Electricity Glossary

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Electric terminology can be confusing. This glossary will help.

Alternative Energy - Energy as solar, wind, hydro, nuclear or other, that can replace or supplement traditional fossil-fuel based sources of energy as coal, oil, and natural gas.

Ancillary Services - The services in addition to electric supply that are required to deliver electricity to end users and to maintain system reliability. These include automatic generation control, reserves, voltage support and black start.

Annual Usage- The total amount of electricity consumed in a year by a given end user.

Balancing Power - See imbalance energy.

Baseload - Electricity usage that is constant through a specified time period. Also used to refer to the generating units that run all 24 hours of the day to serve a system's baseload demand.

Blackout - The loss of power to a portion of the distribution or transmission system.

Black Start - Generation that can start-up without energy from the grid.

Capacity - The maximum electric power output of a generating unit (measured in MW) or the maximum amount of power that lines or equipment can safely carry.

Capacity payment - A payment for making generation capacity available to another party.

Certificate Case - Regulatory proceeding held to approve or deny construction of new facilities as requested by utilities.

Cogeneration - The use of fuel to produce electricity as well as another product such as steam or hot water.

Commercial Customer - An end user that uses power to create a service. Sometimes also used by utilities to refer to manufacturing customers smaller than 500 kW.

Commodity - A standardized product or device that is easily traded among market participants. Also used to refer to electric supply.

Concentrated Solar Power - A system characterized by the optical concentration of solar rays through an arrangement of lenses and mirrors to generate high temperatures which is used as the heat source for a conventional power plant.

Congestion - A condition that occurs when the amount of requested transactions across a transmission path exceeds the physical capacity of that path.

Congestion Charge - A charge by an ISO to market participants who utilize a congested path.

Congestion Management - The process of allocating transmission capacity when congestion occurs.

Cost of Service - The total amount of money, including return on invested capital, operation and maintenance costs, administrative costs, taxes, and depreciation expense required to provide a utility service.

Creditworthiness - An evaluation of customer's or trading partner's financial accountability.

Customer Choice - The ability of an end-use customer to choose their electricity supplier.

Customer Class

- A group of end users with similar characteristics, used to segment customers for the purpose of setting rates.

Demand - The total amount of electricity used at any given moment in time usually measured m kW or MW.

Demand Charge - The portion of a rate that is based on the maximum demand recorded over a specified period of time.

Demand Response - Economic programs that offer end-use customers the opportunity to modify their electric usage in response to wholesale market price signals. Emergency Demand Response programs involve situations where demand will outstrip supply; in a critical peak day, measures are taken to maintain grid reliability.

Demand Side management (DSM). The act of reducing energy consumption or moving energy use from peak to off-peak, periods in order to reduce overall energy costs.

Deregulation - The process of decreasing or eliminating government regulatory control over industries and allowing competitive forces to drive the market. Deregulation involves breaking up or "unbundling" the 3 components of electricity supply; generation, transmission, and distribution.

Distributed Generation - Generation located at an end-use customer's facility.

Distribution - One of the three parts that makes up the electric grid. The delivery of electricity over medium and low-voltage lines to end-use consumers. Distribution is owned and represented by the consumer's local distribution company (LDC), and is state regulated.

Divestiture - The selling of assets by a regulated utility as part of deregulation. In almost all cases, divestiture refers to generation assets being sold - e.g. power plants.

Electricity - A type of energy derived by the transfer of electrons from positive and negative points within a conductor.

Electric Co-op - See rural electric co-op.

End User - The ultimate consumer of electricity.

Energy Efficiency - The act of using less electricity to perform the same amount of work or to get the same end value.

Energy Services Company (ESCO) - A company that provides services to end users relating to their energy usage. Common services include energy efficiency and demand side management.

Federal Energy Regulatory Commission (FERC) - The federal body that regulates wholesale electric services.

Firm Service - Supply or transmission service that is expected to always be available except during operational problems.

Financial Transmission Right (FTR) - A right to receive financial compensation for the difference between actual congestion charges and the price of the FTR.

Fixed-price Contract - Energy costs that are fixed for a predetermined amount of time regardless of market conditions charges and the price of the FTR.

Forward Market - A market where delivery of the item purchased is at some future point in time.

Futures Contract - A supply contract between a buyer and seller where the buyer is obligated to take delivery and the seller is obligated to provide delivery of a fixed amount of commodity at a predetermined price and location at a specific period in time. Futures are bought and sold through an exchange such as NYMEX.

Generation - One of the three parts that make up the electric grid.

Generator - Used synonymously with the term power plant (although technically, the generator is the part of the power plant that converts the mechanical power of a spinning shaft to electricity).

Geothermal Power - Energy derived from heat within the Earth's interior.

Global Warming - The warming of the earth's atmosphere due to increased concentrations of greenhouse gases.

Green Power - Electricity generated from renewable resources.

Grid - Usually used to describe the interconnected transmission system.

Gross Receipts Tax - A tax is imposed in some jurisdictions on the energy suppliers gross receipts from the privilege of selling and/or distributing energy to the end user.

Heat Rate - The amount of fuel required to generate a specified amount of electricity usually expressed in terms of Btu/kwh. Heat rate is particularly applicable in Texas, where fuel driven generation is prevalent.

Hedge - The initiation of a transaction in a physical or financial market to reduce risk.

Hub - A physical location where multiple transmission lines interconnect and were buyers and sellers can make transactions.

Hydro Power - Power that is derived from the weight or motion of water, used as a force to drive a turbine or other machinery.

Imbalance - The discrepancy between the amount of electricity an entity delivers into the grid and the actual amount the entity consumes.

Imbalance Energy - Power purchased by the system operator during the hour to keep the system supply in balance with demand.

Independent Power Producer (IPP) - A generation company that is not part of a regulated vertically-integrated utility company that sells output under a long-term contract.

Independent System Operator (ISO) - Synonymous with RTO - An independent entity that provides system operation functions including managing system reliability and transmission access.

Index - A calculated number designed to represent the average price of electricity bought and sold at a specific location during a specified period of time.

Index -price Contract - The cost of energy that is determined by and fluctuates with current market conditions.

Industrial Customers - An end user that uses power for the manufacturing or production of a product.

Interruptible Rates - An electric rate schedule whereby the end-use customer agrees to not use power during certain hours when instructed by the system operator (used by the system operator as a means of maintaining reliability). In return, the customer receives a rate discount.

Investor-Owned Utility (IOU) - A regulated monopoly utility that is owned by shareholders and run as a for-profit entity.

Kilowatt (kW) - A unit of energy equal to 1,000 watts: equivalent to approximately 1.34 horsepower.

Kilowatt-hour (kWh) - A unit of energy equal to 1,000 watts over the course of 1 hour. The kWh is most commonly known as a billing unit for energy delivered to consumers by electric utilities.

Lighting Retrofit - The practice of replacing lighting components in a facility with counterparts that make it use energy more efficiently.

Load - An amount of end-use demand.

Load Factor - An indicator of how steady an end user electrical load is. It is measured by dividing the average power by the peak power over a period of time.

Load Serving Entity (LSE) - An entity that sells electric supply to an end user.

Local Distribution Company (LDC) - A regulated utility that provides distribution services to end users.

Location Marginal Pricing (LMP) - A method of setting prices in an ISO market whereby prices at specific locations on the grid are determined by the marginal price of generation of power available to that specific location. Prices vary from location-to-location based on transmission congestion and losses.

Losses - Energy lost or wasted during the transmission of energy from the generator to the end user.

Market-based Rates - Charges for regulated services that are determined by market forces rather than being set by the regulator.

Marketer - An entity that buys electricity, arranges for its transmission, and then resells the electricity to end users or other electricity buyers.

Megawatt (mW) - A unit of energy equivalent to 1000 kW or 1,000,000 watts.

Megawatt-hour (mWh) - A unit of energy equivalent to one thousand kilowatt-hours or 1 million watt-hours.

Meter - A device used to measure the amount of el electricity flowing through a point on the system.

Monopoly - A marketplace characterized by only one seller.

Municipal Utility - Also known as "muni". A utility owned and operated by a municipality.

Native Load - The end-use customer load of a specific utility.

New York Mercantile Exchange (NYMEX) - An organization that runs the market for trading of commodity futures and options.

Off-peak - The hours during the day when demand is at its lowest.

Open Access - The requirement that a transmission system transmit electricity for any creditworthy party on a non-discriminatory basis.

Option - A contract that gives the holder the right, but not the obligation, to purchase or sell a commodity at a specific price within a specified time period in return for a premium payment.

Peak - The hours during the day when demand is at its highest.

Peak Demand - The maximum demand for electricity in a given period of time.

Peak Load Contribution (PLC) - Customers contribution to a zone's normalized summer peak load, as estimated by the zone's Electric Distribution Company.

Peaking Units - Generating units run only during times of peak demand on a system.

Photovoltaic - The process of converting radiation from sunlight directly into electricity using specially designed silicon cells.

PJM - The largest ISO in the U.S., which is the system operator for parts if Mid Atlantic, Northeast and Midwest states.

Power - A synonym for electricity.

Power Quality - A measure of the level of voltage and/or frequency disturbances.

Power Purchase Agreement (PPA) - A contract for the sale/purchase or electricity.

Price Volatility - The movement of market prices over time.

Public Service Commission (PSC) - The state agency that regulates the activities of investor-owned utilities (and also municipal utilities in some states).

Public Utility Commission (PUC) - See Public Service Commission.

Public Utility - A regulated entity that supplies the general public with an essential service such as electricity, natural gas, water or telephone.

Rate - A regulated price charged by a regulated entity such as a utility.

Rate Base - The net investment in facilities, equipment and other property a utility has constructed or purchased to provide utility services to its customers.

Rate Case - The regulatory proceeding in which a utility's rate are determined.

Rate Designed - The development and structure of rates for regulated electric services.

Regional Transmission Organization (RTO) - One of the three parts that makes up the electric grid. Synonymous with ISO, an RTO operates over a regional geographical area and fits specific criteria defined by FERC. The system operation manages the transmission grid by dispatching generation, and scheduling reserves and transmission.

Regulation - The multitude of rules or orders issued by state or federal agencies that dictate how electric service is provided to customers. Also used in system operations to describe ramping a generating unit up or down to match supply to demand in real time.

Regulator - The governmental entity that sets the rules and orders that make up regulation.

Renewable Energy Credit (REC) - Tradable non-tangible energy commodities in the United States that represent the environmental attributes of electricity generated from an eligible renewable energy resource.

Renewable Fuel - A fuel that is naturally replenished such as wind or solar.

Reliability - A measure of how often electrical service is interrupted.

Residential Customer - An end user that uses power in a home.

Reserves - Generation capacity that is available to the system operator if needed, but that is not currently generating electricity.

Restructuring - Changes in regulatory rules that result in change in control, ownership or regulatory mechanisms applicable to specific industry sectors.

Retail Access - The opportunity for an end user to buy electric supply from someone other than his regulated utility distribution company.

Retail Competition - The opportunity for multiple electric suppliers to compete to sell electric supply service to end-use customers.

Retail Marketer - A firm that sells products and services directly to end users.

Rules - Commission approved general terms of service included in tariffs.

Rural Electric Co-op - A utility owned by its customers, that usually serves rural areas.

Sales Force Automation (SFA) - Blue Star's award winning, proprietary account management system.

Scheduling - The process of determining which generating units will be generating or on reserve status for a specific hour. Also the process of determining which requested transactions across a transmission line will be allowed to occur.

Service Territory - The geographical area served by a utility.

Settlements - Charges associated with the Regional Transmission Organization used to reconcile costs related to generation resources, adequate capacity and demand and reserve obligations.

Smart Grid - Hardware, software and other upgrades added to the power system to enhance responsiveness to events that impact the electrical power grid and optimize day-to-day operational efficiency.

Smart Meter - An advanced electric meter that records consumption in intervals of an hour or less and communicates that information back to the utility for monitoring and billing purposes.

Solar Power - The generation of electricity from sunlight. This can be done directly as with photovoltaics, PVI or indirectly asking concentrated solar power (CSP).

Speculating - The initiation of a transaction in a physical or financial market with the goal of making a profit due to market movement.

Spot Market - The short term market for electricity - usually refers to day-ahead, hour ahead and real-time markets.

Stranded Costs - Utility costs that result from assets acquired under prior regulatory rules that are in excess of the market value of those assets.

Substation - A facility containing switches, transformers and other equipment used to adjust voltages and monitor circuits.

Supplier Components - The components that make up the supply portion of and energy bill including but not limited to transmission and ancillary, capacity, losses, energy, and gross receipts tax.

Supply - Electricity available to the grid.

System Peak - The recorded point in time in which the maximum load on an electrical system is reached.

Tariff - All effective rate schedules for a utility, along with the general terms and conditions of service.

Transmission - The transport of electricity over high voltage power lines from generations to the interconnection with the distribution system. Transmission is under the jurisdiction of the Regional Transmission Organization (RTO) and is regulated by FERC.

Utility - An entity that generates, transmits and/or distributes electricity from facilities that it owns and operates.

Value-added Services - Services related to electrical supply that are in addition to supply itself.

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