In economic terms,
electricity (both power and energy) is a
commodity capable of being bought, sold, and traded. An
electricity market is a system enabling purchases, through bids to buy; sales, through offers to sell; and
short-term trades, generally in the form of financial or obligation swaps. Bids and offers use
supply and demand principles to set the price. Long-term trades are contracts similar to
power purchase agreements and generally considered private bi-lateral transactions between counterparties.