Glossary of Energy-Related Terms


Glossary of Terms

There are a lot of terms out there in the energy world that merit explanation, especially to someone who is new to energy in general, or to a specific field or technology. We’ve done our best, with assistance from the Minnesota Department of Commerce, to provide helpful definitions for terms that you’ll run into on the CERTs website.

Browse the glossary using the letters below.




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Alternative Compliance Payment (ACP)—Utilities that have to comply with RPS requirements but find SRECs to be scarce or unavailable can provide an alternative payment (i.e. $300/MWh)

AFV—Alternative Fuel Vehicle



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C-BED (Community-Based Energy Development)—C-BED works toward renewable energy development in a way that optimizes local economic development and environmental benefits.


CIP—Conservation Improvement Program

CO—Carbon Monoxide

CO 2 —Carbon Dioxide



Commodity Price—The portion of a natural gas sales or transportation rate based upon the volume actually shipped or used.


Cooperative electric association or utility—utility owned and operated by its members.



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DC—Direct current.


Demand Charge—A fee based on the peak amount of electricity used during the billing cycle.

Department or DOC—the Minnesota Department of Commerce.

Deregulation—The elimination or restructuring of regulation from a previously regulated industry or sector of an industry.

Distributed Generation (DG)— (Also called distributed energy resources, distributed power, distributed energy, distributed generation, on-site generation) Both electric demand reduction (energy conservation, load management, etc.) and supply generated at or near where the power is used. A distributed generation system involves amounts of generation located on a utility’s distribution system for the purpose of meeting local (substation level) peak loads and/or displacing the need to build additional (or upgrade) local distribution lines.

Distribution—The delivery of electricity to the retail customer’s home or business through low voltage distribution lines.

DSM (Demand Side Management)—Programs to influence the amount or timing of customers’ energy use.

DOE—U.S. Department of Energy.



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Economies of Scale—Economies of scale exist where the industry exhibits decreasing average long run costs with increases in size.

EERE—Energy Efficiency & Renewable Energy, U.S. Department of Energy

EIA—The United States Department of Energy’s Energy Information Administration.


Electric System Losses—Total electric energy losses in the electric system. Losses are primarily due to electric resistance within transmission system lines and transformers.

EMF—Electromagnetic fields.


Energy Conservation—Using less energy, either by greater energy efficiency or by decreasing the types of applications requiring electricity or natural gas to operate.

Energy Efficiency—Using less energy (electricity and/or natural gas) to perform the same function at the same level of quality. Programs designed to use energy more efficiently — doing the same with less. For the purpose of this paper, energy efficiency is distinguished from DSM programs in that the latter are utility sponsored and financed, while the former is a broader term not limited to any particular sponsor or funding source.

EPA—U.S. Environmental Protection Agency.

EPBB (Expected Performance-Based Buy-Down)—An EPBB is a type of up-front incentive based on an estimate of your solar system’s expected performance. The performance estimate is based on system size, geographic location, orientation at time of application. The EPBB incentive is offered only to systems smaller than 30 kW AC in California, under the California Solar Initiative.



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Federal Energy Regulatory Commission (FERC)—The Federal Energy Regulatory Commission regulates the price, terms and conditions of power sold in interstate commerce and regulates the price, terms and conditions of all transmission services. FERC is the federal counterpart to state utility regulatory commissions.



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Gigawatt-hour (GWh)—The unit of energy equal to that expended in one hour at a rate of one billion watts. One GWh equals 1,000 megawatt-hours.

Greenhouse gases—Greenhouse gases are water vapor, carbon dioxide, tropospheric ozone, nitrous oxide, methane, and chlorofluorocarbons (CFCs).




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Investor owned utility (IOU)—Common term for a privately owned (shareholder owned) gas or electric utility regulated by the Minnesota Public Utilities Commission (referred to in statutes as a “public utility”).

Independent System Operator (ISO)—A neutral and independent organization with no financial interest in generating facilities that administers the operation and use of the transmission system. ISOs exercise final authority over the dispatch of electricity from generators to customers to preserve reliability and facilitate efficiency, ensure non-discriminatory access, administer transmission tariffs, ensure the availability of ancillary services, and provide information about the status of the transmission system and available transmission capacity. An ISO may make some transmission investment decisions.

Interconnected System—A system consisting of two or more individual electric systems that have connecting tie lines and whose operations are synchronized.

Interconnection—When capitalized, any one of the five major electric system networks in North America: Eastern, Western, ERCOT (Texas), Quebec, and Alaska. When not capitalized, the facilities that connect two systems or control areas. Additionally, an interconnection refers to the facilities that connect a nonutility generator to a control area or system.

IRP—Integrated Resource Planning.

Investment Tax Credit (ITC)—The federal ITC is a 30% tax credit for installing a solar system in your home. You can apply this credit to your tax bill in the following spring.



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KV—A kilovolt equals 1,000 volts.





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Load Center or Load Pocket—A geographical area where large amounts of power are drawn by end-users.

Local Distribution Company (LDC)—Common term for a privately-owned natural gas utility that provides retail natural gas services to end use customers and is usually regulated by the PUC.




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Mcf—one thousand cubic feet; a unit of measure of gas volumes.

Minnesota Public Utilities Commission (Commission or PUC)—the state agency with regulatory jurisdiction over certain Minnesota utilities.

MISO—Midwest Independent System Operator.

MAPP—Mid-Continent Area Power Pool.

MVA—A megavolt-ampere equals 1,000 kVA.

Megawatt (MW)—A megawatt equals 1,000 kilowatts or 1 million watts.

Megawatt-hour (MWh)—The unit of energy equal to that expended in one hour at a rate of one million watts. One MWh equals 3,414,000 Btus.

Monopoly—The only seller with control over market sales.



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NEG and NEM—Net Energy Generation and Net Energy Metering; When producing electricity, NEG is the total electricity you produce minus the electricity you use from the grid. NEM means that the electricity you do generate will feed into the grid and earn you credits against the electricity you do pull from the grid. Your utility bill will then reflect only the net energy you’ve pulled from the utility.


NO x —Nitrogen Oxides



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Property Assessed Clean Energy (PACE)—Cities are beginning to offer PACE programs which provides a loan for your solar panels. The program pays for the panels and you pay for the solar system on your property tax bill, over approximately 20 years, with interest. PACE provides loans for the cost of the panels, before the federal ITC is rewarded – this means that you will need to make payments on a larger, pre-ITC loan.

Parallel Path Flow—As defined by NERC, this refers to the actual flow of electric power on an electric system’s transmission facilities resulting from scheduled electric power transfers between two other electric systems. (Electric power flows on all interconnected parallel paths in amounts inversely proportional to each path’s resistance.) Contract transmission paths, the electricity contracted for between sellers and buyers, do not define the way electricity actually flows.

Peak Load or Peak Demand—The electric load that corresponds to a maximum level of electric demand within a specified time period, usually a year.

Performance Based Incentive (PBI)—A payment or rebate paid based on actual energy production, compared to a UFI, on a $/kWh basis. A PBI benefits those with larger solar power systems.

Performance Based Regulation (PBR)—Any rate setting mechanism that attempts to link rewards (generally profits) to desired results or targets. PBR sets rates, or components of rates, for a period of time based on external indices rather than a utility’s cost of service. Other definitions include light-handed regulation that is less costly and less subject to debate and litigation. A form of rate regulation that provides utilities with incentives to reduce their costs.

Power Authorities—Quasi governmental agencies that perform all or some of the functions of a public utility.

Power Purchase Agreement (PPA)—A financing option for residential solar in which a solar company owns (and installs, monitors, maintains) your solar panels; you pay for electricity. With PPAs, you avoid the high upfront costs of installing solar and pay a monthly rate that depends on how much energy your panels produce.

Power Pool—Two or more interconnected electric systems planned and operated to supply power for their combined demand requirements.

Production Tax Credit (PTC)—The federal PTC is a per-kilowatt-hour tax credit for generating electricity, for a certain period of the solar system’s operation. Those who are less interested in PTCs can apply for an ITC, and vice versa.

Public Good—A good (or a service) that will not be produced and delivered solely by the free market. Economists call these “public goods” because the public consumes them, but they do not solely benefit a single buyer or group of buyers. There is no way to produce a public good without producing a value to society at large. It is unlikely that an individual would pay out of his or her own pocket to ensure that a public good is produced because the value is not exclusively individual.


Public Utility—By Minnesota Statute, an investor owned utility regulated by the PUC. “Public utility” excludes municipal utilities, cooperatives, and power marketing authorities.

PURPA—Public Utility Regulatory Policies Act of 1978.




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RDF—Refuse derived fuel, composed of processed garbage, that is used in some electric generation plants.

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.


REIS—Regional Energy Information System; the Minnesota Department of Commerce’s computerized state energy data collection and information system required under Minnesota Statutes. It includes energy data the DOC collects directly from energy suppliers as well as data collected by other state departments such as the Minnesota Department of Revenue, Petroleum Taxation Division. It also includes energy data specific to Minnesota collected by the U.S. Department of Energy, the U.S. Department of Commerce, Bureau of Census and the U.S. Department of Transportation.


Renewable Energy Certificate (REC)—A REC is the property right to the environmental benefits associated with generating renewable electricity. For instance, homeowners who generate solar electricity are credited with 1 solar REC for every MWh of electricity they produce. Utilities that have to fulfill an RPS requirement can purchase these RECs on the open market.


RES (Renewable Energy Standard)—(Also called RPS, Renewable Portfolio Standard). In Minnesota, the new Renewable Energy Standard that passed the House on February 20, 2007, will require 25 percent of Minnesota’s electricity to come from renewable sources (such as wind and solar) by the year 2025. Currently, Minnesota imports more electricity from outside sources than any other state.




RPS (Renewable Portfolio Standard)—See RES, Renewable Energy Standard

RTO—A regional transmission organization designed to operate the grid and its wholesale power market over a broad region and with independence from commercial interests. An RTO would also have a role in planning and investing in the grid, though how it would conduct these activities remains unresolved. An RTO would also coordinate with other RTOs.



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Silicon (Si)—A semiconducting material found in most solar cells. It absorbs photons in sunlight and creates energy.

Societal Benefits Charge (SBC)—Funding for programs that provide benefits to society, such as low-income, energy efficiency, and renewable energy programs

Solar Renewable Energy Certificate (SREC)—See REC, Renewable Energy Certificate

Substation—A facility for switching electric elements, transforming voltage, regulating power, or metering.



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Tariff—A document, approved by the responsible regulatory agency, listing the terms and conditions, including a schedule of prices, under which utility services will be provided.

Thermal Rating—The maximum amount of electrical current that a transmission line or electrical facility can conduct over a specified time period before it sustains permanent damage by overheating or before it violates public safety requirements.

Time-of-Use (TOU) Rates—The pricing of delivered electricity based on the estimated cost of electricity during a particular time block. Time-of-use rates are usually divided into three or four time blocks per twenty-four hour period (on-peak, midpeak, off-peak and sometimes super off-peak) and by seasons of the year (summer and winter). Real time pricing differs from TOU rates in that it is based on actual (as opposed to forecasted) prices that may fluctuate many times a day and are weather sensitive, rather than varying with a fixed schedule.

Transmitting Utility (Transco)—This is a regulated entity that owns, and may construct and maintain, wires used to transmit wholesale power. It may or may not handle the power dispatch and coordination functions. It is regulated to provide nondiscriminatory connections, comparable service and cost recovery.



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

Universal Service—Energy service sufficient for basic needs (an evolving bundle of basic services) available to and affordable by virtually all members of the population.

Up-Front Incentive (UFI)—A payment or rebate up front for installing solar panels.

Utility—A corporation, person, agency, authority, or other legal entity that owns or operates facilities for the generation, transmission, distribution, or sale of electric energy or natural gas primarily for use by the public and is defined as a utility under the statutes and rules by which it is regulated.

Utility—A regulated entity that exhibits the characteristics of a natural monopoly. For the purposes of the electric industry, “utility” generally refers to a regulated, vertically integrated monopoly electric company. “Transmission utility” refers to the regulated owner/operator of the transmission system only. “Distribution utility” refers to the regulated owner/operator of the distribution system that serves retail customers.



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Vertically Integrated Monopoly—A single entity (provider) which performs all of the basic functions of production, transportation and delivery. For example, in the electric industry a vertically integrated electric utility performs all three basic functions of generation (production), long distance transmission (transportation) and local distribution (delivery) of electrical energy to consumers.



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Watt—The unit of measure for electric power or rate of doing work. The rate of energy transfer equivalent to one ampere flowing under pressure of one volt.

Weather normalized information—Information adjusted to remove fluctuation due to changes in weather.

Wholesale Competition—Power producers competing to sell their power to a variety of distribution companies.

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

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