Wholesale Electricity Pricing: Everything You Need To Know

Have you ever wanted to know what dictates the price of electricity that powers your home or business? While most consumers are familiar with their monthly utility bills, few realize that behind those numbers lies a dynamic and complex market known as wholesale electricity pricing. The most important point to understand about this system is how the cost of energy is determined, why the cost changes and what influences the price that you pay as the end user. Everything you need to know is below. Keep reading!

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Introduction to Wholesale Electricity Pricing

At its core, wholesale electricity pricing refers to the cost at which electricity is bought and sold between electricity generators and utilities or energy retailers before it reaches the end user. These prices are set in competitive markets according to the supply and demand, cost of fuel, grid environment, and other economic considerations. 

Wholesale vs. Retail Electricity Prices

While wholesale prices reflect real-time or day-ahead transactions between large-scale market players, retail electricity prices are what residential, commercial, and industrial customers actually pay. These prices have extra charges to offset transmission, distribution, administrative costs, and the profit margins of utility providers, in many cases.

Wholesale prices can be greatly varied even day-to-day or even hour-to-hour, and retail prices are more constant over time. The reason is that the wholesale electricity markets are prone to short-term variations in fuel supply, demand surges, or weather conditions. Retail prices, on the contrary, are commonly controlled or fixed by long-term agreements.

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Understanding Wholesale Costs on Your Retail Bill

Wholesale prices directly affect the prices that most electricity consumers pay, even though they do not directly enter wholesale markets. The following is a breakdown of the way wholesale electricity pricing appears in your monthly utility bill:

• “Basic Service” or “Default Service” Charges: Basic service or default service charges apply in many states in the United States (particularly those with competitive electricity markets) to customers who do not select an energy supplier. This rate is premised on costs of electricity procured by the utility in the wholesale market. Utilities normally run auctions or request bids from power suppliers and eventually transfer them to the consumers, with or without a marginal gain to cover the administrative or risk management expenses.
  
• Bundled Costs: Retail electricity prices are not made up of just energy costs. They also incorporate capacity charges (payments to make sure that there is enough generation there at times of high demand), ancillary service costs (services that facilitate grid stability), and other wholesale market costs. These are combined into the per-kilowatt-hour (kWh) rate the customers are presented with, but the separate components are typically not billed out.
  
• “Delivery” Charges: This portion of the bill includes the cost to transmit and distribute electricity from the point of generation to homes and businesses. Although regulated, these charges are indirectly impacted despite the fact that they don’t fluctuate as regularly as the wholesale prices.
  
• State-Level Variations in Retail Rates: The influence of wholesale prices on retail bills varies widely across states. Wholesale prices in the market in deregulated states also have a more direct effect on retail rates because customers can select their electricity supplier. In regulated states, utilities will tend to average the price over longer horizons, yet still wholesale trends will drive long-term cost structures.

In the following sections, we’ll dive into where to obtain relevant wholesale data prices, top regional markets in the United States, and the factors influencing future trends in wholesale electricity pricing.

Data and Resources for Wholesale Electricity Information

U.S. Energy Information Administration (EIA)

The EIA is a top federal source of U.S. energy data. It provides an extensive amount of resources specifically covering electricity markets, such as:

• Data Tools, Apps, and Maps: All these interactive tools enable users to have access to real-time and historical electricity pricing, capacity, and generation. Three of the most popular features are the Electric Power Monthly, Electricity Data Browser and the U.S. Energy Mapping System.
  
• Open Data: Through its Open Data API, EIA allows developers and analysts to extract structured electricity market data for deeper analysis. This is conducive to tailored research and third-party app integration.
  
• Reports & Publications: EIA has regular publications that include Electric Power Monthly and Wholesale Electricity Market Reports to provide current information and analysis on regional price trends and fuel consumption as well as system operations.
  
• FAQs and Glossary: EIA also has an easy-to-read glossary and frequently asked questions for those unfamiliar with the electricity markets, which can be useful to consumers and students.

ISO New England (ISO-NE)

ISO New England, the operator of New England power grid, has a healthy data portal and collection of market performance tools. The major resources are:

• ISO Express: Real-time data dashboard in which users can access wholesale electricity prices, system demand, fuel mix, etc. It is a platform that is updated regularly and therefore it would be the best source to monitor live market activity.
  
• Market Performance Reports: These consist of weekly, monthly and annual reports of market performance, pricing trends and system reliability.
  
• Wholesale Load Cost Report: A report on a detailed summary of what consumers in New England paid in terms of wholesale electricity costs over a given period of time. It shows an energy, capacity and ancillary service-cost breakdown.

Regional Wholesale Markets in the United States

The U.S. electricity grid is divided into a few regional markets that are operated by independent system operators (ISOs) or regional transmission organizations (RTOs). Even though the structures of these markets are similar, their pricing dynamics, fuel mixes, and regional constraints are different. 

1. Overview of RTO/ISO Markets

Wholesale electricity pricing in the U.S. is traded on organized markets in the majority of the regions with the assistance of ISOs and RTOs. These markets are real-time and day-ahead coordinating power generation, transmission and pricing. They maintain that electricity is supplied efficiently across the grid and that pricing is according to the supply and demand conditions.

Each RTO/ISO oversees:

• Market Operations (energy, capacity, ancillary services)
• Transmission System Reliability
• Planning and Forecasting

Not all U.S. states are covered by these markets. For example, some Western and Southeastern regions rely on vertically integrated utilities and bilateral contracts rather than formal competitive markets.

2. Key Regional Markets

Below are brief profiles of the major RTOs/ISOs in the U.S.:

ISO New England (ISO-NE)

Covers: 6 New England states

• ISO-NE supplies energy to about 14.5 million individuals.
• The region is highly reliant on natural gas to generate power which exposes it to sensitivity to fuel market fluctuation.
• SO-NE also releases extensive wholesale cost data such as the Wholesale Load Cost Report that separates the average monthly electricity costs into energy, capacity, and transmission costs.
• In March 2025, SO-NE average wholesale electricity prices were stable because of mild weather and moderate fuel prices.
  

New York Independent System Operator (NYISO)

Covers: New York State

• NYISO manages one of the most complicated electricity markets in the US, which includes the density of cities (e.g., NYC) and renewables in the upstate.
  
• Real-time and day-ahead markets are dynamically responsive to congestion in transmission zones, particularly seasonal peaks.

PJM Interconnection (PJM)

Covers: 13 Mid-Atlantic and Midwest states + D.C.

• PJM is the U.S. largest RTO with more than 65 million people.
• The region combines a combination of coal, nuclear, gas and renewables.
• In March 2025, the PJM wholesale prices were a blend of a low winter demand and stable gas prices.
  

Midcontinent Independent System Operator (MISO)

Covers: Midwest and Southern U.S.

• MISO covers a large geographical region of 15 states, controlling the electricity markets in diverse generation sources.
• The difference in weather and generation capacity can cause a wide variation in pricing between MISO northern and southern zones.
  

Electric Reliability Council of Texas (ERCOT)

Covers: Most of Texas

• ERCOT is not regulated by the Federal Energy Regulatory Commission (FERC), and is independent of other RTOs.
• It is an energy-only market (no capacity market) and this is likely to cause high price volatility.
• In spring 2025, ERCOT was experiencing growing renewable generation and growing midday solar generation, which led to a reduction in average daytime wholesale prices, although there were some scarcity prices in the evening peak.
  

California Independent System Operator (CAISO)

Covers: Most of California

• CAISO has a reputation for high renewable integration, particularly solar.
• A common effect in the market is the duck curve, in which the solar generation depresses noontime prices, which are followed by severe demand ramps later in the day.
• Wholesale prices in CAISO were typical of seasonal patterns in March 2025, with solar maintaining its cost at midday and the peaks in demand increasing the price in the evening.
  

3. Market Dynamics (March 2025 examples)

Based on U.S. Energy Information Administration (EIA), the following were the national trends in wholesale electricity markets in March 2025:

Wholesale Electricity Prices: Prices were stable or slightly less than in early winter months when mild weather decreased the heating-related demand. 

• ISO-NE: Wholesale prices dropped between $35/MWh to $120/MWh, where the low end of the range was prevalent in the month.
• NYISO: Prices ranged between 44/MWh to 111/MWh, with the former being more common.
• PJM, MISO, ERCOT and the California locations all had their wholesale electricity prices at the lowest or close to the lowest prices in the twelve months since March 2025.

The seasonal electricity demand and generation patterns were the main causes of the lower prices of wholesale electricity in March 2025. The moderate temperatures in this shoulder season decreased the demand to heat and cool the homes and the overall electricity demand decreased as well. Also, areas that have high hydro generation, e.g., the Northwest (Mid-Columbia) and Northern California (CAISO), tend to have wholesale prices decrease during this season because of plentiful cheap hydropower.

Wholesale Natural Gas Prices: 

• In March 2025, prices of natural gas in wholesale markets were within reasonable bands in most countries.
• The only trading hub that experienced any significant variation in wholesale natural gas prices in March was New England (Algonquin) with prices at approximately $2.80/MMBtu to approximately $7.50/MMBtu.

Daily Peak Demand: 

• In March 2025, the daily peak demand of all parts of the country was on the lower side of the twelve-month range.
• During the month, the daily peak demand in the Midwest (MISO), the Southern Company and California (CAISO) were either near or at the lowest annual levels.

Factors Influencing Wholesale Electricity Prices

Supply and Demand Dynamics

Supply and demand is the fundamental rule in any wholesale market. When the demand of electricity is on the upswing, particularly at peak times like hot summer afternoons or cold winter mornings, then the prices are likely to inflate as the system is loaded and more costly generation resources have to be brought online.

On the other hand, when the demand is low (e.g., overnight or soft spring) the price may drop when the baseload or renewable resources are dominant in generation. 

Fuel Prices (Especially Natural Gas)

Natural gas is the marginal fuel in most of the U.S wholesale markets. This implies that it tends to control the price of the electricity especially during peak demand periods when gas-fired generation plants are called into service to generate load. Thus, the rebalancing of natural gas prices directly and to a large extent, affect the wholesale electricity prices.

EIA estimates that this will increase the cost of natural gas in the country by 24% by the year 2025 and in some markets, it is likely to increase average wholesale electricity pricing.

Weather and Seasonal Patterns

Weather has a direct impact on electricity demand (heating in winter, air conditioning in summer) and renewable resources, such as wind and solar. Any cool-down or heat wave or prolonged quiet weather with little wind can severely alter supply and demand.

• In ERCOT, spring 2025 was a solar generation event that resulted in low midday prices.
• In the meantime, Northeastern markets still experienced price spikes as a result of heating load spikes in colder mornings in March.

Market Tightness and Scarcity Pricing

When the capacity that is available is low in comparison to the demand, markets become tight. This often happens when the capacity is restricted due to outages, fuel shortage or extreme conditions. When these periods occur, the system operators may release pricing mechanisms that are rare and raise prices temporarily to convey that there is more supply or a reduced amount of demand.

In March 2025, ISO New England recorded spikes in prices as high as 130/MWh during reserve-constrained hours and yet the normal demand was not at summer or winter peak levels.

Transmission Constraints and Congestion

Electricity has to be transmitted through the grid and as some of the lines get congested either due to capacity constraints or by regional demand, the prices of the regions can skyrocket. Transmission constraints segment markets into different pricing nodes or zones, which can all be at different prices.

• For example, the difference in price between upstate (renewable-rich) and the downstate (demand-heavy) regions is commonplace in NYISO due to transmission bottlenecks.
  
• Similar problems occur at CAISO when high solar output causes the inland generation to be unable to export most of its power to coastal load centers.

Future Outlook and Challenges

1. Increasing Renewable Energy Penetration

The supply and demand in the market are shifting with the ever-growing use of wind and solar power. In 2025, over 20% of the electricity produced in the United States is renewable, and the percentage is expected to increase rapidly in the coming years. This will reduce fuel prices and emissions, but also introduces additional price volatility especially in the middle of the day when solar generation is highest and demand is minimal.

ERCOT and CAISO are already seeing greater downward pressure on day prices and more significant evening price ramps, named the duck curve. The changes will be dealt with by better predicting and flexible generation, as well as new pricing systems.

2. Emerging Technologies and Market Reforms

Demand response and distributed energy resources (DERs) as well as battery storage are starting to play a larger role. With such technologies, it would be possible to keep the supply and the demand in balance, stabilizing the price fluctuations and reducing the reliance on the fossil fuel peaker plants. However, the old-fashioned facilities and regulations in the market limit their participation in wholesale markets.

FERC and regional operators are exploring reforms to integrate these assets better, but progress will be different by region.

3. Grid Integration and System Reliability

With increasing variable resources, grid stability is getting more complicated. Challenges include:

• Having enough renewable transmission capacity
• Intermittent output of wind and solar energy management
• Increasing storage and flexibility in demand

Such issues can add congestion, scarcity prices and unreliability unless well-planned.

Conclusion

Wholesale electricity pricing is a key part of how the power system works, affecting the cost of energy for homes, businesses, and entire regions. It varies according to supply, demand, fuel cost, weather and circulation of electricity throughout the grid. The system will still evolve as the renewables get bigger and new technology like battery storage evolves.

Thus, with the information we have discussed so far, we hope you have a clear and practical comprehension of what wholesale electricity price is and how it affects the energy that we all use on a daily basis.