The University of Texas at Austin Center for Electromechanics (UT-CEM) has designed and tested a flywheel energy storage system conventionally referred to as a flywheel battery (FWB) for power averaging on a hybrid electric transit bus. The system incorporates a high speed (40,000 rpm) 150 kW permanent magnet motor generator with magnetic bearings to levitate a 2 kWh composite flywheel. This paper summarizes: design goals, required operating parameters, system design, analysis completed prior to fabrication, and initial performance testing completed in the laboratory. The paper includes information on the motor/generator, power electronics, magnetic bearing sensors and controls, and FWB subsystems (including containment). Finally, recommendations for continued testing are made along with recommendations for improvements to the existing design.