Midwest ISO Launches Energy Markets

Regional Dispatch of Electricity Expected to Improve Reliability, Put Downward Pressure on Prices

CARMEL, Ind. — Culminating several years of planning and months of preparation, including an unprecedented level of testing and coordination, the Midwest Independent Transmission System Operator, Inc. (Midwest ISO) formally launched its Midwest Energy Markets early Friday when it began centrally dispatching wholesale electricity and transmission service throughout much of the Midwest.

The independent, non-profit organization will operate the Energy Markets under a tariff approved by the Federal Energy Regulatory Commission (FERC) last August. The tariff calls for the Midwest ISO to operate Day-Ahead and Real-Time Energy Markets that provide for an optimal dispatch of all generation resources within the region. The security constrained economic dispatch of wholesale electricity will enable the Midwest ISO to ensure that all load requirements in its region are met reliably and efficiently.

The Midwest ISO began accepting bids and offers for the sale and purchase of electricity in its Day-Ahead Market on Friday, March 25. Those transactions will settle today, the first formal day of Real-Time market The Midwest ISO tariff is consistent with the mandate of FERC Order No. 2000, which requires Regional Transmission Organizations (RTOs) to provide Real-Time energy imbalance services and a market-based mechanism for congestion management.

James P. Torgerson, president and CEO of the Midwest ISO, said customers in 15 states and the Canadian province of Manitoba will clearly benefit from the Midwest Energy Markets.

"Consumers throughout the Midwest region will benefit from the most efficient use of resources and from a better system for managing congestion along the power grid," Torgerson said. "After many months of preparation, intensive testing, and rigorous training of our personnel, we are pleased to have these markets up Torgerson said the market integration was the product of a collective effort involving many entities. He lauded the Midwest ISO's voluntary members, Federal regulators, the Organization of MISO States (OMS), and other stakeholders for their diligence in resolving numerous issues in preparation for the successful launch of the Energy Markets.

"We would not be where we are today without the hard work and expertise of our dedicated employees and the vital input we have received from our various stakeholders," Torgerson said. "This is an important day for the Midwest ISO and for the entire Midwest region."

Illinois Commerce Commissioner Kevin Wright, who also serves as president of the OMS, a body comprised of regulatory commissioners within the region the Midwest ISO serves, said the OMS "is gratified to see the successful start of regional energy market operations in the Midwest."

"We have worked with the Midwest ISO and its members to be sure that all market participant needs have been considered in planning this market, and we look forward to realizing the economic benefits that the energy markets are expected to bring to our region," Wright added.

FERC Chairman Pat Wood, III said Midwest Energy Markets will be beneficial to the region's customers.

"Today's integration of MISO's energy markets solidifies efforts to bring more reliable and cost-effective power to customers in the Midwest and Mid-Atlantic regions," Wood said. "This is a historic step in creating and sustaining competitive markets in this country and I am pleased to be part of this event. I salute the market participants and the staff at MISO who worked hard to make it happen."

FERC Commissioner Suedeen Kelly also lauded the Midwest ISO for its efforts.

"I want to recognize the hard work and commitment of the many stakeholders in MISO who have labored for several years to create the largest regional transmission organization and electricity market in the United States," Kelly said. "They deserve our thanks for their effort."

"This is an accomplishment of major importance to the country," Kelly added. "It promises to provide the Midwest with more reliable and economic electric service and to foster the development of additional sources of generation, including wind power. I am very pleased to be present at the integration of the markets and to acknowledge this achievement."

A key feature of the Midwest Energy Market is that it produces Locational Marginal Prices, which provide price transparency of the transactions involving the sale and purchase of wholesale electricity. Buyers and sellers of power will, for the first time, be able to see Real-Time prices for electricity at five-minute intervals at some 1,400 points along the power grid.

The Midwest ISO has created four financial trading hubs – MISO-Cinergy, MISO-Illinois, MISO-Michigan and MISO-Minnesota – that provide market participants with price indices along the grid, which they can use to contract or trade. The hubs will reduce uncertainty for parties who wish to contract, as well as improve liquidity and allow for the development of a more robust wholesale electricity market, Torgerson added.

Local Control Area Operators will continue to be responsible for many of their traditional functions, but will operate their systems in response to signals issued by the Midwest ISO.

Torgerson noted that, at FERC's request, the organization conducted an analysis of projected cost savings expected to result from the operation of regional, security-constrained economic dispatch and Real-Time and Day-Ahead Energy Markets that feature Locational Marginal Pricing.

"Our analysis showed that the introduction of centralized security constrained economic dispatch using Locational Marginal Pricing should result in annual gross production cost savings of approximately $255 million throughout the Midwest ISO region," Torgerson said.

"Regional dispatch also will allow for more efficient use of the existing transmission and generation assets, which will not only lower spot energy prices, but also put downward pressure on prices in bilateral contracts, resulting in a potential annual gross savings of approximately $713 million to energy consumers."

As an RTO, the Midwest ISO also is responsible for monitoring the transmission grid throughout much of the Midwest in a region that stretches from Pennsylvania to Montana, and from Missouri to the Canadian province of Manitoba. The organization will continue to be responsible for coordinating the reliable operation of the wholesale electric transmission system and ensuring fair access to the grid.

About the Midwest ISO
The Midwest ISO manages one of the world's largest energy markets using security constrained economic dispatch of electricity. In addition, the organization administers Day-Ahead, Real-Time and Financial Transmission Rights markets as well as Locational Marginal Pricing at over 1,400 nodal locations. Consistent with FERC Order No. 2000 and its Midwest Markets Tariff, the Midwest ISO utilizes a market-based platform for grid congestion management. The Midwest ISO was approved as the nation's first RTO in 2001. Membership in the organization is voluntary. The Midwest ISO acts in close cooperation with the 15 states and the province of Manitoba, where it operates 97,000 miles of transmission lines. The organization is responsible for ensuring fair access and reliable operation of a system with a peak load of 119,000 MW and 131,000 MW of generation. The non-profit organization was founded in 1998, is governed by an independent Board of Directors, and is headquartered in Carmel, Indiana with an operations center in St. Paul, Minnesota. For more information about the Midwest ISO, visit www.midwestiso.org or www.midwestmarket.org

Source: Midwest ISO