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by Tim Hough
2024 has been an action-packed year for the two developing day-ahead markets in the Western Interconnection, the California Independent System Operator’s (CAISO) EDAM and the Southwest Power Pool’s (SPP) Markets+.
Currently, EDAM continues to develop its market design while it prepares to begin onboarding its three currently committed participants: PacifiCorp, Portland General Electric, and Balancing Authority of Northern California (BANC). Markets+ continues to develop its market design while it awaits FERC approval of the Markets+ tariff. Upon approval of its tariff, Markets+ can begin Phase 2, which will implement the Markets+ design from Phase 1 and integrate participants into the market. CAISO’s EDAM aims to go live on May 1, 2026, while SPP’s Markets+ expects to go live in early 2027.
Let’s review the current state of western markets and the critical developments that have occurred so far in 2024.
Current Western Markets
Currently, there are two real-time energy imbalance markets operating in the Western Interconnection in which participants trade power within five or 15 minutes of delivery: CAISO’s Western Energy Imbalance Market (WEIM) and SPP’s Western Energy Imbalance Service Market (WEIS).
Source: Yes Energy’s PowerSignals showing real-time prices across the WEIM and WEIS markets
Because the market operator manages each balancing area authority as a collective whole, rather than several separate balancing areas, power is transacted using the least-cost resources available leading to significant economic and reliability benefits.
CAISO’s WEIM is jointly governed by the CAISO Board of Governors, appointed by California’s governor, and the Western Energy Market (WEM) governing body. Launched in 2014, WEIM represents nearly 80% of electricity demand in the Western Interconnection, providing over $1.6 billion in gross benefits (net benefits not reported) to its 22 participants in 2023.
A map of current and future participants in CAISO’s Western Energy Imbalance Market (WEIM). Source: WesternEIM.com.
SPP’s WEIS, launched in 2021 and governed by SPP’s independent board of directors, currently has 12 participants and provided an estimated $31.7 million in net benefits to participants in 2022. Seeking to further increase their economic and reliability benefits, seven WEIS members will be incorporated into SPP as full RTO members in 2026 as part of SPP’s RTO Expansion into the Western Interconnection, or RTO West project. The WEIS will then be phased out some time after SPP’s RTO expansion goes live.
A map showing the service footprint of SPP’s Western Energy Imbalance Service Market (WEIS). Source: SPP.org.
Developing Day-Ahead Markets
In addition to the WEIM and WEIS, CAISO and SPP are each developing Western day-ahead markets: CAISO’s Extended Day-Ahead Market (EDAM), and SPP’s Markets+. These markets are intended to achieve similar goals, but their designs have several key differences.
(Note that these expanded markets are not full regional markets (e.g., Regional Transmission Organizations [RTOs]), because they have fewer market features and benefits than a full RTO would provide. For example, RTOs are responsible for the transmission system, whereas transmission planning and control will remain with EDAM and Markets+ member utilities.)
Like CAISO’s WEIM, EDAM is also jointly governed by CAISO’s Board of Governors, appointed by California’s governor, and the WEM (formerly WEIM) governing body. As a result, EDAM has received criticism for not being fully independent from any one state because of the Board of Governors’ obligations to California ratepayers. However, EDAM is currently moving towards establishing an independent governance structure through the West-Wide Governance Pathways Initiative.
SPP’s Markets+ governance, on the other hand, is fully independent from any state. Markets+ was developed through collaboration with hundreds of Western stakeholders and has oversight from SPP’s independent board of directors and the Markets+ Independent Panel, providing participants with equal opportunity to contribute to the market’s development and structure.
Meanwhile, seven WEIS members plan to join SPP as full RTO members on April 1, 2026. This will expand SPP's RTO into the Western Interconnection and save utilities an estimated $49 million annually. More utilities can join the RTO as early as 2027.
Some western states like Colorado and Nevada have passed legislation requiring utilities to join an RTO. Both passed in 2021, Colorado Senate Bill 21-072 and Nevada Senate Bill 448 require utilities to join an organized wholesale market (i.e., an RTO or ISO), which may have encouraged the seven WEIS participants operating in Colorado to join SPP. Colorado’s PUC subsequently raised concerns about RTO participation, however, and implemented new requirements that allow utilities to join either one of the new day-ahead markets.
Chronological Timeline of the Developing Day-Ahead Energy Markets in the West
A timeline of Markets+ (blue), EDAM (orange), and Bonneville Power Administration (yellow) developments.
The first major milestone in the development of the expanded day-ahead markets was approval of the EDAM design in February 2023 by the CAISO Board of Governors and WEIM, followed shortly by the official launch of Phase 1 of SPP's Markets+ in April 2023. Initially, 31 entities signed agreements to participate in Markets+, and that number has since grown to 35 (see chart below). FERC later approved the proposed EDAM tariff in December 2023, with a target launch date of spring 2026.
List of SPP’s Markets+ participants, with utilities that currently participate in SPP’s WEIS (orange), CAISO’s WEIM (blue), neither (white), and entities that are not individual utilities (gray)
At the same time, the West-Wide Governance Pathways Initiative launched in October 2023, following EDAM stakeholder comments to develop a new and independent entity. The goal of the Pathways Initiative is to move primary decision-making authority away from CAISO’s Board of Governors and establish an independent regional organization to govern CAISO’s EDAM and WEIM.
This brings us to the major developments in expanding western markets in 2024. In March, SPP submitted its Markets+ tariff design to the FERC, with approximately 39 entities participating in Phase 1. Shortly thereafter, Bonneville Power Administration (BPA) released a staff report recommending Markets+ over EDAM, citing the key issue of EDAM versus Markets+ governance. BPA is one of the largest utilities in the Western Interconnection and is a key contributor to the development of EDAM and Markets+.
At the time, EDAM had five contributors that had indicated their preference to join: Pacificorp, Balancing Authority of Northern California (BANC), Portland General Electric (PGE), Idaho Power, and the Los Angeles Department of Water & Power (LADWP). After BPA's report in April, Pacificorp formally committed to join EDAM, followed shortly by Nevada's largest utility company, NV Energy, in April and PGE in July.
Critically, NV Energy's decision to join EDAM creates a "seam" between Markets+ participants in the Pacific Northwest and the Southwest, causing concern over the potent impacts to the interconnectivity of the Markets+ footprint. SPP dispelled these concerns, saying market connectivity will be minimally impacted given previous experience managing seams in the East. The takeaway is that managing the use of firm point-to-point transmission rights across market seams will require significant stakeholder collaboration.
On August 13, 2024, the CAISO Board of Governors and WEM Governing Body approved Step 1 of the West-Wide Governance Pathways Initiative, which moves to give the WEM Governing Body primary decision-making authority over the two markets once EDAM receives implementation agreements from participants that make up at least 70% of CAISO’s 2022 load.
On September 26, 2024, the Pathways Initiative released its Step 2 draft proposal to create an independent regional organization with full authority over market rules, business practices, and most FERC filings. While CAISO’s board would remain the balancing authority for the ISO, the draft leaves open the possibility of the regional organization assuming more CAISO market responsibilities over time. The final Step 2 proposal was released on November 15, and was approved by the Pathways Initiative’s Launch Committee on November 22, 2024.
Nine days after Step 1 was approved and one week before BPA was scheduled to announce which day-ahead market it would join, BPA delayed this market decision until March 2025, when it will release a draft decision. A final decision will follow in May.
To learn more about the Pathways Initiative and the significant role BPA has played in the development of both Markets+ and EDAM, read our previous Western Markets blog.
Shortly after Step 1 of the Pathways Initiative was approved in August 2024, two Black Hills Energy subsidiaries with footprints in Montana, Wyoming, and South Dakota made the announcement to leave SPP's WEIS and joining CAISO's WEIM in 2026, with BHE Montana also announcing its intent to join EDAM. The decision to leave the WEIS was primarily driven by SPP's intention to phase the WEIS out as it moves ahead with the RTO Expansion in the western interconnection.
On October 30, 2024, the Western Area Power Administration announced that its Sierra Nevada region, which operates in both CAISO and BANC, is moving to join EDAM. This move helps BANC to sign an EDAM implementation agreement, as several of its other members have also committed to joining EDAM.
Most recently, on November 25, 2024, BANC signed an implementation agreement to join EDAM, and four Arizona utilities announced their plans to join Markets+, with all five utilities expecting to enter the respective day-ahead markets as soon as 2027.
Contention Between EDAM and Markets+ Advocates
A source of contention has been the findings of Brattle Group’s Day-Ahead Market Participation Benefits Study for Bonneville Power Administration (BPA), released October 1, 2024. This study, not commissioned by BPA but by interested Northwestern entities, found that BPA would see $65 million in annual benefits from joining EDAM but would face $83 million in increased yearly costs from participating in SPP’s Markets+. Since 2023, Brattle Group has conducted several comparative benefit studies for Western utilities interested in joining a day-ahead market, all of which have found more benefits in joining EDAM.
Brattle’s BPA study caused disagreement among Markets+ advocates, quickly drawing public comments from Pacific Northwest utility Powerex and SPP, marking the first time SPP publicly commented on a Brattle study. Sharing similar sentiments, Powerex and SPP criticized the paper’s findings on several market design elements and questioned the reliance on outdated market studies rather than more recent, conflicting research to support its conclusions.
An Energy and Environmental Economics (E3) Western Market comparative study released at the end of October found that BPA would see greater financial benefits from joining EDAM, but the agency said that this hasn’t shifted the BPA staff’s recommendation to join Markets+ over EDAM.
Further Markets+ support has come from seven ‘Issue Alerts’ written by a group of Markets+ Phase 1 participants. These alerts address contentious market design elements and examine the ways that the differences between EDAM and Markets+ significantly impact participants in areas such as reliability, economic value, and environmental goals. Six have been released between August and November 2024, with one more to come.
Where Does This Leave the West?
In EDAM, preparation has begun for implementing and onboarding. As of October 2024, PacifiCorp, Portland General Electric, and Balancing Authority of Northern California have signed implementation agreements, while BHE Montana, Idaho Power, Los Angeles Department of Water & Power, all of which have publicly signaled their interest or intent to join EDAM, will look to sign implementation agreements soon because the implementation and onboarding process takes about 18 months. NV Energy, which has also signaled its intent to join EDAM, must first get approval from its utilities commission before it can sign an implementation agreement. Many entities will closely follow the progress of the Pathways Initiative, which is looking to lobby the California Legislature for the necessary bill to implement Step 2.
As the Pathways Initiative moves forward with Step 2, EDAM’s market structure continues to develop while entities begin to onboard, and Markets+ aims to enter Phase 2 of its development pending FERC’s response. SPP expects FERC to issue an order on the Markets+ tariff by November 20, 2024, following SPP’s response to a FERC deficiency notice issued over the summer. While these proceedings delayed the launch of Phase 2, as of now SPP does not expect delays to the projected Markets+ launch date of early 2027.
As we move closer to the go-live dates for EDAM and Markets+, markets and regulatory changes in the west are developing quickly. Our team is tracking these changes to determine how they will impact Yes Energy customers.
At the time of writing this blog, Arizona Public Service, Salt River Project, Tucson Electric Power, and UniSource Energy Services have committed to joining SPP's Markets+ as early as 2027. The new market is expected to bring enhanced reliability and savings of “almost $100 million above current market participation,” the utilities said.
Conclusion
If you’re wondering how the developments of US energy markets in the West could impact your business, trading decisions, and bottom line, our team of experts has you covered so you can Win the Day AheadTM. Ask our team your question, or subscribe to our blog to get power industry updates directly to your inbox!
About the author: Tim Hough is a market analyst on the market monitoring team at Yes Energy, specializing in the CAISO and SPP markets. He graduated from Pomona College in 2024, where he pursued his passion in the energy transition by obtaining a degree in environmental analysis and economics.
