Helpful Terminology to Broaden Your Energy Industry Vocabulary

Don’t think you’re alone if you feel that glossy look come over your eyes when people start discussing BCFs or BTUs and how your LDC relates to your ISO or RTO. The energy industry is constantly changing and advancing so it comes as no surprise that this industry jargon can feel overwhelming at times.  Deregulation of energy has allowed for increased consumer choice and we like to help make you as informed and knowledgeable as possible. In this week’s blog we have provided definitions to some common terms used in the industry. We will continue to present explanations to various types of energy terms in future blog posts, so be sure to check back. These definitions are meant to act as a guide, but as always, if there is something you do not understand or would like more insight on please feel free to call Power Management!

Deregulation – The reason you have the opportunity (or need) to know what a lot of these terms mean! Deregulation refers to an attempt by the government to break up the monopoly that utilities have over consumer’s power choices. The goal of deregulation is to allow for a more competitive marketplace where suppliers are forced to become more efficient and provide lower prices overall to the consumer.  It is important to note that the utility still owns and maintains the infrastructure and is responsible for actually distributing the electricity (thus why you still see a charge from the utility for the “demand” portion on your bill).  Deregulation affects the supply portion of your bill.  Consumers are free to choose an alternative supplier since competing electricity providers can buy the electricity and sell it to you directly at varying prices. The deregulation of energy is state specific; some states have agreed to allow deregulation for electricity only, some for natural gas only, while some states allow deregulation for both commodities, and others only allow consumers to receive supply through the utility.

Independent System Operators (ISOs) – An organization that coordinates and manages a region’s electricity transmission grid.

Regional Transmission Organizations (RTOs)
 – These organizations serve similar functions to an ISO by controlling and monitoring a region’s electrical power system. RTOs cover a larger geographic area than ISOs, and the Federal Energy Regulatory Commission (FERC) puts greater pressure on RTOs for responsibility of the transmission network.

Current ISO/RTOs operating in North America:
•Alberta Electric System Operator (AESO)
•California independent System Operator (CAISO)
•Electric Reliability Council of Texas (ERCOT)
•Midcontinent Independent System Operator, Inc. (MISO)
•New Brunswick System Operator (NBSO)
•ISO New England (ISO-NE)
•New York Independent System Operator (NYISO)
•Ontario Independent Electricity System Operator (IESO)
•PJM Interconnection (PJM)
•Southwest Power Pool (SPP)

Local Distribution Company (LDC) – A local distribution company or LDC for short, are regulated utilities that provide commodities such as electricity and natural gas to consumers within a specific geographic area.

Ancillary Services – Charges that relate to the support needed to ensure reliability of the transmission systems as electric power moves from the generating sources to the purchaser or retail customer. These services allow utilities and grid operators to be prepared for power plant or transmission lines that unexpectedly go out of service or for unforeseen increases or decreases in electric demand.  Ancillary service costs vary from market to market and can be presented differently based on the supplier.

Line Loss – A charge for the portion of energy that is lost in transmission during distribution to the customer that must be accounted for by the supplier.

– This charge on your utility bill refers to having the availability to utilize your “peak” energy use during a specific period. This helps to ensure there is enough power to maintain grid reliability during periods of peak demand, regardless of when it occurs.  Therefore, a capacity charge is present even if you rarely use your largest expected amount of power.