1 The Midwest ISO At the Crossroads of America International Meeting of Very Large Power Grid Operators October 24 & 25, 2005 Beijing, China

2 Agenda Midwest ISO: At the Crossroads of America Objective & Benefits of ISO/RTO’s The Midwest ISO Status of the Midwest Market Key Technologies Path Forward Information

3 At the Crossroads of America: Literally and Figuratively Continually evolving industry Regulatory preference Ensuring safe & reliable delivery Energy markets

4 What is an RTO? A Regional Transmission Organization (RTO) provides wholesale electric transmission service under one tariff for a large geographic area An RTO must meet certain characteristics to be approved by the FERC Independence Scope and Regional Configuration Operational Authority Reliability Authority An approved RTO must also be able to provide certain regional functions Tariff Administration Congestion Management Parallel Path Flow Ancillary Services Open Access Same-Time Information Systems (OASIS) Available Transmission Capacity (ATC) Market Monitoring Planning and Expansion Interregional Coordination

5 ISO/RTO Benefits Efficiency & Optionality Efficiency of equipment usage for generators and transmission grid Increased supply options and optimal use of energy resources across footprint Transparency and energy pricing data availability Security constrained unit commitment and economic dispatch for load Market-based congestion management Independence Non-discriminatory open access to a large consolidated transmission system Independent Available Transfer Capability (ATC) & Available Flowgate Capability (AFC) Independent market monitoring and mitigation in place Enhanced Reliability Better planning process for a large region, maintaining or improving reliability Allows the opportunity to provide and implement a long-term congestion solution Improved maintenance and outage coordination One-stop Shopping Single OASIS and scheduling system Consolidation of reliability coordinators into one regional entity Establishes one generator interconnection process Cost Savings Elimination of “pancaked” rates over a large area All of the items above in One-Stop Shopping Eliminates seams within the RTO and addresses seams with other RTO’s Provides opportunity to consolidate and lower reserve requirements regionally

6 Centralize Generation Dispatch and Outage Management Manage congestion via Locational Marginal Pricing (LMP), Transmission Loading Relief (TLR) and Seams agreements Evaluate all resources within the Midwest ISO footprint as a pool Maintain and Enhance Reliability Ensure real-time operating reliability of the interconnected bulk transmission systems Interact with 26 Balancing Authorities and maintain system reliability Provide Transmission Services Provide Market Services Operate Day-Ahead & Real-Time Markets (2 settlements) Administer auctions for Financial Transmission Rights (FTR) Seams Coordination Regional Planning Ensure long-term (1+ years) plan availability for adequate resources and transmission Integrate and assess transmission and resource plans What We Do

7 Who We Are The Midwest ISO is an independent, non-profit reliability coordinator for the transmission of high voltage electricity via a security constrained economic dispatch across all or parts of 15 states and Manitoba Operational Since December 15, 2001 Market Launch on April 1, Transmission-owning entities Security constrained economic dispatch Dynamic market monitoring Multi-control area environment (35 Balancing Authorities (reliability) All-Time Peaks in 2005: 112,197 MW (footprint) & 131,434 MW (reliability) 135,054 MW generating capacity 97,000+ miles of transmission lines Large footprint - 947,000 square miles & 15.1 million customers Over $12 billion installed assets 1,504 generating units (reliability footprint) All industry sectors represented Carmel, IN & St. Paul, MN Control Centers

8 State Estimator: Power System Model 170,000 data points collected every 15 seconds Executes every 90 seconds with 99.8% solution availability 8,500 contingencies assessed every 2.5 minutes for: 31,000 buses 30,000 transmission lines (AC) 15,000 transformers 4,600 generating units Unit Dispatch System (UDS) Utilizes load forecasts, scheduled net market interchange, current generator output, generator ramp limits and offers, transmission constraints Results in most economic generation being utilized to serve customer load and manage constraint Security-constrained dispatch provided every 5 minutes Monitoring & Reliability Tools Topology processor Back-up capability and redundancy Monitoring tools for generation/power supply, transmission “delta flow” and flowgates Midwest ISO: Key Technologies

9 Market Overview Data Midwest ISO PJM NYISO IESO Midwest ISO: Day-Ahead Cleared Demand (2005) TWh$ US (Billions) August July June May April Real-Time Market Prices

10 Status of the Midwest Market Experience  Smooth start-up  Good system performance  Improved reliability  Good Operator performance  Stable seams coordination Challenges  Portal data queries  Generation offer characteristics  Unit Commitment  Data Transfer to Settlements  Generation outage planning  Balancing Authority coordination Preparation  Extensive market trials  Comprehensive Training programs - Market Participants - Midwest ISO Personnel  Coordinated System Operations tests  Comprehensive IT systems testing  Working directly with Market Participants & Other Stakeholders StartupStabilizationMarket Launch April 1 st Q2/Q3Q4 Experience  Smooth transition to Market-Based rates  Continued system stability  Market Participant development Challenges  System enhancement  Market information dissemination  Balancing Authority Control Performance Standards (CPS)  Settlement Disputes  Market development  Access to Operating Reserves January - March

11 Midwest ISO: Path Forward Overall cost efficiencies Operations Excellence: continue to improve operational and market efficiency Explore further market development Joint & Common Market (JCM) & interregional coordination Ancillary Services Generation Adequacy (Capacity) Long-term FTR Energy Policy Act of 2005 Enhancing external reporting capabilities and core IT system performance Continued focus on information, education and communication

12 For More Information