Title: Price determination in the wholesale electricity markets

Authors: Anastassios Gentzoglanis

Addresses: Center for the Study of Regulatory Economics and Finance (CEREF) affiliated with GReFA and CIRST, University of Sherbrooke, 2500, University Bould., Sherbrooke, Quebec, J1K-2R1, Canada

Abstract: Price determination is one of the most complex issues facing business managers and decision makers. Electricity is a major input for almost every product and service sold in the market and its consumption represents a significant expense for retail consumers and industries. Nowadays, in many industrialised countries, many complex bidding mechanisms are used to determine the wholesale electricity prices. At the retail level, prices are determined, most of the times, by the regulatory agencies. This case-study presents the complexities of price determination at the wholesale electricity markets and explains the challenges business executives are facing in developing short and long term winning strategies. The unique case of negative electricity prices and their use as a sound short run business strategy is also explained and justified.

Keywords: wholesale electricity prices; price determination; negative prices; case study; teaching executives; uniform pricing; pay-as bid pricing; electricity markets; short term strategy; business strategy.

DOI: 10.1504/IJTCS.2013.058799

International Journal of Teaching and Case Studies, 2013 Vol.4 No.2, pp.115 - 125

Received: 21 Jul 2012
Accepted: 26 Dec 2012
Published online: 28 Jun 2014 *

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