Glossary of Electric Utility Terms

This glossary encompasses terms used in the electric energy industry and includes additional industry terminology.

Aggregator: An entity that puts together groups of customers into a buying group that purchases a commodity service. Many communities are engaged in municipal aggregation programs for electric and natural gas.

American Municipal Power (AMP): Nonprofit organization based in Columbus, Ohio and providing wholesale power supply and services to 108 member municipal electric communities in Ohio, Michigan, Pennsylvania and West Virginia.

Ampere: The standard unit of measuring the strength of an electric current.

Ancillary Services: Services or tariff provisions related to provision of electricity, other than simple generation, transmission or distribution. Ancillary services related to transmission service include: energy losses, energy imbalances, scheduling and dispatching, load following, system protections and reactive power. Ancillary services related to distribution include meter reading, billing and collections.

Auction Revenue Right (ARR): In some energy market systems, financial transmission rights are obtained through an auction. Revenue gained through this auction is paid to ARR holders. Transmission customers may receive ARRs for purchasing firm transmission service.

Available Transfer Capability (ATC): The amount of electric power that can be transferred over the interconnected transmission systems in a reliable manner under base case conditions.

Base-Load Generation: Facilities designed to run constantly at near capacity levels, to meet basic demand.

Bulk Power Supply: Often used interchangeably with wholesale power supply. In broader terms, it refers to the aggregate of electric generating plants, transmission lines and related equipment. The term may refer to those facilities within one electric utility, or within a group of utilities in which the transmission lines are interconnected.

Capacity Benefit Margin (CBM): The amount of inter-utility transmission transfer capability held in reserve to help ensure that there is a reliable source of power even if the utility experiences problems with its internal generation.

Certified Territory: An area established by the Public Utilities Commission of Ohio that determines the distribution customers an investor-owned or rural electric cooperative will serve.

CO2: Carbon dioxide

Contract Path: A specific contiguous electrical path from a Point of Receipt to a Point of Delivery for which transfer rights have been contracted.

Co-op: Commonly used term for rural electric cooperative. Rural electric cooperatives generate and purchase wholesale power, arrange transmission of that power and then distribute the power to serve the demands of rural customers.

Demand-Side Management: Methods used by end-users to manage their energy usage. Methods may include energy efficiency efforts, load management, fuel substitution and load building. AMP-Ohio offers a load management program that can assist with feasibility studies, engineering, implementation and operation.

Deregulation: The elimination of regulation from a previously regulated industry or sector of an industry.

Distributed Generation: A system involving small amounts of generation located on a utility's distribution system for the purpose of meeting local peak loads.

Distribution Company (Disco): The regulated electric utility that constructs and maintains distribution wires connection the transmission grid to the final customer. The Disco can also perform services such as aggregating customers, purchasing power supply and transmission service for customers, billing customers and reimbursing suppliers and offering regulated or nonregulated services to retail customers.

Divestiture: The separation of one utility function from another by selling, spinning-off, or in some other way changing the ownership of the assets related to that function. Most commonly associated with spinning-off generation assets so they are no longer owned by the shareholders who own the transmission and distribution assets.

Epact: The Energy Policy Act of 1992 addresses a wide range of energy issues. The legislation created a new class of power generators, exempt wholesale generators, that are exempt from the provisions of the Public Utilities Holding Company Act of 1935 and grants authority to FERC to order and condition access by any party to the interconnected transmission grid.

Federal Energy Regulatory Commission (FERC): An independent agency within the Department of Energy that regulates the transmission and wholesale sales of electricity in interstate commerce; licenses and inspects private, municipal and state hydroelectric projects; oversees environmental matters related to natural gas, oil, electricity and hydroelectric projects; and administers accounting and financial reporting regulations and conduct of jurisdictional companies.

Fiber Optic: Thin transparent fibers of glass or plastic that transmit light through their length by internal reflections, used for transmitting data, voice, and images. Fiber-optic technology has virtually replaced copper wire in long distance telephone lines and is used to link computers in local area networks, with digitized light pulses replacing the electric current formerly used for the signal.

Financial Transmission Rights (FTR): A financial instrument used in locational marginal pricing (LMP) energy markets to hedge the cost of congestion between the point of receipt and the delivery of a power supply contract.

Fine Particulate Matter: An atmospheric pollutant linked to emissions from a variety of sources; once emitted, the material is subject to transport and transformation in the atmosphere. Fine particulate matter is characterized as being less than 2.5 microns in aerodynamic diameter.

Futures Market: Arrangement through a contract for the delivery of a commodity at a time and price specified at the time of purchase. The price is based on an auction of market basis.

Generation Company (Genco): A regulated or nonregulated entity (depending upon the industry structure) that operates and maintains generating plants. The Genco may own the generation plants or interact with the short-term market on behalf of plant owners. In the context of market restructuring for electricity, the term is used most often to describe a specialized "marketer" for generating plants formerly owned by a vertically integrated utility.

Ground-Level Ozone: A high accumulation of ozone gas in the lower atmosphere at ground level is air pollution and can be harmful to people, animals, crops, and other materials.

Hedging Contract: A contract to establish the sale of futures against the purchase of electric power to protect against a decline in value; conversely, the purchase of futures against forward sales of, or anticipated need for, power to protect against an increase in value.

Home Rule: A provision of the Ohio Constitution preserving the authority of local decision-makers to determine the economic and social impact of policy changes regarding municipalities in the state.

Independent Power Producer (IPP): An independent company, owned by investors, that generates electricity and is not regulated by FERC.

Independent System Operator (ISO): A company or organization that would act independently of its parent companies or organizations to operate the power transmission grid for a specified geographic area. Owners retain their assets and the ISO runs the system as a joint operation. The ISO files a single transmission tariff for the region, plans and schedules transmission outages, takes a lead role in transmission system planning, collects transmission charges and makes payments to providers.

Independent Transmission Company (ITC): An independent, for-profit entity with management responsibility for transmission assets.

Independent Transmission Provider (ITP): Defined by FERC as any public utility that owns, controls or operates facilities used for the transmission of electricity in interstate commerce, that administers the day-ahead and real-time energy and ancillary services markets in connection with its provision of transmission service and has no financial interest, either directly or through an affiliate, in any market participant in the region in which it provides transmission service or in neighboring regions.

Integrated Resource Planning (IRP): A public planning process and framework within which costs and benefits of both demand-and supply-side resources are evaluated to develop the least-total cost (social cost) mix of utility resource options. The IRP has become a formal process set by law in some states and under some provisions of the Clean Air Act Amendments of 1990.

Interconnection: The physical plant and equipment, usually at transmission-level voltage, that transfers electric energy between two or more entities. It can consist of a substation and an associated transmission line and communications facilities, or a simple electric power line or switching station.

Interconnection Agreement: An agreement between two interconnected utilities that provides for mutual services across interconnections, such as short-term power sales and purchases, emergency power sales and purchases, and third-party power sales and purchases.

Investor-Owned Utility (IOU): Private, for-profit utility company

Kilovolt (kV): 1,000 volts

Kilowatt (kW): 1,000 watts

Kilowatt Hour (kWh): The amount of electricity needed to light 10, 100-watt light bulbs for a one-hour period. One thousand watts used for one hour.

"License Plate" Rate: Created to eliminate "pancaking" of rates (adding one rate on top of another), this method allocates the cost of transmission facilities to local load, and provide access to a regional transmission system at a single rate, although the rate may vary based on where a customer is located.

Load Management: See Demand-Side Management.

Locational Marginal Pricing (LMP): The market clearing price for electrical energy at the location the energy is delivered or received from the transmission system. The price is the cost of supplying the next increment of load, taking into account the physical limitations of the transmission system.

Mark-to-Market (MtM): An accounting method that describes how a trader calculates its trading gains and losses (the amount calculated) and how these gains and losses are reported on a traders annual income tax returns.

Market Power: (a) The ability of a seller to charge rates in excess of costs for a significant period of time because competition is limited by some impediment; (b) Power available for sale at the market price in an unregulated mode.

Marketer: An agent that markets power for the generator. The marketer may arrange transmission or other ancillary services as needed.

Maximum Achievable Control Technology (MACT): The 1990 Clean Air Act Amendments for the control of hazardous air pollutants established a new and fairly complex program for the control of hazardous air pollutants through the application of this control technology. Congress required the EPA to regulate 188 listed hazardous air pollutants from 174 source categories nationwide. Maximum achievable control technology standards apply to major sources, as well as to area or minor sources.

Megawatt (MW): The practical unit of electric measure equal to one million watts, enough power to supply 330 homes for one hour on a hot summers afternoon.

Megawatt Hour (MWh): Amount of electricity needed to light 10,000 100 watt light bulbs for a one-hour period. One million watts used for one hour.

Midwest Independent Transmission System Operator (MISO): A regional transmission organization approved by FERC in December 2001 that operates the transmission system over a large portion of the Midwest. Includes the Cinergy and FirstEnergy systems.

MMBTU: One million BTU (British thermal units)

Multiple Delivery Points: More than one connection into a utility that provides electric transmission service to a wholesale or retail customer. These connections allow service to be fed to a customer from more than one point and can serve as backups in case of a problem with other delivery points.

Municipal Electric Systems: Nonprofit electric utilities owned by municipalities (cities or villages). These utilities are operated and governed by the municipality legislative authority, i.e. the city/village council/board of public affairs elected by municipal residents.

Municipalization: The process through which a municipality assumes responsibility for supplying the electric utility service to its constituents using city-owned facilities. To supply electricity, the municipality may generate and distribute the power or purchase wholesale power from others and distribute it.

Mutual Aid: A network of Ohio municipal electric systems that stand ready to provide assistance to fellow municipal systems when local utility emergencies occur that are too wide-spread to be handled by one system alone.

Network Integration Transmission Service: Transmission service that allows a utility to vary its scheduled power and points of delivery and receipt on a transmission grid without paying an additional charge for each schedule change.

New Source Performance Standards (NSPS): Federal standards of performance for new stationary sources apply to certain industrial processes. States have the option to regulate and enforce these standards. However, if a state chooses not to regulate and enforce the NSPS, the EPA regulates and enforces them. For some categories a "new source" includes any source constructed after 1971.

New Source Review (NSR): A provision of the 1977 Clean Air Act that requires older power plants to comply with modern pollution standards when significant upgrades are made.

NOx: Nitrogen oxides

Ohio Municipal Electric Association (OMEA): Formed in 1962, the association is dedicated to protecting the independence and constitutional rights of Ohio municipal electric systems and monitors legislative processes at state and federal levels.

Open Access: The ability of utility companies to use excess capacity available through the high-voltage, long-distance transmission lines of other utilities in return for fair compensation.

Open Access Transmission Tariff (OATT): A tariff approved by FERC that states the rules for purchasing and using transmission service as well as the price of the service.

Parallel Flows: Refers to the flow of electricity over all paths of least resistance when one utility sends energy to another.

Peak Shaving: Power companies price their power according to demand. Because electricity demand is highest at mid-day and during the summer, these are the times when prices are at their peak, but also the time when most businesses consume their most power. To minimize their electricity bills, many customers elect to "peak shave" or cut down on electricity usage during these times of high demand.

PJM Interconnect: A regional transmission organization that operates the transmission system in the Mid-Atlantic states and a large portion of the Midwest. PJM began the first centralized LMP-based energy market. Includes the American Electric Power and Dayton Power and Light systems.

Performance-Based Regulation (PBR): A rate-setting mechanism that attempts to link rewards (generally profits) to desired behavior. PBR sets rates, or components of rates, for a period of time based on external indices rather than as a utility cost-of-service. Other definitions include: light-handed regulation, which is less costly and less subject to debate, and litigation. A form of rate regulation that provides utilities with better incentives to reduce their costs than does cost-of services regulation.

"Postage Stamp" Rate: Rate for electric transmission that does not vary according to distance from the source of the power supply. So-called because postage stamps for mail are typically at a fixed price, regardless of destination.

Power Pool: An entity established to coordinate short-term operations to maintain system stability and achieve least-cost dispatch. The dispatch provides backup supplies, short-term excess sales, reactive power support and spinning reserves. The pool may own manage and/or operate the transmission lines or be an independent entity that manages the transactions between entities.

Predatory Pricing: When a utility offers specific customers special discounted rates, often below its own cost, to entice customers to switch service from a competitor.

Private Letter Ruling: Taxpayer specific ruling furnished by the IRS national office in response to requests made by taxpayers and/or IRS officials.

Private Use: A shorthand expression for federal tax laws that restrict the ability of a publicly owned electric utility to sell and transport electricity to private parties.

Public Utility Holding Company Act (PUHCA): This law prohibits acquisition of any wholesale or retail electric business through a holding company unless that business forms part of an integrated public utility system when combined with the utilities other electric business. The law also restricts ownership of an electric business by non-utility corporations.

Radionuclides: Radioactive chemicals that are usually naturally occurring and found in drinking water. The Environmental Protection Agency has established maximum contaminant levels (MCLs) as part of its enforcement of the Safe Drinking Water Act.

Real-Time Pricing: The instantaneous pricing of electricity based on the cost of the electricity available for use at the time the electricity is demanded by the customer.

Regional Transmission Organization (RTO): A group of utilities in a certain region that combine to jointly plan and study transmission services and develop rules to monitor those transmission services. These groups must be approved by the Federal Energy Regulatory Commission.

Registered Holding Company: A corporation organized to hold the bonds and stocks of other corporations, which the corporation usually controls. The corporation is registered with the Securities and Exchange Commission and subject to regulations spelled out in the Public Utilities Holding Company Act.

Reliability: The degree to which the performance of elements of the electric system results in electricity being delivered to customers within accepted standards, and in the amount desired. Reliability may be measured by the frequency, duration and size of adverse effects on the electric supply (or service to customers).

Renewable Energy Sources: Any source of energy that is continually available or that can be renewed or replaced. Examples include wind, solar, geothermal, hydro, photovoltaic, landfill gas, wood and solid waste.

Resource Efficiency: Using less physical resources to produce the same product or service. Resource efficiency involves a concern for the use of all physical resources and materials used in the production and use cycle.

Restructuring: The reconfiguration of the vertically integrated electric utility. Restructuring usually refers to separation of the various utility functions in individually owned and operated entities. The term is now often used to describe customer choice.

Retail Electric Choice: A system under which more than one electric provider can sell to retail customers, and retail customers are allowed to buy from more than one provider. In Ohio, this was made possible for customers of IOUs by electric industry restructuring legislation enacted by the Ohio General Assembly in 1999.

Retail Market: A market in which electricity and other energy services are sold directly to the end-use customer.

Rotating Over-fire Air (ROFA): Mobotec USA Patented process that is said to provide significant NOx reduction from fossil-fueled power plants without the use of a selective catalytic reducer. This technology includes high inertia asymmetrical injection of combustion air to create high-energy cyclone NOx reduction sites.

Seams elimination cost adjustment: A temporary charge set by the FERC to replace through-and-out transmission pricing, beginning in December 2004 and ending in April 2006. It will be replaced by the "license plate" pricing system.

Self-Generation: A generation facility dedicated to serving a particular retail customer, usually located on the customers premises. The facility may either be owned directly by the retail customer or owned by a third party with a contractual arrangement to provide electricity to meet some, or all, of the customers load.

SO2: Sulfur dioxide

State Implementation Plan (SIP): A document that describes the plans a state has proposed to effect compliance with the National Ambient Air Quality Standards (NAAQS). A SIP is required by the federal Clean Air Act.

Stranded Costs: Many utilities argue that under a regulated environment they were required to build generating plants to serve their customers actual and projected needs. If those customers are allowed to purchase power from another supplier under the electric choice provisions, the utilities argue that their investment in generating plants would then be "stranded." Under Ohio restructuring law, the states IOUs were given a transition period in which they could collect stranded costs from customers. This period was essentially extended by the PUCO through rate stabilization plans filed by the IOUs in 2004.

Tagging: The electronic means of scheduling energy transactions over a bulk transmission system.

Time-of-Use Rates: The pricing of electricity based on its estimated cost during a particular time black. Time-of-use rates are usually divided into three or four time blocks per 24-hour period (on-peak, mid-peak, off-peak and sometimes super off-peak) and by seasons of the year (summer and winter). Real-time pricing differs from time-of-use rates in that it is based on actual (as opposed to forecast) prices that may fluctuate many times a day and are weather-sensitive, rather than varying with a fixed schedule.

Total Maximum Daily Load (TMDL): A calculation of the maximum amount of a pollutant that a body of water can receive and still meet water quality standards, and an allocation of that amount to the pollutants sources.

Transmission Access Policy Study Group (TAPS): An association of transmission-dependent utilities and other supporters of equal, nondiscriminatory access to the nation's transmission grids. TAPS members, which include AMP-Ohio and the OMEA, are located in more than 30 states.

Transmission Company (Transco): A company that is engaged solely in the transmission function.

Transmission Loading Relief (TLR): Procedure used by transmission control area security coordinators to curtail energy schedules in an attempt to limit power flow across a transmission system element to avoid exceeding the equipment's peak operating limits.

Unbundling: Disaggregating electric utility service into its basic components and offering separate rates for each component. For example, generation, transmission and distribution could be unbundled and offered as discrete services.

Universal Service: Electric service sufficient for basic needs made available to all members of the populations, regardless of income.

Volt-ampere: The unit of apparent power in an alternating-current circuit equal to the product of the voltage in volts and the current in amperes with regard to phase.

Wholesale Power Market: The purchase of electricity from generators by resellers (who sell to retail customers), along with the ancillary services needed to maintain reliability and power quality at the transmission level.