UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-KANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

Commission File Number 333-59348

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Midwest Generation, LLC(Exact name of registrant as specified in its charter)

|Delaware(State or other jurisdiction of incorporation
or organization)                                             |  | 33-0868558(I.R.S. Employer Identification No.)
|------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------------
|One Financial Place
440 South LaSalle Street, Suite 3500
Chicago, Illinois(Address of principal executive offices) |  | 60605(Zip Code)                               

Registrant's telephone number, including area code:(312) 583-6000

Securities
registered pursuant to Section 12(b) of the Act:

|None             |  | Not Applicable                             
|---------------- |  | -------------------------------------------
|(Title of Class) |  | (Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act:

| |  | None             |  | 
| |  | ---------------- |  | 
| |  | (Title of Class) |  | 

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Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES o NO ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YES o NO ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days. YES ý NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K ý.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of
"accelerated filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):    Large accelerated
filer o    Accelerated filer o    Non-accelerated
filer ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES o NO ý

Aggregate market value of the registrant's Membership Interests held by non-affiliates of the registrant as of June 30, 2006: $0. Number of
units outstanding of the registrant's Membership Interests as of February 28, 2007: 100 units (all units held by an affiliate of the registrant).

The registrant meets the conditions set forth in General Instruction I.(1)(a) and (b) of Form 10-K and is therefore filing this
Form 10-K under the reduced disclosure format.

DOCUMENTS INCORPORATED BY REFERENCE

None



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TABLE OF CONTENTS

|         |  |                                                                                                              |  | Page
|-------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|         |  | Glossary                                                                                                     |  | ii  
|PART I  
|Item 1.  |  | Business                                                                                                     |  | 1   
|Item 1A. |  | Risk Factors                                                                                                 |  | 15  
|Item 1B. |  | Unresolved Staff Comments                                                                                    |  | 22  
|Item 2.  |  | Properties                                                                                                   |  | 22  
|Item 3.  |  | Legal Proceedings                                                                                            |  | 23  
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                          |  | 23  
|PART II 
|Item 5.  |  | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 24  
|Item 6.  |  | Selected Financial Data                                                                                      |  | 25  
|Item 7.  |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                        |  | 26  
|Item 7a. |  | Quantitative and Qualitative Disclosures about Market Risk                                                   |  | 63  
|Item 8.  |  | Financial Statements and Supplementary Data                                                                  |  | 64  
|Item 9.  |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 64  
|Item 9A. |  | Controls and Procedures                                                                                      |  | 64  
|Item 9B. |  | Other Information                                                                                            |  | 64  
|PART III
|Item 10. |  | Managers, Executive Officers and Corporate Governance                                                        |  | 105 
|Item 11. |  | Executive Compensation                                                                                       |  | 105 
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 105 
|Item 13. |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 105 
|Item 14. |  | Principal Accountant Fees and Services                                                                       |  | 105 
|PART IV 
|Item 15. |  | Exhibits and Financial Statement Schedules                                                                   |  | 107 
|         |  | Signatures                                                                                                   |  | 113 

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GLOSSARY

When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below.

|ARO                 |  | asset retirement obligations                                                         
|------------------- |  | -------------------------------------------------------------------------------------
|Btu                 |  | British thermal units                                                                
|CAIR                |  | Clean Air Interstate Rule                                                            
|CAMR                |  | Clean Air Mercury Rule                                                               
|Commonwealth Edison |  | Commonwealth Edison Company                                                          
|CPS                 |  | Combined Pollutant Standard                                                          
|EME                 |  | Edison Mission Energy                                                                
|EMMT                |  | Edison Mission Marketing & Trading, Inc.                                             
|EPA                 |  | Environmental Protection Agency                                                      
|EPAct 2005          |  | Energy Policy Act of 2005                                                            
|EWG                 |  | exempt wholesale generator                                                           
|Exelon Generation   |  | Exelon Generation Company LLC                                                        
|FASB                |  | Financial Accounting Standards Board                                                 
|FERC                |  | Federal Energy Regulatory Commission                                                 
|GWh                 |  | gigawatt-hours                                                                       
|Illinois EPA        |  | Illinois Environmental Protection Agency                                             
|Illinois Plants     |  | EME's largest power plants (fossil fuel) located in Illinois                         
|ISO                 |  | independent system operator                                                          
|kV                  |  | kilovolt                                                                             
|LIBOR               |  | London Interbank Offered Rate                                                        
|MD&A                |  | Management's Discussion and Analysis of Financial Condition and Results of Operations
|MEHC                |  | Mission Energy Holding Company                                                       
|Midwest Generation  |  | Midwest Generation, LLC                                                              
|MISO                |  | Midwest Independent Transmission System Operator                                     
|MMBtu               |  | million British thermal units                                                        
|Moody's             |  | Moody's Investors Service, Inc.                                                      
|MPS                 |  | Multi-Pollutant Standards                                                            
|MW                  |  | megawatts                                                                            
|MWh                 |  | megawatt-hours                                                                       
|NLRB                |  | National Labor Relations Board                                                       
|NOX                 |  | nitrogen oxide                                                                       
|NSR                 |  | New Source Review                                                                    
|PJM                 |  | PJM Interconnection, LLC                                                             
|PRB                 |  | Powder River Basin                                                                   
|                    |  |                                                                                      

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|PUHCA 1935      |  | Public Utility Holding Company Act of 1935 (as amended)                                                                                 
|--------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------
|PUHCA 2005      |  | Public Utility Holding Company Act of 2005                                                                                              
|PURPA           |  | Public Utility Regulatory Policies Act of 1978 (as amended)                                                                             
|RPM             |  | reliability pricing model                                                                                                               
|RTO             |  | regional transmission organizations                                                                                                     
|S&P             |  | Standard & Poor's Ratings Services                                                                                                      
|SECA            |  | Seams Elimination Cost Adjustment                                                                                                       
|SFAS            |  | Statement of Financial Accounting Standards issued by the FASB                                                                          
|SFAS No. 123(R) |  | Statement of Financial Accounting Standards No. 123(R), "Share-Based Payment"                                                           
|SFAS No. 133    |  | Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities"                     
|SFAS No. 155    |  | Statement of Financial Accounting Standards No. 155, "Accounting for Certain Hybrid Financial Instruments"                              
|SFAS No. 157    |  | Statement of Financial Accounting Standards No. 157, "Fair Value Measurements"                                                          
|SFAS No. 158    |  | Statement of Financial Accounting Standards No. 158, "Employers' Accounting for Defined Benefit Pension and Other Post-Retirement Plans"
|SIP             |  | State Implementation Plan                                                                                                               
|SO2             |  | sulfur dioxide                                                                                                                          
|US EPA          |  | United States Environmental Protection Agency                                                                                           

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PART I

ITEM 1.    BUSINESS

The Company

Midwest Generation was formed on July 12, 1999 as a Delaware limited liability company with Edison Mission Midwest Holdings Co. as the sole owner. Edison
Mission Midwest Holdings is a wholly owned subsidiary of Midwest Generation EME, LLC, which is in turn a wholly owned subsidiary of EME. EME is a wholly owned subsidiary of MEHC and is an indirect
wholly owned subsidiary of Edison International. Midwest Generation was formed for the purpose of owning or leasing, making improvements to, and operating and selling the capacity and energy of, the
power generation assets it purchased from Commonwealth Edison, which are referred to as the Illinois Plants. Midwest Generation acquired the Illinois Plants on December 15, 1999 for a purchase
price of approximately $4.9 billion, with adjustments for changes in the book value of inventories and pro-rations related to specific items, including but not limited to taxes,
rents and fees.

Concurrent
with the acquisition of the Illinois Plants, Midwest Generation assigned its right to purchase the Collins Station, a 2,698 MW gas and oil-fired generating
station located in Illinois, to four third-party entities. After this assignment, and the purchase of the facility by the third parties, an affiliate of Midwest Generation leased and Midwest
Generation subleased the Collins Station. Each of the leases and subleases had an initial term of 33.75 years. In April 2004, Midwest Generation terminated the Collins Station lease
through a negotiated transaction with the lease equity investor and received title to the Collins Station as part of the transaction. Following the lease termination, Midwest Generation permanently
ceased operations at the Collins Station, effective September 30, 2004, and decommissioned
the plant by December 31, 2004, and all units were permanently retired from service, disconnected from the grid, and rendered inoperable, with all operating permits surrendered.

As
of December 31, 2006, Midwest Generation operated 5,918 MW of power plants consisting of:

Midwest
Generation has a contract with EMMT, an affiliate of Midwest Generation engaged in the power marketing and trading business, to sell energy and capacity into the wholesale
market, to engage in hedging activities and to provide scheduling and other services. Midwest Generation has a revolving credit agreement with EMMT in order to make revolving loans to, or have letters
of credit issued on behalf of, EMMT, to provide credit support for forward contracts. EMMT also purchases natural gas and has the ability to enter into fuel hedging arrangements on Midwest
Generation's behalf. Midwest Generation also has an agreement with another affiliate, Edison Mission Energy Services, Inc., to provide fuel and transportation services related to coal and fuel
oil.

In
August 2000, Midwest Generation completed a sale-leaseback transaction with respect to the Powerton and Joliet power facilities to third-party lessors for an
aggregate purchase price of $1.367 billion. In connection with this transaction, Midwest Generation facilitated the issuance of $333.5 million 8.30% Series A
Pass-Through Certificates due 2009 and $813.5 million 8.56% Series B Pass-Through Certificates due 2016 through a private placement. In 2001, these certificates
were

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subsequently
exchanged for certificates identical in all material respects, which were registered with the Securities and Exchange Commission.

EME,
MEHC and Edison International are each registered with the Securities and Exchange Commission and have financial statements that are filed in accordance with rules enacted by the
Securities and Exchange Commission. For more information regarding each of these companies, see their respective annual reports on Form 10-K for the year ended December 31,
2006.

Midwest
Generation's principal executive offices are located at One Financial Place, 440 South LaSalle Street, Suite 3500, Chicago, Illinois 60605, and its telephone number is
(312) 583-6000.

Midwest
Generation's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to
those reports, are electronically filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and are available on the Securities and Exchange Commission's
internet web site at http://www.sec.gov.

Forward-Looking Statements

This annual report on Form 10-K contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of
1995. These statements reflect Midwest Generation's current expectations and projections about future events based on Midwest Generation's knowledge of present facts and circumstances and assumptions
about future events and include any statement that does not directly relate to a historical or current fact. Other information distributed by Midwest Generation that is incorporated in this annual
report, or that refers to or incorporates this annual report, may also contain forward-looking statements. In this annual report and elsewhere, the words "expects," "believes," "anticipates,"
"estimates," "projects," "intends," "plans," "probable," "may," "will," "could," "would," "should," and variations of such words and similar expressions, or discussions of strategy or plans, are
intended to identify forward-looking statements. Such statements necessarily involve risks and uncertainties that could cause actual results to differ materially from those anticipated. Some of the
risks, uncertainties and other important factors that could cause results to differ, or that otherwise could impact Midwest Generation, include but are not limited to:

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Certain
of the risk factors listed above are discussed in more detail in "Item 1A. Risk Factors" below and in "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of OperationsMarket Risk Exposures." Additional information about the risk factors listed above and other risks and uncertainties is contained throughout this annual
report. Readers are urged to read this entire annual report, including the information incorporated by reference, and carefully consider the risks, uncertainties and other factors that affect Midwest
Generation's business. Forward-looking statements speak only as of the date they are made, and Midwest Generation is not obligated to publicly update or revise forward-looking statements. Readers
should review future reports filed by Midwest Generation with the Securities and Exchange Commission.

Description of the Industry

Industry Overview

The United States electric industry, including companies engaged in providing generation, transmission, distribution and ancillary services, has undergone
significant deregulation, which has led to increased competition. Until the enactment of PURPA, utilities and government-owned power agencies were the only producers of bulk electric power intended
for sale to third parties in the United States. PURPA encouraged the development of independent power by removing regulatory constraints relating to the production and sale of electric energy by
certain non-utilities and requiring electric utilities to buy electricity from specified types of non-utility power producers, known as qualifying facilities, under specified
conditions. The passage of the Energy Policy Act of 1992 further encouraged the development of independent power by significantly expanding the options available to independent power producers with
respect to their regulatory status and by liberalizing transmission access. In addition, in EPAct 2005, Congress made several changes to PURPA and other statutory provisions recognizing that a
significant market for electric power produced by independent power
producers, such as Midwest Generation, has developed in the United States and indicating that competitive wholesale electricity markets have become accepted as a fundamental aspect of the electricity
industry.

As
part of the regulatory developments discussed above, the FERC encouraged the formation of ISOs and RTOs. In those areas where ISOs and RTOs have been formed, market participants have
expanded access to transmission service. ISOs and RTOs may also operate real-time and day-ahead energy and ancillary service markets, which are governed by
FERC-approved tariffs and market rules. The development of such organized markets into which independent power producers are able to sell has

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reduced
their dependence on bilateral contracts with electric utilities. See further discussion of regulations under "Regulatory MattersU.S. Federal Energy Regulation."

Power Markets

The Illinois Plants sell power into PJM. PJM operates a wholesale spot energy market and determines the market-clearing price for each hour based on bids
submitted by participating generators which indicate the minimum prices a bidder is willing to accept to be dispatched at various incremental generation levels. PJM conducts both day-ahead
and real-time energy markets. PJM's energy markets are based on locational marginal pricing, which establishes hourly prices at specific locations throughout PJM. Locational marginal
pricing is determined by considering a number of factors, including generator bids, load requirements, transmission congestion and transmission losses. PJM requires all load serving entities to
maintain prescribed levels of capacity, including a reserve margin, to ensure system reliability. PJM also determines the amount of capacity available from each specific generator and operates
capacity markets. PJM's capacity markets have a single market-clearing price. Load serving entities and generators, such as Midwest Generation, may participate in PJM's capacity markets or transact
capacity sales on a bilateral basis.

All
the energy and capacity from the Illinois Plants is now sold under terms, including price and quantity, arranged by EMMT with customers through a combination of bilateral agreements,
forward energy sales and spot market sales. Thus, Midwest Generation is subject to market risks related to the price of energy and capacity from the Illinois Plants. Capacity prices for merchant
energy sales within PJM are, and are expected in the near term, to remain, at a level unlikely to generate significant revenue for Midwest Generation.

On
April 1, 2005, the MISO commenced operation, linking portions of Illinois, Wisconsin, Indiana, Michigan, and Ohio, as well as other states in the region. In the MISO, there is
a bilateral market and
day-ahead and real-time markets based on locational marginal pricing similar to that of PJM. While Midwest Generation does not own generating facilities within the MISO, its
opening has further facilitated transparency of prices and provided liquidity to support risk management strategies.

For
a discussion of the market risks related to Midwest Generation's sale of electricity, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of
OperationsMarket Risk Exposures."

Competition

Midwest Generation is subject to intense competition from energy marketers, utilities, industrial companies and other independent power producers. For a number of
years, natural gas has been the fuel of choice for new power generation facilities for economic, operational and environmental reasons. While natural gas-fired facilities will continue to
be an important part of the nation's generation portfolio, some regulated utilities are now constructing clean coal units and units powered by renewable resources, often with subsidies or under
legislative mandate. These utilities generally have a lower cost of capital than most independent power producers and often are able to recover fixed costs through rate base mechanisms, allowing them
to build, buy and upgrade generation without relying exclusively on market clearing prices to recover their investments.

Where
Midwest Generation sells power from the Illinois Plants, it is subject to market fluctuations in prices based on a number of factors, including the amount of capacity available to
meet demand, the price and availability of fuel and the presence of transmission constraints. Some of Midwest Generation's

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competitors,
such as electric utilities and distribution companies, have their own generation capacity, including nuclear generation. These companies, generally larger than Midwest Generation, have a
lower cost of capital and may have competitive advantages as a result of their scale and location of their generation facilities.

Facilities Overview

The Crawford Station

The Crawford Station is a 542 MW coal-fired power plant located in Cook County, Illinois, and is within the city limits of Chicago. The
Crawford Station occupies approximately 72 acres, inclusive of the switchyard. The operating units are referred to as Units 7 and 8 and began operations in 1958 and 1961, respectively.

Southern
PRB coal is loaded into barges at the Will County Station and delivered by barge primarily on a "just-in-time" basis supported by Crawford's
on-site storage. Natural gas is used for ignition and combustion support and for full boiler operation, when economical. Peoples Energy Corporation delivers natural gas under a delivery
contract that includes balancing storage, which is also shared by the Fisk Station.

The Fisk Station

The Fisk Station is a 326 MW coal-fired power plant located in Cook County, Illinois, and is within the city limits of Chicago. The Fisk
Station is located on approximately 44 acres, inclusive of the switchyard. The operating unit comprising the Fisk Station is referred to as Unit 19 and began operations in 1959.

Southern
PRB coal is loaded into barges at the Will County Station, delivered by barge on a "just-in-time" basis. Natural gas is used for ignition and combustion
support and for full boiler operation, when economical. Peoples Gas delivers natural gas under a delivery contract that includes balancing storage, which is shared by the Crawford Station.

The Joliet Station

The Joliet Station is located in Joliet, Will County, Illinois, approximately 40 miles southwest of Chicago on an approximately 467-acre site. The
operating units comprising the Joliet Station are referred to as Units 6, 7 and 8. Only Units 7 and 8 are subject to the leveraged lease transaction described in this annual report. The operation of
Units 6, 7 and 8 began in 1959, 1965 and 1966, respectively. Joliet Unit 6 is a 290 MW coal-fired unit located adjacent to, but across the Des Plaines River from, Joliet
Units 7 and 8. Joliet Units 7 and 8 are coal-fired and have a combined capacity of 1,044 MW. The Joliet Station burns Southern PRB coal which is shipped by rail. With the completion
of a new rail spur in early 2003, direct deliveries are received from the Union Pacific Railroad. Natural gas is delivered for the boilers as a startup and stabilizing fuel by Nicor Gas Company under
a delivery contract.

The Powerton Station

The Powerton Station is a 1,538 MW coal-fired station located in Pekin, Tazwell County, Illinois, approximately 16 miles southwest of Peoria or
166 miles from Chicago on an approximately 568-acre site. The Powerton Station is subject to the leveraged lease transaction described in this annual report. The site also includes an
approximately 1,440-acre lake. The operating units comprising the Powerton Station are referred to as Units 5 and 6 and began operations in 1972 and 1975, respectively. The

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Powerton
Station burns Southern PRB coal which is shipped by rail by the Illinois and Midland Railroad Company from interchange points with the Union Pacific Railroad.

The Waukegan Station

The Waukegan Station is a 781 MW coal-fired power plant located in Waukegan, Lake County, Illinois, on Lake Michigan. The Waukegan Station
occupies approximately 194 acres, inclusive of the switchyard. The operating units comprising the Waukegan Station are referred to as Units 6, 7 and 8 and began operations in 1952, 1958 and 1962,
respectively. Midwest Generation has agreed with the Illinois EPA to shut down permanently Unit 6, representing 100 MW of capacity, on or before December 31, 2007.

Unit 6
utilizes oil for ignition and startup, while Unit 7 utilizes oil or natural gas and Unit 8 utilizes natural gas for ignition and startup. The Waukegan Station
burns Southern PRB coal, which is shipped by rail by the Union Pacific Railroad.

The Will County Station

The Will County Station is a 1,092 MW coal-fired power plant located in Romeoville, Will County, Illinois. The Will County Station is located
on approximately 215 acres, inclusive of the switchyard. The operating units comprising the Will County Station are referred to as Units 1, 2, 3 and 4 and began operations between 1955 and 1963.
Beginning in January 2003, operations at Units 1 and 2, representing 310 MW of capacity, were suspended pending improvement in market conditions. In late
2004, both units were returned to service. Midwest Generation has agreed with the Illinois EPA to shut down permanently Units 1 and 2 on or before December 31, 2010.

The
Will County Station burns Southern PRB coal, which is shipped by rail by the Elgin, Joliet & Eastern Railway Company from interchange points with the Union Pacific Railroad.
The Will County Station uses No. 2 fuel oil for ignition and combustion support, which is delivered by tanker truck to a 100,000 gallon on-site storage tank.

The Collins Station

On September 30, 2004, Midwest Generation permanently ceased operations at the Collins Station and all units were decommissioned on or before
December 31, 2004. The Collins Station was a 2,698 MW gas and oil-fired power plant located in Grundy County, near Morris, Illinois.

On-Site and Off-Site Peaking Facilities

The on-site peaking units of Joliet and the off-site peaking units of Calumet, Electric Junction, Lombard and Sabrooke ceased operations
as of December 31, 2004 following a management analysis of the future competitiveness of eight of Midwest Generation's small peaking units in the expanded PJM marketplace in
September 2004. In addition, the on-site peaking units of Crawford ceased operations as of April 21, 2005 as a result of the same management analysis. The remaining
on-site peaking units consist of Fisk and Waukegan, which were commissioned in 1968.

The
Fisk and Waukegan peaking units burn No. 1 fuel oil (jet fuel). Natural gas is used by the Fisk peaking unit for ignition. Natural gas is purchased in the monthly and daily
spot markets and is shipped at the seller's risk to Chicago. Peoples Gas provides delivery services, including balancing storage, to the site under tariffs approved by the Illinois Commerce
Commission. Midwest Generation purchases No. 1 fuel oil and No. 2 fuel oil from bids taken annually. The oil price is tied to the Oil Price Information

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Service
posted price (the market price) on the date of delivery. Shipments to the various sites are in tanker trucks and inventory is replenished as needed by the site. Truck delivery charges are at
fixed agreed-upon prices.

Transmission

Station units at Will County, Crawford, Waukegan, and Joliet Unit 6 are connected to Commonwealth Edison's 138 kV transmission system. The Fisk Station is
connected via various circuit breakers and transformers to transmission substations. The Joliet Units 7 and 8, subject to the leveraged lease transactions, and the two Powerton units deliver their
power into Commonwealth Edison's 345kV transmission system.

Prior
to May 1, 2004, sales of power produced by Midwest Generation required using transmission that had to be obtained from Commonwealth Edison. As discussed previously, the
Illinois Plants are now dispatched into the PJM market. Sales may also be made from PJM into the MISO, where there is a single rate for transmission.

On
November 18, 2004, the FERC issued an order eliminating regional through and out transmission rates in the region encompassed by PJM and the MISO. The effect of this order was
to eliminate so-called rate pancaking between PJM and the MISO on a prospective basis. Rate pancaking occurs when energy must move through multiple, separately priced transmission systems
to travel from its point of production to its point of delivery, and each transmission owner along the line charges separately for the use of its system. At the same time, the FERC also imposed a
transitional revenue recovery mechanism which has created controversy and some continuing uncertainty as to its impact on transactions in the region. The mechanism required the filing of tariffs by
PJM and the MISO imposing a SECA to be in effect until May 1, 2006, to compensate the "new PJM companies"AEP, Commonwealth Edison and Dayton Power & Light, among
othersfor lost revenues attributable to the elimination of such rates. On November 30, 2004, the FERC clarified that SECAs can be recovered for lost revenues associated with
elimination of intra-RTO pancaked rates.

The
response to the November 18 and November 30 orders from the parties potentially liable for the SECAs was strongly negative. Rehearings were sought by a broad range of
interests that are opposed to the imposition of SECAs. Although both PJM and the MISO have made tariff filings with the FERC that purport to comply with the orders and eliminate through and out
transmission rates as of December 1, 2004, numerous protests to such filings have been made, challenging SECAs on legal and equitable grounds and evidentiary hearings have been held by the
FERC. Pending further orders of the FERC and/or the outcome of future hearings, under the provisions of the PJM tariff as filed, Midwest Generation is currently not subject to SECAs with respect to
its sales of power within PJM. It is not possible, however, to predict the outcome of the FERC proceedings or to rule out the possibility that Midwest Generation could be ordered in the future to pay
SECAs with respect to sales within PJM after December 1, 2004.

For
further discussion of the market risks related to Midwest Generation's transmission service, see "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of OperationsMarket Risk Exposures."

Significant Customer

In the past three fiscal years, Midwest Generation derived a significant source of its operating revenues from electric power sold into the PJM market by EMMT.
Sales into PJM accounted for

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approximately
67%, 75% and 14% of Midwest Generation's consolidated operating revenues for the years ended December 31, 2006, 2005 and 2004, respectively.

In
2004, Midwest Generation also derived a significant source of its operating revenues from the sale of energy and capacity to Exelon Generation primarily under three power purchase
agreements. These power purchase agreements had all expired by the end of 2004. Exelon Generation accounted for approximately 54% of Midwest Generation's consolidated operating revenues for the year
ended December 31, 2004.

Fuel Supply

Coal is used to fuel 5,613 MW of Midwest Generation's generating capacity. The coal is purchased from several suppliers that operate mines in the Southern
PRB of Wyoming. The total volume of coal consumed annually is largely dependent on the amount of generation and ranges between 16 million to 20 million tons.

All
coal is transported under long-term transportation agreements with the Union Pacific Railroad and various delivering carriers. As of December 31, 2006, Midwest
Generation leased approximately 4,200 railcars to transport the coal from the mines to the generating stations and the leases have remaining terms that range from less than one year to
13 years, with options to extend the leases or purchase some railcars at the end of the lease terms. The coal is transported nearly 1,200 miles from the mines to the Illinois Plants.

Coal
for the Fisk and Crawford Stations is first shipped by rail to the Will County Station where it is transferred from the railcars, blended as necessary to meet station
specifications, and loaded into river barges. These barges are towed to the stations by an independent contractor under a transportation agreement with Midwest Generation.

Midwest
Generation has approximately 305 MW of peaking capacity in the form of simple cycle combustion turbines at the Fisk and Waukegan Stations. These units are fueled with
distillate fuel oils.

After
two derailments in May 2005, the railroads that bring coal from the PRB mines to the Illinois Plants discovered significant problems with the joint rail line that services
the PRB mines. Repairs to the joint rail line continued through 2006. Even though some restrictions in coal shipments occurred while repairs were being completed, Midwest Generation received
sufficient amounts of coal to generate power as planned and to maintain adequate inventory levels.

See
"Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesContractual Obligations,
Commitments and Contingencies," for additional discussion of contractual commitments related to Midwest Generation's fuel supply and coal transportation contracts.

Emission Allowances

Certain state and federal environmental laws require power plant operators to hold or obtain emission allowances equal, on an annual basis, to their plants'
emissions of SO2 and, on a seasonal basis, to their plants' emissions of NOX. Emission allowances were acquired as part of the acquisition of the Illinois Plants. Additional
allowances are purchased by Midwest Generation when operations make this necessary and are sold by Midwest Generation when it has more than needed for planned levels of operation.

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See
"Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesEnvironmental Matters
and Regulations" for a discussion of environmental regulations related to emissions.

Insurance

Midwest Generation maintains insurance policies consistent with those normally carried by companies engaged in similar business and owning similar properties.
Midwest Generation's insurance program includes all-risk property insurance, including business interruption, covering real and personal property, including losses from boilers, machinery
breakdowns, and the perils of earthquake and flood, subject to specific sublimits. Midwest Generation also carries general liability insurance covering
liabilities to third parties for bodily injury or property damage resulting from operations, automobile liability insurance and excess liability insurance. Limits and deductibles in respect of these
insurance policies are comparable to those carried by other electric generating facilities of similar size. However, no assurance can be given that Midwest Generation's insurance will be adequate to
cover all losses.

Seasonality

Due to higher electric demand resulting from warmer weather during the summer months and cold weather during the winter months, electric revenues from the
Illinois Plants vary substantially on a seasonal basis. In addition, maintenance outages generally are scheduled during periods of lower projected electric demand (spring and fall) further reducing
generation and increasing major maintenance costs which are recorded as an expense when incurred. Accordingly, earnings from the Illinois Plants are seasonal and have significant variability from
quarter to quarter. Seasonal fluctuations may also be affected by changes in market prices. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of
OperationsMarket Risk ExposuresCommodity Price RiskEnergy Price Risk" for further discussion regarding market prices. Prior to 2005, Midwest Generation's
electric revenues were substantially higher during the June through September months because Midwest Generation received significantly higher capacity payments during those months under the terms of
the power purchase agreements with Exelon Generation.

Regulatory Matters

General

Midwest Generation's operations are subject to extensive regulation by governmental agencies. Federal laws and regulations govern, among other things,
transactions by and with purchasers of power, including utility companies, the operation of a power plant and the ownership of a power plant. Under limited circumstances where exclusive federal
jurisdiction is not applicable or specific exemptions or waivers from state or federal laws or regulations are otherwise unavailable, federal and/or state utility regulatory commissions may have broad
jurisdiction over non-utility owned electric power plants. Energy-producing projects are also subject to federal, state and local laws and regulations that govern the geographical
location, zoning, land use and operation of a project. Federal, state and local environmental requirements generally require that a wide variety of permits and other approvals be obtained before the
commencement of construction or operation of an energy-producing facility and that the facility then operate in compliance with these permits and approvals.

Midwest
Generation is subject to a varied and complex body of laws and regulations that are in a state of flux. Intricate and changing environmental and other regulatory requirements
could necessitate substantial expenditures and could create a significant risk of expensive delays or significant loss of

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value
in a power plant if Midwest Generation were to become unable to function as planned due to changing requirements or local opposition.

U.S. Federal Energy Regulation

The FERC has ratemaking jurisdiction and other authority with respect to interstate wholesale sales and transmission of electric energy (other than transmission
that is "bundled" with retail sales) under the Federal Power Act and with respect to certain interstate sales, transportation and storage of natural gas under the Natural Gas Act of 1938. Prior to
February 8, 2006, the Securities and Exchange Commission had regulatory powers with respect to upstream owners of electric and natural gas utilities under PUHCA 1935, which was repealed as of
that date by EPAct 2005. The enactment of PURPA and the adoption of regulations under PURPA by the FERC provided incentives for the development of cogeneration facilities and small power production
facilities using alternative or renewable fuels by establishing certain exemptions from the Federal Power Act and PUHCA 1935 for the owners of qualifying facilities. The passage of the Energy Policy
Act in 1992 further encouraged independent power production by providing additional exemptions from PUHCA 1935 for EWGs, such as Midwest Generation.

The Energy Policy Act of 2005

A comprehensive energy bill was passed by the U.S. House and Senate in July 2005 and was signed by President Bush on August 8, 2005. Known as "EPAct
2005," this comprehensive legislation includes provisions for the repeal of PUHCA 1935 and amendments to PURPA, for merger review reform, for the introduction of new regulations regarding
"Transmission Operation Improvements," for FERC authority to impose civil penalties for violation of its regulations, for transmission rate reform, for incentives for various generation technologies
and for the extension through December 31, 2007 of production tax credits for wind and other specified types of generation.

The
FERC has finalized rules to implement the congressionally mandated repeal of PUHCA 1935, effective February 8, 2006, and enactment of PUHCA 2005. The repeal of PUHCA 1935 and
its replacement by PUHCA 2005 effectively eliminates many of the restrictions on outside investment in the electricity industry, investment by and transactions between utilities, and geographic
constraints on utility systems. PUHCA 1935 repeal is expected to enable investment in utility systems by private equity funds, financial institutions, foreign utility companies, and other
non-utility companies without
the burden of registration as a "public utility holding company." It also eliminates limits on investment in non-utility operations companies that were registered holding companies under
PUHCA 1935, subject to other applicable regulatory limitations, as well as geographic limits on potential utility combinations. PUHCA 2005 is primarily a "books and records access" statute and does
not give the FERC any new substantive authority under the Federal Power Act or Natural Gas Act. The FERC has also issued final rules to implement the electric company merger and acquisition provisions
of EPAct 2005.

Under
both PUHCA 1935 and PUHCA 2005, a company engaged exclusively in the business of owning and/or operating a facility used for the generation of electric energy exclusively for sale
at wholesale may be exempted from regulation as an EWG. On November 9, 1999, the FERC issued an order determining that, based on the facts stated in Midwest Generation's application, Midwest
Generation is an EWG. If Midwest Generation were to lose its EWG status, defaults under the covenants in Midwest Generation's agreements could be triggered.

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Federal Power Act

The Federal Power Act grants the FERC exclusive jurisdiction over the rates, terms and conditions of wholesale sales of electricity and transmission services in
interstate commerce (other than transmission that is "bundled" with retail sales), including ongoing, as well as initial, rate jurisdiction. This jurisdiction allows the FERC to revoke or modify
previously approved rates after notice and opportunity for hearing. These rates may be based on a cost-of-service approach or, in geographic and product markets determined by
the FERC to be workably competitive, may be market based. Most qualifying facilities, as that term is defined in PURPA, are exempt from the ratemaking and several other provisions of the Federal Power
Act. EWGs certified in accordance with the FERC's rules under PUHCA 2005 and other non-qualifying facility independent power projects are subject to the Federal Power Act and to the FERC's
ratemaking jurisdiction thereunder, but the FERC typically grants EWGs the authority to charge market-based rates to purchasers which are not affiliated electric utility companies as long as the
absence of market power is shown. In addition, the Federal Power Act grants the FERC jurisdiction over the sale or transfer of jurisdictional facilities, including wholesale power sales contracts and,
after EPAct 2005, generation facilities, and in some cases, jurisdiction over the issuance of securities or the assumption of specified liabilities and some interlocking directorates. In granting
authority to make sales at market-based rates, the FERC typically also grants blanket approval for certain obligations, such as those related to the issuance of securities.

Midwest
Generation is subject to the FERC ratemaking regulation under the Federal Power Act. In addition, the FERC's order, as is customary with market-based rate schedules, reserved the
right to revoke Midwest Generation's market-based rate authority on a prospective basis if it is subsequently determined that Midwest Generation or any of its affiliates possess excessive market
power. If the FERC were to revoke Midwest Generation's market-based rate authority, it would be necessary for Midwest Generation to file, and obtain the FERC's acceptance of, its rate schedule as a
cost-of-service rate schedule. In addition, the loss of market-based rate authority would subject Midwest Generation to the accounting, record keeping and reporting
requirements that are imposed on utilities with cost-based rate schedules.

PJM
Reliability Pricing Model

On
August 31, 2005, PJM filed under sections 205 and 206 of the Federal Power Act a proposal for a RPM to replace its existing construct for the purchase and sale of capacity.
PJM's proposal offered RPM as a way to address deficiencies in PJM's current structure in a comprehensive and integrated manner. On April 20, 2006, the FERC issued an Initial Order on RPM,
finding PJM's existing capacity construct to be unjust and unreasonable as a long-term capacity solution, because it fails to set prices adequate to ensure energy resources to meet PJM's
reliability responsibilities. Although the FERC did not find the RPM proposal, as filed by PJM, to be a just and reasonable replacement for the current capacity construct, because some elements of the
proposal need further development and elaboration, it did find that certain elements of the RPM proposal, with some adjustment and clarification, could form the basis for a just and reasonable
capacity market. Accordingly, in the order the FERC provided guidance on PJM's RPM proposal, noted other features that need to be included in a just and reasonable capacity market, and established
further proceedings to resolve these issues. On September 29, 2006, a comprehensive settlement agreement among PJM and many of its stakeholders, including EME, embodying a proposed capacity
market construct for PJM, was submitted to the FERC for approval. On December 22, 2006, the FERC issued an order conditionally approving the RPM settlement. Midwest Generation continues to
review and evaluate the FERC order, but believes at this time that the implementation of the settlement will benefit the Illinois Plants.

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FERC
Order Regarding PJM Marginal Losses

On
May 1, 2006, the FERC issued an order in response to a complaint filed by Pepco Holdings, Inc. against PJM regarding marginal losses for transmission. The FERC concluded
that PJM had violated its tariff by not implementing marginal losses and further directed PJM to implement marginal losses by October 2, 2006. On June 19, 2006, the FERC issued an order
delaying implementation of marginal losses in PJM until June 1, 2007. On August 3, 2006, PJM filed its Tariff and Operating Agreement changes to implement marginal losses. On
November 6, 2006, the FERC issued an order accepting those Tariff and Operating Agreement changes.

Implementation
of marginal losses will adjust the algorithm that calculates locational marginal prices to include a component for marginal transmission losses in addition to the already
included component for congestion. This may reduce market prices for sellers in the Western PJM and Northern Illinois regions, including the Illinois Plants.

Natural Gas Act

Midwest Generation's peaking units have the dual capability of burning natural gas or oil. Under the Natural Gas Act, the FERC has jurisdiction over certain sales
of natural gas and over transportation and storage of natural gas in interstate commerce. The FERC has granted blanket authority to all persons to make sales of natural gas without restriction but
continues to exercise significant oversight with respect to transportation and storage of natural gas services in interstate commerce.

State Energy Regulation

The Illinois Commerce Commission does not have jurisdiction over Midwest Generation. Midwest Generation is not considered a public utility for purposes of
Illinois state law, nor is Midwest Generation certified by the Illinois Commerce Commission as an alternative retail electric supplier.

Some
states that have restructured their electric industries require generators to register to provide electric service to customers. Many states are currently undergoing significant
changes in their electric statutory and regulatory frameworks that result from restructuring the electric industries that may affect generators in those states. Although the FERC generally has
exclusive jurisdiction over the rates charged by a non-qualifying facility independent power project to its wholesale customers, a state's public utility commission has the ability, in
practice, to influence the establishment of these rates by asserting jurisdiction over a purchasing utility's ability to pass the resulting cost of purchased power through to its retail customers. In
addition, states may assert jurisdiction over the siting and construction of independent power projects and, among other things, the issuance of securities, related party transactions and the sale or
other transfer of assets by these facilities. The actual scope of jurisdiction over independent power projects by state public utility commissions varies from state to state. See "Midwest
Deregulation Status" below.

Although
state public utility commissions do not have jurisdiction to modify the terms of wholesale power sales, Midwest Generation cannot provide assurance that its power sales
contracts will not be subject to adverse consequences as a result of regulatory actions by a state commission even though it sells power exclusively at wholesale.

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Midwest Deregulation Status

Illinois Restructuring

In December 1997, the Governor of Illinois signed into law the Electric Service Customer Choice and Rate Relief Law of 1997. Midwest Generation refers to
this law as the Illinois Electric Law. The Illinois Electric Law required electric utilities to file delivery services implementation plans for non-residential retail customers no later
than March 1, 1999 and for residential customers no later than August 1, 2001 and allowed utilities to recover the costs associated with the provision of delivery services. The Illinois
Electric Law also required the Illinois Commerce Commission to adopt reliability rules for the transmission and distribution systems of Illinois utilities. These rules have been adopted and include
reporting and penalty provisions that apply to Commonwealth Edison.

Illinois'
transition to retail electric competition was conducted in phases with approximately one-third of non-residential customers having had the opportunity
to purchase electricity from alternative retail electric suppliers or electric utilities serving retail customers outside their service areas, effective October 1, 1999. Choice of suppliers is
now available to all non-residential customers, and the retail market for residential electric customers was opened to competition on May 1, 2002. Currently, there are two
alternative retail electric suppliers certified to sell electricity to residential customers in Illinois. Alternative retail electric suppliers include any person or company, other than an Illinois
electric utility, that sells electricity to one or more retail electric customers in Illinois.

During
the transition period that runs until the end of 2006, customers that switch to alternative retail electric suppliers or electric utilities serving retail customers outside their
service areas may be required to pay transition charges, also known as "stranded cost" charges, to compensate the utilities that previously supplied these customers for past investments, including
investments in generating plants. The Illinois Electric Law calls for these transition charges to end no later than December 31, 2006.

In
February 2005, Commonwealth Edison and the Ameren Illinois utilities filed tariffs at the Illinois Commerce Commission. The tariffs propose the adoption of what is known as a
New Jersey style full requirement auction process for the procurement of power for the utilities' bundled customers beginning January 1, 2007. The proposed process could potentially allow
Midwest Generation to secure multi-year power supply contracts through a competitive transparent process. The Illinois Commerce Commission unanimously approved the competitive auction
process on January 24, 2006. The Illinois Attorney General appealed the Illinois Commerce Commission order approving the auction and has filed several unsuccessful motions to stay or suspend
the auction results. The appeal is pending before the Illinois Appellate Court.

In
September 2006, the first Illinois procurement auction was held according to the rules approved by the Illinois Commerce Commission. Through the auction, EMMT entered into two
load requirements service contracts. Under the terms of these agreements, Midwest Generation expects to deliver, through EMMT, electricity, capacity and specified ancillary, transmission and load
following services necessary to serve a portion of Commonwealth Edison's residential and small commercial customer load. For further discussion, see "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of OperationsMarket Risk Exposures."

Transmission of Wholesale Power

Midwest Generation utilizes power lines owned by others for the transmission of electricity. The prices and other terms and conditions of transmission contracts
are regulated by the FERC when the

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entity
providing the transmission service is a jurisdictional public utility under the Federal Power Act, Order No. 2000, and subsequent orders.

The
Energy Policy Act of 1992 laid the groundwork for a competitive wholesale market for electricity by, among other things, expanding the FERC's authority to order electric utilities to
transmit third-party electricity over their transmission lines, thus allowing qualifying facilities under PURPA, power marketers and those qualifying as EWGs under PUHCA 1935, such as Midwest
Generation, to more effectively compete in the wholesale market. See "Regulatory MattersU.S. Federal Energy Regulation" for further detail on legislative developments.

In
1996, the FERC issued Order No. 888, also known as the Open Access Rules, which require utilities to offer eligible wholesale transmission customers open access on utility
transmission lines on a comparable basis to the utilities' own use of the lines and directed jurisdictional public utilities that control a substantial portion of the nation's electric transmission
networks to file uniform, non-discriminatory open access tariffs containing the terms and conditions under which they would provide such open access transmission service. The FERC
subsequently issued Order Nos. 888-A, 888-B and 888-C to clarify the terms that jurisdictional transmitting utilities are required to include in their open access
transmission tariffs, and also issued Order No. 889, which required those transmitting utilities to abide by specified standards of conduct when using their own transmission systems to make
wholesale sales of power, and to post specified transmission information, including information about transmission requests and availability, on a publicly available computer bulletin board.

On
February 15, 2007, the FERC issued Order No. 890 with the stated intent of promoting competition in wholesale power markets and strengthening the electric power grids. Order
No. 890 is designed to strengthen the Open Access Rules embodied in Order No. 888, increase transparency in the rules applicable to planning and use of the transmission system, make
undue discrimination in transmission easier to detect, and facilitate the FERC's enforcement efforts in remedying such discrimination. Public utility transmission providers, including RTOs and ISOs,
are required to make changes in their tariffs to comply with Order No. 890. Order No. 890 will take effect within 60 days of its publication in the Federal Register, which is
expected to occur within 30 days of its issuance.

See
"Transmission" for further discussion of developments and other transmission issues affecting the Illinois Plants.

Environmental Matters and Regulations

See the discussion on environmental matters and regulations in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of
OperationsLiquidity and Capital ResourcesEnvironmental Matters and Regulations."

Employees

At December 31, 2006, Midwest Generation employed 967 employees, approximately 732 of whom were covered by a collective bargaining agreement with the
International Brotherhood of Electrical Workers, Local 15, AFL-CIO (Local 15), governing wages, certain benefits and working conditions. This agreement will expire on
December 31, 2009. Midwest Generation also has a separate collective bargaining agreement governing retirement, health care, disability and insurance benefits that expired on June 15,
2006. Despite extensive negotiations, Midwest Generation and Local 15 were not able to reach agreement on changes in this benefits agreement. Midwest Generation will continue to provide
benefits

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under
the expired agreement until a determination is made to implement the proposed new terms over which the parties are at impasse.

On
June 28, 2001, following unsuccessful negotiations over a new collective bargaining agreement, Local 15 commenced a strike at all the Illinois Plants. With the exception
of eight employees who continued working, the entire bargaining unit of approximately 1,150 employees joined the strike. During the course of the strike, 53 additional employees, known as crossover
employees, abandoned the strike
and returned to work. In late August 2001, Local 15 offered to end the strike, but the offer was not accompanied by an agreement to accept Midwest Generation's collective bargaining
offer. Midwest Generation rejected Local 15's offer and instituted a partial "lockout" of striking employees only. Midwest Generation advised Local 15 that those employees who had
abandoned the strike earlier in the summer would be allowed to continue working. Local 15 filed an unfair labor practice charge with the NLRB and the NLRB issued a complaint which alleged that
Midwest Generation's partial lockout constituted an unlawful act because it did not extend to crossover employees and those employees who did not strike in the first instance.

On
September 30, 2004, the NLRB dismissed Local 15's complaint. Local 15 appealed the NLRB's ruling to the United States Court of Appeals for the Seventh Circuit. On
October 31, 2005, the Seventh Circuit reversed the NLRB's decision and ordered that the case be sent back to the NLRB with instructions to find the partial lockout an unfair labor practice, and
further ordered the NLRB to consider whether the partial lockout coerced employees into accepting Midwest Generation's contract offer. Midwest Generation and the NLRB sought and were denied rehearing
of the October 31 order. The Supreme Court denied further review, and the case has now been remanded to the NLRB. The remedies in unfair labor practice proceedings traditionally include a
posting notifying employees of the unfair labor practice, a cease and desist order and, where appropriate, back pay. Given the unique facts and procedures of this case, Midwest Generation cannot
predict with certainty the remedy that the NLRB might fashion.

ITEM 1A.    RISK FACTORS

Midwest Generation's operations are subject to market risks related to wholesale energy prices.

Midwest Generation no longer sells power pursuant to long-term power purchase agreements with Exelon Generation. Thus, Midwest Generation is subject
to market risks related to the price of energy, capacity, and ancillary services. The factors that influence the market prices for these products in PJM include:

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In
addition, unlike most other commodities, electric power can only be stored on a very limited basis and generally must be produced concurrently with its use. As a result, the wholesale
power markets are subject to significant and unpredictable price fluctuations over relatively short periods of time. There is no assurance that Midwest Generation will be successful in selling energy
and capacity into the markets or that the prices received for the energy and capacity will generate positive cash flow. Due to the volatility of market prices in PJM for energy and capacity during the
past several years, Midwest Generation cannot predict whether sales of energy and capacity to other customers or the market will be
at prices sufficient to generate cash flow necessary to meet Midwest Generation's obligations. If Midwest Generation's operations do not meet these objectives, Midwest Generation may not be able to
generate enough cash to service its own debt and lease obligations, which would have a material adverse effect on Midwest Generation. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of OperationsMarket Risk Exposures."

Midwest Generation's financial results can be affected by changes in fuel prices, fuel transportation cost increases, and interruptions in fuel supply.

Midwest Generation's business is subject to changes in fuel costs, which may negatively affect its financial results and financial position by increasing the cost
of producing power. The fuel markets can be volatile, and actual fuel prices can differ from Midwest Generation's expectations.

Although
Midwest Generation attempts to purchase fuel based on its known fuel requirements, it is still subject to the risks of supply interruptions, transportation cost increases, and
fuel price volatility. In addition, fuel deliveries may not exactly match energy sales, due in part to the need to purchase fuel inventories in advance for reliability and dispatch requirements. The
price at which Midwest Generation can sell its energy may not rise or fall at the same rate as a corresponding rise or fall in fuel costs. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of OperationsMarket Risk ExposuresCommodity Price Risk."

Midwest Generation may not be able to hedge market risks effectively.

Midwest Generation is exposed to market risks through its ownership and operation of the Illinois Plants. These market risks include, among others, volatility
arising from the timing differences associated with buying fuel, converting fuel into energy and delivering energy to a buyer. Through EMMT, Midwest Generation uses forward contracts and derivative
financial instruments, such as futures contracts and options, to manage market risks and exposure to fluctuating electricity and fuel prices. However, Midwest Generation cannot provide assurance that
these strategies will successfully mitigate market risks, or that they will not result in net losses.

Midwest
Generation may not cover the entire exposure of its assets or positions to market price volatility, and the level of coverage will vary over time. Fluctuating commodity prices
may negatively affect Midwest Generation's financial results to the extent that assets and positions have not been hedged.

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EME,
directly and through a subsidiary, has historically provided credit support to its subsidiaries, including EMMT, which markets the energy and capacity from the Illinois Plants.
Midwest Generation is permitted to use its working capital facility and cash on hand to provide credit support (either through loans or letters of credit) for forward contracts with third-party
counterparties entered into by EMMT for capacity and energy generated by Midwest Generation. Although EME may provide credit support from time to time, Midwest Generation intends to use its working
capital facility instead of relying on credit support from EME. Utilization of this credit facility in support of such forward contracts provides additional liquidity support for implementation of
Midwest Generation's contracting strategy for the Illinois Plants. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsResults of
OperationsRelated Party TransactionsEMMT Agreements."

The
effectiveness of Midwest Generation's hedging activities may depend on the amount of working capital available to post as collateral in support of these transactions, either in
support of performance guarantees or as a cash margin. The amount of credit support that must be provided typically is based on the difference between the price of the commodity in a given contract
and the market price of the commodity. Significant movements in market prices can result in a requirement to provide cash collateral and letters of credit in very large amounts. Without adequate
liquidity to meet margin and collateral requirements, Midwest Generation could be exposed to the following:

As
a result of these and other factors, Midwest Generation cannot predict with precision the effect that risk management decisions may have on its businesses, operating results or
financial position.

Midwest Generation is exposed to credit and performance risk from third parties under supply and transportation contracts.

The Illinois Plants rely on contracts for the supply and transportation of fuel and other services required for their operation. Midwest Generation's operations
are exposed to the risk that counterparties will not perform their obligations. If a counterparty failed to perform under a contract, Midwest Generation
would need to obtain alternate suppliers or alternate means of transportation for its requirements of fuel or other services, which could result in higher costs or disruptions in its operations.
Furthermore, Midwest Generation is exposed to credit risk because damages related to a breach of contract may not be recoverable. Accordingly, the failure of a supplier to fulfill its contractual
obligations could have a material adverse effect on Midwest Generation's financial results.

Midwest Generation is subject to extensive energy industry regulation.

Midwest Generation's operations are subject to extensive regulation by governmental agencies. Federal laws and regulations govern, among other things,
transactions by and with purchasers of power, including utility companies, the development and construction of a power plant, the ownership and operations of a power plant, and access to transmission.
Under limited circumstances where exclusive federal jurisdiction is not applicable or specific exemptions or waivers from state or federal laws or regulations are otherwise unavailable, federal and/or
state utility regulatory commissions may have broad jurisdiction over non-utility owned electric power plants such as the Illinois Plants. Generation facilities

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are
also subject to federal, state and local laws and regulations that govern, among other things, the geographical location, zoning, land use and operation of a project. For more information, see
"Regulatory Matters."

In
addition to its exposure to government regulation affecting all electric power suppliers and generating companies on a national level, Midwest Generation is especially susceptible to
regulatory actions and litigation outcomes that are specific to the geographic power market in which the Illinois Plants are located. For example, the FERC may impose various forms of market
mitigation measures, including price caps and operating restrictions, where it determines that potential market power might exist and that the public interest requires mitigation. In addition, ISOs
and RTOs may impose bidding and scheduling rules, both to curb the potential exercise of market power and to facilitate market functions. Such actions may materially affect Midwest Generation's
results of operations.

There
is no assurance that the introduction of new laws or other future regulatory developments will not have a material adverse effect on Midwest Generation's business, results of
operations or financial condition, nor is there any assurance that Midwest Generation will be able to obtain and comply with all necessary licenses, permits and approvals for its plants. If Midwest
Generation cannot comply with all applicable regulations, its business, results of operations and financial condition could be adversely affected.

Midwest Generation is subject to extensive environmental regulation and permitting requirements that may involve significant and increasing costs.

Midwest Generation's operations are subject to extensive environmental regulations with respect to, among other things, air quality, water quality, waste
disposal, and noise. Midwest Generation is required to comply with these regulations, as well as conditions established by licenses, permits and other approvals in order to construct, operate or
modify its facilities. Failure to comply with these requirements could subject Midwest Generation to civil or criminal liability, the imposition of liens or fines, or actions by regulatory agencies
seeking to curtail Midwest Generation's operations. Midwest Generation may also be exposed to risks arising from past, current or future contamination at its former or existing facilities or with
respect to off-site waste disposal sites that have been used in its operations.

Midwest
Generation devotes significant resources to environmental monitoring, pollution control equipment and emission allowances to comply with environmental regulatory requirements.
Midwest Generation believes that it is currently in substantial compliance with environmental regulatory requirements. However, the current trend is toward more stringent standards, stricter
regulation, and more expansive application of environmental regulations. Environmental advocacy groups and regulatory agencies in the United States have been focusing considerable attention on carbon
dioxide emissions from coal-fired power plants and their potential role in climate change. The adoption of laws and regulations to implement carbon dioxide controls could adversely affect
the Illinois Plants. Also, coal plant emissions of NOX and SO2, mercury and particulates are subject to increased controls and mitigation expenses. Additionally, the State of
Illinois is contemplating air pollution control regulations that are more stringent than existing and proposed federal regulations. The continued operation of the Illinois Plants will require
substantial capital expenditures for environmental controls.

For
example, in December 2006, Midwest Generation entered into an agreement with the Illinois EPA to reduce mercury, NOXand SO2 emissions at the Illinois
Plants. Capital expenditures relating to controls contemplated by the agreement are expected (in 2006 dollars) to be in the range of approximately $2.7 billion to $3.4 billion. See
"Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesEnvironmental Matters

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and
RegulationsAir Quality RegulationClean Air Act." There is no assurance that these capital expenditures will not exceed the above estimates.

In
addition, future environmental laws and regulations, and future enforcement proceedings that may be taken by environmental authorities could affect the costs and the manner in which
Midwest Generation conducts its business. There is no assurance that Midwest Generation would be able to recover these increased costs from its customers or that its business, financial condition and
results of operations would not be materially adversely affected. Changing environmental regulations could require Midwest
Generation to purchase additional emission allowances or install additional pollution control technology, and could make some units uneconomical to maintain or operate. If Midwest Generation cannot
comply with all applicable regulations, it could be required to retire or suspend operations at its facilities, or restrict or modify the operations of its facilities, and its business, results of
operations and financial condition could be adversely affected. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and
Capital ResourcesEnvironmental Matters and Regulations."

Typically,
environmental laws require a lengthy and complex process for obtaining licenses, permits and approvals prior to construction, operation or modification of a project or
generating facility. Meeting all the necessary requirements can delay or sometimes prevent the completion of a proposed project as well as require extensive modifications to existing projects, which
may involve significant capital expenditures. Midwest Generation cannot provide assurance that it will be able to obtain and comply with all necessary licenses, permits and approvals for the Illinois
Plants.

Midwest Generation may not be able to raise capital on favorable terms, to refinance existing indebtedness or to fund operations and capital
expenditures, which could adversely affect its results of operations.

The factors that influence Midwest Generation's ability to arrange for financing and its costs of capital include:

While
Midwest Generation believes that its sources of capital will be adequate to meet its obligations for the foreseeable future, this belief is based on a number of material
assumptions, including without limitation assumptions about its ability to access the capital and commercial lending markets and its operating and financial performance. Any of these assumptions could
prove to be incorrect. Midwest Generation cannot provide assurance that its projected sources of capital will be available when needed or that its actual cash requirements will not be greater than
expected.

Midwest Generation has a substantial amount of indebtedness, including long-term lease obligations.

As of December 31, 2006, Midwest Generation had $1.3 billion of long-term debt and $1.1 billion in lease financings. See
"Item 8. Financial Statements and Supplementary DataNotes to Consolidated Financial StatementsNote 6. Long-Term Debt" and "Item 8. Financial
Statements and Supplementary DataNotes to Consolidated Financial StatementsNote 10. Commitments and Contingencies."

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Midwest
Generation's substantial amount of debt and financial obligations presents the risk that Midwest Generation might not have sufficient cash to service its indebtedness or
long-term lease obligations and could limit the ability of Midwest Generation to grow its business, to compete effectively or to operate successfully under adverse economic conditions.

Midwest Generation's ability to meet its obligations under its long-term leases is dependent on payment of interest and principal on its
notes receivable from EME.

During 2000, Midwest Generation loaned $1.367 billion to EME from the proceeds of the sale-leaseback of the Powerton and Joliet plants. The
debt service payments made by EME on the intercompany notes evidencing this loan are used by Midwest Generation to make the lease payments under the Powerton and Joliet leases. Midwest Generation's
ability to meet its obligations under the leases is partially dependent on receiving payment on these intercompany notes. There is no assurance that EME will have sufficient cash flow to meet its
obligations under the intercompany notes or make payments on the EME guarantees of the Powerton and Joliet leases. A default by EME in the payment of these intercompany notes would result in a
shortfall of cash available to Midwest Generation to meet its lease and debt obligations. A default by Midwest Generation in meeting its lease obligations
could give rise to various remedies, including the right to terminate the Powerton and Joliet leases, which would result in the loss of revenues from the Powerton and Joliet power plants and would
have a material adverse effect on Midwest Generation's business, results of operations and financial condition.

Competition could adversely affect Midwest Generation's business.

The independent power industry is characterized by numerous capable competitors, some of whom may have more extensive operating experience in the acquisition and
development of power projects, larger staffs, and greater financial resources than Midwest Generation. Several participants in the wholesale markets, including many regulated utilities, have a lower
cost of capital than most merchant generators and often are able to recover fixed costs through rate base mechanisms, allowing them to build, buy and upgrade generation assets without relying
exclusively on market clearing prices to recover their investments. This could affect Midwest Generation's ability to compete effectively in the markets in which those entities operate.

Further,
in recent years some power markets, including PJM, have been characterized by strong and increasing competition as a result of regulatory changes and other factors which can
contribute to a reduction in market prices for power from time to time. These regulatory and other changes may increase competitive pressures in this market.

Newer
plants owned by Midwest Generation's competitors are often more efficient than Midwest Generation's facilities. This may put some of Midwest Generation's facilities at a
competitive disadvantage to the extent that its competitors are able to produce more power from each increment of fuel than Midwest Generation's facilities are capable of producing. Over time, the
Illinois Plants may become obsolete in their markets, or be unable to compete, because of the construction of newer, more efficient power plants.

Restrictions in the financing documents binding on Midwest Generation and its affiliates limit the ability of Midwest Generation to enter into specified
transactions that it otherwise might enter into.

EME and MEHC have entered into debt agreements that contain restrictive covenants that are applicable to their subsidiaries, including Midwest Generation. Midwest
Generation has not guaranteed these obligations. However, these financing documents contain restrictions on the ability of Midwest

20

---



Generation
to enter into specified transactions or engage in specified business activities, including, in some instances, a requirement that EME obtain the approval of MEHC's board of directors. The
instruments governing Midwest Generation's indebtedness also contain financial and investment covenants. These restrictions may significantly impede the ability of Midwest Generation to take advantage
of business opportunities as they arise, to grow its business or compete effectively, to make capital expenditures when required, or to develop and implement any refinancing plans in respect of its
indebtedness. See "Midwest Generation has a substantial amount of indebtedness, including long-term lease obligations" for further discussion.

In
addition, in connection with the entry by Midwest Generation or its affiliates into new financings or amendments to existing financing arrangements, Midwest Generation's financial and
operational flexibility may be further reduced as a result of more restrictive covenants, requirements for security and other terms that are often imposed on sub-investment grade entities.

The Illinois Plants may be affected by general operating risks and hazards customary to the power generation industry. Midwest Generation may not have
adequate insurance to cover all these hazards.

The operation of power generation facilities involves many operating risks, including:

These
and other hazards can cause significant personal injury or loss of life, severe damage to and destruction of property, plant and equipment, contamination of or damage to the
environment, and suspension of operations. The occurrence of one or more of the events listed above could decrease or eliminate revenues generated by the Illinois Plants or significantly increase the
costs of operating them, and could also result in Midwest Generation's being named as a defendant in lawsuits asserting claims for substantial damages, potentially including environmental cleanup
costs, personal injury, property damage, fines and penalties. Equipment and plant warranties and insurance may not be sufficient or effective under all circumstances to cover lost revenues or
increased expenses. A decrease or elimination in revenues generated by the facilities or an increase in the costs of operating them could decrease or eliminate funds available to meet Midwest
Generation's obligations as they become due and could have a material adverse effect on Midwest Generation.

21

---



The accounting for Midwest Generation's hedging activities may increase the volatility of its quarterly and annual financial results.

EMMT, on behalf of Midwest Generation, engages in hedging activities in order to mitigate Midwest Generation's exposure to market risk with respect to electricity
sales from its generation facilities, fuel utilized by those facilities and emissions allowances. EMMT generally attempts to balance its fixed-price physical and financial purchases and sales
commitments in terms of contract volumes and the timing of performance and delivery obligations through the use of financial and physical derivative contracts. These derivative contracts are recorded
on Midwest Generation's balance sheet at fair value pursuant to SFAS No. 133. Some of these derivative contracts do not qualify under SFAS No. 133 for hedge accounting and changes in
their fair value are therefore recognized currently in earnings as unrealized gains or losses. As a result, Midwest Generation's financial results, including gross margin, operating income and balance
sheet ratios, will at times be volatile and subject to fluctuations in value primarily due to changes in electricity and fuel prices. For a more detailed discussion of the accounting treatment of
Midwest Generation's hedging activities, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsMarket Risk
ExposuresAccounting for Energy Contracts."

ITEM 1B.    UNRESOLVED STAFF COMMENTS

Inapplicable.

ITEM 2.    PROPERTIES

As of December 31, 2006, Midwest Generation owned a fee interest in the Illinois Plants, with the exception of the Powerton Station and the Joliet Units 7
and 8, as more particularly described below. In December 1999, Commonwealth Edison sold only a portion of its then owned properties related to the Illinois Plants to Midwest Generation and
retained the remaining portions of the properties for its own uses. Midwest Generation and Commonwealth Edison have various reciprocal permanent and temporary easements over Midwest Generation's
respective parcels for the location, use, maintenance and repair of those facilities and equipment that are used in connection with the operations of Midwest Generation and Commonwealth Edison. On
December 30, 2004, Midwest Generation acquired additional property adjacent to the Collins Station from Commonwealth Edison in exchange for easements Midwest Generation granted to Commonwealth
Edison at the Will County, Joliet and Powerton Stations.

In
conjunction with the sale-leaseback of the Powerton Station and Joliet Units 7 and 8 in August 2000, Midwest Generation leased substantially all the property on
which the generating units are located to the owner trusts under site leases, and the owner trusts in turn subleased their undivided ground interest in the property back to Midwest Generation under
site subleases. The terms of the site subleases are 33.75 years for the Powerton property and 30 years for the Joliet property, with renewal options. Rent is paid on each
January 2 and July 2.

22

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Description of Properties

Operating Plant or Site

Location

Leased/
Owned

Fuel

MegawattsElectric Generating FacilitiesCrawford Station

Chicago, Illinois

owned

coal

542Fisk Station

Chicago, Illinois

owned

coal

326Joliet Unit 6

Joliet, Illinois

owned

coal

290Joliet Units 7 and 8

Joliet, Illinois

leased

coal

1,044Powerton Station

Pekin, Illinois

leased

coal

1,538Waukegan Station

Waukegan, Illinois

owned

coal

781
(1)Will County Station

Romeoville, Illinois

owned

coal

1,092
(2)Peaking UnitsFisk

Chicago, Illinois

owned

oil/gas

197Waukegan

Waukegan, Illinois

owned

oil/gas

108Total







5,918Other Plant or SiteCollins Station(3)

Grundy County, Illinois

ownedCrawford peaker(4)

Chicago, Illinois

ownedJoliet peaker(5)

Joliet, Illinois

ownedCalumet peaker(5)

Chicago, Illinois

ownedElectric Junction peaker(5)

Aurora, Illinois

ownedLombard peaker(5)

Lombard, Illinois

ownedSabrooke peaker(5)

Rockford, Illinois

owned


---

ITEM 3.    LEGAL PROCEEDINGS

No material legal proceedings are presently pending against Midwest Generation.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Inapplicable.

23

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

All the outstanding membership interest of Midwest Generation is, as of the date hereof, owned by Edison Mission Midwest Holdings Co., which is an indirect wholly
owned subsidiary of Edison International. There is no market for Midwest Generation's membership interest.

Distributions
on the membership interest will be paid when declared by Midwest Generation's board of managers. Midwest Generation paid cash distributions to Edison Mission Midwest
Holdings totaling $542 million in 2006, $330 million in 2005 and $88 million in 2004.

24

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ITEM 6.    SELECTED FINANCIAL DATA

The selected financial data was derived from Midwest Generation's audited financial statements and is qualified in its entirety by the
more detailed information and financial statements, including the notes to the financial statements, included in this annual report.

|                                                         |                                                                              | Years Ended December 31, |        
|-------------------------------------------------------- | ---------------------------------------------------------------------------- | ------------------------ | -------
|
|
|INCOME STATEMENT DATA                                    |                                                                              |                          |        
|Operating revenues                                       |                                                                              | $                        | 1,398.9
|Operating expenses                                       |                                                                              |                          |        
|                                                         | Fuel and plant operations                                                    |                          |        
|                                                         | Depreciation and amortization                                                |                          |        
|                                                         | Loss on lease termination, asset impairment and other charges and credits(1) |                          |        
|                                                         | Administrative and general                                                   |                          |        
|                                                         |                                                                              |                          |        
|                                                         |                                                                              |                          | 909.8  
|                                                         |                                                                              |                          |        
|Operating income (loss)                                  |                                                                              |                          | 489.1  
|Interest and other expense                               |                                                                              |                          | (83.4  
|                                                         |                                                                              |                          |        
|Income (loss) before income taxes                        |                                                                              |                          | 405.7  
|Provision (benefit) for income taxes                     |                                                                              |                          | 158.9  
|                                                         |                                                                              |                          |        
|Income (loss) before accounting change                   |                                                                              |                          | 246.8  
|Cumulative effect of change in accounting, net of tax(2) |                                                                              |                          |       
|                                                         |                                                                              |                          |        
|Net income (loss)                                        |                                                                              | $                        | 246.8  
|                                                         |                                                                              |                          |        

---

|                                                |  | As of December 31, |        
|----------------------------------------------- |  | ------------------ | -------
|
|
|BALANCE SHEET DATA                              |  |                    |        
|Assets                                          |  | $                  | 5,283.6
|Current liabilities                             |  |                    | 363.4  
|Long-term debt                                  |  |                    | 1,326.1
|Lease financing                                 |  |                    | 1,029.8
|Other long-term obligations                     |  |                    | 183.6  
|Member's equity                                 |  |                    | 2,380.6
|
|
|
|CASH FLOW DATA                                  |  |                    |        
|Cash provided by (used in) operating activities |  | $                  | 873.7  
|Cash provided by (used in) financing activities |  |                    | (819.2 
|Cash provided by (used in) investing activities |  |                    | (7.9   

25

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This MD&A contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These
statements reflect Midwest Generation's current expectations and projections about future events based on Midwest Generation's knowledge of present facts and circumstances and assumptions about future
events and include any statement that does not directly relate to a historical or current fact. Other information distributed by Midwest Generation that is incorporated in this MD&A, or that refers to
or incorporates this MD&A, may also contain forward-looking statements in this MD&A and elsewhere. In this MD&A and elsewhere, the words "expects," "believes," "anticipates," "estimates," "projects,"
"intends," "plans," "probable," "may," "will," "could," "would," "should," and variations of such words and similar expressions, or discussions of strategy or plans, are intended to identify
forward-looking statements. Such statements necessarily involve risks and uncertainties that could cause actual results to differ materially from those anticipated. See "Item 1.
BusinessForward-Looking Statements" and "Item 1A. Risk Factors" for a discussion of some of the risks, uncertainties and other important factors that could cause results to differ, or
otherwise could impact Midwest Generation. Additional information about risks and uncertainties is contained throughout this MD&A. Readers are urged to read this entire annual report, including the
information incorporated by reference, and carefully consider the risks, uncertainties and other factors that affect Midwest Generation's business. Forward-looking statements speak only as of the date
they are made, and Midwest Generation is not obligated to publicly update or revise forward-looking statements. Readers should review future reports filed by Midwest Generation with the Securities and
Exchange Commission.

This
MD&A presents a discussion of Midwest Generation's financial results and analysis of its financial condition. It is presented in four sections:

PageManagement's Overview; Critical Accounting Estimates

26Results of Operations

31Liquidity and Capital Resources

39Market Risk Exposures

54


MANAGEMENT'S OVERVIEW; CRITICAL ACCOUNTING ESTIMATES

Management's Overview

Introduction

Midwest Generation is a Delaware limited liability company formed on July 12, 1999 for the purpose of owning or leasing, making improvements to, and
operating and selling the capacity and energy of, the power generation assets it purchased from Commonwealth Edison, which are referred to as the Illinois Plants.

Midwest
Generation is currently operating 5,918 MW of power plants consisting of:

26

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Midwest
Generation's power plants are located in the control area managed by PJM. For further discussion, see "Item 1. BusinessDescription of the IndustryPower
Markets," "Transmission," and "Regulatory Matters."

The
energy and capacity from the Illinois Plants are sold under terms, including price and quantity, arranged by EMMT, an EME subsidiary engaged in the power marketing and trading
business, with customers through a combination of bilateral agreements, forward energy sales and spot market sales. See "Market Risk Exposures" for further discussion of forward market prices.

Obligations of Indirect Parent Companies of Midwest Generation

In July 2001, MEHC, the parent company of EME and indirect parent of Midwest Generation, issued $800 million of notes due 2008. The financing
documents entered into by MEHC contain financial and investment covenants restricting EME and its subsidiaries. The instruments governing Midwest Generation's indebtedness also contain financial and
investment covenants. Restrictions contained in these documents could affect, and in some cases, significantly limit or prohibit Midwest Generation's ability to, among other things, incur, refinance
and prepay debt, make capital expenditures, make distributions, make investments, create liens, sell assets, enter into sale and leaseback transactions, issue equity interests, enter into transactions
with affiliates, create restrictions on the ability to make distributions, engage in mergers and consolidations, make capital expenditures, or engage in speculative transactions. See "Item 1A. Risk
FactorsRestrictions in the financing documents binding on Midwest Generation and its affiliates limit the ability of Midwest Generation to enter into specified transactions that it
otherwise might enter into" for further discussion.

Significant 2006 Items

Illinois Auction

In September 2006, the first Illinois power procurement auction was held by Commonwealth Edison according to the rules approved by the Illinois Commerce
Commission. Through the auction, EMMT entered into two load requirements services contracts. Under the terms of these agreements, Midwest Generation expects to deliver, through EMMT, electricity,
capacity and specified ancillary, transmission and load following services necessary to serve a portion of Commonwealth Edison's residential and small commercial customer load. The estimated
megawatt-hours for 2007, 2008 and 2009 under these energy supply agreements are 8.5 million, 6.2 million and 1.8 million, respectively. The amount of power sold under these
agreements can vary significantly with variations in load. See "Market Risk ExposuresCommodity Price RiskEnergy Price Risk" for further discussion of Midwest Generation's
hedge position.

Environmental Developments Regarding Emissions

On December 11, 2006, Midwest Generation entered into an agreement with the Illinois EPA to reduce mercury, NOX and SO2 emissions
at Midwest Generation's Illinois coal-fired power plants. Implementation of the agreement will require further regulatory proceedings in order to become effective, and once implemented the
agreement will provide reasonable certainty of the timing and amount of emissions reductions which will be required of Midwest Generation's Illinois Plants for these pollutants through 2018. No
assurance can be given that all required regulatory approvals will be received, and if not received, Midwest Generation will remain subject to existing and future requirements as to emissions of these
pollutants. If the agreement is implemented as contemplated, Midwest Generation will be required to achieve specified emissions reductions through a combination of environmental retrofits or

27

---



unit
shutdowns. Capital expenditures are estimated (in 2006 dollars) between $2.7 billion and $3.4 billion. See "Liquidity and Capital ResourcesEnvironmental Matters and
RegulationsAir Quality RegulationClean Air Act" for further discussion.

Overview of Midwest Generation's Operating Performance

Midwest Generation's net income decreased $54.4 million in 2006, compared to 2005. The decrease in earnings was primarily attributable to:

Partially
offset by:

Critical Accounting Estimates

Introduction

The accounting policies described below are viewed by management as "critical" because their correct application requires the use of material judgments and
estimates, and they have a material impact on Midwest Generation's results of operations and financial position.

Derivative Financial Instruments and Hedging Activities

Midwest Generation uses derivative financial instruments for hedging activities for non-trading purposes. Derivative financial instruments are mainly
utilized to manage exposure from changes in electricity and fuel prices. Midwest Generation follows SFAS No. 133, which requires derivative financial instruments to be recorded at their fair
value unless an exception applies. SFAS No. 133 also requires that changes in a derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met.
For derivatives that qualify for hedge accounting, depending on the nature of the hedge, changes in fair value are either offset by changes in the fair value of the hedged assets, liabilities or firm
commitments through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value is immediately
recognized in earnings. For further discussion, see "Market Risk ExposuresAccounting for Energy Contracts."

Management's
judgment is required to determine if a transaction meets the definition of a derivative and, if it does, whether the normal sales and purchases exception applies or whether
individual transactions qualify for hedge accounting treatment. The majority of Midwest Generation's long-term power sales and fuel supply agreements related to its generation activities
either: (1) do not meet the

28

---



definition
of a derivative, or (2) qualify as normal purchases and sales and are, therefore, recorded on an accrual basis. Determining the fair value of derivatives under SFAS No. 133 is
a critical accounting estimate because the fair value of a derivative is susceptible to significant change resulting from a number of factors, including: volatility of energy prices, credit risks,
market liquidity and discount rates. See "Market Risk Exposures" for a description of risk management activities and sensitivities to change in market prices.

Impairment of Long-Lived Assets

Midwest Generation follows SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS No. 144). Midwest
Generation evaluates long-lived assets whenever indicators of impairment exist. This accounting standard requires that if the undiscounted expected future cash flow from a company's assets
or group of assets (without interest charges) is less than its carrying value, asset impairment must be recognized in the financial statements. The amount of impairment is determined by the difference
between the carrying amount and fair value of the asset.

The
assessment of impairment is a critical accounting estimate because significant management judgment is required to determine: (1) if an indicator of impairment has occurred,
(2) how assets should be grouped, (3) the forecast of undiscounted expected future cash flow over the asset's estimated useful life to determine if an impairment exists, and
(4) if an impairment exists, the fair value of the asset or asset group. Factors that Midwest Generation considers important, which could trigger an impairment, include operating losses from a
project, projected future operating losses, the financial condition of counterparties, or significant negative industry or economic trends. At December 31, 2006 and 2005, the expected
undiscounted future cash flow from long-lived assets exceeded the carrying value of those assets. During 2004, Midwest Generation recorded impairment charges of $39.1 million
related to specific assets. See "Results of OperationsOperating Expenses" for additional discussion.

Contract Indemnity

Midwest Generation has agreed to reimburse Commonwealth Edison and Exelon Generation for 50% of specific asbestos claims pending as of February 2003 and
related expenses less recovery of insurance costs, and agreed to a sharing arrangement for liabilities and expenses associated with future asbestos-related claims as specified in a supplemental
agreement. See "Liquidity and Capital ResourcesContractual Obligations, Commitments and ContingenciesContingenciesIndemnity Provided as Part of the Acquisition
from Commonwealth Edison." Midwest Generation engaged an independent actuary during 2004 with extensive experience in performing asbestos studies to estimate future losses based on its claims
experience and other available information. In calculating future losses, the actuary made various assumptions, including but not limited to, the settlement of future claims under the supplemental
agreement with Commonwealth Edison as described above, the distribution of exposure sites, and that the filing date of asbestos claims will not be after 2045. At December 31, 2006, Midwest
Generation recorded a liability related to this contract indemnity of $64.6 million.

Income Taxes

Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109), requires the asset and liability approach for
financial accounting and reporting for deferred income taxes. Midwest Generation uses the asset and liability method of accounting for deferred income taxes and provides deferred income taxes for all
significant income tax temporary differences. See "Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial StatementsNote 8. Income Taxes" for additional details.

29

---



As
part of the process of preparing its consolidated financial statements, Midwest Generation is required to estimate its income taxes in each jurisdiction in which it operates. This
process involves estimating actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as depreciation, for tax and accounting
purposes. These differences result in deferred tax assets and liabilities, which are included within Midwest Generation's balance sheet. At December 31, 2006, Midwest Generation had net federal
and California state deferred tax assets of $22.9 million. The deferred tax assets primarily relate to net operating loss carryforwards that are available to reduce future taxable income. The
net operating losses primarily relate to tax deductions from the termination of the Collins Station lease and subsequent decommissioning of the power plant. In assessing the realization of Midwest
Generation's deferred tax assets, management considered whether it is more likely than not the deferred tax assets will be realized. The ultimate realization of Midwest Generation's deferred income
tax assets depends upon its ability to generate taxable income in the future (which under Midwest Generation's tax-allocation agreement is not subject to a net operating loss carryforward
period). On a quarterly basis, management evaluates the recoverability of its deferred tax assets based upon forecasted taxable income to ensure there is adequate support for the realization of the
deferred tax assets. While management has considered future taxable income in assessing the need for a valuation allowance, in the event management were to determine that Midwest Generation would not
be able to realize all or part of its net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged as a reduction to income in the period such determination was
made. Although realization is not assured, management believes it is more likely than not that the net deferred tax asset balance as of December 31, 2006 will be realized.

For
additional information regarding Midwest Generation's accounting policies, see "Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial
StatementsNote 2. Summary of Significant Accounting Policies."

30

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RESULTS OF OPERATIONS

Summary

The table below summarizes total revenues as well as key performance measures related to coal-fired generation, which represents the majority of
Midwest Generation's operations.

Years Ended December 31,2006

2005

2004Operating Revenues(in millions)

$
1,399

$
1,429

$
1,058StatisticsGeneration (in GWh):Merchant


28,898


30,953


17,133Power purchase agreement








13,435Total coal-fired generation


28,898


30,953


30,568Equivalent availability(1)


79.3%


79.6%


84.4%Capacity factor(2)


58.8%


63.0%


65.3%Load factor(3)


74.1%


79.1%


77.4%Forced outage rate(4)


7.9%


7.8%


5.4%Average realized energy price/MWh(5):Merchant

$
46.19

$
45.55

$
31.20Power purchase agreement

$


$


$
17.60Total coal-fired generation(6)

$
46.19

$
45.55

$
25.22Capacity revenue only (in millions)

$
24

$
27

$
289Average fuel costs/MWh

$
13.19

$
12.40

$
11.60


---

Operating Revenues

Operating revenues decreased $30.5 million in 2006 compared to 2005 and increased $371.6 million in 2005 compared to 2004. The 2006 decrease was
primarily attributable to lower energy revenues resulting from lower generation, partially offset by higher average realized energy prices. The decrease in

31

---



energy
revenues was partially offset by an increase in unrealized gains in 2006 related to hedge contracts described below. The 2005 increase was primarily due to higher average realized energy
prices. The increase in average realized energy prices was driven largely by higher natural gas prices and the elimination of sales to Exelon Generation under power purchase agreements with lower
contract energy prices.

Included
in operating revenues were unrealized gains (losses) of $30.6 million, $(18.3) million and $(4.0) million in 2006, 2005 and 2004, respectively. Unrealized gains (losses)
are primarily due to power contracts that did not qualify for hedge accounting under SFAS No. 133 (sometimes referred to as economic hedges). These energy contracts were entered into to hedge
the price risk related to projected sales of power. During 2005 and 2004, power prices increased, resulting in mark-to-market losses on economic hedges. As economic hedge
contracts were settled in 2006 the previous unrealized losses resulted in unrealized gains. The 2006 unrealized gains also included $7.5 million of mark-to-market gains
from economic hedges for periods subsequent to December 31, 2006, resulting from a decline in market prices during the fourth quarter of 2006. See "Market Risk ExposuresAccounting
for Energy Contracts" for more information.

Due
to higher electric demand resulting from warmer weather during the summer months and cold weather during the winter months, electric revenues from the Illinois Plants vary
substantially on a seasonal basis. In addition, maintenance outages generally are scheduled during periods of lower projected electric demand (spring and fall) further reducing generation and
increasing major maintenance costs which are recorded as an expense when incurred. Accordingly, earnings from the Illinois Plants are seasonal and have significant variability from quarter to quarter.
Seasonal fluctuations may also be affected by changes in market prices. See "Market Risk ExposuresCommodity Price RiskEnergy Price Risk" for further discussion regarding
market prices.

Operating Expenses

Operating expenses increased $72.8 million in 2006 compared to 2005 and decreased $220.2 million in 2005 compared to 2004. Operating expenses
consist of fuel, gain on the sale of emission allowances, plant operations, loss on lease termination, asset impairment and other charges, depreciation and amortization, loss (gain) from disposal of
assets, and administrative and general expenses. The change in the components of operating expenses is discussed below.

Fuel
expenses decreased $1.4 million in 2006 compared to 2005 and decreased $23.5 million in 2005 compared to 2004. The 2006 decrease was primarily attributable to lower
coal consumption in 2006, as compared to 2005, resulting from lower generation, partially offset by scheduled price increases and escalation under existing contracts. The 2005 decrease was primarily
attributable to a reduction of $42.7 million in the costs for natural gas and fuel oil related to the closing of the Collins Station, partially offset by an increase of $27.6 million in
coal costs primarily due to higher coal prices from price escalation under coal and transportation agreements.

Gain
on sale of emission allowances income decreased $48.0 million in 2006 compared to 2005, and increased $36.4 million in 2005 compared to 2004. Midwest Generation sold
excess SO2 emission allowances primarily to affiliates in all three years. The change in sales of SO2 emission allowances to
affiliates was primarily attributable to changes in prices which were $475 per ton in 2006, $1,575 per ton in 2005 and $700 per ton in 2004.

Plant
operations expenses increased $18.3 million in 2006 compared to 2005, and decreased $27.8 million in 2005 compared to 2004. The 2006 increase was primarily due to
higher plant overhaul

32

---



costs
in 2006, as compared to 2005. The 2005 decrease was primarily due to a $56 million charge recorded during the fourth quarter of 2004 related to an estimate of possible future payments
related to asbestos claims with respect to activities at the Illinois Plants prior to their acquisition in 1999. Partially offsetting this decrease in 2005 were higher plant overhaul expenses. See
"Liquidity and Capital ResourcesContractual Obligations, Commitments and ContingenciesContingenciesGuarantees and IndemnitiesIndemnity Provided as
Part of the Acquisition from Commonwealth Edison" for a discussion of the contract indemnity agreement with Commonwealth Edison.

Asset
impairment charges for 2005 consisted of $7.0 million primarily associated with a redefined capital program related to coal dust mitigation. Loss on lease termination, asset
impairment and other charges in 2004 consisted of $60.9 million related to the loss on termination of the Collins Station lease, $10.3 million of impairment charges related to the
termination of the power purchase agreement for the remaining two units at the Collins Station, a $4.6 million inventory reserve for excess spare parts and fuel oil inventory at the Collins
Station, and $28.8 million related to the impairment of the small peaking units.

Depreciation
and amortization expense increased $0.9 million in 2006 compared to 2005, and decreased $28.8 million in 2005 compared to 2004. The 2005 decrease was primarily
attributable to the elimination of depreciation on the Collins Station since September 30, 2004 and the peaking units since June 30, 2004, as a result of impairments and decommissioning.
The amortization expense relates to the Powerton-Joliet facilities sale-leaseback which is being amortized over the term of the lease and the Collins Station lease through its termination
in April 2004.

In
2006, Midwest Generation recorded a net loss of $11.1 million on asset disposal, primarily due to a $13.5 million write-off of the estimated net book value
of some major components that were replaced in 2006, partially offset by a gain of $2.4 million on the sale of peaker equipment. In 2005, Midwest Generation recorded gains on asset disposal
primarily related to the sale of Collins Station equipment.

Other Income (Expense)

Years Ended December 31,2006

2005

2004(in thousands)Interest income and other expense

$
4,130

$
848

$
(551
)Interest income from affiliate


114,993


113,084


113,229Interest expense


(202,519
)

(207,271
)

(184,016
)Interest expense to affiliate








(66,148
)Total other expense

$
(83,396
)
$
(93,339
)
$
(137,486
)


Interest expense decreased $4.8 million in 2006 compared to 2005, and increased $23.3 million in 2005 compared to 2004. The 2005
increase was primarily due to a full year of interest in 2005 versus approximately eight months of interest in 2004 on Midwest Generation's 8.75% second priority senior secured notes, first priority
secured institutional term loan and working capital facilities. The increase was partially offset by lower lease financing interest from the termination of the Collins Station lease. Interest expense
in 2004 relates to $1.74 billion in new debt entered into by Midwest Generation in April 2004 in addition to the lease financings of the Powerton and Joliet Stations and the Collins
Station through April 27, 2004.

33

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Interest
expense to affiliate in 2004 related to borrowings from Edison Mission Overseas Co., a wholly owned subsidiary of Midwest Generation's parent, under subordinated loan agreements
that were settled and terminated in April 2004.

Provision (Benefit) For Income Taxes

Midwest Generation had effective income tax provision (benefit) rates of 39.2%, 39.4% and (42.5)% in 2006, 2005 and 2004, respectively. The effective tax rates
were different from the federal statutory rate of 35% due to state income taxes. The income tax benefit results from the tax-allocation agreement with Midwest Generation's parent, Edison
Mission Midwest Holdings.

Cumulative Effect of Change in Accounting Principle

Statement of Financial Accounting Standard Interpretation No. 47

Effective December 31, 2005, Midwest Generation adopted Financial Accounting Standard Interpretation No. 47, "Accounting for Conditional Asset
Retirement Obligations" (FIN 47). For further discussion of FIN 47 refer to "New Accounting Pronouncements." Midwest Generation recorded a $1.2 million, after tax, decrease to net income as the
cumulative effect of the adoption of FIN 47.

Related Party Transactions

EMMT Agreements

Midwest Generation entered into a revolving credit agreement with EMMT, dated as of April 27, 2004, pursuant to which Midwest Generation can, from time to
time, make revolving loans to, and have letters of credit issued on behalf of, EMMT. The loans and letters of credit provide credit support for forward contracts entered into by EMMT related to the
Illinois Plants. Midwest Generation had provided $43.5 million and $328.1 million to EMMT as of December 31, 2006 and 2005, respectively, which EMMT used to provide credit support
for forward contracts. Loans provided under this revolving credit agreement are repaid by EMMT upon the return of the funds under the terms of the related forward contract. The amount repaid includes
interest earned, if any, under margining agreements supporting such contracts. The maximum amount of available credit under the agreement is $500 million.

Midwest
Generation has entered into a master purchase, sale and services agreement with EMMT, pursuant to which EMMT arranges for purchases and sales of the following products, including
related services: (i) energy and capacity; (ii) natural gas; (iii) fuel oil; and (iv) emission allowances.

Midwest
Generation compensates EMMT in accordance with the following table with respect to these transactions, and reimburses EMMT for brokers' fees, taxes, and other reasonably incurred
direct out-of-pocket expenses. Payment for these services is due within 30 days of billing.

Service

CompensationEnergy

$.02/MWhCapacity

$.02/MW-dayNatural gas

$.02/MMBtuFuel oil

$.05/bblEmission allowances

$.25/SO2 allowance; and $25/NOX allowance


34

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The net fees earned by EMMT were $1.0 million, $1.5 million and $1.8 million for the years ended December 31, 2006,
2005 and 2004, respectively. Midwest Generation had receivables due from EMMT of $104.4 million and $203.6 million at December 31, 2006 and 2005, respectively. The decrease in
receivable balance in 2006 is due to lower sales of power and emissions by Midwest Generation through EMMT in December 2006 compared to December 2005.

Midwest
Generation also entered into several transactions through EMMT to sell surplus or purchase SO2 and NOX allowances. All transactions were completed at
market price on the date of the transaction. Net consideration received by Midwest Generation was $6.6 million, $54.7 million and $26.1 million during 2006, 2005 and 2004,
respectively.

Fuel Services Agreement

Midwest Generation has entered into an agreement with Edison Mission Energy Services, Inc. to provide fuel and transportation services related to coal and
fuel oil. Under the terms of this agreement, Midwest
Generation pays a service fee of $.06 for each ton of coal delivered and $.05 for each barrel of fuel oil delivered, plus the actual cost of the commodities. The amount billable under this agreement
for the service fee for each of the years ended December 31, 2006, 2005 and 2004 was $1.1 million.

Notes Receivable from EME

The proceeds received by Midwest Generation from the Powerton-Joliet sale-leaseback transaction were loaned to EME. The loan is evidenced by four
intercompany notes amounting to $1.367 billion. EME is obligated to repay the principal on the notes in a series of installments on the dates and in the amounts set forth on a schedule to each
note. EME has paid and is required to pay interest on the notes on each January 2 and July 2 at an 8.30% fixed interest rate. All amounts due under the notes are due to be repaid in full
by January 2, 2016. Midwest Generation earned interest income of $115.0 million, $113.1 million and $113.2 million during 2006, 2005 and 2004, respectively.

Loan Agreements with Edison Mission Overseas Co.

Edison Mission Midwest Holdings used the proceeds of the loan under the credit agreement that it entered into in December 1999 (a total of approximately
$1.8 billion) to make an equity investment in its wholly owned subsidiary, Edison Mission Overseas Co., which in turn loaned the money to Midwest Generation. Edison Mission Overseas and Midwest
Generation entered into a subordinated loan agreement with terms matching the terms of Edison Mission Midwest Holdings' credit agreement. Under the terms of the subordinated loan agreement, Midwest
Generation was required to make payments to Edison Mission Overseas similar to those payments made by Edison Mission Midwest Holdings under its credit agreement. The obligations of Edison Mission
Midwest Holdings were guaranteed by Midwest Generation. In April 2004, Midwest Generation refinanced the borrowings of approximately $693 million (plus accrued interest and fees) under
the subordinated loan agreement with proceeds of its $1.7 billion notes issuance and term loan. Midwest Generation then also settled the outstanding balance on the subordinated revolving loan
agreement with Edison Mission Overseas with an equity contribution of approximately $2.2 billion from Edison Mission Midwest Holdings.

Tax-Allocation Agreements

Midwest Generation is included in the consolidated federal and state income tax returns of Edison International and is party to a tax-allocation
agreement with its parent, Edison Mission Midwest Holdings. As long as Edison International continues to own, directly or indirectly, at least 80% of the voting power of the stock of EME and its
existing subsidiaries and at least 80% of the value of such

35

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stock,
Midwest Generation will be included in the consolidated federal and state income tax returns of Edison International. In accordance with the agreement and the tax-allocation
procedures that have been in effect since Midwest Generation's formation, its current tax liability or benefit is generally determined on a separate return basis, except for calculating consolidated
state income taxes, for which Midwest Generation uses the long-term state tax apportionment factors of the Edison International group. Also, while Midwest Generation is generally subject
to separate return limitations for net losses, under the tax-allocation agreement it is permitted to transfer to Edison Mission Midwest Holdings, or its subsidiaries, net operating loss
benefits which would not yet be realized in a separate return in exchange for a reduction in Midwest Generation's intercompany account balances (including subordinated loans).

Amounts
on the balance sheet associated with this tax-allocation agreement totaled $19.1 million at December 31, 2006 included in due to affiliates and
$13.0 million at December 31, 2005 included in due from affiliates.

Services Agreements with EME and Edison International

Certain administrative services, such as payroll, employee benefit programs, insurance and information technology are shared among all affiliates of Edison
International, and the costs of these corporate support services are allocated to all affiliates. The cost of services provided by Edison International and EME, including those related to Midwest
Generation, are allocated based on one of the following formulas: percentage of the time worked, equity in investment and advances, number of employees, or multi-factor (operating revenues, operating
expenses, total assets and total employees). Midwest Generation participates in a common payroll and benefit program with all Edison International employees. In addition, Midwest Generation is billed
for any direct labor and out-of-pocket expenses for services directly requested for its benefit. Midwest Generation believes the allocation methodologies are reasonable. Costs
incurred for these programs, payroll funding, and other services during the years ended December 31, 2006, 2005 and 2004 were $125.0 million, $125.7 million and
$138.1 million, respectively. Midwest Generation had a net receivable due from Edison International of $0.3 million and $0.9 million at December 31, 2006 and 2005,
respectively, related to these programs.

Midwest
Generation participates in the insurance program of Edison International, including property, general liability, workers compensation and various other specialty policies.
Midwest Generation's insurance premiums are generally based on its share of risk related to each policy. In connection with the property insurance program, a portion of the risk is reinsured by a
captive insurance subsidiary of Edison International.

Agreements with Midwest Generation EME, LLC

Management and Administration Agreement

In April 2004, Midwest Generation EME and Midwest Generation entered into a new management and administration agreement pursuant to which Midwest
Generation EME began charging Midwest Generation for management and administrative services. Actual costs billable under this agreement for the years ended December 31, 2006, 2005 and 2004 were
$12.3 million, $13.1 million and $15.7 million, respectively.

Support Services Agreement

Midwest Generation has entered into an agreement with Midwest Generation EME for support services, including construction and construction management, operations
and maintenance management, technical services and training, environmental, health and safety services, administrative and IT support,

36

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and
other managerial and technical services needed to operate and maintain electric power facilities. Under the terms of the agreement, Midwest Generation reimburses Midwest Generation EME for actual
costs incurred by functional area in providing support services, or in the case of specific tasks requested by Midwest Generation, the amount negotiated for the task. Actual costs billable under this
agreement for the years ended December 31, 2006, 2005 and 2004 were $7.1 million, $6.9 million and $6.1 million, respectively.

Midwest
Generation had payables of $1.5 million due to Midwest Generation EME at both December 31, 2006 and 2005 related to these agreements.

New Accounting Pronouncements

Accounting Principles Adopted

Statement of Financial Accounting Standards No. 123(R)

SFAS No. 123(R) requires companies to use the fair value accounting method for stock-based compensation. Midwest Generation implemented SFAS
No. 123(R) in the first quarter of 2006 and applied the modified prospective transition method. Under the modified prospective method, SFAS No. 123(R) was applied effective
January 1, 2006 to the unvested portion of awards previously granted and will be applied to all prospective awards. Prior financial statements were not restated under this method. SFAS
No. 123(R) resulted in the recognition of expense for all stock-based compensation awards. In addition, Midwest Generation elected to calculate the pool of windfall tax benefits as of the
adoption of SFAS No. 123(R) based on the method (also known as the short-cut method) proposed in FSP FAS 123(R)-3, "Transition Election to Accounting for the Tax Effects of Share-Based
Payment Awards." Prior to January 1, 2006, Midwest Generation used the intrinsic value method of accounting, which resulted in no recognition of expense for Edison International stock options.
The adoption of this standard had an insignificant impact on Midwest Generation's consolidated financial statements.

FASB Staff Position FIN 46(R)-6

In April 2006, the FASB issued Staff Position FIN 46(R)-6, "Determining Variability to be Considered in Applying FIN 46(R)." FIN
46(R)-6 states that the variability to be considered in applying FIN 46(R) shall be based on an analysis of the design of the entity following a two-step process. The first
step is to analyze the nature of the risks in the entity. The second step would be to determine the purpose(s) for which the entity was created and determine the variability (created by the risks
identified in Step 1) the entity is designed to create and pass along to its interest holders. The guidance in this FASB Staff Position was effective prospectively beginning July 1,
2006, although companies had until December 31, 2006 to elect retrospective applications. Midwest
Generation adopted FIN 46(R)-6 prospectively beginning July 1, 2006. Applying the guidance had no effect on Midwest Generation's consolidated financial statements for the year ended
December 31, 2006.

Statement of Financial Accounting Standards No. 158

In September 2006, the FASB issued SFAS No. 158, which amends the accounting by employers for defined benefit pension plans and postretirement
benefits other than pensions. SFAS No. 158 requires companies to recognize the overfunded or underfunded status of a defined benefit pension and other postretirement plans as assets or
liabilities in their balance sheet; the assets or liabilities are offset through other comprehensive income. Midwest Generation adopted SFAS No. 158 prospectively on December 31, 2006.
SFAS No. 158 also requires companies to align the measurement dates for their plans to their fiscal year-ends; Midwest Generation already has a fiscal year-end
measurement date for

37

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all
of its postretirement plans. Upon adoption, Midwest Generation recorded additional postretirement benefit liabilities of $8.5 million (included in benefit plans and other
long-term liabilities) and a reduction to accumulated other comprehensive income (a component of member's equity) of $5.2 million, net of tax.

Staff Accounting Bulletin No. 108

In September 2006, the SEC issued Staff Accounting Bulletin (SAB) No. 108, which provides interpretive guidance on the consideration of the effects
of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB No. 108 requires additional quantitative testing to determine whether a
misstatement is material. Midwest Generation implemented SAB No. 108 for the filing of its Annual Report on Form 10-K for the year ended December 31, 2006. Applying
the guidance had no effect on Midwest Generation's consolidated financial statements for the year ended December 31, 2006.

Accounting Principles Not Yet Adopted

Statement of Financial Accounting Standards Interpretation No. 48

In July 2006, the FASB issued Statement of Financial Accounting Standards Interpretation No. 48, "Accounting for Uncertainty in Income Taxes," that
clarifies the accounting for uncertain tax positions. An enterprise would be required to recognize, in its financial statements, the best estimate of the impact of a tax position by determining if the
weight of the available evidence indicates it is more likely than not, based solely on the technical merits, that the position will be sustained on audit. Midwest Generation will adopt the new
interpretation in the first quarter of 2007. The new interpretation is not expected to result in a material adjustment to member's equity.

Statement of Financial Accounting Standards No. 155

In February 2006, the FASB issued SFAS No. 155, which amends SFAS No. 133 and SFAS No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." SFAS No. 155 allows financial instruments that have embedded derivatives to be accounted for at fair value at acquisition, at issuance, or
when a previously recognized financial instrument is subject to a remeasurement event, on an instrument-by-instrument basis, in cases in which a derivative would otherwise have
to be bifurcated. SFAS No. 155 is effective for all financial instruments acquired, issued, or subject to remeasurement after January 1, 2007. The fair value election provided for in
paragraph 4(c) of this Statement may also be applied upon adoption of this Statement for hybrid financial instruments that had been bifurcated under paragraph 12 of SFAS No. 133
prior to the adoption of this Statement. Midwest Generation does not expect the adoption of this standard to have a material impact on Midwest Generation's consolidated financial statements.

Statement of Financial Accounting Standards No. 157

In September 2006, the FASB issued a new accounting standard on fair value measurements (SFAS No. 157). SFAS No. 157 clarifies the definition
of fair value, establishes a framework for measuring fair value and expands the disclosures on fair value measurements. Midwest Generation will adopt SFAS No. 157 on January 1, 2008.
Midwest Generation is currently evaluating the impact of adopting SFAS No. 157 on its consolidated financial statements.

38

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LIQUIDITY AND CAPITAL RESOURCES

Introduction

The following discussion of liquidity and capital resources is organized in the following sections:

PageConsolidated Cash Flow

39Capital Expenditures

40Credit Facility and Indenture Covenants

40Powerton-Joliet Lease Payments

41Credit Ratings

42Contractual Obligations, Commitments and Contingencies

43Off-Balance Sheet Transactions

46Environmental Matters and Regulations

46


Consolidated Cash Flow

At December 31, 2006, Midwest Generation had cash and cash equivalents of $170.8 million, compared to $124.1 million at December 31,
2005. Net working capital at December 31, 2006 was $237.4 million, compared to $395.4 million at December 31, 2005. The decline in working capital was primarily the result
of a decrease in receivables from affiliates including loans for margin deposits and a decrease in current deferred tax assets, partially offset by an increase in net derivative assets. These changes
were largely driven by a decline in forward power prices.

Net
cash provided by operating activities totaled $873.7 million, $145.3 million and $190.5 million in 2006, 2005 and 2004, respectively. The 2006 increase was
primarily due to payments received from affiliates on loans and receivables, partially offset by an increase in net derivative assets. Midwest Generation's significant profits in 2005 contributed to
net cash provided by operating activities, partially offset by the timing of cash receipts and disbursements related to working capital items.

Net
cash used in financing activities totaled $819.2 million, $256.3 million and $37.8 million in 2006, 2005 and 2004, respectively. In 2006, Midwest Generation made
distributions of $541.8 million to its parent, repaid $170 million under its working capital facility, and repaid capital lease obligation of $103.9 million. In 2005, Midwest
Generation paid a $330.2 million distribution to its parent, repaid $493.0 million of long-term debt, received a $300 million capital contribution from its parent and
borrowed $328.4 million of long-term debt. In 2004, Midwest Generation refinanced all its affiliate debt by completing a $1 billion private offering of secured notes and
borrowing $700 million under a new term loan facility. Midwest Generation used these proceeds primarily to pay off the $692.7 million of debt that was due to its affiliate in
December 2004 and to make the approximately $960 million termination payment under the Collins Station lease. Midwest Generation settled the remaining balance of its affiliate debt by
receiving a $2.2 billion non-cash equity contribution from its parent. Midwest Generation also entered into a new $200 million working capital facility that replaced a prior
facility, of which $40 million had been drawn during 2004 and subsequently paid off by December 31, 2004. In 2004, Midwest Generation generated excess cash flow as defined in its new
credit agreement which allowed Midwest Generation to make an $87.9 million cash distribution to its parent.

Net
cash provided by (used in) investing activities totaled $(7.9) million, $78.9 million and $(33.0) million in 2006, 2005 and 2004, respectively. The 2006 increase in cash used
in investing activities was primarily due to a decrease in the proceeds received from the sale of SO2 emission allowances, a

39

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decrease
in the loan repayments to affiliates in 2006 and the sale of auction rate security investments for $20 million in 2005. The 2005 increase in cash provided by investing activities was
primarily due to an increase in the proceeds received from the sale of excess SO2 emission allowances, proceeds received from the sale of Collins Station assets and the sale of
$20.0 million of auction rate security investments.

Midwest
Generation's principal sources of liquidity are cash on hand, a $500 million working capital facility, payments by EME under the intercompany notes issued in connection
with the Powerton-Joliet facilities sale-leaseback and future cash flow from operations.

Capital Expenditures

At December 31, 2006, the three-year estimated capital expenditures by Midwest Generation were as follows:

2007

2008

2009(in millions)Plant capital expenditures

$
53.9

$
44.5

$
26.4Environmental expenditures


21.0


38.6


66.5Total

$
74.9

$
83.1

$
92.9


Plant capital expenditures relate to non-environmental projects such as upgrades to dust collection/mitigation systems and mill
inerting projects. Environmental expenditures relate to various projects to achieve specified emissions reductions such as installation of mercury controls. Midwest Generation plans to finance these
expenditures with financings, cash on hand or cash generated from operations. See further discussion regarding these and possible additional capital expenditures under "Environmental
Matters and RegulationsAir Quality Regulation."

Credit Facility and Indenture Covenants

Midwest Generation is bound by the covenants in its credit agreement and indenture as well as certain covenants under the Powerton-Joliet lease documents with
respect to Midwest Generation making payments under the leases. These covenants include restrictions on the ability to, among other things, incur debt, create liens on its property, merge or
consolidate, sell assets, make investments, engage in transactions with affiliates, make distributions, make capital expenditures, enter into agreements restricting its ability to make distributions,
engage in other lines of business or engage in transactions for any speculative purpose. In addition, the credit agreement contains financial covenants binding on Midwest Generation.

Covenants in Credit Agreement

In order for Midwest Generation to make a distribution, it must be in compliance with the covenants specified under its credit agreement, including maintaining
the following two financial performance requirements:

40

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In
addition, Midwest Generation's distributions are limited in amount. Under the terms of Midwest Generation's credit agreement, Midwest Generation is permitted to distribute 75% of its
excess cash flow (as defined in the credit agreement). In addition, if equity is contributed to Midwest Generation, Midwest Generation is permitted to distribute 100% of excess cash flow until the
aggregate portion of distributions that Midwest Generation attributed to the equity contribution equals the amount of the equity contribution. Because EME made a $300 million equity
contribution to Midwest Generation on April 19, 2005, Midwest Generation is permitted to distribute 100% of excess cash flow until the aggregate portion of such distributions attributed to that
equity contribution equals $300 million. In January 2007, Midwest Generation made an additional distribution of $117 million. After taking into account this distribution, the
remaining incremental distribution that can be attributed to the equity contribution is $58 million. To the extent Midwest Generation makes a distribution which is not fully attributed to an
equity contribution, Midwest Generation is required to make concurrently with such distribution an offer to repay debt in an amount equal to the excess, if any, of one-third of such
distribution over the amount attributed to the equity contribution.

Covenants in Indenture

Midwest Generation's indenture contains restrictions on its ability to make a distribution substantially similar to those in the credit agreement. Failure to
achieve the conditions required for distributions will not result in a default under the indenture, nor does the indenture contain any other financial performance requirements.

Powerton-Joliet Lease Payments

As part of the sale-leaseback of the Powerton and Joliet Stations, Midwest Generation loaned the proceeds (in the original amount of
$1.367 billion) to EME in exchange for promissory notes in the same aggregate amount. EME's obligations under the promissory notes payable to Midwest Generation are general corporate
obligations of EME and are not contingent upon receiving distributions from its subsidiaries. There is no assurance that EME will have sufficient cash flow to meet these obligations. Furthermore, EME
has guaranteed Midwest Generation's lease obligations under these leases. If EME fails to pay under its guarantee, including payments due under the Powerton-Joliet leases in the event that Midwest
Generation could not make such payments, this would result in an event of default under the Powerton and Joliet leases. This event would have a material adverse effect on Midwest Generation.

41

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Credit Ratings

Overview

Credit ratings for EME, Midwest Generation and EMMT, at December 31, 2006, were as follows:

Moody's Rating

S&P RatingEME

B1

BB-Midwest Generation:First priority senior secured rating

Baa3

BBSecond priority senior secured rating

Ba2

B+EMMT

Not Rated

BB-


On September 27, 2006, Moody's raised Midwest Generation's first priority senior secured rating to Baa3 from Ba2 and its second priority
senior secured rating to Ba2 from Ba3. On September 29, 2006, S&P raised the credit rating of EME and EMMT to BB- from B+. In addition, S&P raised Midwest Generation's first
priority senior secured rating to BB from BB- and its second priority senior secured rating to B+ from B.

Midwest
Generation cannot provide assurance that the credit ratings above will remain in effect for any given period of time or that one or more of these ratings will not be lowered.
Midwest Generation notes that these credit ratings are not recommendations to buy, sell or hold securities and may be revised at any time by a rating agency.

Credit Rating of EMMT

Midwest Generation sells merchant energy and capacity and purchases its natural gas through EMMT, which currently has a below investment grade credit rating.
Midwest Generation is expected to have cash on hand and has a $500 million working capital facility that can be used to provide credit support for hedging contracts entered into by EMMT related
to the Illinois Plants. As of December 31, 2006, $4.6 million was utilized under this facility.

As
of December 31, 2006, Midwest Generation had $43.5 million in loans receivable from EMMT. EMMT borrows under its revolving credit agreement with Midwest Generation to
provide credit support for futures and forward contracts. Loans provided under this revolving credit agreement are repaid by EMMT upon the return of the funds under the terms of the related forward
contracts. The amount repaid includes interest earned, if any, under margining agreements supporting such contracts.

Midwest
Generation anticipates that sales of its power through EMMT may require additional credit support, depending upon market conditions and the strategies adopted for the sale of
this power. Changes in forward market prices and margining requirements and increases in merchant sales could further increase the need for credit support related to hedging activities. Midwest
Generation is able to provide collateral to support bilateral contracts for power and fuel to the extent that any such transactions relate to its merchant energy operations. Depending on market
conditions and the volume and duration of forward sales, there is no assurance that Midwest Generation will be able to provide sufficient credit support to EMMT.

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Contractual Obligations, Commitments and Contingencies

Contractual Obligations

The following table summarizes Midwest Generation's significant contractual obligations as of December 31, 2006.

Payments Due by Period (in millions)Contractual Obligations

Total

Less than
1 year

1 to 3
years

3 to 5
years

More than
5 yearsLong-term debt(1)

$
2,087.0

$
112.7

$
226.7

$
528.8

$
1,218.8Lease financing(2)


1,666.4


184.9


369.9


321.3


790.3Operating lease obligations(3)


124.0


17.5


27.6


23.8


55.1Purchase obligations:Capital improvements


10.1


10.1








Calumet Energy Team contract


16.7


3.9


8.1


4.7


Fuel supply contracts


339.7


145.5


113.3


70.8


10.1Coal transportation


435.7


210.7


148.5


76.5


Employee benefit plan contribution(4)


9.2


9.2








Total Contractual Obligations

$
4,688.8

$
694.5

$
894.1

$
1,025.9

$
2,074.3


---

Lease Financing

In August 2000, Midwest Generation entered into a sale-leaseback transaction with respect to the Powerton-Joliet power facilities to
third-party lessors for an aggregate purchase price of $1.367 billion. Midwest Generation loaned the proceeds from the sale of the facilities to EME. Under the terms of the leases
(33.75 years for Powerton and 30 years for Joliet), Midwest Generation makes semi-annual lease payments on each January 2 and July 2, which began
January 2, 2001. EME guarantees Midwest Generation's payments under the leases. If a lessor intends to sell its interest in the Powerton or Joliet power facility, Midwest Generation has a right
of first refusal to acquire the interest at fair market value. Under the terms of each lease, Midwest Generation may request a lessor, at its option, to refinance the lessor debt, which, if completed,
would affect the base lease rent. Midwest Generation can make lease payments from the principal and interest payments it receives from EME under the intercompany notes as well as Midwest Generation's
cash flow from operating activities. However, in certain situations, the Powerton-Joliet lease documentation restricts the ability of Midwest Generation to use cash flow from its operating activities
to make lease payments. Midwest Generation is also required to pay operating expenses and other expenses, including interest and principal on its debt. The gain on the sale of the power facilities has
been deferred and is being amortized over the term of the leases. For more information on Midwest Generation's loans to EME, see "Item 1A. Risk Factors." In the event of a

43

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default
under the leases, each lessor can exercise all its rights under the applicable lease, including repossessing the power plant and seeking monetary damages. Each lease sets forth a termination
value payable upon termination for default and in certain other circumstances, which generally declines over time and in the case of default may be reduced by the proceeds arising from the sale of the
repossessed power plant. A default under the terms of a lease could result in a loss of Midwest Generation's ability to use the power plant subject to that lease, and would have a material adverse
effect on Midwest Generation's results of operations and financial position.

Purchase Obligations

Capital Improvements

At December 31, 2006, Midwest Generation had firm commitments in 2007 for capital expenditures primarily related to reheater tubes replacement and mill
inerting. These capital expenditures are planned to be financed by cash generated from operations.

Calumet Energy Team Contract

At December 31, 2006, Midwest Generation was party to a long-term power purchase contract with Calumet Energy Team LLC entered into as part of
the settlement agreement with Commonwealth Edison, which terminated Midwest Generation's obligation to build additional gas-fired generation in the Chicago area. The contract requires
Midwest Generation to pay a monthly capacity payment and gives Midwest Generation an option to purchase energy from Calumet Energy Team at prices based primarily on operations and maintenance and fuel
costs.

Fuel Supply Contracts

At December 31, 2006, Midwest Generation had fuel purchase commitments with various third-party suppliers for the purchase of coal. The remaining
contracts' lengths range from less than one year to six years. The minimum commitments are based on the contract provisions, which consist of fixed prices, subject to adjustment clauses. For further
discussion, see "Market Risk ExposuresCommodity Price RiskCoal Price Risk."

Coal Transportation Agreements

At December 31, 2006, Midwest Generation had contractual commitments for the transport of coal to its facilities, with remaining contract lengths that
range from one year to five years. The primary contract is with Union Pacific Railroad (and various delivering carriers) which extends through 2011. Midwest Generation commitments under this agreement
are based on actual coal purchases from the PRB. Accordingly, Midwest Generation's contractual obligations for transportation are based on coal volumes set forth in its fuel supply contracts.

Commercial Commitments

Interconnection Agreement

Midwest Generation has entered into interconnection agreements with Commonwealth Edison to provide interconnection services necessary to connect the Illinois
Plants with its transmission systems. Unless terminated earlier in accordance with their terms, the interconnection agreements will terminate on a date mutually agreed to by both parties. Midwest
Generation is required to compensate Commonwealth Edison for all reasonable costs associated with any modifications, additions or

44

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replacements
made to the interconnection facilities or transmission systems in connection with any modification, addition or upgrade to the Illinois Plants.

Guarantees and Indemnities

Tax Indemnity Agreements

In connection with the sale-leaseback transactions related to the Powerton and Joliet Stations and previously the Collins Station, EME, Midwest
Generation and another wholly owned subsidiary of EME entered into tax indemnity agreements. Under these tax indemnity agreements, these entities agreed to indemnify the lessors in the
sale-leaseback transactions for specified adverse tax consequences that could result in certain situations set forth in the tax indemnity agreement, including specified defaults under the
respective leases. The potential indemnity obligation under these tax indemnity agreements could be significant. Due to the nature of these obligations, Midwest Generation cannot determine a maximum
potential liability which would be triggered by a valid claim from the lessors. Midwest Generation has not recorded a liability related to these indemnities. In connection with the termination of the
Collins Station lease in April 2004, Midwest Generation will continue to have obligations under the tax indemnity agreement with the former lease equity investor. For more information about the
termination of the Collins Station lease, see "Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial StatementsNote 3. Loss on Lease Termination, Asset
Impairment and Other Charges."

Indemnity Provided as Part of the Acquisition from Commonwealth Edison

In connection with the acquisition of the Illinois Plants, Midwest Generation agreed to indemnify Commonwealth Edison with respect to specified environmental
liabilities before and after December 15, 1999, the date of sale. The indemnification claims are reduced by any insurance proceeds and tax benefits related to such claims and are subject to a
requirement that Commonwealth Edison take all reasonable steps to mitigate losses related to any such indemnification claim. Due to the nature of the obligation under this indemnity, a maximum
potential liability cannot be determined. This indemnification for environmental liabilities is not limited in term and would be triggered by a valid claim from Commonwealth Edison. Except as
discussed below, Midwest Generation has not recorded a liability related to this indemnity.

Midwest
Generation entered into a supplemental agreement with Commonwealth Edison and Exelon Generation on February 20, 2003 to resolve a dispute regarding interpretation of its
reimbursement obligation for asbestos claims under the environmental indemnities set forth in the Asset Sale Agreement. Under this supplemental agreement, Midwest Generation agreed to reimburse
Commonwealth Edison and Exelon Generation for 50% of specific asbestos claims pending as of February 2003 and related expenses less recovery of insurance costs, and agreed to a sharing
arrangement for liabilities and expenses associated with future asbestos-related claims as specified in the agreement. As a general matter, Commonwealth Edison and Midwest Generation apportion
responsibility for future asbestos-related claims based upon the number of exposure sites that are Commonwealth Edison locations or Midwest Generation locations. The obligations under this agreement
are not subject to a maximum liability. The supplemental agreement has a five-year term with an automatic renewal provision (subject to the right of either party to terminate). Payments
are made under this indemnity upon tender by Commonwealth Edison of appropriate proof of liability for an asbestos-related settlement, judgment, verdict, or expense. There were approximately 186 cases
for which Midwest Generation was potentially liable and that had not been settled and dismissed at December 31, 2006. Midwest Generation had recorded a $64.6 million liability at
December 31, 2006 related to this matter.

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The
amounts recorded by Midwest Generation for the asbestos-related liability are based upon a number of assumptions. Future events, such as the number of new claims to be filed each
year, the average cost of disposing of claims, as well as the numerous uncertainties surrounding asbestos litigation in the United States, could cause the actual costs to be higher or lower than
projected.

Contingencies

FERC Notice Regarding Investigatory Proceeding against EMMT

At the end of October 2006, EMMT was advised by the enforcement staff at the FERC that it is prepared to recommend that the FERC initiate a formal
investigatory proceeding and seek monetary sanctions against EMMT for alleged violation of the FERC's rules with respect to certain bidding practices employed by EMMT. EMMT is engaged in discussions
with the staff to explore the possibility of resolution of this matter. Should a formal proceeding be commenced, EMMT will be entitled to contest any alleged violations before the FERC and an
appropriate court. EMMT has advised Midwest Generation that EMMT believes that it has complied with the FERC's rules and that it intends to contest vigorously any allegation of violation. EMMT has
further advised Midwest Generation that it cannot predict at this time the outcome of this matter or estimate the possible liability should the outcome be adverse.

Tax Matters

Midwest Generation is, and may in the future be, under examination by tax authorities with respect to positions it takes in connection with the filing of its tax
returns. In Midwest Generation's opinion, it is unlikely that the resolution of any such tax audit matters will have a material adverse effect upon Midwest Generation's financial condition or results
of operations.

Off-Balance Sheet Transactions

Midwest Generation has off-balance sheet activities related to operating leases in place for equipment, primarily leased railcars, with termination
option dates in various years through 2020. See "Contractual Obligations, Commitments and Contingencies" for Midwest Generation's minimum operating lease obligations.

Environmental Matters and Regulations

Introduction

The construction and operation of power plants are subject to environmental regulation by federal, state and local authorities. Midwest Generation believes that
it is in substantial compliance with existing environmental regulatory requirements. Typically, environmental laws and regulations require a lengthy and complex process for obtaining licenses, permits
and approvals prior to construction, operation or modification of a project or generating facility. Meeting all the necessary requirements can delay or sometimes prevent the completion of a proposed
project as well as require extensive modifications to existing projects, which may involve significant capital expenditures. If Midwest Generation fails to comply with applicable environmental laws,
it may be subject to injunctive relief or penalties and fines imposed by regulatory authorities.

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Air Quality Regulation

Federal environmental regulations require reductions in emissions beginning in 2009 and require states to adopt implementation plans that are equal to or more
stringent than the federal requirements. Compliance with these regulations and SIPs will affect the costs and the manner in which Midwest Generation conducts its business, and will require Midwest
Generation to make substantial additional capital expenditures. There is no assurance that Midwest Generation would be able to recover these increased costs from its customers or that Midwest
Generation's financial position and results of operations would not be materially adversely affected as a result.

Clean Air Act

On May 12, 2005, the CAIR was published in the Federal Register. The CAIR requires 28 eastern states and the District of Columbia to address ozone
attainment issues by reducing regional NOX and SO2 emissions. The CAIR reduces the current Clean Air Act Title IV Phase II SO2 emissions allowance cap for 2010 and
2015 by 50% and 65%, respectively. The CAIR also requires reductions in regional NOX
emissions in 2009 and 2015 by 53% and 61%, respectively, from 2003 levels. The CAIR has been challenged in court, which may result in changes to the substance of the rule and to the timetables for
implementation.

Midwest
Generation expects that compliance with the CAIR and the regulations and revised SIPs developed as a consequence of the CAIR will result in increased capital expenditures and
operating expenses. Midwest Generation's approach to meeting these obligations will consist of a blending of capital expenditure and emission allowance purchases that will be based on an ongoing
assessment of the dynamics of its market conditions.

On
December 11, 2006, Midwest Generation entered into an agreement with the Illinois EPA to reduce mercury, NOX and SO2 emissions at the Illinois Plants.
The agreement has been embodied in rule language, called the CPS, and Midwest Generation's obligations under the agreement are conditioned upon the formal adoption of the CPS as an Illinois rule. On
January 5, 2007, the Illinois EPA and Midwest Generation jointly filed the CPS in the pending state rulemaking related to the Illinois SIP for the CAIR. Midwest Generation expects the CPS to
become final in the spring of 2007 and believes that, upon adoption, the CPS will provide greater predictability of the timing and amount of emissions reductions which will be required of the Illinois
Plants for these pollutants through 2018. No assurance can be given that all required regulatory approvals will be received, and if not received, Midwest Generation will remain subject to existing and
future requirements as to emissions of these pollutants.

If
the agreement is implemented as contemplated, Midwest Generation will be required to achieve specified emissions reductions through a combination of environmental retrofits or unit
shutdowns. The agreement contemplates three phases with each phase relating to one of the pollutants involved. Capital expenditures will be required for each phase.

The
first phase involves installing activated carbon injection technology in 2008 and 2009 for the removal of mercury, a technology which Midwest Generation has been testing at some of
its plants. Capital expenditures relating to these controls are currently estimated to be approximately $60 million.

The
second phase requires the installation of additional controls by the end of 2011 to further reduce NOX emissions from units to be determined by Midwest Generation in
order to achieve an agreed-on fleetwide level of NOX emissions per million Btu. Capital expenditures for these controls are currently estimated to be approximately
$450 million.

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Thereafter,
during the third phase of the plan, the focus will be on the reduction of SO2 emissions. Midwest Generation will be required either to place controls on several
units at the Illinois Plants between 2012 and 2018 for this purpose or to remove them from service. Midwest Generation will consider many factors in making this choice including, among others, an
assessment of the cost and performance of environmental technologies and equipment, the remaining estimated useful life of each affected unit and the market outlook for the prices of various
commodities including electrical energy and capacity, coal and natural gas. In view of the many factors involved, Midwest Generation has not yet determined what actions it may take at each affected
unit to provide for optimal compliance with the agreement during its third phase. At this time, however, additional capital expenditures during the third phase of the plan are estimated as being in
the range of approximately $2.2 billion to $2.9 billion, depending on the number of units on which controls are placed versus the number which are removed from service. For the reasons
described above, actual capital expenditures may vary substantially from the above estimates.

On
May 30, 2006, the Illinois EPA submitted a proposed regulation to the Illinois Pollution Control Board to implement the Illinois SIP required for compliance with the CAIR. The
Illinois Pollution Control Board held hearings on this SIP on October 10, 2006 and November 28, 2006. As noted previously, on January 5, 2007 the Illinois EPA and Midwest
Generation filed the CPS in the pending Illinois rulemaking.

Mercury Regulation

The CAMR, published in the Federal Register on May 18, 2005, creates a market-based cap-and-trade program to reduce nationwide
utility emissions of mercury in two distinct phases. In the first phase of the program, which will come into effect in 2010, the annual nationwide cap will be 38 tons. Emissions of mercury are to be
reduced primarily by taking advantage of mercury reductions achieved by reducing SO2 and NOX emissions under the CAIR. In the second phase, which is to take effect in 2018,
coal-fired power plants will be subject to a lower annual cap, which will reduce emissions nationwide to 15 tons. States may join the trading program by adopting the CAMR model trading
rule in state regulations, or they may adopt regulations that mirror the necessary components of the model trading rule. States are not required to adopt a cap-and-trade
program and may promulgate alternative regulations, such as command and control regulations, that are equivalent to or more stringent than the CAMR's suggested cap-and-trade
program. Any program adopted by a state must be approved by the US EPA.

Contemporaneous
with the adoption of the CAMR, the US EPA rescinded its previous finding that mercury emissions from coal-fired power plants had to be regulated as a
hazardous air pollutant pursuant to Section 112 of the federal Clean Air Act, which would have imposed technology-based standards. Both the US EPA's rescission action and the CAMR are being
challenged in the courts. Because Midwest Generation cannot predict the outcome of these challenges, which could result in changes to the CAMR rules and timetables, the full impact of this regulation
currently cannot be assessed.

The
final state rule for the reduction of mercury emissions in Illinois was adopted and became effective on December 21, 2006. The rule requires a 90% reduction of mercury
emissions from coal-fired power plants averaged across company-owned Illinois stations and a minimum reduction of 75% for individual generating sources by July 1, 2009. The rule
requires each station to achieve a 90% reduction by January 1, 2014 and, because emissions are measured on a rolling 12-month average, stations must install equipment necessary to
meet the January 1, 2014, 90% reduction by January 1, 2013. Buying or selling of emission allowances under the federal CAMR cap-and-trade program would be
prohibited.

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Midwest
Generation's pending CPS, if adopted, will supersede this rule for the Illinois Plants. The CPS requires installation of activated carbon injection technology for the removal of
mercury on all Midwest Generation units by July 2009 (except for three units to be shut down by the end of 2010), prohibits participation in the federal cap-and-trade
program, and requires a 90% removal of mercury by unit by the end of 2015. While its CPS is pending, Midwest Generation has filed an appeal of the state's mercury rule that would require a 90%
fleetwide reduction in mercury emissions by July 2009.

Ambient Air Quality Standards

The US EPA designated non-attainment areas for its 8-hour ozone standard on April 30, 2004, and for its fine particulate matter
standard on January 5, 2005. Almost all of Midwest Generation's facilities are located in counties that have been identified as being in non-attainment with both standards. States
are required to revise their SIPs for the ozone and particulate matter standards within three years of the effective date of the respective non-attainment designations. Depending upon the
final standards that are adopted, Midwest Generation may incur substantial costs or experience other financial impacts resulting from required capital improvements or operational changes.

On
September 22, 2006 the US EPA issued a final rule that implements the revisions to its fine particulate standard originally proposed on January 17, 2006. Under the new
rule, the annual standard remains the same but the 24-hour fine particulate standard is significantly more stringent. The rule may require states to impose further emission reductions
beyond those necessary to meet the existing standards. Midwest Generation anticipates that any such further emissions reduction obligations would not be imposed under this standard until 2015 at the
earliest, and intends to consider such rules as part of its overall plan for environmental compliance.

Beginning
with the 2003 ozone season (May 1 through September 30), Midwest Generation has been required to comply with an average NOX emission rate of 0.25 lb
NOX/MMBtu of heat input. This limitation is commonly referred to as the East St. Louis State Implementation Plan. This regulation is a State of Illinois requirement. Each of the Illinois
Plants complied with this standard in 2004. Beginning with the 2004 ozone season, the Illinois Plants became subject to the federally mandated "NOX SIP Call" regulation that provided
ozone-season NOX emission allowances to a 19-state region east of the Mississippi. This program provides for NOX allowance trading similar to the SO2
(acid rain) trading program already in effect.

During
2004, the Illinois Plants stayed within their NOX allocations by augmenting their allocation with early reduction credits generated within the fleet. In 2005, the
Illinois Plants used banked allowances, along with some purchased allowances, to stay within their NOX allocations. In 2006, the Illinois Plants used purchased allowances to stay within
their NOX allocations. Midwest Generation plans to continue to purchase allowances as it implements the agreement it reached with the Illinois EPA.

The
Illinois EPA has begun to develop SIPs to meet National Ambient Air Quality Standards for 8-hour ozone and fine particulates with the intent of bringing
non-attainment areas, such as Chicago, into attainment. The SIPs are expected to deal with all emission sources, not just power generators, and to address emissions of NOX,
SO2, and volatile organic compounds. These SIPs are to be submitted to the US EPA by June 15, 2007 for 8-hour ozone, and by April 5, 2008 for fine particulates.
These SIPs are likely to require additional emission reductions from facilities that are significant emitters of ozone precursors and particulates. Any additional obligations on Midwest Generation's
facilities to further reduce their emissions of SO2, NOX and fine particulates to address local non-attainment with the 8-hour ozone and fine
particulate matter standards will not be known until Illinois revises its SIPs.

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Midwest
Generation's agreement with the Illinois EPA and the pending CPS include emission controls that will contribute to ozone and fine particulate attainment. Midwest Generation
expects, but cannot guarantee, that the reductions required under the agreement and the pending CPS will be sufficient for compliance with future ozone and particulate matter regulations. See
"Clean Air Act" for further discussion.

Regional Haze

The goal of the 1999 regional haze regulations is to restore visibility in mandatory federal Class I areas, such as national parks and wilderness areas, to
natural background conditions in 60 years. Sources such
as power plants that are reasonably anticipated to contribute to visibility impairment in Class I areas may be required to install Best Available Retrofit Technology (BART) or implement other
control strategies to meet regional haze control requirements. States are required to revise their SIPs to demonstrate reasonable further progress towards meeting regional haze goals. Emission
reductions achieved through other ongoing control programs may be sufficient to demonstrate reasonable progress toward the long-term goal, particularly for the first 10 to 15 year
phase of the program. States must develop SIPs by December 2007. It is possible that sources subject to the CAIR will be able to satisfy their obligations under the regional haze regulations
through compliance with the CAIR. However, until the SIPs are revised, Midwest Generation cannot predict whether it will be required to install BART or implement other control strategies, and cannot
identify the financial impacts of any additional control requirements.

The
CPS, discussed above in "Clean Air Act," addresses emissions reductions at BART affected sources.

New Source Review Requirements

Since 1999, the US EPA has pursued a coordinated compliance and enforcement strategy to address Clean Air Act NSR compliance issues at the nation's
coal-fired power plants. The NSR regulations impose certain requirements on facilities, such as electric generating stations, in the event that modifications are made to air emissions
sources at a facility. The US EPA's strategy included both the filing of a number of suits against power plant owners, and the issuance of a number of administrative notices of violation to power
plant owners alleging NSR violations. Midwest Generation has not been named as a defendant in these lawsuits and has not received any administrative Notices of Violation alleging NSR violations at any
of its facilities.

On
October 13, 2005, the US EPA proposed a change to the NSR program. The proposal put forth several options for a new emissions test based on the impact of a facility
modification on a facility's maximum hourly emissions or its emissions per unit of energy produced. The existing NSR emissions test is based on the impact of a modification on a generating station's
net annual emissions.

In
October 2005, the US EPA announced a revised NSR strategy to take account of recent US EPA rulemakings, such as the CAIR and regional haze rules, affecting
coal-fired power plants. Under the revised strategy, while the US EPA will continue to pursue filed cases and cases in active negotiation, it intends to shift its future enforcement focus
from coal-fired power plants to other sectors where compliance assurance activities have the potential to produce significant environmental benefits.

On
February 21, 2003, Midwest Generation received a request for information under Section 114 regarding past operations, maintenance and physical changes at the Illinois
Plants from the US EPA. This request was part of the US EPA's industry-wide investigation of compliance by coal-fired plants with the

50

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Clean
Air Act NSR requirements. On July 28, 2003, Commonwealth Edison received a substantially similar request for information from the US EPA related to the same plants. In a request dated
February 1, 2005, the US EPA submitted a request for additional information to Midwest Generation. Midwest Generation has provided responses to these requests. Other than these requests for
information, no NSR enforcement-related proceedings have been initiated by the US EPA with respect to Midwest Generation's facilities.

Midwest
Generation will continue to monitor developments with respect to the NSR program and NSR enforcement to assess what implications, if any, they will have on its facilities, its
results of operations or financial position.

Water Quality Regulation

Clean Water ActCooling Water Intake Structures

On July 9, 2004, the US EPA published the final Phase II rule implementing Section 316(b) of the Clean Water Act establishing standards for cooling
water intake structures at existing large power plants. The purpose of the regulation is to reduce substantially the number of aquatic organisms that are pinned against cooling water intake structures
or drawn into cooling water systems. Pursuant to the regulation, a demonstration study must be conducted when applying for a new or renewed National Pollutant Discharge Elimination System wastewater
discharge permit. If one can demonstrate that the costs of meeting the presumptive standards set forth in the regulation are significantly greater than the costs that the US EPA assumed in its rule
making or are significantly disproportionate to the expected environmental benefits, a site-specific analysis may be performed to establish alternative standards. Depending on the findings
of the demonstration studies, cooling towers and/or other mechanical means of reducing impingement and entrainment of aquatic organisms may be required. Midwest Generation has begun to collect
impingement and entrainment data at its potentially affected Illinois Plants to begin the process of determining what corrective actions may need to be taken.

The
Phase II cooling water intake structure rule was challenged in the courts, and the cases were consolidated and transferred to the United States Court of Appeals for the Second
Circuit. On January 25, 2007, the Second Circuit granted the petitions challenging the rule and remanded the rule to the US EPA for further proceedings. Although the Phase II rule could have a
material impact on Midwest Generation's operations, Midwest Generation cannot reasonably determine the financial impact on it at this time because it is still collecting the data required by the
regulation and because the challenges mentioned above may affect the obligations imposed by the rule.

The
Illinois EPA is reviewing the water quality standards for the Des Plaines River adjacent to the Joliet Station and immediately downstream of the Will County Station to determine if
the use classification should be upgraded. If the existing use classification is changed, the limits on the temperature of the discharges from the Joliet and Will County plants may be made more
stringent. The Illinois EPA has also begun a review of the water quality standards for the Chicago River and Chicago Sanitary and Ship Canal which are adjacent to the Fisk and Crawford Stations.
Proposed changes to the existing standards are still being developed. Accordingly, Midwest Generation is not able to estimate the financial impact of potential changes to the water quality standards.
However, the cost of additional cooling water treatment, if required, could be substantial.

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Environmental Remediation

Under various federal, state and local environmental laws and regulations, a current or previous owner or operator of any facility, including an electric
generating facility, may be required to investigate and remediate releases or threatened releases of hazardous or toxic substances or petroleum products located at that facility, and may be held
liable to a governmental entity or to third parties for property damage, personal injury, natural resource damages, and investigation and remediation costs incurred by these parties in connection with
these releases or threatened releases. In addition, persons who arrange for the disposal or treatment of hazardous or toxic substances at a disposal or treatment facility may be liable for the costs
to remediate releases of hazardous substances from such facilities even where the disposal of such wastes was undertaken in compliance with applicable laws. Many of these laws, including the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, commonly referred to as CERCLA, as amended by the Superfund Amendments and Reauthorization Act of 1986, impose liability
without regard to whether the owner knew of or caused the presence of the hazardous substances, and courts have interpreted liability under these laws to be strict and joint and several.

With
respect to Midwest Generation's potential liabilities arising under CERCLA or similar laws for the investigation and remediation of contaminated property, Midwest Generation accrues
a liability to the extent the costs are probable and can be reasonably estimated. Midwest Generation has accrued approximately $3.0 million at December 31, 2006 for estimated
environmental investigation and remediation costs for the Illinois Plants. This estimate is based upon the number of sites, the scope of
work and the estimated costs for environmental activity where such expenditures could be reasonably estimated. Future estimated costs may vary based on changes in regulations or requirements of
federal, state, or local governmental agencies, changes in technology, and actual costs of disposal. In addition, future remediation costs will be affected by the nature and extent of contamination
discovered at the sites that requires remediation. Given the prior history of the operations at its facilities, Midwest Generation cannot be certain that the existence or extent of all contamination
at its sites has been fully identified. However, based on available information, management believes that future costs in excess of the amounts disclosed on all known and quantifiable environmental
contingencies will not be material to Midwest Generation's financial position.

Federal,
state and local laws, regulations and ordinances also govern the removal, encapsulation or disturbance of asbestos-containing materials when these materials are in poor
condition or in the event of construction, remodeling, renovation or demolition of a building. Those laws and regulations may impose liability for release of asbestos-containing materials and may
provide for the ability of third parties to seek recovery from owners or operators of these properties for personal injury associated with asbestos-containing materials. In connection with the
ownership and operation of its facilities, Midwest Generation may be liable for these costs. Midwest Generation has agreed to indemnify Commonwealth Edison for specified environmental liabilities. See
"Contractual Obligations, Commitments and ContingenciesGuarantees and Indemnities" for a discussion of this indemnity agreement.

Climate Change

To date, the United States has chosen to pursue a voluntary greenhouse gas emissions reduction program to meet its obligations as a signatory to the United
Nations Framework Convention on Climate Change. Currently a number of bills are proposed or under discussion in Congress to mandate reductions of greenhouse gas emissions. At this point, Midwest
Generation is unable to determine whether any of these proposals will be enacted into law or to estimate their potential effect on Midwest Generation.

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There have been petitions from states and other parties to compel the US EPA to regulate greenhouse gases under the CAIR. Also, in 2004, several states and environmental organizations
brought a complaint in federal court in New York, alleging that several electric utility corporations are jointly and severally liable under a theory of public nuisance for damages caused by the
alleged contribution to global warming resulting from carbon dioxide emissions from coal-fired power plants owned and operated by these companies or their subsidiaries. Midwest Generation
was not named as a defendant in the complaint. The case was dismissed and is currently on appeal with the United States Court of Appeals for the Second Circuit.

In
April 2006, private citizens brought a complaint in federal court in Mississippi against numerous defendants, including several electric utilities, arguing that emissions from
the defendants' facilities contributed to climate change and seeking monetary damages related to the 2005 hurricane season. Midwest Generation was not named as a defendant in the complaint.

The
ultimate outcome of the climate change debate could have a significant economic effect on Midwest Generation. Any legal obligation that would require Midwest Generation to reduce
substantially its emissions of carbon dioxide or would impose additional costs or charges for the emission of carbon dioxide could have a materially adverse effect on Midwest Generation.

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MARKET RISK EXPOSURES

Introduction

Midwest Generation sells all its energy into wholesale power markets. Midwest Generation's primary market risk exposures arise from fluctuations in electricity,
capacity and fuel prices, emission allowances, and transmission rights. Additionally, Midwest Generation's financial results can be affected by fluctuations in interest rates. Midwest Generation
manages these risks in part by using derivative financial instruments in accordance with established policies and procedures.

This
section discusses these market risk exposures under the following headings:

PageCommodity Price Risk

54Accounting for Energy Contracts

60Derivative Financial Instruments

61Credit Risk

62Interest Rate Risk

63


Commodity Price Risk

Overview

Midwest Generation's revenues and results of operations of its merchant power plants will depend upon prevailing market prices for capacity, energy, ancillary
services, emission allowances or credits, coal, natural gas and fuel oil, and associated transportation costs in PJM. Among the factors that influence the price of energy, capacity and ancillary
services in PJM are:

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A
discussion of commodity price risk for the Illinois Plants is set forth below.

Introduction

Midwest Generation sells all its energy and capacity into wholesale power markets through EMMT. EMMT enters into forward contracts for Midwest Generation's
electric output in order to provide more predictable earnings and cash flow. When appropriate, EMMT manages the spread between electric prices and fuel prices through the use of forward contracts,
swaps, futures, or options contracts. There is no assurance that contracts to hedge changes in market prices will be effective.

Midwest
Generation's operations expose it to commodity price risk, which represents the potential loss that can be caused by a change in the market value of a particular commodity.
Commodity price risks are actively monitored by a risk management committee to ensure compliance with Midwest Generation's risk management policies through EMMT. Policies are in place which define
risk management processes, and procedures exist which allow for monitoring of all commitments and positions with regular reviews by a risk management committee. Despite this, there can be no assurance
that all risks have been accurately identified, measured and/or mitigated.

In
addition to prevailing market prices, Midwest Generation's ability to derive profits from the sale of electricity will be affected by the cost of production, including costs incurred
to comply with environmental regulations. The costs of production of the units vary and, accordingly, depending on market conditions, the amount of generation that will be sold from the units is
expected to vary from unit to unit.

EMMT
uses "value at risk" to identify, measure, monitor and control Midwest Generation's overall market risk exposure. The use of value at risk allows management to aggregate overall
commodity risk, compare risk on a consistent basis and identify the risk factors. Value at risk measures the possible loss over a given time interval, under normal market conditions, at a given
confidence level. Given the inherent limitations of value at risk and relying on a single risk measurement tool, EMMT supplements this approach with the use of stress testing and
worst-case scenario analysis for key risk factors, as well as stop-loss limits and counterparty credit exposure limits.

Hedging Strategy

To reduce its exposure to market risk, Midwest Generation hedges a portion of its merchant portfolio risk through EMMT. To the extent that Midwest Generation does
not hedge its merchant portfolio, the unhedged portion will be subject to the risks and benefits of spot market price movements. Hedge transactions are primarily implemented through:

The
extent to which Midwest Generation hedges its market price risk depends on several factors. First, Midwest Generation evaluates over-the-counter market prices
to determine whether the types of

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hedge
transactions set forth above at forward market prices are sufficiently attractive compared to assuming the risk associated with fluctuating spot market sales. Second, Midwest Generation's
ability to enter into hedging transactions depends upon its and EMMT's credit capacity and upon the forward sales markets having sufficient liquidity to enable Midwest Generation to identify
appropriate counterparties for hedging transactions.

Midwest
Generation is permitted to use its working capital facility and cash on hand to provide credit support for hedging transactions related to the Illinois Plants entered into by
EMMT. Utilization of this credit facility in support of these hedging transactions provides additional liquidity support for
implementation of Midwest Generation's contracting strategy for the Illinois Plants. See "Credit Risk," below.

Recent Hedging Developments

In 2006, EMMT entered into agreements with third parties to hedge the price risk for power from the Illinois Plants for 2007, 2008 and 2009 (using the Northern
Illinois Hub as a reference point). Under the terms of these agreements, EME has guaranteed the obligation of EMMT, but neither EME nor EMMT is required to post margin, provide liens on property or
provide other collateral to support the obligations under the agreement.

EMMT
participated in the Illinois auction in September 2006, which resulted in its entry into two load requirements services contracts with Commonwealth Edison with periods of
seventeen months and twenty-nine months, beginning January 1, 2007. Under load requirements services contracts, the amount of power sold is a portion of the retail load of the
purchasing utility and can vary significantly with variations in that retail load. Retail load depends upon a number of factors, including the time of day, the time of the year and the utility's
number of new and continuing customers.

Energy Price Risk

All the energy and capacity from the Illinois Plants is sold under terms, including price and quantity, arranged by EMMT with customers through a combination of
bilateral agreements (resulting from negotiations or from auctions), forward energy sales and spot market sales. As discussed further below, power generated at the Illinois Plants is generally sold
into the PJM market.

Midwest
Generation sells its power into PJM at spot prices based upon locational marginal pricing. Hedging transactions related to the generation of the Illinois Plants are generally
entered into at the Northern Illinois Hub in PJM, and may also be entered into at other trading hubs, including the AEP/Dayton Hub in PJM and the Cinergy Hub in the MISO. These trading hubs have been
the most liquid locations for hedging purposes. However, hedging transactions which settle at points other than the Northern Illinois Hub are subject to the possibility of basis risk. See
"Basis Risk" below for further discussion.

PJM
has a short-term market, which establishes an hourly clearing price. The Illinois Plants are situated in the PJM control area and are physically connected to
high-voltage transmission lines serving this market.

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The
following table depicts the average historical market prices for energy per megawatt-hour during 2006, 2005 and 2004.

2006(1)

2005(1)

2004January

$
42.27

$
38.36

$
27.88
(2)February


42.66


34.92


29.98
(2)March


42.50


45.75


30.66
(2)April


43.16


38.98


27.88
(2)May


39.96


33.60


34.05
(1)June


34.80


42.45


28.58
(1)July


51.82


50.87


30.92
(1)August


54.76


60.09


26.31
(1)September


31.87


53.30


27.98
(1)October


37.80


49.39


30.93
(1)November


41.90


44.03


29.15
(1)December


33.57


64.99


29.90
(1)Yearly Average

$
41.42

$
46.39

$
29.52


---

Forward market prices at the Northern Illinois Hub fluctuate as a result of a number of factors, including natural gas prices, transmission
congestion, changes in market rules, electricity demand (which in turn is affected by weather, economic growth, and other factors), plant outages in the region, and the amount of existing and planned
power plant capacity. The actual spot prices for electricity delivered by the Illinois Plants into these markets may vary materially from the forward market prices set forth in the table below.

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The
following table sets forth the forward month-end market prices for energy per megawatt-hour for the calendar year 2007 and calendar year 2008 "strips," which
are defined as energy purchases for the entire calendar year, as quoted for sales into the Northern Illinois Hub during 2006:

24-Hour Northern Illinois Hub
Forward Energy Prices(1)2007

2008January 31, 2006

$
51.25

$
49.01February 28, 2006


45.61


44.74March 31, 2006


48.61


48.58April 30, 2006


51.38


49.88May 31, 2006


44.92


44.89June 30, 2006


45.49


45.10July 31, 2006


48.93


47.67August 31, 2006


48.68


48.40September 30, 2006


44.31


45.09October 31, 2006


44.44


45.63November 30, 2006


46.35


46.66December 31, 2006


41.00


45.14


---

The following table summarizes Midwest Generation's hedge position at December 31, 2006:

2007

2008

2009Energy Only Contracts(1)Megawatt-hours


16,323,600


10,854,400


2,048,000Average price/MWh(2)

$
48.39

$
61.33

$
60.00Load Requirements Services ContractsEstimated megawatt-hours(3)


8,522,380


6,209,315


1,805,456Average price/MWh(4)

$
64.13

$
64.01

$
63.65Total estimated megawatt-hours


24,845,980


17,063,715


3,853,456


---

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The load requirements services contracts set forth in the table above are with Commonwealth Edison. Commonwealth Edison has stated that it would
face possible bankruptcy if an electric rate freeze, which expired January 1, 2007, was re-introduced through legislation. On January 7, 2007, the Illinois House of
Representatives voted to extend the rate freeze by three years, but the bill was not acted on by the State Senate before the Legislature adjourned its 2005-2006 session. It is possible
that the issue will be revisited in the new 2007-2008 session, which convened on January 10, 2007. In addition, the Illinois Attorney General and other parties have appeals pending
before the Illinois Supreme Court pertaining to the Illinois Commerce Commission orders which authorized Commonwealth Edison and Ameren Corporation to procure power through a reverse auction process.
Midwest Generation is unable to predict the outcome of the appeals or whether legislation or other policy changes affecting utility rates or procurement practices will be enacted, and, if so, what
effect these developments may have on Commonwealth Edison's performance under the load requirement services contracts.

Basis Risk

Sales made from the Illinois Plants in the real-time or day-ahead market receive the actual spot prices or day-ahead prices,
as the case may be, at the busbars (delivery points) of the individual plants. In order to mitigate price risk from changes in spot prices at the individual plant busbars, Midwest Generation may enter
into cash settled futures contracts as well as forward contracts with counterparties for energy to be delivered in future periods. Currently, a liquid market for entering into these contracts at the
individual plant busbars does not exist. A liquid market does exist for a settlement point at the Northern Illinois Hub. Midwest Generation's hedging activities use this settlement point (and, to a
lesser extent, other similar trading hubs) to enter into hedging contracts. Midwest Generation's revenues with respect to such forward contracts include:

Under
PJM's market design, locational marginal pricing, which establishes market prices at specific locations throughout PJM by considering factors including generator bids, load
requirements, transmission congestion and losses, can cause the price of a specific delivery point to be higher or lower relative to other locations depending on how the point is affected by
transmission constraints. To the extent that, on the settlement date of a hedge contract, spot prices at the relevant busbar are lower than spot prices at the settlement point, the proceeds actually
realized from the related hedge contract are effectively reduced by the difference. This is referred to as "basis risk." During the past 12 months, the prices at the Northern Illinois Hub were
substantially the same as those at the individual busbars of the Illinois Plants.

59

---



Coal Price Risk

The Illinois Plants purchase coal primarily obtained from the Southern PRB of Wyoming. Coal purchases are made under a variety of supply agreements extending
through 2010. The following table summarizes the amount of coal under contract at December 31, 2006 for the next four years.

2007

2008

2009

2010Amount of coal under contract in millions of tons(1)

17.2

5.8

5.8

5.8


---

In February 2007, Midwest Generation contracted for the purchase of additional coal in the amount of 9 million tons for 2008,
6 million tons for 2009 and 6 million tons for 2010.

Midwest
Generation is subject to price risk for purchases of coal that are not under contract. Prices of PRB coal (with 8,800 Btu per pound heat content and 0.8 pounds of SO2
per MMBtu sulfur content), which is purchased for the Illinois Plants decreased during 2006 from 2005 year-end prices due to easing natural gas prices, fuel switching, lower prices
for SO2 allowances and improved inventory. Prices of PRB coal significantly increased in 2005 due to the curtailment of coal shipments during 2005 due to increased PRB coal demand from
other regions (east), rail constraints, higher oil and natural gas prices and higher prices for SO2 allowances. The price of PRB coal decreased from $20.66 per ton in January 2006
to $9.90 per ton at December 15, 2006, as reported by the Energy Information Administration, which compares to 2005 prices that ranged from $6.20 per ton to $18.48 per ton and 2004 prices which
were generally below $7 per ton.

Based
on Midwest Generation's anticipated coal requirements in 2007 in excess of the amount under contract, Midwest Generation expects that a 10% change in the price of coal at
December 31, 2006 would increase or decrease pre-tax income in 2007 by approximately $0.5 million.

Accounting for Energy Contracts

Midwest Generation uses a number of energy contracts to manage exposure from changes in the price of electricity, including forward sales and purchases of
physical power and forward price swaps which settle only on a financial basis (including futures contracts). Midwest Generation follows SFAS No. 133, and under this Standard these energy
contracts are generally defined as derivative financial instruments. Importantly, SFAS No. 133 requires changes in the fair value of each derivative financial instrument to be recognized in
earnings at the end of each accounting period unless the instrument qualifies for hedge accounting under the terms of SFAS No. 133. For derivatives that do qualify for cash flow hedge
accounting, changes in their fair value are recognized in other comprehensive income until the hedged item settles and is recognized in earnings. However, the ineffective portion of a derivative that
qualifies for cash flow hedge accounting is recognized currently in earnings. For further discussion of derivative financial instruments, see "Management's Overview; Critical Accounting
EstimatesCritical Accounting EstimatesDerivative Financial Instruments and Hedging Activities."

SFAS
No. 133 affects the timing of income recognition, but has no effect on cash flow. To the extent that income varies under SFAS No. 133 from accrual accounting (i.e.,
revenue recognition based on

60

---



settlement
of transactions), Midwest Generation records unrealized gains or losses. Unrealized SFAS No. 133 gains or losses result from:





Midwest
Generation classifies unrealized gains and losses from energy contracts as part of operating revenues. The results of derivative activities are recorded as part of cash flow from
operating activities in the consolidated statement of cash flow. The following table summarizes unrealized gains (losses) for the three-year period ended December 31, 2006:

Years Ended December 31,2006

2005

2004(in millions)Non-qualifying hedges

$
28.7

$
(16.5
)
$
(4.5
)Ineffective portion of cash flow hedges


1.9


(1.8
)

0.5Total unrealized gains (losses)

$
30.6

$
(18.3
)
$
(4.0
)


Derivative Financial Instruments

The following table summarizes the fair values for outstanding financial instruments used for hedging activities. The increase in fair value of electricity
contracts in 2006 as compared to 2005 is attributable to a decline in the average market prices for power as compared to contracted prices at December 31, 2006, which is the valuation date (in
thousands).

December 31,
2006

December 31,
2005Commodity price:Electricity contracts

$
93,983

$
(203,882
)


61

---



In assessing the fair value of Midwest Generation's derivative financial instruments, EMMT uses a variety of methods and assumptions based on the
market conditions and associated risks existing at each balance sheet date. The fair value of commodity price contracts takes into account quoted market prices, time value of money, volatility of the
underlying commodities and other factors. A 10% change in the market price at December 31, 2006 would increase or decrease the fair value of outstanding derivative commodity price contracts by
$248.5 million. The following table summarizes the maturities and the related fair value, based on actively traded prices, of Midwest Generation's commodity derivative assets and liabilities as
of December 31, 2006 (in thousands):

Total Fair
Value

Maturity
<1 year

Maturity
1 to 3 years

Maturity
4 to 5 years

Maturity
>5 yearsPrices actively quoted

$
93,983

$
81,347

$
12,636

$


$



Credit Risk

In conducting Midwest Generation's hedging activities, EMMT contracts with a number of utilities, energy companies, financial institutions, and other companies,
collectively referred to as counterparties. In the event a counterparty were to default on its trade obligation, Midwest Generation would be exposed to the risk of possible loss associated with
re-contracting the product at a price different from the original contracted price if the non-performing counterparty were unable to pay the resulting liquidated damages owed
to Midwest Generation. Midwest Generation's agreement with EMMT transfers the risk of non-payment of accounts receivable from counterparties to EMMT. Notwithstanding the foregoing, Midwest
Generation will not be in default under the senior secured notes and credit agreement if it fails to enforce payment from EMMT in the case of nonpayment of an account receivable from a counterparty,
so long as the counterparty is rated investment grade.

The
obligations of Midwest Generation under the senior secured notes and credit agreement are secured by, among other things, an account of EMMT in which EMMT will deposit funds received
from third-party counterparties for sales of energy and capacity from the Illinois Plants. See "Results of OperationsRelated Party TransactionsEMMT Agreements."

To
manage credit risk, EMMT looks at the risk of a potential default by counterparties. Credit risk is measured by the loss that would be incurred if counterparties failed to perform
pursuant to the terms of their contractual obligations. EMMT measures, monitors and mitigates credit risk to the extent possible. To mitigate credit risk from counterparties, master netting agreements
are used whenever possible and counterparties may be required to pledge collateral when deemed necessary. EMMT also takes other appropriate steps to limit or lower credit exposure. Processes have also
been established to determine and monitor the creditworthiness of counterparties. EMMT manages the credit risk on the portfolio based on credit ratings using published ratings of counterparties and
other publicly disclosed information, such as financial statements, regulatory filings, and press releases, to guide it in the process of setting credit levels, risk limits and contractual
arrangements, including master netting agreements. A risk management committee regularly reviews the credit quality of EMMT's counterparties. Despite this, there can be no assurance that these efforts
will be wholly successful in mitigating credit risk or that collateral pledged will be adequate.

In
addition, coal for the Illinois Plants is purchased from suppliers under contracts which may be for multiple years. A number of the coal suppliers to the Illinois Plants do not
currently have an investment grade credit rating and, accordingly, Midwest Generation may have limited recourse to collect damages in the event of default by a supplier. Midwest Generation seeks to
mitigate this risk through diversification

62

---



of
its coal suppliers and through guarantees and other collateral arrangements when available. Despite this, there can be no assurance that these efforts will be successful in mitigating credit risk
from coal suppliers.

Midwest
Generation derives a significant source of its operating revenues from electric power sold into the PJM market by EMMT. Sales into PJM accounted for approximately 67% of Midwest
Generation's consolidated operating revenues for the year ended December 31, 2006. Moody's rates PJM's senior unsecured debt Aa3. PJM, an ISO with over 300 member companies, maintains its own
credit risk policies and does not extend unsecured credit to non-investment grade companies. Any losses due to a PJM member default are shared by all other members based upon a
predetermined formula.

Beginning
in 2007, a significant amount of power from the Illinois Plants will be sold to Commonwealth Edison under load requirements services contracts. See "Energy Price Risk" for
further discussion.

Interest Rate Risk

Interest rate changes can affect earnings and the cost of capital needed to make capital improvements. Midwest Generation had $329.5 million outstanding
under its variable rate term loan facility due in 2011 as of December 31, 2006 and a $500 million working capital facility, maturing in 2011, which exposes Midwest Generation to the risk
of earnings loss resulting from changes in interest rates. Based on the amount of variable rate debt outstanding on December 31, 2006, a 100 basis point change in interest rates at
December 31, 2006 would increase or decrease Midwest Generation's 2007 annual income before taxes by approximately $3.3 million.

Midwest
Generation also has $1 billion of 8.75% second priority senior secured notes due 2034. The fair market value of this fixed interest rate obligation is also subject to
interest rate risk. The fair market value of Midwest Generation's total long-term obligations (including current portion) was $1.4 billion at December 31, 2006, compared to
the carrying value of $1.3 billion. A 10% increase in market interest rates at December 31, 2006 would result in a decrease in the fair value of Midwest Generation's total
long-term obligations by approximately $86.1 million. A 10% decrease
in market interest rates at December 31, 2006 would result in an increase in the fair value of Midwest Generation's total long-term obligations by approximately
$99.1 million.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information responding to Item 7A is filed with this report under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations."

63

---



ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

|Financial Statements: |                                                                                                             | 
|--------------------- | ----------------------------------------------------------------------------------------------------------- | 
|                      | Report of Independent Registered Public Accounting Firm                                                     | 
|                      | Consolidated Statements of Income (Loss) for the years ended December 31, 2006, 2005 and 2004               | 
|                      | Consolidated Balance Sheets at December 31, 2006 and 2005                                                   | 
|                      | Consolidated Statements of Member's Equity for the years ended December 31, 2006, 2005 and 2004             | 
|                      | Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2006, 2005 and 2004 | 
|                      | Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004                  | 
|                      | Notes to Consolidated Financial Statements                                                                  | 

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.    CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Midwest Generation's management, with the participation of the company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of
Midwest Generation's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the
period, Midwest Generation's disclosure controls and procedures are effective.

Internal Control over Financial Reporting

There were no changes in Midwest Generation's internal control over financial reporting (as such term is defined in Rules 13a-15(f) or
15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2006 that have materially affected, or are reasonably likely to materially affect, Midwest
Generation's internal control over financial reporting.

ITEM 9B.    OTHER INFORMATION

None.

64

---



MIDWEST GENERATION, LLC
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Member and Board of Managers of Midwest Generation, LLC:

In
our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Midwest Generation, LLC and its
subsidiary at December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006 in conformity with
accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As
discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for defined benefit pension plans and other postretirement
plans as of December 31, 2006. As discussed in Note 5 to the consolidated financial statements, the Company changed the manner in which it accounts for asset retirement costs as of
December 31, 2005.

PricewaterhouseCoopers
LLP
Los Angeles, California
February 28, 2007

65

---



MIDWEST GENERATION, LLC
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands)

|                                                               |                                                               | Years Ended December 31, |        
|-------------------------------------------------------------- | ------------------------------------------------------------- | ------------------------ | -------
|
|Operating Revenues                                             |                                                               |                          |        
|                                                               | Operating revenues from marketing affiliate                   |                          | $      
|                                                               | Energy and capacity revenues                                  |                          |        
|                                                               |                                                               |                          |        
|                                                               |                                                               | Total operating revenues |        
|                                                               |                                                               |                          |        
|Operating Expenses                                             |                                                               |                          |        
|                                                               | Fuel                                                          |                          |        
|                                                               | Gain on sale of emission allowances                           |                          |        
|                                                               | Plant operations                                              |                          |        
|                                                               | Loss on lease termination, asset impairment and other charges |                          |        
|                                                               | Depreciation and amortization                                 |                          |        
|                                                               | Loss (gain) from disposal of assets                           |                          |        
|                                                               | Administrative and general                                    |                          |        
|                                                               |                                                               |                          |        
|                                                               |                                                               | Total operating expenses |        
|                                                               |                                                               |                          |        
|                                                               | Operating income (loss)                                       |                          |        
|                                                               |                                                               |                          |        
|Other Income (Expense)                                         |                                                               |                          |        
|                                                               | Interest and other income                                     |                          |        
|                                                               | Interest expense                                              |                          |        
|                                                               |                                                               |                          |        
|                                                               |                                                               | Total other expense      |        
|                                                               |                                                               |                          |        
|Income (loss) before income taxes                              |                                                               |                          | 405,738
|Provision (benefit) for income taxes                           |                                                               |                          | 158,930
|                                                               |                                                               |                          |        
|Income (Loss) Before Accounting Change                         |                                                               |                          | 246,808
|Cumulative effect of change in accounting, net of tax (Note 5) |                                                               |                          |       
|                                                               |                                                               |                          |        
|Net Income (Loss)                                              |                                                               | $                        | 246,808
|                                                               |                                                               |                          |        

The
accompanying notes are an integral part of these consolidated financial statements.

66

---



MIDWEST GENERATION, LLC
CONSOLIDATED BALANCE SHEETS
(In thousands)

|                                              |                                                                                           | December 31,                      |          
|--------------------------------------------- | ----------------------------------------------------------------------------------------- | --------------------------------- | ---------
|
|Assets                                        |                                                                                           |                                   |          
|Current Assets                                |                                                                                           |                                   |          
|                                              | Cash and cash equivalents                                                                 |                                   | $        
|                                              | Due from affiliates                                                                       |                                   |          
|                                              | Fuel inventory                                                                            |                                   |          
|                                              | Spare parts inventory                                                                     |                                   |          
|                                              | Loans to affiliate for margin deposits                                                    |                                   |          
|                                              | Interest receivable from affiliate                                                        |                                   |          
|                                              | Derivative assets                                                                         |                                   |          
|                                              | Deferred taxes                                                                            |                                   |          
|                                              | Other current assets                                                                      |                                   |          
|                                              |                                                                                           |                                   |          
|                                              |                                                                                           | Total current assets              |          
|                                              |                                                                                           |                                   |          
|Property, Plant and Equipment                 |                                                                                           |                                   | 4,210,743
|                                              | Less accumulated depreciation                                                             |                                   |          
|                                              |                                                                                           |                                   |          
|                                              |                                                                                           | Net property, plant and equipment |          
|                                              |                                                                                           |                                   |          
|Notes receivable from affiliate               |                                                                                           |                                   | 1,359,276
|Deferred taxes                                |                                                                                           |                                   | 46,277   
|Long-term derivative assets                   |                                                                                           |                                   | 19,288   
|Other assets                                  |                                                                                           |                                   | 37,593   
|                                              |                                                                                           |                                   |          
|Total Assets                                  |                                                                                           | $                                 | 5,283,570
|                                              |                                                                                           |                                   |          
|Liabilities and Member's Equity               |                                                                                           |                                   |          
|Current Liabilities                           |                                                                                           |                                   |          
|                                              | Accounts payable                                                                          |                                   | $        
|                                              | Accrued liabilities                                                                       |                                   |          
|                                              | Due to affiliates                                                                         |                                   |          
|                                              | Interest payable                                                                          |                                   |          
|                                              | Derivative liabilities                                                                    |                                   |          
|                                              | Deferred taxes                                                                            |                                   |          
|                                              | Current maturities of long-term obligations                                               |                                   |          
|                                              | Current portion of lease financing                                                        |                                   |          
|                                              |                                                                                           |                                   |          
|                                              |                                                                                           | Total current liabilities         |          
|                                              |                                                                                           |                                   |          
|Lease financing, net of current portion       |                                                                                           |                                   | 1,029,805
|Long-term obligations                         |                                                                                           |                                   | 1,326,096
|Long-term derivative liabilities              |                                                                                           |                                   | 6,652    
|Benefit plans and other long-term liabilities |                                                                                           |                                   | 176,933  
|                                              |                                                                                           |                                   |          
|Total Liabilities                             |                                                                                           |                                   | 2,902,932
|                                              |                                                                                           |                                   |          
|Commitments and Contingencies(Note 10)        |                                                                                           |                                   |          
|Member's Equity                               |                                                                                           |                                   |          
|                                              | Membership interests, no par value; 100 units authorized, issued and outstanding (Note 1) |                                   |          
|                                              | Additional paid-in capital                                                                |                                   |          
|                                              | Accumulated deficit                                                                       |                                   |          
|                                              | Accumulated other comprehensive income (loss)                                             |                                   |          
|                                              |                                                                                           |                                   |          
|Total Member's Equity                         |                                                                                           |                                   | 2,380,638
|                                              |                                                                                           |                                   |          
|Total Liabilities and Member's Equity         |                                                                                           | $                                 | 5,283,570
|                                              |                                                                                           |                                   |          

The
accompanying notes are an integral part of these consolidated financial statements.

67

---



MIDWEST GENERATION, LLC
CONSOLIDATED STATEMENTS OF MEMBER'S EQUITY
(In thousands)

|                             |                                                        | Membership
Interests |   | Additional
Paid-In Capital |   | Accumulated
Deficit |           | Accumulated
Other Comprehensive
Income (Loss) |            | Member's
Equity |  
|---------------------------- | ------------------------------------------------------ | -------------------- | - | -------------------------- | - | ------------------- | --------- | --------------------------------------------- | ---------- | --------------- | -
|Balance at December 31, 2003 |                                                        | $                    |  |                            | $ | 1,241,133           |           | $                                             | (910,966   | )               | $
|                             | Non-cash equity contribution                           |                      |   |                           |   |                     | 2,190,902 |                                               |            |                |  
|                             | Non-cash contribution of services                      |                      |   |                           |   |                     | 2,453     |                                               |            |                |  
|                             | Net loss                                               |                      |   |                           |   |                     |          |                                               |            | (78,615         | )
|                             | Other comprehensive income                             |                      |   |                           |   |                     |          |                                               |            |                |  
|                             | Cash distribution to parent                            |                      |   |                           |   |                     |          |                                               |            | (87,926         | )
|                             |                                                        |                      |   |                            |   |                     |           |                                               |            |                 |  
|Balance at December 31, 2004 |                                                        |                      |  |                            |   | 3,434,488           |           |                                               | (1,077,507 | )               |  
|                             |                                                        |                      |   |                            |   |                     |           |                                               |            |                 |  
|                             | Equity contribution                                    |                      |   |                           |   |                     | 300,000   |                                               |            |                |  
|                             | Net income                                             |                      |   |                           |   |                     |          |                                               |            | 301,175         |  
|                             | Other comprehensive loss                               |                      |   |                           |   |                     |          |                                               |            |                |  
|                             | Cash distribution to parent                            |                      |   |                           |   |                     | (330,209  | )                                             |            |                |  
|                             |                                                        |                      |   |                            |   |                     |           |                                               |            |                 |  
|Balance at December 31, 2005 |                                                        |                      |  |                            |   | 3,404,279           |           |                                               | (776,332   | )               |  
|                             |                                                        |                      |   |                            |   |                     |           |                                               |            |                 |  
|                             | Net income                                             |                      |   |                           |   |                     |          |                                               |            | 246,808         |  
|                             | Other comprehensive income                             |                      |   |                           |   |                     |          |                                               |            |                |  
|                             | Adjustment to initially apply SFAS No. 158, net of tax |                      |   |                           |   |                     |          |                                               |            |                |  
|                             | Cash distribution to parent                            |                      |   |                           |   |                     | (541,794  | )                                             |            |                |  
|                             |                                                        |                      |   |                            |   |                     |           |                                               |            |                 |  
|Balance at December 31, 2006 |                                                        | $                    |  |                            | $ | 2,862,485           |           | $                                             | (529,524   | )               | $
|                             |                                                        |                      |   |                            |   |                     |           |                                               |            |                 |  

The
accompanying notes are an integral part of these consolidated financial statements.

68

---



MIDWEST GENERATION, LLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)

|                                               |                                                                         | Years Ended December 31,                                                                                                                                                     |        
|---------------------------------------------- | ----------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------
|
|Net Income (Loss)                              |                                                                         | $                                                                                                                                                                            | 246,808
|Other comprehensive income (loss), net of tax: |                                                                         |                                                                                                                                                                              |        
|                                               | Unrealized gains (losses) on derivatives qualified as cash flow hedges: |                                                                                                                                                                              |        
|                                               |                                                                         | Other unrealized holding gains (losses) arising during period, net of income tax expense (benefit) of $98,671, $(17,051) and $(21,653) for 2006, 2005 and 2004, respectively |        
|                                               |                                                                         | Reclassification adjustments included in net income (loss), net of income tax expense (benefit) of $(5,422), $56,907 and $(23,915) for 2006, 2005 and 2004, respectively     |        
|                                               |                                                                         |                                                                                                                                                                              |        
|Other comprehensive income (loss)              |                                                                         |                                                                                                                                                                              | 163,157
|                                               |                                                                         |                                                                                                                                                                              |        
|Comprehensive Income (Loss)                    |                                                                         | $                                                                                                                                                                            | 409,965
|                                               |                                                                         |                                                                                                                                                                              |        

The
accompanying notes are an integral part of these consolidated financial statements.

69

---



MIDWEST GENERATION, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

|                                                     |                                                                                      | Years Ended December 31,                                      |        
|---------------------------------------------------- | ------------------------------------------------------------------------------------ | ------------------------------------------------------------- | -------
|
|Cash Flows From Operating Activities                 |                                                                                      |                                                               |        
|                                                     | Income (loss) after accounting change, net                                           |                                                               | $      
|                                                     | Adjustments to reconcile income (loss) to net cash provided by operating activities: |                                                               |        
|                                                     |                                                                                      | Depreciation and amortization                                 |        
|                                                     |                                                                                      | Non-cash contribution of services                             |        
|                                                     |                                                                                      | (Gain) loss on disposal of assets                             |        
|                                                     |                                                                                      | Gain on sale of emission allowances                           |        
|                                                     |                                                                                      | Loss on lease termination, asset impairment and other charges |        
|                                                     |                                                                                      | Deferred taxes                                                |        
|                                                     |                                                                                      | Cumulative effect of change in accounting, net of tax         |        
|                                                     | Decrease in accounts receivable                                                      |                                                               |        
|                                                     | Decrease (increase) in due to/from affiliates                                        |                                                               |        
|                                                     | Decrease (increase) in inventory                                                     |                                                               |        
|                                                     | Decrease (increase) in loans to affiliate for margin deposits                        |                                                               |        
|                                                     | Decrease in interest receivable from affiliate                                       |                                                               |        
|                                                     | Decrease (increase) in other current assets                                          |                                                               |        
|                                                     | Decrease in other assets                                                             |                                                               |        
|                                                     | Decrease in accounts payable                                                         |                                                               |        
|                                                     | Increase in accrued liabilities                                                      |                                                               |        
|                                                     | Decrease in interest payable                                                         |                                                               |        
|                                                     | Increase in other liabilities                                                        |                                                               |        
|                                                     | Decrease (increase) in derivative assets and liabilities                             |                                                               |        
|                                                     |                                                                                      |                                                               |        
|                                                     |                                                                                      | Net cash provided by operating activities                     |        
|                                                     |                                                                                      |                                                               |        
|Cash Flows From Financing Activities                 |                                                                                      |                                                               |        
|                                                     | Borrowings from subordinated long-term debt with affiliate                           |                                                               |        
|                                                     | Repayments of subordinated long-term debt with affiliate                             |                                                               |        
|                                                     | Borrowings from credit revolver                                                      |                                                               |        
|                                                     | Issuance of long-term debt                                                           |                                                               |        
|                                                     | Repayment of long-term debt                                                          |                                                               |        
|                                                     | Capital contributions from parent                                                    |                                                               |        
|                                                     | Cash distribution to parent                                                          |                                                               |        
|                                                     | Repayment of capital lease obligation                                                |                                                               |        
|                                                     | Financing costs                                                                      |                                                               |        
|                                                     |                                                                                      |                                                               |        
|                                                     |                                                                                      | Net cash used in financing activities                         |        
|                                                     |                                                                                      |                                                               |        
|Cash Flows From Investing Activities                 |                                                                                      |                                                               |        
|                                                     | Capital expenditures                                                                 |                                                               |        
|                                                     | Proceeds from sale of assets                                                         |                                                               |        
|                                                     | Proceeds from sale of emission allowances                                            |                                                               |        
|                                                     | Decrease in restricted cash                                                          |                                                               |        
|                                                     | Sale of short-term investments                                                       |                                                               |        
|                                                     | Purchase of short-term investments                                                   |                                                               |        
|                                                     | Loan to affiliates                                                                   |                                                               |        
|                                                     | Repayment of loan to affiliates                                                      |                                                               |        
|                                                     |                                                                                      |                                                               |        
|                                                     |                                                                                      | Net cash provided by (used in) investing activities           |        
|                                                     |                                                                                      |                                                               |        
|Net increase (decrease) in cash and cash equivalents |                                                                                      |                                                               | 46,637 
|Cash and cash equivalents at beginning of period     |                                                                                      |                                                               | 124,118
|                                                     |                                                                                      |                                                               |        
|Cash and cash equivalents at end of period           |                                                                                      | $                                                             | 170,755
|                                                     |                                                                                      |                                                               |        

The
accompanying notes are an integral part of these consolidated financial statements.

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MIDWEST GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. General

Midwest Generation is a wholly owned subsidiary of Edison Mission Midwest Holdings Co., which is an indirect wholly owned subsidiary of EME. EME is a wholly owned
subsidiary of MEHC and is an indirect wholly owned subsidiary of Edison International. Midwest Generation is a Delaware limited liability company formed on July 12, 1999 by the issuance of 100%
of its membership interests to Edison Mission Midwest Holdings Co. for one hundred dollars. The amount outstanding for the membership interests is not reflected on the face of the Balance Sheet due to
rounding to the nearest thousand. Midwest Generation was formed for the purpose of obtaining financing and acquiring, owning and operating multiple fossil-fuel electric generating units
located within the state of Illinois, which are referred to as the Illinois Plants, for the purpose of producing electric energy.

As
of December 31, 2006, Midwest Generation operated 5,918 MW of power plants consisting of:

In
connection with the acquisition of the Illinois Plants, Midwest Generation entered into three separate five-year power purchase agreements for the coal-fired
stations, the Collins Station and the peaker stations with Commonwealth Edison, which were subsequently assigned to its affiliate, Exelon Generation. The Collins Station power purchase agreement was
terminated on September 30, 2004 and the other power purchase agreements expired on December 31, 2004. For the year ended December 31, 2004, Exelon Generation accounted for
approximately 54% of Midwest Generation's operating revenue, 52% of which came from the power purchase agreements. As each of the power purchase agreements has expired, Midwest Generation now sells
all its energy and capacity into the wholesale power markets.

Midwest
Generation has entered into a contract with EMMT, a marketing affiliate, to sell energy and capacity into the wholesale market, to engage in hedging activities and to provide
scheduling and other services. In April 2004, Midwest Generation entered into a revolving credit agreement with EMMT in order to make revolving loans to, or have letters of credit issued on
behalf of, EMMT, in order to provide credit support for forward contracts. EMMT also purchases natural gas and has the ability to enter into fuel hedging arrangements on Midwest Generation's behalf.
Midwest Generation has also entered into an agreement with another affiliate, Edison Mission Energy Services, Inc., to provide fuel and transportation services related to coal and fuel oil.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of Midwest Generation and its two subsidiaries, Midwest Finance Corp. and Midwest Generation
Procurement Services, LLC. All significant intercompany transactions and balances have been eliminated in the consolidated financial statements. Certain prior year reclassifications have been made to
conform to the current year financial statement presentation.

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The
preparation of financial statements in conformity with generally accepted accounting principles requires Midwest Generation to make estimates and assumptions that affect reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash Equivalents and Short-term Investments

Cash equivalents include time deposits and other investments totaling $171 million and $124 million at December 31, 2006 and 2005,
respectively, with maturities of three months or less.

At
December 31, 2006 and 2005, Midwest Generation had no short-term investments. Midwest Generation sold all $20 million of its investments in auction rate
securities in 2005. In 2004, purchases and sales of auction rate securities were $63 million and $43 million, respectively.

Deferred Financing Costs

Bank, legal and other direct costs incurred in connection with obtaining financing are deferred and amortized as interest expense on a basis which approximates
the effective interest rate method over the term of the related debt. Accumulated amortization of these costs at December 31, 2006 and 2005 amounted to $13 million and
$7.6 million, respectively. Amortization of deferred financing costs charged to operations was $5.3 million and $4.9 million in 2006 and 2005, respectively.

Derivative Instruments

SFAS No. 133 as amended and interpreted by other related accounting literature, establishes accounting and reporting standards for derivative instruments
(including certain derivative instruments embedded in other contracts). SFAS No. 133 requires companies to record derivatives on their balance sheets as either assets or liabilities measured at
their fair value unless exempted from derivative treatment as a normal sale and purchase. The coal contracts either do not qualify as derivatives under SFAS No. 133 or meet the normal sales and
purchases exception. All changes in the fair value of derivatives are recognized currently in earnings unless specific hedge criteria are met, which requires that a company must formally document,
designate, and assess the effectiveness of transactions that receive hedge accounting. The results of derivative activities are recorded as part of cash flows from operating activities in the
accompanying consolidated statements of cash flows.

SFAS
No. 133 sets forth the accounting requirements for cash flow hedges. SFAS No. 133 provides that the effective portion of the gain or loss on a derivative instrument
designated and qualifying as a cash
flow hedging instrument be reported as a component of other comprehensive income and be reclassified into earnings in the same period during which the hedged forecasted transaction affects earnings.
The remaining gain or loss on the derivative instrument, if any, must be recognized currently in earnings.

Impairment of Long-Lived Assets

Midwest Generation evaluates the impairment of its long-lived assets based on a review of estimated future cash flows expected to be generated
whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If the carrying amount of the asset exceeds the amount of the expected future cash
flows, undiscounted and without interest charges, then an impairment loss for its long-lived assets is recognized in accordance with SFAS No. 144.

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Income Taxes

Midwest Generation is included in the consolidated federal and state income tax returns of Edison International and is party to a tax allocation agreement with
its parent Edison Mission Midwest Holdings. As long as Edison International continues to own, directly or indirectly, at least 80% of the voting power of the stock of EME and its existing subsidiaries
and at least 80% of the value of such stock, Midwest Generation will be included in the consolidated federal and state income tax returns of Edison International. In accordance with the agreement and
the tax-allocation procedures that have been in effect since Midwest Generation's formation, its current tax liability or benefit is generally determined on a separate return basis, except
for calculating consolidated state income taxes, for which Midwest Generation uses the long-term state tax apportionment factors of the Edison International group. The amount on the
balance sheet associated with this tax-allocation agreement totaled $19.1 million at December 31, 2006 included in due to affiliates and $13.0 million at
December 31, 2005 included in due from affiliates.

Midwest
Generation accounts for deferred income taxes using the asset-and-liability method, wherein deferred tax assets and liabilities are recognized for future
tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities using enacted income tax rates.

Inventory

Inventory consists of spare parts, natural gas, coal and fuel oil and is stated at the lower of weighted average cost or market.

New Accounting Pronouncements

Accounting Principles Adopted

Statement
of Financial Accounting Standards No. 123(R)

SFAS
No. 123(R) requires companies to use the fair value accounting method for stock-based compensation. Midwest Generation implemented SFAS No. 123(R) in the first quarter
of 2006 and applied the modified prospective transition method. Under the modified prospective method, SFAS No. 123(R) was applied effective January 1, 2006 to the unvested portion of
awards previously granted and will be applied to all prospective awards. Prior financial statements were not restated under this method. SFAS No. 123(R) resulted in the recognition of expense
for all stock-based compensation awards. In addition, Midwest Generation elected to calculate the pool of windfall tax benefits as of the adoption of SFAS No. 123(R) based on the method (also
known as the short-cut method) proposed in FSP FAS 123(R)-3, "Transition Election to Accounting for the Tax Effects of Share Based Payment Awards." Prior to January 1, 2006, Midwest
Generation used the intrinsic value method of accounting, which resulted in no recognition of expense for Edison International stock options. The adoption of this standard had an insignificant impact
on Midwest Generation's consolidated financial statements.

FASB
Staff Position FIN 46(R)-6

In
April 2006, the FASB issued Staff Position FIN 46(R)-6, "Determining Variability to be Considered in Applying FIN 46(R)." FIN 46(R)-6 states that the
variability to be considered in applying FIN 46(R) shall be based on an analysis of the design of the entity following a two-step process. The first step is to analyze the nature of the
risks in the entity. The second step would be to determine the purpose(s) for which the entity was created and determine the variability (created by the risks identified in Step 1) the entity
is designed to create and pass along to its interest holders. The guidance in this

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FASB
Staff Position was effective prospectively beginning July 1, 2006, although companies had until December 31, 2006 to elect retrospective applications. Midwest Generation adopted FIN
46(R)-6 prospectively beginning July 1, 2006. Applying the guidance had no effect on Midwest Generation's consolidated financial statements for the year ended December 31,
2006.

Statement
of Financial Accounting Standards No. 158

In
September 2006, the FASB issued SFAS No. 158, which amends the accounting by employers for defined benefit pension plans and postretirement benefits other than pensions.
SFAS No. 158 requires companies to recognize the overfunded or underfunded status of a defined benefit pension and other postretirement plans as assets or liabilities in their balance sheet;
the assets or liabilities are offset through other comprehensive income. Midwest Generation adopted SFAS No. 158 prospectively on December 31, 2006. SFAS No. 158 also requires
companies to align the measurement dates for their plans to their fiscal year-ends; Midwest Generation already has a fiscal year-end measurement date for all of its
postretirement plans. Upon adoption, Midwest Generation recorded additional postretirement benefit liabilities of $8.5 million (included in benefit plans and other long-term
liabilities) and a reduction to accumulated other comprehensive income (a component of member's equity) of $5.2 million, net of tax.

Staff
Accounting Bulletin No. 108

In
September 2006, the SEC issued Staff Accounting Bulletin (SAB) No. 108, which provides interpretive guidance on the consideration of the effects of prior year
misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB No. 108 requires additional quantitative testing to determine whether a misstatement is
material. Midwest Generation implemented SAB No. 108 for the filing of its Annual Report on Form 10-K for the year ended December 31, 2006.
Applying the guidance had no effect on Midwest Generation's consolidated financial statements for the year ended December 31, 2006.

Accounting Principles Not Yet Adopted

Statement
of Financial Accounting Standards Interpretation No. 48

In
July 2006, the FASB issued Statement of Financial Accounting Standards Interpretation No. 48, "Accounting for Uncertainty in Income Taxes," that clarifies the accounting
for uncertain tax positions. An enterprise would be required to recognize, in its financial statements, the best estimate of the impact of a tax position by determining if the weight of the available
evidence indicates it is more likely than not, based solely on the technical merits, that the position will be sustained on audit. Midwest Generation will adopt the new interpretation in the first
quarter of 2007. The new interpretation is not expected to result in a material adjustment to member's equity.

Statement
of Financial Accounting Standards No. 155

In
February 2006, the FASB issued SFAS No. 155, which amends SFAS No. 133 and SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." SFAS No. 155 allows financial instruments that have embedded derivatives to be accounted for at fair value at acquisition, at issuance, or when a previously
recognized financial instrument is subject to a remeasurement event, on an instrument-by-instrument basis, in cases in which a derivative would otherwise have to be bifurcated.
SFAS No. 155 is effective for all financial instruments acquired, issued, or subject to remeasurement after January 1, 2007. The fair value election provided for in paragraph 4(c)
of this Statement may also be applied upon adoption of this Statement for hybrid financial instruments

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that
had been bifurcated under paragraph 12 of SFAS No. 133 prior to the adoption of this Statement. Midwest Generation does not expect the adoption of this standard to have a material
impact on Midwest Generation's consolidated financial statements.

Statement
of Financial Accounting Standards No. 157

In
September 2006, the FASB issued a new accounting standard on fair value measurements (SFAS No. 157). SFAS No. 157 clarifies the definition of fair value,
establishes a framework for measuring fair value and expands the disclosures on fair value measurements. Midwest Generation will adopt SFAS No. 157 on January 1, 2008. Midwest Generation
is currently evaluating the impact of adopting SFAS No. 157 on its consolidated financial statements.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation and amortization are computed by using the straight-line method over the following
estimated useful lives:

Power plant facilities

3-30 yearsEmission allowances

25-33.75 yearsEquipment, furniture and fixtures

3-7 yearsPlant and equipment under lease financing

30-33.75 years


As part of the acquisition of the Illinois Plants, Midwest Generation acquired emission allowances under the US EPA's Acid Rain Program. Although
the emission allowances granted under this program are freely transferable, Midwest Generation intends to use substantially all the emission allowances in the normal course of its business to generate
electricity. Accordingly, Midwest Generation has classified emission allowances expected to be used to generate power as part of property, plant and equipment. Acquired emission allowances are
amortized over the estimated lives of the Illinois Plants on a straight-line basis.

Repairs and Maintenance

Certain major pieces of Midwest Generation's equipment require repairs and maintenance on a periodic basis. These costs, including major maintenance costs, are
expensed as incurred.

Restricted Cash

Several cash balances are restricted primarily to provide collateral for trading activities and fuel suppliers. The total restricted cash included in Midwest
Generation's consolidated balance sheet, composed entirely of collateral reserves, was $4.3 million and $6.3 million at December 31, 2006 and 2005, respectively.

Revenue Recognition

Midwest Generation records revenue and related costs as electricity is generated or services are provided unless Midwest Generation is subject to SFAS
No. 133 and does not qualify for the normal sales and purchases exception. Midwest Generation enters into power and fuel hedging and optimization transactions under a contract with EMMT. These
transactions are executed primarily through the use of physical forward commodity purchases and sales and financial commodity swaps and options. With respect to its physical forward contracts, Midwest
Generation generally takes title to the commodities, and assumes the risks and rewards of ownership. Therefore, Midwest Generation records settlement of

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non-trading
physical forward contracts on a gross basis. Financial swap and option transactions are settled net and, accordingly, Midwest Generation does not take title to the underlying
commodity. Therefore, gains and losses from settlement of financial swaps and options are recorded net. Managed risks typically include commodity price risk associated with fuel purchases and power
sales.

Note 3. Loss on Lease Termination, Asset Impairment and Other Charges

During 2004, Midwest Generation recorded loss on lease termination, asset impairment and other charges of $104.7 million. On April 27, 2004, Midwest
Generation terminated the Collins Station lease through a negotiated transaction with the lease equity investor. Midwest Generation made a lease termination
payment of approximately $960 million. This amount represented the $774 million of lease debt outstanding, plus accrued interest, and the amount owed to the lease equity investor for
early termination of the lease. Midwest Generation received title to the Collins Station as part of the transaction. Midwest Generation recorded a pre-tax loss of approximately
$65.5 million (approximately $40.2 million after tax) due to termination of the lease and the planned decommissioning of the asset. Included in the pre-tax loss is a
$2.7 million inventory reserve for excess spare parts at the Collins Station and $1.9 million pre-tax loss for fuel oil inventory.

Following
the termination of the Collins Station lease, Midwest Generation announced plans on May 28, 2004 to permanently cease operations at the Collins Station by
December 31, 2004 and decommission the plant. By the fourth quarter of 2004, the Collins Station was decommissioned and all units were permanently retired from service, disconnected from the
grid and rendered inoperable with all operating permits surrendered. In September 2004, Midwest Generation recorded a pre-tax impairment charge of $10.3 million resulting
from the termination of the power purchase agreement effective September 30, 2004 for the two units at the Collins Station that remained under contract. In addition, Midwest Generation
recognized a $4.5 million pre-tax charge for exit costs related to reducing the workforce in Illinois during the fourth quarter of 2004.

In
September 2004, management completed an analysis of future competitiveness in the expanded PJM marketplace of its eight remaining small peaking units. Based on this analysis,
management decided to decommission six of the eight small peaking units. As a result of the decision to decommission the units, projected future cash flows associated with the peaking units were less
than the book value of the units resulting in an impairment under SFAS No. 144. During the third quarter of 2004, Midwest Generation recorded a pre-tax impairment charge of
$28.8 million (approximately $17.7 million after tax).

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Note 4. Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) consisted of the following:

|                             |                             | Unrealized Gains
(Losses) on Cash
Flow Hedges |          | Unrecognized Losses and
Prior Service Costs, Net |   | Accumulated Other
Comprehensive
Income (Loss) |       
|---------------------------- | --------------------------- | --------------------------------------------- | -------- | ------------------------------------------------ | - | --------------------------------------------- | ------
|
|Balance at December 31, 2004 |                             | $                                             | 5,441    |                                                  | $ |                                              |       
|                             | Change for 2005             |                                               |          | (115,731                                         | ) |                                               |      
|                             |                             |                                               |          |                                                  |   |                                               |       
|Balance at December 31, 2005 |                             |                                               | (110,290 | )                                                |   |                                              |       
|                             | Change for 2006             |                                               |          | 163,157                                          |   |                                               |      
|                             | SFAS No. 158 adjustments(1) |                                               |          |                                                 |   |                                               | (5,190
|                             |                             |                                               |          |                                                  |   |                                               |       
|Balance at December 31, 2006 |                             | $                                             | 52,867   |                                                  | $ | (5,190                                        | )     
|                             |                             |                                               |          |                                                  |   |                                               |       

---

Unrealized gains on cash flow hedges, net of tax, at December 31, 2006, include unrealized gains on commodity hedges primarily related to
futures and forward energy sales contracts that qualify for hedge accounting. These gains arise because current forecasts of future electricity prices are lower than Midwest Generation's contract
prices. The change from unrealized losses to unrealized gains during 2006 resulted from a decrease in market prices for power.

As
Midwest Generation's hedged positions are realized, $41.2 million, after tax, of the net unrealized gains on cash flow hedges at December 31, 2006 are expected to be
reclassified into earnings during the next twelve months. Management expects that reclassification of net unrealized gains will offset energy revenue recognized at market prices. Actual amounts
ultimately reclassified to earnings over the next twelve months could vary materially from this estimated amount as a result of changes in market conditions. The maximum period over which a cash flow
hedge is designated is through December 31, 2009.

Under
SFAS No. 133, the portion of a cash flow hedge that does not offset the change in value of the transaction being hedged, which is commonly referred to as the ineffective
portion, is immediately recognized in earnings. Midwest Generation recorded net gains (losses) of $(1.5) million, $(2.5) million and $0.5 million during the years ended December 31,
2006, 2005 and 2004, respectively, representing the amount of cash flow hedges' ineffectiveness, reflected in operating revenues in the consolidated income statements.

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Note 5. Property, Plant and Equipment

At December 31, 2006 and 2005, property, plant and equipment consisted of the following:

2006

2005(in thousands)Land

$
33,209

$
33,209Power plant facilities


1,960,203


1,929,889Emission allowances


834,203


834,203Construction in progress


15,494


25,118Equipment, furniture and fixtures


11,204


10,410Plant and equipment under lease financing


1,356,430


1,365,6744,210,743


4,198,503Less accumulated depreciation


990,409


851,917Property, plant and equipment, net

$
3,220,334

$
3,346,586


In connection with Midwest Generation's financing activities, Midwest Generation has given first and second priority security interests in
substantially all the coal-fired generating plants owned by Midwest Generation and the assets relating to those plants, the receivables of EMMT directly related to Midwest Generation's
hedge activities, and the pledge of the intercompany notes from EME (approximately $1.4 billion at December 31, 2006). The amount of assets pledged or mortgaged totals approximately
$2.9 billion at December 31, 2006. In addition to these assets, Midwest Generation's membership interests and the capital stock of Edison Mission Midwest Holdings were pledged. Emission
allowances have not been pledged.

Property,
plant and equipment includes assets which are capitalized under lease financing. Midwest Generation recorded amortization expense related to the leased facilities of
$42.4 million, $42.6 million and $43.0 million for 2006, 2005 and 2004, respectively. Accumulated amortization related to the leased facilities was $268.8 million,
$228.0 million and $185.6 million at December 31, 2006, 2005 and 2004, respectively.

Asset Retirement Obligations

Effective January 1, 2003, Midwest Generation adopted Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 requires entities to record the fair value of a liability for an ARO in the period in which it is incurred. When the liability is initially recorded, the entity
capitalizes the cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is increased to its present value each period, and the capitalized cost is
depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement.

In
March 2005, the FASB issued FIN 47, "Accounting for Conditional Asset Retirement Obligations," an interpretation of SFAS No. 143. This interpretation clarifies that an
entity is required to recognize a liability for the fair value of a conditional ARO if the fair value can be reasonably estimated, even though uncertainty exists about the timing and/or method of
settlement. This interpretation became effective as of December 31, 2005 for Midwest Generation. Midwest Generation identified conditional AROs related to asbestos removal and disposal costs at
its owned buildings and power plant facilities and at retired structures leased at the Powerton Station. Midwest Generation recorded a $1.2 million, after tax, charge as a cumulative effect
adjustment for asbestos removal and disposal activities associated with retired Powerton structures that are currently scheduled for demolition in 2007. Midwest Generation has

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not
recorded a liability related to the owned structures because it cannot reasonably estimate fair value of the obligation at this time. The range of time over which Midwest Generation may settle
this obligation in the future (demolition or other method) is sufficiently large to not allow for the use of expected present value techniques.

Midwest
Generation recorded a liability representing expected future costs associated with site reclamation, facilities dismantlement and removal of environmental hazards as follows:

2006

2005

2004(in thousands)Beginning balance

$
2,220

$
291

$
265Cumulative effect of accounting change





1,900


Liabilities settled during the period


(892
)




Accretion expense


32


29


26Change in estimates


2,660





Ending balance

$
4,020

$
2,220

$
291


The pro forma net income effect of adopting FIN 47 is not shown due to its immaterial impact on Midwest Generation's results of operations. The
pro forma liability for conditional AROs is not shown due to the immaterial impact on Midwest Generation's consolidated balance sheet.

Note 6. Long-Term Debt

On April 27, 2004, Midwest Generation completed a private offering of $1 billion aggregate principal amount of 8.75% second priority senior secured
notes due 2034. The notes were co-issued
by a newly formed wholly owned subsidiary, Midwest Finance Corp. Holders of the notes may require Midwest Generation to repurchase, or Midwest Generation may elect to repay, the notes on May 1,
2014 and on each one-year anniversary thereafter at 100% of their principal amount, plus accrued and unpaid interest. At December 31, 2006 and 2005, $1 billion remained
outstanding. Concurrent with the issuance of the notes, Midwest Generation entered into a term loan and working capital facility, which terms have been amended as discussed below.

On
December 15, 2005, Midwest Generation completed a refinancing of indebtedness. The refinancing was effected through the amendment and restatement of Midwest Generation's
existing credit facility previously amended and restated on April 18, 2005. The credit facility, as previously amended and restated, provided for approximately $343 million of first
priority secured institutional term loans due in 2011 and $500 million of first priority secured revolving credit, working capital facilities, $200 million due in 2009 and
$300 million due in 2011, with a lender option to require prepayment in 2010.

The
refinancing consisted of, among other things, a reduction in the interest rate applicable to the term loan and the working capital facilities, and a modification of financial
covenants. After giving effect to the refinancing, all the facilities carry a lower interest rate of LIBOR + 1.50% (6.94% at December 31, 2006). The maturity date of the repriced
term loan remains 2011. The previously existing working capital facilities were combined into one $500 million facility, maturing in 2011, with a lender option to require prepayment in 2010.
Also, as part of the refinancing, Midwest Generation's financial covenants were modified, with its consolidated interest coverage ratio for the immediately preceding four consecutive fiscal quarters
required to be at least 1.40 to 1 (increased from 1.25 to 1), and its secured leverage ratio for the 12-month period ended on the last day of the immediately preceding fiscal quarter
required to be no greater than 7.25 to 1 (reduced from 8.75 to 1).

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Midwest
Generation is permitted to use its working capital facility and cash on hand to provide credit support for forward contracts with third-party counterparties entered into by EMMT
for capacity and energy generated by Midwest Generation. Utilization of this credit facility in support of such forward contracts is expected to provide additional liquidity support for implementation
of Midwest Generation's contracting strategy for the Illinois Plants.

As
of December 31, 2006, Midwest Generation had $330 million outstanding under its term loan and a $500 million working capital facility available for working
capital requirements, including credit support for hedging activities. As of December 31, 2006, $4.6 million was utilized under this facility.

The
term loan and working capital facility share a first priority lien and the senior secured notes have a second priority lien in a collateral package which consists of, among other
things, substantially all the coal-fired generating plants owned by Midwest Generation and the assets relating to those
plants, as well as the equity interests of Midwest Generation and its parent company, the intercompany notes entered into by EME and Midwest Generation in connection with the Powerton-Joliet
sale-leaseback transaction, and the receivables of EMMT directly related to Midwest Generation's hedge activities.

Annual Maturities on Long-Term Debt

Annual maturities on long-term debt at December 31, 2006 for the next five years are $3.5 million each year for 2007 through 2010, and
$315.7 million for 2011.

Midwest Generation Credit Agreement and Indenture Covenants

Midwest Generation is bound by the covenants in its credit agreement and indenture as well as certain covenants under the Powerton-Joliet lease documents with
respect to Midwest Generation making payments under the leases. These covenants include restrictions on the ability to, among other things, incur debt, create liens on its property, merge or
consolidate, sell assets, make investments, engage in transactions with affiliates, make distributions, make capital expenditures, enter into agreements restricting its ability to make distributions,
engage in other lines of business or engage in transactions for any speculative purpose. In addition, the credit agreement contains financial covenants binding on Midwest Generation.

Covenants in Credit Agreement

In order for Midwest Generation to make a distribution, it must be in compliance with covenants specified under its credit agreement. Compliance with the
covenants in its credit agreement includes maintaining the following two financial performance requirements:

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In
addition, Midwest Generation's distributions are limited in amount. Under the terms of Midwest Generation's credit agreement, Midwest Generation is permitted to distribute 75% of its
excess cash flow (as defined in the credit agreement). In addition, if equity is contributed to Midwest Generation, Midwest Generation is permitted to distribute 100% of excess cash flow until the
aggregate portion of distributions that Midwest Generation attributed to the equity contribution equals the amount of the equity contribution. Because EME made a $300 million equity
contribution to Midwest Generation on April 19, 2005, Midwest Generation is permitted to distribute 100% of excess cash flow until the aggregate portion of such distributions attributed to that
equity contribution equals $300 million. After taking into account Midwest Generation's most recent distribution in January 2007, $58 million of the equity contribution is still
available for this purpose. To the extent Midwest Generation makes a distribution which is not fully attributed to an equity contribution, Midwest Generation is required to make concurrently with such
distribution an offer to repay debt in an amount equal to the excess, if any, of one-third of such distribution over the amount attributed to the equity contribution.

Covenants in Indenture

Midwest Generation's indenture contains restrictions on its ability to make a distribution substantially similar to those in the credit agreement. Failure to
achieve the conditions required for distributions will not result in a default under the indenture, nor does the indenture contain any other financial performance requirements.

Loan Agreement with EMMT

Midwest Generation entered into a revolving credit agreement with EMMT, dated as of April 27, 2004, pursuant to which Midwest Generation will, from time to
time, make revolving loans to, and have letters of credit issued on behalf of, EMMT. The loans and letters of credit provide credit support for forward contracts entered into by EMMT related to the
Illinois Plants. As of December 31, 2006, Midwest Generation has provided EMMT $43.5 million, which EMMT has used to provide credit support for
forward contracts. Loans provided under this revolving credit agreement are repaid by EMMT upon the return of the funds under the terms of the related forward contract. The amount repaid includes
interest earned, if any, under margining agreements supporting such contracts. The maximum amount of available credit under the agreement is $500 million.

Fair Values of Non-Derivative Financial Instruments

The carrying amount of cash and cash equivalents, accounts receivables and payables contained in Midwest Generation's consolidated balance sheet approximates fair
value. The following table summarizes the carrying amounts and fair values for outstanding non-derivative financial instruments:

December 31, 2006

December 31, 2005Carrying Amount

Fair Value

Carrying Amount

Fair Value(in thousands)InstrumentsNon-derivatives:Long-term obligations

$
1,329,546

$
1,441,418

$
1,502,996

$
1,629,984


In assessing the fair value of Midwest Generation's financial instruments, Midwest Generation uses a variety of methods and assumptions that are
based on market conditions and risks existing at each balance sheet date. Quoted market prices for the same or similar instruments are used for long-term obligations.

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Note 7. Risk Management and Derivative Financial Instruments

Commodity Price Risk Management

Midwest Generation's risk management policy allows for the use of derivative financial instruments through EMMT to limit financial exposure to electricity,
capacity, fuel prices, emission allowances and transmission rights for non-trading purposes. Use of these instruments exposes Midwest Generation to commodity price risk, which represent
the potential loss that can be caused by a change in the market value of a particular commodity. Commodity price risks are actively monitored by a risk management committee to ensure compliance with
Midwest Generation's risk management policies through EMMT. Policies are in place which define risk management processes, and procedures exist which allow for monitoring of all commitments and
positions with regular reviews by a risk management committee. Despite this, there can be no assurance that all risks have been accurately identified, measured and/or mitigated. EMMT uses "value at
risk" to identify, measure, monitor and control Midwest Generation's overall market risk exposure. The use of value at risk allows management to aggregate overall commodity risk, compare risk on a
consistent basis and identify risk factors. Value at risk measures the possible loss over a given time interval, under normal market conditions, at a given confidence level. Given the inherent
limitations of value at risk and relying on a single risk measurement tool, EMMT supplements this approach with the use of stress testing and worst-case scenario analysis for key risk
factors, as well as stop-loss limits and counterparty credit exposure limits.

The
following table summarizes the carrying amounts and fair values for outstanding financial instruments used for hedging activities. The change in fair value of electricity contracts
in 2006 as compared to 2005 is attributable to the decline in average market prices for power as compared to contracted prices at December 31, 2006, which is the valuation date, causing the
fair value of the contracts to become assets instead of liabilities.

December 31, 2006

December 31, 2005Carrying Amount

Fair Value

Carrying Amount

Fair Value(in thousands)Commodity price:Electricity contracts

$
93,983

$
93,983

$
(203,882
)
$
(203,882
)


In assessing the fair value of Midwest Generation's electricity contracts, Midwest Generation uses a variety of methods and assumptions based on
market conditions and associated risks existing at each balance sheet date. The fair value of the electricity contracts takes into account quoted market prices, time value of money, volatility of the
underlying commodities and other factors.

Credit Risk

In conducting hedging activities, EMMT contracts with a number of utilities, energy companies, financial institutions and other companies, collectively referred
to as counterparties. In the event a counterparty were to default on its trade obligation, Midwest Generation would be exposed to the risk of possible loss associated with re-contracting
the product at a price different from the original contracted price if the non-performing counterparty were unable to pay the resulting liquidated damages owed to Midwest Generation under
the intercompany energy services agreement. Midwest Generation's agreement with EMMT transfers the risk of non-payment of accounts receivable from counterparties to EMMT. Notwithstanding
the foregoing, Midwest Generation will not be in default under the senior secured notes

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and
credit agreement if it fails to enforce payment from EMMT in the case of nonpayment of an account receivable from a counterparty, so long as the counterparty is rated investment grade.

The
obligations of Midwest Generation under the senior secured notes and credit agreement are secured by, among other things, an account of EMMT in which EMMT will deposit funds received
from third-party counterparties for sales of energy and capacity from the Illinois Plants. See Note 6Long-term Debt and Note 11Related Party
TransactionsEMMT Agreements.

To
manage credit risk, EMMT looks at the risk of a potential default by counterparties. Credit risk is measured by the loss that would be incurred if counterparties failed to perform
pursuant to the terms of their contractual obligations. EMMT measures, monitors and mitigates credit risk to the extent possible. To mitigate credit risk from counterparties, master netting agreements
are used whenever possible and counterparties may be required to pledge collateral when deemed necessary. EMMT also takes other appropriate steps to limit or lower credit exposure. Processes have also
been established to determine and monitor the creditworthiness of counterparties. EMMT manages the credit risk on the portfolio based on credit ratings using published ratings of counterparties and
other publicly disclosed information, such as financial statements, regulatory filings, and press releases, to guide it in the process of setting credit levels, risk limits and contractual
arrangements, including master netting agreements. A risk management committee regularly reviews the credit quality of EMMT's counterparties. Despite this, there can be no assurance that these efforts
will be wholly successful in mitigating credit risk or that collateral pledged will be adequate.

In
addition, coal for the Illinois Plants is purchased from suppliers under contracts which may be for multiple years. A number of the coal suppliers to the Illinois Plants do not
currently have an investment grade credit rating and, accordingly, Midwest Generation may have limited recourse to collect damages in the event of default by a supplier. Midwest Generation seeks to
mitigate this risk through diversification of its coal suppliers and through guarantees and other collateral arrangements when available. Despite this, there can be no assurance that these efforts
will be successful in mitigating credit risk from coal suppliers.

Midwest
Generation derived a significant source of its operating revenues from electric power sold into the PJM market by EMMT. Sales into PJM accounted for approximately 67%, 75% and
14% of Midwest Generation's consolidated operating revenues for the years ended December 31, 2006, 2005 and 2004, respectively. Moody's rates PJM's senior unsecured debt Aa3. PJM, an ISO with
over 300 member companies, maintains its own credit risk policies and does not extend unsecured credit to non-investment grade companies. Any losses due to a PJM member default is shared
by all members based upon a predetermined formula.

In
2004, Midwest Generation also derived a significant source of its operating revenues from the sale of energy and capacity to Exelon Generation primarily under three power purchase
agreements. These power purchase agreements had all expired by the end of 2004. Exelon Generation accounted for 54% of Midwest Generation's consolidated operating revenues for the year ended
December 31, 2004.

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Note 8. Income Taxes

Income tax provision (benefit) includes the current tax provision (benefit) from operating income (loss) and the change in deferred income taxes during the year.
The components of the net accumulated deferred income tax asset were:

Years Ended December 31,2006

2005(in thousands)Deferred tax assetsLease financing

$
38,909

$
27,227Derivative assets





84,490Accrued expenses


13,148


5,870Credit carryforward


19,117


12,265Net operating loss carryforward


98,315


191,488Total

$
169,489

$
321,340Deferred tax liabilitiesDerivative liabilities

$
31,305

$
Property, plant and equipmentbasis differences


123,625


41,905Employee benefits





9,738State taxes


(5,231
)

(10,141
)Other


(3,096
)

4,037Total


146,603


45,539Deferred tax asset, net

$
22,886

$
275,801Classification of accumulated deferred income taxes:Included in current assets

$


$
70,734Included in non-current assets

$
46,277

$
205,067Included in current liabilities

$
23,391

$



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Midwest Generation has $210 million and $465 million of federal net operating losses at December 31, 2006 and
December 31, 2005, respectively, which expire beginning in 2024. Midwest Generation has $118 million and $297 million of California net operating losses at December 31,
2006 and December 31, 2005, respectively, which expire beginning in 2014. In addition, Midwest Generation has $43 million and $57 million of Illinois net operating losses at
December 31, 2006 and December 31, 2005, respectively, which expire beginning in 2015. The provision (benefit) for income taxes is comprised of the following:

Years Ended December 31,2006

2005

2004(in thousands)CurrentFederal

$
4,414

$
11,414

$
State


1,686


2,149


Total current

$
6,100

$
13,563

$
DeferredFederal

$
130,808

$
152,239

$
(47,805
)State


22,022


31,012


(10,394
)Total deferred


152,830


183,251


(58,199
)Provision (benefit) for income taxes

$
158,930

$
196,814

$
(58,199
)


Variations from the 35% federal statutory rate are as follows:

Years Ended December 31,2006

2005

2004(in thousands)Provision (benefit) for federal income taxes at statutory rate

$
142,008

$
174,702

$
(47,885)Increase (decrease) in taxes from:State tax, net of federal benefit


14,947


21,554


(480)Reversal of valuation allowance








(9,655)Other


1,975


558


(179)Total provision (benefit) for income taxes

$
158,930

$
196,814

$
(58,199)Effective tax (benefit) rate


39.2%


39.4%


(42.5)%


Midwest Generation is, and may in the future be, under examination by tax authorities with respect to positions it takes in connection with the
filing of its tax returns. In Midwest Generation's opinion, it is
unlikely that the resolution of any such tax audit matters will have a material adverse effect upon Midwest Generation's financial condition or results of operations.

Note 9. Compensation and Benefit Plans

Employees of Midwest Generation are eligible for various benefit plans of Edison International.

Employee Savings Plan

A 401(k) plan is maintained to supplement eligible employees' retirement income. Midwest Generation matches 100% of non-union employee contributions,
up to 6% of such employees' base

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annual
compensation. Midwest Generation also matches 75% of contributions made by union employees, up to 6% of base annual compensation. Employer contributions vest 20% per year. Contribution expense
for the years ended December 31, 2006, 2005 and 2004 was $2.7 million, $2.6 million and $2.5 million, respectively.

Pension Plans and Postretirement Benefits Other Than Pensions

SFAS No. 158 requires companies to recognize the overfunded or underfunded status of a defined benefit pension plan and other postretirement plans as
assets or liabilities in their balance sheet; the assets or liabilities are offset through other comprehensive income. See Note 2Summary of Significant Accounting
PoliciesNew Accounting Pronouncements for further discussion. Midwest Generation adopted SFAS No. 158 prospectively on December 31, 2006.

Pension Plans

Midwest Generation maintains a pension plan specifically for the benefit of its union employees. A portion of Midwest Generation's non-union employees
participate in the Edison
International pension plan. Eligibility depends on a number of factors, including the employee's hire date. Both plans are noncontributory, defined benefit pension plans and cover employees who
fulfill minimum service requirements. The Edison International plan has a cash balance feature.

The
expected contributions (all by employer) for the plans are approximately $8.8 million for the year ended December 31, 2007. The amount is subject to change based on,
among other things, the limits established for federal tax deductibility.

The
fair value of plan assets is determined by market value.

Information
on plan assets and benefit obligations is shown below:

Years Ended December 31,2006

2005(in thousands)Change in projected benefit obligationProjected benefit obligation at beginning of year

$
83,382

$
71,122Service cost


11,651


12,143Interest cost


4,445


3,746Actuarial gain


(2,314
)

(2,595
)Benefits paid


(1,180
)

(1,034
)Projected benefit obligation at end of year

$
95,984

$
83,382Accumulated benefit obligation at end of year

$
80,260

$
65,632Change in plan assetsFair value of plan assets at beginning of year

$
49,638

$
38,043Actual return on plan assets


8,409


5,040Employer contributions


8,432


7,589Benefits paid


(1,180
)

(1,034
)Fair value of plan assets at end of year

$
65,299

$
49,638


86

---



Determination of net recorded liabilityFunded status

$
(30,685
)
$
(33,744
)Unrecognized net loss





7,530Unrecognized prior service cost





2,304Net recorded liability

$
(30,685
)
$
(23,910
)Additional detail of amounts recognized in balance sheets:Intangible asset

$


$
Accumulated other comprehensive loss


2,814


Additional detail of amounts recognized in accumulated other comprehensive loss:Prior service cost

$
2,073

$
Net actuarial loss


741


Pension plans with an accumulated benefit obligation in excess of plan assets:Projected benefit obligation

$
95,984

$
83,382Accumulated benefit obligation


80,260


65,632Fair value of plan assets


65,299


49,638Weighted-average assumptions at end of year:Discount rate


5.75%


5.50%Rate of compensation increase


5.00%


5.00%


Expense components are:

Years Ended December 31,2006

2005

2004(in thousands)Service cost

$
11,651

$
12,143

$
11,796Interest cost


4,445


3,746


3,013Expected return on plan assets


(3,934
)

(3,002
)

(2,148
)Net amortization


231


507


395Total expense

$
12,393

$
13,394

$
13,056Change in accumulated other comprehensive income

$
(2,814
)
$


$
Weighted-average assumptions:Discount rate


5.50%


5.50%


6.00%Rate of compensation increase


5.00%


5.00%


5.00%Expected return on plan assets


7.50%


7.50%


7.50%


The estimated amortization amounts for 2007 are $231,000 for prior service costs and $9,000 for net actuarial gain.

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The
following benefit payments, which reflect expected future service, are expected to be paid:

Years Ending December 31,

(in thousands)2007

$
1,4642008


1,8342009


2,4322010


3,1682011


4,2182012-2016


42,933


Asset allocations are:

December 31,Target for
20072006

2005United States equity

45%

47%

47%Non-United States equity

25%

26%

26%Private equity

4%

2%

2%Fixed income

26%

25%

25%


Postretirement Benefits Other Than Pensions

A portion of Midwest Generation's non-union employees retiring at or after age 55 with at least ten years of service are eligible for postretirement
health care, dental, life insurance and other benefits paid in part by Midwest Generation. Eligibility depends on a number of factors, including the employee's hire date.

On
December 8, 2003, President Bush signed the Medicare Prescription Drug, Improvement and Modernization Act of 2003. The Act authorized a federal subsidy to be provided to plan
sponsors for certain prescription drug benefits under Medicare. Midwest Generation adopted a new accounting pronouncement for the effects of the Act, effective July 1, 2004, which reduced
Midwest Generation's accumulated benefits obligation by $813,000 upon adoption.

The
expected contributions (all by the employer) for the postretirement benefits other than pensions trust are $427,000 for the year ended December 31, 2007. This amount is
subject to change based on, among other things, the Act referenced above and the impact of any benefit plan amendments.

The
fair value of plan assets is determined by market value.

Information
on non-union plan assets and benefit obligations is shown below:

Years Ended December 31,2006

2005(in thousands)Change in benefit obligationBenefit obligation at beginning of year

$
25,162

$
19,534Service cost


656


582Interest cost


1,436


1,288Actuarial loss (gain)


(76
)

4,082Benefits paid


(345
)

(324
)Benefit obligation at end of year

$
26,833

$
25,162


88

---



Change in plan assetsFair value of plan assets at beginning of year

$


$
Employer contributions


345


324Benefits paid


(345
)

(324
)Fair value of plan assets at end of year

$


$
Determination of net recorded liabilityFunded status

$
(26,833
)
$
(25,162
)Unrecognized net loss





9,742Unrecognized prior service cost





(3,943
)Net recorded liability

$
(26,833
)
$
(19,363
)Additional details of amounts recognized in accumulated other comprehensive loss (income):Prior service cost

$
(3,228
)
$
Net actuarial loss


8,903


Weighted-average assumptions at end of year:Discount rate


5.75%


5.50%Assumed health care cost trend rates:Rate assumed for following year


9.25%


10.25%Ultimate rate


5.00%


5.00%Year ultimate rate reached


2011


2011


Expense components are:

Years Ended December 31,2006

2005

2004(in thousands)Service cost

$
656

$
582

$
608Interest cost


1,436


1,288


1,046Amortization of unrecognized prior service costs


(715
)

(715
)

(747
)Amortization of unrecognized net loss


763


652


312Total expense

$
2,140

$
1,807

$
1,219Weighted-average assumptions:Discount rate


5.50%


5.75%


6.25%Assumed health care cost trend rates:Current year


10.25%


10.00%


12.00%Ultimate rate


5.00%


5.00%


5.00%Year ultimate rate reached


2011


2010


2010


The estimated amortization amounts for 2007 are $(715,000) for prior service cost (credit) and $577,000 for net actuarial loss.

89

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Increasing
the health care cost trend rate by one percentage point would increase the accumulated obligation as of December 31, 2006 by $4.8 million and annual aggregate
service and interest costs by $392,000. Decreasing the health care cost trend rate by one percentage point would decrease the accumulated obligation as of December 31, 2006 by
$4.0 million and annual aggregate service and interest costs by $330,000.

The
following benefit payments are expected to be paid:

Years ended December 31,

Before
Subsidy

Net(in thousands)2007

$
432

$
4272008


497


4912009


619


6112010


767


7572011


944


9292012-2016


7,706


7,501


Discount Rate

The discount rate enables Midwest Generation to state expected future cash flows at a present value on the measurement date. Midwest Generation selects its
discount rate by performing a yield curve analysis. This analysis determines the equivalent discount rate on projected cash flows, matching the timing and amount of expected benefit payments. Three
yield curves were considered: two corporate yield curves (Citigroup and AON) and a curve based on treasury rates (plus 90 basis points). Midwest Generation also compared the yield curve analysis
against the Moody's AA Corporate bond rate.

Description of Pension and Postretirement Benefits Other Than Pensions Investment Strategies

The investment of plan assets is overseen by a fiduciary investment committee. Plan assets are invested using a combination of asset classes, and may have active
and passive investment strategies within asset classes. Midwest Generation employs multiple investment management firms. Investment managers within each asset class cover a range of investment styles
and approaches. Risk is controlled through diversification among multiple asset classes, managers, styles, and securities. Plan, asset class and individual manager performance is measured against
targets. Midwest Generation also monitors the stability of its investments managers' organizations.

Allowable
investment types include:

90

---



Permitted
ranges around asset class portfolio weights are plus or minus 5%. Where approved by the fiduciary investment committee, futures contracts are used for portfolio rebalancing and
to approach fully invested portfolio positions. Where authorized, a few of the plan's investment managers employ limited use of derivatives, including futures contracts, options, options on futures
and interest rate swaps in place of direct investment in securities to gain efficient exposure to markets. Derivatives are not used to leverage the plans or any portfolios.

Determination of the Expected Long-Term Rate of Return on Assets

The overall expected long term rate of return on assets assumption is based on the target asset allocation for plan assets and capital markets return forecasts
for asset classes employed. A portion of postretirement benefits other than pensions trust asset returns are subject to taxation, so the expected long-term rate of return for these assets
is determined on an after-tax basis.

Capital Markets Return Forecasts

The estimated total return for fixed income is based on an equilibrium yield for intermediate United States government bonds plus a premium for exposure to
non-government bonds in the
broad fixed income market. The equilibrium yield is based on analysis of historic data and is consistent with experience over various economic environments. The premium of the broad market over United
States government bonds is a historic average premium. The estimated rate of return for equity is estimated to be a 3% premium over the estimated total return of intermediate United States government
bonds. This value is determined by combining estimates of real earnings growth, dividend yields and inflation, each of which is determined using historical analysis. The rate of return for private
equity is estimated to be a 5% premium over public equity, reflecting a premium for higher volatility and illiquidity.

Note 10. Commitments and Contingencies

Lease Commitments

Midwest Generation has lease financings with respect to its Powerton-Joliet Stations, which are described in more detail below. Midwest Generation also has
operating leases in place with respect to equipment, primarily railcars, with termination option dates in various years through 2020.

At
December 31, 2006, the future operating and lease financing commitments were as follows:

Years Ending December 31,

Operating Leases

Lease Financing(in thousands)2007

$
17,520

$
184,9422008


15,221


184,9302009


12,357


184,9412010


12,080


169,9732011


11,758


151,316Thereafter


55,074


790,307Total future commitments

$
124,010

$
1,666,409Amount representing interest





(525,649
)Net commitments




$
1,140,760


Operating lease expense amounted to $18.6 million, $18.0 million and $17.0 million in 2006, 2005 and 2004, respectively.

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Powerton-Joliet Facilities Sale-Leaseback

On August 24, 2000, Midwest Generation entered into a sale-leaseback transaction with respect to the Powerton and Joliet power facilities
located in Illinois to third-party lessors for an aggregate purchase price of $1.367 billion. Under the terms of the leases (33.75 years for Powerton and 30 years for Joliet),
Midwest Generation makes semi-annual lease payments on each January 2 and July 2, beginning January 2, 2001. If a lessor intends to sell its interest in the Powerton
or Joliet power facility, Midwest Generation has a first right of refusal to acquire the interest at fair market value. Under the terms of each lease, Midwest Generation may request a lessor, at its
option, to refinance the lessor debt, which if completed would affect the base lease rent. The lessor debt of $1.147 billion was obtained from the issuance pursuant to two
pass-through trust agreements between Midwest Generation and pass-through trustees of Pass-Through Certificates with terms ranging from nine to sixteen years with
fixed
interest rates ranging from 8.30% to 8.56%. The gain on the sale of the power facilities has been deferred and is being amortized over the term of the leases.

Capital Improvements

At December 31, 2006, Midwest Generation had firm commitments to spend approximately $10.1 million on capital expenditures in 2007 primarily for
reheater tubes replacement and mill inerting. These capital expenditures are planned to be financed by cash generated from operations.

Calumet Energy Team LLC Power Purchase Contract

At December 31, 2006, Midwest Generation was party to a long-term power purchase contract with Calumet Energy Team LLC entered into as part of
the settlement agreement with Commonwealth Edison, which terminated Midwest Generation's obligation to build additional gas-fired generation in the Chicago area. The contract requires
Midwest Generation to pay a monthly capacity payment and gives Midwest Generation an option to purchase energy from Calumet Energy Team at prices based primarily on operations and maintenance and fuel
costs. These minimum commitments are currently estimated to aggregate $16.7 million in the next five years, summarized as follows: 2007$3.9 million;
20084.0 million; 2009$4.1 million; 2010$4.3 million; and 2011$0.4 million.

Fuel Supply Contracts

At December 31, 2006, Midwest Generation had fuel purchase commitments with various third-party suppliers for the purchase of coal. The remaining
contracts' lengths range from less than one year to six years. Based on the contract provisions, which consist of fixed prices subject to adjustment clauses, these minimum commitments are currently
estimated to aggregate $329.6 million in the next five years, summarized as follows: 2007$145.5 million; 200856.6 million;
2009$56.7 million; 2010$61.7 million; and 2011$9.1 million.

In
February 2007, Midwest Generation contracted for the purchase of additional coal in the amount of 9 million tons for 2008, 6 million tons for 2009 and 6 million
tons for 2010.

Coal Transportation Agreements

At December 31, 2006, Midwest Generation had contractual commitments for the transport of coal to its facilities, with remaining contract lengths that
range from one year to five years. The primary contract is with Union Pacific Railroad (and various delivering carriers) which extends through 2011. Midwest Generation commitments under this agreement
are based on actual coal purchases from the PRB. Accordingly, Midwest Generation's contractual obligations for transportation are based on coal volumes set forth in its fuel supply contracts. Based on
the committed coal volumes in the fuel supply

92

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contracts
described above, these minimum commitments are currently estimated to aggregate $435.7 million in the next four years, summarized as follows: 2007$210.7 million;
2008$73.5 million; 2009$75.0 million; and 2010$76.5 million.

Interconnection Agreement

Midwest Generation has entered into interconnection agreements with Commonwealth Edison to provide interconnection services necessary to connect the Illinois
Plants with its transmission systems. Unless terminated earlier in accordance with their terms, the interconnection agreements will terminate on a date mutually agreed to by both parties. Midwest
Generation is required to compensate Commonwealth Edison for all reasonable costs associated with any modifications, additions or replacements made to the interconnection facilities or transmission
systems in connection with any modification, addition or upgrade to the Illinois Plants.

Guarantees and Indemnities

Tax Indemnity Agreements

In connection with the sale-leaseback transactions related to the Powerton and Joliet Stations and previously the Collins Station, EME, Midwest
Generation and another wholly owned subsidiary of EME entered into tax indemnity agreements. Under these tax indemnity agreements, these
entities agreed to indemnify the lessors in the sale-leaseback transactions for specified adverse tax consequences that could result in certain situations set forth in the tax indemnity
agreement, including specified defaults under the respective leases. The potential indemnity obligation under these tax indemnity agreements could be significant. Due to the nature of these
obligations, Midwest Generation cannot determine a maximum potential liability which would be triggered by a valid claim from the lessors. Midwest Generation has not recorded a liability related to
these indemnities. In connection with the termination of the Collins Station lease in April 2004, Midwest Generation will continue to have obligations under the tax indemnity agreement with the
former lease equity investor. For more information about the termination of the Collins Station lease, see Note 3Loss on Lease Termination, Asset Impairment and Other Charges.

Indemnity Provided as Part of the Acquisition from Commonwealth Edison

In connection with the acquisition of the Illinois Plants, Midwest Generation agreed to indemnify Commonwealth Edison with respect to specified environmental
liabilities before and after December 15, 1999, the date of sale. The indemnification claims are reduced by any insurance proceeds and tax benefits related to such claims and are subject to a
requirement that Commonwealth Edison take all reasonable steps to mitigate losses related to any such indemnification claim. Due to the nature of the obligation under this indemnity, a maximum
potential liability cannot be determined. This indemnification for environmental liabilities is not limited in term and would be triggered by a valid claim from Commonwealth Edison. Except as
discussed below, Midwest Generation has not recorded a liability related to this indemnity.

Midwest
Generation entered into a supplemental agreement with Commonwealth Edison and Exelon Generation on February 20, 2003 to resolve a dispute regarding interpretation of its
reimbursement obligation for asbestos claims under the environmental indemnities set forth in the Asset Sale Agreement. Under this supplemental agreement, Midwest Generation agreed to reimburse
Commonwealth Edison and Exelon Generation for 50% of specific asbestos claims pending as of February 2003 and related expenses less recovery of insurance costs, and agreed to a sharing
arrangement for liabilities and expenses associated with future asbestos-related claims as specified in the

93

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agreement.
As a general matter, Commonwealth Edison and Midwest Generation apportion responsibility for future asbestos-related claims based upon the number of exposure sites that are Commonwealth
Edison locations or Midwest Generation locations. The obligations under this agreement are not subject to a maximum liability. The supplemental agreement has a five-year term with an
automatic renewal provision (subject to the right of either party to terminate). Payments are made under this indemnity upon tender by Commonwealth Edison of appropriate proof of liability for an
asbestos-related settlement, judgment, verdict, or expense. There were approximately 186 cases for which Midwest Generation was potentially liable and that had not been settled and dismissed at
December 31, 2006. Midwest Generation had recorded a $64.6 million and $67.4 million liability at December 31, 2006 and 2005, respectively, related to this matter.

The
amounts recorded by Midwest Generation for the asbestos-related liability are based upon a number of assumptions. Future events, such as the number of new claims to be filed each
year, the average cost of disposing of claims, as well as the numerous uncertainties surrounding asbestos litigation in the United States, could cause the actual costs to be higher or lower than
projected.

Contingencies

FERC Notice Regarding Investigatory Proceeding against EMMT

At the end of October 2006, EMMT was advised by the enforcement staff at the FERC that it is prepared to recommend that the FERC initiate a formal
investigatory proceeding and seek monetary sanctions against EMMT for alleged violation of the FERC's rules with respect to certain bidding practices employed by EMMT. EMMT is engaged in discussions
with the staff to explore the possibility of resolution of this matter. Should a formal proceeding be commenced, EMMT will be entitled to contest any alleged violations before the FERC and an
appropriate court. EMMT has advised Midwest Generation that EMMT believes that it has complied with the FERC's rules and that it intends to contest vigorously any allegation of violation. EMMT has
further advised Midwest Generation that it cannot predict at this time the outcome of this matter or estimate the possible liability should the outcome be adverse.

Environmental Matters and Regulations

Introduction

The construction and operation of power plants are subject to environmental regulation by federal, state and local authorities. Midwest Generation believes that
it is in substantial compliance with existing environmental regulatory requirements. Typically, environmental laws and regulations require a lengthy and complex process for obtaining licenses, permits
and approvals prior to construction, operation or modification of a project or generating facility. Meeting all the necessary requirements can delay or sometimes prevent the completion of a proposed
project as well as require extensive modifications to existing projects, which may involve significant capital expenditures. If Midwest Generation fails to
comply with applicable environmental laws, it may be subject to injunctive relief or penalties and fines imposed by regulatory authorities.

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Air Quality Regulation

Federal environmental regulations require reductions in emissions beginning in 2009 and require states to adopt implementation plans that are equal to or more
stringent than the federal requirements. Compliance with these regulations and SIPs will affect the costs and the manner in which Midwest Generation conducts its business, and will require Midwest
Generation to make substantial additional capital expenditures. There is no assurance that Midwest Generation would be able to recover these increased costs from its customers or that Midwest
Generation's financial position and results of operations would not be materially adversely affected as a result.

Clean Air Act

On May 12, 2005, the CAIR was published in the Federal Register. The CAIR requires 28 eastern states and the District of Columbia to address ozone
attainment issues by reducing regional NOX and SO2 emissions. The CAIR reduces the current Clean Air Act Title IV Phase II SO2 emissions allowance cap for 2010 and
2015 by 50% and 65%, respectively. The CAIR also requires reductions in regional NOX emissions in 2009 and 2015 by 53% and 61%, respectively, from 2003 levels. The CAIR has been challenged
in court, which may result in changes to the substance of the rule and to the timetables for implementation.

Midwest
Generation expects that compliance with the CAIR and the regulations and revised SIPs developed as a consequence of the CAIR will result in increased capital expenditures and
operating expenses. Midwest Generation's approach to meeting these obligations will consist of a blending of capital expenditure and emission allowance purchases that will be based on an ongoing
assessment of the dynamics of its market conditions.

On
December 11, 2006, Midwest Generation entered into an agreement with the Illinois EPA to reduce mercury, NOX and SO2 emissions at the Illinois Plants.
The agreement has been embodied in rule language, called the CPS, and Midwest Generation's obligations under the agreement are conditioned upon the formal adoption of the CPS as an Illinois rule. On
January 5, 2007, the Illinois EPA and
Midwest Generation jointly filed the CPS in the pending state rulemaking related to the Illinois SIP for the CAIR. Midwest Generation expects the CPS to become final in the spring of 2007 and believes
that, upon adoption, the CPS will provide greater predictability of the timing and amount of emissions reductions which will be required of the Illinois Plants for these pollutants through 2018. No
assurance can be given that all required regulatory approvals will be received, and if not received, Midwest Generation will remain subject to existing and future requirements as to emissions of these
pollutants.

If
the agreement is implemented as contemplated, Midwest Generation will be required to achieve specified emissions reductions through a combination of environmental retrofits or unit
shutdowns. The agreement contemplates three phases with each phase relating to one of the pollutants involved. Capital expenditures will be required for each phase.

The
first phase involves installing activated carbon injection technology in 2008 and 2009 for the removal of mercury, a technology which Midwest Generation has been testing at some of
its plants. Capital expenditures relating to these controls are currently estimated to be approximately $60 million.

The
second phase requires the installation of additional controls by the end of 2011 to further reduce NOX emissions from units to be determined by Midwest Generation in
order to achieve an agreed-on fleetwide level of NOX emissions per million Btu. Capital expenditures for these controls are currently estimated to be approximately
$450 million.

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Thereafter,
during the third phase of the plan, the focus will be on the reduction of SO2 emissions. Midwest Generation will be required either to place controls on several
units at the Illinois Plants between 2012 and 2018 for this purpose or to remove them from service. Midwest Generation will consider many factors in making this choice including, among others, an
assessment of the cost and performance of environmental technologies and equipment, the remaining estimated useful life of each affected unit and the market outlook for the prices of various
commodities including electrical energy and capacity, coal and natural gas. In view of the many factors involved, Midwest Generation has not yet determined what actions it may take at each affected
unit to provide for optimal compliance with the agreement during its third phase. At this time, however, additional capital expenditures during the third phase of the plan are estimated as being in
the range of approximately $2.2 billion to $2.9 billion, depending on the number of units on which controls are placed versus the number which are removed from service. For the reasons
described above, actual capital expenditures may vary substantially from the above estimates.

On
May 30, 2006, the Illinois EPA submitted a proposed regulation to the Illinois Pollution Control Board to implement the Illinois SIP required for compliance with the CAIR. The
Illinois Pollution Control Board held hearings on this SIP on October 10, 2006 and November 28, 2006. As noted
previously, on January 5, 2007 the Illinois EPA and Midwest Generation filed the CPS in the pending Illinois rulemaking.

Mercury Regulation

The CAMR, published in the Federal Register on May 18, 2005, creates a market-based cap-and-trade program to reduce nationwide
utility emissions of mercury in two distinct phases. In the first phase of the program, which will come into effect in 2010, the annual nationwide cap will be 38 tons. Emissions of mercury are to be
reduced primarily by taking advantage of mercury reductions achieved by reducing SO2 and NOX emissions under the CAIR. In the second phase, which is to take effect in 2018,
coal-fired power plants will be subject to a lower annual cap, which will reduce emissions nationwide to 15 tons. States may join the trading program by adopting the CAMR model trading
rule in state regulations, or they may adopt regulations that mirror the necessary components of the model trading rule. States are not required to adopt a cap-and-trade
program and may promulgate alternative regulations, such as command and control regulations, that are equivalent to or more stringent than the CAMR's suggested cap-and-trade
program. Any program adopted by a state must be approved by the US EPA.

Contemporaneous
with the adoption of the CAMR, the US EPA rescinded its previous finding that mercury emissions from coal-fired power plants had to be regulated as a
hazardous air pollutant pursuant to Section 112 of the federal Clean Air Act, which would have imposed technology-based standards. Both the US EPA's rescission action and the CAMR are being
challenged in the courts. Because Midwest Generation cannot predict the outcome of these challenges, which could result in changes to the CAMR rules and timetables, the full impact of this regulation
currently cannot be assessed.

The
final state rule for the reduction of mercury emissions in Illinois was adopted and became effective on December 21, 2006. The rule requires a 90% reduction of mercury
emissions from coal-fired power plants averaged across company-owned Illinois stations and a minimum reduction of 75% for individual generating sources by July 1, 2009. The rule
requires each station to achieve a 90% reduction by January 1, 2014 and, because emissions are measured on a rolling 12-month average, stations must install equipment necessary to
meet the January 1, 2014, 90% reduction by January 1, 2013. Buying or selling of emission allowances under the federal CAMR cap-and-trade program would be
prohibited.

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Midwest
Generation's pending CPS, if adopted, will supersede this rule for the Illinois Plants. The CPS requires installation of activated carbon injection technology for the removal of
mercury on all Midwest Generation units by July 2009 (except for three units to be shut down by the end of 2010), prohibits participation in the federal cap-and-trade
program, and requires a 90% removal of mercury by unit by the end of 2015. While its CPS is pending, Midwest Generation has filed an appeal of the state's mercury rule that would require a 90%
fleetwide reduction in mercury emissions by July 2009.

Ambient Air Quality Standards

The US EPA designated non-attainment areas for its 8-hour ozone standard on April 30, 2004, and for its fine particulate matter
standard on January 5, 2005. Almost all of Midwest Generation's facilities are located in counties that have been identified as being in non-attainment with both standards. States
are required to revise their SIPs for the ozone and particulate matter standards within three years of the effective date of the respective non-attainment designations. Depending upon the
final standards that are adopted, Midwest Generation may incur substantial costs or experience other financial impacts resulting from required capital improvements or operational changes.

On
September 22, 2006 the US EPA issued a final rule that implements the revisions to its fine particulate standard originally proposed on January 17, 2006. Under the new
rule, the annual standard remains the same but the 24-hour fine particulate standard is significantly more stringent. The rule may require states to impose further emission reductions
beyond those necessary to meet the existing standards. Midwest Generation anticipates that any such further emissions reduction obligations would not be imposed under this standard until 2015 at the
earliest, and intends to consider such rules as part of its overall plan for environmental compliance.

Beginning
with the 2003 ozone season (May 1 through September 30), Midwest Generation has been required to comply with an average NOX emission rate of 0.25 lb
NOX/MMBtu of heat input. This limitation is commonly referred to as the East St. Louis State Implementation Plan. This regulation is a State of Illinois requirement. Each of the Illinois
Plants complied with this standard in 2004. Beginning with the 2004 ozone season, the Illinois Plants became subject to the federally mandated "NOX SIP Call" regulation that provided
ozone-season NOX emission allowances to a 19-state region east of the Mississippi. This program provides for NOX allowance trading similar to the SO2
(acid rain) trading program already in effect.

During
2004, the Illinois Plants stayed within their NOX allocations by augmenting their allocation with early reduction credits generated within the fleet. In 2005, the
Illinois Plants used banked allowances, along with some purchased allowances, to stay within their NOX allocations. In 2006, the Illinois Plants used purchased allowances to stay within
their NOx allocations. Midwest Generation plans to continue to purchase allowances as it implements the agreement it reached with the Illinois EPA.

The
Illinois EPA has begun to develop SIPs to meet National Ambient Air Quality Standards for 8-hour ozone and fine particulates with the intent of bringing
non-attainment areas, such as Chicago, into attainment. The SIPs are expected to deal with all emission sources, not just power generators, and to address emissions of NOX,
SO2, and volatile organic compounds. These SIPs are to be submitted to the US EPA by June 15, 2007 for 8-hour ozone, and by April 5, 2008 for fine particulates.
These SIPs are likely to require additional emission reductions from facilities that are significant emitters of ozone precursors and particulates. Any additional obligations on Midwest Generation's
facilities to further reduce their emissions of SO2, NOX and fine particulates to address local non-attainment with the 8-hour ozone and fine
particulate matter standards will not be known until Illinois revises its SIPs.

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Midwest
Generation's agreement with the Illinois EPA and the pending CPS include emission controls that will contribute to ozone and fine particulate attainment. Midwest Generation
expects, but cannot guarantee, that the reductions required under the agreement and the pending CPS will be sufficient for compliance with future ozone and particulate matter regulations. See
"Clean Air Act" for further discussion.

Regional Haze

The goal of the 1999 regional haze regulations is to restore visibility in mandatory federal Class I areas, such as national parks and wilderness areas, to
natural background conditions in 60 years. Sources such as power plants that are reasonably anticipated to contribute to visibility impairment in Class I areas may be required to install
Best Available Retrofit Technology (BART) or implement other control strategies to meet regional haze control requirements. States are required to revise their SIPs to demonstrate reasonable further
progress towards meeting regional haze goals. Emission reductions achieved through other ongoing control programs may be sufficient to demonstrate reasonable progress toward the long-term
goal, particularly for the first 10 to 15 year phase of the program. States must develop SIPs by December 2007. It is possible that sources subject to the CAIR will be able to satisfy
their obligations under the regional haze regulations through compliance with the CAIR. However, until the SIPs are revised, Midwest Generation cannot predict whether it will be required to install
BART or implement other control strategies, and cannot identify the financial impacts of any additional control requirements.

The
CPS, discussed above in "Clean Air Act," addresses emissions reductions at BART affected sources.

New Source Review Requirements

Since 1999, the US EPA has pursued a coordinated compliance and enforcement strategy to address Clean Air Act NSR compliance issues at the nation's
coal-fired power plants. The NSR regulations impose certain requirements on facilities, such as electric generating stations, in the event that modifications are made to air emissions
sources at a facility. The US EPA's strategy included both the filing of a number of suits against power plant owners, and the issuance of a number of administrative notices of violation to power
plant owners alleging NSR violations. Midwest Generation has not been named as a defendant in these lawsuits and has not received any administrative Notices of Violation alleging NSR violations at any
of its facilities.

On
October 13, 2005, the US EPA proposed a change to the NSR program. The proposal put forth several options for a new emissions test based on the impact of a facility
modification on a facility's maximum hourly emissions or its emissions per unit of energy produced. The existing NSR emissions test is based on the impact of a modification on a generating station's
net annual emissions.

In
October 2005, the US EPA announced a revised NSR strategy to take account of recent US EPA rulemakings, such as the CAIR and regional haze rules, affecting
coal-fired power plants. Under the revised strategy, while the US EPA will continue to pursue filed cases and cases in active negotiation, it intends to shift its future enforcement focus
from coal-fired power plants to other sectors where compliance assurance activities have the potential to produce significant environmental benefits.

On
February 21, 2003, Midwest Generation received a request for information under Section 114 regarding past operations, maintenance and physical changes at the Illinois
Plants from the US EPA. This request was part of the US EPA's industry-wide investigation of compliance by coal-fired plants with the

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Clean
Air Act NSR requirements. On July 28, 2003, Commonwealth Edison received a substantially similar request for information from the US EPA related to the same plants. In a request dated
February 1, 2005, the US EPA submitted a request for additional information to Midwest Generation. Midwest Generation has provided responses to these requests. Other than these requests for
information, no NSR enforcement-related proceedings have been initiated by the US EPA with respect to Midwest Generation's facilities.

Midwest
Generation will continue to monitor developments with respect to the NSR program and NSR enforcement to assess what implications, if any, they will have on its facilities, its
results of operations or financial position.

Water Quality Regulation

Clean Water ActCooling Water Intake Structures

On July 9, 2004, the US EPA published the final Phase II rule implementing Section 316(b) of the Clean Water Act establishing standards for cooling
water intake structures at existing large power plants. The purpose of the regulation is to reduce substantially the number of aquatic organisms that are pinned against cooling water intake structures
or drawn into cooling water systems. Pursuant to the regulation, a demonstration study must be conducted when applying for a new or renewed National Pollutant Discharge Elimination System wastewater
discharge permit. If one can demonstrate that the costs of meeting the presumptive standards set forth in the regulation are significantly greater than the costs that the US EPA assumed in its rule
making or are significantly disproportionate to the expected environmental benefits, a site-specific analysis may be performed to establish alternative standards. Depending on the findings
of the demonstration studies, cooling towers and/or other mechanical means of reducing impingement and entrainment of aquatic organisms may be required. Midwest Generation has begun to collect
impingement and entrainment data at its potentially affected Illinois Plants to begin the process of determining what corrective actions may need to be taken.

The
Phase II cooling water intake structure rule was challenged in the courts, and the cases were consolidated and transferred to the United States Court of Appeals for the Second
Circuit. On January 25, 2007, the Second Circuit granted the petitions challenging the rule and remanded the rule to the US EPA for further proceedings. Although the Phase II rule could have a
material impact on Midwest Generation's operations, Midwest Generation cannot reasonably determine the financial impact on it at this time because it is still collecting the data required by the
regulation and because the challenges mentioned above may affect the obligations imposed by the rule.

The
Illinois EPA is reviewing the water quality standards for the Des Plaines River adjacent to the Joliet Station and immediately downstream of the Will County Station to determine if
the use classification should be upgraded. If the existing use classification is changed, the limits on the temperature of the discharges from the Joliet and Will County plants may be made more
stringent. The Illinois EPA has also begun a review of the water quality standards for the Chicago River and Chicago Sanitary and Ship Canal which are adjacent to the Fisk and Crawford Stations.
Proposed changes to the existing standards are still being developed. Accordingly, Midwest Generation is not able to estimate the financial impact of potential changes to the water quality standards.
However, the cost of additional cooling water treatment, if required, could be substantial.

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Environmental Remediation

Under various federal, state and local environmental laws and regulations, a current or previous owner or operator of any facility, including an electric
generating facility, may be required to investigate and remediate releases or threatened releases of hazardous or toxic substances or petroleum products located at that facility, and may be held
liable to a governmental entity or to third parties for property damage, personal injury, natural resource damages, and investigation and remediation costs incurred by these parties in connection with
these releases or threatened releases. In addition, persons who arrange for the disposal or treatment of hazardous or toxic substances at a disposal or treatment facility may be liable for the costs
to remediate releases of hazardous substances from such facilities even where the disposal of such wastes was undertaken in compliance with applicable laws. Many of these laws, including the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, commonly referred to as CERCLA, as amended by the Superfund Amendments and Reauthorization Act of 1986, impose liability
without regard to whether the owner knew of or caused the presence of the hazardous substances, and courts have interpreted liability under these laws to be strict and joint and several.

With
respect to Midwest Generation's potential liabilities arising under CERCLA or similar laws for the investigation and remediation of contaminated property, Midwest Generation accrues
a liability to the extent the costs are probable and can be reasonably estimated. Midwest Generation has accrued approximately $3.0 million at December 31, 2006 for estimated
environmental investigation and remediation costs for the Illinois Plants. This estimate is based upon the number of sites, the scope of work and the estimated costs for environmental activity where
such expenditures could be reasonably estimated. Future estimated costs may vary based on changes in regulations or requirements of federal, state, or local governmental agencies, changes in
technology, and actual costs of disposal. In addition, future remediation costs will be affected by the nature and extent of contamination discovered at the sites that requires remediation. Given the
prior history of the operations at its facilities, Midwest Generation cannot be certain that the existence or extent of all contamination at its sites has been fully identified. However, based on
available information, management believes that future costs in excess of the amounts disclosed on all known and quantifiable environmental contingencies will not be material to Midwest Generation's
financial position.

Federal,
state and local laws, regulations and ordinances also govern the removal, encapsulation or disturbance of asbestos-containing materials when these materials are in poor
condition or in the event of construction, remodeling, renovation or demolition of a building. Those laws and regulations may impose liability for release of asbestos-containing materials and may
provide for the ability of third parties to seek recovery from owners or operators of these properties for personal injury associated with asbestos-containing materials. In connection with the
ownership and operation of its facilities, Midwest Generation may be liable for these costs. Midwest Generation has agreed to indemnify Commonwealth Edison for specified environmental liabilities. See
"Guarantees and Indemnities" for a discussion of this indemnity agreement.

Climate Change

To date, the United States has chosen to pursue a voluntary greenhouse gas emissions reduction program to meet its obligations as a signatory to the United
Nations Framework Convention on Climate Change. Currently a number of bills are proposed or under discussion in Congress to mandate reductions of greenhouse gas emissions. At this point, Midwest
Generation is unable to determine whether any of these proposals will be enacted into law or to estimate their potential effect on Midwest Generation.

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There
have been petitions from states and other parties to compel the US EPA to regulate greenhouse gases under the CAIR. Also, in 2004, several states and environmental organizations
brought a complaint in federal court in New York, alleging that several electric utility corporations are jointly and severally liable under a theory of public nuisance for damages caused by the
alleged contribution to global warming resulting from carbon dioxide emissions from coal-fired power plants owned and operated by these companies or their subsidiaries. Midwest Generation
was not named as a defendant in the complaint. The case was dismissed and is currently on appeal with the United States Court of Appeals for the Second Circuit.

In
April 2006, private citizens brought a complaint in federal court in Mississippi against numerous defendants, including several electric utilities, arguing that emissions from
the defendants' facilities contributed to climate change and seeking monetary damages related to the 2005 hurricane season. Midwest Generation was not named as a defendant in the complaint.

The
ultimate outcome of the climate change debate could have a significant economic effect on Midwest Generation. Any legal obligation that would require Midwest Generation to reduce
substantially its emissions of carbon dioxide or would impose additional costs or charges for the emission of carbon dioxide could have a materially adverse effect on Midwest Generation.

Note 11. Related Party Transactions

EMMT Agreements

Midwest Generation entered into a revolving credit agreement with EMMT, dated as of April 27, 2004, pursuant to which Midwest Generation can, from time to
time, make revolving loans to, and have letters of credit issued on behalf of, EMMT. The loans and letters of credit provide credit support for forward contracts entered into by EMMT related to the
Illinois Plants. Midwest Generation had provided $43.5 million and $328.1 million to EMMT as of December 31, 2006 and 2005, respectively, which EMMT used to provide credit support
for forward contracts. Loans provided under this revolving credit agreement are repaid by EMMT upon the return of the funds under the terms of the related forward contract. The amount repaid includes
interest earned, if any, under margining agreements supporting such contracts. The maximum amount of available credit under the agreement is $500 million.

Midwest
Generation has entered into a master purchase, sale and services agreement with EMMT, pursuant to which EMMT arranges for purchases and sales of the following products, including
related services: (i) energy and capacity; (ii) natural gas; (iii) fuel oil; and (iv) emission allowances.

Midwest
Generation compensates EMMT in accordance with the following table with respect to these transactions, and reimburses EMMT for brokers' fees, taxes, and other reasonably incurred
direct out-of-pocket expenses. Payment for these services is due within 30 days of billing.

Service

CompensationEnergy

$.02/MWhCapacity

$.02/MW-dayNatural gas

$.02/MMBtuFuel oil

$.05/bblEmission allowances

$.25/SO2 allowance; and $25/NOX allowance


The net fees earned by EMMT were $1.0 million, $1.5 million and $1.8 million for the years ended December 31, 2006,
2005 and 2004, respectively. Midwest Generation had receivables due from EMMT

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of
$104.4 million and $203.6 million at December 31, 2006 and 2005, respectively. The decrease in receivable balance in 2006 is due to lower sales of power and emissions by
Midwest Generation through EMMT in December 2006 compared to December 2005.

Midwest
Generation also entered into several transactions through EMMT to sell surplus or purchase SO2 and NOX allowances. All transactions were completed at
market price on the date of the transaction. Net consideration received by Midwest Generation was $6.6 million, $54.7 million and $26.1 million during 2006, 2005 and 2004,
respectively.

Fuel Services Agreement

Midwest Generation has entered into an agreement with Edison Mission Energy Services, Inc. to provide fuel and transportation services related to coal and
fuel oil. Under the terms of this agreement, Midwest Generation pays a service fee of $.06 for each ton of coal delivered and $.05 for each barrel of fuel oil delivered, plus the actual cost of the
commodities. The amount billable under this agreement for the service fee for each of the years ended December 31, 2006, 2005 and 2004 was $1.1 million.

Notes Receivable from EME

The proceeds received by Midwest Generation from the Powerton-Joliet sale-leaseback transaction were loaned to EME. The loan is evidenced by four
intercompany notes amounting to $1.367 billion. EME is obligated to repay the principal on the notes in a series of installments on the dates and in the amounts set forth on a schedule to each
note. EME has paid and is required to pay interest on the notes on each January 2 and July 2 at an 8.30% fixed interest rate. All amounts due under the notes are due to be repaid in full
by January 2, 2016. Midwest Generation earned interest income of $115.0 million, $113.1 million and $113.2 million during 2006, 2005 and 2004, respectively.

Services Agreements with EME and Edison International

Certain administrative services, such as payroll, employee benefit programs, insurance and information technology are shared among all affiliates of Edison
International, and the costs of these corporate support services are allocated to all affiliates. The cost of services provided by Edison International and EME, including those related to Midwest
Generation, are allocated based on one of the following formulas: percentage of the time worked, equity in investment and advances, number of employees, or multi-factor (operating revenues, operating
expenses, total assets and total employees). Midwest Generation participates in a common payroll and benefit program with all Edison International employees. In addition, Midwest Generation is billed
for any direct labor and out-of-pocket expenses for services directly requested for its benefit. Midwest Generation believes the allocation methodologies are reasonable. Costs
incurred for these programs, payroll funding, and other services during the years ended December 31, 2006, 2005 and 2004 were $125.0 million, $125.7 million and
$138.1 million, respectively. Midwest Generation had a net receivable due from Edison International of $0.3 million and $0.9 million at December 31, 2006 and 2005,
respectively, related to these programs.

Midwest
Generation participates in the insurance program of Edison International, including property, general liability, workers compensation and various other specialty policies.
Midwest Generation's insurance premiums are generally based on its share of risk related to each policy. In connection with the property insurance program, a portion of the risk is reinsured by a
captive insurance subsidiary of Edison International.

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Agreements with Midwest Generation EME, LLC

Management and Administration Agreement

In April 2004, Midwest Generation EME and Midwest Generation entered into a new management and administration agreement pursuant to which Midwest
Generation EME began charging Midwest Generation for management and administrative services. Actual costs billable under this agreement for the years ended December 31, 2006, 2005 and 2004 were
$12.3 million, $13.1 million and $15.7 million, respectively.

Support Services Agreement

Midwest Generation has entered into an agreement with Midwest Generation EME for support services, including construction and construction management, operations
and maintenance management, technical services and training, environmental, health and safety services, administrative and IT support, and other managerial and technical services needed to operate and
maintain electric power facilities. Under the terms of the agreement, Midwest Generation reimburses Midwest Generation EME for actual costs incurred by functional area in providing support services,
or in the case of specific tasks requested by Midwest Generation, the amount negotiated for the task. Actual costs billable under this agreement for the years ended December 31, 2006, 2005 and
2004 were $7.1 million, $6.9 million and $6.1 million, respectively.

Midwest
Generation had payables of $1.5 million due to Midwest Generation EME at both December 31, 2006 and 2005 related to these agreements.

Note 12. Supplemental Statements of Cash Flows Information

Years Ended December 31,2006

2005

2004(in thousands)Cash paidInterest

$
200,568

$
206,893

$
261,057Non-cash financing activitiesReduction in affiliate debt due to tax-allocation agreement offset

$
3,250

$


$
25,966Reduction in affiliate debt and affiliate interest due to equity contribution as part of refinancing

$


$


$
2,190,902


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Note 13. Quarterly Financial Data (unaudited)

|2006                            |  | First |         | Second |   | Third(i) |  | Fourth |         | Total
|------------------------------- |  | ----- | ------- | ------ | - | -------- |  | ------ | ------- | -----
|
|Operating revenues              |  | $     | 345,984 |        | $ | 266,262  |  | $      | 438,065 |      
|Operating income                |  |       | 130,824 |        |   | 25,856   |  |        | 201,170 |      
|Provision for income taxes      |  |       | 43,166  |        |   | 969      |  |        | 69,818  |      
|Income before accounting change |  |       | 66,818  |        |   | 1,600    |  |        | 110,295 |      
|Net income                      |  |       | 66,818  |        |   | 1,600    |  |        | 110,295 |      
|
|Operating revenues              |  | $     | 324,924 |        | $ | 252,655  |  | $      | 417,858 |      
|Operating income                |  |       | 104,135 |        |   | 25,987   |  |        | 198,326 |      
|Provision for income taxes      |  |       | 31,077  |        |   | 1,556    |  |        | 68,669  |      
|Income before accounting change |  |       | 48,158  |        |   | 2,227    |  |        | 107,085 |      
|Net income                      |  |       | 48,158  |        |   | 2,227    |  |        | 107,085 |      

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PART III

ITEM 10.    MANAGERS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Omitted pursuant to General Instruction I.(2)(c).

Code of Business Conduct and Ethics for Principal Officers

Midwest Generation has adopted an Ethics and Compliance Code that applies to its principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions. The Ethics and Compliance Code is posted on the Internet website maintained by Midwest Generation's ultimate parent, Edison
International, at www.edisonethics.com. Any amendment to or waiver from a provision of the Ethics and Compliance Code that must be disclosed under rules and forms of the Securities and Exchange
Commission will be disclosed at the same Internet website address within four business days following the date of the amendment or waiver.

ITEM 11.    EXECUTIVE COMPENSATION

Omitted pursuant to General Instruction I.(2)(c).

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Omitted pursuant to General Instruction I.(2)(c).

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Omitted pursuant to General Instruction I.(2)(c).

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

INDEPENDENT ACCOUNTANT FEES

The following table sets forth the aggregate fees billed to Midwest Generation (consolidated total including Midwest Generation and its subsidiaries), for the
fiscal years ended December 31, 2006 and December 31, 2005, by PricewaterhouseCoopers LLP:

Midwest Generation
and Subsidiaries
($000)2006

2005Audit Fees

$
787

$
749Audit Related Fees





Tax Fee





All Other Fees








The Edison International Audit Committee reviews with management and pre-approves all audit services to be performed by the
independent accountants and all non-audit services that are not prohibited and that require pre-approval under the Securities Exchange Act. The Edison International Audit
Committee's pre-approval responsibilities may be delegated to one or more Edison International

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Audit
Committee members, provided that such delegate(s) presents any pre-approval decisions to the Edison International Audit Committee at its next meeting. The independent auditors must
assure that all audit and non-audit services provided to Midwest Generation and its subsidiaries have been approved by the Edison International Audit Committee.

During
the fiscal year ended December 31, 2006, all services performed by the independent accountants were pre-approved by the Edison International Audit Committee,
regardless of whether the services required pre-approval under the Securities Exchange Act.

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PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

| |  | (a) |  | (1) |  | List of Financial Statements                                                                                                                                          
| |  | --- |  | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |     |  |     |  | See Index to Consolidated Financial Statements at Item 8 of this report.                                                                                              
| |  |     |  | (2) |  | List of Financial Statement Schedules                                                                                                                                 
| |  |     |  |     |  | Schedules have been omitted because they are not applicable or because the required information is included in the consolidated financial statements or notes thereto.
| |  |     |  | (3) |  | List of Exhibits                                                                                                                                                      

|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1         |  | Asset Sale Agreement, dated March 22, 1999, between Commonwealth Edison Company and Edison Mission Energy as to the Fossil Generating Assets, incorporated by reference to Exhibit 2.5 to Edison Mission Energy's
Form 10-K for the year ended December 31, 1998.                                                                                                                                                                                                                                                             
|3.1         |  | Limited Liability Company Agreement of Midwest Generation, LLC effective as of July 12, 1999, incorporated by reference to Exhibit 3.3 to Edison Mission Energy's and Midwest Generation, LLC's Registration Statement on Form S-4 to the
Securities and Exchange Commission on April 20, 2001.                                                                                                                                                                                                                               
|3.2         |  | Certificate of Formation of Midwest Generation, LLC, dated as of July 9, 1999, incorporated by reference to Exhibit 3.4 to Edison Mission Energy's and Midwest Generation, LLC's Registration Statement on Form S-4 to the Securities and
Exchange Commission on April 20, 2001.                                                                                                                                                                                                                                              
|4.1         |  | Pass-Through Trust Agreement A, dated as of August 17, 2000, between Midwest Generation, LLC and United States Trust Company of New York, as Pass-Through Trustee, made with respect to the formation of the Midwest Generation Series A Pass-
Through Trust, and the issuance of 8.30% Pass-Through Certificates, Series A, incorporated by reference to Exhibit 4.1 to Edison Mission Energy's and Midwest Generation, LLC's Registration Statement on Form S-4 to the Securities and
Exchange Commission on April 20, 2001.
|4.2         |  | Pass-Through Trust Agreement B, dated as of August 17, 2000, between Midwest Generation, LLC and United States Trust Company of New York, as Pass-Through Trustee, made with respect to the formation of the Midwest Generation Series B Pass-
Through Trust, and the issuance of 8.56% Pass-Through Certificates, Series B, incorporated by reference to Exhibit 4.2 to Edison Mission Energy's and Midwest Generation, LLC's Registration Statement on Form S-4 to the Securities and
Exchange Commission on April 20, 2001.
|4.3         |  | Form of 8.30% Pass-Through Certificate, Series A (included in Exhibit 4.1), incorporated by reference to Exhibit 4.3 to Edison Mission Energy's and Midwest Generation, LLC's Registration Statement on Form S-4 to the Securities and
Exchange Commission on April 20, 2001.                                                                                                                                                                                                                                                 
|4.4         |  | Form of 8.56% Pass-Through Certificate, Series B (included in Exhibit 4.2), incorporated by reference to Exhibit 4.4 to Edison Mission Energy's and Midwest Generation, LLC's Registration Statement on Form S-4 to the Securities and
Exchange Commission on April 20, 2001.                                                                                                                                                                                                                                                 
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

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|4.5   |  | Indenture of Trust, Mortgage and Security Agreement (T1), dated as of August 17, 2000, between Powerton Trust I and United States Trust Company of New York, as Lease Indenture Trustee, incorporated by reference to Exhibit 4.5 to Edison
Mission Energy's and Midwest Generation, LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.5.1 |  | Schedule identifying substantially identical agreement to Indenture of Trust, Mortgage and Security Agreement constituting Exhibit 4.5 hereto, incorporated by reference to Exhibit 4.5.1 to Edison Mission Energy's and Midwest Generation,
LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.                                        
|4.6   |  | Indenture of Trust, Mortgage and Security Agreement (T1), dated as of August 17, 2000, between Joliet Trust I and United States Trust Company of New York, as Lease Indenture Trustee, incorporated by reference to Exhibit 4.6 to Edison
Mission Energy's and Midwest Generation, LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.  
|4.6.1 |  | Schedule identifying substantially identical agreement to Indenture of Trust, Mortgage and Security Agreement constituting Exhibit 4.6 hereto, incorporated by reference to Exhibit 4.6.1 to Edison Mission Energy's and Midwest Generation,
LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.                                        
|4.7   |  | Facility Lease Agreement (T1), dated as of August 17, 2000, by and between Powerton Trust I, as Owner Lessor, and Midwest Generation, LLC, as Facility Lessee, incorporated by reference to Exhibit 4.7 to Edison Mission Energy's and Midwest
Generation, LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.                          
|4.7.1 |  | Schedule identifying substantially identical agreement to Facility Lease Agreement constituting Exhibit 4.7 hereto, incorporated by reference to Exhibit 4.7.1 to Edison Mission Energy's and Midwest Generation, LLC's Registration Statement
on Form S-4 to the Securities and Exchange Commission on April 20, 2001.                                                                   
|4.8   |  | Facility Lease Agreement (T1), dated as of August 17, 2000, by and between, Joliet Trust I, as Owner Lessor, and Midwest Generation, LLC, as Facility Lessee, incorporated by reference to Exhibit 4.8 to Edison Mission Energy's and Midwest
Generation, LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.                           
|4.8.1 |  | Schedule identifying substantially identical agreement to Facility Lease Agreement constituting Exhibit 4.8 hereto, incorporated by reference to Exhibit 4.8.1 to Edison Mission Energy's and Midwest Generation, LLC's Registration Statement
on Form S-4 to the Securities and Exchange Commission on April 20, 2001.                                                                   
|4.9   |  | Guarantee, dated as of August 17, 2000, made by Edison Mission Energy, as Guarantor in favor of Powerton Trust I, as Owner Lessor, incorporated by reference to Exhibit 4.9 to Edison Mission Energy's and Midwest Generation, LLC's
Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.                                                      
|4.9.1 |  | Schedule identifying substantially identical agreement to Guarantee constituting Exhibit 4.9 hereto, incorporated by reference to Exhibit 4.9.1 to Edison Mission Energy's and Midwest Generation, LLC's Registration Statement on Form S-4
to the Securities and Exchange Commission on April 20, 2001.                                                                                  
|      |  |                                                                                                                                                                                                                                                                                                                                                                                           

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|4.10   |  | Guarantee, dated as of August 17, 2000, made by Edison Mission Energy, as Guarantor in favor of Joliet Trust I, as Owner Lessor, incorporated by reference to Exhibit 4.10 to Edison Mission Energy's and Midwest Generation, LLC's Registration
Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.                                                                                                                                                                                                                                                                                         
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.10.1 |  | Schedule identifying substantially identical agreement to Guarantee constituting Exhibit 4.10 hereto, incorporated by reference to Exhibit 4.10.1 to Edison Mission Energy's and Midwest Generation, LLC's Registration Statement on
Form S-4 to the Securities and Exchange Commission on April 20, 2001.                                                                                                                                                                                                                                                                                                                  
|4.11   |  | Registration Rights Agreement, dated as of August 17, 2000, among Edison Mission Energy, Midwest Generation, LLC and Credit Suisse First Boston Corporation and Lehman Brothers Inc., as representatives of the Initial Purchasers, incorporated by
reference to Exhibit 4.11 to Edison Mission Energy's and Midwest Generation, LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.                                                                                                                                                                                      
|4.12   |  | Participation Agreement (T1), dated as of August 17, 2000, by and among, Midwest Generation, LLC, Powerton Trust I, as the Owner Lessor, Wilmington Trust Company, as the Owner Trustee, Powerton Generation I, LLC, as the Owner Participant, Edison
Mission Energy, United States Trust Company of New York, as the Lease Indenture Trustee, and United States Trust Company of New York, as the Pass Through Trustees, incorporated by reference to Exhibit 4.12 to Edison Mission Energy's and Midwest
Generation, LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
|4.12.1 |  | Schedule identifying substantially identical agreement to Participation Agreement constituting Exhibit 4.12 hereto, incorporated by reference to Exhibit 4.12.1 to Edison Mission Energy's and Midwest Generation, LLC's Registration Statement
on Form S-4 to the Securities and Exchange Commission on April 20, 2001.                                                                                                                                                                                                                                                                                                    
|4.13   |  | Participation Agreement (T1), dated as of August 17, 2000, by and among, Midwest Generation, LLC, Joliet Trust I, as the Owner Lessor, Wilmington Trust Company, as the Owner Trustee, Joliet Generation I, LLC, as the Owner Participant, Edison
Mission Energy, United States Trust Company of New York, as the Lease Indenture Trustee and United States Trust Company of New York, as the Pass Through Trustees, incorporated by reference to Exhibit 4.13 to Edison Mission Energy's and Midwest
Generation, LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.     
|4.13.1 |  | Schedule identifying substantially identical agreement to Participation Agreement constituting Exhibit 4.13 hereto, incorporated by reference to Exhibit 4.13.1 to Edison Mission Energy's and Midwest Generation, LLC's Registration Statement
on Form S-4 to the Securities and Exchange Commission on April 20, 2001.                                                                                                                                                                                                                                                                                                    
|4.14   |  | Promissory Note ($499,450,800), dated as of August 24, 2000, by Edison Mission Energy in favor of Midwest Generation, LLC, incorporated by reference to Exhibit 4.5 to Edison Mission Energy's Form 10-K for the year ended
December 31, 2000.                                                                                                                                                                                                                                                                                                                                                                              
|4.14.1 |  | Schedule identifying substantially identical agreements to Promissory Note constituting Exhibit 4.14 hereto, incorporated by reference to Exhibit 4.5.1 to Edison Mission Energy's Form 10-K for the year ended December 31,
2000.                                                                                                                                                                                                                                                                                                                                                                                          
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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|4.15   |  | Indenture, dated as of April 27, 2004, among Midwest Generation, LLC, Midwest Finance Corp. and The Bank of New York, as Trustee incorporated by reference to Exhibit 4.1 to Midwest Generation, LLC's Form 10-Q for the quarter ended
March 31, 2004.                                                                                                                                                 
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.15.1 |  | Supplemental Indenture, dated as of March 1, 2006, among Midwest Generation Procurement Services, LLC, Midwest Generation, LLC, and Midwest Finance Corp., and The Bank of New York, as Trustee, incorporated by reference to Exhibit 10.4.1 to
Midwest Generation, LLC's Form 10-Q for the quarter ended June 30, 2006.                                                                               
|4.16   |  | Registration Rights Agreement, dated April 27, 2004, among Midwest Generation, LLC, Midwest Finance Corp. and Credit Suisse First Boston LLC, as Representative of the Initial Purchasers incorporated by reference to Exhibit 4.2 to Midwest
Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.                                                                                        
|4.17   |  | Collateral Trust Agreement, dated as of April 27, 2004, among Midwest Generation, LLC, the Pledgors from time to time party thereto, Citicorp North America, Inc., as Administrative Agent, The Bank of New York, as Trustee, and Wilmington Trust
Company, as Collateral Trustee incorporated by reference to Exhibit 4.4 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.
|4.18   |  | Security Agreement, dated as of April 27, 2004, between Midwest Generation, LLC and Wilmington Trust Company, as Collateral Trustee incorporated by reference to Exhibit 4.5 to Midwest Generation, LLC's Form 10-Q for the quarter ended
March 31, 2004.                                                                                                                                              
|4.19   |  | Pledge Agreement, dated as of April 27, 2004, between Midwest Generation EME, LLC and Wilmington Trust Company, as Collateral Trustee incorporated by reference to Exhibit 4.6 to Midwest Generation, LLC's Form 10-Q for the quarter ended
March 31, 2004.                                                                                                                                            
|4.20   |  | Pledge Agreement, dated as of April 27, 2004, between Edison Mission Midwest Holdings Co. and Wilmington Trust Company, as Collateral Trustee incorporated by reference to Exhibit 4.7 to Midwest Generation, LLC's Form 10-Q for the
quarter ended March 31, 2004.                                                                                                                                    
|4.21   |  | Security Agreement, dated as of April 27, 2004, between Edison Mission Marketing & Trading, Inc. and Wilmington Trust Company, as Collateral Trustee incorporated by reference to Exhibit 4.8 to Midwest Generation, LLC's Form 10-Q
for the quarter ended March 31, 2004.                                                                                                                             
|4.22   |  | Mortgage, Assignment of Rents and Leases, Fixture Filing, Financing Statement and Security Agreement, dated as of April 27, 2004 from Midwest Generation, LLC to Wilmington Trust Company, as Collateral Trustee (Joliet No. 9Station No.
6 and Joliet Peaking Unit) incorporated by reference to Exhibit 4.9 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.            
|4.23   |  | Mortgage, Assignment of Rents and Leases, Fixture Filing, Financing Statement and Security Agreement, dated as of April 27, 2004 from Midwest Generation, LLC and Chicago Title Land Trust Company to Wilmington Trust Company, as Collateral Trustee
(Will County Facility) incorporated by reference to Exhibit 4.10 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.    
|4.24   |  | Mortgage, Assignment of Rents and Leases, Fixture Filing, Financing Statement and Security Agreement, dated as of April 27, 2004 from Midwest Generation, LLC to Wilmington Trust Company, as Collateral Trustee (Calumet Facility) incorporated by
reference to Exhibit 4.11 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.                                             
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                        

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|4.24.1 |  | Schedule identifying substantially identical agreements to Mortgage, Assignment of Rents and Leases, Fixture Filing, Financing Statement and Security Agreement constituting Exhibit 4.24 hereto incorporated by reference to Exhibit 4.11.1 to
Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.                                                                                                                                       
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1   |  | Reimbursement Agreement, dated as of October 26, 2001, between Edison Mission Energy and Midwest Generation, LLC, incorporated by reference to Exhibit 10.15 to Edison Mission Energy's Form 10-Q for the quarter ended March 31,
2004.                                                                                                                                                                                                                         
|10.2   |  | Instrument of Assumption, dated as of December 15, 1999, by Midwest Generation, LLC in favor of Commonwealth Edison Company and Unicom Investment Inc., incorporated by reference to Exhibit 10.91 to Edison Mission Energy's and Midwest
Generation, LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.                                                                                                     
|10.3   |  | Pledge Agreement, dated as of August 17, 2000, between Midwest Generation, LLC and Citibank, N.A., incorporated by reference to Exhibit 10.105 to Edison Mission Energy's and Midwest Generation, LLC's Registration Statement on Form S-4
to the Securities and Exchange Commission on April 20, 2001.                                                                                                                                                         
|10.3.1 |  | Schedule identifying substantially identical agreements to the Pledge Agreement constituting Exhibit 10.3 hereto, incorporated by reference to Exhibit 10.105.1 to Edison Mission Energy's and Midwest Generation, LLC's Registration Statement
on Form S-4 to the Securities and Exchange Commission on April 20, 2001.                                                                                                                                        
|10.4   |  | Credit Agreement, dated as of April 27, 2004 among Midwest Generation, LLC, the Lenders referred to therein, the Issuing Lenders referred to therein and Citicorp North America, Inc., as Administrative Agent for the Lenders and the Issuing
Lenders party thereto incorporated by reference to Exhibit 4.3 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.                                                                      
|10.4.1 |  | First Amended and Restated Credit Agreement (amending and restating the Credit Agreement listed as Exhibit 10.4 herein) dated as of April 18, 2005 among Midwest Generation, LLC, the Lenders referred to therein the Citicorp North America,
Inc., as administrative Agent for the Lenders and the Issuing Lenders thereto incorporated by reference to Exhibit 10.1 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2005.              
|10.4.2 |  | Second Amended and Restated Credit Agreement (amending and restating the Credit Agreement listed as Exhibit 10.4.1 herein) dated as of December 15, 2005, among Midwest Generation, LLC, the Lenders referred to therein and Citicorp North
America, Inc. as Administrative Agent for the Lenders and the Issuing Lenders party thereto incorporated by reference to Exhibit 10.6.2 to Midwest Generation, LLC's Form 10-K for the year ended December 31, 2005.
|10.5   |  | Accession Agreement dated as of April 18, 2005, among Midwest Generation, LLC, the Lenders referred to therein and Citicorp North America, Inc., as Administrative Agent for the Lenders and the Issuing Lenders thereto incorporated by referenced
to Exhibit 10.2 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2005.                                                                                                                
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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|10.5.1  |  | Accession Agreement dated as of December 15, 2005, among Midwest Generation, LLC, the Lenders referred to therein and the Issuing Lenders party thereto incorporated by reference to Exhibit 10.7.1 to Midwest Generation, LLC's Form 10-K
for the year ended December 31, 2005.                             
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.6    |  | Tax-Allocation Agreement, effective January 1, 2002, by and between Midwest Generation, LLC and Edison Mission Midwest Holdings Co., incorporated by reference to Exhibit 10.25 to Midwest Generation, LLC's Form 10-Q for the quarter
ended September 30, 2002.                                             
|10.7    |  | Amended and Restated Master Purchase, Sale and Services Agreement, entered into on April 27, 2004, between Midwest Generation, LLC and Edison Mission Marketing & Trading, Inc incorporated by reference to Exhibit 10.2 to Midwest
Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.        
|10.8    |  | Support Services Agreement, dated as of August 7, 2000, between Midwest Generation, LLC and Midwest Generation EME, LLC incorporated by reference to Exhibit 10.4 to Midwest Generation, LLC's Form 10-Q for the quarter ended
March 31, 2004.                                                               
|10.9    |  | Management and Administration Agreement, effective as of April 27, 2004, between Midwest Generation, LLC and Midwest Generation EME, LLC incorporated by reference to Exhibit 10.1 to Midwest Generation, LLC's Form 10-Q for the quarter
ended March 31, 2004.                                              
|10.10   |  | Revolving Credit Agreement, dated as of April 27, 2004, between Edison Mission Marketing & Trading, Inc. as Borrower and Midwest Generation, LLC, as Lender incorporated by reference to Exhibit 10.5 to Midwest Generation, LLC's
Form 10-Q for the quarter ended March 31, 2004.                           
|10.10.1 |  | Amendment One to Revolving Credit Agreement, dated as of August 30, 2005 by and between Edison Mission Marketing & Trading, Inc. as Borrower and Midwest Generation, LLC as Lender incorporated by reference to Exhibit 10.1 to Midwest
Generation, LLC's Form 10-Q for the quarter ended September 31, 2005.
|31.1*   |  | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.                                                                                                                                                                                                              
|31.2*   |  | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.                                                                                                                                                                                                              
|32*     |  | Statement Pursuant to 18 U.S.C. Section 1350.                                                                                                                                                                                                                                                                

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

| |  | MIDWEST GENERATION, LLC(REGISTRANT)
| |  | -----------------------------------
| |  | By:                                
| |  | Date:                              

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

|Signature                                |  | Title                                                                      |  | Date             
|---------------------------------------- |  | -------------------------------------------------------------------------- |  | -----------------
|                                         |  |                                                                            |  |                  
|/s/ Guy F. GorneyGuy F. Gorney           |  | Manager and President
(Principal Executive Officer)                        |  | February 28, 2007
|/s/ W. James ScilacciW. James Scilacci   |  | Manager and Vice President
(Principal Financial Officer)                   |  | February 28, 2007
|/s/ Mark C. ClarkeMark C. Clarke         |  | Vice President and Controller
(Controller or Principal Accounting Officer) |  | February 28, 2007
|/s/ Raymond W. VickersRaymond W. Vickers |  | Manager                                                                    |  | February 28, 2007

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