State of the Interconnection 2026
Market Evolution
2025 was a year of change for energy markets in the Western Interconnection with developments in several new markets. Tariffs were approved for SPP's full Regional Transmission Operator, RTO West, and for new day-ahead markets: CAISO’s Extended Day-ahead Market (EDAM), and SPP’s Markets+.
Progress was also made in creating the Western Resource Adequacy Program (WRAP), and legislation was passed in California that helps clarify the Pathways Initiative regarding future EDAM governance.
In April 2026, RTO West began operations, becoming the first market to connect the Eastern and Western interconnections. In May 2026, CAISO’s EDAM became operational as a day-ahead market for participating entities.
Energy Markets in the West
An electric energy market is a system for purchasing and selling electricity using supply and demand to set the energy price. The energy market is coordinated by an Independent System Operator (ISO) or a Regional Transmission Organization (RTO). The energy market is used in a restructured electric industry in which power producers provide electric power generating facilities and services, and transmission owners and operators provide power transmission lines and services to create more efficient energy production.
Energy markets are typically constructed with day-ahead and real-time market periods that economically dispatch generation while satisfying reliability constraints. Rather than many individually priced bilateral deals, entities participating in markets have access to transparent information over a broader geographic area, allowing scarcity events to be more easily relieved, potentially at lower costs. In general, energy markets provide an incentive for developing the most cost-effective way to produce and deliver electricity.
Energy markets typically run an additional ancillary services market. There are four types of ancillary services products provided in an ancillary market: regulation up, regulation down, spinning reserve, and non-spinning reserve. The ancillary services markets are designed to meet reserve obligations with the lowest-cost resources possible while maintaining grid reliability.
Alberta Electric System Operator (AESO)
The AESO is a not-for-profit entity that was organized to run the electricity market in Alberta in 2003. The AESO’s primary functions are to operate an open and competitive wholesale electricity market, to operate a safe and reliable electric system, and to plan, develop, and provide access to the electric transmission system.
The AESO is a real-time market that dispatches generation to match demand as needed. The AESO market is an “energy-only” model which pays only for energy produced and does not have a market to buy and sell generating capacity. The AESO also runs a separate ancillary services market, which purchases specific services to maintain the safe and reliable operations of the power grid.
The AESO is redesigning its market through the Restructured Energy Market (REM) with the intent to implement the new market design mid-2027. The REM was developed with input from policymakers, market participants, and stakeholders and is designed to:
- Enhance grid reliability.
- Deliver affordability.
- Attract investment.
RTO West
RTO West went live April 1, 2026. It is an extension of SPP’s market in the Eastern Interconnection with Southwest Power Pool (SPP) acting as the Balancing Authority (BA) for the RTO West footprint, which includes parts of Arizona, Utah, Colorado, Wyoming, Montana, and New Mexico. The market runs as a single market solution connecting SPP’s BAs in the Eastern and Western interconnections through use of the direct current (DC) ties, which SPP envisions will bring price convergence between the two interconnections. SPP also expects to maximize energy from variable energy generation through diversity of load of the two BAs.
RTO West absorbed the membership of SPP’s Western Energy Imbalance Service (WEIS) market, a real-time market that ceased operations when RTO West went live.
CAISO Extended Day-Ahead Market
The Extended Day-ahead Market (EDAM) is an expansion of CAISO’s day-ahead market developed to include additional Balancing Authority Areas in the West outside of California. This larger footprint potentially brings a range of benefits, including improved reliability, transmission and resource planning, and more efficient integration of variable generation. The primary benefit of EDAM is the added surety that adequate resources from participating Balancing Authorities will meet forecast demand well before real-time conditions exist. Real-time imbalances will then only represent the risk associated with forecast uncertainty and resource uncertainty between the day-ahead and real-time periods.
EDAM, which went live on May 1, 2026, does not replace CAISO’s real-time imbalance market, the Western Energy Imbalance Market (WEIM), but incorporates WEIM market functions into EDAM for the entities that choose to join the day-ahead market. WEIM will continue to function as a real-time balancing market for entities that do not choose to join a day-ahead market but want to continue participating in WEIM.
SPP Markets+
Markets+ is a day-ahead and real-time market that will operate in the Western Interconnection. Markets+ is a bundle of services that centralize day-ahead and real-time unit commitment and dispatch, provide hurdle-free transmission service across its footprint, and pave the way for the reliable integration of a rapidly growing fleet of renewable generation, but Markets+ does not consolidate planning functions or Balancing Authority responsibilities under SPP.
SPP has targeted a go-live date for Markets+ of May 2027 and completed the first step for developing the market by filing the necessary tariff language at FERC, which approved the tariff in early 2025.
WRAP Update
Western Power Pool began the effort to establish the Western Resource Adequacy Program (WRAP) in 2019 at the request of stakeholders from across the Western Interconnection. It is a multi-state program designed to drive regional coordination to ensure resource adequacy and reliability. Through collaboration among participants, WRAP provides a pool of generating resources to share, creating operating efficiencies while taking advantage of the region's diversity.
Several utilities announced their intent to withdraw from WRAP in October 2025, the deadline to leave the program before its binding phase, where deficiency charges can be levied. Several utilities that withdrew requested a one-year delay in the deadline due to factors including the deficiency charges and the emergence of two day-ahead markets in the West. WRAP leaders declined to postpone the deadline, saying it would undermine confidence in the program, limit compliance, and prevent unlocking WRAP’s full benefits. Sixteen entities have confirmed their participation in binding operations in winter 2027–28, the first year of the binding phase.
New Resource Adequacy Program in the Works
In April 2026, a group of entities, either participating in EDAM or leaning toward participating in CAISO's day-ahead market, began a process to develop a regional resource adequacy program that uses the EDAM footprint to ensure that participants maintain sufficient capacity to meet load under a range of conditions.
California Legislation Sets Stage for Market Changes
California Assembly Bill 825 was signed into law in September 2025, setting the stage for a new, independent organization to oversee CAISO's EDAM and WEIM.
The bill’s passage builds on the West-wide Governance Pathways Initiative, which was launched in 2023 with the goal of developing an independently governed entity capable of offering a host of wholesale market functions across the largest possible footprint. The passage of AB 825 allows CAISO to transition the governance and operation of WEIM and EDAM to an independent organization, a transition intended to address concerns that the markets could be biased toward California.
Since the passage of the California legislation, the leaders of the Pathways Initiative have created the Regional Organization of Western Energy (ROWE), the independent entity that would oversee the markets. They are also working to seat an initial board, hire staff, and develop processes and tariff amendments. The goal is for an operational, tariff-funded organization to be in place by 2028.
Pathways Initiative
The West-wide Governance Pathways Initiative began in July 2023 when a group of state public utility commissioners and energy office officials submitted a letter to the leadership of the Western Interstate Energy Board (WIEB), the Western Interconnection Regional Advisory Body (WIRAB), and the Committee for Regional Electric Power Cooperation (CREPC), announcing their intention to create an independently governed entity that can “serve as a means for delivering a market that includes all states in the Western Interconnection.”
In fall 2023, the Pathways Launch Committee was formed to “develop a new and independent entity.” The 26-member committee comprises volunteers with experience throughout the industry, from state utility commissioners to utilities to trade organizations.
The Pathways Initiative is designed to be developed in three phases. Phase I, which was approved in 2024, elevates the authority of the WEIM/EDAM Governing Body in the governance of existing CAISO energy markets. Phase II, completed in 2025, transfers governance authority of the CAISO’s real-time and day-ahead markets (EIM and EDAM) from the CAISO to a new Regional Organization: the Regional Organization for Western Energy (ROWE). Phase III would continue expanding the scope of regionalized functions and services offered by the regional organization to potentially develop a West-wide RTO.
Latest Developments
In early 2026, ROWE was established and asked CAISO to serve as a guarantor of a loan to help cover the startup costs of the organization. Repayment of the loan would not start until 2028, when the ROWE assumes its full governance responsibilities.
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