Published: April 25, 2025
By Concentric Staff Writer
Key takeaways:
- The Western utility landscape is set for major changes with the formation of two competing day-ahead market proposals: the California Independent System Operator’s (CAISO) extended day-ahead market (EDAM) and the Southwest Power Pool’s (SPP) Markets+.
- Markets+ recently received support from a decision by the Bonneville Power Administration to join that market, while CAISO’s EDAM moved forward with the introduction of new legislation in California to create a regional organization to manage it.
- SPP is also moving forward with an expansion of its existing regional transmission organization (RTO) from the Eastern Interconnection into the Western Interconnection, receiving approval from the Federal Energy Regulatory Commission (FERC) for what is known as RTO West.
There are major movements happening in Western wholesale energy markets, with two major competing efforts to launch a day-ahead trading market and billions of dollars in future market transactions at stake.
Across the West, the development of new day-ahead markets and the an RTO are the key factors Western utilities are monitoring as they determine which choice in a market is the optimal one. The goals of these markets are maintaining grid reliability and controlling costs for energy consumers, more efficient dispatch of power plants, and in many areas, enabling a transition to cleaner energy resources.
A recent seismic shift in Western energy markets occurred when Bonneville Power Administration (BPA), which markets power from 31 federal hydropower dams in the Northwest and manages 15,000 miles of high-voltage transmission lines, chose a day-ahead market to join. Western market players for years had been wondering where the federally regulated entity would land, but BPA on March 5 announced a “policy direction” that it will select the SPP’s Markets+ day-ahead market over the CAISO’s EDAM.
Utilities across the West are looking for the best place to collaborate on resource trading, which becomes critical during times of grid stress. In the West, this grid stress mostly occurs in summer evenings, when air conditioning load decrease solar output leads to peak grid demand.
Currently, the only two major Western organized regional markets are the CAISO market and its Western Energy Imbalance Market (WEIM), a real-time trading market that has led to billions of dollars in benefits for market participants. But the real-time market lacks day-ahead scheduling of power, which provides better reliability and scheduling abilities.
SPP has its own version of a regional market similar to CAISO’s WEIM, which is known as the Western Energy Imbalance Service Market. Imbalance markets differ from day-ahead markets in that they are real-time grid balancing markets and do not include day-ahead energy trading, which improves reliability, economic efficiency, and transparency .
The difference between a full RTO and the current visions of Markets+ and EDAM is that in an RTO, utilities and other participating entities hand over full control of their transmission systems to the RTO, which manages the dispatch of power plants and the flow of power. This is the system that has long been in place in regional markets that have operated across the country, such as the PJM Interconnection in the Mid-Atlantic, the Midcontinent Independent System Operator, and ISO New England.
CAISO’s EDAM has been under development for years and the tariff for the day-ahead market gained approval from the Federal Energy Regulatory Commission in December 2023. Entities that have announced intentions to join EDAM include the Los Angeles Department of Water & Power (2027), the Balancing Authority of Northern California (2027), PacifiCorp (2026), and Portland General Electric (2026). According to the CAISO, entities that are “leaning towards EDAM” are Idaho Power, NV Energy, BHE Montana, and Public Service Company of New Mexico.
SPP’s Markets+ is due to begin operations in 2027. In addition to BPA, Salt River Project, Tacoma Power, Arizona Public Service, Tucson Electric Power, and UniSource Energy Services have signed on to participate in the market.
The main issue around the emerging Western markets, which would bring the West into a more advanced market design similar to other RTOs around the country, is how the market will be governed and who will oversee it. Western states and California alike want to ensure that they retain control over resource mix and other planning and environmental decisions if and when they join an organized market.
Likewise, environmental groups and trade unions in California have resisted expanding CAISO into a regional market. Unions, a powerful force in the Golden State, have also opposed the regionalization of CAISO over worries that jobs will be lost to other states. As a result, for years, legislative attempts to regionalize CAISO in the California State Legislature have failed.
The CAISO Board of Governors is appointed by the California governor. The Board of Governors oversees the CAISO wholesale market, while the WEIM is governed by the WEIM Governing Body, which has shared authority with the CAISO board on many market decisions but is nominated by a nominating committee rather than being appointed by the governor.
In an effort to absolve these concerns about governance in the EDAM, the West-Wide Governance Pathways Initiative (WWGPI) was created in October 2023. The initiative was meant to ease concerns about governance through the creation of a regional organization (not a full-blown RTO) to manage the EDAM that is governed by multiple states, not just California. WWGPI officials are hoping that the initiative will lead to a full Western RTO.
The WWGPI got a major boost in late February when legislation was introduced to move the initiative forward, Senate Bill 540. The bill would allow the WWGPI and its transmission owners to participate in energy markets governed by the regional organization created through the WWGPI process. It has gained support from electrical worker and labor unions that have traditionally opposed the expansion of CAISO.
In a press release announcing the introduction of SB 540, bill sponsor Senator Josh Becker (D-Menlo Park) said, “As we move toward achieving California’s 100% clean energy goals, we must look at all possible solutions to reduce costs, improve reliability, and cut emissions,” Becker continued, “Pathways strikes that balance by unlocking the benefits of a regional energy market while safeguarding California’s critical public policy priorities. It offers a win-win scenario for California—achieving cleaner energy, more reliable power, and real savings for ratepayers.”
Little Rock, Arkansas-based SPP, which has operated an RTO in the Eastern Interconnection, has an expansion project underway into the Western Interconnection, known as RTO West.
The Federal Energy Regulatory Commission (FERC) on March 20 approved SPP’s tariff revisions for RTO West. It is the first RTO to have a footprint in both the Western and Eastern Interconnections. The RTO expansion is part of SPP’s five-year plan to bring western entities into its markets, known as ASPIRE 2026.
“I am pleased to announce FERC’s approval of the amended RTO tariff,” SPP president and CEO Barbara Sugg said in a press release. “Expanding the RTO into the Western Interconnection is an exciting step in SPP’s growth, bringing value to new and existing members while enhancing reliability in both interconnections.”
Utilities and others that plan to participate in RTO West are Basin Electric Power Cooperative; Colorado Springs Utilities; Deseret Generation and Transmission Cooperative; Municipal Energy Agency of Nebraska; Platte River Power Authority; Tri-State Generation and Transmission Association; and three regions of the Western Area Power Administration: Colorado River Storage Project, Rocky Mountain Region, and Upper Great Plains-West.
“The Western expansion of the SPP RTO bolsters reliability and resiliency for our members as we grow and diversify our resource portfolio while reducing emissions,” Tri-State Generation and Transmission Association CEO Duane Highley said in the release. “We greatly value the full benefits of the SPP RTO, including day-ahead and ancillary services markets, efficient regional transmission planning, a common transmission tariff and participatory governance model that help us to further reduce costs for our members across the West. Prior to SPP RTO West entry, we will be making a filing with our state regulators highlighting these market benefits.”
Some Western market participants have pointed out that the creation of two large day-ahead markets—EDAM and Markets+—will create a large “seam” across the West between the two markets. Markets without seams are considered favorable because one large market allows more resource sharing and more efficient plant dispatch, which would deliver greater reliability, cost, and environmental benefits. But unless Markets+ and EDAM are merged, it appears that this seam will be taking shape in the future.
There are many moving parts in play in the two day-ahead market proposals and much work still to be done, but it is clear that major changes are in the works for Western energy markets.
Background Information:
This article drew upon reports from materials from CAISO, SPP, WWGPI, and California legislation.
Links to Cited Sources:
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All views expressed by the author are solely the author’s current views and do not reflect the views of Concentric Energy Advisors, Inc., its affiliates, subsidiaries, related companies, or clients. The author’s views are based upon information the author considers reliable at the time of publication. However, neither Concentric Energy Advisors, Inc., nor its affiliates, subsidiaries, and related companies warrant the information’s completeness or accuracy, and it should not be relied upon as such.
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