PJM Chargeback Provisions

The chargeback provisions for PJM are contained in Paragraph 15.2 of the PJM
Operating Agreement. As it relates to PJM Members being chargeback for
another Member's default the paragraph states in part

"...the PJM Board may assess against, and collect from, the Members not in
default, in proportion to their Weighted Interest, an amount equal to the
amount that the defaulting Member has failed to pay to the Office of the
Interconnection, along with appropriate interest, but such assessment shall
in no way relieve the defaulting Member of its obligations, and shall confer
upon the Members Committee the right to recover the assessed from the
defaulting Member." (Note that upper case denotes defined terms in the
Operating Agreement)

I will fax a copy of the section of the Operating Agreement pertaining to
default to Ed Sacks and request that he forward a copy to Rhonda and
Elizabeth if desired. If you would like a copy of the entire Operating
Agreement (all 160 pages) it can be found on the PJM website at www.pjm.com
by clicking on "Manuals and Documents" on the Home page (left side), then
under "PJM Agreements" clicking on "Operating Agreement, PJM Interconnection,
L.L.C."

Note that in light of the recent defaults in PJM, there is a subgroup in PJM
reviewing the existing credit policy in PJM and will recommend changes to the
policy if required. I will forward you information from this group as it is
available and ask that you review it and comment.