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Understanding changes in wholesale electricity prices.

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The wholesale price of electricity is determined by the forces of supply and demand.

Suppliers of electricity offer to provide electricity to the market at certain prices, while some users of electricity offer to cut consumption should the price of electricity reach certain levels. The IESO takes this information and matches it against projected demand for electricity. It accepts the lowest-priced offers available required to meet electricity needs.

As a result, the price of electricity rises and falls based on a variety of factors -- such as demand, the weather and the types of generation available. Market rate consumers need to be aware of changes in price and the factors that influence these changes so that they can better manage their energy consumption. For example:

  • Prices are generally lower on weekends and at night. On a weekday, the price of electricity usually peaks in the early evening as people arrive home from work.
  • Weather can have a tremendous impact on demand. Extreme cold spells and heat waves often create surges in demand as people increase heating and air conditioning. For example, each degree above 16 C creates an additional 380MW of demand.
  • Companies that do not use an interval meter to track their energy use pay a wholesale price for electricity based on consumption patterns within their local utility's distribution area. These local prices may vary slightly from the Ontario Weighted Average Price posted on this site.
  • The amount of electricity that is available in the market also influences the price. Some generation may not be available because of equipment maintenance.
  • Price also depends on what types of generation are available -- some cost more to operate than others.
  • Brief fluctuations in the price are unlikely to have a significant impact on your overall energy bill. It is, however, important to know when higher electricity prices are sustained over a number of hours. The price graph on the demand and price page will show you when prices are unusually high over a period of time.

If you notice high pre-dispatch (or projected) prices, this is usually a signal that more offers of electricity from generators and suppliers are needed. As more offers are submitted to the market, the price becomes more competitive. In most cases, the price will decline.

There are also numerous opportunities to look at ways to improve your energy efficiency and use the market to your advantage. Interval meters that track how much electricity you use throughout the day will allow you to shift consumption to off-peak hours and pay lower spot prices. Buying your electricity through a retailer is another option and allows you to lock into a set price for the length of your contract.