What do day-ahead traders do in the energy markets?

Discussion in 'Energy Futures' started by Valuestrats920, Jan 21, 2013.

  1. I'm quite confused about the mechanics of energy trading, I have searched around endlessly for these answers, and I have not found one source that explains in simple terms what day-ahead traders do. Any help will be greatly, and I mean greatly, appreciated.

    So day-ahead traders submit bids to the RTO/ISO by 12pm, and they take specific positions during time intervals for the next day.

    What exactly are they betting on? When they submit their bid, are they locking in a price of x amount of dollars for x amount of electricity tomorrow, and the next day when it is actually generated, they either win or lose based on the actual generation cost? So they basically pay less for electricity tomorrow, because they locked in a lower price when they submitted the bid yesterday?

    Do day-ahead traders buy and sell contracts? So does bid=buy and offer=sell?

    Thank you so much for anyone that can help