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Glossary of Industry Terms


Glossary of Industry Terms
Affiliate: A company that is directly or indirectly controlled by, or shares the same
owner as, another company.
Aggregator: A group or organization that represents a group of energy consumers to
buy electricity and tries to negotiate pricing and terms that meet the specific needs or
desires of that group of customers. The group of consumers is called a buying group
Avoided Cost: The incremental cost that a utility would have to incur if it did not acquire
energy from another source. Thus, it is the cost of producing or delivering power that
the utility can avoid by lowering capacity and energy requirements.
Base Rates: The rates utility charges to cover its non-fuel costs.
Broker: Any entity that serves as an agent or intermediary in the purchase and sale of
electricity to retail customers.
Capacity: The amount of electric power that can be delivered at one time by a
generating unit, generating station, or all the plants on an electric system.
Co-generator: A power plant that produces both electrical (or mechanical) energy and
thermal (steam or process heat) energy.
Congestion: Transmission congestion results when transmission system operators
must limit or re-dispatch generation to maintain the voltage integrity of the grid to ensure
reliability. The cost of transmission congestion, assuming that demand is fixed and must
be met, is the net cost of the replacement power that must be supplied by other means
(e.g., from generators located closer to the loads to be served) to make up for deliveries
that cannot be executed as requested.
Competition: Allowing two or more entities to sell similar goods and services, in this
case electricity, in the same market.
Consumer Contract: A written agreement between a customer and an electricity
supplier. Contract Terms: The provisions of an agreement between an electricity supplier and a
consumer, typically including such items as the cost, length of service, and ability to end
the contract.
Cramming: The practice of adding charges to a customer's monthly bill for services that
the customer has not authorized. This is an illegal practice.
Customer Choice: The ability of electricity consumers to shop, compare prices, select
the kind of electricity such as renewable electricity they desire, the pricing plan best
suited to their needs, and the retail supplier of their choice.
Default Service: The electric service provided to any consumer who does not or is
unable to arrange for or maintain electric services with an electric supplier after
deregulation begins.
Demand: The amount of energy used at a specific moment in time, measured in watts,
kilowatts (kW=1000 watts), megawatts (mW=1000 kilowatts, or 1 million watts).
Deregulation: Government action to allow competition in any industry where historic
regulated monopolies exist; sometimes used interchangeably with Restructuring.
Distribution: The process of delivering electricity through low-voltage power lines to a
consumer's home or business. Distribution includes local wires, transformers,
substations and other equipment used to deliver electricity from the high-voltage
transmission lines to homes and businesses.
Distribution Utility: The regulated electric utility entity that constructs and maintains
the distribution wires connecting the transmission grid to the final customer.
Distribution lines: Local wires, transformers, substations and other equipment used to
deliver electricity to homes and most businesses.
Electric Supplier: An entity (including an electric aggregator or participating municipal
electric utility) licensed by a state utility regulatory agency to provide retail electricity to
consumers. With electric choice, consumers can choose their electric supplier. The
power is then delivered by the consumer's electric distribution company.
Electric Utility: Any person or state agency with a monopoly franchise (including any
municipality) that provides electricity, transmission and distribution services to
customers.
Energy: The result of consuming power over a period of time. In electricity, measured in
watt hours: 1000 watt hours = 1 kilowatt hour, or the equivalent of a 100 watt bulb
running for 10 hours. Most electricity rates/prices for residential service are quoted in
kilowatt-hours. In gas, measured in volumes of gas (cubic feet) or a proxy for volumes
(therms, q.v.).
Energy Efficiency Programs: Tools that give consumers more control over how and
when they use energy
Federal Energy Regulatory Commission (FERC): The Federal Energy Regulatory
Commission regulates the price, terms and conditions of power sold in interstate commerce and regulates the price, terms and conditions of interstate transmission
services. FERC is the federal counterpart to state utility regulatory commissions.
FPA - Federal Power Act of 1935: Established guidelines for federal regulation of
interstate electricity sales for resale and transmission. It is the primary statute governing
FERC regulation of the electric sector.
Generation: The process of producing electricity. Generation may also refer to the
amount of electrical energy produced, usually expressed in watt-hours, kilowatt-hours
(kWh), or megawatt hours (MWh).
Generation Company: An entity that generates electricity.
Grid: A network of transmission and distribution lines used to deliver electricity.
Green Power: A general term that describes electricity that is environmentally friendly.
It typically uses a mix of energy sources with renewable energy being at least one of the
sources.
IPP - Independent power producer: A company other than a utility that operates a
generation facility and sells power to suppliers for sale to retail customers.
ISO - Independent System Operator: An organization responsible for maintaining
instantaneous balance of the grid system, ensuring that loads match available
resources.
Kilowatt-hour (kWh): This is the basic unit of electric energy equal to one kilowatt of
power supplied to or taken from an electric circuit steadily for one hour. One kilowatt-
hour equals 1,000 watt-hours.
Load: The amount of power drawn from a utility system at a given point in time. The
peak load is the highest amount of power drawn down at anyone time, or the utilities
maximum capacity or demand.
Load Profile: Information on a customer's energy usage over a period of time,
sometimes shown in a graph format.
Market-Based Price: A price set by the mutual decisions of many buyers and sellers in
a competitive market.
Marketer: An entity selling wholesale or retail power in a competitive market.
Megawatt-hour (MWh): One megawatt-hour equals one million (1,000,000) watt-hours.
Monopoly: A seller with sole control over market sales.
Non-Utility Generator (NUG): Any entity not regulated by the government as a public
utility that owns or operates a generating facility and offers electric power for sale to
utilities or the public (also known as Independent Power Producer).
Obligation to Serve: The obligation of a utility to provide electric service to any
customer who seeks that service and is willing to pay the rates set for that service. Off-Peak: Those periods of time when energy is being delivered far below the utility's
maximum demand.
On-Peak: Those periods of time when energy is being delivered near and including the
utility's maximum demand.
Peak Load: The maximum load experienced by an electric customer during a given
period of time.
Peaking Capacity: Generation used in times of maximum demand.
PJM: an organization responsible for the operation and control of the bulk electric
power system in thirteen states and the District of Columbia. PJM operates an efficient,
effective wholesale electricity market, and manages a long term regional electric
transmission planning process to maintain the reliability of the power supply system.
Power Pool: Two or more interconnected electric systems that seek to obtain greater
reliability of service and efficiency of operation by coordinating the development and
operation of their electric generation and transmission facilities.
Price Cap: A way of setting rates in which the utility is given a limit on the prices it may
charge.
Provider of Last Resort (POLR): A company that serves as the interim provider of
electricity for customers whose retail electric provider has left the market.
Public Service Commission: State agency that is responsible for regulating the state's
public utilities. The Commission is overseeing the deregulation of the electric market.
PURPA - The Public Utility Regulatory Policy Act of 1978: Among other things, this
federal legislation requires utilities to buy electric power from private "qualifying
facilities" at an avoided cost rate.
Reliability: The ability of the electric system to supply the electrical demand and energy
requirements and to withstand sudden disturbances such as electric short circuits or
unanticipated loss of system facilities.
Renewable Energy: Sustainable e