The pros and cons of spot pricing — electric utility perspective

Abstract Until recently, spot pricing of electrical energy has been an academic curiosity. Electric utilities, by and large, do not vary the price of their product by time-of-day or cost of generation even though such costs vary considerably from peak to off-peak periods. The primary reason for not using spot (or real-time) pricing has been communication and administrative costs. Recent advancements in technology have reduced the costs to a level where spot pricing is being considered a viable option for many utilities. The remaining obstacles to be resolved are development of hardware and software to administer real-time prices, customer education to understand and participate in spot pricing programmes, and reaching agreements with regulators on appropriate rates.