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12-month strip
Prices for the next 12 months of consecutive natural gas futures trading contracts, usually starting with the nearest, or prompt, month.



Active traders
Market participants who trade frequently, often many times a day, and therefore are attune to the ebbs and flows, the rumors, breaking news, activities of other market participants, market price, arbitrage opportunities and other rapidly-changing factors.

Ancillary services
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. Ancillary services supplied with generation include load following, reactive power-voltage regulation, system protective services, loss compensation service, system control, load dispatch services, and energy imbalance services.

The simultaneous purchase of a commodity or derivative in one market and the sale of the same, or similar, commodity or derivative in another market in order to exploit price differentials.

Automated mitigation procedure
A procedure under which the bids of individual suppliers are capped under certain predetermined conditions.

Automatic generation control
The automatic regulation of the power output of electric generators within a prescribed range in response to a change in system frequency, or tie-line loading, to maintain system frequency or scheduled interchange with other areas within predetermined limits.

The amount of time an electrical generator is generating or available to generate, as a fraction of the total time the generator is in commercial service.



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The requirement imposed by electricity grids or natural gas pipelines that supply and demand be equal over a certain time period.


In electric markets, refers to an agreed-upon level of electricity consumption from which deviations are measured. Usually based on a customer's historical usage. Variations may be billed at a different rate.

The minimum level of electric power demand of a utility, region, or utility customer delivered or required over a given period of time at a steady rate; generally expressed in units of kilowatts or megawatts. The minimum continuous load or demand in a power system over a given period of time.

Baseload Unit
An electric power plant, or generating unit within a power plant, that is normally operated continuously to meet the base load of a utility.

The price difference between otherwise identical products in different markets (in this report, different geographical natural gas markets).

Basis Swaps
Exchange of fixed price for a floating for a defined basis product (e.g. a Houston Ship Channel – HSC Swap at $1.00 means that one party is willing to pay a fixed price of $1.00 for the basis while the counterparty is willing to take on the risk of paying the floating price, usually a published index price after the applicable market venue forms the price).

Bid-ask differentialor spread
The difference in price between what a buyer offers to pay for a commodity and what a seller offers to accept for a commodity, sometimes referred to as bid-offer spread.

Bilateral transaction
A direct contract between a seller and buyer outside of a centralized market or exchange (e.g. Nymex or an RTO/ISO). In energy markets, the buyer or seller usually finds his or her matching counter-party through a broker (e.g. voice brokers, ICE, etc.).

An intermediary (or middleman) who matches a willing seller to willing buyer for all contract terms (price, volume, location, physical or financial) to effect a transaction. It can occur through personal contact (usually by phone or instant messaging [IM]) or electronically (trade matching platform like ICE's).

A British Thermal Unit is a measure of the heating value of a fuel. It is the amount of heat energy required to raise the temperature of one pound of water one degree Fahrenheit.

A conductor or group of conductors that serves as a common connection for two or more electric circuits within a station.



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In reference to electricity, the maximum load that a generating unit or generating station can carry under specified conditions for a given period of time without exceeding approval limits of temperature and stress.

Capacity factor
Average output compared to maximum potential output over a given period of time, usually expressed as a fraction. For example, a generating facility that operates at an average of 60% of its normal full-power capacity over a measured period has a capacity factor of 0.6 for that period. It can apply to an individual generating unit or a collection.

Capacity margin
The amount of capacity above planned peak system demand available to provide for scheduled maintenance, emergency outages, system operating requirements, and unforeseen demand.

Capacity markets
A market for the trading of capacity credits (the ability to produce electricity in the market area during a defined period) usually between parties obligated to deliver electricity to customers and power plant owners.

Centralized Exchange
A market where market participants execute all transactions with the central entity operating under a set of rules (product specifications, execution procedures, credit requirements, dispute resolution, code of conduct, etc.) that apply to a range of products offered to this entity. (e.g., Nymex under CFTC jurisdiction is one such market, regional transmission organizations (RTOs) and independent system operators (ISOs) who run markets under FERC jurisdiction can also be considered centralized exchanges).

City Gate
Generally refers to the location at which gas changes ownership or transportation responsibility from a pipeline to a local distribution company or gas utility.

The registration and settlement of a trade that includes provisions for margin requirement and performance guarantee.

Coalbed methane
A methane-rich gas, similar to natural gas, produced from in-situ coal through drilled wells that are typically completed open-hole, as opposed to the cased and perforated wells used to produce conventional natural gas.

Security, cash or something of value, deposited by the party owing money to the party to whom money is owed, to help assure that payables will be paid when due. The collateral is called for when the pre-established credit limit has been reached. In commodity markets, such payables arise from every physical or financial transaction where cash is paid upfront. Margin at a futures exchange is one form of collateral.

Combined-cycle generators
(See Combined-cycle Power Plant)

Combined-cycle power plant
A power plant that uses two thermal cycles for producing electricity. The first cycle burns a fuel inside a gas turbine, and the gas turbine drives an electric generator. In the second cycle, hot exhaust gases from turn water into steam, and a steam turbine turns a second electric generator. Combined-cycle power plants are the most efficient commercial technology currently available for producing electricity. They can use a wide variety of liquid and gaseous fuels, but most plants in the United States burn natural gas.

Combustion turbine
An engine, similar to a jet engine, that burns fuel to produce a large volume of exhaust gases that expand through a series of precision blades to rotate a shaft. The shaft may turn an electric generator; such plants can be built at a lower cost than other large power plants, but they are relatively inefficient and therefore more expensive to operate.

A characteristic of the transmission system produced by a constraint on the optimum economic operation of the power system, such that the marginal price of energy to serve the next increment of load, exclusive of losses, at different locations on the transmission system is unequal.

Congestion costs
Charges assessed and redistributed due to electricity network constraints.

Control area
An electric power system or combination of electric power systems to which a common automatic control scheme is applied in order to:

  • Match, at all times, the power output of the generators within the electric power system(s) and capacity and energy purchased from entities outside the electric power system(s), with the load in the electric power system(s).
  • Maintain, within the limits of Good Utility Practice, scheduled interchange with other Control Areas.
  • Maintain the frequency of the electric power system(s) within reasonable limits in accordance with Good Utility Practice.
  • Provide sufficient generating capacity to maintain operating reserves in accordance with Good Utility Practice.


Cooling degree days (CDD)
A measure of cooling energy demand determined by how far a location's temperature averaged above 65 degrees Fahrenheit.

For any given transaction, there must be at least two parties to the transaction – a party and a counterparty. For a transaction with a centralized exchange, the exchange is often referred to as the central counterparty.  

The dollar limit or range a party is willing to extend to a counterparty for doing business or transactions without demanding cash upfront (e.g. party A may agree to grant party B a credit limit of $1 million, allowing B to owe A up to $1 million for any number of transactions. As existing obligations are paid off, B can build up its debt with A with more transactions up to the credit limit. The credit limit is usually mutual between parties. For centralized exchanges, standard credit procedures and criteria are followed, along credit collateral or margining requirements as thresholds are crossed. Increasingly, bilateral transactions also have collateral thresholds and collateral calls).

Credit clearing
A mechanism for settling mutual claims that shares among many parties the risk of a company failing to fulfill its contract. Markets have evolved to where most centralized exchanges have centralized clearing (e.g., Nymex; but RTO/ISOs do not), with well-defined rules and risk management mechanisms, often with regulatory oversight (CFTC and SEC in the US, FSA in the UK, etc.). Commodity Futures Exchange Act (CFMA) of 2000 further facilitates the use of centralized clearing for over-the-counter (OTC) transactions. Most centralized clearing houses operate with a layer of financially sound Futures Commission Merchants (FCM or commonly referred to as clearing members – CFTC also has oversight over these “qualified” financial intermediaries). A nonclearing-member market participant would get a credit arrangement with an FCM and get the benefits of clearing indirectly through its FCM’s participation in central clearing. Market participants in markets with multi-lateral netting resulting from centralized clearing find that they can save some 90% of credit capital required to transact. This savings enable an order of magnitude more transactions to be done for a given level of credit capital, facilitating greater market liquidity..

Credit rating
A statistical technique wherein several financial characteristics are combined to form a single score to represent a customer's creditworthiness. A credit score provided and published by SEC approved-rating agencies (Moody’s, Standard & Poor’s, Fitch, and Toronto Dominion) relied on by providers of credit (banks, bond investors, exchanges, market participant extending credit to a counterparty) to help judge the level of credit or financing to provide to a customer or counterparty. A rating is set using financial analytical technique combined with informed judgment of qualitative factors to form a single score to represent a customer's creditworthiness.

Credit risk
The risk that an issuer of debt securities or a borrower may default on his obligations, or that the payment may not be made on a negotiable instrument.

Credit score
A market participant’s or an exchange’s (e.g., RTO/ISO) measure of a counterparty’s creditworthiness using its own assessment method (which usually incorporates a credit rating agency’s rating, if available along with other relevant financial and non-financial factors).

Critical notices
Pipeline issuances that provide information on conditions that affect natural gas scheduling or adversely affect scheduled gas flow.

Curtailable load
Electricity deliveries that are subject to interruption by the grid operator.



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Daily Deals
Usually transactions done on a day for delivery or settlement or both, the next day.

Daily (or Next-Day) Indexes
Published (Platts, NGI, Dow Jones, SNL, ICE, NGW) price indices for commodities (gas or electricity) to be delivered the next day based on transactions occurring between certain hours during the current day. Some market participants choose not to transact at a fixed price during the day for next-day delivery because prices can vary throughout the day. Instead, they choose to buy or sell at an index compiled by a publisher (usually a volume-weighted average of all transactions within specified hours), capturing a representative market price.

Day-ahead markets
Forward markets for electricity to be supplied the following day. This market closes with acceptance by the independent system operator, power exchange, or scheduling coordinator of the final day-ahead schedule. Day-ahead is not a term commonly used for natural gas (“next day” is more common).

Debt financing
Providing capital by selling bonds, bills, or notes to individuals or institutions.

Delivery Point(s)
An industry-designated location at which delivery may be made in fulfillment of contract terms.

Electrical consumption of a customer or area at a particular moment in time. Often averaged over an hour, and thus usually expressed in kilowatts or megawatts rather than kilowatt-hours or megawatt-hours. Used interchangeably with “load” when referring to energy requirements for a given customer or area.

Demand elasticity
The degree to which demand changes relative to a change in price.

Demand responsiveness/demand response
A change in demand for a good or service in response to a change in price for the good or service.

Distillate fuel oil
Products of refinery distillation sometimes referred to as middle distillates; kerosene, diesel fuel, and home heating oil. No. 2 fuel oil is the most common of these products used for heating and in boilers.

DTH (dekatherm or decatherm)
Ten therms, same as one million British thermal units or one MMBtu.

Dual-fueled (or dual-fired) unit
A generating unit that can produce electricity using two or more fuels. In some of these units, only the primary fuel can be used continuously; the alternate fuel(s) can be used only as a start-up fuel or in emergencies.



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Electric utilities
All enterprises engaged in the production and/or distribution of electricity for use by the public, including investor-owned electric utility companies; cooperatively-owned electric utilities; government-owned electric utilities (municipal systems, federal agencies, state projects, and public power districts).

Electronic trading platform
An electronic system matching bids (to buy) and offers (to sell), increasingly employed in many venues (Nymex, ICE, voice brokers, index-forming publishers). It is the technology employed by different rule-based markets to effect transactions for market participants.

Equity financing
Provision of capital through the sale of common or preferred stock to investors.

A marketplace in which shares, options and futures on stocks, bonds, commodities and indexes are traded.



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Financial liquidity
An entity’s ability to obtain funds to meet its cash flow obligations, with consideration for the speed with which such funds can be obtained. This is among the main factors considered in credit rating or scoring.

Financial markets
Markets where financially settled products (instruments) are traded (bought and sold). In commodity markets, it is markets where financially settled commodity derivatives are traded. Nymex is purely financial, where any residual delivery obligations on the futures contracts are matched and settled physically off-exchange by the matched parties. ICE trades both physically and financially settled products. Brokers also do both physical and financial transactions. Financial markets are also a term used for capital markets where stocks, bonds, T-Bills, foreign exchange and other financial instruments are traded.

Financial transaction
A transaction that involves only the exchange of money, with no physical delivery.

Financial transmission right
A contract that entitles the holder to receive or pay compensation for transmission charges that arise when grid congestions cases price differences due to the redispatch of generators.

Financially settled
Consummated exclusively by an exchange of funds, without the potential of exchange – or actual exchange – of commodities or other things of value.

Firm transportation
Energy network service assuring market participants of a specified quality and quantity of service under normal operating conditions.  May ascribe rights to specific receipt and/or delivery points for service. Network facilities are generally designed, installed, and dedicated to meeting firm transportation service requirements.

First Contingency Reliability Criteria
The requirement that an electric system be planned and operated so that it can safely withstand the loss of the largest single system element (i.e. power plant or transmission line).

Fixed price transactions
Buying or selling a commodity at a fixed price. For example,  fixed physical gas prices are used to form indices at some locations; and fixed basis prices plus Nymex settled prices are used to form price indices at other locations.

Floating price transactions
Buying or selling a commodity at a price that is not fixed and will be set by mutual agreement, usually based a published price index.

Floating Storage
Use of LNG tanker ships for LNG storage, rather than simply for transportation, to take advantage of temporal and geographic LNG price differences.

Forward price curve
The set of prices of contracts for delivery of a good over a span of time in the future. For example Nymex deals in natural gas futures contracts for 72 months in the future. Each of the 72 contract months end-of-day settlement price forms the forward curve for Nymex gas futures for the day.

Fuel-adjustment clause
A provision of a power sales agreement or rate schedule that allows for the electricity price to be changed based on changes in the price of the fuel used to generate the power.

Futures market
A market in which contracts for future delivery of a commodity or a security are bought and sold. Nymex is the primary futures market for energy commodities in the United States.



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Gas turbine
(See Combustion turbine)


The act of producing electrical energy from other forms of energy (such as thermal, mechanical, chemical or nuclear); also, the amount of electric energy produced, usually expressed in kilowatthours (KWh) or megawatthours (MWh).

An electrical device used to convert mechanical energy to electrical energy. The generator moves a conductor through a magnetic field and directs the current produced by the induced voltage to an external electric circuit.

Gigawatt (GW)
1 billion watts, the same as 1,000 Megawatts, or 1 million kilowatts.

Globex (GW)
The electronic trading platform for the Chicago Mercantile Exchange (CME). Since Sept. 5, 2006, electronic executions for Nymex have run on CME’s Globex simultaneously with Nymex trading.



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Heat rate
For a generator or power plant, the heat content of the fuel consumed divided by input divided by the electrical energy produced, usually expressed as BTU/kWh. A measure of how efficiently a generator converts fuel into electrical energy.

Heating degree days (HDD)
A measure of heating demand equal to the number of degrees a location’s mean daily temperature was below 65 degrees Fahrenheit.

Protecting the value of an investment or contractual commitment from loss due to price fluctuations by, for example, acquiring instruments whose price changes are expected to offset the loss.

Henry Hub
A location near the coastal town of Egan, LA and the Texas border where more than a dozen major natural gas pipelines converge and exchange gas. It is owned and operated by Sabine Pipeline, a subsidiary of Chevron-Texaco.Widely used for physical trading, including physical delivery of the Nymex natural gas futures contracts. Henry Hub is also one of the most widely used points for monthly and daily price indexes.

A defined point, usually a geographical location or region, where multiple participants trade services (in effect, a micro-market that forms prices). An active trading site used by publishers of price indexes.



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Imbalance energy
Discrepancy between the amount that a seller contracted to deliver and the actual volume of power delivered. Imbalances are resolved through monetary payment.

Independent system operator (ISO)
An independent, Federally regulated entity established to coordinate regional transmission in a non-discriminatory manner and ensure the safety and reliability of the electric system. (See also Regional Transmission Organization).

Also Price Index. A representative price usually computed and published by a trade journal or transaction venues (e.g., ICE), using information from actual fixed price transactions. Buyers and sellers not active in a market may transact at a price index that is representative of the market. It is also used by state regulators as a benchmark for distributor pass-through of commodity costs to consumers. Market participants who are active and willing to transact at fixed prices during the trading period, in effect, are the ones forming the index prices. A price index based on large volumes, many transactions and many counterparties, is representative of a liquid and competitive market point, but indices formed at points with few transactions may be less reliable.

Injection season
The period from April 1 through October 31, during which gas is injected into natural gas storage reservoirs in preparation for withdrawal and use during the winter heating season.

Installed capacity

  • The total potential output of a given set of existing generators, usually measured in megawatts.
  • A share of potential (not actual) output that load-serving entities are required to procure as an administrative measure to ensure adequate generation supply. (See also Capacity Markets, Locational Installed Capacity.)


IntercontinentalExchange (ICE)
An exempt exchange under CFMA 2000. It is exempt from many reporting requirements that are required of Nymex. It was initially backed by major energy merchants (excluding Enron) and investment banks Goldman Sachs and Morgan Stanley. Today it is a publicly traded business that offers trading in over a 1000 physical and financial products and clearing through LCH (formerly London Clearing House). It has a futures exchange (formerly IPE) in London, and just made a bid for NYBOT.

Interruptible or nonfirm transportation
Transmission service that is reserved and scheduled on an as–available basis and is subject to curtailment or interruption.

The point of physical interconnection between adjacent transmission systems.




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Kilowatt (kW)
1,000 watts


Kilowatthour (kWh)
A measure of electricity defined as a unit of work or energy, measured as 1 kilowatt (1,000 watts) of power expended for 1 hour. 1 kWh is equivalent to 3,412 Btu.



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Liquefied natural gas (LNG)
Reducing the temperature of natural gas to -259 degrees Fahrenheit at atmospheric pressure will convert the gas into a liquid, with a volume about 1/600 compared to its volume as a gas.

The total amount of power carried by an electric system at a point in time. Often used synonymously with “demand.”

Load control
The process of managing demand requirements in order to achieve a desired load pattern. Load control devices are installed on customers' appliances or services to reduce the electric system's demand when a peak situation is about to occur. Examples of load control devices would include controls on air conditioner compressors, hot water heaters and dual-fuel heaters.

Load factor
A measure of natural gas pipeline utilization equal to average gas flows over a given time divided by an assumed maximum or peak flow.

Load pocket
An area often dependent on transmission for reliable electric system operation because the area’s load often exceeds the generation in the area.

Load-serving entity (LSE)
Any entity, including a load aggregator or power marketer, that serves end-users within a control area and has been granted the authority or has an obligation pursuant to state or local law, regulation, or franchise to sell electric energy to end-users located within the control area.

Load shedding
The reduction of system demands by systematically and in a predetermined sequence interrupting the load flow to major customers and/or distribution circuits, normally in response to system or area capacity shortages or voltage control considerations.

Local distribution company (LDC)
Any firm, other than a natural gas pipeline, engaged in the transportation or local distribution of natural gas and its sale to customers that will consume the gas.

Locational installed capacity
Installed capacity in a specific location (e.g., New York City), rather than in a broader area (e.g., anywhere in New York State).

Locational marginal price
The market-clearing price for electricity at the location the energy is delivered or received.


  • Possessing a futures contract to establish a market position;
  • A market position that obligates the holder to take delivery;
  • Owning an inventory of commodities.


Loop flow
Unintended or unscheduled flow of electricity through a line or system.

Energy (kilowatt-hours) and power (kilowatts) lost in the operation of an electric system, principally as waste heat in electrical conductors and apparatus such as transformers.



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Margin requirement
Money or collateral deposited with a broker, clearing member or clearing organization intended to hold futures contracts and cover changes in the value of futures contracts. Margin is one way of dealing with credit exposure. Properly designed margining, along with effective clearing, has helped exchanges stay in business even as occasional large defaults occur.

Marginal electric generating unit
In organized wholesale markets, the price of the marginal source of electricity usually sets the price of the unit providing the next increment or decrement of energy, which price usually sets the price for all generation.

Adjustment of the book value or collateral value of a security – including a security such as a multiyear contract – to reflect current market value for the applicable period.

A venue where participants buy and sell products or services. Usually there is agreement of product description and some standard terms to enable determination of value and price.

Market capitalization
A measure of company size that is computed as current market price per share of stock times the total number of shares outstanding.

Market concentration
A measure, usually an estimate, of the market share of a participant or groups of participant in the overall market or a submarket (a given region, product, or time, for example).

Market liquidity
The ease, or lack thereof, with which a buyer can buy or a seller can sell at a prevailing price in a marketplace.

Market participant
A market buyer or a market seller, or both, that meets reasonable creditworthiness standards established by the market operator.

Market power
The ability of any market participant with a large market share to significantly control or affect price by withholding production from the market, limiting service availability, or reducing purchases.

Market share analysis (Hirschman-Herfindahl Index HHI)
The sum of the squares of the market shares of firms competing in a market. HHI is a commonly accepted measure of market concentration.

Market structure
The rules, mechanisms and processes, under which a market operates to form prices, provide benefits and introduce risks to participants, and ultimately end consumers. Structure could enhance or inhibit competition, create just and reasonable outcomes, provide economically efficient incentives, or introduce unintended consequences including adverse market outcomes.

1,000 cubic feet (of gas).

1 million British thermal units, or 1 dekatherm. Approximately equal to 1,000 cubic feet (Mcf) of natural gas.

1 million cubic feet (of gas), or 1,000 Mcf.

Megawatt (MW)
1 million watts of electricity.

Megawatthour (MWh)
1,000 kilowatt-hours or 1 million watt-hours.

Merchant generator
A generating plant built with no energy sales contracts in place.

Mothballed capacity
A power plant that is out-of-service, but is being maintained in such a condition that an operator can bring it back into service.



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Natural gas
A naturally occurring combustible mixture of gases recovered from the earth from wells. It is composed predominantly of methane, but contains other light hydrocarbons and impurities.

National balancing point (NBP)
Location of wholesale natural gas trading in the United Kingdom; a key reference point for spot and forward market natural gas transactions in Europe.

Native load
Wholesale and retail customers that the electric transmission provider is obligated to serve.

New York Mercantile Exchange (Nymex)
The centralized exchange where CFTC–sanctioned natural gas and electricity futures are traded in the United States. Nymex is also a central credit clearing house where the credit risk of counterparties is transferred and risk-managed through clearing membership, reserve funds and risk management protocols with CFTC oversight as a designated clearing organization (DCO).

Nitrogen oxide (NOx)
NOx is a key pollutant in the formation of acid rain and ground-level ozone (smog).  NOx also contributes to the formation of fine particles that are associated with significant health effects and regional haze.

North American Electric Reliability Council (NERC)
A council formed in 1968 by the electric utility industry to promote the reliability and adequacy of bulk power supply in the electric utility systems of North America. NERC consists of regional reliability councils and encompasses essentially all the power regions of the contiguous United States, Canada, and Mexico.

NOx Budget Trading Program (NBP)
An ozone season cap-and-trade program intended to help states meet their NOx state implementation plan (SIP) required reductions. Twenty-one states and the District of Columbia began participating in 2003–04 or will participate in the future.

NOx State Implementation Plan (SIP)
Building upon analyses done by the Ozone Transport Assessment Group (OTAG), this rule was finalized by the Environmental Protection Agency (EPA) in 1998. It required states significantly contributing to ozone non-attainment problems in other states to reduce their NOx emissions during the ozone season beginning in 2003. This rule gave states the flexibility to reduce emissions through various means and gave them the option to participate in the NOx Budget Trading Program.

Nymex ClearPort
It is the execution and clearing platform for transactions not listed for open-outcry on Nymex. It also handles clearing of OTC transactions executed elsewhere (e.g. voice brokers). All trades cleared on ClearPort are subject to CFTC jurisdiction and Nymex rules.



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The electric energy used for the remaining hours that are not on-peak. (See on-peak).

A block of (usually 16) hours in each week-day when demand is at its peak. On-peak definitions for physical electricity vary by North America Electric Reliability Council region. Standardized products are used on certain financial exchanges.

Open access
Order No. 888 requires utilities to allow others to use their transmission and distribution facilities, to move bulk power from one point to another on a nondiscriminatory basis for a cost-based fee.


Open outcry
The process whereby futures contracts are traded in an actual physical trading pit at the exchange where traders shout offers and bids to each other and bids or offers to effect a transaction.

Operating reserves
That capability above firm system demand required to provide for regulation, load forecasting error, equipment forced and scheduled outages, and local area protection. 

The period during which a generating unit, transmission line, or other facility is out of service. A forced or unplanned outage is the shutdown of a generating unit, transmission line or other facility for emergency reasons. A scheduled or planned outage is the shutdown for inspection or maintenance, in accordance with an advance schedule.



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Peak load, peak demand
These two terms are used interchangeably to denote the maximum power requirement of a system at a given time, or the amount of power required to supply customers at times when need is greatest. Refers either to the load at a given moment (e.g., a specific time of day) or to average load over a given period of time (e.g., a specific day or hour of the day). Usually expressed in megawatts.

Peaking capacity
Generating equipment normally operated only during the hours of highest daily, weekly, or seasonal loads.

Peakshaving LNG facility
A liquefied natural gas plant that supplies a gas pipeline system during peak-use periods. During slack periods the liquefied gas is stored. With the need for additional gas, the liquid product is gasified and fed into local distribution and gas pipeline systems.

Physical basis
Describes a physical natural gas purchase for the following month where the price is tied to the closing price of the expiring Nymex futures contract.

Pivotal supplier
A power supplier whose capacity must be used to meet peak demand and whose capacity exceeds the market’s supply margin.

Plant factor
The capacity factor of an entire generating facility including all available generating units. (See also capacity factor)

Power marketer
A business entity engaged in buying and selling electricity. Power marketers do not usually own generating or transmission facilities. Power marketers, as opposed to brokers, take ownership of the electricity and are involved in interstate trade. These entities must file with the Commission to obtain status as a power marketer.

Power purchase agreement
Guarantees a market for power produced by an independent power producer and the price at which it is sold to a purchaser. Such an agreement imposes legal obligations on both the parties to perform previously accepted tasks in a predetermined manner.

Price discovery
The process of making prices visible and readily available to interested parties and, in some cases, the public.

Price/Earnings Ratio (P/E Ratio)
A company’s stock price divided by its annual earnings, a widely used equity valuation measure.

Project financing
A form of asset-based financing in which a firm finances a discrete set of assets (the project) on a stand-alone basis.




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Ramp rate
The rate at power system load or generator output varies, or the limits to such rates due to mechanical or reliability considerations.

Real-time market
An electricity market that settles–determines the price–for one-hour periods or less during the day of delivery.

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.

Reference price

  • The settlement price of a derivatives contract, based on a particular location and commodity; 
  • An estimated electricity offer price based on operating and maintenance costs, or a pre-negotiated offer price.


Regional Transmission Organization (RTO)
A voluntary organization of electric transmission owners, transmission users and other entities approved by the Commission to efficiently coordinate electric transmission planning (and expansion), operation and use on a regional (and interregional) basis. Operation of transmission facilities by the RTO must be performed on a non-discriminatory basis.

Reliability must run (RMR)
A unit that must run for operational or reliability reasons, regardless of economic considerations. Also called a reliability agreement.

Reserve margin
The percentage of installed capacity exceeding the expected peak demand during a specified period.

Residual fuel oil
Heavy fuel oil produced from the residue in the fractional distillation process rather than from the distilled fractions. No. 6 fuel oil is the most common product used to generate electricity.

Retail unbundling
Disaggregating electric utility service into its basic components and offering each component separately for sale with separate rates for each component. For example, generation, transmission, and distribution could be unbundled and offered as discrete services.

Techniques used to isolate the credit risk of a subsidiary within a corporation from the risk of its affiliated companies.

Risk management
The process of analyzing exposure to risk and determining how to best handle such exposure.

Rolling blackouts
A controlled and temporary interruption of electrical service. They are necessary when a utility is unable to meet heavy peak demands because of an extreme deficiency in power supply.



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Safe harbor
The ability of management to discuss in good faith a company's prospects and financial projections with analysts and investors without fearing litigation.

(Natural Gas) Volume of natural gas that is re-gasified and delivered into the downstream natural gas grid from an LNG terminal. (Electricity) Electric energy delivered to the grid.

Short position

  • The selling side of the open futures contract;
  • A trader whose net position in the futures market shows an excess of open sales over open purchases.


Single settlement system
A market structure that provides only a real-time market.

Spark spread
The difference in price between electricity purchased from the grid and electricity generated from, for example, purchased natural gas. Also, the difference between gas and electricity futures prices.

Spot market
The natural gas market for contractual commitments that are short term (usually a month or less) and that begin in the near future (often the next day, or within days). In electricity, spot markets are usually organized markets for day-ahead and real-time electricity run by an independent system operator or regional transmission organization.

Spread trading
Buying one instrument/commodity and selling another, with a view to profiting from the change in the gap between the two markets.

Steam plant
A plant in which the prime mover is a steam turbine. The steam used to drive the turbine is produced in a boiler where fossil fuels are burned.

Sulfur dioxide (SO2)
SO2 is a key pollutant in the formation of acid rain and contributes to the formation of fine particles that are associated with significant negative health effects and regional haze.

An exchange of streams of payments over time according to specified terms. A common type is a fixed-for-floating  swap, in which one party agrees to pay a fixed price in return for receiving a changing price (e.g., spot price) from another party.



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One hundred thousand (100,000) Btu.  10 therms equals 1 MMBtu.

Time-of-use pricing
A rate design imposing higher charges to customers during periods of the day when higher demand is experienced.

Tolling agreement
An agreement whereby a party moves fuel to a power generator and receives kilowatt hours (kWh) in return for pre-established fees.

Transaction costs
Costs, such as commissions and spreads, incurred when buying or selling assets. Large bid-ask spreads are an indication of high transaction costs. Competition and electronic trading facilitates low trade execution fees or commissions. Poor credits lead to high-margining, thus increasing transactions costs. Extended settlement and payments increase transaction costs. Limited netting and lack of central clearing increase credit costs, which result in high transaction costs.

Moving bulk energy products from where they are produced or generated to distribution lines that carry the energy products to consumers.

Transmission loading relief (TLR)
A NERC procedure that allows reliability coordinators to curtail transactions (among other actions) to mitigate potential or actual operating security limit violations while respecting transmission service reservation priorities.

A measure of the extent to which a market's current trade and quote information is readily available to the public.

A machine that converts the kinetic energy of a moving fluid to mechanical power by the impulse or reaction of the fluid with a series of blades arrayed about the circumference of a wheel or cylinder.

Two-settlement system
A system under which the price for electricity on any given day is established and settled both on a day-ahead and a real-time basis. Day-ahead prices are based on forecasted energy demand and transmission and generation availability. Real-time prices reflect not only day-ahead anticipated events, but what actually occurs in real time–for example, generation or transmission failures, and differences between forecasted load and actual load.



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Unconventional natural gas
A term applied to natural gas that is difficult and expensive to find and produce; if found, it often is bypassed in favor of more easily obtainable supply that is less costly to produce.  Higher gas prices, however, increase the interest in these more-costly gas sources.  Examples of unconventional gas can be found in tight sandstone reservoirs and shale, including the increasingly popular Barnett Shale in Texas.


Charges from an RTO/ISO collected outside of the market-clearing commodity price; these charges can include payments to reliability must run (RMR) units, other out-of-merit-order power purchases, administrative costs of the RTO/ISO, or other cost categories.


Usage charge
A charge levied on power suppliers or their customers for the use of transmission or distribution lines and facilities.



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Virtual bidding
In two-settlement electricity markets, financial transactions that allow participants to hedge against the risk that real-time and day-ahead prices will differ, or to speculate on the difference.

Voice broker
 A trading intermediary matching buyers and sellers using traditional telephone confirmation.

A measure of price fluctuations (for example, of a commodity) over a certain period of time.

Voltage reduction
Any intentional reduction of system voltage by 3 percent or greater for reasons of maintaining the continuity of service of the bulk electric power supply system.

Volumetric risk
The effect on revenue of fluctuations in demand for a product or service.



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Watt (W)
The unit of electrical power equal to 1 ampere under a pressure of one volt. A Watt is equal to 1/746 horsepower.

Watthour (Wh)
The electrical energy unit of measure equal to 1 watt of power supplied to, or taken from, an electric circuit steadily for one hour.

West Texas Intermediate (WTI)
Also known as Texas Sweet Light, is a type of crude oil used as a benchmark in oil pricing and the underlying commodity of New York Mercantile Exchange's oil futures contracts. This is usually the type referenced in Western news reports about oil prices, alongside North Sea Brent Crude.

WTI is a light crude that contains about 0.24% sulfur, rating it a sweet (low-sulfur) crude, sweeter than Brent. Its properties and production site make it ideal for being refined in the United States, mostly in the Midwest and Gulf Coast regions.

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

Winter heating season
The November 1 through March 31 period, during which most natural gas use for space heating takes place.







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European continental terminus of the Interconnector and Bacton-Balgzand pipelines linking the United Kingdom market with European gas receipts. Because of its strategic location Zeebrugge is also a trading point for physical gas in Europe.

Zonal price
A pricing mechanism for a specific zone within a control area.

This page was last updated on August 31, 2020