California has never been a simple electricity market. But for commercial and industrial energy buyers, understanding what drives your electricity costs is becoming even more important.
Two developments deserve particular attention: the launch of the Extended Day-Ahead Market (EDAM) and the continuing importance of Resource Adequacy (RA).
The simplest way to think about them is this:
EDAM is changing how electricity is bought and moved across the West. Resource Adequacy determines what California pays to make sure enough generating capacity is available when we need it.
One primarily affects the energy market. The other affects reliability. California businesses need to pay attention to both.
In May 2026, California took another step toward a more regional electricity market by launching EDAM.
EDAM extends regional electricity trading into the day-ahead market, where most electricity is scheduled. A larger day-ahead market allows participating utilities to coordinate generation and transmission resources earlier and across a wider geographic area.
California may have abundant solar generation while another area has available hydro, wind, or other generation. Weather, transmission constraints, and demand also vary across the West. EDAM gives the market a larger pool of resources to meet tomorrow's electricity needs.
For California energy buyers, that could improve market efficiency, make better use of transmission, and reduce some of the volatility that occurs when supply and demand become unexpectedly tight in real time.
That doesn't mean EDAM eliminates volatility or guarantees lower prices. It gives the market another tool for managing it.
If EDAM is about efficiently supplying electricity, Resource Adequacy (RA) is about making sure enough generating capacity exists to keep the lights on when the grid is under stress.
California requires utilities, Community Choice Aggregators, and Electric Service Providers to procure sufficient capacity in advance to meet expected demand plus required reserves.
When you purchase electricity, you pay for the energy you consume. With RA, you're also paying for the capacity needed to be available when the system needs it.
When available capacity becomes scarce, RA can become more expensive. Local transmission limitations can add another challenge because California doesn't just need enough capacity statewide; it needs resources available in the right places.
That leads to an important point for California buyers:
A favorable wholesale energy market does not necessarily mean your total electricity cost is becoming equally favorable.
Energy prices can decline while RA (capacity) and other non-energy costs move in the opposite direction.
EDAM asks: How can we use generation and transmission across a larger regional market to meet tomorrow's demand efficiently?
RA asks: Do we have enough dependable capacity available when the system is stressed?
One can improve energy-market efficiency, while the other adds cost to ensure reliability.
That's why looking only at the forward price of electricity can give a California buyer an incomplete picture.
Energy managers should watch four developments.
1 - More stability between day-ahead and real-time prices. A larger pool of resources in the day-ahead market should reduce reliance on expensive real-time balancing and potentially narrow the spread between day-ahead and real-time prices. Customers with market exposure could see fewer volatility-driven surprises.
2 - Greater visibility into congestion and locational costs. A larger regional market should provide greater transparency into transmission constraints and their impact on pricing, particularly in areas where local congestion can materially affect costs.
3 - Greater importance of RA costs. California still needs dependable capacity to meet growing electricity demand. Plant retirements, electrification, load growth, and reliability requirements could continue to put upward pressure on RA costs.
4 - Evolving procurement strategies. As the relationship between day-ahead and real-time pricing changes, buyers should understand their exposure between each market and whether it still balances market opportunity and budget certainty.
The key is that these forces may move in different directions.
EDAM could make the energy market more efficient and less volatile, while Resource Adequacy and other non-energy costs increase.
Start by understanding what you're actually paying for. When evaluating a renewal or procurement strategy, don't focus solely on the commodity price. Ask:
How much of my projected cost is energy? How much is Resource Adequacy? What other market or regulatory costs are embedded in my price? Which costs are fixed and which can change?
You should also understand your exposure to day-ahead and real-time markets, particularly if your contract includes index exposure or pass-through components.
None of this means a changing market automatically means a different purchasing strategy. The right approach still depends on your load profile, risk tolerance, contract structure, budget objectives, and market conditions.
But it does mean you should know how these changes affect your particular business.
California energy buyers don't need to become experts on CAISO market design.
But they do need to understand that electricity price and electricity cost are not the same thing.
EDAM may improve efficiency and reduce volatility in the energy market while Resource Adequacy and other costs move higher. Understanding those different components is becoming an increasingly important part of making good energy decisions in California.