"is, by common definition, equal to the additional costs that would be incurred to produce an additional unit of electricity sold in the market. As long as sufficient supplies exist, the competitive price is roughly proportional to the fuel costs required to generate the next unit of power. However, when supplies grow increasingly scarce, leading to a tight balance between demand and supply, generating costs can rise dramatically because they include the costs of running generating units at higher than normal rates, thereby increasing the likelihood of breakdowns. At the point that all available generating capacity is in use, the competitive price will rise until demand equals supply at that price." [GAO-02-828 Restructured Electricity Markets]
