A CAISO perspective on seams

With the emergence of multiple day-ahead markets in the Western Interconnection, the issue of seams is gaining increasing interest among market participants, policy makers and regulators. In this blog, I share the California Independent System Operator’s (CAISO) perspective on seams as well as a set of principles we have developed with our partners to address them.

In any discussion of seams and the future evolution of the Western grid, we start with a reminder that for more than a decade, the Western Energy Imbalance Market (WEIM) has provided significant reliability and financial benefits to its participants and their customers across the West.

By providing a seamless real-time electricity market, the WEIM has demonstrated how a diverse group of load-serving entities and the states they serve can work across geographic boundaries and different energy policy objectives for the greater good of improved reliability and affordability for electricity consumers.

Benefits have grown as the WEIM footprint has expanded to include 22 entities in 11 states, representing approximately 80% of demand across the Western Interconnection. During unprecedented extreme weather events in both summer and winter, the WEIM has served as an invaluable mechanism to shift power around the region and support reliability for market participants. This is in addition to the more than $8 billion in production cost savings for market participants and their customers. 

Building on this success, the CAISO is preparing for the May 1 launch of the Extended Day-Ahead Market (EDAM) with PacifiCorp. EDAM is designed to bring the same collaborative, reliability-focused approach to better optimizing next-day grid operations.

At the same time, we recognize that new seams are emerging. The Southwest Power Pool is expanding its regional transmission organization into the West. And some balancing authorities have made decisions to join Markets+. This will introduce complex new seams in day-ahead and real-time operations.

A lesson from work on seams issues in eastern markets is the importance of starting with a clear set of principles that all parties commit to, ensuring outcomes are mutually beneficial. The Principles for Addressing Western Market Seams document describes a set of eight principles the CAISO developed with our partners and shared with SPP last year. They fall into three themes: reliability, respect, and mutual benefits.

First, we must maintain system reliability. Electricity markets find reliable solutions at the least cost for consumers. With separate markets, however, there are separate solutions that conflict because markets have limited and partial information about each other’s use of the grid. Where the physics and economics of the grid need to be reconciled, seams agreements must prioritize reliability.

Second, seams discussions need to respect jurisdictional independence and approved market designs. Market evolution in the West has been incremental and voluntary. Both the Western Energy Imbalance Market and the Extended Day-Ahead Market allow Western balancing authorities and transmission providers to self‑determine when, how, and to what extent they participate in organized markets. Seams agreements and negotiations must respect their retained authority and ownership interests and should not become a forum for market design advocacy.

Third, there should be mutual benefit to both markets by improving market-based transactions and operations across seams. Each market has Federal Energy Regulatory Commission-approved rules to manage imports, exports, and congestion. Coordination between distinct market platforms will require the investment of time and resources. Those costs need to be outweighed by improvements to reliability and affordability outcomes for each market footprint compared to operating under its stand-alone rules.

We at the CAISO feel a deep sense of responsibility to support reliability and affordability across the interconnected system. The principles lean into CAISO’s stewardship role in seams discussions, knowing that it is not a bilateral negotiation between CAISO and SPP. Instead, it requires balancing authorities, transmission providers, transmission operators, reliability coordinators, and market operators to be engaged in scoping procedures, agreements, discussions, and solutions.

The West has made incredible progress by working together to optimize operations across the Western energy footprint. Day-ahead market development is a natural extension of that success. Shrinking real-time footprints and adding unnecessary seams risks reversing hard-won gains. It is important to set expectations that no seams arrangement will overcome the inefficiencies inherent in multiple markets working on their own to optimize separate portions of one interconnected grid.

The passage last year of California Assembly Bill 825 and the creation of the new Regional Organization for Western Energy put both the WEIM and EDAM on track to be administered under fully independent governance beginning in 2028. The landmark achievement was in response to longstanding concerns about the governance of CAISO-operated markets that have stood in the way of integration in the past.

As we look ahead, we remain committed to collaboration, transparency, and practical solutions – and we hope all WEIM participants will carefully consider the unprecedented and fortuitous combination of physics, economics and fully independent governance of WEIM and EDAM before leaving the seamless real-time market we have worked so hard to build together.