Wholesale prices

Wholesale prices

Wholesale prices are the basis of suppliers' energy prices (consumer prices net of the system charges, taxes, levies and surcharges). Most wholesale transactions are bilateral contracts between suppliers and generators on the over-the-counter (OTC) market. However, there are also formalised markets such as the Austrian EXAA, German EEX or French EPEX power exchanges.

As OTC and exchange prices are closely correlated it is possible to track wholesale prices by following quotes on the power exchanges. Electricity is traded on these markets in the same way as other commodities, and prices are driven by the interplay of supply and demand. A variety of standardised products are offered on the exchanges; these are mainly differentiated by the delivery dates.

In the case of futures, a specified quantity of electricity is bought and delivered at a given price, over a predefined future period of time. The purpose is not physical fulfilment but hedging against future spot price movements. Futures products differ according to whether they are baseload or peakload contracts.

On the spot or day-ahead market, electricity is traded on an hourly basis for delivery on the following day. The arithmetic mean of all the hourly prices yields the base index, whereas on most European exchanges the peak index is the arithmetic mean of the prices from 8 am to 8 pm.