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Glossary of Electricity Terms

One of the difficulties in discussing the electric industry is that the same terms mean different things to different people.  The following list was compiled based on a list developed through the Public Utilities Commission of Ohio. 

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, like buyer cooperatives or brokers, could perform this function in a restructured power market. 

Ampere:  The standard unit for measuring the strength of an electric current. 

Ancillary Services:  Services or tariff provisions related to provision of electricity, other than simple generation, transmission or distribution.  Ancillary services related to transmission or distribution.  Ancillary services related to transmission service include: energy losses, energy imbalances, scheduling and dispatching, load following, system protection and reactive power.  Ancillary services related to distribution include meter reading, billing and collections. 

Bulk Power Supply:  This term often is used interchangeably with wholesale power supply.  In broader terms, it refers to the aggregate of electric generating plants, transmission lines and related equipment.  The term may refer to those facilities within one electric utility, or within a group of utilities in which the transmission lines are interconnected. 

Contract Path:  The presumed path that the energy flow associated with a certain transaction will take.  Because electrons will follow the “path of least resistance” between any two points (sometimes referred to as the “physical path”), the contract path is not necessarily the same as the physical path. 

Coordination Services:  A combination of services --- usually the generation, transmission and delivery of power --- provided to a utility’s customers. 

Customer Choice:  Allowing electric customers to purchase energy from the generation source they choose.  Transmission and distribution functions would continue to be regulated.  Sometimes used interchangeably with the terms retail wheeling and restructuring. 

Demand Charges:  These are charges for the greatest amount of electrical power (in kilowatts, kW) supplied to you by your electric utility.  Demand charges are the way your utility pays for maintaining the excess capacity it must have to meet peak demands that occur from time to time.  The demand charge you pay is calculated on the basis of your highest demand over a short period of times (in DOE’s case, 15 minutes) during the past month.  Your utility assumes that, during the following month, you are likely to need that amount of peak power again, at some undetermined times, and bills you accordingly for the cost of maintaining extra power supply capacity so it can meet your demand at any time during the entire month. 

Deregulation:  The elimination of regulation from a previously regulated industry or sector of an industry. 

Distributed Generation:  A distributed generation system involves small amounts of generation located on a utility’s distribution system for the purpose of meeting local (substation level) peak loads and/or displacing the need to build additional (or upgrade) local distribution lines. 

Energy Charge:  This is the amount you are paying for each kilowatt hour of energy you consume.  We simply multiply the kilowatt hours of power your meter shows you used by the energy charge to get a monthly energy charge. 

EPACT:  The Energy Policy Act of 1992 (EPACT) addresses a wide range of energy issues.  The legislation creates a new class of power generators, exempt wholesale generators (EWGs), which is exempt from the provisions of the Public Utilities Holding Company Act of 1935 and grants authority to the FERC to order and condition access by any party to the interconnected transmission grid. 

FERC:  The Federal Energy Regulatory Commission (FERC) regulates the price, terms and conditions of power sold in interstate commerce and regulates the price, terms and conditions of all transmission services.  The FERC is the federal counterpart to the PUCO. 

Futures Market:  Arrangement through a contract for the delivery of a commodity at a time and price specified at the time of purchase.  The price is based on an auction or market basis. 

Hedging Contracts:  Contracts that establish the future process and quantities for electricity purchases, independent of the short-term market. 

Independent System Operator (ISO):  A company or organization that would act independently of its parent company or organization to operate the power transmission grid for a specified geographic area, offering equal service terms to all users. 

Interconnection:  The physical plant and equipment, usually at transmission-level voltage, that transfers electric energy between two or more entities.  It can consist of a substation and an associated transmission line and communications facilities, or a simple electric power line or switching station. 

Interconnection Agreement:  An agreement between two interconnected utilities that provides for mutual services across interconnections, such as short-term power sales and purchases, emergency power sales and purchases, and third-party power sales and purchases. 

Kilovolt (kV):  One thousand volts.  Volts are units of electromotive force, or the difference of electrical potential between two points of a conductor carrying a constant current of one ampere.

Kilowatt (kW):  Equal to one thousand watts.  A watt is the practical unit of electric power equal to the power developed in a circuit by a current of one ampere flowing through a potential difference of one volt. 

Kilowatt Hour (kWh):  A unit of electric energy or work equal to the use of one kilowatt for one hour. 

Megavolt (MV):  One million watts. 

Megawatt (MW):  The practical unit of electric measure equal to one million watts. 

Megawatt Hour (MWh):  A unit of electric energy or work equal to the use of one megawatt for one hour. 

Multiple Delivery Points:  More than one connection into a utility that provides electric transmission service to a wholesale or retail customer.  These connections allow service to be fed to a customer from more than one point and can serve as backups in case of a problem with other delivery points. 

Municipalization:  The process through which a municipality assumes responsibility for supplying electric utility service to its constituents using city-owned facilities.  To supply electricity, the municipality may generate and distribute the power or purchase wholesale power from others and distribute it. 

Municipal Electric Systems:  Nonprofit electric utilities that are owned by municipal communities (villages or cities).  These utilities are operated and governed by the municipality’s legislative authority, i.e. the city/village council/board of public affairs elected by municipal residents.  There are 84 in Ohio and two in West Virginia. 

Network Transmission Service:  Transmission service that allows a utility to vary its scheduled power and points of delivery and receipt on a transmission grid without paying an additional charge for each schedule change. 

Open Access:  The ability of utility companies to use excess capacity available through the high-voltage, long-distance transmission lines of other utilities in return for fair compensation. 

Parallel Flows:  Refers to the flow of electricity over all paths of least resistance when one utility sends energy to another. 

Power Factor:  The ratio of actual power being used in a circuit, expressed in watts or kilowatts (KW), to the power which is apparently being drawn from the line, expressed in volt-amperes or kilovolt-amperes.  When the volt-ampere (KVA) exceeds the actual power (KW), a power component known as reactive power (KVAR) is present since the operating current results in useful work;  the second, known as the reactive current does not.  This results in a lower power factor and less efficient use of a circuit. 

Power Pool:  An entity established to coordinate short-term operations to maintain system stability and achieve least-cost dispatch.  The dispatch provides backup supplies, short-term excess sales, reactive power support and spinning reserves.  The pool may own, manage and/or operate the transmission lines (“wires”) or be an independent entity that manages the transactions between entities. 

Real-Time Pricing:  The instantaneous pricing of electricity based on the cost of the electricity available for use at the time the electricity is demanded by the customer. 

Regional Transmission Group:  A group of utilities in a certain region that get together to jointly plan and study transmission services and come up with rules to monitor those transmission services.  The Federal Energy Regulatory Commission approves these groups. 

Reliability:  The degree to which the performance of elements of the electric system results in electricity being delivered to customers within accepted standards, and in the amount desired.  Reliability may be measured by the frequency, duration and size of adverse effects on the electric supply (or service to customers). 

Renewable Energy Sources:  Any source of energy that is continually available or that can be renewed or replaced.  Examples include wind, solar, geothermal, hydro, photovoltaic, wood and waste. 

Resource Efficiency:  Using less physical resources to produce the same product or service.  Resource efficiency involves a concern for the use of all physical resources and materials used in the production and use cycle. 

Restructuring:  The reconfiguration of the vertically integrated electric utility.  Restructuring usually refers to separation of the various utility functions into individually owned and operated entities.  The term is now often used to describe customer choice. 

Retail Market:  A market in which electricity and other energy services are sold directly to the end-use customer. 

Retail Wheeling:  The ability of a retail customer to purchase commodity electricity directly from the wholesale market rather than through a local distribution utility. 

Securitization:  When a utility issues bonds against the assured revenue stream resulting from transition costs that the state, or other regulatory agency, permits the utility to recover. 

Self-Generation:  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. 

Service Area:  The area a utility serves.  Investor-owned utilities and rural electric cooperatives have certified territories with boundaries established by the PUCO.  Municipal electric systems do not have certified territories, but their service areas are limited by the Ohio Constitution, which allows a municipal electric system to provide no more than one-third of its total sales outside municipal boundaries. 

Service Charge:  This is a charge on your bill each month which covers any future expenses for servicing customers.  It is basically a monthly fee customers pay for long term reliable maintenance.

Time-of-Use Rates:  The pricing of electricity based on its estimated cost during a particular time block.  Time-of-use rates are usually divided into three or four time blocks per 24-hour period (on-peak, mid-peak, off-peak and sometimes super off-peak) and by seasons of the year (summer and winter).  Real-time pricing differs from time-of-use rates in that it is based on actual (as opposed to forecast) prices that may fluctuate many times a day and are weather-sensitive, rather than varying with a fixed schedule. 

Universal Service:  Electric service sufficient for basic needs made available to all members of the population, regardless of their income. 

Volt-Ampere:  The unit of apparent power in an alternating-current circuit equal to the produce of the voltage in volts and the current in amperes without regard to phase. 

Wheeling:  The transmission of electricity by an entity that does not own or directly use the power it is transmitting.  This term is often used colloquially to mean “transmission.” 

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