1The Electricity Industry | Section B: Glossary of Terms North American Power

The Electricity IndustrySection B: Glossary of Terms

Glossary of Terms: Electric

Aggregation: 1) Forming a large (or aggregate) group of consumers who together can bargain for the lowest possible electric rates. 2) The process of estimating demand and scheduling deliveries of power to a group of customers.

Ampere (amp): A unit measuring the strength of an electric current. One amp is the amount ofcurrent one volt can push through one ohm of resistance.

Avoided cost: A utility company’s production or transmission cost avoided by conservation orpurchasing from another source rather than by building a new generation facility.

Back-up power: Power supplied to a customer when its normal supply is interrupted.

Bus-bar cost: A term that refers to the total cost for a power plant to produce electricity. Expressed as a cost-per-kilowatt-hour, it includes the cost of fuel, operations and maintenance, as well as capital costs for a plant to generate power. The lower the cost-per-kilowatt-hour, the greater the efficiency.

Bypass: Obtaining energy service from a new supplier without using the facility of the formersupplier, usually the regulated utility company.

Capability: The maximum load a generating unit, station, or other electrical apparatus can carryunder specific conditions for a given period of time, without exceeding design limits of temperature and stress. Capability and capacity are sometimes used interchangeably.

Capacity: The capability of a system, rated in terms of the maximum quantity of electricity which it can produce, transport, distribute or use in a given period of time.

Cogeneration: A process that uses industrial waste heat to generate electrical power.

Combustion turbine: Electric generating units designed to run on an as-needed or peaking basis.

Decommission: To permanently remove a power generating plant or electrical facility from service and restore the site to a condition that allows unrestricted use.

Demand: The rate at which electricity is delivered to or by a system, part of a system or a piece of equipment. It is measured in kilowatts.

2The Electricity Industry | Section B: Glossary of Terms North American Power

Degree days: A measure of weather severity determined by subtracting 65 degrees from the mean daily temperature. A positive number results in cooling degree days. A negative number results in heating degree days.

Direct access: The ability of a retail customer to purchase electricity from another supplier and then have the local distribution company deliver the power over its transmission and distribution system for a fee (a.k.a retail open access, open access).

Distribution: The process of receiving electricity in its wholesale form from transmission system, and delivering it at acceptable conditions to retail customers.

Electric cooperative: A member-owned electric utility company that generates and purchases wholesale power, arranges the transmission of that power, and then distributes the power to serve the demand of rural customers on a not-for-profit basis.

Energy Policy Act of 1992: Legislation which introduced competition at the wholesale level through new open access requirements for transmission and authorizing exempt wholesale generators.

Exempt wholesale generator: A company that generates power solely for wholesale use and not for sale to the public.

Federal Energy Regulatory Commission (FERC): Federal agency responsible for regulating inter-state wholesale electricity markets and interstate transmission.

Firm capacity: The amount of energy, stated by agreement, that is required to be available at all times to a specified customer, even under adverse conditions.

Fuel mix: The percentage of various fuels used to generate electricity.

Generating capacity: The maximum amount of electricity a given power plant is able to produce, usually expressed in megawatts.

Generation: The process of converting thermal, mechanical, chemical, or nuclear energy intoelectric energy.

Green power: Electricity that is produced from environmentally cleaner sources than traditionalelectricity. Green power is usually defined as renewable energy that comes from sources like wind, solar, biomass energy, etc.

Integrated resource planning: The process many utility commissions use to select the generation resources needed to meet future demand for electricity.

Investor owned utilities (IOUs): Utilities that are structured as a tax-paying business financed through sales of common stock.

IPP: This is an acronym that stands for Independent Power Producer. An IPP is a generator ofelectricity that can sell its output to electric utilities or directly to large customers. Unlike utilities, IPPs are not regulated by state public service commissions.

3The Electricity Industry | Section B: Glossary of Terms North American Power

ISO: Independent System Operators serve geographic regions around the U.S. to meet electricity demands of the regions economy and people.

kW (kilowatt): 1,000 watts; a basic unit of electric power measurement that measures the rate at which electricity is being used.

kWh (kilowatt hour): 1,000 watt hours; a basic unit of electric energy equal to one kilowatt of power supplied to, or taken from, an electric circuit steadily for one hour. The amount of electricity produced or consumed is measured in kilowatt hours.

Load: The amount of power delivered or required at any specific point on a system. Load also refers to the amount of electricity required by a customer or a piece of equipment. When the term refers to the total demand in an electric system, it is called system load.

Load factor: The ratio – expressed as a percentage – of the average load in kilowatts suppliedduring a designated period to the peak or maximum load in kilowatts occurring in that period.

Load management: Shifting of electricity use from periods of high demand to periods of low demand.

Marginal cost: The cost to increase output by one unit (i.e., the cost to produce on additional kWh of electricity).

Minimum load: Minimum amount of electric power required at the lowest point of demand during a specified period. Also referred to as base load.

Monopoly: The exclusive control of a commodity or service by one entity. In the electricity industry, interstate pipelines and local distribution companies are generally monopolies.

Municipal utility: An electric utility system owned and operated by a municipality that generates and/or purchases electricity at wholesale for distribution to retail customers generally within the boundaries of the municipality.

MW (megawatt): 1,000 kilowatts of electricity. The generating capacity of utility plants is expressed in megawatts.

National Electrical Code (NEC): This outlines the electrical safety standards applicable to buildings or structures.

National Electrical Safety Code (NESC): These are the electrical safety standards applicable to high voltage electrical systems found in the utility industry.

Off-system sales: A sales classification covering electric energy supplied to other utilities.

On–peak power: Electricity supplied during periods of high system demand.

Off-peak power: Electricity generated during periods of typically low consumer demand, such as early morning hours, Sundays and holidays.

4The Electricity Industry | Section B: Glossary of Terms North American Power

Peak: The maximum demand or load which has occurred during a specified period of time. The time period may be 30 minutes or an hour during a day, month, or year. Peak periods fluctuate by season. Peaks usually occur during the morning hours in the winter and in the late afternoon in the summer.

Peaking units: Generating units which are available to assist in meeting the portion of peak load which is above a system’s base load. Such units are normally operated occasionally and for relatively short periods of time over the course of a year.

Power grid: A network of electric power lines and associated equipment used to transmit anddistribute electricity over a geographic area.

Power marketer: A person or company that buys or sells energy. In some cases, a marketer may not produce (in the case of electricity) the energy they buy or sell.

Power pool: Two or more electric systems interconnected and coordinated for combined load and maintenance to generate and supply electricity in an economical manner.

Qualifying facility: A generator that qualifies as a cogenerator or small power producer under the Public Utility Regulatory Policy Act of 1978 (PURPA). Generally, these facilities sell power to utilities at the utilities’ avoided cost.

Regulatory compact: A theory advocated by some utilities which holds that, in exchange for building the generation, transmission, and distribution infrastructure necessary to provide power to their service area, the utility is guaranteed a return on those investments.

Reliability council: A group of interconnected utilities in a geographic area that work together toassure system-wide reliability.

Rural Electric Cooperative (REC): A cooperatively owned, joint-venture electric utility organized to supply electricity to specified rural areas. Most cooperatives have been financed by the Rural Electrification Administration and are exempt from federal income tax laws.

Securitization: A means of financing stranded costs with low-interest debt.

Service territory: The geographical area served by a particular utility company.

Spot market: A market where a commodity is purchased under a short-term agreement fromsources other than those contracted.

Steam generators: These are used to generate electricity using the steam that is created fromwater heated by a nuclear reactor or a fossil fuel boiler.

Stranded benefits: Social programs and other regulatory “benefits” currently included in utility rates that could be stranded in an open market.

Stranded costs/investments: Utility assets (mainly high-cost power plants) that would lose value in a competitive market.

5The Electricity Industry | Section B: Glossary of Terms North American Power

Structural unbundling: See Vertical disaggregation.

Substation: A facility that contains electrical equipment, such as transformers, switches, and other associated electrical facilities used in the bulk transmission and distribution of electricity. A substa-tion usually changes the voltage by either increasing or decreasing it before sending it on.

Switching station: A facility that contains switches and other electrical devices used in the bulk transmission and distribution of electricity. A switching station only reroutes electrical current; it does not change its voltage.

Transmission access: The ability to move electricity through another company’s pipeline or electrical transmission system to another. This provides a company with the capability of accessing broader energy markets.

Transmission grid: The high voltage wires that connect generation facilities with distribution facilities. Also known simply as “the grid,” it is the infrastructure through which power moves around the United States. It is necessary to carefully coordinate use of the transmission system to ensure reliable and efficient service.

Vertical disaggregation: Separating electric generation, transmission, and distribution functions of a utility into separate companies.

Watt: The electrical unit of power. The rate of energy transfer equivalent to one ampere flowing under pressure on one volt at unity power factor.

Wheeling: A term that describes using the transmission facilities of one energy (electric) system to transmit or deliver electricity produced or owned by another energy system for a fee. Wholesale and retail are two terms that are often associated with wheeling. Wholesale wheeling involves moving and selling energy between utilities or power pools. Retail wheeling involves selling energy directly to a customer other than an energy distributor.