Glossary

Risk management is the reducing of the prospect of losses which will interfere with the execution of a company's business strategy. It allows managers to focus directly on shareholder value as an objective in decision making.

A pricing method which establishes rates on a weighted average of all costs, as opposed to allocating specific costs to specific customers.

In natural gas contracts, a contract clause that permits a contract to extend beyond the initial term. In futures contracts, astraddle trading procedure involving the shift of one month of a straddle into a future month, while maintaining the other contract month of the original spread.

During an emergency, a system operator sequentially rotates portions of its system that will be without power so that the total system load remains under its maximum load level and no one customer is without power for the entire emergency.

The completion of a purchase and a sale of a futures contract.

With respect to oil and gas properties, a share of production, which mayor may not bear a share of expenses of production, depending upon the terms of the specific lease.

A person who owns a royalty interest in production.

Regional Transmission Group.

Rules set in advance to delineate acceptable activities by participants, particularly participants with significant market power.

A hydroelectric plant which depends chiefly on the flow of a stream as it occurs for generation, as opposed to a storage project, which has space available to store water from one season to another. Some run-of-river projects have a limited storage capacity (pondage) which permits them to regulate streamflow on a daily or weekly basis.

In general, quick-start capability refers to generating units that can be available for load within a 3-minute period.

The amount of kilowatt-hours sold in a given period of time, usually grouped by classes of service, such as residential, commercial, industrial, and other. Other sales include public street and highway lighting, other sales to public authorities and railways, and interdepartmental 'sales.

Energy supplied to other utilities, cooperatives, municipalities, and Federal and State agencies for resale to ultimate consumers. Wholesale sales. May be subject to FERC regulations

Sand or porous sandstone in underground strata that contains natural gas.

The number of appliances or customers, divided by the basic units or total potential of the market. The term should not be used alone, but should be related to customers, families, households, population or other qualifying terms indicating the relevant market.

Electric power schedules to flow between control areas. Typically this is the net of all sales, purchases, and wheeling transactions between those areas at a given time.

The shutdown of a generating unit, transmission line, or other facility, for inspection or maintenance, in accordance with an advance schedule.

Operating a power system to balance generation and loads; managing the accounting, billing and information reporting for such operations.

A penalty assessed for differences between the amount of gas scheduled and the amount of gas tendered for delivery.

See RATE, SEASONAL.

Service sold only during certain periods of the year. Seasonal service may be sold either on a firm or on an interruptible basis.

Securities and Exchange Commission.

All methods of oil and natural gas extraction in which energy sources extrinsic to the reservoir other than pumps or pumping units are used.

Transportation service provided by a pipeline pursuant to NGPA Section 311 authorization. Under NGPA Section 311, an interstate pipeline may provide transportation service "on behalf of' an intrastate pipeline or a local distribution company, and an intrastate pipeline may provide transportation service" on behalf of an interstate pipeline or a local distribution company "served by an interstate pipeline."

The retail power market is commonly divided into several sectors for energy planning. These can include: residential, commercial, industrial, agricultural, public agency, and street lighting.

The aggregation of contracts for the purchase of the power output from various energy projects into one pool which then offers shares for sale in the investment market. This strategy diversifies project risks from what they would be if each project were financed individually, thereby reducing the cost of financing.

The ability of the bulk electric power system to withstand sudden disturbances and remain in operation.

The entity that provides the security assessment and emergency operations coordination for a group of control areas. Security Coordinators must not participate in the wholesale or retail merchant functions.

The ability of pipelines to charge discounted transportation rates to customers under FERC Order No. 436.

A generation facility dedicated to serving a particular retail customer, usually located on the customer's premises. The facility may either be owned directly by the retail customer or owned by a third party with a contractual arrangement to provide electricity to meet some or all of the customer's load.

The seller of an option is obligated to make-or take delivery according to the term s of the contract if the buyer chooses to. exercise the option. The seller is paid a premium by the buyer for assuming this risk. The seller is also known as the option grantor.

The Control Area within whose metered boundaries a schedule of capacity and/or energy originates. When there are no offsetting simultaneous interchange schedules, the Sending Control Area will increase generation, or use generation not needed for load requirements to effectuate a net export schedule of capacity and/or energy.

The total natural gas produced or purchased (including exchange gas receipts), or the net natural gas withdrawn from underground storage within a specified time interval, measured at the point of production, purchase, or withdrawal, adjusted for changes in local storage quantity. Gas send-out is comprised of natural gas sales, exchanges, deliveries, natural gas used by the company and unaccounted-for gas.

Southeastern Power Administration. A power marketing and electric transmission agency of the United States government with headquarters in Elberton, Georgia.

The territory in which a utility system is required or has the right to supply service to ultimate customers.

See RATE SCHEDULE.

The pipe that carries natural gas from a main to a customer's meter.

The obligation of a natural gas company to perform the services required by law or certificate regardless of whether the company has contractual duties.

The voltage level at which a customer is connected to the electric transmission and distribution system.

Energy created through rotational or motive force through a coupling.

The scheduling and operation of generating resources to meet changing load levels. Load shaping on a hydroelectric system usually involves the adjustment of water releases from reservoirs so that generation and load are continuously in balance.

A measure of the economic value of a business entity, where the economic value is equal to the net present value of expected cash flows discounted at the cost of capital. Unlike other financial measures, shareholder value encompasses the time value of money and addresses aspects such as risk, investment requirements and accounting methods.

See PEAK SHAVING.

One who contracts with a pipeline for transportation of natural gas and who retains title to all natural gas while it is being transported by the pipeline.

A short position is the trading position of a person who has sold securities or commodities that they do not own with the hope of buying at a later date at a lower price. A short sale is a contract for the sale of something, such as a commodity or futures contract, that the seller does not own. It is a method of profiting from the expected fall in price of the commodity but risky because if the commodity goes up, the owner of the short will have to purchase the underlying commodity at whatever price it reaches to cover the short sale.

A calculation of the costs that are not or would not be incurred by a utility because it takes power from a QF over a modest, specified (e.g., one month) period.

All variable production costs.

The reduction in volume of wet natural gas due to the removal of natural gas liquids, hydrogen sulfide, carbon dioxide, water vapor, and other impurities from the natural gas.

Under the Public Utility Regulatory Policies Act (PURPA), a small power producer (or small power production facility) generates electricity using waste, renewable (water, wind and solar), or geothermal energy as a primary energy source. Fossil fuels can be used, but renewable resource must provide at least 75 percent of the total energy input. (See Code of Federal Regulations, Title 18, Part 292.)

The use of radiation from the 'sun to substitute for electric power or natural gas heating.

A contract that commits the seller to deliver natural gas, usually within a stated maximum and minimum, from specific described and committed natural gas reserves or sources.

Any contract that provides a utility service under terms and conditions other than those listed in the utility's tariffs. For example, an electric utility may enter into an agreement with a large customer to provide, electricity at a rate below the tariffed rate in order to prevent the customer from taking advantage of some other option that would result in the loss of the customer's load. This generally allows that customer to compete more effectively in their product market.

A protection system designed to perform functions other than the isolation of electrical faults. Also called "remedial action scheme."

As applied to natural gas, specific gravity is the ratio of the weight of a given volume to that of the same volume of air, both measured under the same conditions.

To take on a position with the intent of increasing return. The individual or firm that speculates does not use or supply the underlying commodity but is willing to assume some of the price risk associated with the commodity in order to earn a return. Speculators provide the market with liquidity.

Those who use options to take on risk and the potential gains/losses associated with that risk.

Release of water from a reservoir over a spillway rather than putting it through turbines to generate electricity. A spillway is the overflow structure of a dam.

Unused capacity available from units connected to and synchronized with the grid to serve additional demand. The spinning reserve must be under automatic governor control to instantly respond to system requirements.

A method of pricing where the buyer and the seller agree to divide the difference between the sellers' costs of producing power and the buyer's otherwise available purchase price of power.

An interchange schedule where power is scheduled in from one source and out to multiple destinations.

Commodity transactions in which the transaction commencement is near term (e.g., within 10 days) and the contract duration is relatively short (e.g., 30 days).

A short-term single shipment sale of a commodity, including electricity or gas, purchased for delivery within one year, generally on an interruptible or best efforts basis. Spot purchases are often made to fulfill a certain portion of energy requirements to meet unanticipated energy needs, or to take advantage of low prices.

Generally speaking, a spot-start 'Swap begins two business days after the swap has been agreed to by the counterparty and the market maker.

The difference between two prices, amounts, or numbers such as the bid/ask prices in a commodity trading. In the futures and options markets a spread is the simultaneous purchase and sale of two different contracts in the expectation of a favorable change in their relative prices.

An option on the price differential between two related instruments or commodities.

The stability of a power system is its ability to develop restoring forces equal to or greater than the disturbing forces so as to maintain a state of equilibrium.

The basic temperature and pressure for measurement of natural gas volumes.

A measure of the volatility of an underlying instrument. It is a statistical quantity that measures the magnitude of the daily price change of that asset.

A set of codes developed by the Office of Management and Budget, which categorizes business into groups with similar economic activities.

Base Standard conditions, plus agreed corrections, to which all natural gas volumes are corrected for purposes of comparison and payment.

A contract that adheres to an established set of standards regarding the size of the contract, the strike prices, expiration dates, and other conditions.

Requirements under FERC's marketing affiliate rule, which prohibit discrimination in favor of the pipeline's own marketing affiliates and which require pipelines to submit reports detailing compliance with the rules.

A set unit fee payable at the outset by the recipient of a service based on total entitlement imposed on each unit of natural gas not purchased from, but transported by, the pipeline (Similar to a "demand" charge). The charge is intended to recover fixed costs otherwise recoverable in the sales commodity charge.

A facility that supports a utility system and is generally running under no load. It is available to replace or supplement a facility normally in service.

Support service that is available, as needed, to supplement a consumer, a utility system, or to another utility to replace normally scheduled power that becomes unavailable.

A site that contains one or more power generating units.

The electric supply for the ancillary equipment used to operate a generating station or substation.

A generator, usually found in hydroelectric plants, used to supply electric energy for station service equipment.

Also known as thermal coal," this is coal used in electric utility power plants, district steam heating plants, and industrial steam boilers to produce electricity or process steam or both.

A plant in which the prime mover is a steam turbine. The steam used to drive the turbine is produced in a boiler where fossil fuels are burned.

A thermal electric generating plant which 'Creates steam to drive a turbine.

See Turbine.

A principal momentum indicator or price oscillator used with natural gas futures, similar to the Relative Strength Index, although the calculation includes the lowest low and the highest high over a specific period.

A supply of fuel accumulated for future use. This includes coal and fuel oil stocks at the plant site, in coal cars, tanks, or barges at the plant site, or at separate storage sites.

A resting order to close out a lasing position when the price reaches a specified point.

The energy equivalent .of water stared in a reservoir above normal bottom elevation.

Facility used for the storage of natural gas; usually a cavern carved out of natural salt domes or depleted natural gas reservoirs into which natural gas can be reinjected and produced with minimal loss.

A reservoir which has space for retaining water from springtime snowmelts. Stored water is released as necessary far purposes such as power generation, fish passage and irrigation.

A service in which natural gas is received by the seller of the service and held for the account of the customer for redelivery at a later time. Storage services are typically utilized by customers to allow more even purchases or sales of natural gas throughout the year, despite variations in end-use demand. Storage service is also a critical element of the peak period deliverability of many interstate natural gas pipelines and distributors. Injection, withdrawal and holding fees are usually charged, and limits an rates, times of injection and withdrawal, and maximum volumes to be held are usually imposed.

A natural gas processing plant constructed near a transmission pipeline downstream from the fields where the natural gas in the pipeline has been produced. Also called an "on-line" plant. Generally, the straddle plant does not purchase and resell natural gas, but provides only a processing service for the owner of the natural gas or of processing rights to the natural gas. Frequently, natural gas producers reserve processing rights when they sell natural gas, so they can have natural gas liquids removed from the gas stream by a straddle plant.

Rate Design A rate design method applied by the FERC on gas pipelines which allocates all fixed costs to the demand component and all variable costs to the commodity, or usage component.

A utility company that derives the major portion of its total sales revenues from natural gas operations.

Under FERC Order No. 636, costs associated with certain gas pipeline assets previously used to provide bundled sales service, such as gas in storage and capacity on upstream pipelines, 'can no longer be assigned to customers of the unbundled services.

An investment with a cost recovery schedule that was initially approved by regulatory action that subsequent regulatory action or market forces has rendered not practically recoverable. Costs that electric utilities are currently permitted to recover through their rates but whose recovery may be impeded or prevented by the advent of competition in the industry.

The rate at which water passes a given point in a stream, usually expressed in cubic feet per second (cfs).

The set price at which a position will be established or cash settlement made if the buyer exercises the option. (See Option for more detail.)

Young black coal with high moisture content of between 15 and 40 percent by weight. In the U.S. the most often cited example is the Power River Basin coal found in Wyoming and Montana. Heating value varies from 7,000 Btu/lb to slightly over 9,000 Btu/lb. This type of coal is considered by many to have the largest reserves by weight around the world. Countries such as Indonesia and Malaysia have much more subbituminous coal that bituminous coal. Sulfur value is typically quire low, and ash is also usually low. Volatile matter is usually high, and can exceed 40% of the weight of the cal "as received."

The practice of remetering purchased .energy beyond the customer's utility meter, generally done when natural gas or electricity is distributed to building tenants through privately-owned or rented meters.

The imposition of costs on one customer or class of customers that are attributable to services provided to other customers or classes of customers, who therefore pay less than the appropriate actual costs for the services they receive.

Facility equipment that switches, changes, or regulates electric voltage. An electric power station which serves as a control and transfer point on an electrical transmission system. Substations route and control electrical power flow, transform voltage levels, and serve as delivery points to industrial customers.