Market forces a powerful tool for power industry

The basic idea of electricity deregulation is to incorporate some market-based competition into providing power for the country. More and more, market structures like this are entering into the electricity industry with a powerful effect.

The primary means of competition from the consumer's perspective is between different electricity providers in their region. Each attempts to offer the lowest electricity rates for any given utility to attract customers, helping to push down electricity prices as a whole.

But The Financial Times reports that another form of competition comes from a somewhat unrelated market, where traders buy and sell electricity in bulk to take advantage of different prices in different regions.

While it may seem like this would drive up costs because the traders are still aiming to make a profit, it actually helps to ensure a consistent demand for electricity when it is put up for auction ahead of time. This also serves to put all the predictive ability of the financial market at the disposal of utility companies, if in a roundabout fashion.

Most consumers will never see any of these activities, but everyone will make use of them regardless.