FERC Rescinds WECC $1,000/MWh Soft Price Cap: Western Markets Grow Up
The Federal Energy Regulatory Commission rescinded the $1,000/MWh soft price cap for bilateral spot energy sales in the Western Electricity Coordinating Council (WECC) region on February 19, 2026. The cap — which required sellers to file cost-justification paperwork with FERC for sales exceeding $1,000/MWh — had been in place to protect against price manipulation in a less mature market. FERC's removal signals confidence that organized wholesale markets, particularly CAISO's Extended Day-Ahead Market (EDAM) launching May 1, 2026, now provide sufficient price transparency and competitive discipline. For commercial electricity buyers in California, Arizona, and the broader West, this marks another step toward a fully competitive, transparent electricity marketplace — but also one with potentially wider price swings during extreme events.
Why FERC Removed the Cap Now
The WECC soft price cap was a legacy safeguard from an era when the Western Interconnection operated primarily through bilateral contracts between utilities — a relatively opaque market compared to the organized ISOs in the East (PJM, NYISO, ISO-NE). The $1,000/MWh threshold didn't actually prevent transactions above that price, but it imposed regulatory paperwork that effectively discouraged them and gave FERC oversight into potential price manipulation.
FERC's February 19 order cited the maturation of Western markets as the primary justification. With CAISO's real-time Energy Imbalance Market (EIM) already operating successfully across 22 participating entities, and the day-ahead EDAM launching May 1, the Commission concluded that organized market structures now provide the transparency and competitive discipline that the soft cap was designed to proxy.
CAISO EDAM: The Bigger Story
The cap rescission is a supporting act. The main event is CAISO EDAM launching May 1, 2026. This extends CAISO's day-ahead market beyond California to utilities across the Western Interconnection, creating a unified wholesale marketplace that should improve price efficiency and resource optimization.
Economic analyses are bullish. Aurora Energy Research estimates Arizona Public Service (APS) could save $110 million annually by joining EDAM, while Tucson Electric Power projects savings of $8.1 million per year. A new independent Regional Organization — created under California Assembly Bill 825 — will oversee EDAM governance, addressing concerns about CAISO's California-centric management.
The Price Outlook: Wider Spreads Ahead
According to Modo Energy's February 2026 WECC Power Price Forecast, CAISO price spreads are expected to rise from $160/MWh in 2025 to $240-270/MWh by 2030, driven by data center demand (3.5 GW of new peak load from California data centers alone) and broader electrification.
Longer-term, spreads are projected to moderate to $90-100/MWh by 2050 as battery storage replaces retiring natural gas units and offshore wind contributes to lower overnight prices. But for the next 5 years, commercial buyers in the West should expect increasing wholesale price volatility and wider peak-to-off-peak spreads.
⚡ Expert Insight — KilowattLogic Analysis Team
"Removing the soft cap is FERC betting that organized markets are mature enough to self-regulate. They're mostly right — EDAM will bring real-time price transparency to the West for the first time. But commercial buyers should note the asymmetry: the cap removal means there's now no regulatory friction on extreme high prices during heat waves or supply emergencies. California commercial buyers should be locking in demand response capacity and exploring battery storage — wider price spreads mean behind-the-meter storage has a stronger ROI than ever."
Commercial Buyer Action Items
Wider peak-to-off-peak spreads ($240-270/MWh by 2030) make battery arbitrage increasingly profitable for commercial facilities in CAISO territory.
EDAM launches May 1. If your utility joins, your wholesale price exposure changes. Ask your energy supplier how EDAM participation affects your contract structure.
Without the $1,000/MWh soft cap, extreme price events have no regulatory ceiling. Fixed-price contracts and demand response enrollment are the best hedges against summer volatility.
Sources: FERC Order on WECC Soft Price Cap (February 19, 2026), Aurora Energy Research / Environmental Defense Fund, Modo Energy WECC Power Price Forecast (February 2026), CAISO EDAM stakeholder materials.