GLOSSARY OF
RESTRUCTURING/DEREGULATION TERMS
Aggregator
- A group or organization that represents energy consumers
to buy electricity in a restructured electric industry.
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 a utility charges to cover its non-fuel costs.
Broker - A retail agent who buys and sells power and, sometimes, also
aggregates 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.
Cogenerator - A power plant that produces both electrical (or
mechanical) energy and thermal (steam or process heat) energy.
Conservation
- Reduction of energy use.
Conservation Cost Recovery Charge
- A surcharge on the bill to recover
demand side management costs.
Co-op - A rural electric cooperative. Rural electric cooperatives
generate and purchase wholesale power, arrange for the transmission of that power, and
distribute the power to rural customers.
Cramming - Adding charges to a consumer's energy bill for optional
services without his/her permission.
Cubic Feet
- The most common unit of measurement of gas volume. It is
the amount of gas that can fit within a space one foot times one foot times one foot in
volume. One cubic foot of pipeline-quality gas contains approximately 1,000 BTUs.
Customer Charge
- A flat monthly charge payable regardless of the
level of usage.
Decatherm
- Ten therms or 1 million BTU. One decatherm is equal to
approximately 1,000 cubic feet (Mcf).
Default Service - The electric generation service provided to
any consumer who does not or is unable to arrange for or maintain electric generation
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 - The elimination of regulation from a previously
regulated industry or sector of an industry, sometimes used interchangeably with
restructuring.
Demand-Side Management (DSM)
- Planning, implementation, and
evaluation of utility-sponsored programs to influence the amount or timing of customers'
energy use; can include energy efficiency and conservation programs.
Direct Access - The ability of a retail customer to purchase commodity
electricity directly from the wholesale market rather than through a local distribution
utility.
Distribution - The delivery of electricity to the retail customer's
home or business through low voltage distribution lines.
Distribution Utility - The regulated electric utility entity that
constructs and maintains the distribution wires connecting the transmission grid to the
final customer.
Divestiture - The stripping off of one utility function from the
others by selling (spinning-off) or in some other way changing the ownership of a
utility's energy assets.
Electric Supplier - An entity (including an electric aggregator or
participating municipal electric utility) licensed by a state utility regulatory agency to
provide electric generation services 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 sells electric energy to end-use customers.
End-Use
- The ultimate use to which utility service is put, such as
water heating and air conditioning.
Energy
- The result of consuming power over a period of time. In
electricity, measured in watthours: 1000 watthours = 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 - Programs designed to help consumers use
energy more efficiently.
Externalities
- The consequences of resource decisions that are not
directly included in the price paid for the resource.
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 all 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 energy sales. It is the primary statute governing FERC regulation
of the electric sector.
Fuel Charge
- The rate charged per kilowatt-hour (or cubic feet) to
cover the costs of the fuel used to produce power (or gas).
Futures Market - Arrangement through a contract for the delivery of a
commodity at a future time and at a price specified at the time of purchase.
Grid - A system of interconnected power lines and generators that is
managed to meet the requirements of the customers connected to the grid at various points.
IOU - An investor owned utility.
IPP - Independent power producer - A company that operates a
generation facility and sells power to electric utilities for resale 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.
Market-Based Price - A price set by the mutual decisions of many
buyers and sellers in a competitive market.
Marketer - An agent for generation projects who markets power on
behalf of the generator.
Megawatt-hour (MWh) - One megawatt-hour equals one million (1,000,000)
watt-hours.
Monopoly - The only seller with control over market sales.
Municipalization - The process by which a municipal entity assumes
responsibility for supplying utility service to its constituents.
Municipal Utility - A provider of utility services owned and operated
by a municipal government.
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 over
a given period of time.
Peaking Capacity
- Capacity used in times of maximum demand.
Price Cap
- A way of setting rates in which the utility is given a
limit on the average dollar-per-customer revenue it may collect and still recover profits
on service.
Provider of Last Resort - A legal obligation (traditionally given to
utilities) to provide service to a customer where competitors have decided they do not
want that customer's business.
Public Benefits - Benefits that address unique social and energy
system needs, which society has historically chosen to have provided by regulated
utilities and which are at risk in a more competitive industry. These benefits include
assistance for low-income consumers, renewable energy, research and development, and
energy efficiency.
PUHCA - The Public Utility Holding Company Act of 1935 - This act
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 utility's other electric business. It also restricts ownership of an
electric business by non-utility corporations.
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.
Qualifying Facility (QF) - Renewable energy or cogeneration facilities
that are allowed to sell their electric output to the local utility at avoided cost rates.
Real-Time Pricing - The instantaneous pricing of electricity based on
the cost of the electricity available for use at the time the customer demands it.
Reliability - The ability of the electric system to supply the
electrical demand and energy requirements at all times and to withstand sudden
disturbances such as electric short circuits or unanticipated loss of system facilities.
Renewable Energy - Sustainable energy technologies that include solar,
wind, trash-to-energy, water, methane gas from landfills, fuel cells, and biomass.
Resource Efficiency - The use of smaller amounts of physical resources
to produce the same product or service.
Restructuring - Usually refers to separation of the utility functions
of vertically integrated energy utilities into individually operated and -owned entities,
sometimes used interchangeably with deregulation.
Retail Competition - 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.
Retail Market - A market in which electricity and other energy
services are sold directly to the end-use customer.
Retail Wheeling - The process of delivering electricity to a retail
customer over the transmission and distribution lines of a utility that is not producing
that electricity.
Revenue Requirements
- The amount that must be recovered from
customers to cover a utility's costs.
Rules of Conduct - Defines acceptable activities by utilities and
energy suppliers, particularly those with significant market power.
Securitization
- Allows utilities that are being restructured to
receive full or partial stranded cost recovery, usually through a "customer
transition charge" or other "non-bypassable" obligation placed on
ratepayers. (See Stranded Costs)
Slamming - A term used when an electric supplier switches a consumer's
service without permission. Slamming is illegal.
Stranded Assets - Assets that cannot be sold for some reason. Some
nuclear plants may be examples of stranded assets.
Stranded Benefits
- Benefits of utility regulation, such as energy
conservation programs, that would not be realized in a purely competitive market
structure.
Stranded Costs
- The costs a utility has incurred under
the current system of utility regulation, such as the costs of large power plants, and
which a utility may not be able to recover under deregulation.
Switching - Refers to a customer receiving retail electric
service/supplies from a company or organization other the customer's traditional utility.
System Benefits Charge - A charge on a consumer's bill from an
electric distribution company to pay for the costs of certain public benefits such as
low-income assistance and energy efficiency.
Tariff - A document, approved by the responsible regulatory agency,
listing the terms and conditions, including a schedule of prices, under which utility
services will be provided.
Time-of-Use (TOU) Rates - The pricing of electricity based on the
estimated cost of electricity during a particular time block, either time-of-day or by
season.
Transportation
- Moving gas through pipelines from one place to
another.
Unbundling - Separating electric utility service into its basic
components -- generation, transmission and distribution -- and offering each component
separately for sale with separate rates for each component.
Universal Service - Electric service sufficient for basic needs
available to all members of the population regardless of income.
Utility - A regulated energy company with the characteristics of a
natural monopoly.
Vertical Integration - An arrangement in which the same company owns
all the different aspects of making, selling, and delivering a product or service.
Wheeling - The transmission of electricity by an entity that does not
own or directly use the power it is transmitting.
Wholesale Competition - A system in which a power distributor can buy
its power from a variety of power producers.
Wholesale Power Market - The purchase and sale of electricity from
generators to resellers (who sell to retail customers).
Wholesale (Bulk) Power Supply - Refers to the aggregate of electric
generating plants and transmission lines within one utility or a group of utilities.
Wholesale Transmission Services - The transmission of electric energy
sold, or to be sold, at wholesale in interstate commerce.
