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California is positioning itself to help run a unified, independently governed electricity market across the West. With AB 825 signed on September 19, 2025, the California Legislature authorized the California Independent System Operator (CAISO) to transfer certain market functions to a new Independent Regional Organization (IRO). The IRO will oversee CAISO's Western Energy Imbalance Market (WEIM) and upcoming Extended Day-Ahead Market (EDAM), while CAISO will retain grid-balancing operations, resource adequacy and reliability, transmission planning, and policy implementation.
The transition will begin on or after January 1, 2028, but only if certain conditions are met including: the IRO satisfies statutory criteria; CAISO adopts a resolution confirming such criteria; and the Federal Energy Regulatory Commission (FERC) approves the IRO tariff. In addition, the California Public Utilities Commission (CPUC) must issue a finding that the criteria have been met before investor-owned utilities with systems operated by CAISO can participate. To safeguard state authority and consumer interests, AB 825 embeds a "guardrail checklist" of 13 conditions that must be reflected in the IRO's governance and tariff.
The proposed changes will provide a significant boost to renewable energy development in the western United States. The potential benefits include:
- Less curtailment risk by exporting excess clean power across a broader Western footprint;
- Expanded customer access and efficiencies through optimized regional dispatch and transmission; and
- Potentially stronger lender confidence due to reduced curtailment risk and improved options for replacement offtake.
AB 825 charts a path to a West-wide market that can enhance reliability, reduce costs, and accelerate clean energy integration—while preserving California's policy leadership and oversight.
For a deeper dive into the governance, timeline, and developer impacts, read the full article here.
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