Market force do dictate the position of the switch, open or closed. Without a price that can be paid, the switch stays open and the buyer to the East who purchased long term contracts gets the electrons. And the power plant is not turned on to supply power if the price is not going to be paid.
The State of Kalifornia, in its infinite wisdom, decided the big ol' utilities had to sell ALL their generators to the market forces (the Enrons, Calpines, etc.), so that "competition" could ensue.
If someone could explain how this would lower the cost to consumers, please feel free.
When all the generators were now privately owned, and offered to the Cal ISO, it was natural that the prices were going to be commensurate with the electrical demand at any given time. This is where the "gaming" of the market was implemented, by strategic with-holding of generators at specific locations, to create bottle-necks and/or increased value for power that was available from some marketers portfolio.
For consumers, the wires and facilities that are physically located proximate to them, THAT is where the power physically comes from, regardless of what market deals are used to "own" the power.