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Utility Definitions


Units Of Measurement

A measure of energy equal to one watt-second, or one watt of power supplied to, or taken from, an electrical circuit steadily for one second.

A unit of energy that equals 943,213.3 Btu’s.

Gigawatt (GW) 
One billion watts.

Gigawatt-hour (GWh) 
One billion watt-hours.

Kilovolt (kV) 
Electrical potential equal to 1,000 volts. Most car batteries are 12-volt, so 1 kV is the juice that could be produced by 83.3 car batteries.

Kilowatt (kw) 
A unit of electric power equal to 1,000 watts. One kilowatt can light up ten 100-watt light bulbs.

Kilowatt-hour (kwh) 
The basic unit for pricing electricity. A kilowatt-hour is equivalent to one kilowatt of power used for one hour. That's enough juice to run ten 100-Watt light bulbs for an hour. It equals 1,000 watt-hours and is the equivalent of 3,412 Btu’s of energy.

Megawatt (MW) 
A megawatt equals 1,000 kilowatts. One megawatt-hour is enough power to service 1,000 homes for about one day.


A unit of electromotive force. One volt, applied to a circuit with a resistance of one ohm, produces a current of one ampere. In the United States, electrical systems of most homes and offices are 110 volts

The basic unit for measuring volume of electricity. Technically, it’s the power produced by a current of one ampere across a potential difference of one volt. For those who care, there are at least 135,000 ways to scientifically or mathematically define potential difference.

Watt-hour (Wh) 
One watt of power supplied to or taken from a circuit for one hour.


Billing Definitions &Terms


Industry Definitions & Terms

Access Charge
In 1996, the Federal Energy Regulatory Commission (FERC) published rules to establish open access to electric transmission lines as a major step toward electricity deregulation. A provision of those rules established open access tariffs that would permit companies to recover part of the "stranded" costs represented by investments in their transmission lines and supporting equipment. At the same time, the rules were designed to assure that companies could not exercise an unfair competitive advantage by charging competing generators or resellers exorbitant rates for access to their lines.

Adequate Regulating Margin 
The minimum on-line capacity of a system that can be adjusted instantly to handle changes in electricity use.

Alternating Current (AC) 
Electric current that reverses direction at regularly recurring intervals of time (such as 50 cycles per second), known as the frequency. AC can easily be converted to higher or lower voltages. (See also Direct Current.) In the United States the standard is 60 cycles.

Ampere (amp) 
A unit of measure that tells how much electricity flows through a conductor. Amps = watts divided by volts. On a 120-volt system, a dozen 100-watt bulbs draw 10 amps of electric current.

Ancillary Services 
Also known as Interconnected Operations Services, these are the services necessary for the transfer of electricity between purchasing and selling parties. The FERC requires a transmission provider to include these services (balancing, for example) as part of its open access transmission tariff. In other words, this makes the grid work nicely so your lights don’t flicker all night long.

Available Margin 
The difference between the demand for electricity and the electricity a utility has available. Expressed as a percent, it’s the capacity available to cover demand in the face of random events, such as forced outages, demand forecast errors, weather extremes and slippage in capacity service schedules. Also known as Capacity Margin.

Available Transfer Capability (ATC) 
A measure of physical transmission network available for further commercial activity.

Avoided Cost 
Money a utility saves by purchasing power from another company instead of producing the power itself. Avoided costs include such things as reduced capacity requirements or fuel and lower line costs.

A unit of measure for petroleum products, equal to 42 gallons.

Base Load 
The minimum amount of electric power delivered or required over a given period, at a constant rate.

Base Load Plant 
A power plant built for the specific purpose of providing power to a utility’s customers. Engineers explain it this way because they want to be precise: A plant operated to take all or part of the minimum continuous load of a system and which produces electricity at an essentially constant rate. These plants are operated to maximize system mechanical and thermal efficiency and minimize operating costs. For accounting-types only: These plants typically have high fixed costs and low unit operating costs.

Billing Demand 
A charge a customer pays to reserve capacity or facilities used, regardless of the customer’s actual consumption. Billing demand may vary from actual demand during a given billing period since it can be based on a contract maximum, minimum or previous peak demand. It is also known as Ratchet or Ratcheted Demand Charge.

Blanket Certificate (Authority) 
A general authority, exercised under FERC rules, to purchase, transport or sell natural gas or electricity. A blanket certificate relieves the seller or buyer from obtaining prior approval for a sale or purchase.

Book Cost 
The value at which property or assets are carried on a company’s books, without adjusting for depreciation, amortization or other items. Book value is the book cost minus depreciation. Because book value is designed to allow a company to recover the cost of the item, it may vary significantly from the actual market value, which is used to calculate the cost of replacing the asset at today’s prices.

A reduction in the voltage of power supplied to customers. It results from insufficient supply of power to match demand.

The amount of energy required to raise or lower the temperature of one pound of water one degree Fahrenheit. A kitchen match has about one Btu of energy.

Bulk Power Transmission 
The transport of a large amount of electricity at high voltages, usually from one utility to another, through high-voltage lines. These are usually rated at 100 kilovolts (kV) and above.

Billing for a group of services, such as generation, transmission and distribution of electricity, in a single fee. Most utility customers across the U.S., receive a "bundled" bill.

Capacity Margin 
Excess electric generating capacity, beyond planned peak system demand. It is reserved for emergencies and generally specified by NERC standards.

Captive Customer 
A customer, generally a residential or small business customer, who can purchase natural gas or electricity from only one supplier.

Carbon Capture
Carbon is emitted into the atmosphere (as carbon dioxide, also called CO2) whenever we burn any fuel, anywhere. The largest sources are cars and non-nuclear power stations - those that burn coal, oil or gas, otherwise known as fossil fuels. To prevent the carbon dioxide building up in the atmosphere (and possibly causing global warming), we can catch the CO2, and store it. As we would need to store many millions of tons of CO2, we cannot just build containers, but must use natural storage facilities. Some of the best natural containers are old oil and gas fields

Using heat (steam) that is produced by a natural gas-fired power plant to produce even more electricity or heating. In essence, cogeneration produces energy (electricity or heat) from two sources. While electric production may be somewhat less, more energy from the fuel reaches users (as steam or electricity) than is the case with a boiler or turbine designed to produce only electricity.

Combined Cycle 
A process in a power plant that produces steam from otherwise lost heat. This heat is routed to a conventional boiler or heat-recovery system generator for use by a steam turbine to produce additional electricity.

Reducing the amount of energy consumed by a customer for a specific end-use. Behavior changes, such as thermostat setback, are included in this definition. This definition does not include changing the timing of energy use, switching to other fuel sources or increasing off-peak usage, even though these actions may make more efficient use of generation or distribution facilities.

Contingency Reserve 
Operating reserve that allows a generating facility to reduce control area error to zero within 10 minutes after the loss of generating capacity.

Continuous Rating 
The amount of electricity that a system, facility, or element can support or withstand indefinitely without "burning up." For example, if you put too much electricity into your coffee pot, it will burn up, as in stop working.

Contract Demand 
The maximum amount of service that a party agrees to furnish over a given time (daily, monthly or annually) and for which a buyer agrees to pay a set charge.

Control Area 
Generally, a utility’s service area.

Core Market 
A group of customers who have no choice but to buy electricity, or natural gas, or both, from a local supplier. Also called Regulated Market because prices are set by regulators, not by competition.

In a curtailable interruptible electric service program, the customer agrees to pledge a minimum amount of electricity that can be curtailed (interrupted or withheld) by the utility during emergencies, generally in exchange for a lower rate, known as an interruptible rate.

Demand Charge (also called Capacity Charge) 
A charge designed to recover costs associated with a given level of electric demand. It is paid even if no service is taken by the customer. The demand charge generally includes all costs associated with operating and maintaining a utility’s generation, transmission and distribution systems.

Demand-Side Management 
Any effort aimed at getting customers to use less electricity during peak demand periods, like during and after dinner. It includes conservation efforts like high-efficiency lighting, home insulation and lighting design, and incentives for replacing inefficient heating and cooling systems. Load control may include incentives to use less electricity as well as enabling the utility to turn a customer’s heating and cooling units off or on by remote control.

The process of removing or reducing state regulations typically in the economic sphere. It is the undoing or repeal of governmental regulation of the economy.  Texas deregulation

Direct Current (DC) 
Electric current that flows in one direction, remaining as close to constant "magnitude," or a certain flow, as possible (see also Alternating Current).

Short for distribution company; refers to a vertically disaggregated utility company (with distribution separated from generation and transmission), or one that has never owned power businesses other than retail distribution.

Assigning generation and transmission of electricity through a system to assure coordinated operation. Also, sequencing the order in which generating resources are called upon to generate power to serve fluctuating loads at the most effective cost.

Distributed Generation 
Any technology that provides electricity closer to an end-user’s site, like a home or business. It may involve a small on-site generating plant or fuel cell technology. It’s a hot topic today because improving technology is enabling manufacturers to make generators that are about the size of a refrigerator, or smaller.

The systems that ultimately bring energy to the end-user. Electric distribution refers to the system of power lines, transformers and switches.

The Edison Electric Institute, a Washington, D.C.-based national trade organization of investor-owned electric companies that provides industry information and monitors regulatory changes and political developments.

The Energy Information Administration, an agency of the U.S. Department of Energy that collects and analyzes statistical information. It provides a wealth of information at It also gathers required information from industry participants.

Electric System Losses 
The total energy losses in an electric system between supply sources and delivery points. Loss occurs in transmission and distribution, primarily in the form of heat.

Embedded Costs 
The cost of all the facilities in an electric or natural gas supply system. Also called sunken costs, because the money cannot be recovered by abandoning the project.

Emergency Voltage Limits 
The operating voltage range on interconnected systems that is acceptable for a limited time while system adjustments are being made following a facility outage or system disturbance.

End User 
That’s you: a homeowner, business, plant or other type of consumer of electricity.

Exempt Wholesale Generators (EWGs) 
Independent power plants that generate electricity for sale on a wholesale basis vs. a more exempt generator that generates electricity for assigned or "regulated" customers. EWGs can be owned by utilities, utility holding companies, or developers not affiliated with an electric utility. The Federal Energy Regulatory Commission (FERC) determines EWG status and "exempts" the facility from restrictions imposed by the Public Utility Holding Company Act (PUHCA).

Federal Energy Regulatory Commission (FERC) 
The federal regulatory agency within the Department of Energy that oversees interstate electricity sales, electric rates, hydroelectric licensing, natural gas transmission, gas and oil pipeline rates, and investor-owned utility transmission.

Federal Power Act 
Legislation, enacted in 1920 and amended in 1935, that governs the FERC.

Federal Power Commission (FPC) 
The federal agency that preceded the FERC.

Fixed Price 
A price that is agreed upon by two parties and cannot change, regardless of subsequent fluctuations in market price.

Forced Outage 
The unplanned shutdown of a generating unit, transmission line or other facility.

Forced Outage Reserves 
The capacity needed to meet peak load during forced outages.

Forecast Uncertainty 
The probable deviations from the expected values of factors considered in a forecast for energy demand or supply.

Fuel Cell 
A device that generates direct current electricity from a chemical reaction. This rapidly developing technology promises radical advances in powering everything from automobiles to small buildings, and maybe even homes.

Short for generating company; the generating portion of a disaggregated utility’s operations. Said another way, it’s a company that owns just generators, and no transmission or distribution systems.


Greenhouse Effect 
The warming of the atmosphere caused by the buildup of "greenhouse" gases, which allow sunlight to heat the earth while absorbing the infrared radiation returning to space, preventing the heat from escaping. Gases contributing to the greenhouse effect include carbon dioxide, methane, chlorofluorocarbons, ozone and water vapor (which you see as steam).

Green Power 
Electricity produced using wind, sun, or steam escaping from the earth. By definition, federal regulation also includes power generated by such sources as gas produced by decaying garbage.

The network of high-voltage transmission lines through which power moves. In the United States, there are three distinct electric power grids: the Eastern Interconnection, the Texas (or ERCOT) Interconnection and the Western Interconnection. The grid has big power lines that have a tendency to hum.

Heat (or Heating) Rate 
The measure of efficiency of converting fuel to electricity, expressed as Btu’s of fuel per kilowatt-hour. The lower the heat rate, the more efficient the plant.

Hourly Peak 
The peak demand for energy from a transmission or distribution system during a one-hour period.

Heating, ventilation and air conditioning.

Imbalance (electric) 
The condition that occurs when generation and interchange schedules do not match demand. An imbalance could lead to a "brownout." A prolonged imbalance could lead to a "blackout."

Independent Power Marketer 
A company, other than a utility, that sells wholesale electricity. That is, they sell to just about anyone except homeowners. With the advent of electricity deregulation, independent power marketers proliferated and were becoming an important market force. Now their futures are in question, in part because after the fall of Enron and the highly publicized energy problems in California, many people wonder if there is a future for deregulation in the energy business.

Independent Power Producer (IPP) 
A producer of electricity not affiliated with the local utility company selling the power. Also see Exempt Wholesale Generator (EWG).

Independent System Operator (ISO) 
An entity that controls and administers access to electric transmission in a region or state or across several systems, on a non-discriminatory basis (that means one guy doesn’t get a better deal than the others) for a number of independent utilities. Under FERC Order 2000 an ISO, after complying, can become an RTO (Regional Transmission Organization).

Interchange (or Transfer) 
The net exchange of power across or between control areas. In some ways it resembles an interchange where several highways crisscross each other.

When capitalized, the word refers to one of four synchronized bulk electric system networks in the North American Electric Reliability Council: the Eastern, Western, ERCOT and Quebec. When it is lowercase, it refers to facilities that connect two or more systems or control areas.

Intermediate Load 
The range between base load (see definition) and peak load.

Inverted Block Rate (Graduated Rate) 
A rate structure by which successive blocks of power are priced at increasingly higher rates.

Short-form for an "investor-owned utility," i.e., a utility that has stockholders.

Joint Use (or Common Use) Facility 
A facility jointly used by two or more power generating units.

Just and Reasonable Rate 
A rate set at the lowest reasonable level that recovers a pipeline’s costs, according to the Natural Gas Act of 1938 and the Natural Gas Policy Act of 1978 (see table on page 10). It generally means a rate based on the properly allocated cost of providing service. State regulators use this in rate setting.

Kilowatt-Hour (kwh) 
The amount of electricity used to keep a 50-watt bulb burning for 20 hours.

A local distribution company, which is a utility that obtains the major part of its income from a retail distribution system for the delivery of electricity to end-users.

Load Curve 
A graphic representation showing power supplied, plotted against time, to illustrate the varying magnitude of the electric load during the period covered. Power company employees check the graphs to make sure everything is okay.

Load Factor 
In electric systems, the ratio of average output to peak output during a specific period of time, expressed as a percent. In gas, the ratio of the amount of gas a customer takes, compared to the maximum amount the customer is entitled to take. The load factor capability is a measure of the degree to which physical facilities are being utilized. It’s one indicator of efficiency.

Load Management 
Shifting of electric load patterns to use a system’s facilities more efficiently. Load management generally tries to shift usage from peak times to off-peak periods of a day or year. This is different from conservation measures, which attempt to reduce total usage for a given period of time.

Load Shape 
The pattern of the magnitude of power load over a given period of time. Imagine it as a line that goes up and down as it crosses a sheet of paper.

Load Shedding 
Deliberately removing pre-selected demand from a power system to keep the system working and minimize outages during periods of abnormal conditions. Also, the highway phenomenon that results in all those stray mattresses and sofa cushions along the side of the road.

A distribution line for natural gas or electricity that serves as a common source of supply for more than one service line.

Marginal Cost 
Incremental or differential cost. For electric utilities, it is the cost of providing the next, or marginal, kilowatt-hour of electricity, irrespective of fixed costs.

A company that specializes in bringing together sellers and buyers of energy, usually on a spot-market basis. A marketer negotiates price and arranges transportation and delivery.

Native Load 
The total requirements of a utility’s retail market.

Net Capacity 
The maximum capacity a power plant can sustain over a period of time, less the capacity used to supply its own needs for things such as motors and other equipment essential to its operation. This capacity may be modified to account for seasonal or ambient limitations.

Net Generating Station Capability 
The total capacity of a generating facility to produce power, less the amount it needs for its own uses.

Nominal Voltage Rating 
Voltage standards set by U.S. electrical equipment manufacturers and electric utilities to ensure that equipment is designed for the voltage range encountered in actual use.

Non-Coincident Demand (NCD) 
A customer’s maximum electric demand during a given period. Sometimes called a customer’s monthly Non-Coincident Peak Load.

North American Electric Reliability Council (NERC) 
A power industry alliance formed in 1968 as a result of the massive 1967 New York City blackout. Its purpose is to make sure that kind of event doesn’t recur. NERC is composed of 10 regional councils and includes virtually all the power regions of the contiguous United States, Canada, and part of the Mexican state of Baja.

The Nuclear Regulatory Commission (NRC) 
A federal agency that licenses and regulates U.S. nuclear power plants.

A period of lower energy demand.

A unit of electrical resistance. One volt can produce a current of one ampere through a resistance of one ohm.

Open Access 
Access on a non-discriminatory basis to the transportation or transmission services of a pipeline or electric utility.

Passive Solar Energy 
Using the sun to help meet energy needs through architectural design, such as the orientation of a building, arrangement of windows and choice of materials to conserve heat in winter and dissipate it in summer.

Peak Demand 
The maximum electric load, including losses experienced by a system, in a given period. It is the actual demand by all system customers plus losses.

Peak Load Plant, or Peaker Unit 
A power plant used during maximum load periods. A peaker generally has quick start up time per megawatt energy costs, but often has low capital cots. Generally, it’s used only during peak demand periods like a long hot summer.

Peak Shaving 
Reduction of peak demand for electricity.

Photovoltaic Conversion 
Direct conversion of the sun’s energy into electricity using photovoltaic cells.

Point of Delivery (POD) 
The point where a power supplier delivers electricity. It could include an interconnection with another system or a substation.

Power Broker 
An individual or firm that arranges bulk power transactions. Power brokers bring together a seller and buyer, without taking title to the power. Power brokers, unlike power marketers, assume no risk. Utilities will sometimes go to a power broker to find the lowest priced power available, especially in the summertime when high temperatures and high cooling use increase the need for power.

Power Factor 
That part of the power actually used by a customer’s electrical equipment, expressed as a percentage of the total power supplied. Power factors only apply to AC circuits.

Power Marketing Administrations (PMA's) 
One of five administrations established by Congress to sell hydroelectric power generated by federal dams and power plants. The TVA is a separate agency with similar functions.

Rate Base 
The value of property on which a utility is allowed to earn a specified rate of return. There are many ways to calculate the rate base, including fair value, prudent investment, reproduction cost and original cost. It may also cover items such as working capital and prepayments, and can be adjusted for items such as depreciation, deferred taxes and accumulated deferred investment tax credits.

Rate Structure 
The schedule of charges that an energy company or utility uses to bill customers for energy.

Real-Time Pricing 
Pricing of electricity that reflects the actual time of day when the power is used. Customers with real-time pricing receive frequent signals throughout the day on the price of electricity at that moment.

Regional Transmission Organization (RTO) 
FERC-mandated region-al organizations charged with managing the transmission of power in a region of the country.

For an electric system, reliability means the ability to supply the electrical demand and energy requirements of its customers at all times, taking into account scheduled and unscheduled outages as well as the ability of the system to withstand sudden disturbances, such as electrical shorts or unanticipated loss of facilities.

The generating capability that an electric utility needs, in addition to the highest level of user demand, to meet its needs.

Reserve Generating Capacity 
The capacity of units kept available by an electric utility to meet special needs. This may occur when demand is unusually high, or when other units are offline for maintenance, repair or refueling.

Service Voltage 
The voltage at which a customer is connected to the electric system.

The management of generating resources to meet variable demand. In a hydroelectric system, for instance, shaping may involve varying the release of water from a reservoir in order to maintain a balance between generation and demand.

Small Power Producer (SPP) 
Defined by PURPA as an entity that generates electricity using renewable resources, such as waste, wind, solar or geothermal energy for at least 75 percent of its total energy input. It's design capacity must be 80 megawatts or less.

Standby Demand 
The amount of power available as a secondary source or backup for the outage of a customer’s primary source, as specified by contractual arrangement.

A facility that switches, steps down or regulates electricity. Substations also serve as control or transfer points in an electrical system. Their purpose is to route and control electricity, alter voltage levels and serve as delivery points.

Tiered Rates 
A system of rate schedules that divides customer usage into different tiers or blocks, each with a different price.

Time-of-Day Rates 
Rates that vary with the time of day — higher during periods of peak use and lower during periods of low demand. Also known as Time-of-Use Rates, they differ from real-time pricing in that they are based on forecast, rather than actual, costs. While rates for real-time pricing fluctuate many times a day, time-of-day rates vary on a fixed schedule, usually in blocks of three to four hours.

Tolerable Zone 
A band of voltages that is above and below the Preferred Zone. While not ideal, voltages in the tolerable zone permit customers’ equipment to operate satisfactorily and without undue wear or damage, although performance may be compromised.

Short for transmission or transportation company. The bulk transmission part of a disaggregated electric utility, operated as a separate entity. Transmission lines are those fat wires you see cutting across golf courses and mountains.

A device that changes the voltage of alternating current.

Transition Costs 
Costs associated with deregulating a formerly regulated industry. These costs include stranded costs. They occur when customers are permitted to switch providers before the original provider has recovered certain costs, including mandated purchased power arrangements, capital, taxes, and costs associated with social policy and environmental matters.

Transmission Grid 
An interconnected system for transmitting power along high-voltage lines in bulk from points of supply to points of demand.

Unbundled Services 
Energy services that are sold and priced separately, such as generation, transmission and distribution.

Vertical Integration 
A corporate structure in which one company owns all the different aspects of making, selling and delivering a product or service. A vertically integrated electric utility would own generation, transmission and distribution facilities.

Changes in the commodity price. The more price changes, the greater the volatility and the greater the opportunity to make a profit through trading.





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