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What's a Kilowatt? And Other Definitions
A
Glossary of Electricity- and Competition-Related
Terms
Access Charge: A charge levied on suppliers or
their customers for the right to send electricity
over another party's wires.
Aggregation: Combining the electricity
requirements of several parties to create a larger
requirement with more purchasing clout. Aggregation
can help consumers gain access to cheaper power by
combining them in large groups or matching their loads
to those of other customers with complementary loads.
Avoided Cost: The cost a utility would
have incurred had it produced power itself or bought
it from another source, rather than purchase it from
an independent power producer. The Public Utility
Regulatory Policies Act of 1978 requires utilities
to purchase power from independent producers at their
avoided cost rate.
Base Load: The minimum amount of electricity
a utility needs to keep its customers constantly powered.
Capacity: The total amount of electricity
a producer can generate and distribute at any given
time.
Capacity Factor: The average amount of a producer's
generation expressed as a percentage of the maximum
it could produce.
Competition Transition Charge (CTC):
A temporary, non-bypassable charge that will be levied
on consumers in the competitive marketplace to help
utilities recover their stranded costs.
Cooperative Utility: A utility owned by its
customers. Cooperatives were established in
rural areas to ensure that these areas received service.
They are exempt from federal income taxes.
Cost-of Service Regulation: The way utilities'
rates have traditionally been set in the regulated
marketplace. Cost-of-service regulation is based
on a utility's cost of serving customers by customer
class and includes operating, depreciation, tax, and
other expenses.
Customer Class: Electricity customers
grouped together for ratemaking purposes based on
their similar characteristics. Examples include
residential, commercial, and industrial classes.
Demand: The amount of electricity being
used by consumers at any given time.
Demand-Side Management (DSM): Managing
demand for electricity through conservation, load
management, and consumption reduction.
Distribution: The transportation of electricity
from substations to the end consumer. Distribution
companies, or Discos, arrange for this delivery.
Energy Policy Act of 1992 (EPAct): The
federal law that brought forth competition in wholesale
electricity markets.
Energy Services Company (ESCO): A company
that designs customized energy efficiency and maintenance
systems for clients in order to increase their efficiency
and lower their energy costs.
Federal Energy Regulatory Commission (FERC):
The regulatory body that has jurisdiction over wholesale
interstate electricity markets.
FERC Orders 888 and 889: FERC's rules
expanding on EPAct that require utilities to open
their transmission systems to third parties.
Order 888 also gives utilities the opportunity to
recover costs from customers that leave their systems.
Order 889 requires the establishment of a same-time
information system open to all parties selling power.
Green power: Power provided from a non-pollution
energy source, such as renewable energy sources.
Grid: The transmission network over which
electricity travels. The grid is overseen by
a grid operator.
Independent Power Producer (IPP): An
independent generator currently sells the power it
produces to utilities. Utilities are required
to purchase power from IPPs under the Public Utility
Regulatory Policies Act of 1978 (PURPA).
Independent System Operator (ISO): An independent
entity that would ensure the fairness and reliability
of a transmission system in the competitive market.
Investor-Owned Utility (IOU): A tax-paying,
utility corporation owned by shareholders and managed
by representatives elected by those shareholders.
Kilowatt (kW): One thousand watts of
electricity, or the amount required to light ten 100-watt
lightbulbs.
Kilowatt-Hour (kwh): One-thousand watts
of electricity used over one hour. Ten 100-watt
lightbulbs burning for one hour would consume 1 kWh
of electricity.
Load: The amount of electricity needed
to meet demand at a given time.
Load Profile: A summary of a consumer's load
over a given period of time.
Market-Based Rates: The way rates will be
set in the competitive market for electricity.
Market-based rates are established by competitive
bidding or negotiations between buyer and sellers.
Megawatt (MW): One million watts.
A MW would be required to light 10,000 100-watt lightbulbs.
Municipal Utility: A utility that is
owned and operated by a city.
Off-EAPAk: Denotes a period during which
demands on a supplier's load are lower than usual.
On-EAPAk: Denotes a period during which demands
on a supplier's load are higher than usual.
Performance-Based Ratemaking: Establishing
rates based on goals and incentives for a utility's
operating performance. Performance-based ratemaking
is an alternative to cost-of-service ratemaking.
Power Broker: A party that arranges for the
purchase of electricity from a seller--often a power
marketer--to a buyer.
Power Marketer: A party that buys power
from generators in the wholesale market at wholesale
prices to sell to customers.
Pennsylvania Public Utility Commission:
The entity that currently has jurisdiction over Pennsylvania
utilities' retail rates and practices, and will continue
to regulate transmission and distribution of electricity
under competition.
Public Utility Holding Company Act (PUHCA):
A federal law that regulates electric utility holding
companies. Many utilities believe it hinders
competition because it severely restricts some utility
holding companies' financial activities, but not those
of their competitors.
Public Utility Regulatory Policies Act (PURPA):
A federal law that requires utilities to purchase
power from qualifying independent power producers
at their avoided cost, which is often much higher
than the market rate.
Retail Wheeling: The delivery to a customer
of electricity sold to it by a third party over the
transmission or distribution system of a utility.
Retail wheeling essentially gives customers a choice
of suppliers.
Stranded Costs: Costs incurred by utilities
to serve their customers that will be rendered uneconomic
in the competitive market. Utilities incurred
these costs, which were reviewed and approved by state
regulators, with the understanding that they would
be recovered through rates, but in the competitive
market that will not be the case.
Transmission Company: A company whose sole
business is to transmit electricity, rather than generate
or distribute it. Transmission involves transporting
electricity from the generation plant to a substation,
where it is then "stepped down" to a lower
voltage for distribution to the customer.
Unbundling: The separation of electricity
into its distinct components: generation, transmission,
and distribution. In the competitive market,
unbundled services will apEAPAr separately on customers'
bills, and might be accompanied by other charges,
such as competition transition charges and public
purpose program charges.
Watt: The standard unit used to measure
electric power.
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