The California Independent System Operator (CAISO) has already demonstrated the benefits of regional energy trading through the Western Energy Imbalance Market (WEIM), which has saved participants more than $6.6 billion since its launch in 2014. Building on this success, CAISO’s Extended Day-Ahead Market (EDAM) will allow states to plan optimized electricity dispatch a day in advance. EDAM represents a critical step toward broader market integration. By expanding cooperation beyond real-time transactions, the West can improve efficiency, unlock deeper cost savings, and enhance grid reliability.
Currently, utilities and grid operators operate in silos, leading to inefficiencies and unnecessary costs. A single, unified regional electricity market is the most effective way to optimize resources across the West and avoid overbuilding generation capacity in different regions, which only drives up electricity costs for consumers.
Fragmentation also increases the risk of reliability challenges, especially during extreme weather events. An integrated grid under WEIM and EDAM would allow power to flow where it is needed most, reducing the likelihood of blackouts and ensuring that no state is left vulnerable. By passing SB 540, California can take a leadership role in advancing a cohesive, well-structured market that benefits the entire region.
Why is legislation needed?
Independent governance
CAISO is uniquely positioned to lead this integration effort and SB 540 allows California to participate in a regional electricity market with an independent governance structure that ensures California can meet its own clean electricity goals.
In the past, potential regional market participants have worried that joining a CAISO-led market could mean being subject to California’s state policies. However, the Pathways Initiative directly addresses those concerns through the creation of a new organization with an independent board that will oversee the WEIM and EDAM.
The Pathways Initiative was developed to continue the incremental work to integrate the western grid with broad stakeholder support from public utility commissioners, several districts of the International Brotherhood of Electrical Workers, clean energy advocates, and more. SB 540 enables the Pathways Initiative proposal to become a reality by allowing California to join a regional market governed by an independent organization only if certain conditions are met, including strong consumer protections, educational resources for members of the public, and transparent decision-making that allows all participants to benefit from regional cooperation without compromising their own policy goals.
Protections for state rights and local goals
Importantly, SB 540 includes strong protections to ensure that California retains control over its clean energy trajectory. It requires the independent regional organization to include safeguards for state authority to ensure that California—or any other participating state—retains control over its own clean energy and other policies.
Additionally, the legislation ensures that any regional market must demonstrate clear benefits before California commits to participation, and it preserves the state’s ability to withdraw if the market no longer serves its interests.
Time to act now: The path to a stronger, cleaner, and more affordable grid
California has long been a leader in clean energy innovation. By enabling regional market participation with independent governance, this legislation represents the next step in the state’s effort to build a cleaner, more resilient, and cost-effective grid.
A fully integrated market will drive down electricity costs, improve reliability, and accelerate the deployment of renewable energy across the West. With strong governance protections and clear benefits for consumers, this bill provides the path for California to reap the full benefits of regional cooperation.
The choice is clear: California should seize the opportunity to lead the West toward a better energy future. Passing SB 540 will put the state on the right path—one that ensures a reliable, cost-effective, and sustainable grid for years to come.
