The effort to unite the West under one electricity market appears to be resulting in a patchwork quilt.

Bonneville Power Administration issued a draft decision Thursday to join a market that Arkansas-based Southwest Power Pool is organizing — possibly stretching from Colorado to Washington state — rather than a market organized by the California ISO.

Utilities in the West would likely be divided among two markets if BPA, the federal agency operating in the Pacific Northwest that distributes hydropower from the Columbia River Basin, were to join the Southwest Power Pool.

That could make it harder to save consumers money and build on efforts to ship zero-carbon electricity across the region, said Brian Turner, a director for the clean energy group Advanced Energy United.

“This has been a worry of ours for a while, that we’re headed for a bifurcated West,” Turner said. “That could risk the great promise of the Western market, that we could trade more efficiently and therefore reach an affordable and cleaner grid.”

Any amount of market organization in the West is expected to bring down prices and reduce greenhouse gas emissions by enabling the better flow of low-cost renewable energy.

The utilities and states in the nation's Western Interconnection that stretches west of the Rocky Mountains do not operate as a single regional transmission market. That makes it harder to buy and sell excess power across the region. Better coordination could allow interior states to share wind power or allow California to sell its surplus of midday solar power to other states.

Advocates say a larger market that includes California offers the greatest benefits. The Brattle Group consulting firm found in a 2024 study that a single market could save $985 million a year across the West. A model that had two markets that did not allow coordination between the Pacific Northwest and the Southwest, meanwhile, would save $682 million a year.

Other Brattle Group research has also shown that a large market with California would reduce fossil fuel consumption and decrease greenhouse gas emissions.

BPA argued that joining Southwest Power Pool's Markets+ plan would “provide value to customers." It listed market design, resource adequacy requirements and SPP's handling of transmission congestion issues as reasons to join.

SPP now has preliminary or final commitments to join its expanding market from four Arizona utilities — Arizona Public Service, Salt River Project, Tucson Electric Power and UniSource Energy Services — as well as Xcel Energy-Colorado and Washington’s Tacoma Power.

Crucially, however, it does not include the state of California and its vast array of solar power and other renewables. There, leaders from the California ISO are organizing the Extended Day-Ahead Market, or EDAM, an extension of its existing real-time market that serves 22 entities across the West.

Market friction

The concern with bifurcation — especially a patchwork split that does not divide neatly geographically — is the proliferation of seams, or interconnections between wholesale markets. Sharing electricity across seams is more difficult because there may be incompatible market rules or designs.

Turner of Advanced Energy United said that even if the two market operators can settle some seams issues, there will still be “friction” across the region. Even the existing markets in the U.S. that have worked to smooth out seams issues for decades still experience some trouble, he said.

“It’s like you’re traveling through Eastern Europe during the cold war and you have to show your papers every time you cross a border,” Turner said.

John Tsoukalis, a Brattle Group power market expert, said in an email that the “largest benefits come from one market” but that even a pair of markets would be “better than the status quo.” Even with two markets covering the Western interconnection, Tsoukalis said "you could end up capturing a lot of the benefits of a single market through improved seams-related inefficiencies."

The decision by BPA to join SPP's Markets+ comes despite fervent lobbying from some customers and market participants to instead join the California day-ahead market, or at least delay the decision. California lawmakers are set to consider a bill this legislative session that would remove control of the new market from state-appointed officials and allow a new, independent body to take over, addressing some of the governance questions.

In a letter to BPA this week, several utilities and unions that work with BPA wrote that the best course of action would be to not commit to a day-ahead market and allow more time to consider the decision. That, they wrote, would “delay the creation of an unavoidable, not easily managed or reversible, seam and maintain the coordination in the West that is critical to keep the lights on and costs down.”

BPA noted its experience navigating seams issues already, including with California. In its draft decision, BPA said that seams “can be mitigated through coordination across the various participants.”

Antoine Lucas, vice president of markets and chief operating officer-elect for SPP, said in a statement that the organization is “encouraged” by BPA’s decision.

“From the outset, our goal has been to provide a competitive market option that could earn the participation of western stakeholders,” Lucas said. “We look forward to continued collaboration as we work to implement a market that delivers equitable cost savings, reliability and sustainability benefits to the West.”

BPA says it anticipates making a final record of decision in May.

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