Ancillary Services: United States Federal Energy Regulatory Commission (FERC) definition: “those services necessary to support the transmission of electric power from seller to purchaser given the obligations of control areas and transmitting utilities within those control areas to maintain reliable operations of the interconnected transmission system.”

Backwardation: A downward sloping forward curve.

Benchmark: The baseline of measurement for usage volume, usually for the previous 12 months as provided by the TDSP.

Bilateral: A two sided transaction, i.e., a buyer and a seller meet on a shared platform to transact.

Calendar: Shortened form – “Cal”. The average of the component monthly values of a financial instrument (NYMEX natural gas, heat rates) for a specific calendar year.

CAISO: California Independent Systems Operator. It oversees the operation of California’s bulk electric power system, transmission lines and electricity market generated and transmitted by its member utilities.

Capacity: The maximum amount that something can contain, for instance pipeline capacity or generation capacity.

Congestion: The cost of overcoming obstacles in the path of power delivery.

Contango: An upward sloping forward curve.

DAM: Day Ahead Market. A bilateral market for the following day’s (or incremental portions) power pricing.

Demand: The amount of energy required to meet a load’s needs.

Demand Response: An intentional change (decrease) of power usage by a load financially incentivized to partially offset increased demand on a power grid.

ERCOT: Texas ISO – Energy Reliability Council Of Texas.

Feedstock: The fuel used to generate power; natural gas is the default fuel in the financial markets regardless of actual use or not.

Fixed Price: The pricing venue that captures all energy costs (heat rate X natural gas + shape + losses + ancillaries – the “bucket” – + REP margin + consultant/broker margin, if applicable) for a specific term and transfers future price risk to the REP.

Forward Curve: The financial market-defined value for a specific term in the future usually in monthly increments. The values continually change reflecting buyers and sellers perception of changing market dynamics. The futures markets are forward curves.

Heat Rate: The multiplier of natural gas to calculate wholesale power price. Its origin was an engineering expression of the relative efficiency of the conversion of a fuel to electricity. It has morphed into a financial expression regarding the value of generation.

Heat Rate Index: The pricing venue that captures all energy costs included in fixed pricing except that some or all of the natural gas positions are left open to be locked at a later date. The strategy assumes the risk of natural gas prices moving higher coincidental with assuming the potential reward of prices moving lower.

ICE: Intercontinental Exchange. ICE offers market participants a range of trading and risk management services globally.

ISO: Independent System Operator. A not for profit organization responsible for the orderly and reliable operation of an electric grid. In Texas, this is ERCOT.

ISO-NE: ISO-NE oversees the operation of New England’s bulk electric power system and transmission lines, generated and transmitted by its member utilities, as well as Hydro-Quebec, NB Power and the New York Power Authority and utilities in New York state, when the needs arise.

LMP: Locational Marginal Pricing. The real time pricing venue.

Load: End user of retail power; the consuming customer.

Load Factor: The ratio of the average load over a designated period of time to the peak load occurring in that period. Formula – (total usage/hours of usage/peak demand)*100.

Losses: The amount of power that is lost in transmission from source to load due to physical inefficiencies.

MISO: Midcontinent Independent System Operator, Inc. providing open-access transmission service and monitoring the high-voltage transmission system in the Midwest United State and Manitoba, Canada and a southern United States region which includes much of Arkansas, Mississippi and Louisiana. It operates one of the world’s largest real-time energy markets.

Nodal: Nodal is the mode of delivery for electricity, each source point, trade hub, and load point being a unique node with unique delivery characteristics that carry changing costs. Nodal delivery is considered more transparent and therefore capable of enabling better dispatch and allocation of assets.

NYISO: New York Independent Systems Operator. A non-profit charged by New York that operates its bulk electricity grid, administers the state's wholesale electricity markets, and provides comprehensive reliability planning for the state's bulk electricity system. 

NYMEX: New York Mercantile Exchange. The original trading platform for natural gas futures and most commonly the benchmark for natural gas-related pricing.

Peak Demand: The maximum amount of power required by a load for a specified period regardless of duration.

PJM: Pennsylvania-New Jersey-Maryland Interconnection. The regional competitive market for the purchase and sale of spot electric energy at wholesale in interstate commerce and related services.

Physical Delivery: The process of bringing energy from a source to a destination.

Real Time: Daily (LMP) cost plus power pricing venue as determined by supply and demand market forces, historically the average lowest cost but with open ended upside risk.

REP: Retail Electric Provider. The entity that sells electricity to customers.

Risk Management: The identification and management of variables that may adversely affect intended results guided by a defined, transparent discipline.

Shape: The pattern of power usage of a load.

Southwest Power Pool (SPP): Manages the electric grid and wholesale power market for the central United States.

TDSP: Transmission and Distribution Service Provider. The regulated business organization that constructs, operates, and manages the physical power delivery system (the “wires”).

Technical Analysis: The study of price action with the objective of managing risk by interpretation of patterns and related tools.

Tenor: The term or length of time of a financial instrument; maturity.

Transmission: The movement of power from source to load via intermediate points with usually varying and lessening levels of delivery.

Wholesale Market: The bilateral (buyer and seller) financial market in deregulated jurisdictions where block power is traded.