Published: December 17, 2025
By: Concentric Staff Writer
Key Takeaways:
- New wholesale energy markets forming in the West will create a host of new market seams issues, especially between market and non-market areas, a new Federal Energy Regulatory Commission white paper says.
- Eastern areas where organized markets and regional transmission organizations currently function provide some learning examples, but there are key differences in the current markets in the East and emerging markets in the West.
- Tools to manage this new environment include flow-based rather than contract-based transmission scheduling, reliability standards, and resources such as Parallel Flow Visualization and interchange optimization.
Emerging market complexities in the Western U.S. energy landscape will require new and enhanced approaches to market seams, according to a new report from federal energy regulators. Seams are boundaries between markets and balancing authority areas that create reliability, operation, and market efficiency hurdles according to a white paper from the staff of the Federal Energy Regulatory Commission (FERC), “Seams Coordination in the Western Interconnection,” exploring these evolving dynamics. The paper does not necessarily reflect the positions of the Commission itself, the document says.
The West is changing with new markets under development, such as the California Independent System Operator’s (CAISO) extended day-ahead market (EDAM), due to launch in May 2026 and the Southwest Power Pool’s (SPP) Markets+ day-ahead market due to launch in late 2027.
In addition to EDAM and Markets+, there is also the expansion of SPP’s Regional Transmission Organization (RTO) footprint as well as the ongoing presence of bilateral energy trading going on between more than 30 balancing areas in the West. This “multi-market” environment will create barriers to efficiency of reliability, grid operation and markets, the paper says. SPP’s RTO will eventually include portions of Arizona, Colorado, Montana, Utah, and Wyoming, according to the paper:
“As numerous stakeholders have pointed out, this new, complex environment will require formal seams coordination, and Commission staff believes it will be worthwhile for the relevant parties to work toward crafting new coordination agreements to address seams issues,” the paper says.
Seams are created from differences in transmission modeling, access rights, and scheduling between adjacent transmission owners that can cause congestion and potentially create reliability issues from loop flows. These issues could diminish the economic benefits of both EDAM and Markets+ as they limit the opportunity for interchange trade, although these new markets will still bring economic benefits of their own through optimized unit commitment and market-wide dispatch, the paper says.
The East has provided lessons in three key areas FERC staff said: congestion, reliability, and economic market transactions. But there are significant differences in the West that limit the applicability of these lessons, since eastern RTOs and independent system operators function as single Balancing Authorities (BAs) and as transmission operators.
In EDAM and Markets+, market participants will not turn over functional control of their transmission systems, and balancing authority areas will remain distinct and not consolidated, the report says, while some BA’s will not join centralized markets at all.
As a result, seams agreements in the West could entail more parties in the region, including market operators, BA’s, federal power marketing administrations, public power entities, and governmental entities, and must be aligned across multiple open access transmission tariffs and market protocols.
Efforts to address market seams in the West are already underway, such as one by CAISO’s RC West, the reliability coordinator for 24 BA’s and 40 transmission operators, and the SPP’s Reliability Coordinator’s development of a new proposal to expand procedures and solutions for managing unscheduled flows. This includes a North American Energy Standards Board (NAESB) proposal for “explicit treatment” of system operating limits and interconnection reliability operating limits.
Transmission availability in the West is still primarily modeled on the basis of contract paths rather than flow-based modeling used in the East, FERC staff said.
“The continued use of contract-path based modeling and the use of different modeling methodologies may complicate efforts to maintain reliability, mitigate congestion, and enhance economic benefits in the Western Interconnection. Western entities could therefore investigate whether adopting flow-based modeling across the entire West could aid West-wide coordination,” the white paper says.
Coordination to maintain reliability and manage congestion are tied together, however, and because EDAM and Markets+ participants will not transfer that functional control of transmission systems or consolidate balancing authority areas, schedules cleared in one market can produce parallel loop flows through facilities outside of a given market’s footprint. This will reduce energy transfer capability during times of stressed system conditions, which could affect system operating and interconnection reliability limits and possibly result in system curtailments or redispatch of generation, along with economic impacts.
Another difference between the West and the East is the approach to coordination in efforts to enhance economic benefits, the paper says. Reduced costs to participate in centrally cleared markets can create efficiencies and transaction costs could be reduced by establishing clear and consistent rules around market participation and scheduling at market interfaces. Other tools could include standardizing data interfaces and definitions for transmission availability, scheduling rights, and transactions across borders.
Efforts to schedule and track market transactions in the West stretch back to the 1990s, including initiatives to promote open access and competition in wholesale energy markets such as the Energy Policy Act of 1992 and FERC Order Nos. 888 and 889. To facilitate energy transfers across long distances in the West, methods were developed to facilitate bilateral commercial arrangements and minimize unwanted consequences for third parties.
Under NAESB standards, implementation of interchange transactions begins with a system operator or market participant submitting to the Sink BA1 a request for interchange that includes the financial and physical path of the transaction. The Sink BA has the responsibility to confirm the transaction will not create reliability problems and the information for the transaction is recorded in an “e-Tag.”
e-Tags are also used to manage interchange schedules, with parties to the transaction able to request changes to the interchange schedule for economic or reliability reasons. Reliability Coordinators (RCs) and BA’s can also request change to the interchange schedule for reasons such as the need to manage a physical transmission path defined in a commercial contract that could create a reliability risk.
Shifting to a flow-based modeling approach uses actual power flows to calculate available transmission capacity by identifying the transmission facilities, or flow gates, and their physical parameters and limits. This method is considered to be more consistent and efficient than the contract-based methodology currently used in the West, the paper says.
The flow-based approach has been explored in various FERC proceedings such as its Western Resource Adequacy Technical Conference. Various parties encouraged FERC to direct the North American Electric Reliability Corporation to make the use of flow-gate modeling to calculate available transmission capacity.
“Western entities could consider whether the expansion of centralized markets has sufficiently changed transmission usage patterns and modeling needs such that it is appropriate to move to flow-based modeling across the region,” the paper says.
Contract-based modeling might have been appropriate in a system that is dominated by bilateral contracts and delivery, but a shift to centrally cleared markets such as exists in RTOs might make other modeling methodologies more appropriate, FERC staff said.
Flow-based modeling has made seams coordination more effective, the paper says, such as between the PJM Interconnection and the Midcontinent Independent System Operator, which has created the ability to share grid topology, outage, and dispatch data in real time. This flow-based modeling will exist in both EDAM and Markets+, but BA’s not participating in day-ahead markets could still be scheduling based on contract paths, creating a conflict between the centralized markets and BA’s, leading to inconsistent modeling and estimates of flows.
In the area of reliability, energy transfers between BA’s can maintain system stability in situations of extreme weather, such as experienced with Winter Storms Uri and Elliott. Agreements that formalize these arrangements between market and non-market areas would provide more information for system operators and aid cooperation between BA’s, the paper says. Western entities should consider whether these reliability agreements coordinate modeling of data and models, provide for protocols during emergency weather events and manage loop flows.
Other areas of analysis include market-to-market agreements as are used in the East, which improve reliability and management of congestion, but such agreements do not cover flows in areas not using locational marginal pricing (for flows to/from non-market regions). For transactions between market and non-market regions, tools such as Parallel Flow Visualization could be effective, according to the report.
Additionally, using coordinated trading or interchange optimization on the border of EDAM, Markets+ and the existing Western Energy Imbalance Market could further enhance economic benefits of interchange, the paper says. Interchanges can be managed in different ways, with seams coordination in the East again serving as an example. But each coordination agreement has its own data requirements, forecasting challenges and latency in the optimization process.
Through robust analysis of potential seams issues in the West in the future, the FERC paper provides a valuable resource for grid operators, market participants and others that must function in this new and highly complex environment.
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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.
