There are many companies in the electricity generation sector, from large multinationals to small, family-owned businesses running a single site. There are two types of electricity network: transmission and distribution.
Transmission networks carry electricity long distances around the country at high voltages. Distribution networks run at lower voltages and take electricity from the transmission system into homes and businesses. The transmission system is run by National Grid, which is responsible for balancing the system and making sure that the supply of electricity meets the demand on a second-by-second basis. Similar infrastructure exists for the transmission and distribution of gas.
To fund its operation, it charges a small fee to buyers and sellers in the wholesale markets for each transaction that the ISO handles on their behalf. This fee is determined by a federally-regulated tariff. View the ISO Tariff. Under this section of your bill, wholesale market energy and reliability costs are bundled with other costs from your supplier.
These other costs can include the cost of contracts for electricity purchased from generators or other suppliers, premiums the supplier charges for shielding you and others from wholesale cost volatility, administrative costs, and profit. The way these charges appear on your bill varies by state and jurisdiction.
Wholesale electricity costs are paid for by market participants that purchase electricity from the wholesale market for either their own use, or because they are a supplier to retail consumers. In turn, suppliers and utilities provide electricity to retail consumers based on the retail market structures and requirements of the six New England states.
Utilities charge retail consumers for power supply through their monthly bills; these rates are approved by the state through their public utility commissions. The relationship between wholesale market costs and retail rates varies according to state retail procurement policies. The purchase and sale of electricity to resellers entities that purchase goods or services with the intention to resell them to someone else is done in the wholesale market, while the purchase and sale of electricity to consumers is done in the retail market.
Organized wholesale electricity markets were created to address ever-increasing electricity prices and to encourage innovation through free-enterprise competition. Competition has helped to create a less expensive, more reliable and cleaner grid that can offer market-based solutions to changes in public policy and the industry. The wholesale market refers to the buying and selling of power between the generators and resellers.
Resellers include electricity utility companies, competitive power providers and electricity marketers. Generators use fuels, wind, water and solar to produce electricity. They then send the power they produce into the grid.
Distributors own and maintain the networks power lines and poles that carry electricity to Australian homes and businesses. The distributors are responsible for interruptions or faults such as fallen power lines. The retailer buys electricity at a wholesale price on the NEM, and sells it to retail customers.
The retailer is responsible for getting customers connected to the network, for customer service and billing. The usually forces of supply and demand affect prices on the NEM and prices fluctuate accordingly.
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