Two major problems that need to be considered with using localized pricing are sudden bidding wars and partitioning.

Let's say locally you have a few factories when a sudden drop in supply occurs in the energy market. The biggest costs of those factories are personnel, equipment and building, so rather than shutting down they will be willing to pay much more for energy than what is rational in the market in order to continue producing and maintain contracts in the short term. Long term they may move away to a more energy stable and cheaper location, but for the next 10-20 years they will eat the occasional spike in price. Everyone else who locally live there can't eat a sudden 100x in energy costs, with the result that they will vote into office politicians that protect against such situations, and those politicians will in turn spread out the problem over a wider area where areas with stable supply of energy can help through funding (higher energy price) and transmit energy to areas with less stable energy. Alternatively they can pay their citizens' bills directly, as happened during the energy crisis a couple years ago, money that then get taken from the general budget (paid through taxes).

The other issue is partitioning. The more local zones you get, the more borders you get between those zones. People living on the border will see a unreasonable price difference depending if their house/town/city happened to land on one side or the other. This feels unfair, which results in upset citizens, resulting in people voting in politicians that can fix the situation. Politicians then feel a pressure to even out the prices among the zones, using things like adjusting local taxes.

As a general rule, the voting population want stable energy availability, stable prices and fair prices that are similar to everyone else.

Power demand is often inelastic. There are many places in summer where people would pay $200/kWh to run a small air conditioning unit, for example, when their normal price of power is $0.10/kWh. There is no reason to shift toward generation sources that have price uncertainty when demand is inelastic like this. See the exact same thing in healthcare. The proper solution to this economic problem at a societal level is to have a predictable low price of available power.

If you can't handle volatile prices and know your demand in advance then simply by PPAs or energy futures?

You know, the standard method all markets use to handle volatility. But apparently electricity is different and we need enormous subsidies instead.

Everyone adapts to the single most expensive uneven form of local pricing: property prices.

I think there's a very strong case to link grid and generation capacity improvements to local pricing in the effective area, even if it doesn't end up being through the market. Make the link explicit: "if this pylon project is built, we will give everyone in the receiving county 1p/unit off their bill for five years."