Bilateral electric contract

A bilateral contract is a private trade between two parties. Bilateral transactions usually occur on the phone with two individuals negotiating and agreeing upon a price or via electronic trading exchanges. For shorter transactions, the use of electronic exchanges such as the Intercontinental Exchange (ICE) has become common. Longer-term transactions are typically negotiated face to face.

A bilateral trade specifies key terms including delivery point, volume, time of delivery, price, and whether the transaction is firm. Trades are done for specified blocks of time. Typical blocks include:

• Peak: 5x16 (weekday blocks 5 days per week and 16 hours per day) or 6x16 (Mon-Sat 16 hours per day)

• Off-peak: hours not defined as peak

• Round-the-clock: 24 hours per day

Blocks are also often defined by the time of year they will be delivered:

• Monthly (for a specified number of months)

• Balance-of-month (the remaining days of the current month)

• Daily (for a specific number of days)

• Summer (July-Aug)

• Winter (Jan-Feb)

• Annual (a block for a year)

Common pricing options include:

• Fixed: a specified $/MWh that does not change

• Indexed: a specified formula for determining the price based on published indices

• Strip: a specified fixed price for each month of a contract, which varies by month

An example of a simple bilateral transaction