MC Legal Report Summary of Significant Filings And Federal Energy Regulatory Commission ( Commission ) Orders (April 18, 2016 May 8, 2016)

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1 MC Legal Report Summary of Significant Filings And Federal Energy Regulatory Commission ( Commission ) Orders (April 18, 2016 May 8, 2016) COMMISSION ORDERS On April 18, 2016, in Docket Nos. ER and ER , the Commission issued an Order accepting PJM s filing of a proposal to implement Coordinated Transaction Scheduling ( CTS ) between PJM Interconnection, LLC ( PJM ) and the Midcontinent Independent System Operator, Inc. ( MISO ), comprising revisions to (1) the MISO-PJM JOA; (2) the PJM Operating Agreement; and (3) the PJM Tariff. The implementation of CTS between MISO and PJM will increase the efficiency of transactions across the MISO-PJM border and build on the successful experience to date of implementation of CTS between PJM and New York ISO. The effective date for these revisions is March 1, 2017, as requested. On April 18, 2016, in Docket No. ER , the Commission issued an Order accepting revisions to the PJM Tariff, Attachments H-1A, H-2A, H-3D, and H-9A to reflect changes agreed to by Settlement Agreement in Docket No. EL13-48 et al approved by the Commission on February 23, The revisions are effective as of March 8, 2016, as requested. On April 21, 2016, in Docket No. EL , the Commission issued an Order granting in part, and denying in part Northern Indiana Public Service Company's complaint. In its Order the Commission required a number of compliance directives, including informational filings that require PJM and MISO to consider how they could coordinate more closely. The Commission directed PJM and MISO to submit a compliance filing within 60 days that includes revisions to the MISO-PJM Joint Operating Agreement to: (i) include binding deadlines relative to the Coordination System Planning study process; (ii) remove the requirement that an interregional economic transmission project meet a 1.25-to-1 benefit-to-cost ratio for both MISO and PJM separately; and (iii) coordinate interconnection procedures in PJM's and MISO's business manuals to integrate a single set of procedures in the JOA. Also, the Commission directed MISO and PJM to submit two informational filings; one within 120 days to address how MISO and PJM could conduct Coordinated System Plan Study on single, common timeline; and the second within 180 days to address how MISO and PJM could use a joint model to deal with the interregional transmission issues. In addition, the Commission directed the RTOs coordinate their generator retirement processes and to submit informational status reports on their progress every 60 days starting from the date of the issuance of this order and to propose the required changes no later than December 15, 2016.

2 On April 21, 2016, in Docket No. ER , the Commission issued an Order Denying Clarification and Rehearing of the Commission's September 4, 2015 order denying New Jersey Energy Associates' ("NJEA") January 30, 2015 limited waiver request seeking to allow NJEA recovery of gas balancing costs incurred during the cold weather events in January On April 21, 2016, in Docket No. EL , the Commission issued an Order on Complaint denying the January 27, 2014 complaint of the Independent Market Monitor for PJM. The complaint alleged that PJM s existing capacity market rules fail to treat demand response resources in a manner comparable to generation capacity resources. On April 21, 2016, in Docket No. ER , 003, the Commission issued an Order on Rehearing and Compliance denying the rehearing request of EnergyConnect, Inc. and Comverge, Inc. The request sought rehearing of the Commission s May 9, 2014 order addressing PJM s filing submitted to increase the operational flexibility of demand response resources. Additionally, the Commission accepted PJM s June 22, 2014 compliance filing. On April 21, 2016, in Docket No. ER , the Commission issued an Order on Rehearing denying Public Service Electric and Gas Companies request for rehearing of the Commission s February 28, 2014 order accepting the tariff filing submitted by PJM in which revisions were made to the PJM Tariff and RAA to require that a Demand Resource Provider seeking to participate in PJM s capacity market auctions submit certain information, in advance of the relevant base residual auction, demonstrating its ability to perform when called upon. On April 21, 2016, in Docket No. ER , the Commission issued an Order on Rehearing denying the PJM Industrial Customer Coalition s rehearing request for the January 30, 2014 order in which the Commission accepted PJM s tariff revisions to cap PJM s procurement of certain limited-availability demand response products. On April 22, 2016, in Docket Nos. EL , ER and ER (not consolidated), the Commission issued an Order denying rehearing requested by Consolidated Edison Company of New York, Inc. ( Con Edison ) regarding the allocation of costs for two transmission projects that were approved through the PJM Regional Transmission Expansion Planning process. The Commission found that the allocation of costs through the solution-based DFAX method identifies specific beneficiaries based on ongoing usage of the facilities and is just and reasonable. The Commission also denied Con Edison s and Linden VFT, LLC s request for rehearing of the Sewaren Order in Docket No. ER and directed PJM to submit a compliance filing within 30 days of its order to revise tariff sheets to allocate the costs of the Sewaren project to the zone of the individual transmission owner who filed the Form 715 local planning criteria underlying the Sewaren project. Commissioner LaFleur dissented. Page 2 of 6

3 On April 22, 2016, in Docket No. EL , the Commission issued an Order denying the complaint filed by Linden VFT, LLC, in which Linden challenged the allocation of costs assigned to the Edison Rebuild project, Sewaren project and Bergen- Linden Corridor project based on solution-based DFAX methodology. In its April 22 Order, the Commission found that the solution-based DFAX method is just and reasonable and PJM correctly applied its Tariff to the cost assignments for the Bergen- Linden Corridor and Sewaren projects. Commissioner LaFleur dissented. On April 22, 2016, in Docket Nos. ER , -001 et al, the Commission issued an Order accepting the cost responsibility assignments for reconfiguration of the Bergen-Linden Corridor project included in the RTEP and filed with the Commission on August 28, 2015 in this docket. The amendments are effective as of April 25, On April 22, 2016, in Docket Nos. EL and ER and -001 (not consolidated), the Commission issued an Order denying the complaint filed by the Delaware and Maryland Public Service Commissions and accepting the proposed cost responsibility assignments filed on August 28, 2015 for the Artificial Island project, effective April 25, Commissioner LaFleur dissented. On April 26, 2016, in Docket Nos. ER and -001, the Commission issued an Order accepting and rejecting in part Northeast Transmission Development, LLC s ( NTD ) transmission formula rate proposal to the PJM Tariff, Attachment H-27. The Commission granted NTD s incentives of hypothetical capital structure, recovery of deferred pre-commercial and corporation formation cost and the use of the formula rate and protocols by yet-to-be formed NTD affiliates and subsidiaries. The Commission denied NTD's risk and challenge arguments on rate on equity ( ROE ) adder incentive and set the base ROE for hearing. The Commission directed NTD to submit a compliance filing within 30 days to amend its Protocols to provide detailed description of the methodologies used to allocate and directly assign costs between NTD and its affiliates for the applicable and prior rate year and some ministerial clean up. On April 26, 2016, in Docket No. ER , the Commission issued an Order accepting PJM s March 11, 2016 compliance filing submitted pursuant to the Commission s February 12, 2016 order containing revisions clarifying that PJM will release only non-capacity Performance Resource commitments for the third Incremental Auction for the Delivery Year. On May 3, 2016, in Docket No. ER , the Commission issued an Order Denying Rehearing pertaining to the February 5, 2013 rehearing request of City Power Marketing, L.L.C. ( City Power ), requesting rehearing of the Commission s January 8, 2013 order. In the January 8, 2013 Order, the Commission concluded that PJM had sufficiently demonstrated that City Power failed to make timely payments when due twice during a rolling 12-month period and that City Power s termination was just and reasonable. Further, the Commission found that PJM did not abuse its tariff discretion under the tariff in deciding to terminate City Power s membership, especially given the size of the $17 million default and City Power s failure to pay its other invoices. Page 3 of 6

4 On May 4, 2016, in Docket No. ER , the Commission issued an Order accepting Trans-Allegheny Interstate Line Company, Inc. s ( TrAILCo ) filing of an executed Transmission Facility Interconnection Agreement ( Agreement ) among New York Independent System Operator, Inc., New York State Electric & Gas Corporation, and TrAILCO, designated as Original Service Agreement No The effective date for this Agreement is March 19, 2016, as requested. On May 6, 2016, in Docket No. ER , the Commission issued an Order accepting revision to the PJM Tariff definitions and processes related to two types of New Service Requests for Customer Funded Upgrades: (i) a Transmission Interconnection Request for Merchant Network Upgrades and (ii) an Upgrade Request that would be needed to provide Incremental Auction Revenue Rights pursuant to section 7.8 of Schedule 1 of the PJM Operating Agreement. The revisions are effective as of May 1, 2016, as requested. COMMISSION FILINGS On April 22, 2016, in Docket No. ER , PJM submitted proposed revisions to the MISO-PJM JOA to include the operation of the Michigan-Ontario phase angle Page 4 of 6

5 regulators ( PARs ) in the market-to-market settlement process. The proposed revisions will allow PJM and MISO to model the operational status of the Michigan-Ontario PARs in the Market Flow and Firm Flow Entitlement calculations and settle based on this revised model when the PARs are regulating. PJM requested an effective date of June 22, 2016 for these revisions. On April 25, 2016, in Docket No. EL , PJM filed an answer to certain parties' comments and protests on the complaint in the proceeding, which seeks to extend PJM's minimum Offer Price Rule to existing generation capacity resources in certain circumstances. PJM again urged FERC not to take action that would disrupt or delay the May 2016 Base Residual Auction. On April 25, 2016, in Docket No. ER , PJM submitted on behalf of ComEd proposed revisions to the PJM Tariff, Attachment H-13A to provide for abandoned plant recovery for the Loretto-Wilton Center project. ComEd requested the proposed revisions be effective April 25, On April 25, 2016, PJM joined ISO-NE, NYISO, SPP and IESO in submitting responses to the Commission's Notice of Inquiry issued in Docket No. RM seeking comment on possible actions to ensure that the provision of primary response continues to remain at levels adequate to maintain the reliability of the Bulk Electric System in light of the ongoing transformation of the industry's changing generation resource mix. On April 28, 2016, in Docket No. ER , PJM filed with the Commission a Motion to Intervene and Comments in response to Talen Energy Marketing, LLC s filing of a revised rate schedule setting forth the cost-based revenue requirement for generation resources that provide Reactive Supply and Voltage Control from Generation Sources Service in the PJM region, which are compensated pursuant to Schedule 2 of the PJM Tariff. On April 28, 2016, in Docket No. ER , PJM submitted for filing nonsubstantive, clerical, ministerial and substantive revisions to correct, clarify and/or make consistent certain provisions of the PJM Tariff, PJM Operating Agreement and the RAA. PJM is requesting an effective date of June 27, On April 28, 2016, in Docket Nos. ER and ER , PJM submitted, on behalf of Monongahela Power Company, proposed revisions to PJM OATT Attachment H-11A and an executed Network Integration Transmission Service Agreement ( NITSA ) between PJM, PJM Settlements, Inc. and Harrison Rural Electrification Association, Inc. ( HREA ), designated as Second Revised Service Agreement No The filing revises the Other Supporting Facilities Charges under Attachment H-11A for Monongahela Power s customer, HREA, and revises the NITSA to reflect the revised OSFC, as well as a reduced Direct Attachment Facilities Charge. Monongahela Power is requesting a retroactive effective date of February 1, 2016 for these revisions. Page 5 of 6

6 On April 28, 2016, in Docket No. ER , PJM submitted for filing amendments to PJM Operating Agreement Schedule 12 and RAA Schedule 17 to update those lists to include new members, delete withdrawing members, reflect updates to the list of signatories to the RAA, and reflect corporate name changes. PJM requested an effective date of March 31, 2016 for these amendments. On May 5, 2016, in Docket Nos. ER and -002, ER and -003, ER and ER , PJM filed a Request for Clarification or, in the Alternative, Request for Rehearing of the Commission s April 5, 2016 Order on Rehearing and Compliance concerning the additional Order No interregional compliance filings made by PJM, PJM Transmission Owners, MISO and MISO Transmission Owners in these dockets. Page 6 of 6