the potomac edison company,

THE POTOMAC EDISON COMPANY,dba ALLEGHENY POWER

REQUEST FOR PROPOSALSFOR

DEMAND RESOURCES AND ILR RESOURCES

DATEDJANUARY 16, 2009

The Potomac Edison Company, dba Allegheny Power

RFP – Demand Resources

Request for ProposalsFor

Demand Resources and ILR Resources

Table of Contents

1. Introduction....................................................................................................................42. Resources Requested.....................................................................................................4

2.1. Resource Definition................................................................................................42.2. Term of Agreement.................................................................................................42.3. Resource Quantity..................................................................................................5

3. Contract Structure..........................................................................................................53.1. Resource Requirements..........................................................................................53.2. Settlement and Payment.........................................................................................63.3. Non-Performance Penalties ...................................................................................73.4. Credit Requirements...............................................................................................8

4. Agreement For Capacity Resources...............................................................................85. Eligibility of Applicants.................................................................................................8

5.1. Eligibility Requirements.........................................................................................85.2. Utility and Affiliate Participation...........................................................................95.3. Contingent Proposal from Prospective CSP……………………………………...9

6. Proposals......................................................................................................................116.1. Proposal Content...................................................................................................116.2. Submittal of Proposals..........................................................................................136.3. Proposal Confirmation..........................................................................................146.4. Expiration of Proposals.........................................................................................146.5. Evaluation of Proposals........................................................................................14

7. Schedule for RFP Process............................................................................................148. Reserved Rights...........................................................................................................15

8.1. Bidder Elimination Right......................................................................................158.2. Contract Termination Right..................................................................................158.3. Withdraw and Rejection Right.............................................................................158.4. Non-Interference by Bidders…………………………………………………….15

9. Miscellaneous..............................................................................................................159.1. Warranty on Information......................................................................................159.2. Hold Harmless......................................................................................................169.3. Proposals Become Utility's Property....................................................................169.4. Bidder's Acceptance.............................................................................................169.5. Permits, Licenses and Compliance with the Law.................................................169.6. Proprietary Information........................................................................................169.7. Regulatory Approvals...........................................................................................17



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9.8. Non-Discrimination Policy………………………………………………………17



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Attachments

1. Expression of Interest Form2. Confidentiality Agreement3. 2011-12 BRA Certification Form4. PJM Membership and Curtailment Service Provider Certification Form5. Binding Bid Agreement6. Contingent Proposal Certification7. Price and Volume Bid Template8. Agreement for Capacity Resources9. Schedule 6 (Procedures for Demand Resources and ILR) of the PJM RAA10. Attachment DD (Reliability Pricing Model) of the PJM OATT



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Request for ProposalsFor

Demand Resources and ILR Resources

1. Introduction

Pursuant to Order No. 82404 issued by the Maryland Public Service Commission (PSC) in Case No. 9149: IN THE MATTER OF THE INVESTIGATION OF THE PROCESS AND CRITERIA FOR THE USE AND DEVELOPMENT OF REQUEST FOR PROPOSAL BY THE MARYLAND INVESTOR-OWNED UTILITIES FOR NEW GENERATION TO ALLEVIATE POTENTIAL SHORT TERM RELIABILITY PROBLEMS IN THE STATE OF MARYLAND, a Request For Proposals (RFP) is being issued for Capacity Resources from Demand Resources and Interruptible Load for Reliability (ILR) Resources located in the Maryland service territory of The Potomac Edison Company, dba Allegheny Power (“Utility” or “Allegheny Power”). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Reliability Assurance Agreement (RAA) and the Open Access Transmission Tariff (OATT) of the PJM Interconnection, L.L.C. (PJM) or in the Agreement for Capacity Resources (see Section 4 below and Attachment 8).

2. Resources Requested

2.1. Resource Definition

Allegheny Power is requesting proposals for Capacity Resources from Demand Resources and ILR Resources located in the Utility’s Maryland service territory, as such resources are defined in Schedule 6 (Procedures for Demand Resources and ILR) of the PJM RAA and Attachment DD (Reliability Pricing Model) of the PJM OATT, or any successor, superceding or amended versions that may take effect from time to time. Attachment 9 to this RFP provides a copy of Schedule 6 of the PJM RAA, and Attachment 10 to this RFP provides a copy of Attachment DD of the PJM OATT.

2.2. Term of Agreement

Bidders may submit proposals to commit Capacity Resources for an initial period of up to five years beginning June 1, 2011 and ending May 31, 2016, and for a two-year extension period (June 1, 2016 – May 31, 2018). The following restrictions regarding the term of the agreement will apply to all proposals.

a. Proposal must include at least a three-year term, beginning June 1, 2011 and ending May 31, 2014;



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b. All delivery years within a term must be continuous, i.e., fourth year of a four-year term must be the 2014-15 Delivery Year, not the 2015-16 Delivery Year;

c. Only five-year term proposals qualify to bid in the extension period;d. Extension period proposals must include bids for both Delivery Years in the

extension period; and e. Proposals must be for complete Delivery Years, i.e., partial Delivery Year

bids will not be accepted.

2.3. Resource Quantity

There is no limitation to the amount of Capacity Resources that can be bid. However, whatever amount of Capacity Resources that is bid must be constant across all Delivery Years for which the bidder bids. For example, a five-year term proposal with a two-year extension offer must contain a constant amount of Capacity Resources for the entire seven-year period. The amount of Capacity Resources that Utility selects will be determined by the PSC.

3. Contract Structure

The Supplier will act as a Curtailment Service Provider (CSP) for the Capacity Resources committed as a result of this RFP. The Capacity Resources will remain the resources of the CSP in all aspects, including, but not limited to, ownership, operation, maintenance, PJM market participation, performance and customer relationship. In accordance with Section 3.2 (Settlement and Payment), Utility will enter into a financial arrangement with the CSP in which physical delivery to the Utility of the committed Capacity Resources is not required. Rather, the obligation of physical delivery of the committed Capacity Resources and related performance will be an obligation of the CSP to PJM in accordance with the PJM RAA and OATT. The financial arrangement will provide for stable compensation for capacity only, and will not include energy or ancillary service payments associated with the committed Capacity Resources’ participation in the PJM energy and ancillary service markets as shown below. The financial arrangement, however, will not restrict the committed Capacity Resources from receiving energy and ancillary service payments from PJM for participation in the PJM energy and ancillary service markets.

3.1. Resource Requirements

In addition to the requirements of Capacity Resources from Demand Resources and ILR Resources that are stated in the PJM RAA and OATT, the Capacity Resources provided will participate in the "Full Program Option" of PJM's Emergency Load Response Program (the Program) and Supplier will cause the Capacity Resources to meet the requirements of the Program and to make the load reductions requested by PJM under the Program. The CSP must also meet the following Capacity Resource requirements:



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a) The Capacity Resource must not have cleared in the 2011-2012 PJM Reliability Pricing Model (RPM) Base Residual Auction (BRA);

b) For Capacity Resources proposed for the 2011-2012 Delivery Year, the CSP must certify such Capacity Resources as ILR Resources;

c) For Capacity Resources proposed for Delivery Years beyond the 2011-2012 Delivery Year, the CSP must bid such Capacity Resources into the relevant RPM BRA at a price of zero;

d) The Capacity Resources shall not include any of the Utility’s existing demand response resources or energy efficiency resources, as well as those resources and programs included in the Utility's EmPower Maryland Energy Efficiency Act of 2008 plan pending in Case No. 9155. In addition, the Capacity Resources shall not be sourced from the direct load control of residential and small commercial customers eligible to participate in Utility's direct load control programs (including residential air conditioning load reduction programs);

e) The CSP must keep separate in the PJM eRPM system the Capacity Resources committed as a result of this RFP from other Capacity Resources of the CSP; and

f) The CSP must provide Utility read-only access to their PJM eRPM system, Market Settlements Reporting System (MSRS), and Load Response system accounts for the Capacity Resources committed as a result of this RFP for the sole purpose of verifying contract performance.

For the purpose of sub-paragraph a), only Capacity Resources incremental to those resources cleared in the 2011-2012 BRA are eligible for this procurement.

3.2. Settlement and Payment

The financial arrangement between Utility and a CSP will be a Contract for Difference (CfD) between the CSP’s contract capacity price and the PJM RPM price applicable to Utility’s Maryland service territory. For the 2011-2012 Delivery Year, the RPM price will be the price paid to ILR Resources which is assumed to be $110.04 per MW/day for the 2011-2012 Delivery Year. For Delivery Years beyond the 2011-2012 Delivery Year, the RPM price will be the Capacity Resource Clearing Price from the relevant BRA paid to Demand Resources. An example (Example 1) of the CfD revenue and expense streams (assuming full performance by the CSP’s Capacity Resource) for the CSP and Utility is provided below.



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Contract for Difference - Example 1

2011-2012 2012-2013 2013-2014 2014-2015 2015-2016Contract Price, $/MWUCAPDay 150 160 170 180 190

RPM Price, $/MWUCAPDay 110 150 200 180 130

CSP RPM Revenue, $/MWUCAPDay 110 150 200 180 130

CSP CfD Stream, $/MWUCAPDay 40 10 (30) - 60

CSP Net Revenue, $/MWUCAPDay 150 160 170 180 190

Utility CfD Stream, $/MWUCAPDay (40) (10) 30 - (60)

Delivery Year

The schedule for payment of the CfD expenditures will be monthly.

3.3. Non-Performance Penalties

Capacity Resources committed as a result of this RFP by a CSP have the obligations to perform in accordance with the PJM RAA and OATT. Any deficiency in the performance of Demand Resources or ILR Resources, as defined in the PJM RAA and OATT, will be subject to penalties assessed by PJM in accordance with the PJM RAA and OATT, as well as a diminished payment from the Utility, if applicable. An example is provided below (Example 2) of the CfD revenue and expense streams assuming that the CSP is deficient by 25% throughout the entire five-year term. (This penalty example illustrates the implications of a “deficiency” in Capacity Resources, i.e., lack of delivering the committed capacity amount, and does not include any “availability” penalties that may arise if the CSP’s committed capacity amount does not perform at its committed level during a PJM-called emergency event.)



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Contract for Difference - Example 2

2011-2012 2012-2013 2013-2014 2014-2015 2015-2016Contract Capacity Amount, UCAP MW 100 100 100 100 100

Delivered Capacity Amount, UCAP MW 75 75 75 75 75 Contract Price, $/MWUCAPDay 150 160 170 180 190

RPM Price, $/MWUCAPDay 110 150 200 180 130

CSP RPM Revenue, $/MWUCAPDay 110 150 200 180 130

CSP CfD Stream, $/MWUCAPDay 40 10 (30) - 60

CSP Net Revenue, $/MWUCAPDay 150 160 170 180 190

CSP RPM Revenue 4,026,000$ 5,475,000$ 7,300,000$ 6,570,000$ 4,758,000$

RPM Penalty Fees1 (1,207,800)$ (1,642,500)$ (2,190,000)$ (1,971,000)$ (1,427,400)$ CSP CfD Stream 1,098,000$ 273,750$ (821,250)$ -$ 1,647,000$

CSP Net Revenue 3,916,200$ 4,106,250$ 4,288,750$ 4,599,000$ 4,977,600$

Utility CfD Stream, $/MWUCAPDay (40) (10) 30 - (60)

Utility CfD Stream (1,098,000)$ (273,750)$ 821,250$ -$ (1,647,000)$

1. RPM penalty fees assume new penalty structure at 120% of RPM revenue.

Delivery Year

3.4. Credit Requirements

Credit requirements of the CSP will be those required by PJM associated with the CSP’s Capacity Resource obligations. Utility will not require additional credit provisions.

4. Agreement For Capacity Resources

The Agreement For Capacity Resources to be executed as a result of this RFP is provided as Attachment 8. The Agreement For Capacity Resources contains the parties' rights and obligations for providing and receiving Capacity Resources from Demand Resources and ILR Resources. No provision within the Agreement For Capacity Resources is negotiable.

5. Eligibility of Applicants

5.1. Eligibility Requirements

The purpose of the eligibility process is to provide information to the applicants regarding their eligibility to bid. An applicant is eligible to bid if, in a timely and complete fashion, the applicant:

a) Submits a non-binding Expression of Interest Form, provided as Attachment 1;b) Submits an executed copy of the Confidentiality Agreement, provided as

Attachment 2;



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c) Submits an executed copy of the certification that the Capacity Resources for which it plans to bid were not cleared in the 2011-2012 BRA, provided as Attachment 3;

d) Submits an executed copy of the certification that it meets the PJM membership requirements and it is a registered CSP in PJM, provided as Attachment 4; and

e) Submits an executed copy of the Binding Bid Agreement, provided as Attachment 5.

5.2. Utility and Affiliate Participation

The Utility shall not participate as a bidder in this RFP process. Any affiliate of the Utility may participate as a bidder in this RFP process, however an affiliate’s bid will be due one day prior to the due date for bids from non-affiliate bidders. No employee of an affiliate that is participating in the bidding shall be allowed to review proposal information, to participate in the proposal evaluation process, or to communicate with any employee of the Utility, and vice versa, with respect to the proposals.

5.3. Contingent Proposal from Prospective CSP

An applicant that is not currently a registered CSP in PJM may become eligible to bid in this RFP if, in addition to the requirements set forth in this RFP, the applicant meets the following conditions:

(i) At the time eligibility documents are due, as set forth in Section 7 (Schedule for RFP Process), applicant submits a certification (see Attachment 6) executed by an authorized signatory of the applicant stating that on or before two business days prior to March 20, 2009 (deadline for submitting information to PJM regarding planned demand resources for the 2012/13 Base Residual Auction) the bidder intends: a. to meet the PJM membership requirements and to be a registered

CSP in PJM; or b. to enter into a contract with a CSP who meets the PJM

membership requirements and is a registered CSP in PJM (such CSP, a “Bidder Designated CSP”); and

(ii) At the time eligibility documents are due, as set forth in Section 7 (Schedule for RFP Process), applicant submits a certification executed by an authorized signatory of the applicant stating that the applicant controls directly, or will control directly on and after two business days prior to March 20, 2009, the Capacity Resource(s) offered pursuant to this RFP.

If applicant meets the eligibility requirements stated in Section 5.3(i) and (ii) and becomes an eligible bidder, the bidder’s proposal must meet the following conditions:



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(iii) The Capacity Resource(s) bid is for no fewer than 4 (four) megawatts of Committed Capacity across all Delivery Years for which the bidder submits an offer. If such condition is not met, the bidder’s proposal shall be deemed invalid and removed from further consideration.

If the bidder’s offer is accepted by the Utility, the bidder must meet the following conditions:

(iv) On or before two business days prior to March 20, 2009 (deadline for submitting information to PJM regarding planned demand resources for the 2012/13 Base Residual Auction), such bidder: a. meets the PJM membership requirements and is a registered CSP

in PJM; or b. submits written evidence, executed by both the bidder and the

Bidder Designated CSP:1. of a contractual relationship between the bidder and

the Bidder Designated CSP for performance by the Bidder Designated CSP of the Agreement for Capacity Resources; and

2. that the Bidder Designated CSP meets the PJM membership requirements and is a registered CSP in PJM.

(v) In the event the accepted offer is under a Bidder Designated CSP arrangement, the Bidder Designated CSP shall, on or before two business days prior to March 20, 2009 (deadline for submitting information to PJM regarding planned demand resources for the 2012/13 Base Residual Auction), submit to the Utility, and file with the Commission, all documentation required by the RFP. Such documentation submitted and filed by the Bidder Designated CSP shall not differ in any material respect from the documentation provided by the original bidder, except with respect to bidder specific information (e.g., the Proposal Content set forth in Section 6.1(a) of the RFP ).

In the event that any condition under Section 5.3(iv) and (v) are not met, no contract will be entered with the Utility and the bidder’s bid pursuant to this RFP shall be terminated immediately upon such condition not being met. In all cases, the bidder must control directly, or will control directly on and after two business days prior to March 20, 2009, the Capacity Resource(s) offered pursuant to this RFP.

Notwithstanding the RFP schedule set out in Section 7, in the event the accepted offer is under a complying Bidder Designated CSP arrangement, the Utility will enter into an Agreement for Capacity Resources with the bidder when it becomes a CSP or with the



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Bidder Designated CSP at the time the Bidder Designated CSP is identified (on or before two business days prior to March 20, 2009).

6. Proposals

6.1. Proposal Content

Proposal content must include:a. Summary description of the bidder, including bidder’s:

Purpose Legal form (e.g., sole proprietorship, partnership, limited partnership,

joint venture, corporation, etc.) Date of establishment State of incorporation Residency of organization Affiliates Description of all indictments or pending litigation by any foreign or

domestic federal, state, or local jurisdiction relating to the company, any officer, director, partner or member thereof, affiliate or related entity

Description of any situation in which the bidder (either alone or as part of a joint venture), or an affiliate of the bidder has been determined in writing by a court or arbitration panel to have breached or defaulted under any agreement related to the provision of services similar to those described in this solicitation, including any financing agreements, and the resolution of such breach or default

Principal contact informationb. Summary description of Capacity Resources (if known), including:

Type of demand reduction (e.g., system demand reduction due to reducing premise load consumption, or system demand reduction due to the use of behind-the-meter generation)

Current status of Capacity Resource (e.g., does the resource capability exist today, or is it a planned resource that does not currently exist)

If applicable, all pertinent air emissions and other permits necessary for the Capacity Resource, the status of such permits, and electric and gas interconnection requirements

c. Price and Volume Bid (initial period): Bidder is to use the Price and Volume Bid Template, provided as

Attachment 7. Restrictions on term of the agreement within the initial period are

noted in Section 2.2 (Term of Agreement).



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As noted on the Price and Volume Bid Template, the Committed Capacity Amount is to be stated in megawatt (MW) terms as measured at the premise level. The minimum bid amount is 100 kW. (For settlement purposes, the Committed Capacity Amount will be grossed up to an Installed Capacity Amount by applying Utility’s applicable line loss factor(s) (e.g., 2-10% depending on the voltage level of the electric service) for the relevant Delivery Year; and the Installed Capacity Amount will be grossed up to an Unforced Capacity Amount by applying PJM’s Forecast Pool Requirement and Demand Resource Factor for the relevant Delivery Year (1.0833 and 0.955, respectively, for Delivery Year 2011-2012).

As noted on the Price and Volume Bid Template, the capacity price is to be stated in dollars per megawatt of Unforced Capacity (UCAP) per day, or $/MWUCAPDay.

As noted on the Price and Volume Bid Template, the maximum price bid for the 2011-2012 Delivery Year is $110.04/MWUCAPDay.

Bidder’s proposal may contain multiple bids. Bidder must state any conditions under which each specific bid is

offered for the initial period (e.g., if a bid is for multiple Delivery Years, but the bidder can not accept Utility selecting less than all of the Delivery Years). See Section 6.5 (Evaluation of Proposals) for additional information regarding conditions placed on bids.

An example (Example 3) of the derivation of the Unforced Capacity Amount is provided below.

Unforced Capacity Amount - Example 3

Committed Capacity Amount, kW 1,000 (Premise-Level Peak Demand Reduction)

Utility Line Loss Factor 1.050 Installed Capacity (ICAP) Amount, kW 1,050

PJM Forecast Pool Requirement 1.0833 PJM Demand Resource Factor 0.955

Unforced Capacity (UCAP) Amount, kW 1,086

d. Price and Volume Bid (extension period):



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Bidder may provide an option to Utility for the two Delivery Years (June 1, 2016 – May 31, 2018) within the extension period beyond the five-year initial period (June 1, 2011 – May 31, 2016). If Bidder offers an extension period, Utility may exercise such option any time prior to 60 days before the first day of the RPM Base Residual Auction for Delivery Year 2016-2017 at no additional cost to the option price amount indicated in the proposal.

Restrictions on term of the agreement within the extension period are noted in Section 2.2 (Term of Agreement).

Bidder must state any conditions under which each specific bid is offered for the extension period. See Section 6.5 (Evaluation of Proposals) for additional information regarding conditions placed on bids.

6.2. Submittal of Proposals

Proposals from bidders that are not affiliated with the Utility are due no later that 5:00 p.m. Eastern Prevailing Time (EPT), on Friday, January 30, 2009. Proposals from bidders that are affiliated with the Utility are due no later that 5:00 p.m. Eastern Prevailing Time (EPT), on Thursday, January 29, 2009. Submit five (5) hard copies of the proposal through express mail (e.g., FedEx, UPS, etc.) to the following name and address:

Name: ALLEGHENY MD GAP RFP Coordinator

Address: Allegheny Power

800 Cabin Hill Drive

Greensburg, PA 15601

Fax: (724) 853.4273

Email: [email protected]

In addition to the hard copy submittal, submit electronic versions of the proposal to the following addresses:

Utility email address(es)[email protected]@psc.state.md.us



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mailto:[email protected]

mailto:[email protected]

6.3. Proposal Confirmation

Utility will confirm receipt of a bidder's proposal by phone. As indicated in each proposal, the bidder will provide a contact name and phone number which will be used for the receipt confirmation.

6.4. Expiration of Proposals

Proposals shall expire the earlier of the time Utility notifies the bidder that its proposal has been rejected in full or part, or at midnight EPT on March 13, 2009, or on two business days prior to March 20, 2009 in connection with a bid qualifying under Section 5.3 of the RFP.

6.5. Evaluation of Proposals

Price ($/MWUCAPDay) will be the only consideration in the evaluation of qualified proposals. Each bid within each proposal for the initial period will be ranked according to the discounted average term price. Each bid within each proposal for the extension period will be ranked according to the discounted average term price. The discount rate will be the prime rate plus 200 basis points. Subject to conditions pertaining to an initial period bid stated by the bidder, Utility may select any or all Delivery Years contained in an initial period bid. Subject to conditions pertaining to an extension period bid stated by the bidder, Utility may select any or all Delivery Years contained in an extension period bid. A bidder can not condition an initial period bid on the Utility’s selection of any extension period bid, but can condition an extension period bid on the Utility’s selection of any initial period bid. The amount of Capacity Resources that Utility selects in the initial period and for option in the extension period will be determined by the PSC.

7. Schedule for RFP Process

The RFP schedule, along with key RPM dates, is as follows:

Activity Date RFP issued Jan 16Solicitation for Expressions of Interest Jan 16Pre-bid conference Jan 21Eligibility documents due Jan 23Issue applicants' eligibility status Jan 26Proposals due: affiliates Jan 29Proposals due: non-affiliates Jan 30RFP results filed with PSC Feb 6Public comments due to PSC Feb 18PSC hearing Feb 25PSC selects and approves winning bids Mar 11



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Execute PSC-approved agreements Mar 13Milestone timeline due to PJM for planned demand resources Mar 20Base Residual Auction conducted for 2012-13 delivery year May 4-8

8. Reserved Rights

8.1. Bidder Elimination Right

If, in the course of the RFP process, any bidder is found to provide faulty information, misrepresents itself or omits any pertinent information, Utility reserves the right to eliminate such bidder from the RFP process. Utility also reserves the right to reject any proposal that does not comport with the requirements set forth in the RFP.

8.2. Contract Termination Right

If a bidder who engages in any conduct described in Section 8.1 (Bidder Elimination Right) is successful in being awarded a bid and executes the contract, Utility reserves the right to terminate the contract and pursue remedies as outlined in the Agreement for Capacity Resources.

8.3. Withdrawal and Rejection Right

Utility reserves the right to withdraw, modify or cancel this RFP at any time and to accept or reject any or all proposals received as a result of this RFP.

To the extent reasonably possible, Utility will inform bidders that have filed an Expression of Interest form of any such change. Utility further reserves the right to waive, in its sole discretion, any irregularity or defect in proposals received and to consider alternatives outside of this solicitation.

Nothing in this RFP limits Utility’s right, and Utility expressly reserves its right, to enter into one or more bilateral contracts for Capacity Resources outside of this RFP process.

8.4. Non-Interference by Bidders

Bidders shall not seek to influence Utility’s evaluation of proposals in any way. Attempts to do so will be grounds for disqualification from eligibility.

9. Miscellaneous

9.1. Warranty on Information

The information provided in the RFP has been prepared to assist bidders in evaluating the RFP. It does not purport to contain all the information that may be relevant to a bidder in



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satisfying its due diligence efforts. Utility makes no representation or warranty, expressed or implied, as to the accuracy or completeness of the information, and shall not, individually or as a corporation, be liable for any representation expressed or implied in the RFP or any omissions from the RFP, or any information provided to a bidder by any other source.

Neither the RFP nor any other related correspondence from Utility, its affiliates, or its or their employees, officers, directors, agents, or consultants shall be considered legal, financial or other advice and do not establish a contract or any contractual obligations.

9.2. Hold Harmless

Except as provided in the Confidentiality Agreement, bidder shall hold Utility and its affiliates, and its and their employees, officers, directors, agents and contractors harmless of and from all damages and costs, including but not limited to legal costs, in connection with all claims, expenses, losses, proceedings or investigations that arise as a result of this RFP or the award of a bid pursuant to this RFP.

Each bidder is responsible for its costs incurred in responding to this RFP.

9.3 Proposals Become Utility Property

Subject to the Confidentiality Agreement, all proposals submitted by each bidder pursuant to this RFP shall become the exclusive property of Utility.

9.4 Bidder’s Acceptance

The submission of a proposal to Utility shall constitute a bidder’s acknowledgment and acceptance of all the terms, conditions and requirements of this RFP and the agreement(s) that are a result of this RFP.

Bidder and its representatives irrevocably agree to submit to the personal jurisdiction of any Maryland State or Federal court and any appellate court thereof in respect of any action, dispute or proceeding arising out of this RFP process, including but not limited to the execution, implementation and performance of an agreement.

9.5 Permits, Licenses and Compliance with the Law

Bidder shall obtain all licenses and permits that may be required by any governmental body or agency necessary to conduct bidder’s business or to perform hereunder. Bidder’s subcontractors, employees, agents and representatives of each in performance hereunder shall comply with all applicable governmental laws, ordinances, rules, regulations, orders and all other governmental requirements.

9.6 Proprietary Information



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The treatment of proprietary and confidential information of a bidder's and of Utility is addressed in the Confidentiality Agreement (Attachment 2).

9.7 Regulatory Approvals

As indicated in Section 7 (Schedule for RFP Process) and as set out in the Agreement for Capacity Resources, the executed agreements will be contingent upon the Utility's receipt of Maryland Public Service Commission approval. Bidder agrees to cooperate, to the fullest extent necessary, to obtain any and all required State, Federal or other regulatory approvals of the agreement(s) resulting from its proposal(s).

9.8 Non-Discrimination Policy

Throughout the RFP evaluation, Utility will not discriminate between, or grant preferences to, any bidder based on race, gender, ethnic origin, creed or religion, in accordance with legal requirements. Utility’s consideration, evaluation and selection of proposals shall be entirely based on the merits of each proposal and not upon unrelated factors.



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Attachment 1

Expression of Interest Form

Fax to: ALLEGHENY MD GAP RFP CoordinatorAllegheny Power

724-853-4273

This response is an indication of our interest in The Potomac Edison Company, dba Allegheny Power, Request For Proposals to provide Demand Resources and ILR Resources during the initial period June 1, 2011 – May 31, 2016 [and the extension period June 1, 2016 – May 31, 2018].

Company:

Contact Name:

Contact Title:

Address:

City:

State:

Zip:

Phone Number

Fax Number:

E-mail address:

*Note completion of all fields is required.

The Potomac Edison Company,dba Allegheny Power


Attachment 2

Confidentiality Agreement

[Name and Address of Company]

[Date]

Ladies and Gentlemen,

This letter is a Confidentiality Agreement between The Potomac Edison Company, dba Allegheny Power (“Utility”) and ______________ (the “Company”) in connection with the Company’s intent to participate in the Request for Proposals for Demand Resources and ILR Resources issued by Utility on January 16, 2009 (“RFP”). This Confidentiality Agreement also pertains to the rights and obligations of the Utility and the Company in the event the Company ultimately is selected as a winner in the RFP and provides service pursuant to the Agreement For Capacity Resources, included as Attachment 8 to the RFP (“Agreement for Capacity Resources”). Utility and the Company hereby agree to accept, and to be bound by the terms of this Agreement.

DEFINITIONS:

(a) The following terms have the following meanings:

1. “Agreement” is this Confidentiality Agreement.

2. “Maryland PSC” has the meaning set forth in Section 3(b) (Limitations on Use and Disclosures).

3. “Confidential Information” has the meaning set forth in Section 4 (Definition of Confidential Information).

4. “Party” means Utility or the Company.



5. “Parties” means Utility and the Company collectively.

6. “Representatives” means the officers, directors, employees, advisors, lenders, and other persons, including but not limited to any affiliates who are actively and directly participating in evaluating, responding to, negotiating and consummating or performing under the RFP and/or the response to the RFP and the Agreement for Capacity Resources. A person or entity is not a “Representative” unless that person or entity agrees to preserve the confidentiality of the Confidential Information in accordance with the terms of this Agreement.

7. “Third Parties” means a party or parties other than Utility, the Company or their respective Representatives.

(b) Other capitalized terms used in this Agreement have the meaning set forth in this Agreement and/or the Request for Proposals dated January 16, 2009, and/or the Agreement For Capacity Resources.

TERMS:

1. Condition Precedent. The Utility and the Company shall execute this Agreement as a condition precedent to Utility’s furnishing to the Company or the Company furnishing to the Utility a copy of any Confidential Information.

2. Purpose. The purpose of this Agreement is to protect the confidentiality of the Confidential Information and to restrict the use and disclosure of that information in the manner set forth below.

3. Limitations on Use and Disclosure. (a) A Party shall use the other Party’s Confidential Information only for the purpose of evaluating, responding to, negotiating and consummating the RFP and/or the response to the RFP, and/or consummating and performing under the Agreement For Capacity Resources, and not for any other purpose. Neither Party shall disclose to Third Parties any information about the Utility’s or Company’s participation in the RFP or execution of an Agreement For Capacity Resources, or the terms or conditions or any other facts relating thereto, including the fact that discussions are taking place with respect thereto, the status of those discussions, or the fact that Confidential Information has been made available by or to the Utility or Company or their Representatives.

(b) Notwithstanding the foregoing or any other provision of this Agreement, the Utility may share any Confidential Information with the Maryland Public Service Commission, its Staff, or any consultant working for the Maryland Public Service Commission (collectively “Maryland PSC”). Any such information shared will be designated as confidential, and the



Utility will ask the Maryland PSC to hold and use it on a confidential basis. To the extent that the Maryland Office of People’s Counsel and its representatives and/or consultants (collectively “OPC”) enter into a confidentiality agreement to hold any shared information confidentially, Utility may also share Confidential Information with OPC for the purposes of OPC’s review of the results of the RFP.

4. Definition of Confidential Information. Confidential Information shall consist of oral, electronic and written information that is confidential, proprietary, or generally not available to the public. Whenever possible, such Confidential Information shall be marked prior to or at the time of disclosure as being “Confidential Information”. Confidential Information in the case of information provided by Utility to the Company shall include, without limitation, all data, reports, interpretations, forecasts or records relating to Utility and/or its customers, and any other document created by Utility or others which directly or indirectly relates to all or any portion of the bid evaluation information provided to the Company by Utility or relates to its performance under the Agreement for Capacity Resources. Confidential Information in the case of information provided by the Company to the Utility shall include, without limitation, all data, reports, interpretations, forecasts, bids, credit information, credit collateral amounts, bidder identity, and shall also include information prepared by the Company that includes directly or indirectly Confidential Information furnished by Utility.

5. Non-Confidential Information. Notwithstanding the provisions of Section 4 (Definition of Confidential Information), information shall not be deemed confidential that (i) becomes generally available to the public; (ii) is already known to the receiving Party at the time of receipt by the receiving Party; or (iii) is acquired after such receipt from a Third Party not known to the receiving Party to be prohibited from making disclosures. In addition, notwithstanding any other provision of this Agreement, the Company may always make public, at its sole discretion, the fact that it has participated in the RFP, whether the Company has been awarded any contracts, the amount of Capacity Resources awarded, and/or the price to be paid for the Capacity Resources. The receiving Party shall give prompt notice to the other Party in the event it believes that any of the other Party’s information in its possession is not Confidential Information as a result of the provisions of this Section 5.

6. Property of Utility or the Company. Confidential Information belonging to Utility shall consist of Confidential Information supplied by Utility to the Company and shall also include the portion of Confidential Information furnished by the Company to Utility that incorporates Confidential Information furnished to the Company by Utility. Confidential Information belonging to the Company consists of all other Confidential Information supplied by the Company to Utility. Utility and the Company acknowledge that each Party’s Confidential Information is and at all times remains the sole and exclusive property of that Party, who, it is agreed, has the exclusive right, title, and interest to its Confidential Information. Neither Party grants any right or license, by implication or otherwise, as a result of the provision of



Confidential Information to the receiving Party.

7. Disclosure Prohibited Except Where Explicitly Permitted. Neither Party shall disclose or use the other Party’s Confidential Information without the other Party’s prior written consent except as explicitly stated in Sections 3 (Limitations on Use and Disclosure), 8 (Disclosure For Bid Evaluation Purposes) and 9 (Disclosure to Governmental Authorities) of this Agreement.

8. Disclosure For Bid Evaluation Purposes. A Party may disclose the other Party’s Confidential Information to its Representatives for the purposes set forth in Section 3 (Limitations on Use and Disclosure). The obligations and restrictions under this Agreement that apply to a Party also apply to a Party’s Representatives.

9. Disclosure to Governmental Authorities. (a) A Party (the “disclosing Party”) may also disclose the other Party’s Confidential Information to any governmental, judicial, or regulatory authority (“Authority”) requiring such Confidential Information; provided that, the disclosing Party (a) promptly informs the other Party of the substance of any inquiries, requests or requirements in order to afford the other Party an opportunity to attempt to prevent or limit the disclosure of the Confidential Information; (b) makes a good faith effort to persuade the Authority (i) that submission of the Confidential Information should not be required, or, if that effort fails, (ii) that submission of the Confidential Information on a non-public basis should be permitted; and (c) endeavors in good faith to protect the Confidential Information provided to an Authority from disclosure to Third Parties. If an Authority orders the disclosing Party to disclose any documents containing the other Party’s Confidential Information, the disclosing Party shall (a) attempt to obtain from the other Party, if the Authority allows the time, a “Public Disclosure Copy”, or (b) if the Authority does not allow such time, shall prepare itself a “Public Disclosure Copy” in which the Confidential Information has been redacted to the extent that such redaction is permitted by the Authority requiring disclosure. Confidential Information disclosed pursuant to this Section 9 (Disclosure to Governmental Authorities) on a non-public basis shall not loose its status as Confidential Information by virtue of such non-public disclosure.

(b) Notwithstanding the foregoing, the Parties agree that:

(i) either party may be required to provide information, potentially including Confidential Information to the Federal Energy Regulatory Commission (“FERC”) in order to comply with FERC Form 1 or FERC transaction reporting requirements. Each Party agrees that to the extent it is required to provide FERC any such Confidential Information, the Party required to provide such Confidential Information will provide only the Confidential Information that is reasonably necessary to comply with such reporting requirements and shall not be required to comply with the provisions of



Section 9(a) (Disclosure to Governmental Authorities) of this Agreement unless there have been substantive changes to the information required for FERC reporting purposes.

(ii) either party may be required by law, including but not limited to by operation of Section 7-510(c)(4)(ii)(5) of the Public Utility Companies Article, to publicly disclose Confidential Information. Each Party agrees that to the extent that it is required to disclose such Confidential Information, the Party required to make the disclosure will disclose only the Confidential Information that is reasonably necessary to comply with such legal requirements and shall not be required to comply with the provisions of Section 9(a) (Disclosure to Governmental Authorities) of this Agreement.

10. Termination of RFP Participation. If the Company determines that it does not wish

to proceed with the RFP, or if the Utility excludes the Company from the RFP for any of the reasons set forth in the RFP, it will immediately notify the other Party of that decision. In such case, or if the Agreement for Capacity Resources is not consummated, upon the written request of the Party (the “requesting Party”), the other Party (the “receiving Party”) shall not retain and shall promptly return to the requesting Party all the requesting Party’s written Confidential Information in the possession of the receiving Party or its Representatives, except for the portion (“said portion”) of the requesting Party’s Confidential Information that may be found in analyses, compilations, or other documents prepared by, or for, the receiving Party and its Representatives. The said portion and any oral Confidential Information furnished by the requesting Party and not so requested or returned will be held by the receiving Party and kept subject to the terms of this Agreement, or destroyed.

11. Liability and Relief. A Party or any of its Representatives shall be liable for any breach of this Agreement. In the event a non-breaching Party or its Representatives shall have knowledge of any breach of the confidentiality of, or the misappropriation of, any of the Confidential Information, the non-breaching Party shall promptly give notice thereof to the breaching Party. The non-breaching Party shall be entitled to specific performance or other equitable relief by way of injunction or otherwise, if the other Party or any of its Representatives breach or threaten to breach any of the provisions of this Agreement. Such remedy shall not be deemed to be the exclusive remedy available to the non-breaching Party, but shall be in addition to all other available remedies. Neither failure nor delay by the non-breaching Party, in exercising any of its rights or privileges herein, shall operate as a waiver nor shall any single or partial exercise preclude any other or further exercise of any right, power or privilege.

12. Representatives, Successors and Assigns. This Agreement shall be binding upon and for the benefit of the Parties, and their respective Representatives, successors, and permitted assigns. Neither Party may assign its rights or obligations hereunder without prior written



consent of the other Party.

13. Controlling Law. This Agreement shall be governed by and construed in accordance with the laws of the state of Maryland without regard to conflicts of laws rules or principles

14. Full Compliance Required. The failure in any instance to insist on full compliance with the terms of this Agreement shall not be deemed to be a waiver of the right to insist upon full compliance with these terms thereafter.

15. Signatures. The signatures below establish each Party’s agreement to the terms hereof.

16. Termination. This Agreement shall terminate ten years from the date hereof.

COMPANY THE POTOMAC EDISON COMPANY

By _____________________________ By _____________________________

Title ____________________________ Title ____________________________



Attachment 3

Participation in the PJM RPM BRA for Delivery Year 2011-2012

Certification Form

I, ________________________ (“Agent”) am an authorized signatory for

________________________ (“Company”) and hereby certify that Company’s Capacity

Resources committed as a result of this RFP were not cleared in the PJM Reliability Pricing

Model Base Residual Auction for Delivery Year 2011-2012.

Signed: Date:

Type or Print Name:

Title:

Company:



Attachment 4

PJM Membership and Curtailment Service Provider

Certification Form

I, ____________________________ (“Agent”) am an authorized signatory for

________________________ (“Company”) and hereby certify that Company is a member of

Pennsylvania-New Jersey-Maryland Interconnection, LLC (“PJM”) and is qualified as a

Curtailment Service Provider in good standing able to comply with all applicable requirements

of PJM to fulfill the obligations of this RFP, including the Agreement For Capacity Resources

provided as Attachment 8.

Signed: Date:

Type or Print Name:

Title:

Company:



Attachment 5

Binding Bid Agreement

________________________________________, (“Bidder”) agrees to be bound by the price and volume quotes contained in Bidder’s proposal, up to the expiration time of its proposal, as set forth in Section 6.4 (Expiration of Proposals) of this RFP, submitted to Allegheny Power in response to this RFP, which shall constitute a firm offer to provide Capacity Resources in accordance with the Agreement For Capacity Resources and applicable Maryland Law and regulations. Bidder agrees to execute the Agreement For Capacity Resources in a timely manner, as set forth in Section 7 (Schedule for RFP Process) of this RFP, for any proposal of the Bidder accepted by Allegheny Power.

The submission of any binding offer to Allegheny Power shall constitute the Bidder’s acknowledgment and acceptance of all the terms, conditions and requirements of this Request For Proposals.

The undersigned represents and warrants that he/she has the authority to act on behalf of, and to bind, the Bidder to perform the terms and conditions and otherwise comply with all obligations stated herein.

Signature: ______________________________

Title: __________________________________ Date_____________________



Attachment 6

Contingent Proposal Certification Form

I, ____________________________ (“Agent”) am an authorized signatory for

________________________ (“Company”) and hereby certify as follows: (i) that on or before

two business days prior to March 20, 2009, the Company intends to (a) meet the Pennsylvania-

New Jersey-Maryland Interconnection, LLC (“PJM”) membership requirements and to be a

registered Curtailment Service Provider (“CSP”) in PJM, or (b) to enter into a binding contract

with a CSP that meets the PJM membership requirements and is a registered CSP in PJM for the

performance of the Company’s obligations contemplated in the Request for Proposals for

Demand Resources and ILR Resources issued by Allegheny Power, dated January 16, 2009 (the

“RFP”); and (ii) that the Company controls directly, or on and after two business days prior to

March 20, 2009 will control directly, the Capacity Resource(s) offered by the Company pursuant

to the RFP.

Signed: Date:

Type or Print Name:

Title:

Company:



Attachment 7

Price and Volume Bid Template

Price and Volume Template for Capacity Resources

Committed Capacity Amount, MW (in minimum increments of 100 kW or 0.1 MW)(premise-level Peak Load Reduction)

2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

Contract Price, $/MWUCAPDay

Note: Please enter N/A for the Capacity Price in any Delivery Year in which the Bidder does not intend to offer Capacity Resources.

Initial Term Extension TermDelivery Year

Notes:1. See Section 2.2 (Term of Agreement), Section 6.1 (Proposal Content) and Section 6.5 (Evaluation of

Proposals) for applicable restrictions.2. Maximum price allowed in Delivery Year 2011-2012 is $110.04.

Conditions (to be provided by bidder):

The Potomac Edison Company,dba Allegheny Power


Attachment 8

Agreement For Capacity Resources

(separate attachment)



Attachment 9

Schedule 6 (Procedures for Demand Resources and ILR) of the PJM RAA




Attachment 10

Attachment DD (Reliability Pricing Model) of the PJM OATT




the potomac edison company,

Business

proposals fordemand

capacity resources

proposalsfor demand

submittal of proposals

expiration of proposals

evaluation of proposals

resource requirements

eligibility requirements