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Frequently Asked Questions

Flowgate Right

A right to transmit electricity over flowgates; a control area operator defines flowgate rights for links experiencing significant congestion and such rights may then be traded in bilateral markets

Interconnected System

A system consisting of two or more individual electric systems that operates synchroniously and have connecting tielines

LMP (Locational Marginal Pricing)

Pricing electricity to include the costs of transmission losses, congestion and the local costs of generation (also called location-based pricing)

Option

A contractual agreement that allows the holder the right to buy (call option) or sell (put option) a fixed quantity of a security or commodity at a fixed price within a specified period (there are standardized, exchange-traded, government-regulated, over-the-counter customized and unregulated options)

PUHCA (Public Utility Holding Company Act of 1935)

Enacted by Congress, it prohibits acquisition of any wholesale or retail electric business through a holding company, unless the business forms part of an integrated public utility system when combined with the utility's other electric business, and restricts the ownership of an electric business by non-utility corporations

Spot Market

The market in which electricity is traded for immediate delivery

Uplift

The additional expense from operating more expensive generating units to meet local demand; also called congestion costs

Avoided Costs

Costs of new transmission or generation (sometimes both) that electric utilities can "avoid" by purchasing from other sources, managing demand, conservation

CDR

Capacity deficient revenues

Default Service

Ensuring that electric service is not interrupted for customers who temporarily lack an electricity provider or who switch from one supplier to another