AEE CEP key terms

A ranking of available generating units by their short-run marginal cost, cheapest first. System operators dispatch in this order to serve demand at least cost, so the most expensive unit running at any moment sets the market price.

The amount of fuel energy a power plant consumes to produce one unit of electricity, usually stated in British thermal units per kilowatt-hour. Lower heat rates mean greater efficiency and lower fuel cost per megawatt-hour generated.

The difference between the market price of electricity and the cost of the natural gas needed to generate it, calculated using the plant's heat rate. It signals whether gas-fired generation is profitable at current prices.

Average load divided by peak load over a period, expressed as a percentage. A high load factor means consumption is steady, which typically supports better energy prices and more efficient use of contracted capacity.

Plants expected to run nearly continuously to serve the minimum level of demand on a system. They are usually large, efficient, or low-fuel-cost units, and their output is often priced under long-term contracts.

A forward auction in which electricity for each hour of the next operating day is bought and sold. Prices from this market are widely used as reference points in physical and financial supply contracts.

The price of electricity at a specific point on the transmission grid, reflecting generation cost plus congestion and line losses. LMPs vary by location and are the basis for settling wholesale energy transactions in many markets.

A natural gas pipeline interchange in Louisiana used as the delivery point for the NYMEX futures contract. Its price is the main North American benchmark for gas supply contracts and index pricing.

Actual electricity output over a period divided by the output the plant would have produced running at full power the whole time. It indicates how intensively a generator is used and varies widely by technology.

The generating capacity available above forecast peak demand, expressed as a percentage of that peak. Regulators and grid operators use it to judge whether supply can reliably meet demand.

A formal document inviting suppliers to bid on specified energy volumes, terms, and services. It lets buyers compare offers on price and non-price factors before negotiating a final supply contract.

A purchasing event in which invited suppliers compete by submitting successively lower bids within a set time window. The buyer sets the specification and volume, and the lowest offer typically wins the award.

Buying energy at a set price per unit for a defined volume and delivery period. It removes price uncertainty for the buyer but usually costs more than expected spot prices because the supplier bears the risk.

Buying energy at a price tied to a published market index, such as a day-ahead power or gas index, plus a supplier margin. Cost follows the market, so the buyer keeps price risk rather than the supplier.

A purchasing approach that combines fixed-price forward blocks for part of the load with index-priced supply for the remainder. It balances budget certainty against the flexibility to benefit from lower spot prices.

Buying a required volume in several smaller purchases spread over time rather than in one transaction. This averages out entry prices and reduces the risk of buying at a single market peak.

The full lifetime cost of an energy purchase, including commodity price, transmission and distribution charges, contract fees, metering, and risk-management costs, not just the headline energy rate.

A record of how much energy a site or portfolio consumes in each interval, such as every 15 minutes or hour. It determines the shape and volume a supplier must price and schedule.

A long-term contract in which a generator sells electricity, and often associated environmental attributes, to a buyer at agreed prices and terms. PPAs underpin project financing and give buyers price certainty.

A framework contract that sets standard legal and commercial terms, such as payment, credit, and default provisions, for many individual transactions between two parties. Each trade is then confirmed separately under it.

A supply or transport arrangement that lets the provider curtail delivery under defined conditions, usually in exchange for a lower rate. The customer accepts curtailment risk to reduce fixed costs.

A contract term requiring the buyer to pay for a minimum quantity whether or not it takes delivery. It shifts volume risk to the buyer and is common in pipeline, storage, and project contracts.

A clause excusing a party from performance when events beyond its reasonable control, such as natural disasters, war, or government action, prevent it. It defines which events qualify and the notice required.

The permitted range above or below a contracted volume within which the buyer may vary its nominations without penalty. It gives flexibility to match actual consumption while protecting the supplier's scheduling.

A provision that adjusts price or obligations if new laws, taxes, or regulations materially affect the cost of performing the contract. It allocates regulatory risk between buyer and seller.

A monthly fee based on the highest power drawn during a billing period, usually measured in kilowatts. It recovers the cost of capacity reserved for the customer and rewards flatter consumption profiles.

A standardized, exchange-traded agreement to buy or sell a fixed quantity of a commodity at a set price on a future date. Futures are cleared, margined daily, and used for hedging or speculation.

A financial contract in which two parties exchange payment streams, typically a fixed price for a floating index price, on a defined volume. It lets a buyer lock in cost without taking physical delivery.

A contract giving the buyer the right, but not the obligation, to purchase energy at a specified strike price before or on an expiry date. The buyer pays a premium for that protection against price rises.

A hedging structure combining a purchased call option with a sold put option, which sets a ceiling and a floor on price. The premium received from the put offsets part or all of the call cost.

A statistical estimate of the maximum loss a portfolio could suffer over a given period at a stated confidence level. Companies use it to size hedging programs and set risk limits.

The risk that the price difference between a hedged instrument and the actual supply location or index moves unexpectedly. It leaves part of the buyer's exposure unhedged even when volumes match.

The proportion of an exposure that is covered by offsetting financial or physical positions. A ratio below one leaves some volume exposed to market price movements.

A regulation requiring electricity suppliers to source a minimum share of their sales from renewable generation. Suppliers demonstrate compliance by surrendering certificates, which creates demand for renewable projects.

A tradable instrument representing the environmental attributes of one megawatt-hour of renewable generation. RECs are sold separately from the underlying electricity and used to prove compliance or voluntary green claims.

A regulatory system that sets a total limit on emissions and issues tradable allowances equal to that cap. Emitters must surrender allowances for their emissions, and the allowance price becomes a cost of generation.

Indirect greenhouse gas emissions from purchased electricity, heat, or steam consumed by an organization. They are calculated using consumption and grid or contractual emission factors and reported in sustainability disclosures.

A utility program letting customers pay a premium or sign a special contract to receive electricity matched to renewable generation. It provides a procurement route where direct retail choice is unavailable.

A market in which generators are paid for making capacity available, separate from energy sales, to ensure adequate supply. Payments reward reliability, and buyers of electricity ultimately fund them.