Electricity that AES sold for less than 5 cents per kilowatt-hour to Williams changed hands perhaps 10 times in the wholesale market and emerged at times in recent months with a price tag for consumers that was 300 percent higher. Williams' trading profits increased by 523 percent in the first quarter this year. Advance sales All this buying and selling creates curious confluences. But they acknowledge less often that their trading units may also be buying power, which could boost the company's electricity inventory. It is a company's power traders who frequently direct plant operators to increase or decrease the generation of power in response to market conditions.
Energy companies have little option but to turn to trading for profits.
One of the better kept secrets of electrical deregulation and its promise of competition is that there is remarkably little competition in the production side of the business. More important, nearly all modern plants generate power from turbines built by a handful of manufacturers. Modern plants owned by different companies produce power at nearly identical cost. So the extraction of profit in the electricity business relies much more on trading. But despite the obvious temptation to manipulate the market, the burgeoning electricity trading business has remained largely unregulated.