CONTRACTS FOR DIFFERENCES

(CFD) - A type of bilateral contract where the electric generation seller is paid a fixed amount over time which is a combination of the short-term market price and an adjustment with the purchaser for the difference. For example, a generator may sell a distribution company power for ten years at 6-cents/kilowatt-hour (kWh). That power is bid into Poolco at some low /kWh value (to ensure it is always taken). The seller then gets the market clearing price from the pool and the purchaser pays the producer the difference between the Poolco selling price and 6-cents/kWh (or vice versa if the pool price should go above the contract price).