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How Are Electricity Rates Determined?

The price of electricity is determined based on a reverse auction that takes place every hour.

REVERSE AUCTION: A type of auction in which the roles of buyer and seller are reversed.  The sellers compete to obtain business from the buyer and prices decrease as the sellers underbid each other.  The lowest bidder wins. ~Wikipedia.org

  1. Producers who wish to sell electricity submit supply offers with price bids to the market on a day-ahead basis for every hour, 24 hours a day.
  2. AESO facilitates the auction.  Producers’ bids are sorted from lowest to highest price for each hour of the day.  AESO Controllers start with the lowest bid and continue down the list until the amount of electricity required for the hour is met. This ensures that Alberta’s overall electricity needs are met by the most competitively priced electricity.
  3. Hourly pool price is determined by averaging the highest bid received every minute at auction for that hour. The average of these 60 bids is posted to the AESO website at the end of the hour and used to calculate payments to retailers and ultimately to consumers.

  4. Retailers purchase electricity at the monthly pool price to sell to consumers. The monthly rate is a derivative of the hourly pool rates over the course of a month.

 Source: www.aeso.ca

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A note about fair competition: 

All customers are free to purchase natural gas services from the default supply provider or from a retailer of their choice and to purchase electricity from a regulated rate provider or from a retailer of their choice. The delivery of natural gas and electricity to you is not affected by your choice. If you change you you purchase natural gas or electricity services from, you will continue receiving natural gas and electricity from the distribution company in your service area. For a current list of retailers you may choose from, visit ucahelps.gov.ab.ca or call 310-4822 (toll free in Alberta). 

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