Along with operating the power grid, the Cal-ISO is a one-stop energy emporium for electricity traders in the final hours before energy is consumed. It conducts three open-competition markets that not only help lower the cost of providing electricity, but most importantly, assist the Cal-ISO in maintaining reliability of the transmission grid.

Cal-ISO is like a bank, acting as a clearinghouse for energy transactions, but never buying or selling power itself. The markets allow the ISO to make adjustments in power deliveries in response to changes in energy consumption due to, for example, new weather forecasts or malfunctioning power plants. The markets also provide the ISO with electrical services such as regulation and voltage support that it needs to maintain the reliability of the power grid.

The highest volume of Cal-ISO energy trading is through the Real-Time Imbalance Market (Spot Market). This market is available for both in-state and out-of-state participants where trades are made across the western United States. Cal-ISO dispatchers adjust generation of electrons second-by-second to match California's demand for power at any given time. Market traders, called Scheduling Coordinators, either receive payment for extra generation they supply or are billed for the extra energy they need to meet the demand of their customers.

Another method the Cal-ISO uses to ensure reliable operation is the Ancillary Services Market. The market takes place a day ahead and an hour ahead of when customers actually use the electricity. This is what's for sale at the Ancillary Services Auction:

Generation that is already up and running (synchronized with the power grid) and can be increased or decreased instantly to keep energy supply and energy use in balance.

Generation that is running, with additional capacity, that can be dispatched within minutes.

Generation that is not running, but can be brought up to speed, within ten minutes.

Generation that can begin contributing to the grid within an hour.

Unique to California, the Congestion Management Market is a mechanism to allocate transmission to the various users. To facilitate this allocation, the Cal-ISO accepts "adjustment bids" a day ahead and an hour ahead of when electricity is consumed. Scheduling Coordinators operating in congestion zones, between which heavy volumes of electricity are being transported, can voluntarily curtail their loads or generate additional power to meet demand and make money at the same time. If market participants do not submit sufficient adjustment bids, a Congestion Management Charge will be levied if they continue to schedule power over lines that are in heavy use.