Electricity wholesale prices fluctuate with supply and demand.
The sale and purchase of electricity between generators and retailers is carried out
in the wholesale electricity spot market, where generators offer electricity to the
market and retailers bid to buy the electricity.
Prices fluctuate with supply and demand. At different times of the day demand can
be high, this is typically late afternoon and early evening when consumers start to
cook, and turn on lights and heaters at the end of the day. Likewise when demand is low
(like overnight) the spot prices drop.
Electricity supply can change with climate conditions. The amount of electricity
being generated, such as in periods of drought or snow, can reduce the amount of
power generated. We see this reflected in the spot prices.
Electricity retailers can provide businesses and consumers with price stability by
purchasing hedge contracts.