This post is part of our Industry 101 Series, an ongoing campaign to provide a foundation of knowledge about our unique industry. To learn more about this campaign, please click here.
3.1 RETAIL MARKET
Electricity goes through a
This post is part of our Industry 101 Series, an ongoing campaign to provide a foundation of knowledge about our unique industry. To learn more about this campaign, please click here.
3.1 RETAIL MARKET
Electricity goes through a complex delivery system before the end user is able to consume it. Traditionally, the U.S. uses a vertically integrated monopoly where the utility company is responsible for all aspects of the energy services, from generation to the electric system operations. This utility model could be an investor-owned utility, municipal and public utility district, or a rural electric co-op. Because of the lack of competition, government imposed cost regulations exist to protect the end user. However, the electric marketplace is also evolving, and the once dominating business model of government regulated monopolies is shifting toward a business model that fosters competition. This change will allow for cheaper, more reliable service. It also encourages innovation in the marketplace. Since the market is changing, the set of rules defined by regulators must change as well in order to adapt to this new competitive market.
3.1.1 INDUSTRIAL AND COMMERCIAL PRICING IN DEREGULATED MARKETS
In contrast to the regulated market where prices are set by regulations, market-based electricity prices fluctuate based on the perception of the supply and demand. These prices are determined in two ways. A common place for short-term transaction is the Intercontinental Exchange (ICE). ICE was founded to facilitate the purchase and sale of energy commodities. For l