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Wholesale Electricity Price

Trading Term

The wholesale electricity price is the bulk price at which power is bought and sold between generators, utilities, retailers and other large participants, as distinct from the retail rate that appears on an end user’s bill. In much of the United States wholesale pricing is organized through markets run by Independent System Operators and Regional Transmission Organizations, and prices vary sharply over hours in response to demand, fuel costs, renewable output and physical grid constraints. Because meeting higher demand requires dispatching progressively more expensive generation, wholesale prices tend to rise nonlinearly during temperature extremes, which is why a few degrees of forecast error can translate into large differences in procurement cost.

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