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Glossary of Energy Market TermsCompiled by Energybuyer.org EBI - Electronic billing information. Economic Development Zone (EDZ) - An area designated by a government agency in which businesses financial incentives are available, such as reduced taxes. Electric and natural gas utilities may provide discounts to customers in these zones. Economic Dispatch - The allocation of demand to individual generating units on line to effect the most economical production of electricity. Economic Efficiency - A term that refers to the optimal production and consumption of goods and services. This generally occurs when prices of products and services reflect their marginal costs. Economic efficiency gains can be achieved through cost reduction, but it is better to think of the concept as actions that promote an increase in overall net value (which includes, but is not limited to, cost reductions). Economies of Scale - Advantages realized when combining of loads or services results in decreased average long-run costs. EDRP (Emergency Demand Response Program) - Any of several efforts to utilize nontraditional resources, such as retail customer-owned generation and curtailable power demands (e.g., dimming systems) to increase the reserve margin between peak demand and peak available capacity; such programs are typically operated through ISOs via retail power providers, such as utilities and retail power marketers. EEI (Edison Electric Institute) - An association of electric companies formed in 1933 "to exchange information on industry developments and to act as an advocate for utilities on subjects of national interest." EFP (Exchange of Futures for Physicals) - A futures contract provision involving the delivery of physical product (which does not necessarily conform to contract specifications in all terms) to one market participant from another and a concomitant assumption of equal and opposite futures positions by the same participants to the physical transaction. An EFP occurs during the futures contract trading period. ELCON (Electricity Consumers Resources Council) - An association of 28 large industrial consumers of electricity accounting for over five percent of all electricity consumed in the United States. Formed in 1976 "to enable member companies to work cooperatively for the development of coordinated, rational and consistent policies affecting electric energy supply and pricing at the federal, state, and local levels." Electrical Energy - The generation or use of electric power by a device over a period of time, expressed in kilowatt-hours (kWh), megawatt hours (MWh), or gigawatt hours (Gwh). Some ways of buying/supplying energy are:
Electric Plant (Physical) - A facility containing prime movers, electric generators, and auxiliary equipment for converting mechanical, chemical, and/or fission energy into electric energy. Electric Power Supply - Electricity required to meet the customers' needs, including energy, operating capacity, losses, Ancillary Services, and installed capacity including installed reserves. Electric Rate Schedule - Also often called a tariff, a statement of the electric rate and the terms and conditions governing its application, including attendant contract terms and conditions that have been accepted by a regulatory body with appropriate oversight authority. See also tariff. Electric System Losses - Total electric energy losses in the electric system. The losses consist of transmission, transformation, and distribution losses between supply sources and delivery points. Electric energy is lost primarily due to heating of transmission and distribution elements. Electric Utility - A corporation, person, agency, authority, or other legal entity or instrumentality that owns or operates facilities for the generation, transmission, distribution, or sale of electric energy primarily for use by retail customers and is defined as a utility under the statutes and rules by which it is regulated. Types of Electric Utilities include investor-owned, cooperatively owned, and government-owned (federal agency, crown corporation, state, provincials, municipals, and public power districts). This term includes the Tennessee Valley Authority, but does not include other Federal power marketing agency (from EPAct). EBI - Electronic billing information. EBIT - Earnings before interest and taxes. Element - Any electric device with terminals that may be connected to other electric devices, such as a generator, transformer, circuit, circuit breaker, or bus section Embedded Costs Exceeding Market Prices (ECEMP) - Embedded costs of utility investments exceeding market prices are: 1) costs incurred pursuant to a regulatory or contractual obligation; 2) costs that are reflected in cost-based rates; and 3) cost-based rates that exceed the price of alternatives in the marketplace. ECEMPS may become "stranded costs" where they exceed the amount that can be recovered through the asset's sale or employment in a competitive marketplace. Regulatory questions involve whether such costs should be recovered by utility shareholders and if so, how they should be recovered. "Transition costs" are stranded costs which are charged to utility customers through some type of fee or surcharge after the assets are sold or separated from the vertically-integrated utility. "Stranded assets" are assets which cannot be sold for some reason. Emergency - Any abnormal system condition that requires automatic or immediate manual action to prevent or limit loss of transmission facilities or generation supply that could adversely affect the reliability of the electric system. End User - A retail customer of a natural gas or electricity product or service. End-use Services - The provision of energy, power and related services, such as energy efficiency or on-site generation, to the ultimate consumer. Energy- The capacity for doing work. Electrical energy is usually measured in kilowatt-hours, while heat energy is usually measured in British thermal units. Energy Charge - That portion of the charge for electric service based upon the electric energy (kWh) consumed or billed. Energy Deliveries- Energy generated by one electric utility system and delivered to another system through one or more transmission lines. Energy Efficiency - The act of using less energy/electricity to perform a given function, as distinguished from conservation, which implies accepting less. Energy efficiency efforts differ from DSM programs in that the latter are focused on impacting the peak rate of usage, as versus the quantity of energy used to perform a function. Many people use these terms interchangeably, which is often incorrect. Energy Emergency - A condition when a system or power pool does not have adequate energy resources (including water for hydro units) to provide its customers' expected energy requirement. See Capacity Emergency. Energy Exchange - Transaction whereby the receiver accepts delivery of energy for a supplier's account and returns energy later at times, rates, and in amounts as mutually agreed. See Storage; Banking. Energy Imbalance Service - Provides energy correction for any hourly mismatch between a transmission customer's energy supply and the demand served. Energy Receipts - Energy generated by one electric utility system and received by another system through one or more transmission lines. Energy Service Company - While initially applied to those firms performing energy efficiency upgrades, now (in some states) defined to include those who merely supply retail energy. Often abbreviated as ESCo or ESCO. See also ESCo. Energy Service Provider - California's name for an ESCo; often abbreviated ESP. Energy Source - The primary source that provides the power that is converted to electricity through chemical, mechanical, or other means. Energy sources include coal, petroleum and petroleum products, gas, water, uranium, wind, sunlight, and geothermal heat. Enron Terms - Terms introduced by the Enron controversy EPA - The Environmental Protection Agency. A federal agency charged with protecting the environment. EPAct - The Energy Policy Act of 1992 addresses a wide variety of energy issues. This federal legislation creates a new class of power generators, exempt wholesale generators (EWGs), that are exempt from the provisions of the Public Utilities Holding Company Act of 1935 and grants the authority to FERC to order and condition access by eligible parties to the interconnected transmission grid. It also mandated efficiency standards for various devices (such as light bulbs) and reductions in energy use in federal facilities. Equity Capital - The sum of capital from retained earnings and the issuance of stocks. Escalation - A clause, usually in long-term supply contracts, which provides for periodic price adjustment based on variations in any or all cost factors. "Escalating prices" are the opposite of "firm" prices, which are not subject to change over the life of a contract. ESCo (Energy Service Company) - A company that offers to reduce a client's energy cost, often by taking a share of such reduced costs as repayment for installing and financing such upgrades. In some states, ESCos are also suppliers of energy. Estimated Usage - Customer usage based on history rather than meter readings. European Option - An options contract that may be exercised only on its expiration date. See also American Option. Evergreen Clause - A section in a contract under which the contract is automatically renewed (typically for the same time length as the existing contract) unless the buyer, within a period stated in contract (e.g., at least 60 days before the end of the existing term), notifies the seller that he does not wish the contract renewed. Failure by the seller to notify the buyer that the "evergreen period" has started or is approaching does not typically release the buyer from the automatic renewal, unless so stated in the contract. Exchange - A forum, either physical or electronic, that brings together buyers and sellers of commodities and their derivatives (e.g., futures) for purposes of matching them together. Typically, an exchange acts as a third party guarantor for such deals by requiring the posting of collateral, while establishing and enforcing market rules that ensure liquidity and fairness. Entry to an exchange is generally through "seats" that are limited in number, usually to brokerage houses. Exchange Member - An individual or organization holding a seat on an exchange. See seat. Exchange of Futures for Physicals (EFP) - A futures contract provision involving the delivery of physical product (which does not necessarily conform to contract specifications in all terms) to one market participant from another and a concomitant assumption of equal and opposite futures positions by the same participants to the physical transaction. An EFP occurs during the futures contract trading period. Exempt Wholesale Generator (EWG) - Created under the 1992 Energy Policy Act, these wholesale generators are exempt from certain financial and legal restrictions stipulated in the Public Utilities Holding Company Act (PUHCA) of 1935. Exercise - The process of converting an options contract into a futures position. Exercise Price - The price at which the underlying futures contract will be bought or sold in the event an option is exercised. Also called the strike price. Exotic - A complex or unusual contractual arrangement; opposite of Vanilla. Expected Unserved Energy - The expected amount of energy curtailment per year due to demand exceeding available capacity. It is usually expressed in megawatt hours (MWh). Expenditure - The incurrence of a liability to obtain an asset or service. Expiration Date - In options trading, the last day on which an option can be exercised or traded; if not exercised, it expires without having yielded any financial value. Extrinsic Value - The amount by which the premium exceeds its intrinsic value. Also known as time value.
Facility - An existing or planned location or site at which prime movers, electric generators, and/or equipment for converting mechanical, chemical, and/or nuclear energy into electric energy are situated, or will be situated. A facility may contain more than one generator of either the same or different prime mover type. For a cogenerator, the facility includes the industrial or commercial process. FASB - See Financial Accounting Standards Board (this abbreviation is pronounced "faz-bee"). Fat Boy - An Enron term for taking advantage of differential market pricing. When adjacent power markets exhibit significantly differing prices (such as the price-controlled California market and the nearby Pacific Northwest where no price caps existed), a trader would purchase power at a low (controlled) price and sell it into the uncapped market for several times that price because there was no limit on such interstate transactions or price differentials (until FERC mandated regional price caps). Fault - An event occurring on an electric system such as a short circuit, a broken wire, or an intermittent connection. FCR - Abbreviation for financial congestion rights. See also transmission congestion contracts (TCC) and fixed transmission rights (FTR). Federal Energy Regulatory Commission (FERC) - The federal agency regulating price, terms and conditions of power sold in interstate commerce and that of all transmission services. FERC is the federal counterpart to state utility regulatory commissions (often called PUCs). Federally Mandated Congestion Charges (FMCC) - Line item seen on some electric bills that covers increased costs due to locational marginal pricing (as required by many ISOs, which are federally chartered organizations); seen first in Connecticut in early 2004. Federal Power Act - Administered by FERC, it was enacted in 1920 and amended in 1935, and consists of three parts. The first part incorporated the Federal Water Power Act administered by the former Federal Power Commission, whose activities were confined almost entirely to licensing non-Federal hydroelectric projects. Parts II and III were added with the passage of the Public Utility Act. These parts extended the Act's jurisdiction to include regulating the interstate transmission of electrical energy and rates for its sale as wholesale in interstate commerce. Federal Power Commission The predecessor agency to FERC. The Federal Power Commission (FPC) was created by an Act of Congress under the Federal Water Power Act on June 10, 1920. Originally charged with regulating the electric power and natural gas industries, it was abolished on September 20, 1977, when the Department of Energy was created. The functions of the FPC were divided between the Department of Energy and the Federal Energy Regulatory Commission. Feebates - A feebate is a revenue neutral strategy which imposes a fee on polluting resources and rebates those fees to cleaner technologies. This can be accomplished directly through the revenue paid to generators by the PoolCo or through incorporation of these values into the dispatch/pricing mechanism of the pool. Fence - A long (short) underlying position together with a long (short) out-of-the-money put and a short (long) out-of-the-money call. All options must expire at the same time. FERC - See Federal Energy Regulatory Commission. FIA - Futures Industry Association. Fill - The price at which an order is executed (applies to any kind of market). Financial Accounting Standards Board - Federal agency that creates standards for reporting expenses and profits that impact both commodity and energy services accounting. Often abbreviated as FASB, pronounced "faz-bee." Financial Congestion Rights (FCR) - New England ISO term for Transmission Congestion Contract, also known as Congestion Revenue Rights (CRRs) Fire Wall - The line of demarcation separating residential and small commercial customers from all other customers preventing the shifting of costs between customer classes as a result of special rate discounts or other restructuring activities. Firm Gas - Gas sold on a continuous and generally long-term contract. Firm Power - Power or power producing capacity intended to be available at all times during the period covered by a guaranteed commitment to deliver, even under adverse conditions. Firm Purchase - A purchase of electricity or natural gas by one utility from another under contract, arranged in advance of delivery. Firm Transmission Rights (FTR) - PJM Interconnection (ISO) term for transmission congestion contract; also called fixed transmission rights (FTR) or financial congestion rights (FCR) by some. Firm Transmission Service Point-to-point transmission service that is reserved and/or scheduled for a term of one year or more and that is of the same priority as that of the Transmission Provider's firm use of the transmission system. Firm Transmission service that is reserved and/or scheduled for a term of less than one year shall be considered Short-Term Firm Transmission Service for the purposes of service liability. First Notice Day - The first day on which a notice of intent to deliver the actual commodity or security can be given to the clearinghouse by the party that sold the contract. Fish Flush - Description of increased movement of water at hydroelectric power plants in which the flow of water may bypass generators to allow fish to move without harm. 5x16 Market - Typical wholesale pricing designation for power supplied at 100% load factor for the 5 weekdays, between 6 AM and 10 PM (16 hours). Fixed Cost - A set cost, under terms of contract, even if no energy was produced. Fixed Transmission Rights (FTR) - The PJM Interconnection (ISO) name for transmission congestion contracts (TCC). Flexible Rate - An economic incentive rate designed by a Public Utility Commission that allows a utility to negotiate costs with industrial or large commercial users. Floor broker - An exchange member who executes orders for the accounts of others. Floor trader or local - An exchange member who executes orders for his own account. Flowgate Model - Recently (2000) proposed alternative method to price transmission in which various points of constrained transmission would be assigned economic value such that the sum of the cost to transmit power passing through a combination of "flow gates" would become the charge added to the commodity cost for power to bring it to an LDC's distribution system. This model may compete with the existing Locational Marginal Pricing (LMP) method. Flue Gas Desulfurization Unit (Scrubber) - Equipment used to remove sulfur oxides from the combustion gases of a boiler plant before discharge to the atmosphere. Chemicals, such as lime, are used as the scrubbing media. FOB (free on board) - A transaction in which the seller provides product or crude oil at an agreed unit price, at a specified loading port within a specified period; it is the responsibility of the buyer to arrange for transportation and insurance and lift the material within the specified laytime. Force majeure - A standard clause which indemnifies either or both parties to a transaction whenever events reasonably beyond the control of either or both parties occur to prevent fulfillment of the terms of the contract. Forecast - Predicted demand for electric power. A forecast may be short term (e.g., 15 minutes) for system operation purposes, long-term (e.g., five to 20 years) for generation planning purposes, or for any range in between. Forecast Uncertainty - Probable deviations from the expected values of factors considered in a forecast. Forex - Foreign exchange. Form Value Trading - See Tolling. Forward Price Curve - A set of commodity prices typically based on the market prices for futures available at a given point in time. Forwards - A forward is a commodity bought and sold for delivery at some specific time in the future. It is differentiated from futures markets by the fact that a forward contract is customized, non-exchange traded, and a non-regulated hedging mechanism. Fossil Fuel - Any naturally occurring organic fuel, such as petroleum, coal, and natural gas. Fossil-Fuel Plant - A plant using coal, petroleum, or gas as its source of energy. FPA Federal Power Act of 1935 - Established guidelines for federal regulation of interstate energy sales. It is the primary statute governing FERC regulation of the electric sector. Frequency - Rate of variation of voltage and current, typically 60.0 Hertz (i.e., cycles per second), except during a time correction.
FTR - Fixed transmission rights; the PJM name for transmission congestion contracts (TCC) FUCO - Foreign utility company owning power generation in the U.S.Fuel - Any substance that can be burned to produce heat; also, materials that can be fissioned in a chain reaction to produce heat. Fuel Adjustment Charge - Fee added to base utility rates to account for above-normal pricing of fuels used in the supply of electricity, natural gas, or district steam. Fuel Diversity - The situation in which a given supply portfolio is made up of plants using several different types of fuel to generate electricity, for the purpose of avoiding over-reliance on one fuel, and the related risk of supply interruption and price spikes. A form of hedging by maintaining a diverse portfolio of fuel inputs. Fuel Expenses - These costs include the fuel used in the production of steam or driving another prime mover for the generation of electricity. Other associated expenses include unloading the shipped fuel and all handling of the fuel up to the point where it enters the first bunker, hopper, bucket, tank, or holder in the boiler house structure. Full-Forced Outage - The net capability of main generating units that are unavailable for load for emergency reasons. Functional Unbundling - The functional separation of generation, transmission, and distribution transactions within a vertically integrated utility without selling or spinning off these functions into separate companies. See also divestiture. Fundamentals analysis - The study of pertinent supply and demand factors which influence the specific price behavior of commodities. Fungible - Interchangeable. Products which can be commingled for purposes of shipment or storage. Futures Contract - A standardized financial agreement for the purchase or sale of a commodity or product at a specified price that is traded in an open auction under the rules of an exchange and that requires delivery on or settlement through the sale or purchase of an offsetting contract by a specified future date. Futures Market - Arrangement through a contract for the delivery of a commodity at a future time, place, and price specified at the time of purchase. The price is based on an auction or market basis. Futures are a standardized, exchange-traded, and government-regulated hedging tool.
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