Market participants may opt to purchase or sell energy through physical bilateral contracts. A physical bilateral contract is an agreement between an energy consumer and an energy supplier to buy and sell a specified quantity of energy at a specific price. In Ontario, physical bilateral contracts are used primarily to manage price uncertainty.

Physical Bilateral Contracts and Energy Scheduling/Dispatch

In the IESO-administered markets, physical bilateral contracts are not part of the actual scheduling and dispatch of energy. Physical bilateral contracts are used only in the settlement of market charges and payments. (In many other jurisdictions, the bilateral contract information is integrated into market scheduling and dispatch decisions.)

In Ontario, the injection or withdrawal of energy by dispatchable participants, importers, and exporters is based on their offer/bid prices in relation to the market price for energy. Non-dispatchable facilities withdraw energy as needed, or supply energy according to their submitted forecasts and schedules. Physical bilateral contracts do not affect the way the IESO dispatches loads and generators.

Submitting Physical Bilateral Contract Data to the IESO

The parties to a physical bilateral contract may choose to submit the contract data to the IESO for settlement, or they may decide to settle the contract themselves.

If the parties submit the contract data to the IESO, they provide information about the time, amount, and point of supply for the energy under contract. The actual price and payment terms are private; there is no provision or need for the IESO to know this information. The IESO uses the contract data to adjust the energy market settlement statements for the consumer and supplier.

For parties who decide to settle the transaction on their own, the IESO bills consumers and pays suppliers in the same way as it does for parties without physical bilateral contracts. The parties themselves administer any payments required by the contract.