Black & Veatch's NY Energy Industry Briefing was held on Tuesday, 24 March, at the Crowne Plaza Hotel in Times Square, New York. This briefing, entitled "PJM Update: Strategic Investing in an Evolving Capacity Market", brought together a panel of Black & Veatch experts to discuss important investment considerations for the PJM market. Learn more: http://bv.com/home/capabilities/market/management-consulting/infrastructure-investment-services

1. NEW YORK ENERGY INDUSTRY BRIEFING
PJM: STRATEGIC INVESTING IN AN
EVOLVING CAPACITY MARKET
March24,2015

2. March 24, 2015
2
NY Energy Industry Briefing
PJM Market Overview
•Serves 60 million people across 13 states
and the District of Columbia
•~185,600 MW of installed capacity
•158,450 MW is historic peak load (July 2011)

3. March 24, 2015
3
NY Energy Industry Briefing
Briefing Agenda
•Proposed capacity performance standard
•Outlook on natural gas
•Impact on energy prices
•Pipeline infrastructure implications
•Investment considerations
•Roundtable

4. March 24, 2015
4
NY Energy Industry Briefing
Today’s Panelists
•Marjorie (Marji) Philips: Director of RTO
and Federal Services, Direct Energy
•Peter Abt: Managing Director of Black &
Veatch’s Oil & Gas Strategy Practice
•Neil Copeland: Director, Black & Veatch
•Michael Schwartz: Executive Consultant,
Black & Veatch

5. March 24, 2015
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NY Energy Industry Briefing
Why standard is needed
•System designed for summer peak
•2014 winter peak tripled forced
outages
•Resource mix is shifting – too
much natural gas
Without change, capacity
challenges will only get worse.
Coal
13,700 MW, 34%
Gas Plant Outages
9,700 MW, 24%
Natural Gas
Interruption
9,300 MW, 23%
Nuclear
1,400 MW, 3%
Other
1,400 MW, 3%
January 7 Evening Peak (7 p.m.) Forced Outage
Source: Problem Statement on PJM Capacity Performance Definition, PJM 2014
Total Forced
Outages:
40,200 MW
22% Total PJM
Capacity

6. March 24, 2015
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NY Energy Industry Briefing
What the proposed standard
means … Perform or pay!
•No fuel excuses
•Requires greater asset flexibility and
resiliency
•Greater investment for fossil-fuel assets
•Little room for intermittent resources
•Demand response/energy efficiency
participation is questionable
31.0%
0% 20% 40% 60% 80%
Other
Hydro and Renewables
Nuclear
Coal
Natural Gas
62.6%
0% 20% 40% 60% 80%
Other
Hydro and Renewables
Nuclear
Coal
Natural Gas
PJM Capacity Mix in 2015
PJM Capacity Mix in 2039

7. March 24, 2015
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NY Energy Industry Briefing
Proposed Auction / Transition Timeline
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021
60/40 80/2080/2070/30 100/0
NPP = Non-Performance Penalty
CONE = Cost of New Entry
Target Capacity Mix:
Performance/Base
Transition
Auctions
No Transition Penalties:
33.3% NPP
Max: 0.5x Net CONE
Penalties:
66.6% NPP
Max: 0.75x Net CONE
Incremental
Approach
Offer Price:
Cap: 0.5x Net CONE
Offer Price:
Cap: 0.6x Net CONE
NewCapacity
Auctions
◊ May 2015:
Auction for the 2018/2019 delivery year

8. March 24, 2015
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NY Energy Industry Briefing
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Projected Henry Hub Prices
$/MMBtu
Natural Gas Outlook
•2015: Under $4.00/MMBtu
•Next Decade: $4.00-$5.00/MMBtu
•Supply: Grows in 2015 then flattens
Prices increase slowly despite
rapidly growing demand.

9. 0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
-20,000
-15,000
-10,000
-5,000
0
5,000
10,000
Retiring Capacity Natural Gas Additions
Reserve Margin Minimum Reserve Margin
March 24, 2015
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NY Energy Industry Briefing
MWs
Projections, based on
“business as usual
approach,” have reserve
margin dipping slightly
2018 – 2020.
Current Projections for PJM Cumulative Additions
and Retirements
2015 2016 2017 2018 2019 2020

10. 0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
-25,000
-20,000
-15,000
-10,000
-5,000
0
5,000
10,000
Representative Capacity Performance Retirements Natural Gas Additions
Retiring Capacity Reserve Margin (Business as Usual)
Reserve Margin (Capacity Performance) Minimum Reserve Margin
March 24, 2015
10
NY Energy Industry Briefing
MWs
Potential Impacts of Capacity Performance in PJM
2015 2016 2017 2018 2019 2020
Some plants in Eastern
PJM may have issues
with firm gas or dual
fuel.

11. March 24, 2015
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NY Energy Industry Briefing
Oct. Nov. Dec. Jan. Feb. March April May June July Aug. Sept.
Base Energy Prices Capacity Performance Energy Prices
PJMEasternHub
$/MWh
Energy Price Delta
occurs during the
summer peak
Potential Impacts of Capacity Performance on PJM Eastern Hub Prices

12. Deeply Depressed Prices
Winter
Premium
Market
—Natural Gas Pipelines
Gas-fired only generation
 Operational  Planned or Proposed
Moderately
Depressed Prices
March 24, 2015NY Energy Industry Briefing
12
Location is Everything!
•West vs. East
•Generators must firm up
pipeline capacity
•Evaluate ancillary pipeline
capacity – hybrid solutions

13. March 24, 2015
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NY Energy Industry Briefing
Performance capacity requirements
will have economic impacts on all
generating resources
•Existing natural gas generation
•New gas generation projects
•Coal and nuclear generation

14. www.bv.com

15. March 24, 2015
15
NY Energy Industry Briefing
How we can help
•Strategy for portfolio opportunities
•Scenario planning for capacity
performance investment options
•Existing plant performance assessments
•Owner’s Engineer or EPC services for
improvements
Black & Veatch delivers concept through
completion solutions to our clients’ most
complex challenges

16. March 24, 2015
16
NY Energy Industry Briefing
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17. www.bv.com