Presentation to Federal Energy Regulatory Commission

Kathryn L. Patton, Sr. Vice President and General Counsel

June 26, 2002

Why PJM?Why PJM?

Operational Reasons For IP Joining PJM

IP has 345 kV Interconnections with 4 Utilities: Ameren, AEP, ComEd and TVA

Imports for Native Load:

50% of Imports for Illinois Power’s Native Load Came from ComEd and AEP

Exports:

60% of Exports were Delivered to the ComEd and AEP Systems

19% of Exports from IP System Served Load in PJM

25% of Exports from IP system Served Load in ComEd and AEP Service Territories

IP

TVA

CE

SIPC

CWLP

CILCo

MECS

LGEE

EEIAmeren

AEP

2812200

572

287

230

93740911

250

280

307

Interconnections

Imports for Native Load From Source Transmission System

OTHER3.0%

CINERGY1.9%

WISCONSIN ELECTRIC

3.5%

CILCO2.1%

AEP17.0% TVA

24.5%

COMMONWEALTH EDISON

33.1%

AMEREN10.4%

LG&E4.5%

Based on Year 2000 ActualsBased on Year 2000 Actuals

Exports From Illinois Power Transmission System by Transmission Ties

AEP41.1%

COMMONWEALTH EDISON

19.0%

AMEREN18.7%

TVA14.6%

MIDAMERICAN3.8%

SIPC1.6%

LG&E0.3%

CILCO0.7% CWLP

0.2%

Based on Year 2000 ActualsBased on Year 2000 Actuals

Exports by Load Served (Ultimate Sink Transmission System)

MIDAMERICAN5.5%

AMEREN3.0%

OTHER13.9%

SOUTHERN COMPANY

1.4%WISCONSIN ELECTRIC

3.1%

ENTERGY9.6%

AEP10.6%

COMMONWEALTH EDISON14.2%

TVA19.3%

PJM19.4%

Based on Year 2000 ActualsBased on Year 2000 Actuals

Customer Value of PJM Membership

Liquid and Competitive Market Access to Diverse Supply from Historic Supply Sources Encourages New Generation Promotes Retail Access Lower Administration Charges in Long Term Timing of Start-Up Much Sooner

Transmission Service By End of 2002

Full LMP/Market Implementation by End of 2003

Other Benefits to IP of Joining PJM

Transparent and Robust Market Experienced Operator

Has Been Up and Running for a Number of Years

Already Worked through Start-Up Problems Efficient Stakeholder Process All Transmission Owners Offer Retail Choice Rate Design Doesn’t Shift Costs to Others Results in Greater Opportunity to Recover Transmission

Revenue Requirement Quick Start-Up

Why Not MISO?

Strands Illinois Power: IPs Only Strong Interconnection With MISO Is

Ameren, and Ameren Has No ATC Either Into or Out of IP For This Summer

Historic Supply Is Not Sourced From Ameren Generation Exports Don’t Serve Ameren

Inefficient Stakeholder Process Few Transmission Owners Offer Retail Choice Rate Design Results in Cost Shift and Traps Generation

in MISO (discouraging new generation) Market Start-Up Delayed Until Late 2004/Early 2005

Why Not MISO?

Inexperienced Operator Numerous Start-up Problems

– Inaccurate ATC– OASIS Frequently Down– Slow Response to Service Requests– Slow Response to Customer Inquiries

Over 55 FERC Tariff Change Filings in Last 1 ½ Years

Killed Liquidity at Cinergy Hub, which was One of the Most Liquid Trading Points in Industry

Degradation of Service from Pre-MISO

Illinois Power’s Commitment

Illinois Power is Fully Committed to Joining PJM Will Join as a Transmission Owner, or Part of Independent Transmission Company

Illinois Power Does Not Intend to Spend Any More Money Toward Start-Up of an RTO Until FERC Issues a Final and Unequivocal Order.

Illinois Power Already Spent $6.5 million to Leave MISO and $7.5 million to Develop ARTO. Annual Net Income for Transmission is Only ~ $7.9 Million/Year.