About Electricity Prices
At its most basic, electricity is priced at the balancing point of supply and demand. Lowest-cost generators are dispatched first and the more expensive ones are only brought in as necessary to handle a higher load.
Electricity prices are set every hour at the lowest price that brings on enough supply to meet the demand. When demand is low, the cost of electricity can be lower since only the lower-cost generators are running.
For each hour of every day the actual Pool price is a weighted average. Power distributors take energy from the power pool and pay the declared hourly Pool price for the energy they buy.
Even so, it is also important to note that most of the electricity traded in the province is not priced at the hourly Pool price; rather the price is set in a contract between the buyer and seller. For example, forwards market trading organizations, such as the Alberta Watt Exchange, provides wholesale power purchasers with the option to buy quantities of power (one hour out, one day out, one month out, one quarter out, and one year out).
Electricity retailers, in turn, buy large blocks of energy and then repackage it into offers to end use consumers, whether that is through the regulated rate or contracts.
More information is available regarding regulated and contract rates at the Utilities Consumer Advocate website. As well, you will find information on how consumers can shop wisely when choosing electrical or natural gas suppliers.
On March 22, 2012, the Government of Alberta appointed an independent committee to review the retail electricty market. Alberta’s Energy Minister Ken Hughes issued a statement in response to receiving a report by the Retail Market Review Committee on September 6th, 2012.