Efficiency
As energy demand grows in the Midwest, the Midwest ISO takes the steps necessary to meet the need in a manner that leverages the strength of the region's pool of generation and transmission resources. This requires the use of multiple, complex IT systems.
From an information perspective, the Midwest ISO's state estimator brings in data every two to four seconds to provide the Midwest ISO with up to date information regarding the state of the system. This tool feeds the contingency analysis tool, which considers 9,000 "what if" scenarios, allowing the Midwest ISO to determine the most efficient and effective steps to take when managing system reliability and administering the Midwest energy market.
Midwest ISO customers see the results of our efforts in large and small ways - from centralization of tools to identifying ways to free up energy to serve growing demand in the region.
Prior to the start of the Midwest ISO, those who conducted business in the Midwest reserved transmission by coordinating with each transmission owner along the path of their transaction. With each reservation came a separate web site to enter the reservation, as well as individual charges and bills. With the advent of the Midwest ISO, customers use a single site to reserve transmission service in the Midwest, coordinate all billing through the Midwest ISO, and no longer see multiple charges for transmission service in the region.
On December 31, 2006, the Midwest ISO began administering the Midwest Contingency Reserve Sharing Group. This effort pulls together the generation owners within the region to collectively set aside generation for use during an emergency. By pooling resources, generation owners are able to more efficiently manage the amount of energy needed to assist during critical situations. To date, participants have seen a nearly 40 percent savings in the amount of operating reserves held, moving from 3,720 MW prior to the start of the Sharing Group to 2,250 MW after the launch of the group. Energy that is freed up as a result of this reduction is then made available in the Midwest Market to meet existing demand.
The Midwest ISO also brings more efficient use of generation resources within the region. As noted in the Independent Market Monitor State of the Market report for 2005, "the day-ahead market facilitates substantial improvements in the daily commitment of generating resources in the region." This efficiency gain is due to the ability to identify the most economic source for energy, resulting in a decrease in the amount of generation to be brought on-line to meet energy needs.
The ability to view pricing information provides assurance that the market uses resources that are least cost and most efficient. This data transparency also spurs on competition by providing all Market Participants with information on how system conditions are impacting prices, allowing Market Participants to make strategic decisions that benefit their customers.
The Midwest ISO enlists the assistance of an Independent Market Monitor to confirm that the market is operating in a fair manner. The role of the Independent Market Monitor is to observe and analyze the behaviors of Market Participants to safeguard against entities performing activities that negatively influence market prices.
In a study released by ICF International in early 2007, the following findings were identified:
- Up to $460 million in benefits are potentially achievable under the market structure. This is a 3.8 percent reduction in overall production costs when compared to "Day 1" or the previous operations-only model utilized by Midwest ISO.
- During the study period (June 2005-August 2006), about $271 million of the maximum potential benefits was achievable. This number will climb with the implementation of an Ancillary Services Market.
- The Midwest ISO realized $58 million in benefits during the study period (equivalent to $70 million on an annualized basis).
- Results during the initial launch of the market, early in the study period, are lower, but the percentage of achieved benefits nears the maximum achievable amount toward the end of the study period. These numbers also include a period of high natural gas, coal, and emission allowance prices, which offset potential benefits gained during that same time period.
The Midwest ISO also projects that operating costs over the next 10 years will steadily decrease before leveling off. Schedule 10, 16, and 17 for the years 2017 and 2018 were inflated at 3 percent annually based on the 2016 costs.
From an operations perspective, the Midwest ISO realizes efficiencies through the use of seams agreements with neighboring entities. These agreements allow the participating entities to share critical operating information, system models and planning data to ensure reliable operations and coordinated planning between regions. Managing seams on a broad, wholesale level also reduces the administrative costs assessed to Balancing Authorities if the seams were handled on a local basis.
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