Energy Terms

Energy Terminology

The energy world is full of words and abbreviations that have little meaning to the uninitiated. Here is a compilation of some terms you will hear:

Electricity Terms:

Capacity: A slush fund mandated by FERC to get money from users to build more generation capability, long term, to meet our generation demand. It is a fixed number.

Capacity Reserve Price : 25% more than the Clearance Price

Clearance Price: A number in kilowatts, charged once a year. $3.05 per kw for the year.

Congestion: In crowded areas, the cost to get electricity through the grid. This is an undefined cost.

Demand: a measure of the highest amount of electricity used during a single moment during a month.

Generation Charge: charges for the production of electricity, set by the generation supplier that you have chosen.

KWH: kilowatt-hours, the most common measure of electricity usage which is the number of kilowatts used in an hour.

Pass-Through Charges: these are fees that are “passed-though” to the customer with no profit.  These include Capacity, RMR, Congestion, Ancillary Services, Renewable Resources, and other charges.  If a supplier contract “includes pass-through charges” you will not see these charges on your utility bill.  If you decide to have some of the pass-through charges not included in your supplier contract, you will see them as line items on your utility bill.  For contracts longer than one year, there may be some benefits to not including some pass-though charges in your supply price.

RMR: Reliability Must Run: This fee was created to meet the demands on the grid that might be needed only during energy emergencies. These needs can be during very hot weather or if another regular power plant stops generating electricity. As a result,. there are generators that have to sit idle to be available for these peak periods. When they run, their cost is much higher than the normal generation. Since there is no way to know how often these generators must run, the real cost is unknown and changes. It can be zero for a month or it can be high during another month. RMR varies by your location.

ICAP Tag: Everyone has a number determined by the utility company based on the capacity demands on the grid as of August of the previous year, revised on June 1st of each year moving forward.

Interval Data File: see Load Profile Data below.

LFR: Locational Forward Reserves: A NEMA fee charged only by Constellation New Energy.

Load Factor: the average power divided by the peak power over a period of time. For interval meter customers, the load factor has an effect on what your electricity price will be.

Load Profile: a measure of how electricity is used on a 24×7 basis. The generation of electricity at night and on weekends (off-peak hours) is much less expensive than during peak-hours. The greater the percentage of electricity used during off-peak hours, the better your load profile.  Better load profiles permit customers to obtain lower electricity contracted rates.

Load Profile Data: a data file obtained from the utility that displays electricity usage in intervals of every fifteen minutes (or 60 minutes) over the course of 365 days. This file is used by electricity generation companies to model your usage on their computers to determine what price to charge. Electricity is less expensinve at night and on weekends, so higher use at these times results in a lower fixed price contract rate, since the fixed price is an average based on your load profile.

Renewable Energy Credits (RECs): are tradable, non-tangible energy commodities in the United States that represent proof that 1megawatt-hour (MWh) of electricity was generated from an eligible renewable energy resource (renewable electricity). The owner of the REC can claim to have purchased renewable energy. According to the U.S. Department of Energy‘s Green Power Network, RECs represent the environmental attributes of the power produced from renewable energy projects and are sold separately from commodity electricity.  It is important to understand that the energy associated with a REC is sold separately and is used by another party. The consumer of a REC receives only a certificate.  A green energy provider (such as a wind farm) is credited with one REC for every 1,000 kWh or 1 MWh of electricity it produces  A certifying agency gives each REC a unique identification number to make sure it doesn’t get double-counted. The green energy is then fed into the electrical grid (by mandate), and the accompanying REC can then be sold on the open market.

Once in the grid, renewable energy is impossible to separate from the conventionally generated energy. This makes purchasing of a REC equal to purchasing a claim, that the REC owner consumed energy from the renewable portion of the whole energy in the grid. Therefore REC purchase does not affect how much renewable energy was actually generated – only how it was distributed.

Transmission Charge:  Charges for moving high voltage electricity from a generation facility to the distribution lines to the distribution lines of an electric distribution company.  The Federal Energy Regulatory Commission

Natural Gas Terms:

Therm: A unit of measurement for natural gas equal to 100,000 BTU of energy.

MMBTU: Million BTUs or 10 Therms.

Dekatherm or DTH: One million BTU of energy, or ten therms.

CCF: Hundred Cubic Feet. Roughly equal to 1 Therm +- 5%. Each month, the conversion factor from CCF to therms varies. This value is typically listed on your bill.

MCF: Thousand Cubic Feet

BCF: Billion Cubic Feet

Conversion Factor: A factor used to change CCF or MCF to Therms, DTH, BTU or MMBTU.

LDC: Local Distribution Company, usually a regulated utility which owns and operates the local pipeline system and metering that delivers gas to consumers and business users,

Swing Commodity Credit: a term used on some gas contracts, where the customer is charged for a contracted amount of natural gas, but if they don’t use the contracted amount, a credit is applied to the account, for a portion of the unused, but contracted gas. This is a common method for gas sales people to give the perception of the lowest price in a competitive situation, when in fact, the price may be much higher if actual usage varies from the contract, which is almost always the case.

Basis: an amount of money added to the NYMEX natural gas price to account for the pipeline and delivery costs of getting gas from the well-head to the local distribution center.

NYMEX Plus Basis: A method of contracting gas where the contract specifies a fixed Basis number that is added to the NYMEX market price. This approach makes sense for customers who expect energy prices to remain stable or go down.

Transition Costs: Costs which are being passed on to utilities from interstate pipeline companies as a result of federally-mandated restructuring of the natural gas pipeline industry.

Retainage or Shrinkage: Natural gas kept by a utility or pipeline to recover “lost” or unaccounted for natural gas.  Includes pipeline fuel consumed by compressor stations used to pressurize pipeline system.