Energy Glossary
Here is an Energy Glossary on electricity and natural gas, these are some terms used in the Energy Industry with definitions and examples.
Capacity Charge
Definition: A charge that commercial customers pay for their peak energy usage, measured in kilowatts (kW). It covers the cost of maintaining enough capacity to meet energy demands.
Example: A manufacturing company is billed an extra fee for using a significant amount of electricity during peak hours in the summer.
Demand Charge
Definition: A fee based on the maximum amount of electricity a commercial customer uses during a specific time period.
Example: If a factory’s peak electricity usage is 200 kW, their demand charge will reflect this maximum level.
Energy Efficiency
Definition: Reducing the amount of energy required to provide the same service.
Example: Upgrading a commercial building to LED lighting reduces energy use while maintaining the same level of illumination.
Kilowatt (kW)
Definition: A measure of power that equals 1,000 watts. It represents the rate at which energy is consumed.
Example: A commercial office building uses 50 kW of power during regular business hours.
Kilowatt-Hour (kWh)
Definition: A unit of energy consumption. It represents the use of 1,000 watts of power over one hour.
Example: A large retail store consumes 2,000 kWh of electricity in a day.
Load Factor
Definition: A measure of the efficiency of electricity usage. It compares the actual electricity consumed to the maximum possible usage during a period.
Example: A business with a high load factor is using electricity more efficiently throughout the day compared to a business with sporadic peak usage.
Peak Demand
Definition: The highest level of electricity consumption in a given time period, typically during the busiest business hours.
Example: A hotel experiences peak demand at 8 AM when guests are using hot water, heating, and electrical devices at the same time.
Power Factor
Definition: A measure of how effectively electricity is used. A low power factor means that energy is being wasted.
Example: If a manufacturing plant has a power factor of 0.7, they may install power factor correction equipment to reduce energy waste.
Retail Electricity Provider (REP)
Definition: A company that sells electricity directly to customers in deregulated markets.
Example: A commercial office building in Texas buys its electricity from a retail electricity provider, which offers them competitive rates.
Time-of-Use Rates (TOU)
Definition: A pricing structure where electricity rates vary based on the time of day, with higher rates during peak hours and lower rates during off-peak hours.
Example: A commercial business lowers its energy costs by scheduling operations during off-peak hours when TOU rates are lower.
Deregulation
Definition: The process of opening up electricity markets to competition by allowing customers to choose their electricity supplier, while the utility continues to deliver the electricity.
Example: Businesses in Pennsylvania can shop for electricity supply rates from multiple suppliers due to deregulation.
Transmission Charge
Definition: A fee for moving electricity over long distances from power plants to local distribution networks.
Example: A hospital in Illinois pays a transmission charge to the utility company for delivering electricity from a distant power plant.
Distribution Charge
Definition: A fee for delivering electricity from the local utility’s distribution system to the end consumer’s facility.
Example: A restaurant in Ohio pays a distribution charge as part of their utility bill for the maintenance of local electrical lines.
Supply Rate
Definition: The price that consumers pay for the actual electricity they use, separate from delivery or transmission charges.
Example: A manufacturing plant compares supply rates from different energy providers to find the best deal.
Demand Response
Definition: A program that incentivizes commercial customers to reduce electricity usage during peak demand periods, often in exchange for lower rates or rebates.
Example: A large data center reduces energy consumption during peak hours as part of a demand response program, saving on utility costs.
Power Purchase Agreement (PPA)
Definition: A contract between an energy producer and a customer, where the customer agrees to purchase electricity from a renewable energy project for a specified price over a long-term period.
Example: A tech company enters into a PPA to source all its electricity from a solar farm at a fixed rate for 10 years.
Renewable Energy Certificates (RECs)
Definition: A tradable commodity that represents proof that 1 megawatt-hour (MWh) of electricity was generated from a renewable energy resource.
Example: A commercial building purchases RECs to meet sustainability goals and claim they are powered by 100% renewable energy.
Fixed Rate Plan
Definition: A type of electricity plan where the supply rate remains constant for the duration of the contract, regardless of market fluctuations.
Example: A retail chain opts for a fixed-rate plan to lock in their electricity costs for the next three years.
Variable Rate Plan
Definition: A type of electricity plan where the supply rate fluctuates based on market conditions.
Example: A small business in a deregulated market chooses a variable rate plan, which means their electricity rate may change monthly based on market prices.
Load Shedding
Definition: The intentional reduction of electricity consumption by commercial customers to prevent overloading the power grid.
Example: During a heatwave, an office building shuts down non-essential systems to reduce strain on the electrical grid.
Energy Audits
Definition: An assessment of how much energy a commercial building uses, identifying areas where energy savings can be achieved.
Example: A hotel undergoes an energy audit and discovers it can save thousands of dollars annually by upgrading its HVAC system.
Combined Heat and Power (CHP)
Definition: A system that generates electricity and captures usable heat simultaneously, improving overall energy efficiency.
Example: A manufacturing plant installs a CHP system to generate electricity and use the excess heat to power its production processes.
Demand-Side Management (DSM)
Definition: Programs designed to encourage consumers to modify their energy usage, either by reducing consumption or shifting usage to off-peak times.
Example: A utility offers rebates to commercial customers who install energy-efficient lighting systems as part of a DSM program.
Grid Parity
Definition: The point at which renewable energy becomes cost-competitive with conventional electricity sources without subsidies.
Example: Solar power reaches grid parity when it becomes cheaper for a business to install solar panels than to buy electricity from the grid.
Net Metering
Definition: A system that allows commercial customers who generate their own electricity (e.g., via solar panels) to feed excess power back into the grid in exchange for credits.
Example: A corporate office with rooftop solar panels sends surplus energy to the grid and receives a credit on their electricity bill.
Interruptible Rate
Definition: A reduced electricity rate offered to commercial customers in exchange for agreeing to curtail their electricity usage during periods of high demand.
Example: A large factory signs up for an interruptible rate plan, where they receive a discount on their energy bill but must reduce operations during peak demand.
Smart Meter
Definition: A digital device that records electricity consumption in real-time and communicates that information to the utility.
Example: A business uses a smart meter to track its hourly electricity usage and adjust operations to reduce costs during peak times.
Tariff
Definition: A document that outlines the rates, fees, and conditions under which a utility provides electricity service to its customers.
Example: A commercial office building reviews the local utility’s tariff to understand the rates they are being charged for electricity.
Peak Shaving
Definition: Reducing the amount of electricity consumed during periods of peak demand to lower energy costs and reduce strain on the grid.
Example: A warehouse shifts the operation of energy-intensive machinery to late evening hours, effectively shaving their peak energy consumption.
Interruptible Power
Definition: A power supply that can be temporarily reduced or stopped by the utility during times of high demand, typically in exchange for a lower electricity rate.
Example: A commercial plant agrees to interruptible power to save on electricity costs but must be prepared to halt production during grid emergencies.
Base Load
Definition: The minimum amount of consistent, steady electricity demand required by a utility’s customers at any time.
Example: The base load for a city may be primarily supplied by nuclear or coal-fired power plants that run continuously to meet the minimum demand.
Blackout
Definition: A complete loss of power in an area due to failure in the electricity generation, transmission, or distribution system.
Example: A severe storm causes damage to transmission lines, resulting in a blackout for several commercial customers in the region.
Brownout
Definition: A temporary reduction in voltage from the utility, typically used to prevent a full blackout during times of high electricity demand.
Example: During a heatwave, the utility reduces voltage to prevent overloading the grid, causing lights to dim in commercial buildings.
Cogeneration
Definition: The simultaneous production of electricity and useful thermal energy from the same energy source.
Example: A hospital operates a cogeneration system, using natural gas to generate electricity while capturing the waste heat for space heating.
Conservation Voltage Reduction (CVR)
Definition: A method by which utilities reduce the voltage supplied to customers to lower electricity consumption and prevent grid overload.
Example: During peak demand, a utility implements CVR to reduce the strain on the grid without causing significant disruption to customers.
Curtailment
Definition: The reduction in electricity use by a utility customer at the utility’s request, typically during periods of high demand.
Example: A commercial office park agrees to reduce its lighting and HVAC system usage when requested by the utility during peak demand periods.
Distributed Generation (DG)
Definition: Electricity generation that occurs at or near the point of use, rather than at a centralized power plant.
Example: A commercial complex installs rooftop solar panels, using distributed generation to power its own operations.
Distribution Network
Definition: The system of wires, transformers, and substations that delivers electricity from the transmission system to the end user.
Example: After high-voltage electricity is transmitted across the grid, it is stepped down through the distribution network to serve commercial customers.
Dynamic Pricing
Definition: A pricing strategy where electricity rates change based on real-time supply and demand conditions.
Example: A manufacturing plant is charged higher rates during periods of peak demand and lower rates during off-peak times under a dynamic pricing model.
Energy Management System (EMS)
Definition: A computer-based system used by utilities to monitor, control, and optimize the performance of the generation and transmission systems.
Example: Utilities use an EMS to balance supply and demand in real-time, ensuring reliable electricity service for commercial customers.
Firm Power
Definition: Electricity that is guaranteed by the utility to be available at all times, regardless of demand.
Example: A data center requires firm power to ensure continuous electricity, even during peak periods or emergencies.
Generation Charge
Definition: The cost of producing electricity, often separated out on a utility bill from transmission and distribution charges.
Example: A commercial customer pays a generation charge based on the amount of electricity they consume, which reflects the cost of the utility’s power plants.
Green Power
Definition: Electricity that is generated from renewable energy sources such as wind, solar, and hydropower.
Example: A commercial business opts for a green power plan, ensuring that their electricity comes from renewable sources.
Hedge Contract
Definition: A financial contract used by businesses to lock in electricity prices for a future date, providing protection against price fluctuations.
Example: A manufacturer signs a hedge contract to secure a fixed electricity rate for the next five years, avoiding future market volatility.
Interruptible Service
Definition: An agreement in which the utility can interrupt a customer’s power during periods of high demand in exchange for lower electricity rates.
Example: A large commercial factory participates in an interruptible service plan, agreeing to reduce its power usage when requested by the utility.
Line Loss
Definition: The loss of electrical energy as it travels through the transmission and distribution lines from the power plant to the end user.
Example: A commercial facility located far from a power plant may experience higher line losses, leading to slightly higher electricity costs.
Load Balancing
Definition: The process of distributing electricity across the grid to ensure that supply meets demand and prevent overloading certain parts of the system.
Example: During periods of high commercial electricity demand, the utility uses load balancing to prevent blackouts by distributing power more evenly across the grid.
Load Profile
Definition: A graph or chart that shows the variation in a customer’s electricity consumption over a given period, typically a day, week, or month.
Example: A hotel reviews its load profile to understand when its peak electricity consumption occurs and adjusts its operations accordingly.
Off-Peak Hours
Definition: The times during the day when electricity demand is lower, often resulting in lower electricity rates for consumers.
Example: A commercial bakery shifts some operations to off-peak hours to take advantage of reduced electricity rates.
Power Purchase Agreement (PPA)
Definition: A long-term contract between a power producer and a customer to purchase electricity at a predetermined price.
Example: A retail chain enters a 15-year PPA to buy electricity generated from a nearby wind farm at a fixed rate.
Reactive Power
Definition: The power that is used to maintain the voltage on the electricity grid, ensuring the proper functioning of electrical systems.
Example: A factory's machinery requires reactive power to maintain voltage levels, even though it does not directly consume that power.
Real-Time Pricing (RTP)
Definition: A rate structure where the price of electricity changes throughout the day based on actual wholesale electricity market prices.
Example: A large office building uses real-time pricing to schedule HVAC and lighting systems during the lowest-priced hours.
Reliability
Definition: The ability of the electricity grid to deliver power without interruptions.
Example: Commercial businesses rely on the utility’s grid reliability to maintain consistent power for their operations.
Service Charge
Definition: A fixed fee that commercial customers pay to their utility for maintaining electrical service, regardless of the amount of electricity used.
Example: A restaurant is charged a monthly service fee by the utility, even if their electricity usage is low during certain months.
Smart Grid
Definition: An advanced electricity network that uses digital technology to monitor and manage the flow of electricity from suppliers to consumers.
Example: Utilities use smart grid technology to detect power outages in real-time and restore service to commercial customers more quickly.
Standby Power
Definition: The backup power that is available to a commercial customer in case of an outage or reduction in regular power supply.
Example: A hospital has standby power systems in place, including generators, to ensure continuous operations during outages.
Tariff Schedule
Definition: A document that details the rates, terms, and conditions for electricity service, including different pricing tiers based on consumption levels.
Example: A commercial customer reviews their utility’s tariff schedule to determine whether they qualify for lower rates under a different pricing plan.
Transmission System
Definition: The network of high-voltage power lines that transport electricity from power plants to substations where it is distributed to consumers.
Example: Commercial facilities are often located near transmission lines to ensure efficient delivery of high-voltage electricity.
Voltage Surcharge
Definition: An additional charge applied to customers who require higher-than-standard voltage levels for their operations.
Example: A steel manufacturer pays a voltage surcharge to receive the high-voltage power needed to operate their industrial equipment.
Wheeling
Definition: The process of transporting electricity over the grid from one utility’s service area to another.
Example: A commercial entity contracts with a utility to wheel electricity generated from its wind farm to a customer in a different state.
Aggregator
Definition: A company or service that groups multiple businesses or consumers together to purchase electricity in bulk, often at a lower rate.
Example: A shopping mall joins an aggregator to purchase electricity collectively with nearby businesses, securing a lower supply rate.
Ancillary Services
Definition: Support services necessary to maintain grid stability, such as frequency control and reserve power, ensuring reliable delivery of electricity.
Example: A data center relies on ancillary services from its utility to prevent power outages and maintain constant energy flow during peak periods.
Balancing Authority
Definition: An entity responsible for maintaining a balance between electricity supply and demand in a specific geographical area.
Example: The local balancing authority ensures that there is always enough electricity supply to meet the demand from commercial users in the region.
Block and Index Pricing
Definition: A hybrid pricing model where part of a business's electricity consumption is purchased at a fixed rate (block), while the rest is purchased at a market rate (index).
Example: A manufacturing company uses block and index pricing to lock in stable rates for most of their energy use while benefiting from fluctuating market rates for the remainder.
Capacity Market
Definition: A marketplace where electricity providers buy and sell the rights to supply future electricity capacity to ensure there is enough available during peak demand.
Example: A utility participates in the capacity market to secure enough electricity for its commercial customers during high-demand periods in the summer.
Cogeneration (Combined Heat and Power, CHP)
Definition: A system that produces both electricity and heat from the same fuel source, often improving energy efficiency for large businesses.
Example: A hotel installs a cogeneration system to simultaneously generate electricity for its rooms and use the heat to provide hot water.
Coincidental Peak Demand (CPD)
Definition: The highest level of electricity demand from a commercial user that coincides with the peak demand of the entire grid or utility service area.
Example: A manufacturing plant's operations coincide with the utility's peak demand during a hot summer day, increasing their CPD charges.
Commercial Demand Response
Definition: A program where businesses reduce their electricity usage during peak demand periods, usually in exchange for financial incentives.
Example: A warehouse participates in a commercial demand response program by temporarily reducing its HVAC usage when the utility requests it during peak periods.
Competitive Retailer
Definition: A company that competes with other electricity providers to sell power to businesses in deregulated markets.
Example: A commercial office park in Texas contracts with a competitive retailer to receive lower electricity rates than the default utility provider offers.
Distributed Energy Resources (DER)
Definition: Small-scale power generation or storage units, such as solar panels or battery storage, located close to the point of consumption.
Example: A supermarket installs solar panels as a distributed energy resource to generate some of its own electricity, reducing reliance on the grid.
Electricity Broker
Definition: A third-party intermediary who helps businesses find and negotiate electricity supply contracts, often at more favorable rates.
Example: A large retail chain uses an electricity broker to compare supply rates from different providers and secure a competitive deal.
Firm Service
Definition: Electricity service that is guaranteed to be available at all times and cannot be interrupted except in emergency situations.
Example: A hospital opts for firm service to ensure continuous power, critical for operating life-saving equipment.
Hedging
Definition: A risk management strategy that allows businesses to lock in electricity prices through long-term contracts, protecting them from price fluctuations.
Example: A commercial office building enters a hedging agreement to secure a fixed rate on electricity for five years, shielding it from future rate increases.
Interruptible Load
Definition: A contractual agreement where a business agrees to reduce or stop electricity usage during peak demand periods in exchange for lower rates.
Example: A cold storage warehouse agrees to be part of an interruptible load program, reducing power usage during grid emergencies.
Load Aggregation
Definition: Combining the electricity demands of multiple customers to negotiate better rates or participate in the energy market more effectively.
Example: Several small businesses band together through load aggregation to purchase electricity at a reduced bulk rate.
Load Forecasting
Definition: The process of predicting future electricity demand based on historical data, current trends, and external factors like weather.
Example: A utility uses load forecasting to predict how much electricity its commercial customers will need next month and adjust supply accordingly.
Metering and Monitoring
Definition: The tracking and recording of electricity consumption using advanced meters, helping businesses manage energy use and control costs.
Example: A large industrial complex installs smart meters and energy monitoring software to track energy consumption and identify inefficiencies.
Off-Take Agreement
Definition: A contract in which a buyer agrees to purchase electricity from a generator at a fixed price, often used for renewable energy projects.
Example: A tech company enters into an off-take agreement with a wind farm to purchase all of its electricity needs at a set price over 15 years.
Peak Shaving
Definition: Reducing energy consumption during peak demand times to lower overall energy costs and avoid higher peak charges.
Example: A factory implements peak shaving by shifting some operations to nighttime hours when electricity rates are lower.
Power Factor Correction
Definition: The process of improving the power factor of a business's electrical system to make it more efficient and reduce energy costs.
Example: A data center installs power factor correction equipment to improve its electrical efficiency and lower its utility bills.
Renewable Portfolio Standard (RPS)
Definition: A regulation that requires utilities and electricity providers to source a certain percentage of their electricity from renewable energy.
Example: A state with an RPS mandates that 30% of all electricity sold by utilities must come from renewable sources like wind or solar.
Retail Energy Provider (REP)
Definition: A company that sells electricity directly to consumers in a deregulated market.
Example: A commercial office park contracts with a retail energy provider to obtain lower electricity rates than those offered by the default utility.
Spot Market
Definition: A marketplace where electricity is bought and sold for immediate delivery, with prices determined by real-time supply and demand.
Example: A business purchases electricity from the spot market when its long-term contract doesn’t cover unexpected surges in demand.
Tariff Rider
Definition: An additional charge or credit applied to a business's electricity bill, often reflecting changes in regulatory or market conditions.
Example: A commercial customer in a deregulated market might see a tariff rider applied to their bill to reflect rising wholesale electricity costs.
Transmission Access Charge
Definition: A fee for using high-voltage transmission lines to move electricity from the generation site to local distribution networks.
Example: A factory that sources electricity from an out-of-state provider pays a transmission access charge for transporting the electricity over long distances.
Virtual Power Plant (VPP)
Definition: A network of distributed energy resources, such as solar panels or batteries, that are managed collectively to provide power to the grid.
Example: A collection of commercial solar panel systems acts as a virtual power plant, feeding excess electricity back into the grid when demand is high.
Wholesale Electricity Market
Definition: A marketplace where electricity is bought and sold in large quantities, typically between generators and utility companies.
Example: A large retail chain contracts with a supplier that purchases electricity on the wholesale electricity market to offer lower prices.
Zero Net Energy (ZNE)
Definition: A building or facility that produces as much energy as it consumes over a specified time period, often through renewable energy sources.
Example: A corporate headquarters achieves zero net energy by using on-site solar panels to generate all the electricity it consumes annually.
Aggregator Service Provider (ASP)
Definition: A third-party company that combines the electricity demand of multiple businesses to negotiate better rates with electricity suppliers.
Example: A group of small businesses partners with an Aggregator Service Provider to secure more favorable electricity pricing from suppliers than they could individually.
Ancillary Service Provider
Definition: An entity that offers services like voltage control, frequency regulation, and reserve power to support the grid’s reliability.
Example: A commercial energy provider contracts with an ancillary service provider to ensure its customers have stable and reliable electricity.
Balancing Mechanism
Definition: A system that electricity suppliers and grid operators use to balance supply and demand in real time by adjusting generation or consumption.
Example: A power plant increases output in the balancing mechanism when electricity demand spikes unexpectedly due to hot weather.
Bilateral Contract
Definition: A direct agreement between an electricity supplier and a customer, often for a fixed price and duration, negotiated outside of the wholesale electricity market.
Example: A commercial factory signs a bilateral contract with a local energy supplier to lock in electricity prices for five years, protecting it from market volatility.
Block Pricing
Definition: A pricing strategy where a business buys blocks of electricity at fixed rates for different periods, often used to hedge against price volatility.
Example: A data center purchases electricity in quarterly blocks at a fixed rate to protect itself from fluctuating prices in the wholesale market.
Capacity Auction
Definition: A market-based process where electricity suppliers bid to provide future capacity to meet anticipated demand.
Example: An electricity supplier participates in a capacity auction to secure rights to provide power during peak demand periods next year.
Capacity Obligation
Definition: A requirement for electricity suppliers to secure enough capacity to meet their customers’ peak demand, often through contracts with power plants or participation in capacity markets.
Example: A commercial electricity supplier must fulfill its capacity obligation by ensuring it has contracts with sufficient power generation to meet demand during the hottest months.
Contract for Differences (CfD)
Definition: A contract where the buyer and seller agree to settle the difference between a fixed strike price and the market price of electricity.
Example: A renewable energy developer enters a CfD with an electricity supplier, guaranteeing a fixed price for wind-generated electricity, even if market prices fluctuate.
Curtailment Service Provider (CSP)
Definition: A company that helps commercial electricity customers reduce or "curtail" their electricity usage during peak demand in exchange for financial incentives.
Example: A factory works with a CSP to temporarily reduce its energy consumption during peak hours, receiving compensation from the utility for doing so.
Day-Ahead Market
Definition: A wholesale electricity market where suppliers and consumers commit to buying or selling electricity for delivery the following day.
Example: An electricity supplier purchases power in the day-ahead market to meet the projected demand of its commercial customers for the next day.
Energy Risk Management
Definition: Strategies and tools used by electricity suppliers and customers to manage price volatility and market risks.
Example: A large commercial company uses energy risk management techniques such as hedging to avoid unexpected spikes in electricity costs.
Fixed-Price Supply Contract
Definition: A contract where the price per kilowatt-hour (kWh) remains constant throughout the term, protecting the business from market fluctuations.
Example: A retail chain opts for a fixed-price supply contract to stabilize its electricity costs over the next three years.
Forward Contract
Definition: An agreement between an electricity supplier and a customer to deliver a specified amount of electricity at a future date for a pre-determined price.
Example: A large office park enters a forward contract to buy electricity at a set price six months from now, securing stable rates for future use.
Guaranteed Service Level (GSL)
Definition: A commitment from electricity suppliers to provide a certain standard of service, with penalties for non-performance.
Example: A commercial business chooses a supplier offering a GSL, ensuring that if there is a service disruption, the company will receive financial compensation.
Hedge Contract
Definition: A financial instrument used by electricity suppliers and customers to lock in prices and reduce exposure to price volatility.
Example: A manufacturing company signs a hedge contract with its electricity supplier to fix its rates for the next two years, mitigating the risk of price increases.
Interruptible Service Agreement
Definition: A contract where a customer agrees to reduce electricity use during peak periods in exchange for lower electricity rates or rebates.
Example: A large commercial warehouse signs an interruptible service agreement with its electricity supplier, allowing the supplier to cut power during high demand to avoid grid stress.
Load Management
Definition: The practice of adjusting electricity consumption patterns to reduce peak demand and lower electricity costs.
Example: A supplier offers a load management program to commercial clients, helping them shift non-essential energy usage to off-peak times to reduce their overall costs.
Load Shifting
Definition: A strategy used by electricity suppliers to encourage customers to move energy usage from peak periods to off-peak periods to ease demand on the grid.
Example: A commercial business adjusts its operations to take advantage of lower rates offered by its supplier for electricity used at night.
Long-Term Power Purchase Agreement (PPA)
Definition: A contract where an electricity supplier agrees to purchase electricity from a generator, often renewable, at a fixed price for an extended period.
Example: A commercial office building enters a long-term PPA with a solar energy provider, ensuring stable and predictable electricity costs for the next 20 years.
Market Clearing Price
Definition: The price at which electricity is bought and sold in the wholesale market, where supply meets demand.
Example: An electricity supplier secures power for its commercial customers at the market clearing price in the regional power exchange.
Net Metering Agreement
Definition: A contract allowing businesses with on-site generation (like solar panels) to sell excess electricity back to the grid, receiving credits on their future electricity bills.
Example: A shopping mall with rooftop solar panels signs a net metering agreement with its electricity supplier, using credits from surplus generation to offset its energy costs.
Off-Peak Contract
Definition: An agreement that offers lower electricity rates during periods of low demand, often in the evening or overnight.
Example: A warehouse that operates mainly at night signs an off-peak contract with its supplier to benefit from reduced electricity rates during those hours.
Pooled Purchasing
Definition: A strategy where multiple businesses combine their electricity demand to negotiate better terms with suppliers through bulk purchasing.
Example: A group of commercial offices forms a pooled purchasing arrangement, leveraging their combined demand to secure a more favorable rate from an electricity supplier.
Real-Time Market
Definition: A market where electricity is bought and sold in real-time, with prices fluctuating based on immediate supply and demand conditions.
Example: An electricity supplier buys additional power for its commercial customers in the real-time market when demand exceeds forecasts.
Renewable Energy Supplier
Definition: An electricity supplier that offers electricity generated from renewable sources like wind, solar, or hydropower.
Example: A commercial business chooses a renewable energy supplier to power its operations entirely with green energy, meeting sustainability goals.
Retail Electricity Provider (REP)
Definition: A company that sells electricity directly to consumers and businesses in deregulated markets, offering competitive pricing and services.
Example: A commercial building in Texas switches to a Retail Electricity Provider to take advantage of better rates than the default utility offers.
Spot Purchase
Definition: The act of buying electricity on the spot market for immediate delivery, usually at a fluctuating market rate.
Example: An electricity supplier makes a spot purchase to meet a sudden surge in demand from its commercial customers during a heatwave.
Supplier of Last Resort (SOLR)
Definition: A backup supplier that provides electricity to customers if their primary supplier fails or exits the market.
Example: A commercial building automatically switches to the supplier of last resort when its contracted electricity provider goes out of business unexpectedly.
Supply Agreement
Definition: A contract between a business and an electricity supplier that outlines the terms, pricing, and duration of the electricity supply.
Example: A retail chain signs a 3-year supply agreement with an electricity provider, locking in favorable rates and ensuring stable energy costs.
Wholesale Energy Supplier
Definition: A company that sells large quantities of electricity to retail electricity providers or large industrial customers.
Example: A commercial building contracts with a wholesale energy supplier to secure lower electricity costs by buying directly from the wholesale market.
Natural Gas Terms
British Thermal Unit (BTU)
Definition: A unit of measurement for energy, specifically the amount of heat required to raise the temperature of one pound of water by one degree Fahrenheit.
Example: The amount of energy contained in natural gas is often measured in BTUs, with one cubic foot of natural gas containing about 1,030 BTUs.
Capacity Charge
Definition: A fee paid by commercial customers to reserve pipeline capacity for transporting natural gas, typically based on peak demand.
Example: A manufacturing plant pays a capacity charge to ensure they have enough pipeline space to transport natural gas during peak operational hours.
City Gate
Definition: The point where a natural gas distribution company receives gas from a transmission pipeline for local distribution.
Example: The local utility company delivers natural gas to businesses from the city gate, which is supplied by the interstate transmission pipeline.
Compressor Station
Definition: A facility that compresses natural gas to move it through pipelines at a high pressure, ensuring efficient transport.
Example: Natural gas travels through compressor stations as it moves from production fields to commercial users across the country.
Deregulation
Definition: The process of opening up the natural gas market to competition, allowing businesses to choose their gas supplier instead of relying on the utility company.
Example: In deregulated markets, a large commercial bakery can shop for different natural gas suppliers to find the best rates and service options.
Distribution Charge
Definition: A fee that covers the cost of delivering natural gas through the local distribution network to the end consumer.
Example: A commercial office building pays a distribution charge to the utility company for maintaining and delivering natural gas to their facility.
Hedging
Definition: A financial strategy used to lock in future natural gas prices to protect against market volatility.
Example: A large industrial plant uses hedging contracts to secure a fixed price for natural gas over the next two years, avoiding potential price spikes.
Interruptible Service
Definition: A type of natural gas service where the supplier can interrupt deliveries during peak periods in exchange for lower rates.
Example: A commercial factory signs up for interruptible service to receive lower gas rates but must be prepared to reduce consumption during peak demand periods.
Liquefied Natural Gas (LNG)
Definition: Natural gas that has been cooled to a liquid state for storage or transportation, particularly for areas without pipeline access.
Example: A commercial port uses LNG to fuel its equipment, receiving deliveries by tanker truck since there is no direct natural gas pipeline to the area.
Load Factor
Definition: The ratio of a business's actual natural gas usage compared to the maximum possible usage over a given time period, indicating how consistently gas is used.
Example: A manufacturing company with a high load factor uses natural gas more efficiently by maintaining a steady consumption level throughout the day.
Local Distribution Company (LDC)
Definition: A regulated utility that delivers natural gas to homes and businesses through a local distribution network.
Example: A restaurant receives its natural gas supply from the local distribution company, which maintains the gas lines in their area.
Natural Gas Futures
Definition: A financial contract that sets the price for natural gas to be delivered at a future date, commonly used by large commercial consumers to hedge against price fluctuations.
Example: A power plant buys natural gas futures to lock in prices for the upcoming winter months when demand and prices typically rise.
Peak Shaving
Definition: The practice of reducing natural gas usage during peak demand times, often by using alternative fuels to avoid high prices.
Example: A commercial building uses fuel oil as a backup during peak periods to reduce natural gas consumption and avoid peak charges.
Pipeline Capacity
Definition: The maximum amount of natural gas that a pipeline can transport at a given time.
Example: A large commercial customer needs to secure enough pipeline capacity to ensure that natural gas is available during high-demand periods in winter.
Spot Market
Definition: A market where natural gas is bought and sold for immediate delivery, typically with prices fluctuating based on real-time supply and demand.
Example: A commercial business may buy natural gas on the spot market during periods of unexpected demand, but prices can be higher than long-term contracts.
Take-or-Pay Contract
Definition: A contract where the buyer agrees to either take a specified amount of natural gas or pay for it, even if it’s not used.
Example: A large industrial consumer enters a take-or-pay contract to ensure that it has a consistent supply of natural gas, paying for the agreed volume whether they use it or not.
Tariff
Definition: A schedule of rates and charges set by a regulatory agency for natural gas service, outlining the cost for transportation, distribution, and supply.
Example: A commercial business reviews the local utility’s tariff to understand their natural gas rates, including any fixed fees or usage-based charges.
Transportation Service
Definition: A service provided by a pipeline or utility where the customer purchases natural gas from a third-party supplier and pays the utility to transport the gas.
Example: A commercial bakery buys its natural gas from a supplier and uses the local utility’s transportation service to deliver the gas to their facility.
Wellhead Price
Definition: The price of natural gas at the production site before any transportation or distribution costs are added.
Example: The wellhead price for natural gas is lower than what businesses pay since additional costs like transportation and distribution fees are applied afterward.
Weather Normalization Adjustment
Definition: A billing adjustment that accounts for variations in weather, allowing for more stable natural gas rates over time by smoothing out the impact of unusually cold or warm weather.
Example: A commercial office building’s gas bill includes a weather normalization adjustment to balance higher gas consumption during a particularly cold winter month.
Wholesale Gas Market
Definition: A marketplace where large quantities of natural gas are bought and sold between producers, utilities, and large commercial customers.
Example: A large manufacturing plant buys its natural gas supply from the wholesale gas market to benefit from bulk pricing, which is generally lower than retail rates.