scheduled if the technology is upgraded or replaced.

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The Locational Based Marginal Prices (“LBMPs”) developed for NYISO’s PJM

Keystone Proxy Bus25 and the Locational Marginal Prices (“LMPs”) developed for PJM’s NYIS
Proxy Bus26 will be weighted to include the impacts of imports/exports over the ABC Interface
and JK Interface, much like the weighting that occurs today to include the impacts of
imports/exports over the Ramapo Interface. These proxy buses will be modeled in the NYISO
and PJM markets with the objective that for every MW of total interchange injected at the PJM-
NY AC Proxy Bus in the Day-Ahead Market, and for every MW of incremental change in
interchange injected at the Proxy Bus in the Real-Time Market, 0.21 MW is directed over the
ABC Interface, 0.15 MW is directed over the JK Interface, 0.32 MW is directed over the 5018
line, and the remainder is distributed across the Western ties. The impacts of imports and
exports on the NYISO and PJM transmission systems will be reflected in the proxy bus
LBMPs/LMPs, weighted by the same power flow distribution percentages applied to the
interchange in the market models.

Market Participants will continue to bid in the same manner as they do today in both PJM’s and NYISO’s energy markets. Specifically, there will continue to be a single bidding point for PJM-NY AC Interchange. In the NYISO Day-Ahead Market and Real-Time Market, this will continue to be at the PJM Keystone Proxy Bus. In the PJM Day-ahead and Real-time Energy Markets, this will continue to be at the NYIS Proxy bus. While the bidding location for PJM-NY AC interchange will not change, the scheduling and pricing of the proxy bus will change to include the ABC Interface and JK Interface, as discussed above.

The NYISO and PJM studied several scenarios, with different distribution percentages,
prior to arriving at the proposed distribution. These scenario analyses identified reliability
issues27 in Northern New Jersey as well as delivery limitations when exporting from PJM to the
NYISO on the JK Interface and when exporting from NYISO to PJM on the ABC Interface. The
results identified the potential for severe thermal violations in Northern New Jersey under the
high load and high transfer to New York Summer OATF case, demonstrated a shifting of flows
from the 230 kV system to the 345 kV system, and demonstrated that PAR tap adjustments could
be exhausted prior to achieving the desired flow.28 The results also demonstrated a lack of
operational flexibility under extreme system conditions as phase angle limitations on the
Waldwick PARs did not allow for flows to be adjusted to meet scheduled targets when high
levels of exports into NYISO are assumed. NYISO analyses identified delivery limitations when
exporting to PJM over the ABC Interface after securing for N-1-1 on the NYISO system, and
then attempting further deliveries.

25 “Keystone Proxy Bus” is the name used in the NYISO software to identify the PJM-NY AC Proxy Bus.

26 “NYIS Proxy Bus” is the name used in the PJM software to identify the PJM-NY AC Proxy Bus.

27 See PJM OC presentation: http://www.pjm.com/~/media/committees-groups/committees/oc/20160913/20160913-
item-14-pjm-nyiso-wheel-replacement-overview.ashx.

28 The results were discussed and presented to stakeholders in a joint white paper from the NYISO and PJM, Con
Ed/PSEG Wheel Replacement Proposal, attached hereto as Attachment VII and available at
http://www.nyiso.com/public/webdocs/markets_operations/committees/mc/meeting_materials/2016-12-
21/FINAL%20ConEd%20PSEG%20Wheel%20Replacement%20Proposal%20Whitepaper.pdf.

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After identification of reliability issues in Northern New Jersey under the PJM high

export assumption, further studies were performed to identify designs that would allow for

continued support of historical Total Transfer Capability (“TTC”) between the two regions. The
NYISO and PJM conducted studies focused on natural system flows with zero interchange
scheduled between PJM and NYISO and all interface PARs held at neutral tap. Natural system
flow was determined by measuring the flow across the system border as a result of the electrical
characteristics of the transmission system absent any user controlled PAR adjustments under a
balanced generation and load dispatch. The studies focused on summer peak cases and
demonstrated a natural system flow from NYISO to PJM over the JK Interface and from PJM to
NYISO over the ABC Interface. The existence of this natural tendency is unsurprising, since
Con Edison, PSEG, NYISO (including its predecessor, the New York Power Pool) and PJM
planned their systems to accommodate the 1,000 MW Wheel for over 30 years. The RTOs,
therefore, propose to include a natural system flow offset, referred to as an “Operational Base
Flow” or “OBF,” of 400 MW into PJM over the JK Interface and 400 MW into New York on the
ABC Interface when scheduling interchange and when determining target flows.

2. Proposed Operational Base Flow

The proposed initial 400 MW OBF is necessary to address the short-term reliability

issues in Northern New Jersey described above and to maintain historical interface transfer

limits. The RTOs propose to apply an initial OBF of 400 MW in interface flows until

transmission upgrades are completed in Northern New Jersey. Absent the OBF, the TTC

between the two areas would have to be reduced. The OBF is not a firm transmission service on either the NYISO transmission system or the PJM transmission system. The proposed JOA
revisions provide that the OBF will not result in charges from one RTO to the other RTO, or
from one RTO to the other RTO’s Market Participants, except for the settlements described in
the Real-Time Energy Market Coordination and Settlements provisions set forth in Sections 7
and 8 of Schedule D to the JOA. In particular, the NYISO and its Market Participants will not be subjected to PJM Regional Transmission Expansion Plan (“RTEP”) cost allocations as a result of the RTOs’ implementation of an OBF.29

The initial OBF of 400 MW will be applied over the JK Interface from NYISO to PJM

and over the ABC Interface from PJM to NYISO in conjunction with the interchange distribution
percentages discussed above. NYISO and PJM have agreed that the initial OBF will be evenly
distributed across each of the three PARs at the JK Interface, with the expected flow over each
PAR to include one-third of the OBF value. At the ABC Interface, the expected flow over the A
PAR will ordinarily include 25% of the OBF value and the expected flows for the B and C PARs
will each ordinarily include 37.5% of the OBF value. These distribution percentages for the

initial OBF and the interchange distribution percentages were agreed upon by PJM and NYISO
based on the current transmission system and PAR angle limitations experienced on the
Waldwick PARs and ABC PARs. The proposed JOA revisions also allow the RTOs to mutually
agree to modify the OBF MW value or the distribution of the OBF MWs across the PARs.

29 See JOA Section 35.2.1 (proposed definition of OBF).

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NYISO and PJM will review the OBF MW value at least annually to determine if modification is
appropriate. The NYISO and PJM will each post, on their respective websites, the OBF values,
in MW, normally applied to each ABC PAR and Waldwick PAR when all of the ABC PARs and
Waldwick PARs are in service. The RTOs will update their website postings if the OBF MW
value or the OBF distribution across the PARs is modified. The OBF posting will also specify
how the OBF MWs are distributed across the in-service NY-NJ PARs when one or more of the
NY-NJ PARs are out of service. The initial OBF value is expected to be reduced to zero MW
within five years, when, as discussed below, system conditions permit reduction of the OBF.

The RTOs propose to include provisions in the JOA that will permit either RTO to

establish a temporary OBF to address a reliability issue until a long-term solution to the

identified reliability issue can be implemented. If one RTO needs to establish a temporary OBF,
the OBF value must be set at a level that both RTOs agree they can reliably support. The RTO
that establishes the OBF must: (1) explain the reliability need to the other RTO; (2) describe how
the OBF addresses the identified reliability need; and (3) identify the expected long-term
solution to address the reliability need. The NYISO and PJM also reviewed the proposed initial
400 MW OBF using these three criteria. Through this review, PJM identified the reliability need
(discussed above). PJM and NYISO examined how the OBF addresses the reliability need by
providing operational flexibility and by allowing the RTOs to utilize higher transfer limits on the
JK Interface and ABC Interface to maintain reliability in Northern New Jersey. The OBF
improves transfer capability and alleviates thermal violations in Northern New Jersey that arise
when distributing interchange across each interface. PJM then identified the Bergen-Linden
Corridor project under development in Northern New Jersey that is expected to obviate the
reliability need for the OBF in the long-term, i.e., within no more than five years. To implement
the initial OBF as well as any future OBF, the facilities on the ABC Interface and JK Interface
are to be functional and operational, consistent with good utility practice.

C. Proposed Market-to-Market PAR Coordination Modifications

The RTOs currently engage in M2M PAR coordination using the Ramapo PARs.

NYISO and PJM propose to incorporate the ABC PARs and Waldwick PARs into M2M PAR coordination commencing May 1, 2017. The ABC PARs and Waldwick PARs were not
previously included in M2M PAR coordination because their primary function was to facilitate delivery of the 1,000 MW Wheel.

M2M PAR coordination is a real-time operations mechanism that signals the PJM and

NYISO operators when the PARs can be used to minimize regional congestion. Moving taps on PARs allows the operators to reduce regional congestion by redistributing flows across the
various AC interfaces between NYISO and PJM. Today, the JOA includes M2M PAR
coordination rules and associated settlement rules that were accepted by the Commission.30 The RTOs propose to modify the JOA by adding the facilities formerly controlled by the wheel
protocol and apply the M2M PAR coordination rules to all NY-NJ PARs.31

30 See New York Independent System Operator, Inc., 138 FERC ¶ 61,192 (2012).

31 See Section 7.2 of Schedule D to the JOA.

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The RTOs propose to develop an M2M PAR “target value” for each of the ABC PARs
and Waldwick PARs, similar to what is in place today for the Ramapo PARs. The RTOs will
determine the target flow over each PAR by combining the applicable static percentage of
scheduled interchange, the applicable OBF value, and the applicable percentage of Rockland
Electric Company load (“RECo Load”). The proposed JOA revisions specify the percentage of
interchange used to calculate the interchange factor for each PAR and the percentage of RECo
Load that will be included in the target value calculation for each PAR. The OBF values
normally applied to the ABC PARs and Waldwick PARs will be posted on the RTOs’ websites.
The formula for deriving the target flow at each PAR can be expressed as follows:

Target Flow = Interchange Factor + OBF + RECo Load

For example, if the desired net interchange (based on economic transaction schedules) is 1,300

MW into NYISO, the target flow over the A PAR would be determined as follows: (1300*21%/3
+ (400*25%) + (0%*RECo Load) = 191 MW into NYISO. Consistent with the existing JOA,
80% of RECo Load is included in the target flow toward the NYISO for the 5018 line PARs. An
example of a target flow calculation for a PAR that includes RECo Load could be as follows, if
the total net interchange is 1,300 MW into PJM (i.e., -1,300 MW) and RECo load is 450 MW,
then the target flow on the 3500 PAR (at the Ramapo Interface) is ([-1300*32%]/2 + (0) +

[450*80%]/2) or -28 MW (i.e., 28 MW into PJM).

The RTOs are not proposing to modify service to RECo Load in this filing. The current
construct for serving RECo Load requires PJM to compensate NYISO when serving RECo
causes congestion on the New York system. Eighty percent (80%) of telemetered real-time
RECo Load will continue to be included in the target flows over the Ramapo PARs. When both
Ramapo PARs are in service, 40% of RECo Load will be included in the target value for each
Ramapo PAR. If one Ramapo PAR is out of service, 80% of RECo Load will be included in the
target value for the in-service Ramapo PAR. To the extent the 5018 line and Ramapo PARs are
unable to serve 80% of RECo Load, the power to serve RECo Load will travel from PJM to New
York over the Western ties and across the New York Transmission System to the RECo service
area. The current treatment of RECo Load was added to the JOA in January 2013.32 NYISO
and PJM agree to continue to discuss alternative approaches to serve RECo Load.

M2M PAR settlements between NYISO and PJM currently reflect the effect that the

operation of the Ramapo PARs are having on regional congestion. The RTOs propose to revise
the settlement rules currently set forth in the JOA to include the full effect of all in-service NY-
NJ PARs on regional congestion. Target values, as explained above, are compared to the actual
flow values to determine the M2M PAR settlement component associated with each PAR. This
M2M settlement component accounts for the different impact each PAR has on congestion for
each RTO by multiplying a PAR’s shift factor with the shadow price of each active flowgate.

This resultant is then multiplied by the PAR’s deviation from its target flow to arrive at the M2M
settlement component. Each PAR’s M2M settlement component could reflect a net relief or net

32 See New York Independent System Operator, Inc., 140 FERC ¶ 61,205 (2012).

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harm on system congestion. The M2M PAR settlement component will then be netted for all eight NY-NJ PARs, for each interval, to produce a consolidated settlement value.

D. System Planning

The RTOs do not propose any JOA changes with respect to system planning. PJM and
NYISO planning personnel have communicated and will continue to communicate the treatment
of interchange and the OBF in future planning cases through their respective stakeholder
processes.

NYISO will review all relevant data inputs, including the OBF, to establish study

assumptions at the start of each planning study. In general, NYISO planning models

representing the bulk power system from May 1, 2017 through May 31, 2021 will incorporate the 400 MW OBF. Planning models representing the bulk power system beyond June 1, 2021 will assume an OBF of zero MW.

The PJM planning models will assume a zero MW OBF for future cases. PJM reviewed the zero MW OBF methodology with PJM stakeholders at several PJM Planning Committee meetings in 2016. Additionally, PJM reiterated the zero MW OBF assumption for the 2017 RTEP at the recent Transmission Expansion Advisory Committee (“TEAC”) assumptions
meetings in December 2016 and January 2017. PJM’s System Planning Division will annually review the OBF assumption with the TEAC to confirm no changes are needed.

II.Stakeholder Involvement

The JOA revisions proposed in this filing are the product of extensive discussions between the RTOs.

The NYISO and PJM conducted two joint stakeholder meetings on August 15, 2016 and September 16, 2016.

The NYISO formally presented and discussed the proposed revisions with its

stakeholders on numerous occasions prior to the Management Committee (“MC”), in addition to
the two joint stakeholder meetings. Presentations were given at the NYISO Market Issues
Working Group (“MIWG”) meetings held on June 23, 2016, July 21, 2016, August 29, 2016,
September 29, 2016, October 19, 2016 and November 29, 2016. The proposed changes were
also discussed with the NYISO’s Business Issues Committee (“BIC”) on December 14, 2016.
On December 21, 2016, the NYISO’s MC unanimously supported the proposed revisions, with
abstentions.

PJM began discussions with stakeholders in July 2016, and subsequent months, discussed the proposed revisions with them at a high level in November 2016, and also formally presented and discussed the JOA revisions proposed in this filing with its stakeholders at its December 2016 Operating Committee (“OC”), Market Implementation Committee (“MIC”), Planning
Committee (“PC”), and Markets and Reliability Committee (“MRC”) meetings.

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III.Description of Proposed Tariff Revisions

A.Proposed Revisions to Section 35.2 of the JOA

The RTOs propose revisions to the definitions section of the JOA and to add several new definitions. Most of the new definitions relate to identifying the facilities on the various AC interfaces between NYISO and PJM. The RTOs propose to define each PAR individually, each interface between the two areas, and the PARs on each interface as a collective group. A set of example definitions is included below for the Ramapo Interface, with similar sets of definitions proposed for the facilities comprising the ABC Interface and JK Interface:

•“3500 PAR” shall mean the 3500 phase angle regulator at the Ramapo station connected

to the 5018 Hopatcong-Ramapo 500 kV line.

•“4500 PAR” shall mean the 4500 phase angle regulator at the Ramapo station connected

to the 5018 Hopatcong-Ramapo 500 kV line.

•“Ramapo Interface” shall mean the transfer path comprised of the 5018 Hopatcong-

Ramapo 500 kV tie line between PJM and NYISO.

•“Ramapo PARs” shall mean the 3500 PAR and 4500 PAR that control flow on the

Ramapo Interface.

The RTOs also propose a new definition to describe all of the PARs on the border between NYISO and PJM and a definition for Operational Base Flow.

• “NY-NJ PARs” shall mean, individually and/or collectively, the ABC PARs, the

Ramapo PARs, and the Waldwick PARs, all of which are components of the NYISO -
PJM interface.

• “Operational Base Flow” or “OBF” shall mean an equal and opposite MW offset of

power flows over the Waldwick PARs and ABC PARs to account for natural system
flows over the JK Interface and the ABC Interface in order to facilitate the reliable
operation of the NYISO and/or PJM transmission systems. The OBF is not a firm
transmission service on either the NYISO transmission system or on the PJM
transmission system. The OBF shall not result in charges from one Party to the other
Party, or from one Party to the other Party’s Market Participants, except for the
settlements described in the Real-Time Energy Market Coordination and Settlements
provisions set forth in Sections 7 and 8 of Schedule D to this Agreement. In particular,
the NYISO and its Market Participants shall not be subjected to PJM Regional
Transmission Expansion Plan (“RTEP”) cost allocations as a result of the OBF.

The RTOs propose to remove references to Schedule C to the JOA, which contains the Operating Protocol for the Implementation of ConEd - PJM Transmission Service Agreements. In addition, the RTOs propose several types of ministerial revisions that appear throughout the JOA, including use of new defined terms and improved consistency of internal references to
other sections of the JOA.

Honorable Kimberly D. Bose January 31, 2017

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B. Proposed Revisions to Section 35.6 of the JOA

PJM and NYISO rely on emergency assistance during extreme weather conditions and peak load days, as well as other conservative operating events. The RTOs propose to add a new subsection related to emergency conditions. The new language describes the expectations for PAR operation during emergencies and allows the NYISO and PJM to implement appropriate emergency procedures during system emergencies on either the NYISO or PJM system. This assistance during emergency conditions provides both RTOs with a higher level of reliability, which preserves load and reserve margins during emergency events.

C. Proposed Revisions to Sections 35.12, 35.20, and 35.21 of the JOA

The RTOs propose minor revisions to Sections 35.12, 35.20, and 35.21 of the JOA.

Revisions to Section 35.12 include updated references to PARs based on new defined terms and a ministerial revision to use an existing defined term. In Section 35.20, the RTOs propose to
update the contact information in the Notices section and to update the signatories named at the end of the section.

JOA Section 35.21 provides a list of the NY/PJM Interconnection Facilities. With this filing, the RTOs propose to add two new interconnection facility descriptions and to update the names of four existing interconnection facilities.

D. Proposed Revisions to Section 35.22 of the JOA

The RTOs propose to delete Section 35.22 of the JOA. This entire section describes the Operating Protocol for the implementation of the 1,000 MW Wheel. Termination of the 1,000 MW Wheel TSAs on April 30, 2017 will make this section obsolete.

E. Proposed Revisions to Section 35.23 of, Schedule D to, the JOA

Section 35.23 of, Schedule D to, the JOA sets forth the RTOs’ proposed rules for real-
time energy market coordination and M2M PAR coordination. The RTOs propose to revise
Schedule D to incorporate the ABC PARs and Waldwick PARs into energy scheduling and
M2M.

Throughout Section 35.23, the RTOs propose to update references to PARs based on new defined terms, remove references to Schedule C of the JOA, the Operating Protocol for the
Implementation of ConEd - PJM Transmission Service Agreements, and improve consistency of internal references within the JOA.

Section 7.2—the proposed revisions describe operation of the NY-NJ PARs. PJM and
NYISO have operational control of the NY-NJ PARs, while PSEG and Con Edison have
physical control. PJM and NYISO will make reasonable efforts to minimize movement of the
PARs to preserve their long-term availability. The proposed revisions also provide that the

Honorable Kimberly D. Bose January 31, 2017

Page 14

facilities comprising the ABC Interface and JK Interface must be operational to implement M2M PAR coordination and the initial and any future OBF on them.

Section 7.2.1—the proposed revisions define the target value formula for real-time

operation and for settlement purposes that will be used for each of the NY-NJ PARs. The target value formula is made up of the following terms: an interchange factor, the Operational Base Flow (or OBF) and RECo Load. The proposed descriptions of the formula terms identify which terms apply to which PARs. The target values for the ABC PARs and Waldwick PARs will include an interchange factor and a portion of the OBF value. The target values for the Ramapo PARs will include an interchange factor and a portion of RECo Load.

The OBF description identifies the initial 400 MW OBF described above and the

expectation that the OBF will be reduced to zero MW by June 1, 2021. Inclusion of the initial
OBF alleviates thermal violations and improves energy transfers, allowing for continuation of
historical interface transfer limits. The OBF description also specifies the process and criteria
for the RTOs to establish a temporary OBF to address a reliability issue, the ability for the RTOs
to mutually agree to modify the OBF, the obligation for the RTOs to post the OBF values on
their websites and the obligation for the RTOs to post the methodology used to reduce the OBF
under facility outage conditions. The RTOs will review the OBF MW value at least annually.

The proposed OBF description states that either RTO may establish a temporary OBF to address a reliability issue until a long-term solution to the identified reliability issue can be
implemented. Any temporary OBF that is established must be at a level that both RTOs can reliably support. The RTO that establishes the OBF must: (1) explain the reliability need to the other RTO; (2) describe how the OBF addresses the identified reliability need; and (3) identify the expected long-term solution to address the reliability need.

Sections 7.2.2 and 8.1—the proposed revisions apply the existing cost of congestion calculation and information used to calculate M2M settlements provisions to all the NY-NJ PARs, instead of just the Ramapo PARs.

Section 8.3—the RTOs propose to revise the M2M PARs settlement calculation to

incorporate all of the NY-NJ PARs. Comparison of the actual real-time flow to the target flow will now occur for each NY-NJ PAR. The RTO that is under-delivering MWs across a PAR
compared to the target value may be required to compensate the other RTO based on the
difference between the actual and target flows times the transmission congestion costs of the
RTO receiving the MWs. The M2M PARs settlement will be one net value for each interval,
inclusive of all the PARs.

Section 8.3.1—the proposed revisions update references to PARs based on new defined
terms, remove references to Schedule C of the JOA, the Operating Protocol for the
Implementation of ConEd - PJM Transmission Service Agreements, and clarify that the RTOs
are excused from settlements during the first fifteen minutes that a Storm Watch is in effect.

Honorable Kimberly D. Bose January 31, 2017

Page 15

Section 8.4—the proposed revisions clarify that the existing combined M2M settlement will include all the NY-NJ PARs, instead of just the Ramapo PARs.

Section 10.1.8— the proposed revisions update references to PARs based on new defined terms and provide that the PAR settlement component of overall M2M settlements will be
suspended when a request for taps on a NY-NJ PAR is refused by the other RTO.

Section 10.1.9—the proposed revisions state that the RTOs will suspend PAR settlements for a NY-NJ PAR that is out of service, bypassed or if the RTOs mutually agree that the PAR is incapable of facilitating interchange.

F. Proposed Revisions to NYISO Services Tariff Section 17.1

The revisions proposed in this section are only offered by the NYISO and are not subject
to the enclosed PJM Certificate of Concurrence. The NYISO proposes to update the name of the
Hopatcong-Ramapo interconnection, describe the expected flow over the ABC Interface and JK
Interface, and remove references to Schedule C of the JOA, the Operating Protocol for the
Implementation of ConEd - PJM Transmission Service Agreements, and its associated
processes.

IV.Proposed Effective Date

The RTOs respectfully request that the Commission permit the proposed JOA revisions
to become effective on May 1, 2017. The NYISO requests that its proposed Services Tariff
revisions also become effective on May 1, 2017. The RTOs respectfully request that the
Commission issue an order on this filing by April 1, 2017, sixty days from the date of this filing,
to permit the orderly implementation of the enclosed revisions on May 1, 2017, or let this filing
go into effect pursuant to Section 205 of the Federal Power Act.33 If the Commission does not
issue an order addressing the substance of the revisions proposed in this filing by April 1, then
the RTOs are prepared to implement the revisions proposed herein on May 1, 2017.34 Without
these revisions, the RTOs would have no tariff authority to implement economic interchange
over the ABC Interface and JK Interface or to utilize M2M PAR coordination with the PARs at
these interfaces. In the absence of the 1,000 MW Wheel, not utilizing these two interfaces for
economic interchange would reduce the exchange of power between the relatively congested
Southeastern New York and Northern New Jersey areas. If the ABC Interface and JK Interface
are not used to transfer power between the regions, then additional power would be forced over
the Western ties and increase congestion on the already congested transmission facilities

33 The parties note that should the Commission lack a quorum to affirmatively act on this filing by the requested
effective date, it is reasonable for the Commission to allow these scheduling protocols to go into effect given the
demonstrated benefits detailed in this letter. Because this filing implements a revised scheduling protocol, any
future Commission action addressing this protocol, which require changes, could be addressed prospectively by
NYISO and PJM. But given the termination of the wheel service by Con Edison, it is reasonable for the
Commission to allow this filing to go into effect by operation of law should the Commission lack a quorum to issue
an affirmative order in this case.

34 See 16 U.S.C. §824d.

Honorable Kimberly D. Bose January 31, 2017

Page 16

traveling from west to east across New York State, Pennsylvania and New Jersey. The

consequences would be both costly and inefficient. The RTOs’ further respectfully request that any changes to the proposed revisions the Commission instructs in an order issued after April 1, 2017 take effect on a prospective basis only.

V.Documents Enclosed

The RTOs enclose with this transmittal letter:

1. A clean version of the RTOs’ proposed revisions to their JOA (Attachment I);

2. A blacklined version of the RTOs’ proposed revisions to their JOA (Attachment II);

3. PJM’s concurrence letter, concurring with the proposed revisions to the JOA
(Attachment III);

4. A clean version of the NYISO’s proposed revisions to its Services Tariff (Attachment
IV);

5. A blacklined version of the NYISO’s proposed revisions to its Services Tariff
(Attachment V);

6. A letter to Andrew Ott from Milovan Blair dated April 28, 2016 (Attachment VI);
and

7. A joint white paper from the NYISO and PJM, Con Ed/PSEG Wheel Replacement
Proposal (Attachment VII).

VI.Service

A.NYISO Service

This filing will be posted on the NYISO’s website at www.nyiso.com. In addition, the

NYISO will email an electronic copy of this filing to each of its customers, to each participant on its stakeholder committees, to the New York Public Service Commission, and to the New Jersey Board of Public Utilities.

B.PJM Service

PJM has served a copy of this filing on all PJM Members and on all state utility
regulatory commissions in the PJM Region by posting this filing electronically. In accordance
with the Commission’s regulations,35 PJM will post a copy of this filing to the FERC filings
section of its internet site, located at the following link: http://www.pjm.com/documents/ferc-

35 See 18C.F.R §§ 35.2(e) and 385.2010(f)(3).

Honorable Kimberly D. Bose January 31, 2017

Page 17

manuals/ferc-filings.aspx with a specific link to the newly-filed document, and will send an e-
mail on the same date as this filing to all PJM Members and all state utility regulatory
commissions in the PJM Region36 alerting them that this filing has been made by PJM and is
available by following such link. If the document is not immediately available by using the
referenced link, the document will be available through the referenced link within 24 hours of the
filing. Also, a copy of this filing will be available on the FERC’s eLibrary website located at the
following link: http://www.ferc.gov/docs-filing/elibrary.asp in accordance with the
Commission’s regulations and Order No. 714.

VII. Correspondence and Communications

Please send all correspondence and communications regarding this filing to:

Craig Glazer*

VP - Federal Government Policy PJM Interconnection, L.L.C.

1200 G Street, N.W., Suite 600 Washington, D.C. 20005

(202) 423-4743

Raymond Stalter*

Director, Regulatory Affairs
New York Independent System

Operator, Inc.

10 Krey Boulevard Rensselaer, NY 12144 (518) 356-8503

*Persons designated for receipt of service37

Jacqulynn Hugee*

Associate General Counsel PJM Interconnection, L.L.C. 2750 Monroe Blvd.

Audubon, PA 19403 (610) 666-8208

Alex M. Schnell

Assistant General Counsel/
Registered Corporate Counsel
James H. Sweeney*

Attorney

New York Independent System
Operator, Inc.

10 Krey Boulevard Rensselaer, NY 12144 (518) 356-7659

/s/ James H. Sweeney

Alex M. Schnell, Assistant General Counsel/
Registered Corporate Counsel

James H. Sweeney, Attorney

New York Independent System Operator, Inc.

cc:Michael Bardee

Nicole Buell
Anna Cochrane
Jignasa Gadani

Michael Goldenberg Kurt Longo

Valerie Martin
Max Minzner
David Morenoff
Daniel Nowak
David Ortiz

Larry Parkinson

J. Arnold Quinn Douglas Roe

Peter Rosalevich Kathleen Schnorf Jamie Simler

Gary Will

/s/ Jacqulynn Hugee

Jacqulynn Hugee, Associate General
Counsel

Craig Glazer, VP - Fed. Government Policy PJM Interconnection, L.L.C.

35.2Abbreviations, Acronyms, Definitions and Rules of Construction

In this Agreement, the following words and terms shall have the meanings (such

meanings to be equally applicable to both the singular and plural forms) ascribed to them in this Section 35.2. Any undefined, capitalized terms used in this Agreement shall have the meaning given under industry custom and, where applicable, in accordance with Good Utility Practices or the meaning given to those terms in the tariffs of PJM and NYISO on file at FERC.

35.2.1 Abbreviations, Acronyms and Definitions

“3500 PAR” shall mean the 3500 phase angle regulator at the Ramapo station connected to the 5018 Hopatcong-Ramapo 500 kV line.

“4500 PAR” shall mean the 4500 phase angle regulator at the Ramapo station connected to the 5018 Hopatcong-Ramapo 500 kV line.

“A PAR” shall mean the phase angle regulator located a the Goethals station connected to the A2253 Linden-Goethals 230 kV line.

“ABC Interface” shall mean the transfer path comprised of the A2253 Linden-Goethals, B3402 Hudson-Farragut and C3403 Marion-Farragut tie lines between PJM and NYISO.

“ABC PARs” shall mean the A PAR, B PAR and C PAR that control flow on the ABC Interface.

“AC” shall mean alternating current.

“Affected Party” shall mean the electric system of the Party other than the Party to which a

request for interconnection or long-term firm delivery service is made and that may be affected by the proposed service.

“Agreement” shall mean this document, as amended from time to time, including all attachments, appendices, and schedules.

“Area Control Error” or “ACE” shall mean the instantaneous difference between a Balancing Authority’s net actual and scheduled interchange, taking into account the effects of Frequency Bias and correction for meter error.

“Available PAR” shall mean, for purposes of Section 8.3.1 of Schedule D to this Agreement, a NY-NJ PAR that is not subject to any of the following circumstances:

(1) a PAR that is not operational and is unable to be moved;

(2) a PAR that is technically “in-service” but is being operated in an outage configuration and is only capable of feeding radial load;

(3) a PAR that is tapped-out in a particular direction is not available in the tapped-out direction;

(4) if the maximum of 400 taps/PAR/month is exceeded at an ABC PAR, Ramapo PAR or a Waldwick PAR, and the relevant asset owner restricts the RTOs from
taking further taps on the affected PAR, then the affected PAR shall not be available until NYISO and PJM agree to and implement an increased bandwidth in accordance with Section 7.2 of Schedule D to this Agreement;

(5) PJM is permitted to reserve up to three taps at each end of the PAR tap range of each Waldwick PAR to secure the facilities on a post contingency basis, a Waldwick PAR shall not be considered available if a tap move would require the use of a
reserved PAR tap; or

(6) NYISO is permitted to reserve up to two taps at each end of the tap range of each ABC PAR and Ramapo PAR to secure the facilities on a post contingency basis, an ABC or Ramapo PAR shall not be considered available if a tap move would require the use of a reserved PAR tap.

PJM or NYISO may choose to use PAR taps they are permitted to reserve to perform M2M coordination, but they are not required to do so.

“Available Flowgate Capability” or “AFC” shall mean the rating of the applicable Flowgate
less the projected loading across the applicable Flowgate less TRM and CBM. The firm AFC is
calculated with only the appropriate Firm Transmission Service reservations (or interchange
schedules) in the model, including recognition of all roll-over Transmission Service rights. Non-
firm AFC is determined with appropriate firm and non-firm reservations (or interchange
schedules) modeled.

“Available Transfer Capability” or “ATC” shall mean a measure of the transfer capability remaining in the physical transmission network for further commercial activity over and above already committed uses.

“B PAR” shall mean the phase angle regulator located at the Farragut station connected to the B3402 Hudson-Farragut 345 kV line.

“Balancing Authority” or “BA” shall mean the responsible entity that integrates resource plans ahead of time, maintains load-interchange-generation balance within a Balancing Authority
Area, and supports interconnection frequency in real-time.

“Balancing Authority Area” or “BAA” shall mean the collection of generation, transmission, and loads within the metered boundaries of the Balancing Authority. The Balancing Authority maintains load-resource balance within this area.

“Bulk Electric System” shall have the meaning provided for in the NERC Glossary of Terms

used in Reliability Standards, as it may be amended, supplemented, or restated from time to time.

“C PAR” shall mean the phase angle regulator located at the Farragut station connected to the C3403 Marion-Farragut 345 kV line.

“Capacity Benefit Margin” or “CBM” shall mean the amount of firm transmission transfer
capability preserved by the transmission provider for Load-Serving Entities (“LSEs”), whose
loads are located on that Transmission Service Provider’s system, to enable access by the LSEs
to generation from interconnected systems to meet generation reliability requirements.
Preservation of CBM for an LSE allows that entity to reduce its installed generating capacity
below that which may otherwise have been necessary without interconnections to meet its
generation reliability requirements. The transmission transfer capability preserved as CBM is
intended to be used by the LSE only in times of emergency generation deficiencies.

“CIM” shall mean Common Infrastructure Model.

“Confidential Information” shall have the meaning stated in Section 35.8.1.

“Control Area(s)” shall mean an electric power system or combination of electric power systems to which a common automatic generation control scheme is applied.

“Control Performance Standard” or “CPS” shall mean the reliability standard that sets the limits of a Balancing Authority’s Area Control Error over a specified time period.

“Coordinated Transaction Scheduling” or “CTS” shall mean the market rules that allow

transactions to be scheduled based on a bidder’s willingness to purchase energy from a source in either the NYISO or PJM Control Area and sell it at a sink in the other Control Area if the
forecasted price at the sink minus the forecasted price at the corresponding source is greater than or equal to the dollar value specified in the bid.

“Coordination Committee” shall mean the jointly constituted PJM and NYISO committee

established to administer the terms and provisions of this Agreement pursuant to Section 35.3.2.

“CTS Interface Bid” shall mean: (1) in PJM, a unified real-time bid to simultaneously purchase
and sell energy on either side of a CTS Enabled Interface in accordance with the procedures of
Section 1.13 of Schedule 1 of the Amended and Restated Operating Agreement of PJM, L.L.C.;
and (2) in NYISO, a real-time bid provided by an entity engaged in an external transaction at a
CTS Enabled Interface, as more fully described in NYISO Services Tariff Section 2.3.

“Delivery Point” shall mean each of the points of direct Interconnection between PJM and the NYISO Balancing Authority Areas. Such Delivery Point(s) shall include the Interconnection Facilities between the PJM and the New York Balancing Authority Areas.

“DC” shall mean direct current.

“Disclosing Party” shall have the meaning stated in Section 35.8.7. “Dispute” shall have the meaning stated in Section 35.15.

“Disturbance Control Standard” or “DCS” shall mean the reliability standard that sets the time limit following a disturbance within which a balancing authority must return its Area Control Error to within a specified range.

“E PAR” shall mean the phase angle regulator located at the Waldwick station on the E-2257 Waldwick-Hawthorne 230 kV line.

“Economic Dispatch” shall mean the sending of dispatch instructions to generation units to minimize the cost of reliably meeting load demands.

“Effective Date” shall have the meaning stated in Section 35.19.1.

“Emergency” shall mean any abnormal system condition that requires remedial action to prevent or limit loss of transmission or generation facilities that could adversely affect the reliability of the electricity system.

“Emergency Energy” shall mean energy supplied from Operating Reserve or electrical

generation available for sale in New York or PJM or available from another Balancing Authority Area. Emergency Energy may be provided in cases of sudden and unforeseen outages of
generating units, transmission lines or other equipment, or to meet other sudden and unforeseen circumstances such as forecast errors, or to provide sufficient Operating Reserve. Emergency Energy is provided pursuant to this Agreement and the Inter Control Area Transactions
Agreement dated May 1, 2000 and priced according to Section 35.6.4 of this Agreement and said Inter Control Area Transactions Agreement.

“EMS” shall mean the respective Energy Management Systems utilized by the Parties to manage the flow of energy within their Regions.

“External Capacity Resource” shall mean: (1) for NYISO, (a) an entity (e.g., Supplier,

and (2) for PJM, a generation resource located outside the metered boundaries of the PJM

Region (as defined in the PJM Tariff) that meets the definition of Capacity Resource in the PJM Tariff or PJM’s governing agreements filed with the Commission.

“F PAR” shall mean the phase angle regulator located at the Waldwick station on the F-2258 Waldwick-Hillsdale 230 kV line.

“FERC” or “Commission” shall mean the Federal Energy Regulatory Commission or any successor agency thereto.

“Flowgate” shall mean a representative modeling of facilities or groups of facilities that may act as potential constraint points.

“Force Majeure” shall mean an event of force majeure as described in Section 35. 20.1.

“Generator to Load Distribution Factor” or “GLDF” shall mean a generator’s impact on a Flowgate while serving load in that generator’s Balancing Authority Area.

“Good Utility Practice” shall mean any of the practices, methods and acts engaged in or
approved by a significant portion of the North American 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 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 to be acceptable
practices, methods, or acts generally accepted by NERC.

“Governmental Authority” shall mean any federal, state, local or other governmental

regulatory or administrative agency, court, commission, department, board, or other

governmental subdivision, legislature, rulemaking board, tribunal, or other governmental

authority having jurisdiction over the Parties, their respective facilities, or the respective services they provide, and exercising or entitled to exercise any administrative, executive, police, or
taxing authority or power.

“ICCP”, “ISN” and “ICCP/ISN” shall mean those common communication protocols adopted to standardize information exchange.

“IDC” shall mean the NERC Interchange Distribution Calculator used for identifying and requesting congestion management relief.

“Indemnifying Party” shall have the meaning stated in Section 35.20.3. “Indemnitee” shall have the meaning stated in Section 35.20.3

“Intellectual Property” shall mean (i) ideas, designs, concepts, techniques, inventions,

discoveries, or improvements, regardless of patentability, but including without limitation

patents, patent applications, mask works, trade secrets, and know-how; (ii) works of authorship, regardless of copyright ability, including copyrights and any moral rights recognized by law; and (iii) any other similar rights, in each case on a worldwide basis.

“Intentional Wrongdoing” shall mean an act or omission taken or omitted by a Party with knowledge or intent that injury or damage could reasonably be expected to result.

“Interconnected Reliability Operating Limit” or “IROL” shall mean the value (such as MW, MVAR, Amperes, Frequency, or Volts) derived from, or a subset of, the System Operating
Limits, which if exceeded, could expose a widespread area of the bulk electrical system to
instability, uncontrolled separation(s) or cascading outages.

“Interconnection” shall mean a connection between two or more individual Transmission Systems that normally operate in synchronism and have interconnecting intertie(s).

“Interconnection Facilities” shall mean the Interconnection facilities described in Schedule A.

“Intermediate Term Security Constrained Economic Dispatch” shall mean PJM’s algorithm
that performs various functions, including but not limited to forecasting dispatch and LMP
solutions based on current and projected system conditions for up to several hours into the future.

“ISO” shall mean Independent System Operator.

“JK Interface” shall mean the transfer path comprised of the JK Ramapo-South MahwahWaldwick tie lines between PJM and NYISO.

“kV” shall mean kilovolt of electric potential.

“LEC Adjusted Market Flow” shall mean the real-time Market Flow incorporating the observed operation of the PARs at the Michigan-Ontario border.

“Locational Marginal Price” or “LMP” shall mean the market clearing price for energy at a

given location in a Party’s RC Area, and “Locational Marginal Pricing” shall mean the processes related to the determination of the LMP.

“Losses” shall have the meaning stated in Section 35.20.3.

“M2M” shall mean the market-to-market coordination process set forth in Schedule D to this Agreement.

“M2M Entitlement” shall mean a Non-Monitoring RTO’s share of a M2M Flowgate’s total

capability to be used for settlement purposes that is calculated pursuant to Section 6 of Schedule D to this Agreement.

“M2M Event” shall mean the period when both Parties are operating under M2M as defined and set forth in Schedule D to this Agreement.

“M2M Flowgate” shall mean Flowgates where constraints are jointly monitored and coordinated as defined and set forth in Schedule D to this Agreement.

“Market Flows” shall mean the calculated energy flows on a specified Flowgate as a result of dispatch of generating resources serving load within an RTO’s market.

“Market Participant” shall mean an entity that, for its own account, produces, transmits, sells,
and/or purchases for its own consumption or resale capacity, energy, energy derivatives and
ancillary services in the wholesale power markets. Market Participants include transmission
service customers, power exchanges, Transmission Owners, load serving entities, loads, holders
of energy derivatives, generators and other power suppliers and their designated agents.

“Metered Quantity” shall mean apparent power, reactive power, active power, with associated time tagging and any other quantity that may be measured by a Party’s Metering Equipment and that is reasonably required by either Party for Security reasons or revenue requirements.

“Metering Equipment” shall mean the potential transformers, current transformers, meters, interconnecting wiring and recorders used to meter any Metered Quantity.

“Monitoring RTO” shall mean the Party that has operational control of a M2M Flowgate.

“Multiregional Modeling Working Group” or “MMWG” shall mean the NERC working group that is charged with multi-regional modeling.

“Mutual Benefits” shall mean the transient and steady-state support that the integrated

generation and Transmission Systems in PJM and New York provide to each other inherently by virtue of being interconnected as described in Section 35.4 of this Agreement.

“MVAR” shall mean megavolt ampere of reactive power.

“MW” shall mean megawatt of capacity.

“NAESB” shall mean North American Energy Standards Board or its successor organization.

“NERC” shall mean the North American Electricity Reliability Corporation or its successor organization.

“Network Resource” shall have the meaning as provided in the NYISO OATT, for such resources located in New York, and the meaning as provided in the PJM OATT, for such resources located in PJM.

“New Year Market Flow” shall mean the Market Flow incorporating the transmission topology that includes all pre-existing Transmission Facilities and all new or upgraded Transmission
Facilities whose impact on M2M Entitlements has been previously evaluated and incorporated, and all new or upgraded Transmission Facilities whose impact on M2M Entitlements is being evaluated in the current evaluation step.

“Non-Monitoring RTO” shall mean the Party that does not have operational control of a M2M Flowgate.

“Notice” shall have the meaning stated in Section 35. 20.22.

“NPCC” shall mean the Northeast Power Coordinating Council, Inc., including the NPCC Cross Border Regional Entity (“CBRE”), or their successor organizations.

“NY-NJ PARs” shall mean, individually and/or collectively, the ABC PARs, the Ramapo
PARs, and the Waldwick PARs, all of which are components of the NYISO - PJM interface.

“NYISO” shall have the meaning stated in the preamble of this Agreement.

“NYISO Code of Conduct” shall mean the rules, procedures and restrictions concerning the
conduct of the ISO directors and employees, contained in Attachment F to the NYISO OATT.

“NYISO Market Monitoring Plan” shall refer to Attachment O to the NYISO Services Tariff.

“NYISO Tariffs” shall mean the NYISO OATT and the NYISO Market Administration and Control Area Services Tariff (“Services Tariff”), collectively.

“NYSRC” shall mean the New York State Reliability Council.

“NYSRC Reliability Rules” shall mean the rules applicable to the operation of the New York Transmission System. These rules are based on Reliability Standards adopted by NERC and NPCC, but also include more specific and more stringent rules to reflect the particular
requirements of the New York Transmission System.

“O PAR” shall mean the phase angle regulator located at the Waldwick station on the O-2267 Waldwick-Fairlawn 230kV line.

“OASIS” shall mean the Open Access Same-Time Information System required by FERC for
the posting of market and transmission data on the Internet websites of PJM and NYISO.

“OATT” shall mean the applicable Open Access Transmission Tariffs on file with FERC for PJM and NYISO.

“Operating Entity” shall mean an entity that operates and controls a portion of the bulk

transmission system with the goal of ensuring reliable energy interchange between generators, loads, and other operating entities.

“Operating Instructions” shall mean the operating procedures, steps, and instructions for the operation of the Interconnection Facilities established from time to time by the Coordination Committee or the PJM and NYISO individual procedures and processes and includes changes from time to time by the Coordination Committee to such established procedures, steps and instructions exclusive of the individual procedures.

“Operational Base Flow” or “OBF” shall mean an equal and opposite MW offset of power

flows over the Waldwick PARs and ABC PARs to account for natural system flows over the JK
Interface and the ABC Interface in order to facilitate the reliable operation of the NYISO and/or
PJM transmission systems. The OBF is not a firm transmission service on either the NYISO
transmission system or on the PJM transmission system. The OBF shall not result in charges
from one Party to the other Party, or from one Party to the other Party’s Market Participants,
except for the settlements described in the Real-Time Energy Market Coordination and
Settlements provisions set forth in Sections 7 and 8 of Schedule D to this Agreement. In
particular, the NYISO and its Market Participants shall not be subjected to PJM Regional
Transmission Expansion Plan (“RTEP”) cost allocations as a result of the OBF.

“Operating Reserve” shall mean generation capacity or load reduction capacity which can be called upon on short notice by either Party to replace scheduled energy supply which is
unavailable as a result of an unexpected outage or to augment scheduled energy as a result of unexpected demand or other contingencies.

“Operational Control” shall mean Security monitoring, adjustment of generation and

transmission resources, coordinating and approval of changes in transmission status for

maintenance, determination of changes in transmission status for reliability, coordination with other Balancing Authority Areas and Reliability Coordinators, voltage reductions and load shedding, except that each legal owner of generation and transmission resources continues to physically operate and maintain its own facilities.

“OTDF” shall mean the electric PTDF with one or more system facilities removed from service (i.e., outaged) in the post-contingency configuration of a system under study.

“Outages” shall mean the planned unavailability of transmission and/or generation facilities dispatched by PJM or the NYISO, as described in Section 35.9 of this Agreement.

“PAR” shall mean phase angle regulator.

“PAR Shift Factor” or “PSF”, shall mean the PAR’s impact on a Flowgate measured as the ratio of Flowgate flow change in MW to PAR schedule change in MW.

“Party” or “Parties” refers to each party to this Agreement or both, as applicable. “PJM” has the meaning stated in the preamble of this Agreement.

“PJM Code of Conduct” shall mean the code of ethical standards, guidelines and expectations for PJM’s employees, officers and Board Members in their transactions and business dealings on behalf of PJM as posted on the PJM website and as may be amended from time to time.

“PJM Tariffs” shall mean the PJM OATT and the PJM Amended and Restated Operating Agreement, collectively.

“Power Transfer Distribution Factor” or “PTDF” shall mean a measure of the responsiveness or change in electrical loadings on Transmission Facilities due to a change in electric power transfer from one area to another, expressed in percent (up to 100%) of the change in power transfer in the pre-contingency configuration of a system under study.

“Ramapo Interface” shall mean the transfer path comprised of the 5018 Hopatcong-Ramapo 500 kV tie line between PJM and NYISO.

“Ramapo PARs” shall mean the 3500 PAR and 4500 PAR that control flow on the Ramapo Interface.

“Real-Time Commitment” shall mean NYISO’s multi-period security constrained unit commitment and dispatch model, as defined in the NYISO Tariffs.

“Reference Year Market Flow” shall mean the Market Flow based on a transmission topology
that includes all pre-existing Transmission Facilities and all new or upgraded Transmission
Facilities whose impact on M2M Entitlements has been previously evaluated and incorporated.

“Region” shall mean the Control Areas and Transmission Facilities with respect to which a Party serves as RTO or Reliability Coordinator under NERC policies and procedures.

“Regulatory Body” shall have the meaning stated in Section 35.20.21.

“Reliability Coordinator” or “RC” shall mean the entity that is the highest level of authority
who is responsible for the reliable operation of the Bulk Electric System, has the wide area view
of the Bulk Electric System, and has the operating tools, processes and procedures, including the
authority to prevent or mitigate emergency operating situations in both next day analysis and
real-time operations. The Reliability Coordinator has the purview that is broad enough to enable

the calculation of Interconnection Reliability Operating Limits, which may be based on the
operating parameters of transmission systems beyond any Transmission Operator’s vision.

“Reliability Coordinator Area” shall mean that portion of the Bulk Electric System under the purview of the Reliability Coordinator.

“Reliability Standards” shall mean the criteria, standards, rules and requirements relating to reliability established by a Standards Authority.

“RFC” shall mean ReliabilityFirst Corporation.

“RTO” shall mean Regional Transmission Organization. For ease of reference, the New York
Independent System Operator, Inc., may be referred to as an RTO in this Agreement and the
NYISO and PJM may be referred to collectively as the “RTOs” or the “participating RTOs.”

“Schedule” shall mean a schedule attached to this Agreement and all amendments, supplements, replacements and additions hereto.

“SDX System” shall mean the system used by NERC to exchange system data.

“Security” shall mean the ability of the electric system to withstand sudden disturbances

including, without limitation, electric short circuits or unanticipated loss of system elements.

“Security Limits” shall mean operating electricity system voltage limits, stability limits and thermal ratings.

“SERC” shall mean SERC Reliability Corporation or its successor organization.

“Shadow Price” shall mean the marginal value of relieving a particular constraint which is

determined by the reduction in system cost that would result from an incremental relaxation of that constraint.

“Standards Authority” shall mean NERC, and the NERC regional entities with governance

over PJM and NYISO, any successor thereof, or any other agency with authority over the Parties
regarding standards or criteria to either Party relating to the reliability of Transmission Systems.

“Standards Authority Standards” shall have the meaning stated in Section 35.5.2.

“State Estimator” shall mean a computer model that computes the state (voltage magnitudes and angles) of the Transmission System using the network model and real-time measurements. Line flows, transformer flows, and injections at the busses are calculated from the known state and the transmission line parameters. The State Estimator has the capability to detect and
identify bad measurements.

“Storm Watch” shall mean actual or anticipated severe weather conditions under which regionspecific portions of the New York State Transmission System are operated in a more
conservative manner by reducing transmission transfer limits.

“Supplying Party” shall have the meaning stated in Section 35.8.2.

“System Operating Limit” or “SOL” shall mean the value (such as MW, MVAR, Amperes,
Frequency, or Volts) that satisfies the most limiting of the prescribed operating criteria for a
specified system configuration to ensure operation within acceptable reliability criteria.

“Target Value” shall have the meaning stated in Section 7.2 of Schedule D to this Agreement. “Third Party” refers to any entity other than a Party to this Agreement.

“TLR” shall mean the NERC Transmission Loading Relief Procedures used in the Eastern Interconnection as specified in NERC Operating Policies.

“Transmission Adjusted Market Flow” shall mean the result of applying the M2M Entitlement Transmission Adjusted Market Flow Calculation to the New Year Market Flow. The resulting Transmission Adjusted Market Flow is then used as the Reference Year Market Flow in all
subsequent, iterative, evaluations.

“Transmission Operator” shall mean the entity responsible for the reliability of its “local”

Transmission System, and that operates or directs the operations of the Transmission Facilities.

“Transmission Owner” shall mean an entity that owns Transmission Facilities.

“Transmission System” shall mean the facilities controlled or operated by PJM or NYISO as designated by each in their respective OATTs.

“Transmission Facility” shall mean a facility for transmitting electricity, and includes any

structures, equipment or other facilities used for that purpose as defined in the Parties respective
OATTs.

“Transmission Reliability Margin” or “TRM” shall mean the amount of transmission transfer
capability necessary to provide reasonable assurance that the interconnected transmission
network will be secure. TRM accounts for the inherent uncertainty in system conditions and the
need for operating flexibility to ensure reliable system operation as system conditions change.

“Total Transfer Capability” or “TTC” shall mean the amount of electric power that can be
moved or transferred reliably from one area to another area of the interconnected Transmission
Systems by way of all transmission lines (or paths) between those areas under specified system
conditions.

“Voltage and Reactive Power Coordination Procedures” are the procedures under Section

35.11 for coordination of voltage control and reactive power requirements.

“Waldwick PARs” shall mean the E PAR, F PAR and O PAR that control flow on the JK Interface.

35.2. 2Rules of Construction.

35.2. 2.1 No Interpretation Against Drafter.

In addition to their roles as RTOs/ISOs and Reliability Coordinators, and the functions and responsibilities associated therewith, the Parties agree that each Party participated in the drafting of this Agreement and was represented therein by competent legal counsel. No rule of construction or interpretation against the drafter shall be applied to the construction or in the interpretation of this Agreement.

35.2. 2.2 Incorporation of Preamble and Recitals.

The Preamble and Recitals of this Agreement are incorporated into the terms and conditions of this Agreement and made a part thereof.

35.2. 2.3 Meanings of Certain Common Words.

The word “including” shall be understood to mean “including, but not limited to.” The
word “Section” refers to the applicable section of this Agreement and, unless otherwise stated,
includes all subsections thereof. The word “Article” refers to articles of this Agreement.

35.2. 2.4 Standards Authority Standards, Policies, and Procedures.

All activities under this Agreement will meet or exceed the applicable Standards Authority standards, policies, or procedures as revised from time to time.

35.6Emergency Assistance

35.6.1Emergency Assistance

Both Parties shall exercise due diligence to avoid or mitigate an Emergency to the extent
practical in accordance with applicable requirements imposed by the Standards Authority or
contained in the PJM Tariffs and NYISO Tariffs. In avoiding or mitigating an Emergency, both
Parties shall strive to allow for commercial remedies, but if commercial remedies are not
successful or practical, the Parties agree to be the suppliers of last resort to maintain reliability on
the system. For each hour during which Emergency conditions exist in a Party’s Balancing
Authority Area, that Party (while still ensuring operations within applicable Reliability
Standards) shall determine what commercial remedies are available and make use of those that
are practical and needed to avoid or mitigate the Emergency before any Emergency Energy is
scheduled in that hour.

35.6.2Emergency Operating Guides

The Parties agree to jointly develop, maintain, and share operating guides to address credible Emergency conditions.

35.6.3Emergency Energy

Each Party shall, to the maximum extent it deems consistent with the safe and proper

operation of its respective Transmission System, provide Emergency Energy to the other Party in accordance with the provisions of the Inter Control Area Transactions Agreement.

35.6.4Costs of Compliance

Each Party shall bear its own costs of compliance with this Article except that the cost of
Emergency Energy purchased by one Party at the request of the other Party shall be reimbursed

in accordance with the Inter Control Area Transaction Agreement. Nothing in this Agreement shall require a Party to purchase Emergency Energy if the Party cannot recover the costs under an OATT or other agreement or lawful arrangement.

35.6.5Emergency Conditions

If an emergency condition exists in either the NYCA or PJM, the NYISO operator or PJM dispatcher may request that the NY/PJM Interconnection Facilities be adjusted to assist directing power flows between the NYCA and PJM to alleviate the emergency condition. The taps on the ABC PARs, Ramapo PARs, and Waldwick PARs may be moved either in tandem or individually as needed to mitigate the emergency condition.

The NYISO and/or PJM shall implement the appropriate emergency procedures of either the NYISO or PJM, as appropriate, during system emergencies experienced on either the NYISO or PJM system. The NYISO and PJM shall have the authority to implement their respective
emergency procedures in any order required to ensure overall system reliability.

35.12M2M Coordination Process and Coordinated Transaction Scheduling

35.12.1M2M Coordination Process

The fundamental philosophy of the M2M transmission congestion coordination process
that is set forth in the attached Market-to-Market Coordination Schedule is to allow any
transmission constraints that are significantly impacted by generation dispatch changes in both
the NYISO and PJM markets or by the operation of the NY-NJ PARs to be jointly managed in
the real-time security-constrained economic dispatch models of both Parties. This joint real-time
management of transmission constraints near the market borders will provide a more efficient
and lower cost transmission congestion management solution and coordinated pricing at the
market boundaries.

Under normal system operating conditions, the Parties utilize the M2M coordination

process on defined M2M Flowgates that experience congestion. The Party that is responsible for
monitoring a M2M Flowgate will initiate and terminate the redispatch component of the M2M
coordination process. The Party that is responsible for monitoring a M2M Flowgate is expected
to bind that Flowgate when it becomes congested, and to initiate market-to-market redispatch to
utilize the more cost effective generation between the two markets to manage the congestion in
accordance with Section 7.1.2 of the attached Market-to-Market Coordination Schedule. NY-NJ
PAR coordination need not be formally invoked by either Party. It is ordinarily in effect.

The M2M coordination process includes a settlement process that applies when M2M coordination is occurring.

35.12.2 Coordinated Transaction Scheduling

Coordinated Transaction Scheduling or “CTS” are real time market rules implemented
by NYISO and PJM that allow transactions to be scheduled based on a bidder’s willingness to

purchase energy at a source (in the PJM Control Area or the NYISO Control Area) and sell it at a sink (in the other Control Area) if the forecasted price at the sink minus the forecasted price at the corresponding source is greater than or equal to the dollar value specified in the bid.

CTS transactions are ordinarily evaluated on a 15-minute basis consistent with forecasted
real-time prices from NYISO’s Real-Time Commitment run and the forecasted price information
from PJM’s Intermediate Term Security Constrained Economic Dispatch solution. Coordinated
optimization with CTS improves interregional scheduling efficiency by: (i) better ensuring that
scheduling decisions take into account relative price differences between the regions; and
(ii) moving the evaluation of bids and offers closer to the time scheduling decisions are
implemented.

NYISO and PJM may suspend the scheduling of CTS transactions when NYISO or PJM are not able to adequately implement schedules as expected due to: (1) a failure or outage of the data link between NYISO and PJM prevents the exchange of accurate or timely data necessary to implement the CTS transactions; (2) a failure or outage of any computational or data systems preventing the actual or accurate calculation of data necessary to implement the CTS
transactions; or (3) when necessary to ensure or preserve system reliability.

35.20Additional Provisions

35.20.1Force Majeure

A Party shall not be considered to be in default or breach of this Agreement, and shall be
excused from performance or liability for damages to any other party, if and to the extent it shall
be delayed in or prevented from performing or carrying out any of the provisions of this
Agreement, arising out of or from any act, omission, or circumstance by or in consequence of
any act of God, labor disturbance, sabotage, failure of suppliers of materials, act of the public
enemy, war, invasion, insurrection, riot, fire, storm, flood, ice, earthquake, explosion, epidemic,
breakage or accident to machinery or equipment or any other cause or causes beyond such
Party’s reasonable control, including any curtailment, order, regulation, or restriction imposed by
governmental, military or lawfully established civilian authorities, or by making of repairs
necessitated by an emergency circumstance not limited to those listed above upon the property or
equipment of the Party or property or equipment of others which is deemed under the
Operational Control of the Party. A Force Majeure event does not include an act of negligence
or Intentional Wrongdoing by a Party. Any Party claiming a Force Majeure event shall use
reasonable diligence to remove the condition that prevents performance and shall not be entitled
to suspend performance of its obligations in any greater scope or for any longer duration than is
required by the Force Majeure event. Each Party shall use its best efforts to mitigate the effects
of such Force Majeure event, remedy its inability to perform, and resume full performance of its
obligations hereunder.

35.20.2 Force Majeure Notification

A Party suffering a Force Majeure event (“Affected Party”) shall notify the other Party
(“Non-Affected Party”) in writing (“Notice of Force Majeure Event”) as soon as reasonably

practicable specifying the cause of the event, the scope of commitments under the Agreement
affected by the event, and a good faith estimate of the time required to restore full performance. Except for those commitments identified in the Notice of Force Majeure Event, the Affected
Party shall not be relieved of its responsibility to fully perform as to all other commitments in the Agreement. If the Force Majeure Event continues for a period of more than 90 days from the
date of the Notice of Force Majeure Event, the Non-Affected Party shall be entitled, at its sole
discretion, to terminate the Agreement.

35.20.3Indemnification

“Indemnifying Party” means a Party who holds an indemnification obligation hereunder. An “Indemnitee” means a Party entitled to receive indemnification under this Agreement as to any Third Party claim. Each Party will defend, indemnify, and hold the other Party harmless from all actual losses, damages, liabilities, claims, expenses, causes of action, and judgments (collectively, “Losses”), brought or obtained by any Third Party against such other Party, only to the extent that such Losses arise directly from:

(a) Gross negligence, recklessness, or willful misconduct of the Indemnifying Party or
any of its agents or employees, in the performance of this Agreement, except to the extent the
Losses arise (i) from gross negligence, recklessness, willful misconduct or breach of contract or
law by the Indemnitee or such Indemnitee’s agents or employees, or (ii) as a consequence of
strict liability imposed as a matter of law upon the Indemnitee, or such Indemnitee’s agents or
employees;

(b)Any claim arising from the transfer of Intellectual Property in violation of Section

35.20.8; or

(c)Any claim that such Indemnitee caused bodily injury to an employee of Third

Party due to gross negligence, recklessness, or willful conduct of the Indemnifying Party.

(d) The Indemnitee shall give Notice to the Indemnifying Party as soon as reasonably

practicable after the Indemnitee becomes aware of the Indemnifiable Loss or any
claim, action or proceeding that may give rise to an indemnification. Such notice
shall describe the nature of the loss or proceeding in reasonable detail and shall
indicate, if practicable, the estimated amount of the loss that has been sustained
by the Indemnitee. A delay or failure of the Indeminitee to provide the required
notice shall release the Indemnifying Party (a) from any indemnification

obligation to the extent that such delay or failure materially and adversely affects the Indemnifying Party’s ability to defend such claim or materially and adversely increases the amount of the Indemnifiable Loss, and (b) from any responsibility for any costs or expenses of the Indemnitee in the defense of the claim during such period of delay or failure.

(e) The indemnification by either Party shall be limited to the extent that the liability

of a Party seeking indemnification would be limited by any applicable law and arises from a claim by a Party acting within the scope of this Agreement as to obligations of the other Party under this Agreement.

35.20.4Headings

The headings used for the Articles and Sections of this Agreement are for convenience and reference purposes only, and shall not be construed to modify, expand, limit, or restrict the provisions of this Agreement.

35.20.5Liability to Non-Parties

Nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any person or entity that is not a Party or a permitted successor or assign.

35.20.6 Liability Between Parties

The Parties’ duties and standard of care with respect to each other, and the benefits and
rights conferred on each other shall be no greater than as expressly stated herein. Neither Party,
its directors, officers, trustees, employees or agents, shall be liable to the other Party for any loss,
damage, claim, cost, charge or expense, whether direct, indirect, incidental, punitive, special,
exemplary or consequential, arising from the other Party's performance or nonperformance under
this Agreement, except to the extent that a Party, is found liable for gross negligence or willful
misconduct, in which case the Party responsible shall be liable only for direct and ordinary
damages and not for any lost goodwill, incidental, consequential, punitive, special, exemplary or
indirect damage.

This section shall not limit amounts required to be paid under this Agreement, including any of the appendices, schedules or attachments to this Agreement. This section shall not apply to adjustments or corrections for errors in invoiced amounts due under this Agreement, including any of the appendices, schedules or attachments to this Agreement.

35.20.7Limitation on Claims

No claim seeking an adjustment in the billing for any service, transaction, or charge

under this Agreement, including any of the appendices, schedules or attachments to this

Agreement, may be asserted with respect to a week or month, if more than one year has elapsed

(a) since the first date upon which an invoice was rendered for that week or month, or (b) since

the date upon which a changed or modified invoice was rendered for that week or month. The Party responsible for issuing an invoice may not, of its own initiative, issue a changed or
modified invoice if more than one year has elapsed since the first date upon which an invoice
was rendered for a week or month. A changed or modified invoice may be issued more than one year after the first date upon which an invoice was rendered for a week or month in order to
correct for or address a timely-raised claim seeking an adjustment in the billing for any service, transaction, or charge under this Agreement.

35.20.8 Unauthorized Transfer of Third-Party Intellectual Property

In the performance of this Agreement, no party shall transfer to another party any

Intellectual Property, the use of which by another Party would constitute an infringement of the rights of any Third Party. In the event such transfer occurs, whether or not inadvertent, the
transferring Party shall, promptly upon learning of the transfer, provide Notice to the receiving Party and upon receipt of such Notice the receiving Party shall take reasonable steps to avoid claims and mitigate losses.

35.20.9 Intellectual Property Developed Under This Agreement

If during the term of this Agreement, the Parties mutually develop any new Intellectual Property that is reduced to writing or any tangible form, the Parties shall negotiate in good faith concerning the ownership and licensing of such Intellectual Property.

35.20.10 Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware without giving effect to the State of Delaware’s conflict of law principles.

35.20.11 License and Authorization

The agreements and obligations expressed herein are subject to such initial and

continuing governmental permission and authorization as may be required. Each Party shall be responsible for securing and paying for any approvals required by it from any regulatory agency of competent jurisdiction relating to its participation in this Agreement and will reasonably
cooperate with the other Party in seeking such approvals.

35.20.12 Assignment

This Agreement shall inure to the benefit of, and be binding upon and may be performed by, the successors and assigns of the Parties hereto respectively, but shall not be assignable by either Party without the written consent of the other.

35.20.13 Amendment

35.20.13.1 Authorized Representatives

No amendment of this Agreement shall be effective unless by written instrument duly

executed by the Parties’ authorized representatives. For the purposes of this section, an

authorized person refers to individuals designated as such by Parties in their respective corporate by-laws.

35.20.13.2Review of Agreement

The terms of this Agreement are subject to review for potential amendment at the request
of either Party. If, after such review, the Parties agree that any of the provisions hereof, or the
practices or conduct of either Party impose an inequity, hardship or undue burden upon the other
Party, or if the Parties agree that any of the provisions of this Agreement have become obsolete
or inconsistent with changes related to the Interconnection Facilities, the Parties shall endeavor

in good faith to amend or supplement this Agreement in such a manner as will remove such
inequity, hardship or undue burden, or otherwise appropriately address the cause for such
change.

35.20.13.3 Mutual Agreement

The Parties may amend this Agreement at any time by mutual agreement in accordance with Section 35.20.13.1 above.

35.20.14 Performance

The failure of a Party to insist, on any occasion, upon strict performance of any provision of this Agreement will not be considered a waiver of any right held by such Party. Any waiver on any specific occasion by either Party shall not be deemed a continuing waiver of such right, nor shall it be deemed a waiver of any other right under this Agreement.

35.20.15 Rights, Remedies or Benefits

This Agreement is not intended to and does not create any rights, remedies, or benefits of any kind whatsoever in favor of any entities other than the Parties, their principals and, where permitted, their assigns.

35.20.16 Agreement

This Agreement, including all Attachments attached hereto, is the entire agreement between the Parties with respect to the subject matter hereof, and supersedes all prior or contemporaneous understandings or agreements, oral or written, with respect to the subject matter of this Agreement.

35.20.17 Governmental Authorizations

This Agreement, including its future amendments is subject to the initial and continuing governmental authorizations, including approval of the FERC, required to establish, operate and maintain the Interconnection Facilities as herein specified. Each Party shall take all actions necessary and reasonably within its control to maintain all governmental rights and approvals required to perform its respective obligations under this Agreement.

35.20.18 Unenforceable Provisions

If any provision of this Agreement is deemed unenforceable, the rest of the Agreement shall remain in effect and the Parties shall negotiate in good faith and seek to agree upon a substitute provision that will achieve the original intent of the Parties.

35.20.19 Execution

This Agreement may be executed in multiple counterparts, each of which shall be

considered an original instrument, but all of which shall be considered one and the same

Agreement, and shall become binding when all counterparts have been signed by each of the
Parties and delivered to each Party hereto. Delivery of an executed signature page counterpart
by telecopier or e-mail shall be as effective as delivery of a manually executed counterpart.

35.20.20 Billing and Payment

35.20.20.1 General Billing and Payment Rules

This Section 35.20.20.1 of the Agreement sets forth the billing and payment rules that apply to all charges arising under this Agreement except for charges resulting from the M2M coordination process set forth in Schedule D to this Agreement.

35.20.20.1.1 Invoicing. When charges arise under this Agreement, the billing RTO
shall submit an invoice to the other RTO within five (5) business days after the
first day of the month indicating the net amount owed by that RTO for the
previous month.

35.20.20.1.2 Payments. Payments under this Agreement will be effected in
immediately available funds of the United States of America.

The RTO owing payments on net in the invoice shall make those payments within five (5) business days after the receipt of the invoice.

In the event of a billing and payment dispute between the Parties, the dispute
resolution procedures and limitation of the claims section contained in this
Agreement shall apply to the review, challenge, and correction of invoices.

35.20.20.1.3 Interest on Unpaid Balances. Interest on any unpaid amount (including
amounts placed in escrow) shall be calculated in accordance with the method
specified for interest on refunds in the Commission’s regulations at 18 C.F.R. §

35.19a (a)(2)(iii). Interest on unpaid amounts shall be calculated from the due date of the bill to the date of payment. Invoices shall be considered as having been paid on the date of receipt of payment.

35.20.20.1.4 RTO Bills and Payments to their Respective Customers. Bills or

payments that either RTO is authorized to issue directly to its customer shall be

invoiced, paid and/or processed in accordance with the relevant RTO’s billing and payment tariff rules.

35.20.20.2 Billing and Payment for the M2M Coordination Process set forth in
Schedule D to this Agreement

For the limited purposes of these billing and payment rules that apply to the M2M

coordination process, PJM shall be considered a “Customer” as that term is used in Section 7 of the NYISO Services Tariff where the NYISO Services Tariff applies and NYISO shall be
considered a “Transmission Customer” as that term is used in Section 7 of the PJM OATT where the PJM OATT applies.

35.20.20.2.1 Invoicing and Settlement Information. NYISO shall provide invoice
and settlement information to PJM consistent with Section 7.2.1 (Invoices and
Settlement Information), 7.2.3.1 (Weekly Invoice), and 7.2.3.2 (Monthly Invoice)
of the NYISO Services Tariff or any successor NYISO Services Tariff
provision(s).

NYISO may use estimates for invoicing consistent with Section 7.2.4 (Use of

Estimated Data and Meter Data) of the NYISO Services Tariff or any successor NYISO Services Tariff provision(s).

35.20.20.2.2 Payments. Unless otherwise indicated in writing by the Parties, all

payments due under this Agreement will be effected in immediately available funds of the United States of America.

Payments shall be due and payable in accordance with the terms and conditions
set herein and notwithstanding any invoicing disputes. In the event of a billing
and payment dispute between the Parties under this Agreement, the dispute
resolution procedures and limitation of the claims section contained in this
Agreement shall apply to the review, challenge, and correction of invoices.

PJM shall make payments to the NYISO’s Clearing Account consistent with

Sections 7.2.3.3 (Payment by the Customer) and 7.2.5 (Method of Payment) of the
NYISO Services Tariff or any successor NYISO Services Tariff provision(s).
NYISO shall make payments, from the NYISO’s Clearing Account, to PJM
consistent with Section 7.1A(a) (Payments: Monthly Bills), 7.1A(b) (Payments:
Weekly Bills), 7.1A(c) (Payments: Form of Payments), and 7.1A(e) (Payments:
Payment Calendar) of the PJM OATT or any successor PJM OATT provision(s).

35.20.20.2.3 Interest on Unpaid Balances. Interest on any unpaid amount whether

owed to PJM or to NYISO (including amounts placed in escrow) shall be

calculated in accordance with the methodology specified for interest on refunds in
the Commission’s regulations at 18 C.F.R. § 35.19a (a)(2)(iii). Interest on unpaid
amounts shall be calculated from the due date of the bill to the date of payment.
Invoices shall be considered as having been paid on the date of receipt of
payment.

35.20.20.2.4 Payment Obligation. The RTOs each assume responsibility for ensuring
that their respective payment obligations resulting from the M2M coordination
process set forth in Schedule D to this Agreement are satisfied without regard for
their ability to collect such payments from their respective customers.

35.20.21 Regulatory Authority

If any regulatory authority having jurisdiction (or any successor boards or agencies), a

court of competent jurisdiction or other Governmental Authority with the appropriate jurisdiction
(collectively, the ''Regulatory Body'') issues a rule, regulation, law or order that has the effect of
cancelling, changing or superseding any term or provision of this Agreement (the ''Regulatory

Requirement''), then this Agreement will be deemed modified to the extent necessary to comply
with the Regulatory Requirement. Notwithstanding the foregoing, if a Regulatory Body
materially modifies the terms and conditions of this Agreement and such modification(s)
materially affect the benefits flowing to one or both of the Parties, as determined by either of the
Parties within twenty (20) business days of the receipt of the Agreement as materially modified,
the Parties agree to attempt in good faith to negotiate an amendment or amendments to this
Agreement or take other appropriate action(s) so as to put each Party in effectively the same
position in which the Parties would have been had such modification not been made. In the
event that, within sixty (60) days or some other time period mutually agreed upon by the Parties
after such modification has been made, the Parties are unable to reach agreement as to what, if
any, amendments are necessary and fail to take other appropriate action to put each Party in
effectively the same position in which the Parties would have been had such modification not
been made, then either Party shall have the right to unilaterally terminate this Agreement
forthwith.

35.20.22 Notices

Except as otherwise agreed from time to time, any Notice, invoice or other

communication which is required by this Agreement to be given in writing, shall be sufficiently given at the earlier of the time of receipt or deemed time of receipt if delivered personally to a senior official of the Party for whom it is intended or electronically transferred or sent by
registered mail, addressed as follows:

PJM:PJM Interconnection L.L.C.

2750 Monroe Boulevard
Audubon, PA 19403
Attn: President & CEO

NYISO:New York Independent System Operator

10 Krey Boulevard

Rensselaer, New York 12144 Attn: President & CEO

or delivered to such other person or electronically transferred or sent by registered mail to such other address as either Party may designate for itself by Notice given in accordance with this section or delivered by any other means agreed to by the Parties hereto.

Any Notice, or communication so mailed shall be deemed to have been received on the
third business day following the day of mailing, or if electronically transferred shall be deemed
to have been received on the same business day as the date of the electronic transfer, or if
delivered personally shall be deemed to have been received on the date of delivery or if delivered
by some other means shall be deemed to have been received as agreed to by the Parties hereto.
The use of a signed facsimile of future Notices and correspondence between the Parties related to this Agreement shall be accepted as proof of the matters therein set out. Follow-up with hard copy by mail will not be required unless agreed to by the Coordination Committee.
A Party may change its designated recipient of Notices, or its address, from time to time by giving Notice of such change.

IN WITNESS WHEREOF, the signatories hereto have caused this Agreement to be executed by their duly authorized officers.

35.21Schedules A and B

Schedule A - Description Of Interconnection Facilities

The NYISO - PJM Joint Operating Agreement covers the PJM - NYISO Interconnection

Facilities under the Operational Control of the NYISO and PJM. For Operational Control

purposes, the point of demarcation for each of the Interconnection Facilities listed below is the point at which each Interconnection Facility crosses the PJM-New York State boundary, except as noted below.

The PJM-NYISO Interconnection contains twenty-five (25) alternating current (“AC”)

Interconnection Facilities, seven (7) of which form one (1) AC pseudo-tie1; and further contains two (2) HVDC Interconnection Facilities as well as one (1) Variable Frequency Transformer (VFT). These are tabulated below:

NY/PJM Interconnection Facilities:

PJMNYISODesignated(kV)Common Meter Point(s)

HopatcongRamapo5018500Ramapo

CresskillSparkill75169Cresskill

E. SayreN. Waverly956115E. Sayre

E. TowandaHillside70230Hillside

Erie EastSouth Ripley69230South Ripley

Harings CornersCorporate Drive703138Harings

Harings CornersPearl River4534Harings

Harings CornersW. Nyack70169Harings

MainesburgWatercure30345Mainesburg

Homer CityMainesburg47345Homer &Mainesburg

Pierce BrookFive Mile Rd.37345Pierce Brook

Homer CityPierce Brook48345Homer & Pierce Brook

MarionFarragutC3403345Farragut

HudsonFarragutB3402345Farragut

LindenGoethalsA2253230Goethals

Linden VFTLinden CogenVFT345Linden VFT

MontvalePearl River49169Montvale

MontvaleBlue Hill4469Montvale

MontvaleBlue Hill4369Montvale

S. MahwahHilburn6569S. Mahwah

S. MahwahS. MahwahBK 258138/345S. Mahwah

S. MahwahRamapo51138S. Mahwah

WaldwickS. MahwahJ3410345Waldwick

WaldwickS. MahwahK3411345Waldwick

TiffanyGoudey952115Goudey

WarrenFalconer171115Warren

1 WEQ-007 “Inadvertent Interchange Payback Standards,” North American Energy Standards Board (NAESB), on-
line at www.naesb.org.

RECONYISOAC Pseudo-Tie VariousO&R EMS

SayervilleNewbridgeHVDC-Tie500Newbridge

BergenWest 49thHVDC-Tie Y56345Bergen

NY/PJM Interfaces at which NYISO and PJM are Authorized to Consider CTS Interface

Bids:

PJMPNODE IDCorresponding NYISO ProxyPTID

InterfaceGenerator Buses2

Name

NYIS5413134PJM_GEN_KEYSTONE24065

NYIS5413134PJM_LOAD_KEYSTONE55857

LindenVFT81436855PJM_GEN_VFT_PROXY323633

LindenVFT81436855PJM_LOAD_VFT_PROXY355723

Neptune56958967PJM_GEN_NEPTUNE_PROXY323594

Neptune56958967PJM_LOAD_NEPTUNE_PROXY355615

HudsonTP1124361945PJM_HTP_GEN323702

HudsonTP1124361945HUDSONTP_345KV_HTP_LOAD355839

Schedule B - Other Existing Agreements:

1.0Lake Erie Emergency Redispatch (LEER)

2.0RAMAPO PHASE ANGLE REGULATOR OPERATING PROCEDURE prepared by

the NYPP/PJM Circulation Study Operating Committee.

3.0Northeastern ISO/RTO Coordination of Planning Protocol

4.0Inter Control Area Transaction Agreement.

5.0Procedures to Protect for Loss of Phase II Imports (effective January 16, 2007, pursuant

to Order issued January 12, 2007, in FERC Docket No. ER07-231-000).

2 See NYISO Market Administration and Control Area Services Tariff Section 4.4.4 for additional information.

NYISO & PJM

Market-to-Market Coordination Schedule
Table of Contents

1Overview of the Market-to-Market Coordination Process

2M2M Flowgates

3M2M Flowgate Studies

4Removal of M2M Flowgates

5Market Flow Determination

5.1Determine Shift Factors for M2M Flowgates

5.2Compute RTO Load Served by RTO Generation

5.3Compute RTO Generation Serving RTO Load

5.4Compute the RTO GTL for all M2M Flowgates

5.5Compute the RTO Interchange Scheduling Impacts for all M2M Flowgates

5.6Compute the PAR Effects for all M2M Flowgates

5.7Compute the RTO Aggregate Market Flow for all M2M Flowgates

6M2M Entitlement Determination Method

6.1M2M Entitlement Topology Model and Impact Calculation

6.2M2M Entitlement Calculation

6.3M2M Entitlement Adjustment for New Transmission Facilities or Upgraded

Transmission Facilities

6.4M2M Entitlement Adjustment for a New Set of Generation, Load and Interchange

Data

7Real-Time Energy Market Coordination

7.1Real-Time Redispatch Coordination Procedures

7.2Real-Time NY-NJ PAR Coordination

8Real-Time Energy Market Settlements

8.1Information Used to Calculate M2M Settlements

8.2Real-Time Redispatch Settlement

8.3NY-NJ PAR Settlements

8.4Calculating a Combined M2M Settlement

9When One of the RTOs Does Not Have Sufficient Redispatch

10Appropriate Use of the M2M Coordination Process

10.1Qualifying Conditions for M2M Settlement

10.2After-the-Fact Review to Determine M2M Settlement

10.3Access to Data to Verify Market Flow Calculations

11M2M Change Management Process

11.1Notice

11.2Opportunity to Request Additional Information

11.3Objection to Change

11.4Implementation of Change

1Overview of the Market-to-Market Coordination Process

The purpose of the M2M coordination process is to set forth the rules that apply to M2M coordination between PJM and NYISO and the associated settlements processes.

The fundamental philosophy of the PJM/NYISO M2M coordination process is to set up
procedures to allow any transmission constraints that are significantly impacted by generation
dispatch changes and/or Phase Angle Regulator (“PAR”) control actions in both markets to be
jointly managed in the security-constrained economic dispatch models of both RTOs. This joint
management of transmission constraints near the market borders will provide the more efficient
and lower cost transmission congestion management solution, while providing coordinated

pricing at the market boundaries.

The M2M coordination process focuses on real-time market coordination to manage
transmission limitations that occur on the M2M Flowgates in a more cost effective manner.
Coordination between NYISO and PJM will include not only joint redispatch, but will also
incorporate coordinated operation of the NY-NJ PARs that are located at the NYISO - PJM
interface. This real-time coordination will result in a more efficient economic dispatch solution across both markets to manage the real-time transmission constraints that impact both markets, focusing on the actual flows in real-time to manage constraints. Under this approach, the flow entitlements on the M2M Flowgates do not impact the physical dispatch; the flow entitlements are used in market settlements to ensure appropriate compensation based on comparison of the actual Market Flows to the flow entitlements.

2M2M Flowgates

Only a subset of all transmission constraints that exist in either market will require

coordinated congestion management. This subset of transmission constraints will be identified
as M2M Flowgates. Flowgates eligible for the M2M coordination process are called M2M
Flowgates. For the purposes of the M2M coordination process (in addition to the studies
described in Section 3 of this Schedule D) the following will be used in determining M2M
Flowgates.

2.1 NYISO and PJM will only be performing the M2M coordination process on M2M

Flowgates that are under the operational control of NYISO or PJM. NYISO and PJM will not be performing the M2M coordination process on Flowgates that are owned and controlled by third party entities.

2.2 The Parties will make reasonable efforts to lower their generator binding

threshold to match the lower generator binding threshold utilized by the other

Party. The generator and NY-NJ PAR binding thresholds (the shift factor

thresholds used to identify the resource(s) available to relieve a transmission

constraint), will not be set below 3%, except by mutual consent. This requirement applies to M2M Flowgates. It is not an additional criterion for determination of M2M Flowgates.

2.3For the purpose of determining whether a monitored element Flowgate is eligible

for the M2M coordination process, a threshold for determining a significant GLDF or NY-NJ PARs PSF will take into account the number of monitored elements. Implementation of M2M Flowgates will ordinarily occur through mutual agreement.

2.4 All Flowgates eligible for M2M coordination will be included in the coordinated

operations of the NY-NJ PARs. Flowgates with significant GLDF will also be included in joint redispatch.

2.5 M2M Flowgates that are eligible for redispatch coordination are also eligible for

coordinated operation of the NY-NJ PARs. M2M Flowgates that are eligible for coordinated operation of the NY-NJ PARs are not necessarily also eligible for redispatch coordination.

2.6 The NYISO shall post a list of all of the M2M Flowgates located in theNew York

Control Area (“NYCA”) on its web site. PJM shall post a list of all of the M2M Flowgates located in its Control Area on its web site.

3M2M Flowgate Studies

To identify M2M Flowgates the Parties will perform an off-line study to determine if the
significant GLDF for at least one generator within the Non-Monitoring RTO, or significant PSF
for at least one NY-NJ PAR, on a potential M2M Flowgate within the Monitoring RTO is greater
than or equal to the thresholds as described below. The study shall be based on an up-to-date
power flow model representation of the Eastern Interconnection, with all normally closed
Transmission Facilities in-service. The transmission modeling assumptions used in the M2M
Flowgate studies will be based on the same assumptions used for determining M2M Entitlements
in Section 6 of this Schedule D.

3.1Either Party may propose that a new M2M Flowgate be added at any time. The

Parties will work together to perform the necessary studies within a reasonable

timeframe.

3.2The GLDF or NY-NJ PARs PSF thresholds for M2M Flowgates with one or more

monitored elements are defined as:

i. Single monitored element, 5% GLDF/NY-NJ PARs PSF;

ii. Two monitored elements, 7.5% GLDF/NY-NJ PARs PSF; and

iii. Three or more monitored elements, 10% GLDF/NY-NJ PARs PSF.

3.3For potential M2M Flowgates that pass the above NY-NJ PARs PSF criteria, the

Parties must still mutually agree to add each Flowgate as an M2M Flowgate for

coordinated operation of the NY-NJ PARs.

3.4For potential M2M Flowgates that pass the above GLDF criteria, the Parties must

still mutually agree to add each Flowgate as an M2M Flowgate for redispatch

coordination.

3.5The Parties can also mutually agree to add a M2M Flowgate that does not satisfy

the above criteria.

4Removal of M2M Flowgates

Removal of M2M Flowgates from the systems may be necessary under certain conditions including the following:

4.1 A M2M Flowgate is no longer valid when (a) a change is implemented that

affects either Party’s generation impacts causing the Flowgate to no longer pass
the M2M Flowgate Studies, or (b) a change is implemented that affects the
impacts from coordinated operation of the NY-NJ PARs causing the Flowgate to
no longer pass the M2M Flowgate Studies. The Parties must still mutually agree
to remove a M2M Flowgate, such agreement not to be unreasonably withheld.
Once a M2M Flowgate has been removed, it will no longer be eligible for M2M
settlement.

4.2 A M2M Flowgate that does not satisfy the criteria set forth in Section 3.2 above,

but that is created based on the mutual agreement of the Parties pursuant to
Section 3.5 above, shall be removed two weeks after either Party provides a
formal notice to the other Party that it withdraws its agreement to the M2M
Flowgate, or at a later or earlier date that the Parties mutually agree upon. The formal notice must include an explanation of the reason(s) why the agreement to the M2M Flowgate was withdrawn.

4.3 The Parties can mutually agree to remove a M2M Flowgate from the M2M

coordination process whether or not it passes the coordination tests. A M2M

Flowgate should be removed when the Parties agree that the M2M coordination process is not, or will not be, an effective mechanism to manage congestion on that Flowgate.

5Market Flow Determination

Each RTO will independently calculate its Market Flow for all M2M Flowgates using the equations set forth in this Section. The Market Flow calculation is broken down into the
following steps:

• Determine Shift Factors for M2M Flowgates

• Compute RTO Load and Losses (less imports)

• Compute RTO Generation (less exports)

• Compute RTO Generation to Load impacts on the Market Flow

• Compute RTO interchange scheduling impacts on the Market Flow

• Compute PAR impacts on the Market Flow

• Compute Market Flow

5.1Determine Shift Factors for M2M Flowgates

The first step to determining the Market Flow on a M2M Flowgate is to calculate

generator, load and PAR shift factors for the each of the M2M Flowgates. For real-time M2M
coordination, the shift factors will be based on the real-time transmission system topology.

5.2Compute RTO Load Served by RTO Generation

Using area load and losses for each load zone, compute the RTO Load, in MWs, by

summing the load and losses for each load zone to determine the total zonal load for each RTO load zone. Twenty percent of RECo load shall be included in the Market Flow calculation as PJM load. See Section 6.2, of this Schedule D.

ܼ݋݈݊ܽ_ܶ݋ݐ݈ܽ_ܮ݋ܽ݀ݖ݋݊݁ = ܮ݋ܽ݀ݖ݋݊݁ + ܮ݋ݏݏ݁ݏݖ݋݊݁, for each RTO load zone
Where:

Scheduled Line

Dennison Scheduled Line
Cross-Sound Scheduled
Line

HTP Scheduled Line

Linden VFT Scheduled
Line

Neptune Scheduled Line

Northport - Norwalk Scheduled Line

NYISO Load Zone

North

Long Island
New York City
New York City
Long Island
Long Island

PJM Load Zone

Not Applicable
Not Applicable

Mid-Atlantic Control
Zone

Not Applicable

Proxy

PJM shall post and maintain a list of its
proxies on its OASIS website. PJM shall
provide to NYISO notice of any new or

deleted proxies prior to implementing such changes in its M2M software.

NYISO proxies are the Proxy Generator
Buses that are not identified as Scheduled
Lines in the table that is set forth in Section

4.4.4 of the NYISO’s Market Services
Tariff. The NYISO shall provide to PJM

notice of any new of deleted proxies prior to implementing such changes in its M2M software.

Balancing Authorities
Responsible

PJM

NYISO

*Scheduled lines and proxies are mutually exclusive. Transmission Facilities that are
components of a scheduled line are not also components of a proxy (and vice-versa).

௔௟௟

ܴܱܶ_ܰ݁ݐ_ܮ݋ܽ݀ =� ܼ݋݈݊ܽ_ܴ݁݀ݑܿ݁݀_ܮ݋ܽ݀௭௢௡௘

௭௢௡௘=1

Where:

zone =the relevant RTO load zone;

RTO_Net_Load =the sum of load and transmission losses for the entire RTO

footprint reduced by the sum of import schedules over all scheduled lines; and

Zonal_Reduced_Loadzone =the sum of the RTO’s load and transmission losses in a

zone reduced by the sum of import schedules over scheduled lines to the zone.

௔௟௟

ܴܱܶ_ܨ݈݅݊ܽ_ܮ݋ܽ݀ = ܴܱܶ_ܰ݁ݐ_ܮ݋ܽ݀ − � ܫ݉݌݋ݎݐ_ܵܿℎ݁݀ݑ݈݁ݏ௣௥௢௫௬

௣௥௢௫௬=1

Where:

proxy =representations of defined sets of Transmission Facilities

that (i) interconnect neighboring Balancing Authorities, (ii) are collectively scheduled, and (iii) are identified in Table 2 above;

RTO_Final_Load =

RTO_Net_Load =

Import_Schedulesproxy =

the sum of the RTO’s load and transmission losses for the entire RTO footprint, sequentially reduced by (i) the sum of import schedules over all scheduled lines, and (ii) the sum of all proxy import schedules;

the sum of load and transmission losses for the entire RTO footprint reduced by the sum of import schedules over all scheduled lines; and

the sum of import schedules at a given proxy.

zone =

Zonal_Weightingzone =

RTO_Net_Load =

Zonal_Reduced_Loadzone =

the relevant RTO load zone;

the percentage of the RTO’s load contained within the zone;

the sum of load and transmission losses for the entire RTO footprint reduced by the sum of import schedules over all scheduled lines; and

the sum of the RTO’s load and transmission losses in a zone reduced by the sum of import schedules over

scheduled lines to the zone.

RTO_LSFM2M_Flowgate-m =

LSF(zone,M2M_Flowgate-m) =

Zonal_Final_Loadzone =

RTO_Final_Load =

the load shift factor for the entire RTO footprint on M2M Flowgate m;

the load shift factor for the RTO zone on M2M Flowgate
m;

the final RTO load served by internal RTO generation in the zone; and

RTO_Genzone =the sum of the RTO’s generation in a zone; and

Genunit,zone =the real-time output of the unit in a given zone.

Next, reduce the RTO generation located within a load zone by the scheduled line real-time

export transaction schedules that source from that particular load zone:

݈݈ܽ

ܴܱܶ_ܴ݁݀ݑܿ݁݀_ܩ݁݊ݖ݋݊݁ = ܴܱܶ_ܩ݁݊ݖ݋݊݁ − � ܧݔ݌݋ݎݐ_ܵܿℎ݁݀ݑ݈݁ݏݏܿℎ݁݀ݑ݈݁݀_݈݅݊݁,ݖ݋݊݁

ݏܿℎ݁݀ݑ݈݁݀_݈݅݊݁=1

Where:

RTO_Reduced_Genzone =the sum of the RTO’s generation in a zone reduced by the

sum of export schedules over scheduled lines from the zone; and

RTO_Genzone =the sum of the RTO’s generation in a zone.

Once export schedules over scheduled lines are accounted for, it is then appropriate to reduce the net RTO generation by the remaining real-time export schedules at the proxies identified in
Table 2 above.

௔௟௟

ܴܱܶ_ܰ݁ݐ_ܩ݁݊ =� ܴܱܶ_ܴ݁݀ݑܿ݁݀_ܩ݁݊௭௢௡௘

௭௢௡௘=1

Where:

zone =the relevant RTO load zone;

RTO_Net_Gen =the sum of the RTO’s generation reduced by the sum of

export schedules over all scheduled lines; and

RTO_Reduced_Genzone =the sum of the RTO’s generation in a zone reduced by the

sum of export schedules over scheduled lines from the
zone.

௔௟௟

ܴܱܶ_ܨ݈݅݊ܽ_ܩ݁݊ = ܴܱܶ_ܰ݁ݐ_ܩ݁݊ − � ܧݔ݌݋ݎݐ_ܵܿℎ݁݀ݑ݈݁ݏ௣௥௢௫௬

௣௥௢௫௬=1

Where:

proxy =representation of defined sets of Transmission Facilities

that (i) interconnect neighboring Balancing Authorities, (ii) are collectively scheduled, and (iii) are identified in Table 2 above;

RTO_Final_Gen =the sum of the RTO’s generation output for the entire RTO

footprint, sequentially reduced by (i) the sum of export schedules over all scheduled lines, and (ii) the sum of all proxy export schedules;

RTO_Net_Gen =the sum of the RTO’s generation reduced by the sum of

export schedules over all scheduled lines; and

Export_Schedulesproxy =the sum of export schedules at a given proxy.

Finally, weight each generator’s output by the reduced RTO generation:

ܩ݁݊_ܨ݈݅݊ܽݑ݊݅ݐ = ܴ݁݀ݑܿ݁݀ ܩ݁݊ݑ݊݅ݐ × ܴܱܶ_ܨ݈݅݊ܽ_ܩ݁݊
ܴܱܶ_ܰ݁ݐ_ܩ݁݊

Where:

unit =the relevant generator;

Gen_Finalunit =the portion of each unit’s output that is serving the RTO

Net Load;

Reduced Genunit =each unit’s real-time output after reducing the

RTO_Net_Gen by the real-time export schedules over scheduled lines;

RTO_Final_Gen =the sum of the RTO’s generation output for the entire RTO

footprint, sequentially reduced by (i) the sum of export schedules over all scheduled lines, and (ii) the sum of all proxy export schedules; and

RTO_Net_Gen =the sum of the RTO’s generation reduced by the sum of

export schedules over all scheduled lines.

Scheduling Point

NYISO-PJM

HTP Scheduled Line

Linden VFT Scheduled Line Neptune Scheduled Line

PJM shall post and maintain a list of its
non-common scheduling points on its
OASIS website. PJM shall provide to

NYISO notice of any new or deleted non-
common scheduling points prior to

implementing such changes in its M2M software.

NYISO non-common scheduling points include all Proxy Generator Buses and Scheduled Lines listed in the table that is set forth in Section 4.4.4 of the NYISO’s Market Services Tariff that are not

identified in this Table 3 as common
scheduling points. The NYISO shall
provide to PJM notice of any new or
deleted non-common scheduling points

prior to implementing such changes in its M2M software.

SchedulingParticipating

Point TypeRTO(s)

Responsible

commonNYISO and PJM

non-commonPJM

non-commonNYISO

sched_pt =

RTO_Transferssched_pt =

Importssched_pt =

WheelsInsched_pt =

Exportssched_pt =

WheelsOutsched_pt =

the relevant scheduling point. A scheduling point can be either a proxy or a scheduled line;

the net interchange schedule at a scheduling point;

the import component of the interchange schedule at a scheduling point;

the injection of wheels-through component of the interchange schedule at a scheduling point;

the export component of the interchange schedule at a scheduling point; and

the withdrawal of wheels-through component of the interchange schedule at a scheduling point.

RTO_Transfersnc_sched_pt =

PTDF(nc_sched_pt, M2M_Flowgate-m) =

the net interchange schedule at the non-common scheduling point, where a positive number indicates the import

direction; and

the power transfer distribution factor of the non-common scheduling point on M2M Flowgate m. For NYISO, the PTDF will equal the generator shift factor of the non-

common scheduling point.

The equation below applies to common scheduling points that directly interconnect the

participating RTOs. Shared_Transfers are applied to the Monitoring RTO’s Market Flow only. NYISO to PJM transfers would be considered part of NYISO’s Market Flow for NYISO-
monitored Flowgates and part of PJM’s Market Flow for PJM-monitored Flowgates.

ܵℎܽݎ݁݀_ܶݎܽ݊ݏ݂݁ݎݏM2M_Flowgate-m

݈݈ܽ

=�ܴܱܶ_ܶݎܽ݊ݏ݂݁ݎݏcmn_sched_pt × ܲܶܦܨ(cmn_sched_pt,M2M_Flowgate−m)

cmn_sched_pt=1

Where:

M2M_Flowgate-m=the relevant flowgate;

cmn_sched_pt =the relevant common scheduling point. A common

scheduling point can be either a proxy or a scheduled line.

Common scheduling points are identified in Table 3,

above;

Shared_TransfersM2M_Flowgate-m = the flow on M2M Flowgate m due to interchange schedules

on the common scheduling point;

Table 4. List of Phase Angle Regulators

PARDescriptionPARActualTargetResponsible

TypeScheduleScheduleParticipating

RTO(s)

NYISO and

1RAMAPO PAR3500commonFrom telemetryFrom telemetry*PJM

NYISO and

2RAMAPO PAR4500commonFrom telemetryFrom telemetry*PJM

NYISO and

3FARRAGUT TR11commonFrom telemetryFrom telemetry*PJM

NYISO and

4FARRAGUT TR12commonFrom telemetryFrom telemetry*PJM

NYISO and

5GOETHSLN BK_1NcommonFrom telemetryFrom telemetry*PJM

NYISO and

6WALDWICK O2267commonFrom telemetryFrom telemetry*PJM

NYISO and

7WALDWICK F2258commonFrom telemetryFrom telemetry*PJM

NYISO and

8WALDWICK E2257commonFrom telemetryFrom telemetry*PJM

non-

9STLAWRNC PS_33commonFrom telemetry0NYISO

non-

10STLAWRNC PS_34commonFrom telemetry0NYISO

*Pursuant to the rules for implementing the M2M coordination process over the NY-NJ PARs that are set forth in this M2M Schedule.

Compute the PAR control as the actual flow less the target flow across each PAR:
ܲܣܴ_ܥ݋݊ݐݎ݋݈݌ܽݎ = ܣܿݐݑ݈ܽ_ܯܹ݌ܽݎ − ܶܽݎ݃݁ݐ_ܯܹ݌ܽݎ

Where:

par =each of the phase angle regulators listed in Table 4, above;

PAR_Controlpar =the flow deviation on each of the PARs;

Actual_MWpar =the actual flow on each of the PARs, determined consistent

with Table 4 above; and

Target_MWpar =the target flow that each of the PARs should be achieving,

determined in accordance with Table 4 above.

When the Actual_MW and Target_MW are both set to “From telemetry” in Table 4 above, the PAR_Control will equal zero.

Common PARs

In the equations below, the Non-Monitoring RTO is credited for or responsible for

PAR_Impact resulting from the common PAR effect on the Monitoring RTO’s M2M Flowgates.
The common PAR impact calculation only applies to the common PARs identified in Table 4
above.

Compute control deviation for all common PARs on M2M Flowgate m based on the PAR_Controlpar MWs calculated above:

ܥ݉݊_ܲܣܴ_ܥ݋݊ݐݎ݋݈ܯ2ܯ_ܨ݈݋ݓ݃ܽݐ݁−݉

݈݈ܽ

=��ܲܵܨ(ܿ݉݊_݌ܽݎ,ܯ2ܯ_ܨ݈݋ݓ݃ܽݐ݁−݉) × ܲܣܴ_ܥ݋݊ݐݎ݋݈ܿ݉݊_݌ܽݎ�

ܿ݉݊_݌ܽݎ=1

Where:

M2M_Flowgate-m=the relevant flowgate;

cmn_par =each of the common phase angle regulators, modeled as

Flowgates, identified in Table 4, above;

Cmn_PAR_ControlM2M_Flowgate-m = the sum of flow on M2M Flowgate m after accounting for
the operation of common PARs;

Cmn_PAR_MFM2M_Flowgate-m =

PSF(cmn_par,M2M_Flowgate-m) =

RTO_GTLcmn_par =

Parallel_Transferscmn_par =

the sum of flow on M2M Flowgate m due to the generation
to load flows and interchange schedules on the common
PARs;

the PSF of each of the common PARs on M2M Flowgate
m;

the generation to load flow for each common par, computed in the same manner as the generation to load flow is

computed for M2M Flowgates in Section 5.4 above; and

the flow on each of the common PARs caused by
interchange schedules at non-common scheduling points.

Next, compute the impact of the common PAR effect for M2M Flowgate m as:

ܥ݉݊_ܲܣܴ_ܫ݉݌ܽܿݐܯ2ܯ_ܨ݈݋ݓ݃ܽݐ݁−݉

= ܥ݉݊_ܲܣܴ_ܯܨܯ2ܯ_ܨ݈݋ݓ݃ܽݐ݁−݉ − ܥ݉݊_ܲܣܴ_ܥ݋݊ݐݎ݋݈ܯ2ܯ_ܨ݈݋ݓ݃ܽݐ݁−݉

Where:

M2M_Flowgate-m =the relevant flowgate;

Cmn_PAR_ImpactM2M_Flowgate-m = potential flow on M2M Flowgate m that is affected by the
operation of the common PARs;

Cmn_PAR_MFM2M_Flowgate-m = the sum of flow on M2M Flowgate m due to the generation

to load and interchange schedules on the common PARs;

and

Cmn_PAR_ControlM2M_Flowgate-m = the flow deviation on each of the common PARs.

Non-Common PARs

For the equations below, the NYISO will be credited or responsible for PAR_Impact on all M2M Flowgates because the NYISO is the participating RTO that has input into the operation of these devices. The non-common PAR impact calculation only applies to the non-common PARs identified in Table 4 above.

Compute control deviation for all non-common PARs on M2M Flowgate m based on the PAR control MW above:

M2M_Flowgate-m= nc_par =

NC_PAR_ControlM2M_Flowgate-m =

PSF(nc_par,M2M_Flowgate-m) =

PAR_Controlnc_par =

the relevant flowgate;

each of the non-common phase angle regulators, modeled as Flowgates, identified in Table 4 above;

the sum of flow on M2M Flowgate m after accounting for the operation of non-common PARs;

the PSF of each of the non-common PARs on M2M Flowgate m; and

the flow deviation on each of the non-common PARs.

M2M_Flowgate-m= nc_par =

NC_PAR_MFM2M_Flowgate-m =

PSF(nc_par,M2M_Flowgate-m) =

RTO_GTLnc_par =

the relevant flowgate;

the set of non-common phase angle regulators, modeled as Flowgates, identified in Table 4 above;

the sum of flow on M2M Flowgate m due to the generation to load flows and interchange schedules on the non-

common PARs;

the outage transfer distribution factor of each of the non-
common PARs on M2M Flowgate m;

the generation to load flow for each non-common par,
computed in the same manner as the generation to load

flow is computed for M2M Flowgates in Section 5.4 above;
and

M2M_Flowgate-m =

NC_PAR_ImpactM2M_Flowgate-m =

NC_PAR_MFM2M_Flowgate-m =

NC_PAR_ControlM2M_Flowgate-m =

the relevant flowgate;

the potential flow on M2M Flowgate m that is affected by the operation of non-common PARs;

the sum of flow on M2M Flowgate m due to the generation to load and interchange schedules on the non-common

PARs; and

the sum of flow on M2M Flowgate m after accounting for the operation of non-common PARs.

6.1M2M Entitlement Topology Model and Impact Calculation

The M2M Entitlement calculation shall use both RTOs’ static topological models to

determine the Non-Monitoring RTO’s mutually agreed upon share of a M2M Flowgate’s total
capacity based on historic dispatch patterns. Both RTOs’ models must include the following
items:

1. a static transmission and generation model;

2. generator, load, and PAR shift factors;

3. generator output, load, and interchange schedules from 2009 through 2011 or any
subsequent three year period mutually agreed to by the Parties;

4. a PAR impact assumption that the PAR control is perfect for all PARs within the
transmission models except the PARs at the Michigan-Ontario border;

5. new or upgraded Transmission Facilities; and

6. Transmission Facility retirements.

Each Party shall calculate the GLDFs using a transmission model that contains a

mutually agreed upon set of: (1) transmission lines that are modeled as in-service; (2) generators; and (3) loads. Using these GLDFs, generator output data from the three year period agreed to by the Parties, and load data from the three year period agreed to by the Parties, the Parties shall
calculate each Party’s MW impact on each M2M Flowgate for each hour in the three year period agreed to by the Parties.

Using these impacts, the Parties shall create a reference year consisting of four periods
(“M2M Entitlement Periods”) for each M2M Flowgate. The M2M Entitlement Periods are as
follows:

1. M2M Entitlement Period 1: December, January, and February;

2. M2M Entitlement Period 2: March, April, and May;

3. M2M Entitlement Period 3: June, July, and August; and

4. M2M Entitlement Period 4: September, October, and November.

For each of the M2M Entitlement Periods listed above the Non-Monitoring RTO will

calculate its M2M Entitlement on each M2M Flowgate for each hour of each day of a week that
will serve as the representative week for that M2M Entitlement Period. The M2M Entitlement
for each day/hour, for each M2M Flowgate will be calculated by averaging the Non-Monitoring
RTO’s Market Flow on an M2M Flowgate for each particular day/hour of the week. The Non-
Monitoring RTO shall use the Market Flow data for all of the like day/hours, that occurred in
that day of the week and hour in the M2M Entitlement Period, in each year contained within the
three year period agreed to by the Parties to calculate the Non-Monitoring RTO’s average

Market Flow on each M2M Flowgate. When determining M2M settlements each Party will use the M2M Entitlement that corresponds to the hour of the week and to the M2M Entitlement Period for which the real-time Market Flow is being calculated.

The Parties will use the M2M Entitlements that are calculated based on data from the 2009 through 2011 three year period for at least their first year of implementing the M2M coordination process.

6.2M2M Entitlement Calculation

Each Party shall independently calculate the Non-Monitoring RTO’s M2M Entitlement for all M2M Flowgates using the equations set forth in this Section. The Parties shall mutually agree upon M2M Entitlement calculations. Any disputes that arise in the M2M Entitlement calculations will be resolved in accordance with the dispute resolution procedures set forth in Section 35.15 of this Agreement.

Eighty percent of the RECo load shall be excluded from the calculation of Market Flows
and M2M Entitlements, and shall instead be reflected as a PJM obligation over the Ramapo
PARs in accordance with Sections 7.2.1 and 8.3 of this Schedule D. The remaining twenty
percent of RECo load shall be included in the M2M Entitlement and Market Flow calculations as
PJM load.

The following assumptions apply to the M2M Entitlement calculation:

1. the Parties shall calculate the values in this Section using the M2M Entitlement
Topology Model discussed in Section 6.1 above, unless otherwise stated;

2. the impacts from the Parallel_Transfers and Shared_Transfers terms of the Market
Flow calculation (see Section 5.5) are excluded from the Market Flow that is used to
calculate M2M Entitlements;

3. perfect PAR Control exists for all PARs within the transmission models except the
PARs at the Ontario/Michigan border; and

4. External Capacity Resources may be included in the calculation of M2M Entitlements
consistent with Section 6.2.1.1 of this Schedule D.

Once the Reference Year Market Flows have been calculated for each interval to

determine the integrated hourly Market Flow for each hour of the relevant three year period

agreed to by the Parties, the new M2M Entitlement will be determined for a representative week in each M2M Entitlement Period using the method established in Section 6.1 above. In the event of new or upgraded Transmission Facilities, Section 6.3 of this Schedule D sets forth the rules that will be used to adjust M2M Entitlements.

6.2.1Treatment of Out-of-Area Capacity Resources and Representation of

Ontario/Michigan PARs in the M2M Entitlement Calculation Process

6.2.1.1 Modeling of External Capacity Resources

External Capacity Resources may be included in the M2M Entitlement calculation to the extent the Parties mutually agree to their inclusion.

For the initial implementation of this M2M coordination process that will use 2009

through 2011 data to develop M2M Entitlements, PJM will be permitted to include its External
Capacity Resources in the M2M Entitlement calculation. NYISO has not requested inclusion of
any External Capacity Resources in the M2M Entitlement calculation for the initial
implementation of M2M. When the Parties decide to update the data used to determine M2M
Entitlements:

a. PJM will be permitted to include External Capacity Resources that have an equivalent
net M2M Entitlement impact to the net M2M Entitlement impact of the PJM External
Capacity Resources that were used for the initial implementation of the M2M
coordination process. Inclusion of PJM External Capacity Resources that exceed the
net M2M Entitlement impact of the PJM External Capacity Resources that were used
for the initial implementation of the M2M coordination process must be mutually
agreed to by the Parties.

b. The Parties may mutually agree to permit the NYISO to include External Capacity
Resources in the M2M Entitlement calculation.

6.2.1.2 Modeling of the Ontario/Michigan PARs

The Ontario/Michigan PARs will be modeled as not controlling power flows in the M2M
Entitlement calculation process. The Parties agree that this modeling treatment is only
appropriate when it is paired with the rules for calculating Market Flows and M2M settlements
that are set forth in Sections 5 and 8 of this Agreement. Section 7.1 specifies how the RTOs will
adjust Market Flows to account for the impact of the operation of the Ontario/Michigan PARs
when the PARs are in service. The referenced Market Flow and M2M settlement rules are
necessary because they are designed to ensure that M2M settlement obligations based on M2M
Entitlements and Market Flows will not result in compensation for M2M redispatch when no
actual M2M redispatch occurs.

6.3 M2M Entitlement Adjustment for New Transmission Facilities, Upgraded

Transmission Facilities or Retired Transmission Facilities

This Section sets forth the rules for incorporating new or upgraded Transmission

Facilities, and Transmission Facility retirements, into the M2M Entitlement calculation. For all M2M Entitlement adjustments, the non-building RTO is the non-funding market, and the
building RTO is the funding market.

If the cost of a new or upgraded Transmission Facility is borne solely by the Market

Participants of the building RTO for the new or upgraded Transmission Facility, the Market

Participants of the building RTO will exclusively benefit from the increase in transfer capability on the building RTO’s Transmission Facilities. Therefore, the non-building RTO’s M2M
Entitlements shall not increase as result of such new or upgraded Transmission Facilities.
Reciprocally, a building RTO’s M2M Entitlements on the non-building RTO’s M2M Flowgates shall not increase as a result of such new or upgraded Transmission Facilities.

To the extent a building RTO’s new or upgraded Transmission Facility, or Transmission
Facility retirement, reduces the non-building RTO’s impacts on one or more of the building
RTO’s M2M Flowgates by redistributing the non-building RTO’s modeled flows, the non-
building RTO’s M2M Entitlement will be redistributed to ensure that the non-building RTO’s
aggregate M2M Entitlements on the building RTOs transmission system, including both existing
M2M Flowgates and upgraded or new Transmission Facilities that are not yet M2M Flowgates,
is not decreased.

In assessing the impact of new or upgraded Transmission Facilities, or Transmission

Facility retirements, the non-building RTO’s revised total circulation through the building RTO shall not result in a net increase in M2M Entitlements for the non-building RTO on the building RTO’s transmission system. The formulas below shall be used to determine the pro-rata
adjustment that will be applied to determine the redistributed interval level and hourly integrated Market Flow (i.e., the Transmission Adjusted Market Flow). Once a Transmission Adjusted
Market Flow that incorporates the topology adjustment and reallocation of flows has been
calculated for each hour of the three year period agreed to by the Parties, the new M2M
Entitlement will be determined for each hour and day of the week in each M2M Entitlement
Period using the method established in Section 6.1 above.

The Parties will mutually perform an analysis to determine if new or upgraded

Transmission Facilities, or Transmission Facility retirements, will have an impact on any of the non-building RTO’s M2M Flowgates. If the new or upgraded Transmission Facilities, or
Transmission Facility retirements, are determined to have a 5% or less impact on each of the
non-building RTO’s M2M Flowgates, calculated individually for each M2M Flowgate, then the non-building RTO is not required to update its operational models to incorporate the new,
upgraded or retired Transmission Facilities. If the new or upgraded Transmission Facilities, or
Transmission Facility retirements, are determined to have greater than a 5% impact, but less than a 10% impact on each of the non-building RTO’s M2M Flowgates, calculating the impact
individually for each M2M Flowgate, then the Parties may mutually agree not to require the nonbuilding RTO to update its operational models.

If Transmission Facilities outside the Balancing Authority Areas of the Parties are added or upgraded and the new or upgraded Transmission Facilities would, individually or in
aggregate, cause a change in either Party’s aggregate M2M Entitlements of at least 10%, then the Parties may mutually agree to incorporate those Transmission Facilities into the static
transmission models used to perform the M2M Entitlement calculations.

M2M Entitlement Transmission Adjusted Market Flow Calculation:

This process determines the Transmission Adjusted Market Flow for existing and new or retired Transmission Facilities when new Transmission Facilities are built or existing
Transmission Facilities are upgraded or retired. This process does not apply to the addition of new M2M Flowgates that are associated with existing Transmission Facilities.

First, determine the reference set of Market Flows, called Reference Year Market Flows, for all M2M Flowgates using a static transmission model before adding any new or upgraded Transmission Facilities, or removing retired Transmission Facilities.

Second, account for new or upgraded Transmission Facilities or Transmission Facility retirements in order from the first completed new/upgraded/retired facility to the last (most
recently completed) new/upgraded/retired facility. Reflect the new/upgraded/retired facilities, grouped by building RTO, in the reference year model to determine the new set of Market Flows called New Year Market Flows.

Third, compare the New Year Market Flows to the Reference Year Market Flows, in net
across all M2M Flowgates (after adding new or upgraded Transmission Facilities and/or
removing retired Transmission Facilities), to determine whether the New Year Market Flows
have increased or decreased relative to the Reference Year Market Flows. If the comparison
indicates that New Year Market Flows have increased or decreased relative to the Reference
Year Market Flows, apply the formulas below to determine new Transmission Adjusted Market
Flows.

The comparison process is performed on a step-by-step basis. In some cases it will be appropriate to aggregate the impacts of more than one new or upgraded Transmission Facility into a single “step” of the evaluation.

Transmission Adjusted Market Flow Formula:

ܶ݋ݐܲ݋ݏݐ = � ܲ݋ݏݐ௙

௙∈ி

ܶ݋ݐܲݎ݁ = � ܲݎ݁௙

௙∈ா

ܰ݁ݓܲ݋ݏݐ = � ܲ݋ݏݐ௙

௙∈ே

ܧݔ݅ݏݐܲ݋ݏݐ = � ܲ݋ݏݐ௙

௙∈ா

ܧݔ݅ݏݐܲݎ݁ = � ܲݎ݁௙

௙∈ா

The non-building RTO’s Transmission Adjusted Market Flow (Entf) is calculated as follows for each Transmission Facility in the building RTO’s set of monitored M2M Flowgates f ∈ F:

⎩ܰ݁ݓܲ݋ݏݐ , if ܧݔ݅ݏݐܲ݋ݏݐ ≤ ܧݔ݅ݏݐܲݎ݁ and ݂ ∈ ܰ.

The building RTO’s Transmission Adjusted Market Flow (Entf) is calculated as follows for each Transmission Facility in the non-building RTO’s set of monitored M2M Flowgates f ∈ F:

ܶ݋ݐܲݎ݁

ܲ݋ݏݐ௙ ∙

ܶ݋ݐܲ݋ݏݐ , if ܧݔ݅ݏݐܲ݋ݏݐ > ܧݔ݅ݏݐܲݎ݁ and ݂ ∈ ܧ

ܧ݊ݐ௙ = �

ܲ݋ݏݐ௙, if ܧݔ݅ݏݐܲ݋ݏݐ ≤ ܧݔ݅ݏݐܲݎ݁ and ݂ ∈ ܧ
0, otherwise.

Where:

f represents the relevant Transmission Facility within the building or non-building RTO.

E represents the existing facilities: the set of M2M Flowgates and previously accounted for new, upgraded or retired Transmission Facilities (which may not be M2M Flowgates) in the relevant (building or non-building) RTO.

N represents the new, upgraded or retired facilities: the set of Transmission Facilities in
the relevant (building or non-building) RTO whose impact on M2M Entitlements is being
evaluated.

F represents the set of all Transmission Facilities in the relevant (building or nonbuilding) RTO, including all elements of sets E and N.

Pref is pre-upgrade/retirement market flow on f: the market flow on facility f calculated using the M2M Entitlement assumptions and based on a transmission topology that
includes all pre-existing Transmission Facilities and all new, upgraded or retired
Transmission Facilities whose impact on M2M Entitlements has been previously
evaluated and incorporated.

Postf is the post-upgrade/retirement market flow on f: the market flow on facility f

calculated using the M2M Entitlement assumptions and based on a transmission topology that includes all pre-existing Transmission Facilities and all new, upgraded or retired Transmission Facilities whose impact on M2M Entitlements has been previously
evaluated and incorporated, and all new, upgraded or retired Transmission Facilities
whose impact on M2M Entitlements is being evaluated in the current evaluation step. For Transmission Facility retirements, Postf shall equal zero.

6.4M2M Entitlement Adjustment for a New Set of Generation, Load and

Interchange Data

Section 6.3 above addresses how new or upgraded Transmission Facilities and

Transmission Facility retirements will be reflected in the determination of M2M Entitlements.

This Section explains how the Parties will update the model used to determine M2M
Entitlements to reflect new/updated generation, load and interchange information.

When moving the initial 2009-2011 period generation, interchange and load data

forward, the RTOs will need to gather the data specified in Sections 6.1, 6.2 and (where

appropriate) 6.3, above for the agreed upon three year period. External Capacity Resources will be included consistent with Section 6.2.1.1, above.

In accordance with the rules specified in Sections 6.1, 6.2 and (where appropriate) 6.3,
above, the new set of data will be used to establish a new Reference Year Market Flow. When
new or upgraded Transmission Facility or Transmission Facility retirement adjustments are
necessary, the new Reference Year Market Flows will be used to determine the New Year and
Transmission Adjusted Market Flows based on the rules set forth above. When no new or
upgraded Transmission Facility or Transmission Facility retirement adjustments need to be
applied, the new Reference Year Market Flows are the basis for the new M2M Entitlements.

7Real-Time Energy Market Coordination

Operation of the NY-NJ PARs and redispatch are used by the Parties in real-time

operations to effectuate this M2M coordination process. Operation of the NY-NJ PARs will
permit the Parties to redirect energy to reduce the overall cost of managing transmission
congestion and to converge the participating RTOs’ cost of managing transmission congestion.
Operation of the NY-NJ PARs to manage transmission congestion requires cooperation between
the NYISO and PJM. Operation of the NY-NJ PARs shall be coordinated by the RTOs.

When a M2M Flowgate that is under the operational control of either NYISO or PJM and
that is eligible for redispatch coordination, becomes binding in the Monitoring RTOs real-time
security constrained economic dispatch, the Monitoring RTO will notify the Non-Monitoring
RTO of the transmission constraint and will identify the appropriate M2M Flowgate that requires
redispatch assistance. The Monitoring and Non-Monitoring RTOs will provide the economic
value of the M2M Flowgate constraint (i.e., the Shadow Price) as calculated by their respective
dispatch models. Using this information, the security-constrained economic dispatch of the Non-
Monitoring RTO will include the M2M Flowgate constraint; the Monitoring RTO will evaluate
the actual loading of the M2M Flowgate constraint and request that the Non-Monitoring RTO
modify its Market Flow via redispatch if it can do so more efficiently than the Monitoring RTO
(i.e., if the Non-Monitoring RTO has a lower Shadow Price for that M2M Flowgate than the
Monitoring RTO).

An iterative coordination process will be supported by automated data exchanges in order
to ensure the process is manageable in a real-time environment. The process of evaluating the
Shadow Prices between the RTOs will continue until the Shadow Prices converge and an
efficient redispatch solution is achieved. The continual interactive process over the following
dispatch cycles will allow the transmission congestion to be managed in a coordinated, cost-
effective manner by the RTOs. A more detailed description of this iterative procedure is
discussed in Section 7.1 and the appropriate use of this iterative procedure is described in
Section 10.

7.1Real-Time Redispatch Coordination Procedures

The following procedure will apply for managing redispatch for M2M Flowgates in the real-time Energy market:

7.1.1 M2M Flowgates shall be monitored per each RTO’s internal procedures.

a. When (i) an M2M Flowgate is constrained to a defined limit (actual or

contingency flow) by a non-transient constraint, and (ii) Market Flows are such that the Non-Monitoring RTO may be able to provide an appreciable amount of redispatch relief to the Monitoring RTO, then the Monitoring RTO shall reflect the monitored M2M Flowgate as constrained.

b.M2M Flowgate limits shall be periodically verified and updated.

7.1.2Testing for an Appreciable Amount of Redispatch Relief and Determining

the Settlement Market Flow:

When the PARs at the Michigan-Ontario border are not in-service, the ability of
the Non-Monitoring RTO to provide an appreciable amount of redispatch relief
will be determined by comparing the Non-Monitoring RTO’s Market Flow to the
Non-Monitoring RTO M2M Entitlement for the constrained M2M Flowgate.
When the Non-Monitoring RTO Market Flow (also the Market Flow used for
settlement) is greater than the Non-Monitoring RTO M2M Entitlement for the
constrained M2M Flowgate, the Monitoring RTO will assume that an appreciable
amount of redispatch relief is available from the Non-Monitoring RTO and will
engage the M2M coordination process for the constrained M2M Flowgate.

When any of the PARs at the Michigan-Ontario border are in-service, the ability
of the Non-Monitoring RTO to provide an appreciable amount of redispatch relief
will be determined by comparing either (i) the Non-Monitoring RTO’s unadjusted
Market Flow, or (ii) the Non-Monitoring RTO Market Flow adjusted to reflect the
expected impact of the PARs at the Michigan-Ontario border (“LEC Adjusted
Market Flow”), to the Non-Monitoring RTO M2M Entitlement for the
constrained M2M Flowgate. The rules for determining which Market Flow
(unadjusted or adjusted) to compare to the Non-Monitoring RTO M2M
Entitlement when any of the PARs at the Michigan-Ontario border are in-service
are set forth below.

a.Calculating the Expected Impact of the PARs at the Michigan-Ontario

Border on Market Flows

Ontario PAR paths, computed in the same manner

as the Market Flow is computed for M2M Flowgates in Section 5 above; and

LEC =Actual circulation around Lake Erie as measured by each

RTO.

The Non-Monitoring RTO’s LEC Adjusted Market Flow, reflecting the expected impact of the PARs on the Michigan-Ontario border, can be determined by
adjusting the RTO_MF from Section 5 to incorporate the MICH-OH_PAR_Impact calculated above.

ܮܧܥ ܣ݆݀ݑݏݐ݁݀ ܯܽݎ݇݁ݐ ܨ݈݋ݓܯ2ܯ_ܨ݈݋ݓ݃ܽݐ݁−݉
= ܴܱܶ_ܯܨܯ2ܯ_ܨ݈݋ݓ݃ܽݐ݁−݉

− ܯܫܥܪ−ܱܪ_ܲܣܴ_ܫ݉݌ܽܿݐܯ2ܯ_ܨ݈݋ݓ݃ܽݐ݁−݉

Where:

M2M_Flowgate-m=the relevant flowgate;

MICH-OH Path = each of the four PAR paths connecting Michigan to
Ontario, Canada;

MICH-OH_PAR_ImpactM2M_Flowgate-m = the expected impact of the operation

of the PARs at the Michigan-Ontario

border on the flow on M2M Flowgate m;

RTO_MFM2M_Flowgate-m = the Market Flow caused by RTO generation

dispatch and transaction scheduling on M2M

Flowgate m after accounting for the operation of
both the common and non-common PARs; and

LEC Adjusted Market FlowM2M_Flowgate-m = the Market Flow caused by RTO
generation dispatch and transaction

scheduling on M2M Flowgate m after

accounting for the operation of the common
PARs, the non-common PARs, and the
PARs at the Michigan-Ontario border.

b. Determining Whether to Use Unadjusted Market Flow or LEC Adjusted

Market Flow; Determining if Appreciable Redispatch Relief is Available

1) When the Non-Monitoring RTO’s LEC Adjusted Market Flow equals the

Non-Monitoring RTO’s unadjusted Market Flow and the Non-Monitoring

RTO’s Market Flow (also the Market Flow used for settlement) is greater than
the Non-Monitoring RTO M2M Entitlement for the constrained M2M
Flowgate, the Monitoring RTO will assume that an appreciable amount of
redispatch relief is available from the Non-Monitoring RTO and will engage
the M2M coordination process for the constrained M2M Flowgate.

2) When the Non-Monitoring RTO’s unadjusted Market Flow is greater than the
Non-Monitoring RTO’s LEC Adjusted Market Flow, then the following
calculation shall be performed to determine if an appreciable amount of
redispatch relief is expected to be available:

A. Determine the minimum of (a) the Non-Monitoring RTO’s unadjusted
Market Flow, and (b) the Non-Monitoring RTO’s M2M Entitlement, for
the constrained M2M Flowgate; and

B. Determine the maximum of (x) the value from step A above, and (y) the
Non-Monitoring RTO’s LEC Adjusted Market Flow

When the value from B above (the Market Flow used for settlement), is greater than the Non-Monitoring RTO’s M2M Entitlement for the
constrained M2M Flowgate, the Monitoring RTO will assume that an appreciable amount of redispatch relief is available from the Non-
Monitoring RTO and will engage the M2M coordination process for the constrained M2M Flowgate.

3) When the Non-Monitoring RTO’s unadjusted Market Flow is less than the

Non-Monitoring RTO LEC Adjusted Market Flow, the following calculation shall be performed to determine if an appreciable amount of redispatch relief is expected to be available:

A. Determine the maximum of (a) the Non-Monitoring RTO’s unadjusted

Market Flow, and (b) the Non-Monitoring RTO M2M Entitlement, for the constrained M2M Flowgate; and

B. Determine the minimum of (x) the value from A above, and (y) the Non-
Monitoring RTO’s LEC Adjusted Market Flow

When the value from B above (the Market Flow used for settlement), is

greater than the Non-Monitoring RTO’s M2M Entitlement for the constrained
M2M Flowgate, the Monitoring RTO will assume that an appreciable amount
of redispatch relief is available from the Non-Monitoring RTO and will
engage the M2M coordination process for the constrained M2M Flowgate.

7.1.3 The Monitoring RTO initiates M2M, notifies the Non-Monitoring RTO of the

M2M Flowgate that is subject to coordination and updates required information.

7.1.4The Non-Monitoring RTO shall acknowledge receipt of the notification and one

of the following shall occur:

a.The Non-Monitoring RTO refuses to activate M2M:

i. The Non-Monitoring RTO notifies the Monitoring RTO of the reason for
refusal; and

ii. The M2M State is set to “Refused”; or

b. The Non-Monitoring RTO agrees to activate M2M:

i. Such an agreement shall be considered an initiation of the M2M
redispatch process for operational and settlement purposes; and ii. The M2M State is set to “Activated”.

7.1.5The Parties have agreed to transmit information required for the administration of

this procedure, as per Section 35.7.1 of this Agreement.

7.1.6 As Shadow Prices converge and approach zero or the Non-Monitoring RTO’s

Market Flows and Shadow Prices are such that an appreciable amount of

redispatch relief can no longer be provided to the Monitoring RTO, the

Monitoring RTO shall be responsible for the continuation or termination of the M2M redispatch process. Current and forecasted future system conditions shall be considered.1

When the Monitoring RTO’s Shadow Price is not approaching zero the

Monitoring RTO can (1) use the procedure called Testing for an Appreciable Amount of Relief and Determining the Settlement Market Flow from step 2b above, and (2) compare the Non-Monitoring RTO’s Shadow Price to the
Monitoring RTO’s Shadow Price, to determine whether there is an appreciable amount of market flow relief being provided.

When the Testing for an Appreciable Amount of Relief and Determining the

Settlement Market Flow procedure indicates there is not an appreciable amount of relief being provided, and the Non-Monitoring RTO Shadow Price is not less than the Monitoring RTO Shadow Price, then the Monitoring RTO may terminate the M2M coordination process.

7.1.7Upon termination of M2M, the Monitoring RTO shall

a.Notify the Non-Monitoring RTO; and

b. Transmit M2M data to the Non-Monitoring RTO with the M2M State set to

“Closed”. The timestamp with this transmission shall be considered termination of the M2M redispatch process for operational and settlement purposes.

7.2Real-Time NY-NJ PAR Coordination

The NY-NJ PARs will be operated to facilitate interchange schedules while minimizing

regional congestion costs. When congestion is not present, the NY-NJ PARs will be operated to achieve the target flows as established below in Section 7.2.1.

PJM and the NYISO have operational control of the NY-NJ PARs and direct the

operation of the NY-NJ PARs, while Public Service Electric and Gas Company (“PSE&G”) and

1 Termination of M2M redispatch may be requested by either RTO in the event of a system emergency.

Consolidated Edison Company of New York (“Con Edison”) have physical control of the NY-NJ PARs. The Con Edison dispatcher sets the PAR taps for the ABC PARs and Ramapo PARs at the direction of the NYISO. The PSE&G dispatchers set the PAR taps for the Waldwick PARs at the direction of PJM.

PJM and the NYISO have the responsibility to direct the operation of the NY-NJ PARs to
maintain compliance with the requirements of this Agreement. PJM and the NYISO shall make
reasonable efforts to minimize movement of the NY-NJ PARs while implementing the NY-NJ
PAR target flows and the NY-NJ PAR coordination process. PJM and the NYISO will employ a
+/- 50 MW operational bandwidth around each NY-NJ PAR’s target flow to limit tap
movements and to maintain actual flows at acceptable levels. This operational bandwidth shall
not impact or change the NY-NJ PAR Settlement rules in Section 8.3 of this Agreement. The
operational bandwidth provides a guideline to assist the RTOs’ efforts to avoid unnecessary NY-
NJ PAR tap movements.

In order to preserve the long-term availability of the NY-NJ PARs, a maximum number of 20 PAR tap changes per NY-NJ PAR per day, and a maximum number of 400 PAR tap
changes per NY_NJ PAR per calendar month will normally be observed. If the number of PAR tap changes exceed these limits, then the operational bandwidth shall be increased in 50 MW increments until the total number of PAR tap changes no longer exceed 400 PAR tap changes per NY-NJ PAR per month, unless PJM and the NYISO mutually agree otherwise.

In order to implement the NY-NJ PAR coordination process, including the establishment
and continuation of the initial and any future OBF as defined in this Section and Section 35.2 of
this Agreement, on the ABC PARs and the Waldwick PARs, the facilities comprising the ABC
Interface and JK Interface shall be functional and operational at all times, consistent with Good
Utility Practice, except when they are taken out-of-service to perform maintenance or are subject
to a forced outage.

7.2.1NY-NJ PAR Target Values

A Target Value for flow between the NYISO and PJM shall be determined for each NYNJ PAR based on the net interchange schedule between the Parties. These Target Values shall be used for settlement purposes as:

ܶܽݎ݃݁ݐܲܣܴݔ = �ܫ݊ݐ݁ݎܿℎܽ݊݃݁ܨܽܿݐ݋ݎܲܣܴݔ �

+ �ܱ݌݁ݎܽݐ݅݋݈݊ܽ ܤܽݏ݁ ܨ݈݋ݓܲܣܴݔ ) + (ܴܧܥ݋_ܮ݋ܽ݀ܲܣܴݔ�

Where:

ܶܽݎ݃݁ݐܲܣܴݔ =Calculated Target Value for the flow on each NY-NJ PAR For

purposes of this equation, a positive value* indicates a flow from PJM to the NYISO.

ܫ݊ݐ݁ݎܿℎܽ݊݃݁ܨܽܿݐ݋ݎܲܣܴݔ =

OperationalBaseFlow PARx=

The MW value of the net interchange schedule between PJM and NYISO over the AC tie lines distributed across each in-service NY-NJ PAR calculated as net interchange schedule times the interchange percentage. The

interchange percentage for each NY-NJ PAR is listed in Table 5.

If a NY-NJ PAR is out-of-service or is bypassed, or if the
RTOs mutually agree that a NY-NJ PAR is incapable of
facilitating interchange, the percentage of net interchange
normally assigned to that NY-NJ PAR will be transferred
over the western AC tie lines between the NYISO and

PJM. The remaining in-service NY-NJ PARs will continue to be assigned the interchange percentages specified in

Table 5.

The MW value of OBF distributed across each of the in-
service ABC PARs and Waldwick PARs.

Either Party may establish a temporary OBF to address a
reliability issue until a long-term solution to the identified
reliability issue can be implemented. Any temporary OBF
that is established shall be at a level that both Parties can
reliably support. The Party that establishes the OBF shall:

(1) explain the reliability need to the other Party; (2) describe how the OBF addresses the identified reliability need; and (3) identify the expected long-term solution to address the reliability need.

The initial 400 MW OBF, effective on May 1, 2017, is
expected to be reduced to zero MW by June 1, 2021.

The Parties may mutually agree to modify an established OBF value that normally applies when all of the ABC

PARs and Waldwick PARs are in service. Modification of the normally applied OBF value will be implemented no sooner than two years after mutual agreement on such

modification has been reached, unless NYISO and PJM mutually agree to an earlier implementation date.

The NYISO and PJM shall post the OBF values, in MW,
normally applied to each ABC PAR and Waldwick PAR

when all of the ABC PARs and Waldwick PARs are in

service, on their respective websites. The NYISO and PJM shall also post the methodology used to reduce the OBF
under certain outage conditions on their respective
websites. The NYISO and PJM shall review the OBF MW value at least annually.

ܴܧܥ݋_ܮ݋ܽ݀ܲܣܴݔ = The MW value of the telemetered real-time Rockland

Electric Company Load to be delivered over a NY-NJ PAR
shall be calculated as real-time RECo Load times the RECo
Load percentage listed in Table 5. RECo Load is the
portion of Orange and Rockland load that is part of PJM.
The primary objective of the NY-NJ PARs is the delivery
of scheduled interchange. Deliveries to serve RECo Load
over the Ramapo PARs will only be permitted to the extent
there is unused transfer capability on the Ramapo PARs
after accounting for interchange. Subject to the foregoing
limitation, when one of the Ramapo PARs is out of service
the full RECo Load percentage (80%) will be applied to the
in-service Ramapo PAR. The RECo Load percentage
ordinarily used for each NY-NJ PAR is listed in Table 5:

Table 5

PARDescriptionInterchangeRECo Load

NamePercentagePercentage

3500RAMAPO PAR350016%40%^

4500RAMAPO PAR450016%40%^

EWALDWICK E22575%0%

FWALDWICK F22585%0%

OWALDWICK O22675%0%

AGOETHSLN BK_1N7%0%

BFARRAGUT TR117%0%

CFARRAGUT TR127%0%

^ Subject to the foregoing limitation, when one of the Ramapo PARs is out of service the full RECo Load Percentage (80%) will be applied to the in-service Ramapo PAR.

7.2.2 Determination of the Cost of Congestion at each NY-NJ PAR

The incremental cost of congestion relief provided by each NY-NJ PAR shall be determined by
each of the Parties. These costs shall be determined by multiplying each Party’s Shadow Price
on each of its M2M Flowgates by the PSF for each NY-NJ PAR for the relevant M2M
Flowgates.

The incremental cost of congestion relief provided by each NY-NJ PAR shall be determined by the following formula:

ܥ݋݊݃݁ݏݐ݅݋݊$(ܲܣܴݔ,ܴܱܶ) =

��ܲܵܨ(ܯ2ܯ ܨ݈݋ݓ݃ܽݐ݁−݉,ܲܣܴݔ) × ܵℎܽ݀݋ݓ$ܯ2ܯ ܨ݈݋ݓ݃ܽݐ݁−݉�

ܯ2ܯ ܨ݈݋ݓ݃ܽݐ݁ݏ−݉ ∈ܯ2ܯ ܨ݈݋ݓ݃ܽݐ݁ݏܴܱܶ

Where:

ܥ݋݊݃݁ݏݐ݅݋݊$(ܲܣܴݔ,ܴܱܶ) =

ܯ2ܯ ܨ݈݋ݓ݃ܽݐ݁ݏܴܱܶ =

ܲܵܨ(ܯ2ܯ ܨ݈݋ݓ݃ܽݐ݁−݉,ܲܣܴݔ) =

ܵℎܽ݀݋ݓ$ܯ2ܯ ܨ݈݋ݓ݃ܽݐ݁−݉ =

7.2.3Desired PAR Changes

Cost of congestion at each NY-NJ PAR for the
relevant participating RTO, where a negative cost of congestion indicates taps in the direction of the
relevant participating RTO would alleviate that
RTO’s congestion;

Set of M2M Flowgates for the relevant participating RTO;

The PSF for each NY-NJ PAR on M2M Flowgate-
m; and

The Shadow Price on the relevant participating RTO’s M2M Flowgate m.

Any action on the NY-NJ PARs will be coordinated between the Parties and taken into consideration other PAR actions.

8Real-Time Energy Market Settlements

8.1Information Used to Calculate M2M Settlements

For each M2M Flowgate there are two components of the M2M settlement, a redispatch component and a NY-NJ PAR coordination component. Both M2M settlement components are defined below.

For the redispatch component, market settlements under this M2M Schedule will be calculated based on the following:

1. the Non-Monitoring RTO’s real-time Market Flow, determined in accordance with

Section 7.1 above, on each M2M Flowgate compared to its M2M Entitlement for M2M Flowgates eligible for redispatch on each M2M Flowgate; and

2. the ex-ante Shadow Price at each M2M Flowgate.

For the NY-NJ PARs coordination component, Market settlements under this M2M Schedule will be calculated based on the following:

1. actual real-time flow on each of the NY-NJ PARs compared to its target flow
(TargetPARx);

2. PSF for each NY-NJ PAR onto each M2M Flowgate; and

3. the ex-ante Shadow Price at each M2M Flowgate.

Either or both of the Parties shall be excused from paying an M2MPARSettlement (described
in Section 8.3 of this Schedule D) to the other Party at times when a Storm Watch is in effect in
New York and the operating requirements and other criteria set forth in Section 8.3.1 below are
satisfied.

8.2Real-Time Redispatch Settlement

If the M2M Flowgate is eligible for redispatch, then compute the real-time redispatch

settlement for each interval as specified below.

When ܴܶ_ܯ݇ݐܨ݈݋ݓܯ2ܯ ܨ݈݋ݓ݃ܽݐ݁−݉> ܯ2ܯ_ܧ݊ݐܯ2ܯ ܨ݈݋ݓ݃ܽݐ݁−݉ ,

݅݅

ܰ݋݊_ܯ݋ܴܱ݊ܶ_ܲܽݕ݉݁݊ݐܯ2ܯ ܨ݈݋ݓ݃ܽݐ݁−݉

ܯ݋ܴܱ݊ܶ_ܲܽݕ݉݁݊ݐܯ2ܯ ܨ݈݋ݓ݃ܽݐ݁−݉ =

ܴܶ_ܯ݇ݐܨ݈݋ݓܯ2ܯ ܨ݈݋ݓ݃ܽݐ݁−݉ =

ܯ2ܯ_ܧ݊ݐܯ2ܯ ܨ݈݋ݓ݃ܽݐ݁−݉ =

ܯ݋݊_ܵℎܽ݀݋ݓ$ܯ2ܯ ܨ݈݋ݓ݃ܽݐ݁−݉ =

ܰ݋݊_ܯ݋݊_ܵℎܽ݀݋ݓ$ܯ2ܯ ܨ݈݋ݓ݃ܽݐ݁−݉ =

ݏ݅ =

=M2M redispatch settlement, in the form of a
payment to the Non-Monitoring RTO from the

Monitoring RTO, for M2M Flowgate m and interval
i;

M2M redispatch settlement, in the form of a
payment to the Monitoring RTO from the Non-

Monitoring RTO, for M2M Flowgate m and interval
i;

real-time RTO_MF, determined for settlement in accordance with Section 7.1 above, for M2M

Flowgate m and interval i;

Non-Monitoring RTO M2M Entitlement for M2M Flowgate m and interval i;

Monitoring RTO’s Shadow Price for M2M Flowgate m and interval i;

Non-Monitoring RTO’s Shadow Price for M2M Flowgate m and interval i; and

number of seconds in interval i.

× ݏ݅�3600ݏ݁ܿ

When

ܣܿݐݑ݈ܽܲܣܴݔ݅ < ܶܽݎ݃݁ݐܲܣܴݔ݅,

ܻܰܫ݉݌ܽܿݐܲܣܴݔ

= �ܥ݋݊݃݁ݏݐ݅݋݊$(ܲܣܴݔ,ܻܰ) × ݏ݅�3600ݏ݁ܿ

ܲܬܯܫ݉݌ܽܿݐܲܣܴݔ

௜ × �ܣܿݐݑ݈ܽܲܣܴݔ௜ − ܶܽݎ݃݁ݐܲܣܴݔ ݅

× �ܶܽݎ݃݁ݐܲܣܴݔ − ܣܿݐݑ݈ܽ ��

௜ ௜ ܲܣܴݔ݅

ܣܿݐݑ݈ܽܲܣܴݔ݅ =

ܶܽݎ݃݁ݐܲܣܴݔ =

ܲܬܯܫ݉݌ܽܿݐ ܲܣܴݔ =

ܻܰܫ݉݌ܽܿݐܲܣܴݔ =

ܥ݋݊݃݁ݏݐ݅݋݊$(ܲܣܴݔ,ܲܬܯ) =

௜

ܥ݋݊݃݁ݏݐ݅݋݊$(ܲܣܴݔ,ܻܰ) =

௜

ܯ2ܯܲܣܴܵ݁ݐݐ݈݁݉݁݊ݐ݅ =

Measured real-time actual flow on each of the NY-NJ PARs for interval i. For purposes of this equation, a positive value indicates a flow from PJM to the NYISO;

Calculated Target Value for the flow on each NY-NJ PAR as
described in Section 7.2.1 above for interval i. For purposes of this
equation, a positive value indicates a flow from PJM to the
NYISO;

PJM Impact, defined as the impact that the current NY-NJ PAR flow relative to target flow is having on PJM’s system congestion for interval i. For purposes of this equation, a positive value indicates that the PAR flow relative to target flow is reducing PJM’s system congestion, whereas a

negative value indicates that the PAR flow relative to target flow is increasing PJM’s system congestion.

NYISO Impact, defined as the impact that the current NY-
NJ PAR flow relative to target flow is having on NYISO’s system congestion for interval i. For purposes of this

equation, a positive value indicates that the PAR flow relative to target flow is reducing NYISO’s system

congestion, whereas a negative value indicates that the PAR flow relative to the target flow is increasing NYISO’s system congestion system.

Cost of congestion at each NY-NJ PAR for PJM, calculated in accordance with Section 7.2.2 above for interval i;

Cost of congestion at each NY-NJ PAR for NYISO, calculated in accordance with Section 7.2.2 above for interval i, and

M2M PAR Settlement across all NY-NJ PARs, defined as a payment from NYISO to PJM when the value is positive, and a payment from PJM to NYISO when the value is

negative for interval i.

required below to address power flows resulting from the redispatch of generation to address the Storm Watch.

NYISO shall not be required to pay a M2MPARSettlement to PJM when a Storm Watch is in effect and NYISO has taken the actions required of it below to address power flows resulting from the redispatch of generation to address the Storm Watch.

When a Storm Watch is in effect, the RTOs will determine whether PJM and/or NYISO are
required to pay a M2MPARSettlement to the other RTO based on three Storm Watch
compliance requirements that address the operation of (a) the JK transmission lines and
associated Waldwick PARs, (b) the ABC transmission lines and associated ABC PARs, and

a. JK Storm Watch compliance: Subject to the exceptions that follow, PJM will be

“Compliant” at the JK interface when either of the following two conditions are satisfied, otherwise it will be “Non-compliant”:

i. Flow on the JK interface was at or above the sum of the Target flows for
each Available Waldwick PAR at any point in the trailing (rolling) 15-
minutes2; or

ii. PJM took at least two taps on each Available Waldwick PAR in the

direction to reduce flow into PJM at any point in the trailing (rolling) 15-
minutes.

If NYISO denies PJM’s request to take one or more taps at a Waldwick PAR to reduce flow into PJM and achieve compliance at the JK interface, then PJM shall be considered “Compliant” at the JK interface.

If PJM cannot take a required tap at a Waldwick PAR because the change will
result in an overload on PJM’s system unless NYISO first takes a tap at an
ABC PAR increasing flow into New York, and flow on the ABC interface is
not at or above the sum of the Target flows for each Available ABC PAR,
then PJM may request that NYISO take a tap at an ABC PAR increasing flow
into New York. PJM will be “Compliant” at the JK interface if NYISO does
not take the requested tap within five minutes of receiving PJM’s request.
“Compliant” status achieved pursuant to this paragraph shall continue until
NYISO takes the requested PAR tap, or the Parties agree that NYISO not
taking the requested PAR tap is no longer preventing PJM from taking the
PAR tap(s) (if any) PJM needs to achieve compliance at the JK interface.

2 For example, if the sum of the Target flows for Available Waldwick PARs is +200 MW, then PJM will be

“Compliant” if flow into PJM on JK was at or above +200 MW during any six second measurement interval over the trailing (rolling) 15 minutes.

If PJM cannot take a required tap at a Waldwick PAR because the change will
result in an overload on PJM’s system unless NYISO first takes a tap at a
Ramapo PAR increasing flow into New York, and flow on the 5018 interface
is not at or above the sum of the Target flows for each Available Ramapo
PAR, then PJM may request that NYISO take a tap at a Ramapo PAR
increasing flow into New York. PJM will be “Compliant” at the JK interface
if NYISO does not either (i) take the requested tap within five minutes of
receiving PJM’s request, or (ii) inform PJM that NYISO is unable to take the
requested tap at Ramapo because the change would result in an actual or post-
contingency overload on the 5018 lines, or on either of the Ramapo PARs
(NYISO will be responsible for demonstrating both the occurrence and
duration of the condition). “Compliant” status achieved pursuant to this
paragraph shall continue until NYISO takes the requested PAR tap, or the
Parties agree that NYISO not taking the requested PAR tap is no longer
preventing PJM from taking the PAR tap(s) (if any) PJM needs to achieve
compliance at the JK interface.

If PJM cannot take a required tap at a Waldwick PAR because the change

would result in an actual or post-contingency overload on either or both of the
JK lines, or on any of the Waldwick PARs, and the overload cannot be
addressed through NYISO taking taps at ABC or Ramapo, then PJM will be
considered “Compliant” at the JK interface until the condition is resolved.
PJM will be responsible for demonstrating both the occurrence and duration
of the condition.

b. ABC Storm Watch compliance: Subject to the exceptions that follow, NYISO will

be “Compliant” at the ABC interface when either of the following two conditions are satisfied, otherwise it will be “Non-compliant”:

i. Flow on the ABC interface was at or above the sum of the Target values
for each Available ABC PAR at any point in the trailing (rolling) 15-
minutes3; or

ii. NYISO took at least two taps on each Available ABC PAR in the
direction to increase flow into New York at any point in the trailing
(rolling) 15-minutes.

If PJM denies NYISO’s request to take one or more taps at an ABC PAR to increase flow into New York and achieve compliance at the ABC interface, then NYISO shall be considered “Compliant” at the ABC interface.

If NYISO cannot take a required tap at an ABC PAR because the change will
result in an overload on NYISO’s system unless PJM first takes a tap at a

3 For example, if the sum of the Target values for each Available ABC PAR is +200 MW, then NYISO will be

“Compliant” if flow into New York on ABC was at or above +200 MW during any six second measurement interval over the trailing (rolling) 15 minutes.

Waldwick PAR reducing flow into PJM, and flow on the JK interface is not at
or below the sum of the Target values for each Available Waldwick PAR,
then NYISO may request that PJM take a tap at a Waldwick PAR reducing
flow into PJM. NYISO will be “Compliant” at the ABC interface if PJM does
not take the requested tap within five minutes of receiving NYISO’s request.
“Compliant” status achieved pursuant to this paragraph shall continue until
PJM takes the requested PAR tap, or the Parties agree that PJM not taking the
requested PAR tap is no longer preventing NYISO from taking the PAR tap(s)
(if any) NYISO needs to achieve compliance at the ABC interface.

If NYISO cannot take a required tap at an ABC PAR because the change

would result in an actual or post-contingency overload on one or more of the ABC lines, or on any of the ABC PARs, and the overload cannot be addressed through NYISO taking taps at Ramapo or PJM taking taps at Waldwick, then NYISO will be considered “Compliant” at the ABC interface until the
condition is resolved. NYISO will be responsible for demonstrating both the occurrence and duration of the condition.

c. 5018 Storm Watch compliance: Subject to the exceptions that follow, NYISO

will be “Compliant” at the 5018 interface when either of the following two conditions are satisfied, otherwise it will be “Non-compliant”:

i. Flow on the 5018 interface was at or above the sum of the Target values
for each Available Ramapo PAR described in Section 7.2.1 of this
Schedule D at any point in the trailing (rolling) 15-minutes; or

ii. NYISO took at least two taps on each Available Ramapo PAR in the
direction to increase flow into New York at any point in the trailing
(rolling) 15-minutes.

If PJM denies NYISO’s request to take one or more taps at a Ramapo PAR to increase flow into New York and achieve compliance at the 5018 interface, then NYISO shall be considered “Compliant” at the 5018 interface.

requested tap within five minutes of receiving NYISO’s request. “Compliant” status achieved pursuant to this paragraph shall continue until PJM takes the requested PAR tap, or the Parties agree that PJM not taking the requested
PAR tap is no longer preventing NYISO from taking the PAR tap(s) (if any) NYISO needs to achieve compliance at the Ramapo interface.

If NYISO cannot take a required tap at a Ramapo PAR because the change

would result in an actual or post-contingency overload on the 5018 line, or on either of the Ramapo PARs, and the overload cannot be addressed through
NYISO taking taps at ABC or PJM taking taps at Waldwick, then NYISO will be considered “Compliant” at the 5018 interface until the condition is
resolved. NYISO will be responsible for demonstrating both the occurrence and duration of the condition.

When a Storm Watch is in effect in New York, PJM shall only be required to pay a
M2MPARSettlement to NYISO when PJM is “Non-compliant” at the JK interface, while
NYISO is “Compliant” at both the ABC and 5018 interfaces. Otherwise, PJM shall not be
required to pay a M2MPARSettlement to NYISO at times when a Storm Watch is in effect in
New York.

When a Storm Watch is in effect in New York, NYISO shall only be required to pay a

M2MPARSettlement to PJM when NYISO is “Non-compliant” at the ABC interface or the 5018 interface, or both of those interfaces. When NYISO is “Compliant” at both the ABC and 5018 interfaces, NYISO shall not be required to pay a M2MPARSettlement to PJM at times when a Storm Watch is in effect in New York.

When all three interfaces (JK, ABC, 5018) are “Compliant,” or during the first 15-minutes in
which a Storm Watch is in effect, this Section 8.3.1 excuses the Parties from paying a
M2MPARSettlement to each other at times when a Storm Watch is in effect in New York.

Compliance and Non-compliance shall be determined for each interval of the NYISO settlement cycle (normally, every 5-minutes) that a Storm Watch is in effect.

8.4Calculating a Combined M2M Settlement

The M2M settlement shall be the sum of the real-time redispatch settlement for each M2M Flowgate and M2MPARSettlement for each interval

ܴ݁݀݅ݏ݌ܽݐܿℎ ܻܰ ܵ݁ݐݐ݈݁݉݁݊ݐ௜

௔௟௟ ே௒ ெ2ெ ி௟௢௪௚௔௧௘௦

= ��ܯ݋ܴܱ݊ܶ ܲܽݕ݉݁݊ݐܯ2ܯ ܨ݈݋ݓ݃ܽݐ݁ ݉

ெ2ெ ி௟௢௪௚௔௧௘ ௠݅

ܴ݁݀݅ݏ݌ܽݐܿℎ ܻܰ ܵ݁ݐݐ݈݁݉݁݊ݐ௜ =

ܴ݁݀݅ݏ݌ܽݐܿℎ ܲܬܯ ܵ݁ݐݐ݈݁݉݁݊ݐ௜ =

ܰ݋݊ ܯ݋ܴܱ݊ܶ ܲܽݕ݉݁݊ݐܯ2ܯ ܨ݈݋ݓ݃ܽݐ݁ ݉

ܯ݋ܴܱ݊ܶ ܲܽݕ݉݁݊ݐܯ2ܯ ܨ݈݋ݓ݃ܽݐ݁ ݉ =

ܯ2ܯ ܵ݁ݐݐ݈݁݉݁݊ݐ௜

M2M NYISO settlement, defined as a payment from PJM to NYISO when the value is positive, and a payment from the NYISO to PJM when the value is negative for interval i;

M2M PJM settlement, defined as a payment from NYISO to PJM when the value is positive, and a payment from the PJM to NYISO when the value is negative for interval i;

= Monitoring RTO payment to Non-Monitoring RTO
for congestion on M2M Flowgate m for interval i;

and

Non-Monitoring RTO payment to Monitoring RTO
for congestion on M2M Flowgate m for interval i.

ܯ2ܯ ܵ݁ݐݐ݈݁݉݁݊ݐ௜ =

ܴ݁݀݅ݏ݌ܽݐܿℎ ܻܰ ܵ݁ݐݐ݈݁݉݁݊ݐ௜ =

ܴ݁݀݅ݏ݌ܽݐܿℎ ܲܬܯ ܵ݁ݐݐ݈݁݉݁݊ݐ௜ =

ܯ2ܯܲܣܴܵ݁ݐݐ݈݁݉݁݊ݐ݅ =

M2M settlement, defined as a payment from the
NYISO to PJM when the value is positive, and a

payment from PJM to the NYISO when the value is negative for interval i;

M2M NYISO settlement, defined as a payment from PJM to NYISO when the value is positive, and a payment from the NYISO to PJM when the value is negative for interval i;

M2M PJM settlement, defined as a payment from NYISO to PJM when the value is positive, and a payment from the PJM to NYISO when the value is negative for interval i;

M2M PAR Settlement across all NY-NJ PARs, defined as a payment from NYISO to PJM when the value is positive, and a payment from PJM to NYISO when the value is

negative for interval i.

For the purpose of settlements calculations, each interval will be calculated separately and then integrated to an hourly value:

ܯ2ܯ_ܵ݁ݐݐ݈݁݉݁݊ݐℎ = � ܯ2ܯ_ܵ݁ݐݐ݈݁݉݁݊ݐ݅

݅=1

Where:

ܯ2ܯ_ܵ݁ݐݐ݈݁݉݁݊ݐℎ =M2M settlement for hour h; and

n =Number of intervals in hour h.

Section 10.1 of this Schedule D sets forth circumstances under which the M2M
coordination process and M2M settlements may be temporarily suspended.

9When One of the RTOs Does Not Have Sufficient Redispatch

Under the normal M2M coordination process, sufficient redispatch for a M2M Flowgate
may be available in one RTO but not the other. When this condition occurs, in order to ensure
an operationally efficient dispatch solution is achieved, the RTO without sufficient redispatch
will redispatch all effective generation to control the M2M Flowgate to a “relaxed” Shadow
Price limit. Then this RTO calculates the Shadow Price for the M2M Flowgate using the
available redispatch which is limited by the maximum physical control action inside the RTO.
Because the magnitude of the Shadow Price in this RTO cannot reach that of the other RTO with
sufficient redispatch, unless further action is taken, there will be a divergence in Shadow Prices
and the LMPs at the RTO border.

Subject to Section 10.1.2 of this Schedule D, a special process is designed to enhance the
price convergence under this condition. If the Non-Monitoring RTO cannot provide sufficient
relief to reach the Shadow Price of the Monitoring RTO, the constraint relaxation logic will be
deactivated. The Non-Monitoring RTO will then be able to use the Monitoring RTO’s Shadow
Price without limiting the Shadow Price to the maximum Shadow Price associated with a
physical control action inside the Non-Monitoring RTO. With the M2M Flowgate Shadow
Prices being the same in both RTOs, their resulting bus LMPs will converge in a consistent price
profile.

10Appropriate Use of the M2M Coordination Process

Under normal operating conditions, the Parties will model all M2M Flowgates in their

respective real-time EMSs. M2M Flowgates will be controlled using M2M tools for coordinated
redispatch and coordinated operation of the NY-NJ PARs, and will be eligible for M2M
settlements.

10.1Qualifying Conditions for M2M Settlement

10.1.1Purpose of M2M. M2M was established to address regional, not local issues.

The intent is to implement the M2M coordination process and settle on such coordination where both Parties have significant impact.

10.1.2 Minimizing Less than Optimal Dispatch. The Parties agree that, as a general

matter, they should minimize financial harm to one RTO that results from the M2M coordination process initiated by the other RTO that produces less than optimal dispatch.

10.1.3 Use M2M Whenever Binding a M2M Flowgate. During normal operating

conditions, the M2M redispatch process will be initiated by the Monitoring RTO
whenever an M2M Flowgate that is eligible for redispatch is constrained and
therefore binding in its dispatch. Coordinated operation of the NY-NJ PARs is
the default condition and does not require initiation by either Party to occur.

10.1.4 Most Limiting Flowgate. Generally, controlling to the most limiting Flowgate

provides the preferable operational and financial outcome. In principle and as
much as practicable, the M2M coordination process will take place on the most
limiting Flowgate, and to that Flowgate’s actual limit (thermal, reactive, stability).

10.1.5Abnormal Operating Conditions.

a. A Party that is experiencing system conditions that require the system operators’

immediate attention may temporarily delay implementation of the M2M

redispatch process or cease an active M2M redispatch event until a reasonable time after the system condition that required the system operators’ immediate attention is resolved.

b. Either Party may temporarily suspend an active M2M coordination process or

delay implementation of the M2M coordination process if a Party is experiencing,
or acting in good faith suspects it may be experiencing, (1) a failure or outage of
the data link between the Parties prevents the exchange of accurate or timely real-
time data necessary to implement the M2M coordination process; or (2) a failure
or outage of any computational or data systems preventing the actual or accurate
calculation of data necessary to implement the M2M coordination process. The
Parties shall resolve the issue causing the failure or outage of the data link,

computational systems, or data systems as soon as possible in accordance with Good Utility Practice. The Parties shall resume implementation of the M2M coordination process following the successful testing of the data link or relevant system(s) after the failure or outage condition is resolved.

10.1.6 Transient System Conditions. A Party that is experiencing intermittent

congestion due to transient system conditions including, but not limited to,

interchange ramping or transmission switching, is not required to implement the

M2M redispatch process unless the congestion continues after the transient condition(s) have concluded.

10.1.7 Temporary Cessation of M2M Coordination Process Pending Review.

If the net charges to a Party resulting from implementation of the M2M

coordination process for a market-day exceed five hundred thousand dollars, then
the Party that is responsible for paying the charges may (but is not required to)
suspend implementation of this M2M coordination process (for a particular M2M
Flowgate, or of the entire M2M coordination process) until the Parties are able to
complete a review to ensure that both the process and the calculation of
settlements resulting from the M2M coordination process are occurring in a
manner that is both (a) consistent with this M2M Coordination Schedule, and

(b) producing a just and reasonable result. The Party requesting suspension must
identify specific concerns that require investigation within one business day of
requesting suspension of the M2M coordination process. If, following their
investigation, the Parties mutually agree that the M2M coordination process is

(i) being implemented in a manner that is consistent with this M2M Coordination Schedule and (ii) producing a just and reasonable result, then the M2M
coordination process shall be re-initiated as quickly as practicable. If the Parties are unable to mutually agree that the M2M coordination process was being
implemented appropriately, or of the Parties are unable to mutually agree that the M2M coordination process was producing a just and reasonable result, the
suspension (for a particular M2M Flowgate, or of the entire M2M coordination process) shall continue while the Parties engage in dispute resolution in
accordance with Section 35.15 of this Agreement.

10.1.8 Suspension of M2M Settlement when a Request for Taps on NY-NJ PARs to

Prevent Overuse is Refused. If a Party requests that taps be taken on any NY-
NJ PAR to reduce the requesting Party’s overuse of the other Party’s transmission
system, refusal by the other Party or its Transmission Owner(s) to permit taps to
be taken to reduce overuse shall result in the NY-NJ PAR settlement component
of M2M (see Section 8.3 above) being suspended until the tap request is granted.

10.1.9 Suspension of NY-NJ PAR Settlement due to Transmission Facility

Outage(s). The Parties shall suspend PAR settlements for a NY-NJ PAR when that NY-NJ PAR is out of service, is bypassed, or the RTOs mutually agree that a NY-NJ PAR is incapable of facilitating interchange.

No other Transmission Facility outage(s) will trigger suspension ofNY-NJ PAR settlements under this Section 10.1.9.

10.2After-the-Fact Review to Determine M2M Settlement

settlements adjustments. The Parties will cooperate to review the data exchanged and used to determine M2M settlements and will mutually identify and resolve errors and anomalies in the calculations that determine the M2M settlements.

If the data exchanged for the M2M redispatch process was relied on by the Non-

Monitoring RTO’s dispatch to determine the shadow cost the Non-Monitoring RTO was

dispatching to when providing relief at an M2M Flowgate, the data transmitted by the

Monitoring RTO that was used to determine the Non-Monitoring RTO’s shadow cost shall not be modified except by mutual agreement prior to calculating M2M settlements. Any necessary corrections to the data exchange shall be made for future M2M coordination.

10.3Access to Data to Verify Market Flow Calculations

Each Party shall provide the other Party with data to enable the other Party independently
to verify the results of the calculations that determine the M2M settlements under this M2M
Coordination Schedule. A Party supplying data shall retain that data for two years from the date
of the settlement invoice to which the data relates, unless there is a legal or regulatory
requirement for a longer retention period. The method of exchange and the type of information
to be exchanged pursuant to Section 35.7.1 of this Agreement shall be specified in writing. The
Parties will cooperate to review the data and mutually identify or resolve errors and anomalies in
the calculations that determine the M2M settlements. If one Party determines that it is required
to self report a potential violation to the Commission’s Office of Enforcement regarding its
compliance with this M2M Coordination Schedule, the reporting Party shall inform, and provide
a copy of the self report to, the other Party. Any such report provided by one Party to the other
shall be Confidential Information.

11M2M Change Management Process

11.1Notice

Prior to changing any process that implements this M2M Schedule, the Party desiring the
change shall notify the other Party in writing or via email of the proposed change. The notice
shall include a complete and detailed description of the proposed change, the reason for the
proposed change, and the impacts the proposed change is expected to have on the
implementation of the M2M coordination process, including M2M settlements under this M2M
Schedule.

11.2Opportunity to Request Additional Information

Following receipt of the Notice described in Section 11.1, the receiving Party may make
reasonable requests for additional information/documentation from the other Party. Absent
mutual agreement of the Parties, the submission of a request for additional information under this
Section shall not delay the obligation to timely note any objection pursuant to Section 11.3,
below.

11.3Objection to Change

Within ten business days after receipt of the Notice described in Section 11.1 (or within such longer period of time as the Parties mutually agree), the receiving Party may notify in
writing or via email the other Party of its disagreement with the proposed change. Any such notice must specifically identify and describe the concern(s) that required the receiving Party to object to the described change.

11.4Implementation of Change

The Party proposing a change to its implementation of the M2M coordination process

shall not implement such change until (a) it receives written or email notification from the other Party that the other Party concurs with the change, or (b) the ten business day notice period
specified in Section 11.3 expires, or (c) completion of any dispute resolution process initiated pursuant to this Agreement.

35.2Abbreviations, Acronyms, Definitions and Rules of Construction

In this Agreement, the following words and terms shall have the meanings (such

Schedule C to this Agreement contains the Operating Protocol for the Implementation of Con Ed - PJM Transmission Service Agreements. Schedule C was accepted by FERC as a
multi-party settlement to a long-running dispute. To the extent Schedule C contains definitions that differ from those set forth below (see, e.g., Appendix 8 to Schedule C), the definitions
contained in Schedule C shall supersede the definitions set forth below, for purposes of
interpreting Schedule C (including all of the appendices thereto), but shall not be used to
interpret any other part of this Agreement.

35.2.1 Abbreviations, Acronyms and Definitions

“3500 PAR” shall mean the 3500 phase angle regulator at the Ramapo station connected to the 5018 Hopatcong-Ramapo 500 kV line.

“4500 PAR” shall mean the 4500 phase angle regulator at the Ramapo station connected to the 5018 Hopatcong-Ramapo 500 kV line.

“A PAR” shall mean the phase angle regulator located a the Goethals station connected to the A2253 Linden-Goethals 230 kV line.

“ABC Interface” shall mean the transfer path comprised of the A2253 Linden-Goethals, B3402 Hudson-Farragut and C3403 Marion-Farragut tie lines between PJM and NYISO.

“ABC PARs” shall mean the A PAR, B PAR and C PAR that control flow on the ABC Interface.

“AC” shall mean alternating current.

“Affected Party” shall mean the electric system of the Party other than the Party to which a

request for interconnection or long-term firm delivery service is made and that may be affected by the proposed service.

“Agreement” shall mean this document, as amended from time to time, including all attachments, appendices, and schedules.

“Available ABC PAR,” “Available Ramapo PAR” or "Available Waldwick PAR” shall
mean, for purposes of Section 8.3.1 of Schedule D to this Agreement, an A NY-NJ PAR BC,
Waldwick or Ramapo PAR, respectively, that is not subject to any of the following
circumstances:

(1) a PAR that is not operational and is unable to be moved;

(2) a PAR that is technically “in-service” but is being operated in an outage configuration and is only capable of feeding radial load;

(3) a PAR that is tapped-out in a particular direction is not available in the tapped-out direction;

(4) if the maximum of 400 taps/PAR/month is exceeded at an ABC PAR, Ramapo
PAR or a Waldwick PAR, and the relevant asset owner restricts the RTOs from
taking further taps on the affected PAR, then the affected PAR shall not be available
until NYISO and PJM agree to and implement an increased bandwidth in accordance
with Section 7.2 of Schedule D to this AgreementAppendix 5 of Schedule C to this
Agreement;

PJM or NYISO may choose to use PAR taps they are permitted to reserve to perform M2M coordination, but they are not required to do so.

firm AFC is determined with appropriate firm and non-firm reservations (or interchange schedules) modeled.

“B PAR” shall mean the phase angle regulator located at the Farragut station connected to the B3402 Hudson-Farragut 345 kV line.

“Bulk Electric System” shall have the meaning provided for in the NERC Glossary of Terms

used in Reliability Standards, as it may be amended, supplemented, or restated from time to time.

“C PAR” shall mean the phase angle regulator located at the Farragut station connected to the C3403 Marion-Farragut 345 kV line.

“CIM” shall mean Common Infrastructure Model.

“Confidential Information” shall have the meaning stated in Section 35.8.1.

“Control Area(s)” shall mean an electric power system or combination of electric power systems to which a common automatic generation control scheme is applied.

“Control Performance Standard” or “CPS” shall mean the reliability standard that sets the limits of a Balancing Authority’s Area Control Error over a specified time period.

“Coordinated Transaction Scheduling” or “CTS” shall mean the market rules that allow

“Coordination Committee” shall mean the jointly constituted PJM and NYISO committee

established to administer the terms and provisions of this Agreement pursuant to Section 35.3.2.

“DC” shall mean direct current.

“Disclosing Party” shall have the meaning stated in Section 35.8.7. “Dispute” shall have the meaning stated in Section 35.15.

“E PAR” shall mean the phase angle regulator located at the Waldwick station on the E-2257 Waldwick-Hawthorne 230 kV line.

“Economic Dispatch” shall mean the sending of dispatch instructions to generation units to minimize the cost of reliably meeting load demands.

“Effective Date” shall have the meaning stated in Section 35.19.1.

“Emergency Energy” shall mean energy supplied from Operating Reserve or electrical

generation available for sale in New York or PJM or available from another Balancing Authority Area. Emergency Energy may be provided in cases of sudden and unforeseen outages of

generating units, transmission lines or other equipment, or to meet other sudden and unforeseen circumstances such as forecast errors, or to provide sufficient Operating Reserve. Emergency Energy is provided pursuant to this Agreement and the Inter Control Area Transactions
Agreement dated May 1, 2000 and priced according to Section 35.6.4 of this aAgreement and said Inter Control Area Transactions Agreement.

“EMS” shall mean the respective Energy Management Systems utilized by the Parties to manage the flow of energy within their Regions.

“External Capacity Resource” shall mean: (1) for NYISO, (a) an entity (e.g., Supplier,

Transmission Customer) or facility (e.g., Generator, Interface) located outside the NYCA with the capability to generate or transmit electrical power, or the ability to control demand at the direction of the NYISO, measured in megawatts or (b) a set of Resources owned or controlled by an entity within a Control Area, not the NYCA, that also is the operator of such Control Area; and (2) for PJM, a generation resource located outside the metered boundaries of the PJM
Region (as defined in the PJM Tariff) that meets the definition of Capacity Resource in the PJM Tariff or PJM’s governing agreements filed with the Commission.

“F PAR” shall mean the phase angle regulator located at the Waldwick station on the F-2258 Waldwick-Hillsdale 230 kV line.

“FERC” or “Commission” shall mean the Federal Energy Regulatory Commission or any successor agency thereto.

“Flowgate” shall mean a representative modeling of facilities or groups of facilities that may act as potential constraint points.

“Force Majeure” shall mean an event of force majeure as described in Section 35. 20.1.

“Generator to Load Distribution Factor” or “GLDF” shall mean a generator’s impact on a Flowgate while serving load in that generator’s Balancing Authority Area.

“Governmental Authority” shall mean any federal, state, local or other governmental
regulatory or administrative agency, court, commission, department, board, or other