Attachment

UTILITY COMMITTEE AGENDA January 22, 2007 - 5:00 P.M. - Council Chambers - City Hall - City of Dover Public comments are welcomed on any item and will be permitted at appropriate times. When possible, please notify the City Clerk (736-7008 or e-m ail at Tm cdowell@dover.de.us) should you wish to be recognized. AGENDA ADDITIONS/DELETIONS 1. Proposed Energy Conservation Plan for Dover (Ron Zink, Sierra Club) 2. Brown Water Financial Update/Water Quality Expense Report (Committee Tabled January 8, 2007) 3. Discussion - Options to Address Regulation 1146 Emission Control Requirements at McKee Run 3 Electric Generation Station 4. PACE/NAES Monthly Report (December) 5. Adjournment by 6:00 P.M. /tm S:\ClerksOffice\Agendas&Minutes\Committee-Agendas\2007\01-22-2007 UTILITY.wpd THE AGENDA ITEMS AS LISTED MAY NOT BE CONSIDERED IN SEQUENCE. THIS AGENDA IS SUBJECT TO CHANGE TO INCLUDE THE ADDITION OR THE DELETION OF ITEMS, INCLUDING EXECUTIVE SESSIONS.

Utility Committee – January 22, 2007 - 3 Washington New York Houston Columbia San Diego London Moscow Mexico City Options to Address Regulation 1146 Emission Control Requirements at McKee Run 3 Electric Generating Station January 8, 2007

Regulation 1146 • Delaware to enact Regulation No. 1146 for limiting pollutant emissions – Applicable to plants above 25 MW capacity that burn #5 or #6 fuel oil – By January 1, 2009, NOx annual emission rate at McKee 3 not to exceed 244 tons – By January 1, 2009, SO2 emission annual rate at McKee 3 not to exceed 439 tons, and supplied fuel oil not to exceed 0.5% sulfur content by weight – By May 1, 2009, NOx emissions to be reduced to 0.15 lb/MMBtu on rolling 24-hour basis – By January 1, 2012, NOx emissions to be reduced to 0.125 lb/MMBtu on rolling 24-hour basis 2 Proprietary & Confidential

Effects of Regulation on McKee Run 3 • McKee Run 3 Historic Emissions Performance *Per U.S. EPA Clean Air Markets Database 2006 (9 months data) 2005 2004 2003 2002 SO2 tons 29.5 530.2 488.5 502.2 700.3 NOx tons 19.2 211.5 207.7 234.7 345.3 NOx rate (lb/MMBtu) 0.18 0.34 0.28 0.29 0.32 • McKee Run 3 Fuel Supply – Currently burns #6 fuel oil – Currently accepts fuel oil up to 1% sulfur content by weight 3 Proprietary & Confidential

Options for Addressing Regulation 1146 • Fuel Switching – Regulation 1146 does not cover units that burn #4 fuel oil – Due to lower viscosity, switch may require pump and burner replacement or retrofit – Greater volatility of #4 fuel oil may also require additional fire protection measures – $2.82/MMBtu price increase for #4 fuel oil (based on current New York Harbor prices) • SCR on back-end – Will reduce NOx below specified limits – Capital Cost (~$100/kW) – O&M Cost (~2.5 mill/kWh) • SNCR – Will achieve NOx reduction, but less effective than SCR – Capital Cost (~$20/kW) – Similar O&M Costs to SCR 4 Proprietary & Confidential

City of Dover December Monthly Report Asset, Energy and Risk Management This Report was produced by Pace Global Energy Services, LLC (“Pace Global”) and is meant to be read as a whole and in conjunction with this disclaimer. Any use of this Report other than as a whole and in conjunction with this disclaimer is forbidden. Any use of this Report outside of its stated purpose without the prior written consent of Pace Global is forbidden. Except for its stated purpose, this Report may not be copied or distributed in whole or in part without Pace Global’s prior written consent. This Report and the information and statements herein are based in whole or in part on information obtained from various sources as of December 30, 2006. While Pace Global believes such information to be accurate, it makes no assurances, endorsements or warranties express or implied, as to the validity, accuracy or completeness of any such information, any conclusions based thereon, or any methods disclosed in this Report. Pace Global assumes no responsibility for the results of any actions and inactions taken on the basis of this Report. By a party using, acting or relying on this Report, such party consents and agrees that Pace Global, its employees, directors, officers, contractors, advisors, members, affiliates, successors and agents shall have no liability with respect to such use, actions, inactions, or reliance. This Report does contain some forward-looking opinions. Certain unanticipated factors could cause actual results to differ from the opinions contained herein. Forward-looking opinions are based on historical and/or current information that relate to future operations, strategies, financial results or other developments. Some of the unanticipated factors, among others, that could cause the actual results to differ include regulatory developments, technological changes, competitive conditions, new products, general economic conditions, changes in tax laws, adequacy of reserves, credit and other risks associated with City of Dover and/or other third parties, significant changes in interest rates and fluctuations in foreign currency exchange rates. Further, certain statements, findings and conclusions in this Report are based on Pace Global’s interpretations of various contracts. Interpretations of these contracts by legal counsel or a jurisdictional body could differ. over 25 Website: www.paceglobal.com Washington New York Houston Columbia San Diego London Moscow Mexico City

TABLE OF CONTENTS Executive Summary ........................................................................................................ 2 Purchased Power ............................................................................................................ 3 Generation ...................................................................................................................... 4 Operations and Asset Management ................................................................................ 5 Energy Management ....................................................................................................... 9 Risk Management ......................................................................................................... 12 Appendix 1 .................................................................................................................... 19 North American Energy Services December Report.................................................. 19 Appendix 2 .................................................................................................................... 20 PJM Invoice Breakdown ............................................................................................ 20 Proprietary & Confidential 1 PACE Report December 2006 (2)

EXECUTIVE SUMMARY Generation v Budget Dover Load v 3 Year Average Load Load Cost v Budget Cost 15000 100,000 88 12000 75,000 86 MWh 9000 MWh $/MWh 6000 50,000 84 3000 25,000 82 0 06 07 07 20 20 20 0 80 ly n ly Ju Ja Ju Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Actual Gen Budget Gen Actual Average Actual Weighted Average Budget Generation and Asset Management Net generation for the month of December credited by PJM was 5,869 MWh (stations ran out of merit only for reliability purposes to support local transmissions upgrades) compared to a budget of just under 3,000 MWh. Because the units ran out of merit order, a negative gross margin (or loss of $406,092) was realized. During the month of December, North American Energy Services reported that there were no lost time accidents, OSHA reportable incidents or environmental Notice of Violations. Costs attributable to the operations of the McKee Run and VanSant stations were $110,354 above a budget of $453,628 due to retro- active pay to employees due under the IBEW contract, test in McKee Unit three and maintenance work associated with the CT nozzle change-out. For power year 2006-07, operations are $$490,304 below a budget of $2,819,012. Energy and Risk Management Wholesale load for the month of December was 60,384 MWh’s verses a three year historic load of 63,200 MWhs. Purchased power (or hedges) accounted for 60,220 MWH’s of this volume at a cost of $4.51 million. Purchases and sales as well as other PJM related charges accounted for an additional cost of $185,237 inclusive of all load related fees. Total purchased power costs for the month of December was $4.93 million resulting in an all in cost of power with fees of $81.69/MWh or $2.31 below the targeted annual average of $84.00/MWh. Dover remains calculated to be 96% hedged on peak and 100% hedged off peak for an anticipated all in delivered cost of $83.34 for the 2006/07 power year. Hedging has begun for the 2007/08 power year and currently Dover is hedged 91% on peak and 80% off peak with a at market expected price of $82.92/MWh delivered to the Dover bus before any incentive fee paid to the Energy Manager. Hedging for 2008/09 and 2009/10 power years have also begun as described further in the report. All purchases are with investment grade entities. Based on current market conditions, certain hedges have moved to be “out of the money” or possess a negative market value to Dover. Credit is not currently required to be posted by the counterparties but such position is being closely monitored by Pace Asset Management. Proprietary & Confidential 2 PACE Report December 2006 (2)

PURCHASED POWER Dover Load v 3 Year Average Load Load Cost v Budget Cost 100,000 88 75,000 86 MWh $ /M W h 50,000 84 25,000 82 0 80 Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Actual Average Actual Weighted Average Budget December Hedges or Purchased Power Counterparty Volume (MWh) Average Cost Cost to Dover ($/MWh) ($ millions) BP 18,600 72.89 1.33 Constellation 26,400 77.31 2.03 WPS 16,320 68.20 1.14 Connective (Capacity 313 5.00 --- Only) (equivalent cost) (equivalent cost) Total Energy Purchases 60,220 74.83 4.51 Dover Load 60,384 -- -- Balanced Purchased from PJM and Load Related Fees Purchased Power (Hedges) 60,220 MWh’s @ $74.83/MWh: $4,505,970 Power sold to PJM (2,579 MWh’s) and Additional PJM Related Costs $185,236 Total Cost to Serve Load (58,141 MWh’s) $4,586,986 All in $/MWh load cost inclusive of Energy Manager Fees: $81.69/MWh Highlights • Generating units were not dispatch in merit order in the month due to soft prices, units ran to support transmission work only • Market pricing of fuel oil became cheaper in late December allowing the units to run on oil in lieu of gas on several occasions. Proprietary & Confidential 3 PACE Report December 2006 (2)

GENERATION Gross M argin vs Budget Generation v Budget 500 450 400 350 15000 300 250 12000 200 150 MWh 9000 100 50 $1000 0 6000 Ju Au Se O No De Ja Fe M Ap M Ju -50 ly gu pt ct ve ce nu br ar ril ay ne em ob ua ch -100 st er m m ar be be be y ry 3000 -150 r r r -200 0 -250 -300 06 07 07 -350 20 20 20 -400 ly Jan ly -450 Ju Ju -500 Budget Actual Actual Gen Budget Gen Energy Gross Margin includes capacity and ancillary services value. Month – December 2006 McKee McKee McKee MRS VanSant Total Unit 1 Unit 2 Unit 3 Facility Unit 11 All Units Capacity MW 17 17 102 136 39 175 On Line Hours Hrs 0 0 120.252 120.252 2.35 122.602 Starts # 1 1 2 4 0 4 Gross Generation MWh 768.236 385.301 5,324.011 6,477.548 0 6,477.548 Net Generation MWh 725.987 363.640 4,828.053 5,917.68 0 5,917.68 Total Auxiliaries MWh 95.431 74.792 686.666 856.945 34.182 891.127 Auxiliaries purchased MWh 53.182 53.182 190.708 297.072 34.182 331.254 Fuel Gas Used MMBTU 2,577,584 1,748,409 1,318,701 5,644,694 0 5,644,694 Fuel Oil Used MMBTU 8,547,962 3,177,772 65,710,782 77,436,515 0 77,436,515 Fuel Oil Used Gallons 57,177 21,256 439,537 517,790 0 517,790 Total Fuel MMBTU 11,125,545 4,926,772 67,029,483 83,081,209 0 83,081,209 Net Heat Rate BTU/KWh 15,325 13,547 13,883 14,039 0 14,039 Unit Trips # 0 0 0 0 0 0 Capacity Factor % 5.74% 2.88% 6.36% 5.85% 0 4.52% Availability Factor % 100% 100% 100% 100% 100% 100% eFOR % 0 0 0 0 0 0 HW Boiler Gas Usage MMBTU 2,153,162 2,153,162 Pilot Gas Usage MMBTU 123,185 278,442 401,627 401,627 December Emissions and to Date Tons emitted Seasonal tons Tons in Inventory current emitted year to date month/season SOx 39 75 2,679 NOx 1 25 197 Highlights: • McKee Run and Van Sant ran solely for support of local transmission outages resulting in a $406,00 gross margin loss (fuel cost more than power) Proprietary & Confidential 4 PACE Report December 2006 (2)

OPERATIONS AND ASSET MANAGEMENT Unit performance for the month of December is provided below Month – December 2006 McKee McKee McKee MRS VanSant Total Unit 1 Unit 2 Unit 3 Facility Unit 11 All Units Capacity MW 17 17 102 136 39 175 On Line Hours Hrs 0 0 120.252 120.252 2.35 122.602 Starts # 1 1 2 4 0 4 Gross Generation MWh 768.236 385.301 5,324.011 6,477.548 0 6,477.548 Net Generation MWh 725.987 363.640 4,828.053 5,917.68 0 5,917.68 Total Auxiliaries MWh 95.431 74.792 686.666 856.945 34.182 891.127 Auxiliaries purchased MWh 53.182 53.182 190.708 297.072 34.182 331.254 Fuel Gas Used MMBTU 2,577,584 1,748,409 1,318,701 5,644,694 0 5,644,694 Fuel Oil Used MMBTU 8,547,962 3,177,772 65,710,782 77,436,515 0 77,436,515 Fuel Oil Used Gallons 57,177 21,256 439,537 517,790 0 517,790 Total Fuel MMBTU 11,125,545 4,926,772 67,029,483 83,081,209 0 83,081,209 Net Heat Rate BTU/KWh 15,325 13,547 13,883 14,039 0 14,039 Unit Trips # 0 0 0 0 0 0 Capacity Factor % 5.74% 2.88% 6.36% 5.85% 0 4.52% Availability Factor % 100% 100% 100% 100% 100% 100% eFOR % 0 0 0 0 0 0 HW Boiler Gas Usage MMBTU 2,153,162 2,153,162 Pilot Gas Usage MMBTU 123,185 278,442 401,627 401,627 # Note: Does not include HWB or Pilot Gas Unit Trips/Outages During the month of December, at the McKee Run Facility Unit 1 was self dispatched on December 18th, 19th, 20 th, and the 21st. Unit 2 was operated on December 12th and 13th and Unit 3 was operated on December 4th, 5th, 6th 7th, 11th and 12th to support the City of Dover Electric Department while their line crews worked on upgrades to the 69KV electrical distribution system. The line outage work will continue into January 2007. Other Events Operation of the units to support the City of Dover’s 69KV line outages with scheduled dates in December and January has begun. During the line outages in December, Units 1, 2, and 3 were put on line during the month to support the Dover Load and for voltage support in various sections of the city. During the December time frame, the McKee Run generating units also completed emission testing as required by the McKee Run Title V Operating Permits. The test schedule has been approved by DNREC and emission testing on Units 1, 2 & 3 began during the week of December 11. When Units 1, 2 and 3 were operated in the December time period, the units successfully completed capacity tests as required by PJM for the winter season. Unit 11 still is in exempt status until the unit is called upon to run in the winter period. Proprietary & Confidential 5 PACE Report December 2006 (2)

We continue to work on gathering information for DNREC in order to provide them with enough data to approve a two year variance on an internal inspection of the tank. We are also proceeding with cleaning of the #2 fuel oil tank that is now empty so that it can be assessed for either use as a holding tank for the remaining fuel in the #1 fuel tank or to take the tank completely out of service. This work is expected to start in the second week of January. During the month, plant personnel coordinated with XL Insurance Services, the City of Dover’s insurance carrier, to gather oil samples from transformers at both the McKee Run and VanSant facilities. Oil sampling is part of the plant preventative/predictive maintenance program and the test results are used to assess the condition of the transformers. Also during the month, XL Insurance Services provided an outside test firm to perform thermographic tests on all of the motor control centers on Units 1 and 2. Preliminary work has begun on developing the Budget for the fiscal year 2007-2008. Employee suggestions to improve the plant have been solicited and will be evaluated for merit as part of the budget development process. Power Year to Date Performance is provided below: Fiscal Year to Date 7/1/06-6/30/07 McKee McKee McKee MRS VanSant Total Unit 1 Unit 2 Unit 3 Facility Unit 11 All Units Capacity MW 17 17 102 136 39 175 On Line Hours Hrs 184.134 147.234 411.608 742.94 107.120 850.096 Starts # 6 4 21 31 31 62 Gross Generation MWh 1,499.154 1,273.637 20,801.383 23,574.174 3,377.692 26,951.866 Net Generation MWh 1,406.823 1,197.091 18,992.793 21,596.707 3,357.616 24,954.323 Total Auxiliaries MWh 276.078 260.242 2,493.874 3,030.372 155.763 3,186.135 Auxiliaries purchased MWh 183.747 183.747 1,371.95 1,739.444 135.687 1,875.131 Fuel Gas Used MMBTU 13,476,583 13,432,136 152,715,191 179,623,911# 42,000,242 221,624,154# Fuel Oil Used MMBTU 8,547,961 3,177,772 84,820,428 96,546,161, 2,941,527 99,487,689 Fuel Oil Used Gallons 57,177 21,256 565,969 644,402 21,083 661,485 Total Fuel MMBTU 22,024,544 16,609,908 237,535,619 276,170,073# 44,941,770 321,111,843# Net Heat Rate BTU/KWh 15,656 13,875 12,507 12,788 13,385 12,868 Unit Trips # 4 1 1 6 7 13 Capacity Factor % 1.87% 1.59% 4.22% 3.60% 1.95% 3.23% Availability Factor % 96.63% 97.68% 99.22% 97.85% 98.76% 98.07% eFOR % 1.58% 4.96% 0.78% 1.40% 0% 1.09% HW Boiler Gas Usage MMBTU 9,635,410 9,635,410 Pilot Gas Usage MMBTU 526,200 681,457 1,207,657 1,207,657 # Note: Does not include HWB or Pilot Gas Environmental, Health and Safety There were no Notice of Violations or Environmental excursions during the month. There were five opacity deviations during the month which occurred on Unit 2 during soot blowing as a result of Proprietary & Confidential 6 PACE Report December 2006 (2)

operating the unit all day on oil during testing. During emission testing, test protocol prohibited the blowing of soot while testing was underway. Emissions Allowances For the month of December 39 tons of SOx were emitted. Emissions verse banked allowances are cited below; Tons emitted Tons emitted year to Tons in Inventory current date month/season SOx 39 75 2,679 NOx 1 25 197 Current market pricing for allowances will be updated at the Management Committee meeting. Note, NOx allowance retirement is only applicable to generation during the Ozone Season or generation between May 1 and September 30 of each calendar year. Safety During the month of December, there were no employee or contractor related injuries or illnesses. However, an injury did occur to a visitor of one of our employees while on site. The injury occurred when the spouse of an employee fell and broke her ankle. The injury did require surgery to implant pins and a plate into her ankle for support. This was not an OSHA recordable injury. The station operations worked 5,089 hours without an OSHA reportable incident or lost time accident. There have been 635 days since the last OSHA reportable incident or lost time accident (April 5, 2005) Generation Financial Performance Per the table below, the McKee and VanSant station experienced a net gross margin loss of $401,092 on energy sales for the month of December due to the fact the units ran out of merit (reliability reasons) to support transmission related work performed by the City’s electric distribution department. Summary of Generation Sales and Fuel Purchases Transaction Volumes Revenue/Cost PJM Invoice for Power Sold 5,869 MWH’s sold $326,647* Fuel and Transport 8,159 Dth/517,463 gal #6 ($732,739) Net Generation Revenue 5,869 MWh’s ($406,092) * Excludes Black Start revenue shown in December estimates, such revenue is included below Proprietary & Confidential 7 PACE Report December 2006 (2)

Plus Other Revenue Black Start: $5,000 Less Net Generation Revenue ($406,092) Realized margin for December ($401,092) Operating Costs Operating Costs for the month of December were $563,982 (budget $453,628) or above budget by $110,354 due to retro active pay due to employees under the new IBEW agreement, testing of McKee Unit 3 and maintenance work associated with the CT nozzle change-out. A breakdown of operating costs for December and year to date are provided below: Financial – Current Month Month – December 2006 Actual Budget Variance Personnel 384,133 285,528 (98,605) Administrative 69,248 47,019 (22,229) EH & S 4,231 13,000 8,769 Maintenance Expense 90,226 64,550 (25,676) Operations Expense 16,143 43,352 27,209 Total $563,982 $453,628 ($110,354) Financial – Fiscal Year to Date Number of Months – 6 Actual Budget Variance Personnel 1,484,185 1,568,261 84,076 Administrative 500,835 519,849 19,014 EH & S 13,059 49,500 36,441 Maintenance Expense 254,116 347,800 93,684 Operations Expense 76,513 333,602 257,089 Total $2,328,708 $2,819,012 $490,304 Year to date, Operations is below budget by $490,304 primarily due to lower than budgeted run times. Proprietary & Confidential 8 PACE Report December 2006 (2)

ENERGY MANAGEMENT Purchased Power and Volumes and Pricing Purchased power for the month of December is summarized below. This power serves to hedge or protect Dover from the volatility of the wholesale power markets. Counterparty Volume (MWh) Average Cost Cost to Dover ($/MWh) ($ millions) BP 18,600 72.89 1.33 Constellation 26,400 77.31 2.03 WPS 16,320 68.20 1.11 Connective (Capacity 313 5.00 --- Only) (equivalent cost) (equivalent cost) Total Energy Purchases 60,220 74.83 4.51 Total volume of power delivered to the Dover bus was 60,384 MWh’s requiring Dover to purchase 164 MWh’s from the PJM market for the month of December. Summary of Dover Load Costs Purchased Power (Hedges) 60,220 MWh’s @ $74.83/MWh: $4,505,970 Power purchased from PJM (164 MWh’s) and Additional PJM Related Costs 1 $185,237 Energy Manager Fee and Incentive (Fee @ $2.76/MWh, Incentive @ $1.24/MWh) $241,536 Total Cost to Serve Load (60,384 MWh’s) $4,932,743 Cost per MWh $81.69 1 Includes transmission charges, reserve charges, etc. See Appendix 2 for details. Proprietary & Confidential 9 PACE Report December 2006 (2)

Purchased Commodity Gas Volumes and Pricing Mild weather and lower loads in PJM yielded lower on and off-peak market prices which did not warrant running of either the McKee Run or Van Sant generators except for reliability purposes which occurred throughout the month of December. See Operations report for specific Units and days. Date Volume (Dth) Price ($/Dth) Total Commodity Cost ($) 12/1 500 9.50 4,750 12/4 500 9.05 4,525 12/8 500 8.65 4,325 12/11 100 8.10 810 12/11 1,800 7.33 13,194 12/15 400 7.95 3,180 12/15 900 7.95 7,155 12/15 900 7.95 7,155 12/27 200 7.00 1,400 12/28 200 6.08 1,215 12/28 200 6.03 1,206 12/28 200 6.03 1,206 12/28 200 6.03 1,206 Total Cost 6,600 51,327 Gas was purchased to maintain the fuel oil inventories at McKee Run at approximately 140 degrees. A firm delivery of natural gas is required to maintain this temperature. This firm delivery base load gas supply has been purchased from the Hess Corporation. The Details of this deal are as follows: Firm Gas Supply Price Per dth Total Cost 50 dth/day $8.69 $13,466 Gas Transportation Purchased Eastern Shore Natural Gas Pipeline and TransCo agreements provide for deliveries to the McKee Run and VanSant stations. These charges include a firm demand charge and prior period adjustments as follows: ESNG FT Demand Charge $4,342 TransCo FT Demand Charge $3,192 Total Purchases $7,534 Proprietary & Confidential 10 PACE Report December 2006 (2)

Other Gas Purchases Due to the units being run for reliability, gas was purchased from the pipeline. Pace Global Asset Management made every effort possible to minimize the cash out exposure of being long on the pipeline. Below are the imbalances and demand charges from Eastern Shore Pipeline. Imbalance (dth) Estimated $/dth Estimated Total Cost (673) $8.28 ($5,572) Transport Volume Estimated $/dth Estimated Total Cost Firm 1,500 $0.017 ($26.70) IT 9,200 $0.5866 ($5,397) Purchased Commodity Fuel Oil Summary While no fuel oil was purchased during the month December, No. 6 fuel oil did become less expensive then natural gas resulting in the following burns: Date Burns Inventory Cost Cost (gallons) ($/gal) ($’s) 12/4 69,136 1.255 86,766 12/5 80,621 1.255 101,179 12/6 80,987 1.255 101,639 12/7 55,487 1.255 69,636 12/11 120,143 1.255 150,779 12/12 35,048 1.255 43,985 12/13 19,372 1.255 24,312 12/18 2,518 1.255 3,160 12/19 23,785 1.255 29,850 12/20 19,500 1.255 24,473 12/21 10,866 1.255 13,637 517,463 649,416 Oil Inventory as of January 1: # 6 Oil: 1,305,202 gallons #2 Oil: 133,323 gallons Proprietary & Confidential 11 PACE Report December 2006 (2)

RISK MANAGEMENT 2006 - 2007 Power Year Hedge Position As of January 10, estimated power consumption for Power Year 2006-2007 was hedged at 96% on peak and 100% off-peak. Hedge volumes are based on the three year historical load profile of Dover at the Dover bus prior to any distribution losses to the retail meter. As shown below at these hedge levels an all in price to Dover is estimated at $83.34/MWh for the 2006/2007 power year. The 10 day value at risk (with an adverse market movement in commodity and load following) could increase this target number to $84.95/MWh. Price Date Forward Hedge % Power Year 2006-07 1/10/2007 Peak 96% Off Peak 100% At Market At Market + Risk* Energy Cost $71.59 $71.70 Incentive Non-Energy Items LSE Capacity $0.01 $0.01 Load Following $3.50 $5.00 FRC Margin $0.00 $0.00 $3.51 $5.01 Pass-Through Items Transmission $2.24 $2.24 Ancillary $2.00 $2.00 Losses $0.00 $0.00 $4.24 $4.24 Add Pace Fees $2.76 $2.76 Total Cost $82.10 $83.71 Add Incentive $1.24 $1.24 Current Expected $83.34 $84.95 * Includes estimate of 10-Day VaR & LF Risk Includes actual through November 30, 2006 Proprietary & Confidential 12 PACE Report December 2006 (2)

2007 - 2008 Power Year Hedge Position For power year 2007-2008, the estimated power consumption was hedged 91%% on peak and 80% off- peak. Hedge volumes are based on the three year historical load profile at the Dover bus prior to any distribution losses to the retail meter. As shown below at these hedge levels an all in price to Dover is estimated at $82.92/MWh before any incentive fee. Incentive fee will be estimated once the benchmark cost of supply is established for the 2007-2008 power year. The 10 day value at risk (with an adverse market movement in commodity and load following) could increase this target number to $85.15/MWh. Price Date Forward Hedge % Power Year 2007-08 1/10/2007 Peak 91% Off Peak 80% At Market At Market + Risk* Energy Cost $72.41 $73.14 Incentive Non-Energy Items LSE Capacity $0.01 $0.01 Load Following $3.50 $5.00 FRC Margin $0.00 $0.00 $3.51 $5.01 Pass-Through Items Transmission $2.24 $2.24 Ancillary $2.00 $2.00 Losses $0.00 $0.00 $4.24 $4.24 Add Pace Fees $2.76 $2.76 Total Cost $82.92 $85.15 Add Incentive $0.00 $0.00 Current Expected $82.92 $85.15 * Includes estimate of 10-Day VaR & LF Risk Includes actual through November 30, 2006 Proprietary & Confidential 13 PACE Report December 2006 (2)

2008 - 2009 Power Year Hedge Position For power year 2008-2009, the estimated power consumption was hedged 18.7% on peak and 14.6% off- peak. Hedge volumes are based on the three year historical load profile at the Dover bus prior to any distribution losses to the retail meter. As shown below at these hedge levels an all in price to Dover is estimated at $78.90/MWh before any incentive fee. Incentive fee will be estimated once the benchmark cost of supply is established for the 2008-2009 power year. The 10 day value at risk (with an adverse market movement in commodity and load following) could increase this target number to $84.47/MWh. Price Date Forward Hedge % Power Year 2008-09 1/10/2007 Peak 18.7% Off Peak 14.6% At Market At Market + Risk* Energy Cost $68.39 $72.46 Incentive Non-Energy Items LSE Capacity $0.01 $0.01 Load Following $3.50 $5.00 FRC Margin $0.00 $0.00 $3.51 $5.01 Pass-Through Items Transmission $2.24 $2.24 Ancillary $2.00 $2.00 Losses $0.00 $0.00 $4.24 $4.24 Add Pace Fees $2.76 $2.76 Total Cost $78.90 $84.47 Add Incentive $0.00 $0.00 Current Expected $78.90 $84.47 * Includes estimate of 10-Day VaR & LF Risk Includes actual through November 30, 2006 Proprietary & Confidential 14 PACE Report December 2006 (2)

2009 - 2010 Power Year Hedge Position For power year 2009-2010, the estimated power consumption was hedged 18.4% on peak and 14.5% off- peak. Hedge volumes are based on the three year historical load profile at the Dover bus prior to any distribution losses to the retail meter. As shown below at these hedge levels an all in price to Dover is estimated at $76.83/MWh before any incentive fee. Incentive fee will be estimated once the benchmark cost of supply is established for the 2008-2009 power year. The 10 day value at risk (with an adverse market movement in commodity and load following) could increase this target number to $81.01/MWh. Price Date Forward Hedge % Power Year 2009-10 1/10/2007 Peak 18.4% Off Peak 14.5% At Market At Market + Risk* Energy Cost $66.32 $69.00 Incentive Non-Energy Items LSE Capacity $0.01 $0.01 Load Following $3.50 $5.00 FRC Margin $0.00 $0.00 $3.51 $5.01 Pass-Through Items Transmission $2.24 $2.24 Ancillary $2.00 $2.00 Losses $0.00 $0.00 $4.24 $4.24 Add Pace Fees $2.76 $2.76 Total Cost $76.83 $81.01 Add Incentive $0.00 $0.00 Current Expected $76.83 $81.01 * Includes estimate of 10-Day VaR & LF Risk Includes actual through November 30, 2006 Proprietary & Confidential 15 PACE Report December 2006 (2)

Credit and Counterparty Position Pace Global Asset Management continues to monitor the in the money or out of the money position with each of the power purchases Dover has transacted for to reduce it risk profile to its load obligations. Below are summaries or the power purchases made by Dover, their corresponding credit position, term, volumes and pricing. Dover: Counterparty Credit Risk Date: January 11, 2007 10-day Credit Risk ($000) - 97.5% Confidence Level With Offsets Without Offsets Credit Counterparty Tenor Credit Comment Mark-to- Low Price High Price Line Mark-to- Low Price High Price Line Rating (months) Limit Market Outcome Outcome Availability Market Outcome Outcome Availability BP Energy AA- 1 $20,000 Moody's Credit Rating A1 ($3,136) ($5,320) ($952) $20,000 $1,983 $1,307 $3,127 $18,017 Conectiv BBB- 1 $10,000 Moody's Credit Rating Baa3 ($610) ($1,079) ($141) $10,000 $0 $0 $4 $10,000 Constellation AA- 1 $15,000 Moody's Credit Rating A1 ($2,258) ($2,968) ($1,547) $15,000 $0 $0 $0 $15,000 Sempra Energy AA 1 $20,000 Moody's Credit Rating ($1,671) ($4,495) $1,154 $20,000 $2,250 $1,412 $3,792 $17,750 Trading WPS AA- 1 $15,000 Moody's Credit Rating A1 ($1,551) ($2,450) ($652) $15,000 $78 $35 $243 $14,922 2006-2007 power year transactions are cited below: Buy/Sel Start Hedged ID Counterparty Timeblock Quality Trade Date End Date Volume Allocation l Date Price 2 BP Energy On Peak 5x16 Firm 6/22/2006 Buy 7/1/2006 6/30/2007 25 MW per hour $90.25 7 BP Energy Off Peak 5x8+2x24 Firm 6/22/2006 Buy 7/1/2006 6/30/2007 25 MW per hour $57.70 1 Conectiv On Peak 5x16 Firm 6/22/2006 Buy 7/1/2006 9/30/2006 25 MW per hour $95.00 6 Conectiv Off Peak 5x8+2x24 Firm 6/22/2006 Buy 7/1/2006 9/30/2006 25 MW per hour $56.00 3 Constellation On Peak 5x16 Firm 6/27/2006 Buy 7/1/2006 6/30/2007 50 MW per hour $88.50 4 Constellation On Peak 5x16 Firm 6/27/2006 Buy 7/1/2006 8/31/2006 30 MW per hour $90.50 8 Constellation Off Peak 5x8+2x24 Firm 6/27/2006 Buy 7/1/2006 6/30/2007 25 MW per hour $57.75 9 Constellation Off Peak 5x8+2x24 Firm 6/27/2006 Buy 7/1/2006 8/31/2006 25 MW per hour $56.65 5 WPS On Peak 5x16 Firm 7/12/2006 Buy 10/1/2006 6/30/2007 20 MW per hour $84.71 10 WPS Off Peak 5x8+2x24 Firm 7/12/2006 Buy 10/1/2006 6/30/2007 25 MW per hour $56.65 Proprietary & Confidential 16 PACE Report December 2006 (2)

Power year 2007-2008 transactions are cited below: 11 BP Energy On Peak 5x16 Firm 10/13/2006 Buy 7/1/2007 9/30/2007 35 MW per hour $72.65 12 BP Energy On Peak 5x16 Firm 10/13/2006 Buy 10/1/2007 11/30/2007 20 MW per hour $72.65 13 BP Energy Off Peak 5x8+2x24 Firm 10/13/2006 Buy 7/1/2007 11/30/2007 25 MW per hour $72.65 14 BP Energy On Peak 5x16 Firm 10/16/2006 Buy 7/1/2007 6/30/2008 30 MW per hour $75.65 15 BP Energy Off Peak 5x8+2x24 Firm 10/16/2006 Buy 7/1/2007 6/30/2008 20 MW per hour $75.65 16 Conectiv On Peak 5x16 Firm 10/18/2006 Buy 7/1/2007 8/31/2007 20 MW per hour $112.75 18 Conectiv On Peak 5x16 Firm 10/19/2006 Buy 1/1/2008 2/29/2008 40 MW per hour $100.50 17 Conectiv Off Peak 5x8+2x24 Firm 10/18/2006 Buy 7/1/2007 8/31/2007 15 MW per hour $63.25 19 Conectiv Off Peak 5x8+2x24 Firm 10/19/2006 Buy 1/1/2008 2/29/2008 30 MW per hour $65.25 21 Sempra Energy Trading On Peak 5x16 Firm 10/20/2006 Buy 12/1/2007 12/31/2007 20 MW per hour $69.95 23 Sempra Energy Trading On Peak 5x16 Firm 10/20/2006 Buy 3/1/2008 3/31/2008 10 MW per hour $70.10 25 Sempra Energy Trading On Peak 5x16 Firm 10/20/2006 Buy 4/1/2008 4/30/2008 10 MW per hour $58.35 34 Sempra Energy Trading On Peak 5x16 Firm 10/31/2006 Buy 7/1/2007 12/31/2007 10 MW per hour $85.40 20 Sempra Energy Trading Off Peak 5x8+2x24 Firm 10/20/2006 Buy 9/1/2007 9/30/2007 10 MW per hour $46.15 22 Sempra Energy Trading Off Peak 5x8+2x24 Firm 10/20/2006 Buy 12/1/2007 12/31/2007 25 MW per hour $69.95 24 Sempra Energy Trading Off Peak 5x8+2x24 Firm 10/20/2006 Buy 3/1/2008 3/31/2008 20 MW per hour $70.10 26 Sempra Energy Trading Off Peak 5x8+2x24 Firm 10/20/2006 Buy 4/1/2008 4/30/2008 20 MW per hour $58.35 47 Sempra Energy Trading On Peak 5x16 Firm 12/27/2007 Buy 3/1/2008 4/30/2008 25 MW per hour $76.35 48 Sempra Energy Trading On Peak 5x16 Firm 12/27/2007 Buy 5/1/2008 5/31/2008 50 MW per hour $71.35 49 Sempra Energy Trading On Peak 5x16 Firm 12/27/2006 Buy 6/1/2008 6/30/2008 75 MW per hour $85.75 50 Sempra Energy Trading Off Peak 5x8+2x24 Firm 12/27/2006 Buy 5/1/2008 6/30/2008 25 MW per hour $44.50 51 Sempra Energy Trading Off Peak 5x8+2x24 Firm 12/27/2006 Buy 7/1/2007 6/30/2008 5 MW per hour $66.30 52 Sempra Energy Trading On Peak 5x16 Firm 12/27/2006 Buy 7/1/2007 6/30/2008 5 MW per hour $66.30 27 WPS On Peak 5x16 Firm 10/25/2006 Buy 12/1/2007 12/31/2007 20 MW per hour $85.50 28 WPS On Peak 5x16 Firm 10/25/2006 Buy 1/1/2008 2/29/2008 10 MW per hour $101.00 29 WPS On Peak 5x16 Firm 10/26/2006 Buy 7/1/2007 8/31/2007 20 MW per hour $112.00 30 WPS On Peak 5x16 Firm 10/26/2006 Buy 9/1/2007 9/30/2007 30 MW per hour $77.00 32 WPS On Peak 5x16 Firm 10/27/2006 Buy 10/1/2007 11/30/2007 20 MW per hour $75.00 33 WPS Off Peak 5x8+2x24 Firm 10/27/2006 Buy 7/1/2007 6/30/2008 10 MW per hour $53.30 Proprietary & Confidential 17 PACE Report December 2006 (2)

Power Year 2008/09 Transaction Detail Hedged ID Counterparty Timeblock Quality Trade Date Buy/Sell Start Date End Date Volume Allocation Price 53 Sempra Energy Trading On Peak 5x16 Firm 1/4/2007 Buy 7/1/2008 6/30/2009 15 MW per hour $69.05 54 Sempra Energy Trading Off Peak 5x8+2x24 Firm 1/4/2007 Buy 7/1/2008 6/30/2009 15 MW per hour $69.05 Power Year 2009/10 Transaction Detail Hedged ID Counterparty Timeblock Quality Trade Date Buy/Sell Start Date End Date Volume Allocation Price 55 Sempra Energy Trading On Peak 5x16 Firm 1/4/2007 Buy 7/1/2009 6/30/2010 15 MW per hour $68.35 56 Sempra Energy Trading Off Peak 5x8+2x24 Firm 1/4/2007 Buy 7/1/2009 6/30/2010 15 MW per hour $68.35 Proprietary & Confidential 18 PACE Report December 2006 (2)

APPENDIX 1 NORTH AMERICAN ENERGY SERVICES DECEMBER REPORT Proprietary & Confidential 19 PACE Report December 2006 (2)

APPENDIX 2 PJM INVOICE BREAKDOWN The PJM bill is a record of all Electricity Transactions, Transmission Services, Ancillary Services and Miscellaneous fees that allow the PJM to operate. Below is a list of the line items on the PJM bill including all generator activity. December-06 Bill Split Load Generation Net Day Ahead Energy Charges ($4,293.80) $82,135.32 $77,841.52 Real Time Energy Charges $550.00 $246,866.45 $247,416.45 Regulation Charges ($26,930.98) $0.00 ($26,930.98) Synchronized Reserve Charges ($8,926.95) $0.00 ($8,926.95) Balancing Operating Reserves Charges ($4,041.78) ($9,575.79) ($13,617.57) Day Ahead Operating Reserves Charges ($4,143.61) $0.00 ($4,143.61) Synchronous Condensing Charges ($2,865.72) $0.00 ($2,865.72) Reactive Services Charges ($842.12) $0.00 ($842.12) Real-time Economic Load Response Program Charges ($721.97) $0.00 ($721.97) Transmission Losses (Point-to-Point) Credits $2,252.25 $0.00 $2,252.25 Balancing Operating Reserves Credits $0.00 $2,243.61 $2,243.61 Auction Revenue Rights Credits $69,918.33 $0.00 $69,918.33 PJM Scheduling System Control and Dispatch Service Charges ($18,805.81) $0.00 ($18,805.81) Transmission Owner Scheduling System Control and Dispatch Service Charges ($4,486.52) $0.00 ($4,486.52) Reactive Supply and Voltage Control from Generation Sources Service Charges ($24,089.23) $0.00 ($24,089.23) Black Start Service Charges ($1,209.32) $0.00 ($1,209.32) Network Integration Transmission Service Charges ($151,777.24) $0.00 ($151,777.24) Expansion Cost Recovery Charges ($445.25) $0.00 ($445.25) Generation Deactivation (DPL Zone) Charges - Nov 2006 ($5,059.99) $0.00 ($5,059.99) Black Start Service Credits $0.00 $4,977.77 $4,977.77 Non-Firm Point-to-Point Transmission Service Credits $1,169.78 $0.00 $1,169.78 PPA ($487.03) $0.00 ($487.03) ($185,236.96) $326,647.36 $141,410.40 Due to the Settlement of Transmission Rate Case ER05-515: Pepco/ Dpl the city is entitled to an estimated refund of $512,640 to be spread over 12 months beginning in June -06. The credit comes through on the PJM bill as a reduction in the rate charged by DPL for Network transmission service. Pace will track this credit to ensure the proper refund is received by the city. The savings by month is as follows: June-06: $91,577.42 July-06: $94,630.00 Aug-06: $94,630.00 Sept-06 $91,577.42 Oct-06 $94,630.00 Nov-06 $94,630.00 (being researched, appears to be an over refund) Proprietary & Confidential 20 PACE Report December 2006 (2)

Note: There will be many various prior period adjustments that will flow through on every invoice. These adjustments are for the most part small. However, unless the city has made an agreement these prior periods adjustment should be billed back to Duke. Proprietary & Confidential 21 PACE Report December 2006 (2)

North American Energy Services Dover, DE December 2006 Monthly Report #2 Hot Water Boiler @ McKee Run Generating Station 1 of 14

Table of Contents 1.0 Executive Summary 2.0 Environmental Health and Safety 3.0 Financial 4.0 Operations 5.0 Maintenance 6.0 Engineering 7.0 Summary of NAES Performance 2 of 14

1.0 Executive Summary Calendar of Events Date Operate Unit(s) to Support City of Dover 69KV November 28 - December 1, 2006 Line Outages December 4 - 7, 2006 December 11 – 15, 2006 December 18 – 22, 2006 January 2 – 5, 2007 Units 1& 2 Appendix E Testing and Unit 3 RATA December 11 – 15, 2006 and Particulate Testing / Support City of Dover December 18 – 22, 2006 69KV Line Outages XL Insurance Services – Site visit January 23 -25, 2007 McKee Run & VanSant Annual Title V January 31, 2007 Certification Due Unit 1, 2, 3 Annual Outage and #1 Fuel Oil Tank March 5 – April 1, 2007 Inspection Two Year Accident Free Target April 5, 2007 Unit 11 Annual Outage April 16 – 29, 2007 Environmental, Health, and Safety Month Fiscal Year to Date (December 2006) 7/1/06-6/30/07 NOVs 0 0 Opacity Deviations 5 34 Environmental Deviations 0 0 OSHA Recordable 0 0 OSHA LTA's 0 0 Operations Month Fiscal Year to Date (December 2006) 7/1/06-6/30/07 Net Station Output (MWH) – Note 1 5,917.68 24,954.323 Period Hours 2,976 17,664 On line Hours 242.537 850.096 Planned Outage Hours 0 176.817 Maintenance Outage Hours 0 54.667 Forced Outage Hours 0 108.575 Reserve Shutdown Hours 2,733.243 16,473.625 Equivalent Forced Outage Hours 0 214.57 Station Availability - Note 2 100% 98.07% Note 1 – Net Station Output does not include station auxiliaries when units are off line. Note 2 – Availability is calculated using service hours + reserve shutdown hrs divided by hours in period. 3 of 14

Gross Generation vs. Forecast (Revised 12/1/2006 ) 20000 Total Gross Generation (MWh) 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 July Aug Sep Oct Nov Dec Jan Feb Mar Apr May June Month Actual Gross Generation (MWh) Ttl MMBTU Gross Generation Forecast (MWh) 4 of 14

2.0 Environmental, Health and Safety During the month of December, there were no employee or contractor related injuries or illnesses. However, an injury did occur to a visitor of one of our employees while on site. The injury occurred when the spouse of an employee fell and broke her ankle. The injury did require surgery to implant pins and a plate into her ankle for support. This was not an OSHA recordable injury. There were no Notice of Violations or Environmental excursions during the month. There were five opacity deviations during the month which occurred on Unit 2 during soot blowing as a result of operating the unit all day on oil during testing. During emission testing, test protocol prohibited the blowing of soot while testing was underway. Safety Statistics Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun FYTD Hours 5,389.5 5,697.75 5129.5 5,454 5,101.5 5,089.5 31,861.75 Worked First Aid 0 0 0 0 0 0 0 cases OSHA 0 0 0 0 0 0 0 Recordable Lost Time Accidents 0 0 0 0 0 0 0 Restricted Workday 0 0 0 0 0 0 0 Accident Near Miss 0 1 0 0 0 0 1 Date last OSHA Recordable 4/05/05 Date last Lost Time Accident 4/05/05 Days since last OSHA recordable 635 Days since last Lost Time Accident 635 Emissions (NOx & SO2) All data thru 12/31/06 NOx Summary - Year (May-Sept.)Tons Year Unit #1 Unit #2 Unit #3 Unit #11 TOTAL 2002 17.34 14.38 175.76 6.01 213.49 2003 9.34 7.84 127.36 2.45 146.99 2004 3.38 2.74 98.76 7.55 112.43 2005 20.16 20.64 103.3 2.19 146.29 2006 1.82 1.78 19.25 1.72 24.57 5 of 14

SO2 Summary - Year (Jan.-Dec.)Tons Year Unit #1 Unit #2 Unit #3 Unit #11 TOTAL 2002 23.43 24.93 696.91 6.38 751.65 2003 22.77 18.89 490.14 2.35 534.15 2004 10.96 9.64 489.44 1.45 490.89 2005 49.91 52.08 530.24 2.30 634.69 2006 3.69 1.51 69.92 0.24 75.36 2.1 Training During the month of December all of the Dover represented employees completed the “Fitness for Duty” training conducted by Kristi Hearn of the NAES HR Department. The Dover employees also completed their respirator training by reviewing the respirator protection policy, power point presentation and video on respirator use and care. In addition, all eligible employees completed their annual respirator fit tests and their annual audiograms and pulmonary function tests. 6 of 14

3.0 Financial Financial – Current Month Month – December 2006 Actual Budget Variance Personnel 384,133 285,528 (98,605) Administrative 69,248 47,019 (22,229) EH & S 4,231 13,000 8,769 Maintenance Expense 90,226 64,550 (25,676) Operations Expense 16,143 43,352 27,209 Total $563,982 $453,628 ($110,354) Financial – Fiscal Year to Date Number of Months - 6 Actual Budget Variance Personnel 1,484,185 1,568,261 84,076 Administrative 500,835 519,849 19,014 EH & S 13,059 49,500 36,441 Maintenance Expense 254,116 347,800 93,684 Operations Expense 76,513 333,602 257,089 Total $2,328,708 $2,819,012 $490,304 3.1 Variance analysis For the month of December, we experienced an unfavorable variance of $110,354. Key contributors to this variance include: 1) Personnel expenses were higher due to payment of retroactive pay to represented employees as negotiated in the new IBEW union contract. These costs were offset slightly from labor cost savings due to the open operator position. 2) Administrative expenses were higher due to Unit 3 Boiler testing for Multi-P Regulation research and for the PJM Generator Operator Certification Training course held during November at the McKee Run Facility 3) The purchase of fuel nozzles for the combustion turbine to eliminate the exhaust temperature spread problem increased maintenance expenses. This expense was offset slightly by otherwise lower maintenance expenses as a result of lower operating hours. 7 of 14

4.0 Operations Month – October 2006 McKee McKee McKee MRS VanSant Total Unit 1 Unit 2 Unit 3 Facility Unit 11 All Units Capacity MW 17 17 102 136 39 175 On Line Hours Hrs 0 0 120.252 120.252 2.35 122.602 Starts # 1 1 2 4 0 4 Gross Generation MWh 768.236 385.301 5,324.011 6,477.548 0 6,477.548 Net Generation MWh 725.987 363.640 4,828.053 5,917.68 0 5,917.68 Total Auxiliaries MWh 95.431 74.792 686.666 856.945 34.182 891.127 Auxiliaries purchased MWh 53.182 53.182 190.708 297.072 34.182 331.254 Fuel Gas Used MMBTU 2,577,584 1,748,409 1,318,701 5,644,694 0 5,644,694 Fuel Oil Used MMBTU 8,547,962 3,177,772 65,710,782 77,436,515 0 77,436,515 Fuel Oil Used Gallons 57,177 21,256 439,537 517,790 0 517,790 Total Fuel MMBTU 11,125,545 4,926,772 67,029,483 83,081,209 0 83,081,209 Net Heat Rate BTU/KWh 15,325 13,547 13,883 14,039 0 14,039 Unit Trips # 0 0 0 0 0 0 Capacity Factor % 5.74% 2.88% 6.36% 5.85% 0 4.52% Availability Factor % 100% 100% 100% 100% 100% 100% eFOR % 0 0 0 0 0 0 HW Boiler Gas Usage MMBTU 2,153,162 2,153,162 Pilot Gas Usage MMBTU 123,185 278,442 401,627 401,627 # Note: Does not include HWB or Pilot Gas Fiscal Year to Date 7/1/06-6/30/07 McKee McKee McKee MRS VanSant Total Unit 1 Unit 2 Unit 3 Facility Unit 11 All Units Capacity MW 17 17 102 136 39 175 On Line Hours Hrs 184.134 147.234 411.608 742.94 107.120 850.096 Starts # 6 4 21 31 31 62 Gross Generation MWh 1,499.154 1,273.637 20,801.383 23,574.174 3,377.692 26,951.866 Net Generation MWh 1,406.823 1,197.091 18,992.793 21,596.707 3,357.616 24,954.323 Total Auxiliaries MWh 276.078 260.242 2,493.874 3,030.372 155.763 3,186.135 Auxiliaries purchased MWh 183.747 183.747 1,371.95 1,739.444 135.687 1,875.131 Fuel Gas Used MMBTU 13,476,583 13,432,136 152,715,191 179,623,911# 42,000,242 221,624,154# Fuel Oil Used MMBTU 8,547,961 3,177,772 84,820,428 96,546,161, 2,941,527 99,487,689 Fuel Oil Used Gallons 57,177 21,256 565,969 644,402 21,083 661,485 Total Fuel MMBTU 22,024,544 16,609,908 237,535,619 276,170,073# 44,941,770 321,111,843# Net Heat Rate BTU/KWh 15,656 13,875 12,507 12,788 13,385 12,868 Unit Trips # 4 1 1 6 7 13 Capacity Factor % 1.87% 1.59% 4.22% 3.60% 1.95% 3.23% Availability Factor % 96.63% 97.68% 99.22% 97.85% 98.76% 98.07% eFOR % 1.58% 4.96% 0.78% 1.40% 0% 1.09% HW Boiler Gas Usage MMBTU 9,635,410 9,635,410 Pilot Gas Usage MMBTU 526,200 681,457 1,207,657 1,207,657 # Note: Does not include HWB or Pilot Gas 8 of 14

VanSant Lifetime through 12/31/06 Actual Starts Factored Starts Fired Hours VanSant 1148 1877.25 3,755.902 Since HGP - Dec 2004 100 209.55 342.699 CapacityTesting Summer 2006-2007 (June 1- Aug 31) Winter 2006-2007 (Dec 1- Mar 1) Unit Rated Net Reported Net Unit Rated Net Reported Net Capability (MW) Capability (MW) Capability (MW) Capability (MW) 1 17 17 1 17 17.3 2 17 17.4 2 17 17.45 3 102 102.68 3 102 105.18 VanSant 39 40.3 11 40 * Total 175 177.38 Total 176 139.93 * Note: The plant requested that Units 1, 2, 3 & 11 be included in the Winter Cap Test Exemption Program which states that the units do not have to demonstrate capacity unless called upon to run during the December – February cap test period. Units 1, 2 & 3 ran during the month of December and completed their respective capacity test. Historical Performance Month Generation* Gas* Oil* Availability Capacity Factor Starts (MWh) (MMBTU) (gal) 2006 2005 2006 2005 2006 2005 Jul 6,102.198 74,878,054 11,238 97.12 100 4.69 18.2 27 21 Aug 8,144.843 85,343,345 73,580 99.23 100 6.26 18.6 19 27 Sep 0 0 0 93.86 99.93 0 2.29 0 4 Oct 720.739 7,869,890 8,549 100 96.34 .55 0.33 3 2 Nov 4,068.753 44,648,124 54,148 98.10 100 3.21 0.19 9 2 Dec 5,917.68 56,444,693 517,970 100 100 4.52 17.69 4 9 2007 2006 2007 2006 2007 2006 Jan 100 0 1 Feb 98.87 0 6 Mar 90.99 .21 2 Apr 96.53 .01 6 May 100 .09 1 Jun 100 1.07 2 FYTD 24,954.323 179,623,911 665,485 97.68 98.55 2.96 4.99 58 83 * Note: Total Net Generation for all four units combined 4.1 Training During the month of December, the Senior Operators and Operation Supervisors continued with monthly online PJM training in order to meet PJM training requirements and for further exam preparation. The operating teams continued to train on water chemistry testing and treatment of the Hot Water Boiler System, dry startups and shutdowns of the units, RedTag Pro Computer software for the LOTO Program, and the plant air system. The teams continue to utilize their lab training by testing lab samples collected when the units operate on fuel oil. 9 of 14

4.2 Personnel We continue to have an opening in the operations department due to an employee leaving the company in October to pursue other career opportunities. At the present time, we have decided to leave the position unfilled. In addition, we are looking at reorganizing teams to reduce the number of people per shift and eliminate the position all together. Appraisals for the July 1- December 1, 2006 period were completed for all exempt and non-exempt NAES-Dover employees and forwarded to the NAES HR department for their review. Action plans/objectives for the coming year are being mutually developed for all employees and will be finalized in the coming weeks. 10 of 14

5.0 Maintenance During the month of December, plant maintenance staff continued addressing our backlog of work orders and focused on keeping all units available to our client and PJM. Sixty five work orders were issued during the month, with sixty five total work orders being completed. The table below summarizes the monthly work order activities. Work Order Report December - 06 Outstanding From Outstanding Previous Issued This Completed at the end of Priority # Months Month This Month the month P1 0 1 1 0 P2 0 12 12 0 P3 2 21 19 4 P4 8 24 24 8 P5 1 0 0 1 P6 0 0 0 0 P7 7 5 7 5 P8 4 1 0 5 P9 1 0 0 1 P6 - 1 0 0 0 0 P6 - 2 0 0 0 0 P6 - 3 0 0 0 0 P6 – 4 1 1 0 2 P6 – 5 0 0 0 0 P6 – 6 2 0 2 0 P6 – 7 2 0 0 2 P6 - 8 1 0 0 1 PM 6 16 13 9 Totals 29 65 65 29 Note: PM's are included in the priority totals Notable activities during the month include: 1) Appendix E Testing on Units 1 and 2, Particulate testing on Units 1, 2 and 3 and RATA testing on Unit 3 was completed during the month to comply with requirements set forth in the Title V McKee Run Operating Permit. Oil and natural gas samples were taken from each unit sent out for an ultimate analysis. Fuel sample results were sent to the test team to be used in the computations in the final reports. The test reports are expected to be completed and sent back to the plant towards the end of January or early February. 2) Recertification of the oil flow transmitter and oil flow meter for VanSant was completed after the transmitter was replaced when it failed in late November. 11 of 14

The following work orders remained open at the end of the month: Work Due Date Brief Description of Work Order Reason for Past Due Order # 4329 10/31/03 Gearbox vent lines and misc. items Work is being planned. This would be nice to have but does not currently impact the operation of the units. 5638 6/3/05 Replace H2 feed line in plant The line has been prefabricated and will install when all of the units are off line 5711 6/20/05 New control room CEMS view Computer has been dedicated, need to node configure computer, expect assistance from the OEM within 60 days 5960 11/15/06 Erect steps over oil tank berm at Work is in design stage. VanSant 6243 2/13/06 VanSant over speed trip test Tentatively scheduled for the next operation of the unit 6353 4/30/06 Golf cart will not charge Work in progress – a low priority with two additional carts available 6480 7/28/06 Install hood over vent for 4th floor Waiting on parts conf room 6550 10/31/06 VanSant semi-annual vibration Tentatively scheduled for the next monitoring operation of the unit 6600 8/7/06 Air/fuel chart spiking on unit 2 Parts on site, assistance from vendor on configuration details is required 6614 12/31/06 Modify plant safety video Work is 80% complete 6652 10/13/06 Plan and price a smoke detector Work in progress. Waiting for vendor system for admin bldg and quotes. warehouse. 6654 11/17/06 Steps for 006 Outfall Plan is being developed 6655 11/17/06 Steps for 001 Outfall Plan is being developed 6731 12/14/06 Leaking regulator on B acid pump Waiting on parts at VanSant 5.1 Training During the month, all of the maintenance team received the Fitness for Duty training from Kristi Hearn of NAES. The maintenance team also received the annual respirator fit testing that was conducted by Phil Kosek. We also read and reviewed all of the associated training materials for the respirator training. 12 of 14

6.0 Engineering Unit Trips/Outages/Operations During the month of December, at the McKee Run Facility Unit 1 was self dispatched on December 18th, 19th, 20 th, and the 21st. Unit 2 was operated on December 12th and 13th and Unit 3 was operated on December 4th, 5th, 6th 7th, 11th and 12th to support the City of Dover Electric Department while their line crews worked on upgrades to the 69KV electrical distribution system. The line outage work will continue into January 2007. Other Events Operation of the units to support the City of Dover’s 69KV line outages with scheduled dates in December and January has begun. During the line outages in December, Units 1, 2, and 3 were put on line during the month to support the Dover Load and for voltage support in various sections of the city. During the December time frame, the McKee Run generating units also completed emission testing as required by the McKee Run Title V Operating Permits. The test schedule has been approved by DNREC and emission testing on Units 1, 2 & 3 began during the week of December 11. When Units 1, 2 and 3 were operated in the December time period, the units successfully completed capacity tests as required by PJM for the winter season. Unit 11 still is in exempt status until the unit is called upon to run in the winter period. We continue to work on gathering information for DNREC in order to provide them with enough data to approve a two year variance on an internal inspection of the tank. We are also proceeding with cleaning of the #2 fuel oil tank that is now empty so that it can be assessed for either use as a holding tank for the remaining fuel in the #1 fuel tank or to take the tank completely out of service. This work is expected to start in the second week of January. During the month, plant personnel coordinated with XL Insurance Services, the City of Dover’s insurance carrier, to gather oil samples from transformers at both the McKee Run and VanSant facilities. Oil sampling is part of the plant preventative/predictive maintenance program and the test results are used to assess the condition of the transformers. Also during the month, XL Insurance Services provided an outside test firm to perform thermographic tests on all of the motor control centers on Units 1 and 2. Preliminary work has begun on developing the Budget for the fiscal year 2007-2008. Employee suggestions to improve the plant have been solicited and will be evaluated for merit as part of the budget development process. 13 of 14

7.0 Summary of NAES Performance to Date Measure Month Year to Date eFOR 0.0% 1.09% Budget (Actual vs. Budget) 124.33% 91.99% Safety 0 0 Environmental 0 0 Capacity Tests Completed Summer Winter Summer Winter Unit 1 No Yes Yes Yes Unit 2 No Yes Yes Yes Unit 3 No Yes Yes Yes Unit 11 No No Yes # No # Unit is in the PJM Winter Capacity Testing Exemption Program. 14 of 14