AEC Market Education - Module #2
How Electricity Futures Markets Work
Electricity has a price right now - and a price for next July. Those two numbers are almost never the same. Understanding why is how you stop reacting to your bill and start getting ahead of it.
Part 1
Spot vs. forward: two prices for the same thing
Think about concert tickets. Buy six months out and you lock in a price based on expected demand. Wait until the night of the show and you pay whatever the market bears — could be double, could be triple. You took a risk buying early; the seller took a risk pricing too low. Electricity works exactly the same way, just at a scale of millions of kilowatt-hours and with a market that runs 24 hours a day, 365 days a year.
Spot price — right now
$34.18
per MWh · updates every 15 min
Real-time price
What electricity costs this moment in ERCOT’s real-time market. Fluctuates constantly with demand, generation availability, and grid conditions. A mild spring afternoon might show $25/MWh. A heat wave can push it to hundreds — or in extreme cases, thousands.
View live LZ_North prices on ERCOT →
Forward price — locked in
$58.40
per MWh · next August · agreed today
Fixed future price
What someone will agree today to sell you electricity for, delivered at a specific future date. Negotiated now, honored later — regardless of what spot does between now and then. A fixed-rate electricity contract is essentially this: a forward price for your load.
ERCOT real-time spot — live LZ_North → · price below is simulated
$34.18
/MWh
▲ $2.41
Your fixed contract rate (example)
$58.40 /MWh
locked · doesn’t move
Difference today
Fixed is $24.22 higher · summer premium
Part 2
The forward curve: a map of future prices
Scenario:
Forward price
Summer peak
Spring / fall valley
Hover any point on the curve to see what’s driving that month’s price. Switch scenarios to watch the curve reshape.
Part 3
The four forces that shape the curve
Part 4
How a REP turns the forward curve into your rate
For additional reading
ERCOT public market information
Real-time and historical pricing data, forward curve snapshots, and daily market reports. Free and public.
Henry Hub natural gas spot price — EIA
The daily gas benchmark most correlated with ERCOT electricity forward prices. Updated daily by the U.S. Energy Information Administration.
Potomac Economics — ERCOT state of the market
The independent market monitor’s annual review of how ERCOT’s wholesale market performed. Dense but authoritative; readable executive summaries available.
ERCOT nodal protocols
The complete rulebook for how ERCOT’s market works. For the truly curious — and future energy lawyers and engineers.