This is very standard stuff in Finland for decades. And before heat pumps became popular large tanks were common and those were heated during the night.
The explanation is lack of interconnect, not losses in transmission. If you have enough capacity to transfer electricity the prices will be equal in two neighboring electricity markets.
Finland is probably like 15000 kWh/year/house (for a new house more like 10000 kWh/year). All the heating of the house & water is done by electricity, though.
I'm not expert in the system in California, but usually consumers are already paying the average spot price (plus some significant margin, which takes into consideration the demand profile of the consumer). Switching to spot pricing would not raise rates, and if consumer would adapt slightly to spot prices the average rate would actually decrease.
A house will not cool down immediately. It will cool down rather slowly in most cases (or at least if it's well built). There are also various ways to store thermal energy or use alternative, non-electric heat sources.
If the price goes up 10000x there will be blackouts in any case regardless if spot pricing is used or not. Spot pricing will _reduce_ blackouts.
In Nordpool the prices are set the day behind so there's no surprise bill. If the spot price goes up one actually should pay more, which incentives reducing electricity consumption.
I think your apartment complex example is not that realistic as it won't affect the spot price. Something more like a war will..
Seems like a lot of complexity that can be solved by simple spot pricing for electricity. With spot pricing you can decouple solar and battery storage, as battery owners can make a profit by storing electricity when it's cheap and selling it when it's expensive. Solar power owners can just sell to the grid at market rate.