IDK how it is in the jurisdiction of the author, but I know a bit about how it is in the small European country I reside in (and which has a market almost identical to how it's described in the post).

There is a "System operator" which has the final responsibility for the stability of the grid. The TLDR is that they really really really want to use the market to solve it, but in a crisis they have supreme powers over all production and all consumption.

There are multiple short-term intra-day markets for extra capacity, and both producers and consumers can participate (consumers can reduce their capacity temporarily). It is extremely rare that these markets are not enough. Any "weird" bidding (e.g possible attempts at market manipulation) is audited, and market manipulation is of course illegal. You can only provide bids based on your estimation on the value of the power, and you need (if audited) to be able to show how this is calculated in a consistent (over time) way.

In the case of a system instability from either market failure or some extreme unexpected event (e.g. multiple production facilities going offline) there are a hierarchy of actions:

- Many/most large industrial consumers have deals where they pay less in grid fees, but they can be disconnected with little warning and no compensation. In the old days the system operator would call them, but these days more and more of this is digitalized. (There are prototypes of markets where these kind of load-shedd services can sold on a per-kW-per-hour basis)

- Any producer can be forced to produce at any time. They will be compensated according to normal spot-price for that hour.

- Any consumer can be cut at any time. Every substation is prioritized according to their criticality (suburbia is less important than hospitals). If nothing else works then substations will be disconnected in accordance with this list. (Also btw, there is always 2 network-paths to every substation over a certain size)