How To Use The Electricity Futures

With deepening of the power market reform, we implement the price competition system and separate the power plant from dispatching bureau, which will cause the electricity power price fluctuate violently, therefore power plants will face a bid price risk. This paper present a discussion on the role of futures contract to avoid price risk in the electric power market.The paper firstly introduces the basic concept of futures. The characteristic and functions of futures trade, all of which establish a theory base for further exploring the price risk averting function of electricity futures contract.Based on the reviewing and analysis of the development, the paper then introduces the development and operating status of international electricity futures market. It probes and analyzes the function of power futures hedging, then points out that the electricity futures contract is an effective way to avoid price risk.Taking the experiences of international electricity futures market for reference, the author analyzes the possibility and necessity of introducing electricity futures into our country according to the actual situation of our country's ongoing power market reform. The paper gives us some examples to show how the hedging going is. From this paper we can clearly conclude that power plants and huge power consumers could evade huge price risk and lock the long dated price or profits in market.