A physical bilateral contract is an optional arrangement available to energy buyers and sellers. Any authorized market participant can use physical bilateral contracts.
In Ontario's IESO-administered markets, physical bilateral contracts are not part of the scheduling and dispatch process — they are involved only in settlements. If the parties choose, they can submit specific data in order for the IESO to adjust the energy market settlements for each of the buying and selling market participants according to the physical bilateral contract.
The IESO will subtract the value of the energy covered by the physical bilateral contract from the calculated payments owed to the supplier and from those owed by the consumer. The selling market participant is responsible for submitting the physical bilateral contract data with payments settled directly between the buyer and the seller.