The Midwest Independent Transmission System Operator, Inc. has successfully completed the first phase of external testing related to the consolidation of certain Balancing Authority functions in advance of implementing an Ancillary Services Market (ASM). The on-schedule, successful completion of the first round of Business Process Testing (BPT1) represents a key milestone for the ASM and Balancing Authority functional alignment projects, and is a major step toward realizing the scheduled implementation of these initiatives in 2008.

"This first round of testing was a great success for the Midwest ISO and our stakeholders," said Roy Jones, executive director of the ASM Project. "Data moved back and forth smoothly with very few functional issues, and Market Participants analyzed cases and asked in-depth questions about their transactions. I'm proud to say that the Midwest ISO, its market participants, and vendors have done an outstanding job in preparing for the first connectivity and data transfer test between their respective systems."

Business Process Testing allowed the Midwest ISO and its stakeholders to simulate many of the data transactions, processes, and procedures that will be in place when the Midwest ISO becomes a Balancing Authority (BA) and launches an Ancillary Services Market next year. The objectives of this first round of external testing were to:

• Provide a realistic simulation of the Ancillary Services Market.
• Demonstrate the infrastructure required for the Midwest ISO to support  BA functions.
• Test system interactions between the Midwest ISO and Market  Participants.
• Evaluate potential data processing issues.

BPT1 met these objectives and demonstrated the Midwest ISO's ability to operate the new Ancillary Services Market. The testing also revealed both the sophistication and enthusiasm of the Midwest ISO's Market Participants. Although the Midwest ISO's filing that would establish the Ancillary Services Market is still pending before the Federal Energy Regulatory Commission (FERC), it was necessary to undertake Business Process Testing at this time to remain on schedule for the scheduled June 2008 market launch.

The initial phase of Business Process Testing included the successful execution of 14 consecutive Operating Days. The market results during BPT1 were based on the data submitted by Market Participants combined with Midwest ISO production data to facilitate a realistic simulation.

In addition to clearing the simulated Day-Ahead market for every Operating Day during this period, the Midwest ISO sent out non-binding generation instructions for energy along with the new Regulation, Spinning, and Supplemental Reserves products. The successful dispatch of these instructions represents a significant market change, moving from the current sending of generation instructions every five minutes to sending dispatch setpoints every 2-4 seconds as a requirement of the new Regulation market. Based on the BPT market results, the Midwest ISO also produced Locational Marginal Prices (LMPs), the new Market Clearing Prices (MCPs), and Settlement Statements for each Operating Day's transactions.

Over 175,000 transactions were tracked in the BPT Portal during this time period, with participation noted from 154 users representing 122 Asset Owners in 77 companies. Overall, 91% of the Midwest ISO's generating capacity was represented during BPT1.

The Midwest ISO will conduct several iterations of testing with stakeholders prior to implementing the new market, building off the successes and lessons learned during the first round of testing. After launch next year, the Ancillary Services Market initiative is projected to provide additional efficiencies, with annual savings estimated between $115 and $205 million. In addition, the Midwest ISO will operate the first Ancillary Services Market that is based on a "simultaneous cooptimization" approach for dispatching both the Energy and Reserve products. When the project is complete, the Midwest ISO will operate the second-largest Balancing Authority in North America.