Climate Challenge Participation Accord

DOE's Energy Partnerships for a Strong Economy

This Participation Accord describes the commitments that PECO Energy Company (PECO Energy), and the U.S. Department of Energy (DOE) have made to participate in the Climate Challenge Program in pursuit of the President's goals for reducing greenhouse gas emissions. The Climate Challenge Program is a joint, voluntary effort of DOE and the electric utility industry to reduce, avoid or sequester greenhouse gas emissions. The framework of the Climate Challenge Program was established in the Climate Challenge Program Memorandum of Understanding and exhibits thereto dated April 10, 1994 (the Climate Challenge Program MOU) (see Attachment A to this Participation Accord).

I. Utility Commitments

A. Consistent with paragraph II.B.1.d of the Climate Challenge Program MOU, PECO Energy voluntarily pledges to reduce its annual carbon dioxide (CO₂) emissions by five (5) million tons in the year 2000, and to limit and reduce its cumulative CO₂ emissions over the 1997 - 2000 period by 17.6 million tons, below the average annual baseline levels actually experienced during the 1987-1990 period. This baseline includes emissions from PECO Energy's generating facilities and from net power purchased under contract for system use during that period (including power purchased from the PJM Regional Power Pool. Current accounting for actual CO₂ emissions indicates that PECO Energy's historical annual average over this period was 16.6 million tons.

This voluntary pledge thus contains year 2000 and pre-2000 goals. System-wide CO₂ emissions include emissions from the PECO Energy's generating facilities and from the net purchase of power from off-system facilities in order to meet system load requirements.

Consistent with paragraph II.B.1.f of the Climate Challenge Program MOU, PECO Energy commits to the following projects to reduce, avoid or sequester greenhouse gas emissions:

a. Electric and natural gas vehicle programs
b. Promotion and use of electrotechnologies
c. Customer conversions to natural gas
d. Recycling projects and activities
e. Use of fuel cell technology

In order to achieve the goals described above, PECO Energy will engage in the activities described in the attached report entitled "PECO Energy Company Climate Challenge Report" (see Attachment B). This report further discusses and explains PECO Energy's Climate Challenge Goals and projects, and discusses the various programs and activities that will enable PECO Energy to meet its voluntary pledge, as well as those events that have a significant influence on PECO Energy's ability to meet its pledge and mid-course corrections that may be necessary.

For example, the PECO Energy pledge rests on its commitment to non-emitting nuclear and hydroelectric generation and to low-emitting fossil fuels, such as natural gas and landfill gas, and assumes that these commitments will continue to contribute to system CO₂ reductions over the 1997-2000 period. However, with deregulation of the electric utility industry and the emergence of a competitive environment, PECO Energy's current forecast may be altered. If PECO Energy's assumptions prove to be inaccurate, then PECO Energy will meet with DOE in order to consider appropriate adjustments to its pledge.

B. PECO Energy will report annually on activities and achievements under the Climate Challenge Program. Results achieved during each year shall be reported in a clear and understandable manner that is consistent with the guidelines adopted pursuant to subsection 1605(b) Energy Policy Act and the Climate Challenge accounting protocols in Exhibit B of the Climate Challenge Program MOU. The first such report may include a description of the activities and achievements of PECO Energy Company prior to its becoming a participant in the Program, expressed on an annual basis to the extent possible.

C. PECO Energy will confer with DOE on or before June 15, 1998 to evaluate jointly the progress of PECO Energy in achieving its Climate Challenge Program goals and to discuss possible adjustments to its voluntary commitments.

D. The Climate Challenge Program representative for PECO Energy will be:

Thomas A. Sylvester
PECO Energy Company
955 Chesterbrook Boulevard, 53A-2
Wayne, Pennsylvania 19087-5691
PECO Energy agrees to notify DOE prior to or, in any event, no later than 30 days after any change in the contact.

A. DOE's commitments to PECO Energy are those set out in section III of the Climate Challenge Program MOU, which are hereby incorporated in this Participation Accord by reference.

B. DOE will consider PECO Energy's requests to intervene in regulatory proceedings of federal, state and local commissions and boards on issues pertinent to the Climate Challenge Program. Before DOE intervenes in regulatory and other proceedings pertaining to PECO Energy for purposes of addressing Climate Challenge Program issues, it will provide notice to PECO Energy.

C. DOE will provide an annual report to PECO Energy describing the actions that it has taken to fulfill its commitments under section III and Exhibit C of the Climate Challenge Program MOU and the results of those actions.

D. The Climate Challenge Program representative for DOE, who will serve as liaison to PECO Energy, will be Larry Mansueti, Director, Climate Challenge Program, Office of Utility Technologies, U.S. Department of Energy, Room 6B-128 (EE-10), 1000 Independence Avenue, S.W., Washington, D.C., 20585. DOE agrees to notify PECO Energy prior to or, in any event, no later than 30 days after any change in liaison responsibilities or personnel.

A. Use of DOE-developed materials by PECO Energy will be governed by the provisions of section IV of the Climate Challenge Program MOU, which are hereby incorporated in this Participation Accord by reference.

B. In addition to the foregoing provisions, DOE and PECO Energy agree to act in accordance with the principles set out in section I of the Climate Challenge Program MOU and the general provisions set out in subsections

Challenge Program MOU and the general provisions set out in subsections V.A- V.D, V.F and V.G of the Climate Challenge Program MOU, which are hereby incorporated by reference.

C. Either party may withdraw from this Participation Accord or any of its activities under the Climate Challenge Program without penalty and without being subject to remedies at law or equity.

(signed)
Secretary of Energy or designee
U.S. Department of Energy

Attachments

Attachment A - Climate Challenge Program MOU and exhibits
Attachment B - PECO Energy Company Climate Challenge Report

Climate Challenge Memorandum of Understanding

ATTACHMENT B

PECO Energy Company Climate Challenge Report

TABLE OF CONTENTS

1. INTRODUCTION

2. THE BASIS FOR PECO ENERGY'S COMMITMENT TO REDUCING CARBON DIOXIDE EMISSIONS

3. ADDITIONAL GREENHOUSE GAS REDUCTION PROJECTS

TABLE 1 - ESTIMATE OF GASES REDUCED, AVOIDED, OR SEQUESTERED

PECO Energy Company (the Company) is a combination electric and gas utility serving 3.7 million customers in Southeastern Pennsylvania. The Company owns and operates nuclear, hydroelectric (including pumped storage), and fossil (coal, oil and natural gas) generating facilities and is a joint-owner of the Keystone Conemaugh Generating Station (coal-fired) in Western Pennsylvania and the Salem Nuclear Generating Station in Southern New Jersey.

The Company's voluntary pledge is to reduce its annual carbon dioxide (CO₂) emissions by five (5) million tons in the year 2000, and to limit and reduce its cumulative emissions over the 1997 - 2000 period by 17.6 million tons, below the average annual baseline levels actually experienced during the 1987-1990 period. This baseline includes emissions from the Company's generating facilities and from net power purchased under contract for system use during that period (including power purchased from the PJM Regional Power Pool). Current accounting for actual CO₂ emissions indicates that the Company's historical annual average over this period was 16.6 million tons.

Year	Interim Goals	Pledged Reductions
Baseline	16.6	0.0
1997	12.8	3.8
1998	12.4	4.2
1999	12.0	4.6
2000	11.6	5.0
1996-2000 Cumulative Reductions		17.6

System-wide CO₂ emissions include emissions from the Company's generating facilities and from the net purchase of power from off-system facilities in order to meet system load requirements.

The Company's pledge rests on its commitment to non-emitting nuclear and hydroelectric generation and to low-emitting fossil fuels, such as natural gas and landfill gas, and assumes that these commitments will continue to contribute to system CO₂ reductions over the 1997-2000 period. However, with deregulation of the electric utility industry and the emergence of a competitive environment, the Company's current forecast may be altered. If the Company's assumptions prove to be inaccurate, then the Company will meet with DOE in order to consider appropriate adjustments to the pledge.

The Company has made a substantial commitment to clean generating sources. The Company ranks among the lowest emitters in the Northeast and in the United States. Its 1995 emission rate of 0.58 lbs CO₂/kWh is well below the reported national average for 1993 of 1.37 lbs CO₂/kWh and among the best in the Northeast.

The Company has been able to make significant reductions in CO₂ emissions because of its substantial investment in nuclear and hydroelectric generating sources, its expanded use of lower CO₂-emitting fuels, and through its use of energy efficient and low emitting technologies.

The following Company initiatives are part of its commitment to DOE's Climate Challenge Program. A summary of estimated reductions is included at the end of this section in Table 1.

1. PECO Energy Company's nuclear program. Since the late 1960s, the Company has invested in nuclear power and today is able to generate nearly 70 percent of its power from this non-emitting energy source. The Company owns and operates the 2-unit, 2,200 MW Limerick nuclear facility, operates and owns 42.49 percent of the 2-unit, 2,200 MW Peach Bottom nuclear facility, and owns 42.59 percent of the output from the 2-unit 2,200 MW Salem nuclear facility. In the early 70s the Company relied on fossil and hydroelectric generating sources to meet its system demand, but today the Company's total nuclear generating capability is roughly 3,800 MW and supplies nearly 70 percent of the total annual system energy requirements.

Unit 2 at the Limerick nuclear facility was placed into service early in 1990 and has contributed significantly to the Company's generating capability, enabling the Company to reduce its dependence on high-emitting imported power from the Midwest

The Company's two Limerick and two Peach Bottom nuclear units were rerated in 1994 and 1995 in order to add 265 MWH of capability. In addition, the Company has extended its refueling cycles and reduced unit turnaround time with world record setting refueling outages and the use of on-line maintenance practices.

The total estimated avoided emissions due to the operation of PECO Energy's nuclear units is 23 million tons of CO₂ per year.

Approximately 9.0 million tons per year of avoided CO₂ emissions are the result of displacement of contract power purchases through increased nuclear generation since the baseline period. The Company expects the contribution of its nuclear units to continue well beyond the end of the century.

2. Hydroelectric generation - The Company owns and operates the 11-unit Conowingo Hydroelectric facility located at the lower end of the Susquehanna River. The Company also owns and operates the 8-unit Muddy Run Pumped Storage facility located approximately 12 miles upstream of Conowingo. These non-emitting facilities typically provide between 2 and 5 percent of the Company's total annual system energy. The use of low-cost off-peak nuclear energy to replenish the pumped storage reservoir permits the use of the pumped storage generating units during peak energy demand periods and thus offsets the use of higher cost and less efficient CO₂-emitting fossil energy from the PJM Regional Power Pool.

The Company recognizes the strategic value of its hydroelectric and pumped storage facilities and has established a program to refurbish and modernize them.

The Company is currently undertaking a program to replace the runners on the eight pumped storage units and anticipates a 10% improvement in cycle efficiency. In addition, four of the units at the Conowingo facility will also have the runners replaced. The work at Conowingo includes governor upgrades. Along with earlier upgrades to the governors on the remaining seven units at Conowingo, the new governors will allow for more efficient operation of the facility as well as improved regulating capability and response to system demands.

The total estimated avoided emissions due to the operation of PECO Energy's hydroelectric units is 700,000 tons of CO₂ per year. Of this, approximately 70,000 tons per year is the result of efficiency improvements.

3. Fuel switching and cofiring with natural gas - In the early 90s, the Company converted three of its oil-fired units (totaling 1000 MW of generating capability) to cofire low sulfur number 6 fuel oil or natural gas. In addition, the control and data acquisition systems for these three facilities were also modernized. As a result, the Company is able to burn natural gas when it is the economic fuel of choice, typically during the summer months. Since their conversion, these three units have burned roughly 40 million mcf of natural gas, and thus displaced higher emitting fossil sources from the PJM Regional Power Pool. Approximately 118 thousand tons of CO₂ emissions were avoided since the program began in 1993 due to increased utilization of natural gas. The expected yearly reduction is approximately 40,000 tons per year.

4. Natural gas-fueled electric generating unit - The Company is a one-third owner of the Grays Ferry 185 MW natural-gas fired cogeneration facility scheduled to go on-line in 1998. The addition of this high efficiency facility is expected to offset higher emitting fossil generation from the regional power pool and eliminate the need to fire higher emitting and less efficient steam boilers to supply the Downtown Philadelphia Steam Loop. The estimated yearly reduction in CO₂ emissions due to the operation of the Grays Ferry facility is 97,000 tons per year.

5. Methane management and use - The Company has entered into a 20-year contract with the Waste Management Corporation to burn approximately 15,000 mcf/day of landfill gas from its GROWS and Tullytown Landfills. The gas will be burned in 2 - 3.5 MW Solar Centuar combustion turbines and possible in a local industrial facility. The expected completion date for the project is late 1997. Since EPA rules on management of landfills require, at a minimum, that landfill gas be flared, use of landfill gas as a generating fuel will not result in an increase in CO₂ emissions. Therefore, the use of landfill gas as a generating fuel will reduce the use of higher-emitting fuels to generate electricity. The estimated reduction in CO₂ emissions from the use of landfill gas is 3.86 million tons per year.

6. Installation of variable speed motor drives at generating facilities - In the early nineties, the company installed variable speed motor drives on large motor-driven boiler feed pumps at its generating facilities. The use of these drives leads to more efficient plant operation, particularly during cycling periods

In addition to PECO Energy's emissions reduction commitment, the Company will conduct the following greenhouse gas reduction activities.
1. Electric and natural gas vehicle programs - The Company actively promotes and has in place a program to encourage the increased use of natural gas and electric vehicles both internally and in its service territory.

2. Promotion and use of electrotechnologies - The Company is working with customers throughout its service territory to encourage the utilization of electrotechnologies. A study relating various technologies to specific businesses has been prepared and seminars are being offered to familiarize customers with the technologies and their benefits.

3. Customer conversions to natural gas - The company actively markets natural gas to customers in its gas service territory as a replacement fuel for boilers firing coal and fuel oil. Many conversions have been completed since 1990, including several for larger customers.

4. Recycling projects and activities - The Company has developed a program to market and recycle combustion and scrubber byproducts. These recycled products, in some cases, are used in place of virgin products in production processes, such as the use of coal ash in the manufacture of cement, and can result in less energy use and avoidance of significant CO₂ emissions inherent in the production of cement.

5. Use of fuel cell technology - The Company is actively involved in the promotion of emerging technologies such as fuel cells. This technology offers the benefits of improved efficiency, low emissions and the ability to locate the energy source at the customer's facility. The Company is participating in the fuel cell demonstration project at the EPA's Environmental Services Laboratory at Fort Meade, Maryland.

* To be determined

Please send comments to:
Lawrence.Mansueti@hq.doe.gov