Although the Bonneville Power Administration removed any uncertainty by selecting SPP’s Markets+ over CAISO’s Extended Day-Ahead Market (EDAM), the debate over whether BPA made the right choice likely will heat up as the West now confronts a split into two major markets. 

In BPA’s 194-page record of decision (ROD), published May 9, the agency responded to public comments submitted after it issued its draft day-ahead market policy in March. BPA said it received 1,614 comments, many of which concerned some of the more contentious issues in the day-ahead market debate, like governance, market seams and market participation costs. (See BPA Chooses Markets+ over EDAM and BPA Flooded with Comments on Draft Day-ahead Market Decision.) 

Governance has been a key concern in BPA’s decision-making process, and the agency consistently has touted the governance structure of Markets+ as “superior” to CAISO’s EDAM. 

“I think it’s been clear for some time now that the governance structures for these markets are going to matter, and they are going to drive participants to one market or another,” Lincoln Davies, professor of law and executive director of energy, resource and environment programs at the University of Utah S.J. Quinney College of Law, told RTO Insider in an interview. 

Davies, who studies the development of organized electricity markets in the West, said CAISO’s current governance structure “is something that has detracted people from joining EDAM.” 

Markets+ will be governed by an independent panel whose members “must be independent of market participants,” according to BPA’s final market policy. 

By contrast, CAISO’s markets are overseen by the ISO itself, whose Board of Governors members are appointed by the California governor. However, the West-Wide Governance Pathways initiative is developing a new independent “regional organization” (RO) to oversee CAISO’s Western Energy Imbalance Market and the soon-to-be-launched EDAM. 

The Pathways effort now hinges on Senate Bill 540 in the California legislature, which would allow the independent RO to oversee CAISO energy markets. (See Pathways ‘Step 2’ Bill Introduced in Calif. Legislature.) 

Davies noted there is “a lot of optimism” the legislation will pass and change the governance structure but, he said, “part of what BPA’s decision this month has now indicated is they’re not willing to wait to see.” 

“There [are], I think, rational reasons for them to wonder whether Pathways will play out all the way,” Davies said. Similar past attempts, including a bill that would have transformed CAISO into a regional transmission organization, have failed. Though this time might be different, the uncertainty was not good enough for BPA to commit, Davies said. 

‘Pretty Big Division’

In a May 9 call with reporters after the decision was published. Rachel Dibble, vice president of bulk marketing at BPA, said that even with implementation of the Pathways plan, CAISO still would have “a pretty significant role in governing the market.” 

BPA’s ROD contends CAISO management will continue to handle “day-to-day management of policy development and market operations.” It also notes the CAISO board’s “considerations as a [balancing authority] have the potential to influence its decisions as the market operator.” 

As the bill makes its way through the California legislature, recent amendments spurred by concerned consumer advocacy groups also “continue to erode the independence that was even in the initial bill, which we did not find to be superior to Markets+,” Dibble said. 

Under the amendments, the California Public Utilities Commission can order investor-owned utilities to leave the RO if it implements market rules and operations “detrimental to California.”  

During a hearing April 29, the bill’s author, Democratic state Sen. Josh Becker, said the amendments will protect California from possible attempt by the federal government to influence the state’s energy markets, such as pushing the state to buy power from coal-fired generators. (See California Lawmakers Seek to Trump-proof Pathways Initiative Bill.) 

But this will put BPA and other entities outside of California “in a difficult negotiating position within the regional organization governance structure when any proposed rule or business practices can be referred to the CPUC or Legislature for a determination that the proposal will be ‘detrimental’ to a broad and general set of policies,” BPA’s ROD states. 

Still, from a West-wide perspective, it would have made sense for BPA to wait for Pathways to play out, according to Davies. The entire region would benefit from a bigger market, he said. 

“From that perspective, getting everyone into one of the two markets would have been ideal,” Davies said. “I think it’s been clear for some time there’s going to be some division of the markets. And now it’s certain there will be a pretty big division of the markets.” 

Vijay Satyal, deputy director of regional markets and transmission at Western Resource Advocates, shared Davies’ sentiment. He said WRA, a consistent advocate of single Western market under EDAM, respects BPA’s decision, but noted it took the agency “six to eight years to join even a voluntary EIM market,” while the “monumental decision” to join Markets+ took about three years. 

“Why not look to the Pathways Initiative and what truly has an independent governance framework being set up, where no state jurisdiction will help influence or decide the board composition and the processes, because that was the concern with the [CAISO] structure,” Satyal told RTO Insider. 

“That’s an area of regret for WRA, that that opportunity is being discounted a bit quickly,” he added. 

Studies and Costs

Another point of controversy in the BPA decision process: the projected comparative economic benefits of the two markets. 

A production cost study by Energy and Environmental Economics (E3) commissioned by BPA in 2024 showed that participation in EDAM could deliver the agency up to $106 million in greater benefits than Markets+. (See BPA Sticks to Markets+ Leaning Despite Study Showing EDAM Benefits.) 

Proponents of EDAM have pointed to the E3 study and another by The Brattle Group — not commissioned by BPA — that found by 2032, the agency could earn $65 million in benefits from participating in EDAM versus an $83 million net loss in Markets+. (See Brattle Study Finds EDAM Gains, Markets+ Losses for BPA, Pacific NW.) 

Kelsie Gomanie, an advocate for Western markets for the Natural Resources Defense Council, said in a statement that BPA’s decision will lead to the agency and its utility customers losing out on savings “but also increasing costs for all Northwest power customers.” 

“Multiple analyses, including BPA’s own, confirm this finding,” Gomanie said. “This decision also rejects the opportunity of improved reliability and acceleration of meeting Western states decarbonization targets. The decision is inconsistent with BPA’s broad mandate, as a federal agency, to act in the best interests of the whole region it serves. We will continue to work with our partners to ensure reliability and affordability benefits reach broadly across the region and advocate for a well-integrated West-wide grid.” 

BPA has argued consistently that the studies show the largest benefits come under a scenario in which there is only a single West-wide market. But a more likely case is there will be multiple markets in the future, especially since entities already have signed with either Markets+ or EDAM, according to BPA. 

Additionally, the models do not factor in “numerous governance and design differences,” according to BPA. Ashley Donahoo, the agency’s day-ahead markets lead, reiterated that point in the call with reporters May 9. 

“The analysis has already been done, and today we’re setting our policy direction that Markets+ is the preferred day-ahead market for BPA, based on production cost modeling results, based on market design features and all of that,” Donahoo said. 

Market Seams and Connectivity

With BPA’s decision settled, Markets+ participants presumably will need to begin addressing challenges stemming from the non-contiguous nature of the market’s footprint, which is expected to consist of three isolated pockets concentrated in the Pacific Northwest, Arizona and Colorado, as well as a smaller slice in El Paso Electric’s service territory. Chief among those challenges will be the lack of transmission capacity connecting the market’s zones, which will require making energy transfers through the larger EDAM, where possible.  

Dibble acknowledged the challenges, saying transmission projects across the West will “take several years and a lot of negotiations to figure out.” 

However, “Even with market footprints that are separated geographically … there is still improvement in the dispatch when you have one entity that is dispatching across a bigger footprint,” Dibble said. “So, even if it’s not connecting between the Northwest and the Southwest initially as robustly as would be ideal, there is still improvement in the dispatch of generation and serving load when you have one entity dispatching over one larger market.” 

On market seams, BPA said in the ROD that it understands that two day-ahead markets “may create inefficiencies and will be challenging to resolve.” 

But the region has experience mitigating seams issues under the Coordinated Transmission Agreement that BPA has struck with 18 adjacent Balancing Authority Areas and 15 adjacent transmission service providers. Markets+ and EDAM also have an incentive to work out seams issues, according to the ROD. 

BPA also took issue with the notion that the agency is solely responsible for creating seams, noting that PacifiCorp and Portland General Electric (PGE) decided to join EDAM “based on their evaluation of which market is in their best interests, just as Bonneville has done with its decision to pursue participation in Markets+.” 

“However, there has been very limited discussion of seams with those entities, despite their decision relying heavily on use of the Bonneville transmission system, creating the same seams with which many commenters take issue, including PacifiCorp and PGE,” BPA stated. “All entities will need to rely on negotiating seams agreements, regardless of the day-ahead market in which they decide to participate.” 

Satyal said there will be at least three major market seams: EDAM and Markets+; intra seams within each of the markets’ footprints; and larger seams between Markets+ and RTO West — “unless they merge.” 

“Seams management and rules should be developed now, proactively, to help shape the market functioning, rather than the other way around,” Satyal said.  

BPA has indicated it is willing to take on a leading role and bring the various parties to the table, Satyal noted. 

“So the proof is now in the pudding, what BPA is going to be able to do and how, because BPA’s decision impacts the decision making of many embedded entities and load-serving customers,” Satyal said. 

Tom Kleckner contributed to this article.