APX is pleased to present the current and future activities of the CAISO Market Redesign and Technology Upgrade (MRTU). This issue includes:

• MRTU Schedule
• Market Simulation
• Market Simulation Issues
• APX MarketSuite™
• CAISO MRTU Training

The target go-live remains Fall 2008 with the CAISO acknowledging that October 1 is the preferred date. As part of the go-live plan, originally the CAISO Board of Governors indicated it would solicit input from market participants at the July Board meeting before officially announcing a go-live date. The intent was to receive direct input from market participants and stakeholders regarding their experience with market simulation and readiness activities.

The revised plan is to provide market participants the opportunity to address the Board and provide input on the confidence level with respect to making an October 1 go-live date. Key areas that market participants will be commenting on will be the progress of the 50 plus defined market simulation scenarios, the status of the SaMC project, and IMS U2 exit criteria.

At a very high level, the current implementation schedule assuming the October 1 go-live date, utilizes the months of July and August to execute operational scenarios, demonstrate system stability and improve quality of solutions and data traceability from bid to bill. September is earmarked for "parallel operations" (market participants are asked to submit data in the same manner as they are in the current production environment) and system cutover activities. Along the way, there will be several checkpoints with market participants to gauge their level of readiness and include additional opportunities for market participants to share information with the CAISO Board of Governors and CAISO filings at FERC.

To allow the CAISO to promote fixes to the simulation applications and reconfigure the integration environment(s), Integrated Market Simulation Update 2 (IMS U2) took a hiatus from May 23 through June 1. Since resumption of market simulation on June 1, the MRTU systems have performed reasonably well and the markets have run successfully and generally closed on time. A primary focus of the current market simulation phase is to execute specific operational scenarios developed collectively between the CAISO and market participants. To date, the number of scenarios run and executed successfully is lagging behind the expected schedule. Since the focus of simulation for the balance of June will be on system stability and activation of some additional features, it is expected that scenario execution will slip further.

A major change in this round of simulation is that the CAISO is no longer seeding bids into the Day Ahead (DA) market. The CAISO is relying on market participants to submit bids and schedules with enough depth and liquidity to successfully run the market. Since the DA bid set is more variable than it was with seeded bids, this supports the decision to focus on system stability for several weeks. In addition to encouraging market participants to actively participate in the simulation, it also potentially tests reliability backstop mechanisms such as Residual Unit Commitment and the use of Resource Adequacy designated supply.

APX is submitting DA bids and schedules on behalf of clients to assure that they have a continued presence in the market simulation. The bids being submitted are very similar to the bids that were developed by the CAISO. To the extent that APX clients would like to have specific business cases run in the simulation environment, they are welcome and encouraged to submit their own bids through the APX MarketSuite™. Generally APX is only submitting bids for generators and demand, and to a lesser extent imports and exports. In very limited cases bi-lateral trades are also being submitted. APX staff will be happy to discuss any business cases clients would like to submit to the market based on their registered resources and trading activity.

The CAISO is actively working over 300 open issues submitted by market participants during the 14 weeks of the current phase of market simulation. Issues range from items that affect MRTU systems and the ability to run the market, to problems with specific functionality at any given point and time, to narrow issues that may only affect one or several market participants. Issues are graded by their impact to executing expected simulation functionality and addressed based on the priority assigned to the particular item. The CAISO weekly issue log for the week ending June 13, lists 310 open issues. None have a priority rating of critical, but there are 9 rated as very high, 270 as high, 36 as medium and 4 as low. All critical and very high issues have to be resolved prior to go live, and all high issues have to be resolved or have a identified work around or mitigation.

While APX is concerned and monitoring the progress of all open issues, it has submitted and is working with the CAISO to resolve 20 high or very high issues that affect the ability for APX clients to interface with the MRTU market. Some of these issues affect the functionality APX is able to offer to its clients during market simulation through use of the APX system.

If you have any questions regarding details of market simulation or the next steps, please contact Spence Gerber at sgerber@apx.com or (916) 351-9759.

The APX MarketSuite continues to be available for client use to directly participate in market simulation. Changes to features and functionality are deployed on a continuous basis allowing clients to submit bids, schedules and trades into the MRTU Day Ahead and Real-time markets, view market results of submitted data and view settlement data. Due to ongoing issues with CAISO systems and APX development work, not all features and functions will be available at all times, but basic scheduling and trading functions are generally available during the periods when the CASIO simulation environment is available.

The data and information that is in the APX MarketSuite is only as good as what is entered by APX or the client, especially from June forward since the CAISO has ceased seeding DA bids. While connectivity and availability issues between APX and the CAISO systems continue to improve, there are still instances where data doesn't get transferred as expected. APX investigates and works to resolve these issues, but since this is a simulation environment, not all instances of missing or corrupted data are restored (assuming that it can be), and APX encourages clients to monitor simulation activity and report any instance where expected data is missing or suspect. To the extent that these reported issues are not previously known, APX can then escalate to the CAISO as appropriate.

If there are any questions regarding access to or the use of the APX MarketSuite, please call Cris Gallegos or Spence Gerber. We are more than willing to provide your company with a refresher course and demonstration of the APX MRTU software.

The CAISO has posted training calendars for refresher courses and go-live training on its website. Refresher courses are typically condensed 2 hour on site or web based classes covering material previously taught in an all day seminar. Go-live training focus on what schedulers, operators and traders will need to know prior to interacting with the MRTU markets when they are in production.

Scheduled refresher courses include Settlements-Day Ahead Changes and an Inter SC Trades course in June as well as a session that covers three courses offered previously. In July the offering of refresher courses includes Settlements- Real-time Changes and Settlements- Allocations and Obligations.

The go-live classes are two day long sessions and are being offered nine different times at various locations throughout the US during July, August and September. Details regarding the specific dates and locations can be found on the CAISO website at the following link: http://www.caiso.com/docs/2005/10/07/200510071157559066.html. Registration forms and course details can be found at this link http://www.caiso.com/1faa/1faac02f60f0.doc.

Contact your Account Manager Cris Gallegos (408.517.2154) or Tony Frontino (714.544.1774) for more information.