Say what? Featured

10:04am EDT July 22, 2002
Affiliated Power Producer: A company or individual project that generates power and is affiliated with an electric utility. For example, Houston Industries Energy Inc. is affiliated with Houston Lighting and Power, and both are subsidiaries of the holding company Houston Industries.

Aggregator: An entity that puts together groups of customers into a buying group that purchases a commodity service. The vertically integrated investor-owned utility, as well as municipal utilities and rural electric cooperatives, perform this function in today's power market. Other entities, such as buyer cooperatives or brokers, could perform this function in a restructured power market.

Avoided Cost: The incremental cost to an electric utility of new generator transmission capacity or both which the utility avoids through conservation or purchase from another source. (See the definition of Public Utility Regulatory Policy Act for additional information.)

BTU: British thermal unit. The standard unit for measuring the heat content of energy. One unit-the heat roughly given off by a kitchen match-is enough heat to raise the temperature of one point of water by 1 degree Fahrenheit.


1 kwh of electricity = 4312 BTU
1000 cubic feet of gas = 1 million Btu
A barrel of oil = 6.25 million Btu
1 ton of coal = 25 million Btu

Capacity: A measurement of the electrical output of generating usually expressed in kilowatts or megawatts. Typically, the user or manufacturer will rate the generating plant's capacity.

Cogeneration: The simultaneous production of electric energy and useful thermal energy (i.e., heat used for individual, commercial, heating or cooling services) from the same energy source.

Cogenerator: A power plant or industrial firm that sequentially produces electric energy and useful thermal energy. Excess power from the industrial firm can be sold to a local utility, while excess steam from the power plant can be sold to a local industrial or commercial business.

Competitive Procurement: A process used by utilities in many states to select supplier of new electric capacity and energy. Under this system, also known as competitive bidding, a utility solicits bids from prospective competitive generators to meet its power needs. The process often includes: the publication of a request for proposal by a utility for the purchase of capacity, energy, and/or demand-side management products and services; the submission of bids offering to provide such products and services by multiple would-be suppliers; and the selection by the utility of one or more winning bids subject to appropriate regulatory oversight.

Customer Choice: The ability of an end-user (residential, commercial or industrial customer) to purchase electricity from any supplier at negotiated rates and have that electricity delivered to a specific location.

Demand-Side Management: DSM is another word for conservation programs that are meant to save money by avoiding costs for new generation.

Direct Access: Affording customers the ability to receive transmission directly from competing power produces.

Distributing System: The substations, transformers and lines that convey electricity from high-power transmission lines to the ultimate consumers.

Embedded Cost: Funds already expended for investment in plant and operating expenses (i.e., a utility's historic average costs as shown on its books, in contrast to its "marginal cost," which is the change in costs caused by the production of each additional unit of electricity).

Exempt Wholesale Generator: An entity (or individual project) that generates power for wholesale sales only and is exempt from regulation under the Public Utility Holding Company Act of 1935, which is enforced by SEC. EWGs were created and defined by the Energy Policy Act of 1992.

Externalities: This term refers to costs that are not internalized in the stated cost of a power plant. Most of these external costs are environmental (e.g., cost of additional air pollution, increased mortality due to greater emissions).

Grid: The entire interlocking system for delivering electricity from generating station to ultimate customer.

Heat Rate: The amount of thermal energy input required to create a unit of electricity energy output, usually expressed in thousands of British thermal units per kilowatt-hour (Btu/kwh) computed by dividing the total Btu content of fuel burned for electric generation by the net kilowatt-hour generation. The heat rate serves as a proxy value for the efficiency of electricity production.

Independent Power Producer: An entity other than an electric utility that owns and/or operates one or more independent power facilities and that normally falls outside traditional utility cost-of-service regulation. Over time, this term has evolved by common usage to cover any nonutility power producer including cogenerators, nonutility generators private power producers, qualifying facilities and exempt wholesale generators.

Integrated Resource Planning: A process used by utilities to determine what resources they need to meet future demand for electricity. IRP generally emphasizes use of conservation programs and alternative resources to meet future demand.

Intra-Company Power Supply (Affiliate or Self-Service Wheeling): This involves the transmission of excess self-generated electricity from one facility of a company to another facility of the same company. No sale is involved.

Investor Owned Utilities: Utilities that issue common stock that is purchased by the public; also called privately owned utilities (as opposed to electric cooperatives or municipal utilities). Ohio IOUs are regulated by the PUCO.

Kilowatt-Hour: The basic unit of electric energy, it refers to actual electricity usage or consumption and is equal to 1 kilowatt (1,000 watts) of electricity steadily supplied to or taken from an electric circuit in one hour.

Load: The amount of electric power delivered to or required by certain end-use points on an electric distribution system. It can refer to the amount of electricity required by a customer or a piece of equipment.

Load Factor: The ratio of average load to peak load during a designated period. The higher the load factor, the better a utility or independent power producer is able to spread its fixed investment over a larger production base.

MegaWatt: The term used for expressing capacity of a power plant. One megawatt equals 1 million watts.

MegaWatt-Hour: The term used for expressing the output of a power plant in a given time frame. One megawatt-hour equals 1 million watt-hours.

Municipal Utility: An electric utility system owned and operated by a municipality that generates electricity and/or purchases electricity at wholesale for distribution to retail customers (residential, commercial, and industrial). Ohio's municipal electric utilities take their authority from the Ohio Constitution, and are locally regulated by the municipality's governing body (city or village council).

Natural Monopoly: Exclusive control of a commodity or service in a given market, or control that makes possible the fixing of prices. Utilities, including railroads, telephone companies and power companies, were often referred to as "natural" monopolies because a controlled monopoly generally was termed to be in the public interest. The generation services of power companies are no longer considered a natural monopoly.

Non-utility Generator: The broadest term used to describe a company (or individual project) that generates electricity but is not an electric utility (i.e., does not sell electricity on a franchise basis to retail customers).

Plant Efficiency: The percentage of the total energy content of a power plant's fuel that is actually converted into electricity. The remaining energy lost to the environment is waste or exhaust heat.

Power Broker: E ntities that facilitate transactions between buyers and sellers of electricity at wholesale. Unlike power marketers, they do not "take title" to electricity.

Power Pool: Two or more interconnected electric-utility transmissions and distribution systems that are operated in an integrated manner. Utilities establish power pools to handle the combined load requirements, including maintenance of the utilities' system, thereby enhancing the reliability and economic distribution throughout the region.

Public Utility Holding Company Act of 1935: PUHCA was enacted in 1935 in response to gross financial abuses by utility holding companies. Enforcement authority was assigned to the Securities and Exchange Commission. The SEC required a structural reorganization of the holding companies that eliminated most of the problems. PUHCA serves a consumer protection function by creating a check against horizontal expansions through mergers and acquisitions, providing for local control and prohibiting forum shopping.

Public Utility Regulatory Policies Act: PURPA was enacted in 1978 to advance three goals: increase conservation of electric energy, increased efficiency in the use of facilities and resources by electric utilities and equitable retail rates for electric consumers. One of the key elements of the ACT was to require electric utilities to connect with and purchase power from qualifying facilities. This provision reduced the monopoly power of electric utilities by negating the utility's position as the exclusive generator of electricity.

Rate Base: The value established by a state public utility commission on which a local utility is allowed to earn a particular rate of return. Rate base represents the utility's depreciated asset value or net investment in facilities, equipment and other property.

Rate of Return: Generally, this is the annual rate of return allowed to an investor-owned utility by its state public utility commission or to a nonqualifying facility independent power producer by the FERC. It is the ratio of allowed operating income as determined in the utility's most recent rate case to the utility's rate base expressed as a percentage.

Reliability Council: A group of interconnected utilities in a geographical area that work cooperatively to assure system reliability. There are seven electric reliability councils in North America.

Retail Wheeling: The providing of electricity transmission services to the ultimate (or retail) customer.

Rural Electric Cooperatives: Organizations composed of rural areas that band together to generate or purchase electricity at wholesale and distribute the electricity to retail customers. Cooperatives are governed by their member-owners.

System Interconnection: A connection between two electric transmission systems or electric-generating and transmission systems allowing electric energy to be transferred in either direction.

Transformer: An electromagnetic device that increases (steps up) or decreases (steps down) the voltage level of alternating current electricity.

Transmission: The process of transporting electric energy in bulk on a high-voltage power line from a source of supply to a point of use within a utility system or to a point of interconnection with another utility system or power grid.

Unbundle: To separate a utility's generation. transmission and distribution assets in terms of cost or accounting treatment. Also, to charge separate rates for the generation transmission and distribution functions.

Vertically-Integrated Utility: A utility company that sells power on a bundled basis and whose activities encompass the full range of different functional activities (e.g., generation, transmission and distribution).

Voltage: The measure of the potential difference or pressure in an electric circuit that causes electricity to flow, usually measured in volts or kilovolts.

Watt: The basic expression of electrical power or the rate of electrical work. A watt measures power in a circuit. One watt is the power equivalent of 1 ampere flowing through 1 ohm of resistance. One watt is also equivalent to approximately 1/746 horsepower, or 1 joule per second. Watts are the product of volts times amperes times a power factor.

Source: Coalition for Choice in Electricity