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How energy market works?

Within the electricity market, the seller is a producer or trader of electricity, and the buyer is an electricity end user.

The seller can either produce electricity, or purchase it from producers to sell to end customers. Producers and sellers can trade across borders. The electricity market is unique because the quantities of electricity produced and electricity consumed must be identical. Everything depends on supply and demand, which is why this market is so dynamic.

The market infrastructure is provided by Distribution System Operators (DSOs), who deliver electricity from the producer to the end user. The end user pays the seller for the electricity consumed, and pays the infrastructure fee to the DSO.

In the market, buyers can choose between sellers and products, and negotiate prices. Regulators oversee sellers to make sure that they comply with the Electric Energy Market Law, and ascertain that the selling price is agreed upon by the seller and the buyer.

Regulators supervise DSOs and ensure that every participant receives equal treatment. They also approve DSO tariffs.

The price of electricity depends on a number of factors, including transmission capacity, the cost of CO2 emissions allowances, and the global prices of energy resources such as oil, gas, and coal. The price of electricity in the Baltic States, including Latvia, depends largely on the costs and production capacity at the local power plants, and also on the prices on the Nord Pool power exchange (www.nordpool.com).

Ordinary electricity supplier

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