Glossary of Energy Market Terms
Compiled by Energybuyer.org
Lambda - Also called "system lambda," a term describing the cost of the next kilowatt hour that could be produced from dispatchable units on an electric supply system.
Landed Price - The actual delivered cost of oil to a refiner, taking into account all costs from production or purchase to the refinery.
LFG - Landfill gas; an impure form of natural gas commonly taken from landfills to power onsite generation (BTU content may range from 30%-65% that of utility-grade natural gas).
Last Notice Day - The final day on which notices of intent to deliver on futures contracts may be issued.
Last Trading Day - The final day on which futures contracts may be traded, after which they must be settled by delivery.
Laytime - How long an item remains at a physical point before it must be moved to market or to a customer.
LMP - See Locational Market Pricing.
Leverage Ratio - A measure that indicates the financial ability to meet debt service requirements and increase the value of the investment to the stockholders (i.e., the ratio of total debt to total assets).
Liability - An amount payable in dollars or by future services to be rendered.
License Plate Rate - A concept popularized by ELCON in 2000 in which transmission rates within an RTO would remain the same as a transmission customer presently pays to a utility regardless of where the power moves within the RTO. This differs from pancake rates in which, to move across several utilities, the customer would pay each separate utility's rate as his power crossed that utility's territory.
Light Ends - The more volatile products of petroleum refining; e.g., butane, propane, gasoline.
Light Oil - Lighter fuel oils distilled off during the refining process. Virtually all petroleum used in internal combustion and gas turbine engines is light oil.
Limit - The maximum amount a futures price may advance or decline in any one day s trading session.
Limit Order - A contingent order for a futures trade specifying a certain maximum (or minimum) price, beyond which the order is not to be executed.
Line Congestion - See Congestion.
Liquefied Natural Gas (LNG) - Natural gas which has been made liquid by reducing its temperature to minus 258 degrees Fahrenheit at atmospheric pressure.
Liquefied Petroleum Gas (LPG) - Propane, butane or propane-butane mixtures derived from crude oil refining or natural gas fractionation.
Liquidation - The closing out of long positions. (More generally, liquidation means the conversion of something into cash or another commodity.)
Liquidity - How easily assets (such as forward contracts) may be converted to cash. A futures market is said to be "liquid" when it has a high level of trading activity allowing buying and selling of futures contracts with minimum price disturbance.
LBMP - Locational-Based Market Pricing. See Locational Market Pricing (LMP).
LMP - See Locational Market Pricing (LMP).
Load (Electric) - The amount of electric power delivered or required at any specific point or points on a system, as demanded by an electricity-consuming system, or systems.
Load Building - Refers to programs that are aimed at increasing the usage of existing electric equipment or the addition of electric equipment. Examples include industrial technologies such as induction heating and melting, direct arc furnaces and infrared drying; cooking for commercial establishments; and heat pumps for residences.
Load Centers - A geographical area where large amounts of power are drawn by end-users.
Load Cycle - The normal pattern of demand over a specified time period associated with a device or circuit.
Load Data - Electric power consumption (kWh) as measured in one-hour intervals.
Load Duration Curve - A non-chronological, graphical summary of demand levels with corresponding time durations using a curve, which plots demand magnitude (power) on one axis and percent of time that the magnitude occurs on the other axis. Often called a histogram.
Load Factor - A measure of the degree of uniformity of demand over a period of time, equivalent to the ratio of average demand to peak demand expressed as a percentage. It is calculated by dividing the total energy provided by a system during the period by the product of the peak demand during the period and the number of hours in the period.
Load Following - An electric system's process of regulating its generation to follow the changes in its customers' demand.
Load Forecast - An estimate of the level of future energy needs. Bottom-up uses utility revenue meters to develop system-wide loads; used often in projecting loads of specific customer classes. Top-down uses utility meters at generation and transmission sites to develop aggregate control area loads; useful in determining reliability planning requirements, especially where retail choice programs are not in effect.
Load Management - Utility activities designed to influence the timing and amount of electricity that customers may use.
Load Pocket - An area that is served by local generators when the existing electric system is not able to provide service, typically due to transmission constraints.
Load Profile - Electric power consumption (kWh) as measured in one-hour intervals.
Load Serving Entity (LSE) - See Local Distribution Company.
Load Shedding - The process of deliberately removing (either manually or automatically) preselected customer demand from a power system in response to an abnormal condition to maintain the integrity of the system and minimize overall customer outages.
Load Shift - An Enron term for taking advantage of apparent transmission line congestion. Under Load Shift, a trader overschedules load to create the appearance of line congestion. He then shifts that load from the congested zone to a less congested zone (by restating his load schedules), thus earning payments from the ISO for relieving the fictitious congestion.
Load Shifting - Demand-side management programs designed to encourage consumers to move their use of electricity from on-peak times to off-peak times.
Local Distribution Company (LDC) - The utility company (perhaps, in the future, including power marketers) that provides the distribution, customer, and energy services for natural gas and electricity. Also called Utility Distribution Company (UDC), or Load Serving Entity (LSE).
Locational Market Pricing (LMP) - Pricing process that raises all wholesale power prices in a zone to a defined level, based on the cost of the most expensive source of power in that zone at a given time. Also called Locational Based Marginal Pricing (LBMP)
Locked market - A market (an exchange or a private group of traders) where prices have reached their daily trading limit and trading may only be conducted at that price.
Long - As in to "take a long position," or to be "long on supply," indicates a supplier has a lot of commodity to sell; opposite of short, which indicates the supplier has only a minimal amount of commodity at risk and/or to sell
Long-Range Planning The process of forecasting long-term loads, determining a reasonable set of potential resources to meet such loads (including reduction of loads through energy efficiency), analyzing the costs (sometimes including externality costs) of several possible mixes of such resources, and identifying the resources to be secured to meet such future needs.
Long Ton - An avoirdupois weight measure equaling 2,240 pounds.
Loop Flows - See Parallel Path Flows.
Losses - See Electric System Losses.
Loss of Load Expectation (LOLE) - The expected number of days in the year when the daily peak demand exceeds the available generating capacity. It is obtained by calculating the probability of daily peak demand exceeding the available capacity for each day and adding these probabilities for all the days in the year. The index is referred to as Hourly Loss-of-Load-Expectation if hourly demands are used in the calculations instead of daily peak demands. LOLE also is commonly referred to as Loss-of-Load-Probability. See Expected Unserved Energy.
Low - The lowest price of the day of trading for a particular stock or commodity.
LSE - See Load Serving Entity and Local Distribution Company.
Margin - In electric service, the difference between net capacity resources and net internal demand. Margin is usually expressed in megawatts (MW).
Adequate Regulating Margin - The minimum on-line capacity that can be increased or decreased to allow the electric system to respond to all reasonable instantaneous demand changes to be in compliance with the control performance criteria.
Available Margin - The difference between available resources and Net Internal Demand, expressed as a percent of available resources. This is the capacity available to cover random factors such as forced outages of generating equipment, demand forecast errors, weather extremes, and capacity service schedule slippages.
Capacity Margin - The difference between net capacity resources and net internal demand expressed as a percent of net capacity resources.
Margin - In futures trading, funds posted during the trading life of a futures contract to guarantee fulfillment of contract obligations.
Marginal Cost - In the utility context, the cost to the utility of providing the next (marginal) kilowatt-hour of electricity, irrespective of sunk costs.
Margin Call - The demand for additional (variation) margin, the result of adverse price movement and consequent erosion of equity, usually at an exchange, which is the only entity with the power to make and enforce such a call, wherein a broker who bought a commodity without yet having paid for it is then required to cough up a defined amount (usually a percentage) of its price.
Market-Based Price - A price set by the mutual decisions of many buyers and sellers in a competitive market.
Market-Driven Reliability - Efforts made to maintain or improve reliability as a means to increase or hold onto market share.
Marketer - An entity that has the authority to take title to electrical power generated by itself or another entity and re-sell that power at market-based rates. Also, an agent for generation projects who markets power on behalf of the generator. The marketer may also arrange transmission, firming or other ancillary services as needed. Though a marketer may perform many of the same functions as a broker, the difference is that a marketer represents the generator while a broker acts as a middleman.
Market order - See At the Market.
Mark-to-Market - Pricing mechanism based on valuing a commodity or contract at its immediate resale value.
Maximum Demand - The greatest of all demands of the load that has occurred within a specified period of time.
Maximum Price Fluctuation - The limit, as set by the rules of a commodity exchange, of the fluctuation in the price of a futures contract during any one trading session.
Mcf - One thousand cubic feet.
MCP - Market clearing price.
MDR - Market-driven reliability
MDSP (Meter Data Service Providers) - In the competitive metering model, an MDSP is an entity that collects, translates and/or analyzes meter data for billing and related purposes.
Mean Reversion - Tendency of pricing to return to an average level.
Measurement Terms - Describes units used to measure energy.
Megawatt (MW) - One million watts.
Megawatt hour (MWH) - One million watt-hours.
Megawatt Laundering - See Ricochet.
Member System - An eligible customer operating as a part of a lawful combination, partnership, association, or joint action agency composed exclusively of eligible customers.
Merchant Plant - Generating facility that recovers revenue based on sales on an open power market rather than regulated rate-of-return pricing. Ownership may be by a utility outside the service territory, or an independent power producer (IPP). All risk for its development, installation, and operation is borne by its owners, and not by customers.
Metered Data Management Agent - Often abbreviated MDMA, the California name for an agency that receives and handles metering data for power suppliers, the ISO, and customers, and has been certified by the California PUC.
Metering - The methods of applying devices that measure and register the amount and direction of electrical quantities with respect to time.
Meter Services Provider - Often abbreviated MSP, the California name for any entity providing meter sales, installation, calibration, and/or maintenance services that has been certified by a California utility.
Metered Value - A measured electrical quantity that may be observed through telemetering, supervisory control and data acquisition (SCADA), or other means.
Metric Ton - A weight measure equal to 1,000 kilograms, 2,204.62 pounds, and 0.9842 long tons. For approximate conversion purposes, there are about 7.46 barrels of No. 2 distillate fuel in one metric ton; 8.51 barrels of gasoline and 6.7 barrels of residual fuel.
Minimum Price Fluctuation - The minimum unit by which the price of a commodity can fluctuate per trade on a commodity exchange.
Mmcf - One million cubic feet.
MMBtu - One million British thermal units; one decatherm. Approximately equal to 1,000 cubic feet of natural gas.
MMU - Market monitoring unit; a part of an ISO or public utility commission that watches a power market to find and identify pricing abuses and other problems.
Mogas - Industry abbreviation for motor gasoline.
Monitoring & Verification (M&V) - A series of processes for determining the usage and savings resulting from installation and operation of energy efficiency measures.
Monopoly - The only seller with control over market sales.
Monopsony - The only buyer with control over market purchases.
Monte Carlo technique - Mathematical method for assessing risk probabilities.
Motor Gasoline - A complex mixture of relatively volatile hydrocarbons, with or without small quantities of additives, which have been blended to form a fuel suitable for use in spark-ignition engines.
MOU - Memorandum of understanding: an abbreviated version of a contractual arrangement, typically entered into prior to development of a full contract to approximately define the points of agreement between two parties.
MSP (Meter Service Providers) - MSPs are entities that physically handle meters for purposes such as installation, maintenance, setting and upgrading internal parameters and removal.
Municipalization - The process by which a municipal entity assumes responsibility for supplying utility service to its constituents. In supplying electricity, the municipality may generate and distribute the power or purchase wholesale power from other generators and distribute it.
Municipal Utility (MUNI) - A provider of utility services owned and operated by a municipal government. A MUNI may or may not own generation, transmission, or distribution facilities.
Must-Run Generation - Generation designated to operate at a specific level and not available for dispatch, generally to maintain voltage, frequency, or supply in areas with constrained transmission. Also known as "reliability must run (RMR)" generation. See Dispatchable Generation.
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