COMMODITIES 2025: CAISO, SPP work to launch day-ahead markets across Western US

This is part of the COMMODITIES 2025 series where our reporters bring to you key themes that will drive commodities markets in 2025.

The highlight of 2025 for US West electricity markets may be which day-ahead market the Bonneville Power Administration ends up choosing between the California Independent System Operator and Southwest Power Pool.

CAISO and SPP have been jockeying to offer energy imbalance services across the western US and are now working to launch day-ahead market offerings. CAISO's Extended Day-Ahead Market is slated to launch in May 2026, while SPP plans to go live with Markets + in 2027.

"While both day-ahead markets have significant milestones to reach in order to ensure successful implementation, perhaps the largest milestone lies in May 2025, when Bonneville Power Administration is expected to make its final decision regarding which market it will join," said Shayne Willette, S&P Global Commodity Insights senior research analyst.

In April 2024, BPA staff issued a recommendation of opting for Markets+ over EDAM, and has since delayed its final decision.

While there have been some small delays, like the Federal Energy Regulatory Commission's letter of deficiency to SPP regarding its Markets+ tariff, the two markets are more or less expected to stick to their schedules, Willette added.

Each market will require participants to adhere to its own set of rules and regulations, but some key differences include:

• Markets+ requires Western Resource Adequacy Program participation
• Governance structure
• Congestion revenue allocation

Challenges to western market expansion include aligning stakeholder interests, data transparency, and regulation, Willette said. Differences in states' regulatory frameworks can complicate things and are particularly relevant when considering greenhouse gas regulations and renewable portfolio standard mandates, he added.

"Regardless of how things shake out between EDAM and Markets+, WRAP is poised to play a significant role in enhancing reliability across Western electricity markets," Willette said, adding SPP is serving as WRAP's program operator.

It's a WRAP

"Unlike EDAM and Markets+, WRAP is not a market," said Rebecca Sexton, Western Power Pool's director of strategic engagement and communications. "It's a standalone resource adequacy program, which includes a forward showing planning and an operations function, both of which could be integrated into any day-ahead market. We anticipate that some WRAP participants will be part of EDAM, and some will join Markets+, and WRAP is designed to work with both markets."

The WRAP started at the request of WPP's customer utilities who were concerned about the issue of resource adequacy in the West. WRAP is designed to assess if there are enough resources to meet customer needs using an established set of common reliability metrics, and to take advantage of and share in the diversity of a large regional footprint.

"While it is not yet clear how markets will evolve in the West or whether a west-wide [regional transmission organization] will ultimately take hold, programs providing resource adequacy like WRAP are a critical foundation of a reliable interconnected grid," Sexton said.

In 2025, WPP expects a FERC decision on the revised transition plan, Sexton added. WRAP will also be considering further changes to the tariff and business practice manuals throughout 2025. January 2026 is the new deadline for WRAP participants to give notice of intent to enter fully binding operations in Summer 2027.

"Our participants are experiencing headwinds addressing resource adequacy challenges, including rapid load growth, extreme weather and supply chain difficulties that have made it tougher to enter a fully binding WRAP," Sexton said. "However, with the revised transition plan, we believe we have a solid route to achieve that goal."

CAISO day-ahead market expansion

EDAM expands on the success of CAISO's Western Energy Imbalance Market, a real-time wholesale energy market launched in 2014. WEIM leverages transmission connectivity and resource diversity across a broad geographical footprint covering 22 entities in 11 states. The EDAM is a voluntary day-ahead electricity market that is designed to deliver benefits to balancing areas and utilities throughout the West. Day-ahead transactions represent around 85% of energy sales. FERC approved final tariff changes in June.

PacifiCorp is one of three entities that formalized a commitment to join the EDAM.

"The success of the imbalance market is really what drove us to EDAM," said Mike Wilding, PacifiCorp vice president of energy supply management, adding WEIM had provided $6.25 billion of benefits to all of its participants. PacificCorp's share of that is $891 million over the last 10 years. "So, it's the economic benefits, the reliability and the reduced emissions. Because of the success that we've seen in EIM, EDAM was an easy choice."

EDAM captures about 80% of the benefits of an RTO for about 20% of the cost, Wilding said, adding for participants that want to go into an RTO it provides a pathway for that, while entities that don't want to be in an RTO don't have to go down that path. There are potential steps in between EDAM and an RTO.

"In 2025, we expect that more of the entities that have publicly announced their intention to join EDAM will proceed to execute agreements," CAISO spokesperson Anne Gonzales said, adding LADWP's board Dec. 10 authorized execution of an implementation agreement. "The ISO is hard at work already working on implementation activities with the entities that have executed agreements, and will begin testing of the EDAM market later in 2025."

West-Wide Governance Pathways

"The West-Wide Governance Pathways Initiative has helped ease concerns related to EDAM's governance structure – which is one of the fundamental issues for several non-CAISO stakeholders – though it's still to be determined if the effort will be sufficient for those opting for Markets+," Willette said.

The West-Wide Governance Pathways Initiative was launched in summer 2023 by a coalition of regulators from five Western states. The West-Wide Governance Pathways Initiative Launch Committee approved its Step 2 final proposal Nov. 22 that lays out plans to transfer governance authority over existing regional energy markets from CAISO to a new regional organization.

"The adoption of the Step 2 proposal from the Pathways Initiative marks a significant milestone in establishing independent governance for Western energy markets," CAISO spokeswoman Anne Gonzales said.

California legislation is necessary to enable the ISO markets to be governed by this new entity. The California legislative process starts in early 2025.

SPP's day-ahead market expansion

Western entities approached SPP in 2021 to design a market to meet western customer needs not being served by other market options. Markets+ stakeholder working group and task force meetings will continue in 2025 and a new group will be added to address implementation and readiness of market participants, SPP spokesperson Meghan Sever said. SPP will focus on phase two development of Markets+ throughout 2025 and 2026, which is the implementation.

Markets+ phase two funding agreements are still under review. SPP requested executed funding agreements be sent by Dec. 16, but that deadline has been extended due to a later-than-anticipated response from FERC, Sever said. Any new deadline for signed agreements would be dependent on when a response from FERC is issued.

"Markets+ could be a stepping stone for entities interested in RTO membership, but will remain a standalone contract service in the west," Sever said.

Arizona Public Service and Salt River Project are among the utilities planning to join Markets+.

"While there are numerous areas that make Markets+ SRP's preferred choice, the primary drivers relate to governance and resource adequacy," Josh Robertson, SRP's director of energy market strategy. "Markets+ offers a robust governance structure that promotes independence, transparency, inclusivity, and stakeholder-driven decision-making. SRP has directly experienced the benefits of this approach throughout the stakeholder process to develop the tariff and business protocols, with SPP providing technical input and support during the development process."

APS projects annual savings of up to $40 million for customers above current market participation, and nearly $100 million savings across APS, SRP, Tucson Electric Power and UniSource Energy Services directly passed back to customers, APS spokesperson Mike Philipsen said about why the utility is interested in joining Markets+.

Seven western entities have been evaluating the benefits and requirements of RTO membership in the Western Interconnection since 2020, leading to an expansion of the SPP RTO, which is scheduled for April 1, 2026, Sever added.

"This monumental expansion will result in SPP being the first RTO to operate in both the Eastern and Western Interconnections and the first multi-state RTO in the Western Interconnection," Sever said.