USA – CALIFORNIA Trends and Developments Contributed by: Nora Sheriff and Samir Hafez, Buchalter
the Western Interconnection under its RTO West plan. The expected result of these parallel but distinct efforts is the development of at least two region- ally co-ordinated wholesale electricity markets west of the Rockies. Proponents argue that expanded regional markets will enhance reli- ability, improve resource adequacy and reduce costs for ratepayers, by optimising dispatch and reducing reserve margins. However, some industry experts worry that the development of these two distinct markets could lead to “seams” issues and potential market inefficiencies. These concerns were especially pronounced when, in March 2025, Bonneville Power Authority sig- nalled its plans to join SPP’s Markets+ instead of CAISO’s EDAM. Ultimately, the West’s ability to fully realise the reliability and economic benefits associated with these efforts is dependent on the timely deployment of new transmission infrastructure. However, the pace and scale of this necessary build-out is being hindered by persistent delays, interconnection backlogs and the fear of tariff- driven cost increases. Building the Backbone for Transmission and Distribution Amidst Inflation Although transmission remains the linchpin of a reliable, decarbonised electricity system, the USA continues to under-build relative to pro- jected need. Across the West, utilities and inde- pendent developers face cost overruns, permit- ting delays and procurement challenges that complicate long-range planning. Steel tariffs, in particular, are inflating the cost of poles, towers and structural components for high-voltage transmission lines. CAISO and other planning authorities have reported price
increases of 20% to 30% on key materials since the start of calendar year 2025. These changing conditions have prompted the re-evaluation of transmission project timelines, even as the need for interregional connections grows. At the distribution level, utilities are grappling with how to accommodate growing numbers of distributed energy resources (DERs), includ- ing rooftop solar, electric vehicles, and flexible demand technologies. Modernising distribution systems and implementing new rate structures to accommodate increased DER deployment requires advanced metering, bidirectional invert- ers and physical components, which depend heavily on global supply chains currently under stress. West-Wide Power Grid Could Be the Canary in the Coal Plant In California, wildfire mitigation and under- grounding mandates add another layer of cost pressure. Pacific Gas & Electric (PG&E) and Southern California Edison continue to request significant capital budgets for distribution sys- tem upgrades, and their budgets may become an even more burdensome weight on taxpayers as supply chain issues persist and escalate. Some jurisdictions are exploring non-wires alter- natives and enhanced hosting capacity analyses to delay or avoid expensive upgrades. Still, given the unpredictable variables and the high stakes of guessing wrong, only the boldest stakehold- ers are pushing ahead with confidence. The energy sector is also contending with grow- ing macroeconomic uncertainty. A potential recession, coupled with elevated interest rates, is tightening access to capital and reducing developer appetite for risk.
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