Glossary of Terms

Ancillary Services: Services that ensure reliability and support the transmission of electricity from generation sites to customer loads. Such services may include load regulation, spinning reserve, non-spinning reserve, replacement reserve, and voltage support.

Average Load: The highest peak period demand for each month, based on the calculated demand over each 15-minute period of each day of the month.

Backup Generator: A generator that is used in the event of an emergency, such as a shortage of power needed to meet customer load requirements.

Balancing: Represents differences between the sum of the components of natural gas supply and the sum of the components of natural gas disposition. These differences may be due to quantities lost or to the effects of data reporting problems.

Barrel: A unit of volume equal to 42 U.S. gallons.

Base Rate: A fixed kilowatt hour charge for electricity consumed that is independent of other charges and/or adjustments.

BCF: The abbreviation for billion cubic feet. Typically used as a unit of measure for natural gas.

Billing Period: The time between meter readings. It does not refer to the time when the bill was sent or when the payment was to have been received. In some cases, the billing period is the same as the billing cycle that corresponds closely (within several days) to meter-reading dates.

British Thermal Unit (BTU): A British Thermal Unit (BTU) is a measure of the heating value of a fuel. It is the amount of heat energy required to raise the temperature of one pound of water one degree Fahrenheit.

Bundled Utility Service (electric): A means of operation whereby generation, transmission, and distribution services, as well as ancillary and retail services, are provided by one entity, typically the Electric Distribution Company (EDC).

Burnertip: A point at which a distributing gas utility delivers natural gas to the customer’s (residential or industrial) facility through their distribution pipeline system.

Capacity: The maximum output, commonly expressed in megawatts (MW), that generating equipment can supply to system load, adjusted for ambient conditions.

Citygate: A point or measuring station at which a distributing gas utility receives gas from a natural gas pipeline company or transmission system.

Congestion: A condition that occurs when insufficient transfer capacity is available to implement all of the preferred schedules for electricity transmission simultaneously.

Contract price: The delivery price determined when a contract is signed. It can be a fixed price or a base price escalated according to a given formula.

Crude Oil: A mixture of hydrocarbons that exists in liquid phase in natural underground reservoirs and remains liquid at atmospheric pressure after passing through surface separating facilities.

Customer Choice: The right of customers to purchase energy from a retail supplier other than their traditional supplier (EDC) or from more than one seller in the retail market.

Day-Ahead Market: Forward market in which electricity quantities and market clearing prices are calculated individually for each hour of the day on the basis of participant bids for energy sales and purchases.

Decatherm: Ten therms or 1,000,000 BTU.

Default Service: The electric service provided to any consumer who does not or is unable to arrange for or maintain electric 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).

Demand Charge: That portion of the consumer's bill for electric service based on the consumer's maximum electric capacity usage and calculated based on the billing demand charges under the applicable rate schedule.

Deregulation: The elimination of some or all regulations from a previously regulated industry or sector of an industry.

Distribution: For natural gas - the act of distributing gas from the city gate to the customer (or burnertip). For electric - the act of distributing electric power using low voltage transmission lines that deliver power to retail customers.

Electric Distribution Company (EDC): A legal entity engaged primarily in the retail sale and/or delivery of electricity through a distribution system. Since the deregulation of the electricity industry (varies by state), the sale of electricity and/or delivery arrangements may be handled by other agents, such as producers, brokers, and marketers that are referred to as "non-LDC."

Electricity: A form of energy characterized by the presence and motion of elementary charged particles generated by friction, induction, or chemical change.

Federal Energy Regulatory Commission (FERC): The Federal agency with jurisdiction over interstate electricity sales, wholesale electric rates, hydroelectric licensing, natural gas pricing, oil pipeline rates, and gas pipeline certification. FERC is an independent regulatory agency within the Department of Energy and is the successor to the Federal Power Commission.

Firm Gas: Natural Gas service offered to customers under schedules or contracts which anticipate no interruptions.

Fuel Switching Capability: The short-term capability of a manufacturing establishment to substitute energy sources in place of those actually consumed.

Futures Market: A trade center for quoting prices on contracts for the delivery of a specified quantity of a commodity at a specified time and place in the future

Generation: The process of producing electric energy by transforming other forms of energy; also, the amount of electric energy produced, expressed in kilowatt hours.

Grid (Electric Power): A system of synchronized power providers and consumers connected by transmission and distribution lines and operated by one or more control centers. In the continental United States, the electric power grid consists of three systems the Eastern Interconnect, the Western Interconnect, and the Texas Interconnect. In Alaska and Hawaii, several systems encompass areas smaller than the State (e.g., the interconnect serving Anchorage, Fairbanks, and the Kenai Peninsula; individual islands).

Hedging: The buying and selling of futures contracts so as to protect energy traders from unexpected or adverse price fluctuations.

Henry Hub: A pipeline hub on the Louisiana Gulf Coast. It is the delivery point for the natural gas futures contract on the New York Mercantile Exchange (NYMEX).

Independent System Operator (ISO): An organization responsible for maintaining instantaneous balance of the grid system, ensuring that loads match available resources.

Installed Capacity (ICAP): the maximum amount of electricity that an electricity generating station is capable of producing at any given point in time

Interruptible Gas: Gas sold to customers with a provision that permits curtailment or cessation of service at the discretion of the distributing company under certain circumstances, as specified in the service contract.

Interstate Pipeline: Any party engaged in natural gas transportation subject to the jurisdiction of Federal Energy Regulatory Commission (FERC) under the Natural Gas Act.

Kilowatt (kW): A measure of electricity defined as a unit of work or energy, equal to 1,000 watts, equal to one ampere under a pressure of one volt. A Watt is equal to 1/746 horse power.

Kilowatt-Hour (kWh): A measure of electricity defined as a unit of work or energy, measured as 1 kilowatt (1,000 watts) of power expended for 1 hour. One kWh is equivalent to 3,412 Btu

Load Factor: The ratio of the average load to peak load during a specified time interval.

Load Shape: A method of describing peak load demand and the relationship of power supplied to the time of occurrence.

Local Distribution Company (LDC): A legal entity engaged primarily in the retail sale and/or delivery of natural gas through a distribution system that includes all main lines and laterals. Since the deregulation of the gas industry, the sale of gas and/or delivery arrangements may be handled by other agents, such as producers, brokers, and marketers that are referred to as "non-LDC."

Line Loss: Electric energy lost because of the transmission of electricity. Much of the loss is thermal in nature.

Liquefied Natural Gas (LNG): Natural gas (primarily methane) that has been liquefied by reducing its temperature to -260 degrees Fahrenheit at atmospheric pressure.

Market-Based Pricing: Prices of electric power or other forms of energy determined in an open market system of supply and demand under which prices are set solely by agreement as to what buyers will pay and sellers will accept. Such prices could recover less or more than full costs, depending upon what the buyers and sellers see as their relevant opportunities and risks.

Market-Clearing Price: The price at which supply equals demand for the day-ahead or hour-ahead markets.

Marketer: See Retail Supplier

Max Demand: The greatest of all demands of the load that has occurred within a specified period of time.

Megawatt (MW): One million watts of electricity.

Million British Thermal Units: MMBtu. See BTU.

Natural Gas: A gaseous mixture of hydrocarbon compounds, the primary one being methane.

Natural Gas Marketer: A company that arranges purchases and sales of natural gas. Unlike pipeline companies or local distribution companies, a marketer does not own physical assets commonly used in the supply of natural gas, such as pipelines or storage fields. A marketer may be an affiliate of another company, such as a local distribution company, natural gas pipeline, or producer, but it operates independently of other segments of the company. In States with residential choice programs, marketers serve as alternative suppliers to residential users of natural gas, which is delivered by a local distribution company.

NYMEX: The NYMEX (New York Mercantile Exchange) is the world’s largest physical commodity futures exchange, located in New York City.

Off Peak: Period of relatively low system demand. These periods often occur in daily, weekly, and seasonal patterns; these off-peak periods differ for each individual electric utility.

On Peak: Periods of relatively high system demand. These periods often occur in daily, weekly, and seasonal patterns; these on-peak periods differ for each individual electric utility.

Peak Load: The maximum load during a specified period of time. Also see Max Demand.

Peaking Capacity: Capacity of generating equipment normally reserved for operation during the hours of highest daily, weekly, or seasonal loads. Some generating equipment may be operated at certain times as peaking capacity and at other times to serve loads on an around-the-clock basis.

Pipeline: A continuous pipe conduit, complete with such equipment as valves, compressor stations, communications systems, and meters for transporting natural and/or supplemental gas from one point to another, usually from a point in or beyond the producing field or processing plant to another pipeline or to points of utilization. Also refers to a company operating such facilities.

PJM: An organization responsible for the operation and control of the bulk electric power system in thirteen states and the District of Columbia. PJM operates an efficient, effective wholesale electricity market, and manages a long term regional electric transmission planning process to maintain the reliability of the power supply system.

Power Marketer: Business entities engaged in buying and selling electricity. Power marketers do not usually own generating or transmission facilities. Power marketers, as opposed to brokers, take ownership of the electricity and are involved in interstate trade. These entities file with the Federal Energy Regulatory Commission (FERC) for status as a power marketer.

Rate Schedule: The rates, charges, and provisions under which service is supplied to the designated class of customers.

Real-Time Market: Real Time market in which electricity quantities and market clearing prices are calculated individually for each hour of the day on the basis of participant bids for energy sales and purchases.

Regulation: The governmental function of controlling or directing economic entities through the process of rulemaking and adjudication.

Reliability: A measure of the ability of the system to continue operation while some lines or generators are out of service. Reliability deals with the performance of the system under stress.

Renewable Energy: Renewable Energy is energy which comes from natural resources such as sunlight, wind, hydro, and geothermal heat.

Renewable Energy Credits (RECs): Renewable Energy Credits are tradable, non-tangible energy commodities in the United States that represent proof that 1 megawatt-hour of electricity was generated from an eligible renewable energy source.

Renewable Energy Resources: Energy resources that are naturally replenishing but flow-limited. They are virtually inexhaustible in duration but limited in the amount of energy that is available per unit of time. Renewable energy resources include biomass, hydro, geothermal, solar, wind, ocean thermal, wave action, and tidal action.

Re-regulation: The design and implementation of regulatory practices to be applied to the remaining regulated entities after restructuring of the vertically-integrated electric utility. The remaining regulated entities would be those that continue to exhibit characteristics of a natural monopoly, where imperfections in the market prevent the realization of more competitive results, and where, in light of other policy considerations, competitive results are unsatisfactory in one or more respects. Regulation could employ the same or different regulatory practices as those used before restructuring.

Retail Supplier: An entity licensed by a state utility regulatory agency to provide retail electricity or natural gas to consumers. With customer choice, consumers can choose their electric or natural gas supplier. The commodity is then delivered by the consumer's electric distribution company.

Service Area: The territory in which a utility system or distributor is authorized to provide service to consumers.

Slamming: The unauthorized, illegal transfer of a customer’s electric service by a retail electric provider.

Spot Market: A market in which a product is bought and sold for immediate or very near-term delivery, usually for a period of 30 days or less. The transaction does not imply a continuing arrangement between the buyer and the seller.

Spot Price: The price for a one-time open market transaction for near-term delivery of a specific quantity of product at a specific location where the commodity is purchased.

Storage: The use of sub-surface facilities for storing gas that has been transferred from its original location. The facilities are usually hollowed-out salt domes, geological reservoirs (depleted oil or gas fields) or water-bearing sands topped by an impermeable cap rock (aquifer).

Tariff: A published volume of rate schedules and general terms and conditions under which a product or service will be supplied.

Therm: One hundred thousand (100,000) British Thermal Units (BTU).

Time of Use (TOU): The rate charged by an electric utility for service to various classes of customers. The rate reflects the different costs of providing the service at different times of the day.

Transmission: The movement or transfer of electric energy over an interconnected group of lines for which it is transformed for delivery to consumers or is delivered to other electric systems. Transmission is considered to end when the energy is transformed for distribution to the consumer.

Unforced Capacity (UCAP): represents the actual amount of installed capacity (ICAP) that is available at any given time

Weighted Average Cost of Gas (WACOG): Weighted Average Cost of Gas is an average cost of gas purchased during a given time period, usually a month. This WACOG includes gas injected or withdrawn from storage.

Wellhead: The point at which the crude oil (and/or natural gas) exits the ground.

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


  • US Energy Information Administration
  • Federal Energy Regulatory Commission (FERC)
  • Retail Energy Supply Association (RESA)