Merchant generators are electric generation entities that create revenues by participating in competitive electric markets. Some in the industry differentiate between merchant generators, who sell to a variety of market participants in shorter deals and are generally more exposed to market prices and independent power producers (IPPs), who tend to contract all their capacity to utilities or other buyers in long-term agreements. Others use the terms synonymously.
Merchant generators offer a number of services such as electricity (MWh), capacity (MW), and/or ancillary services that may be sold to utilities, marketers, ISOs, or directly to end-use customers. Merchant generators may build new generating stations or may acquire units from utilities selling off existing generation. Some merchant generators evolved as unregulated subsidiaries of utility companies while others formed as independent companies.