Active Power

Electricity used (power) and measured in units of watts.
1 unit: 1 KWh 1 Kilowatt hour;
1,000 kWh: 1 MWh: 1 Megawatt hour:
1,000 MWh: 1 GWh: 1 Gigawatt hour;
1,000 GWh: l TWh: 1 Terawatt hour.

Annual Quantity (AQ)

The expected or nominated annual consumption of gas at a supply point. Also referred to as 'Annual Offtake'.

Ampere

The unit of measurement of electrical current produced in a circuit by 1 volt acting through a resistance of 1 Ohm.

Amsterdam Power Exchange (APX)

The Amsterdam Power Exchange launched a day-ahead spot market for Dutch electricity in May 1999. It publishes a daily index of all trading volumes.

API

American Petroleum Institute, U.S trade association for the oil and natural gas industry.

ARA

Amsterdam - Rotterdam – Antwerp (coal)

Arbitrage

The difference in price of a given commodity either in the same location or in different geographical locations. Grade arbitrage is trading the difference in the price of a commodity in the same location – e.g. the difference in the prices of two sweet crudes in northwest Europe. Geographical arbitrage is trading the difference in the price of the same grade on difference locations. Often grade and geographical arbitrage are combined – e.g. in transatlantic arbitrage which is trading the price difference between, for example, Brent crude in Europe and West Texas Intermediate in the US this calculation will include the cost-of-carry as well as the cost of the alternative crude in the US.

At the beach

When gas has been brought ashore to a terminus by producers but is not yet in the National Transmission system, the gas is called at the beach.

Availability

The percentage of the time that electricity generating plant is available to produce electricity. The agreed level of electricity supply capacity made available by both the networks and the suppliers to meet the consumer's highest likely monthly demand – measured in kVA. The site cannot exceed this specified amount without financial penalty and a modified connection agreement. Also see 'Capacity Factor'. Also described as 'Supply Capacity'.

Availability charge

Electricity availability charges are based on an agreed level of required capacity and should be set at just above the anticipated maximum demand.

Average delivered price

The weighted average of all contract price commitments and market price settlements in a delivery year.

Backwardation

Term used to describe an energy market in which the anticipated value of the spot price in the future is lower than the current spot price. When a market is in backwardation, market participants expect the spot price to go down. The reverse situation is described as contango.

Balancing mechanism

The mechanism used by the National Grid Company (NPC) to balance the supply and demand of electricity. Provides the System operator (NGC) with the means to match system wide imbalances in supply and demand of electricity and adjust local and bulk power flows to ensure the security of the power network. The operation of the balancing mechanism begins after gate closure.

Barrel

Standard measure of quantity for crude oil and petroleum products. Barrel, US barrel and standard barrel are all equal to 42 US gallons.

BBL Abbreviation for barrel.
bbl/d
The abbreviation for barrel(s) per day.
B/D, BD, or BPD

Barrels per day. Used to express crude oil production, refinery throughput capacity (ie, capacity of crude distillation unit), liftings, forward demand projections and crude consumption rates.

Barrels of oil equivalent (BoE)

Volume of natural gas expressed in terms of its energy equivalent to oil. About 6,000 cubic feet of gas equals one barrel of oil equivalent.

Baseload

The load continuously supplied by generators into the electricity networks over a period of time that demand does not fall below. Constant power load for 24 hours per day.

Baseload capacity

The generating equipment normally operated to serve loads on an around-the-clock basis. Baseload plant A plant, usually housing high-efficiency steam-electric units, which is normally operated to take all or part of the minimum load of a system, and which consequently produces electricity at an essentially constant rate and runs continuously. These units are operated to maximize system mechanical and thermal efficiency and minimise system operating costs.

Basis

The difference that exists at any time between the cash, or spot price of a given commodity and the price of the nearest futures contract for the same (or related) commodity. The basis may reflect different time periods, products forms, qualities or locations. The cash price minus the futures price equals the basis.

BAU (Business-As-Usual)

BAU or Business-As-Usual is often referred to as the baseline scenario under the European Union's Emissions Trading Scheme, i.e. if company's included in the EU-ETS continue operating without any change to their operational patterns or without any action to reduce CO2 emissions, it is the forecast of CO2 emissions based on a Business-As-Usual scenario.

Balancing and Settlements Code (BSC)

Allows suppliers to register both imported and exported energy under a single MPAN. Code governing the operation of the balancing mechanism and the imbalance settlement process and the relationships and responsibilities of all electricity market participants.

Balancing mechanism

System used by electricity generators and suppliers to balance their supply and demand positions. Operated by National Grid Transco to maintain the necessary national and local balances between electricity generation and consumption.

BBL pipeline

Gas pipeline from Balgzand (Netherlands) to Bacton (UK)

BCF

Billion cubic feet (of gas.)

Beach gas

The point at which gas is brought ashore to terminals before entering the NTS.

Department for Business, Enterprise & Regulatory Reform (BERR)

Formerly known as DTI, the BERR is a governmental department that works on behalf of business. As part of its role, the BERR oversees nuclear decommissioning and energy security.

BHA

British Hydropower Association.

Bid

The price at which a party is willing to buy at.

Biomass

Biomass is anything derived from plant or animal matter and includes agricultural, forestry wastes/residues and energy crops. It can be used for fuel directly by burning or extraction of combustible oils.

BoM (Balance of month)

The traded market for delivery for the remaining days in the month excluding the following day.

Bid/Ask

A measure of market liquidity, also known as bid/offer. The bid is the price level at which the buyers are willing to buy, and the ask is the price level at which sellers are willing to sell. The thinner the spread, the higher the liquidity.

Bid/Offer Pair

A bid/offer pair is where a BSC party indicates that it is willing to operate at a level other than that at the Final Physical Notification (FPN) in exchange for payment. Offers indicate the willingness to operate above the level of the FPN and bids indicate the willingness to operate below the level of FPN. These Bid/Offer pairs are submitted to the balancing mechanism. The system operator can accept a Bid or Offer up until real time, as long as acceptance is compatible with the dynamic parameters of the BM Unit.

Bids

(1) (NETA) A willingness to reduce the level of generation or increase the level of demand over or below the Physical Notification submitted for a half hour period.

(2) (Trading) The price at which a trader is willing to buy.

Bilateral contract

An agreement between two counterparties to offset the value of all in-the-money contracts with all out-of-the-money contracts, resulting in a single net exposure amount owed by one counterparty to the other.

Biodiesel

Any liquid biofuel suitable as a diesel fuel substitute or diesel fuel additive or extender. Biodiesel fuels are typically made from oils such as soybeans, rapeseed, or sunflowers, or from animal tallow. Biodiesel can also be made from hydrocarbons derived from agricultural products such as rice hulls.

Biogas

Methane-rich gas produced from biodegradable material (e.g. landfill gas and sewage gas).

Biomass

Organic non-fossil material of biological origin constituting a renewable energy source.

BM unit

A unit of generation plant or demand plant/apparatus that imports and/or exports electricity so that physical imports and exports can be treated appropriately under the BSC.

Broker

An intermediary between traders for physical, futures and over-the counter deals. Brokers receive a fixed commission predetermined between the broker and his/her client.

British Electricity Trading Transmission Arrangements (BETTA)

Arrangements to create a single wholesale electricity market & for Great Britain. British electricity trading and transmission arrangements - arrangements designed to draw Scotland into the British wholesale market for trading power. The scheme was enforced from 1st April 2005.

Brent Blend crude oil

Traded on the ICE and based upon North Sea Oil. UK Brent blend is a blend of crude oil from various fields in the east Shetland basin. The crude is landed at the Sullom Voe terminal and is used as a benchmark for the pricing of much of the world;s crude oil production.

British thermal unit (Btu)

The amount of heat required to raise the temperature of 1lb of water by 1 degree Fahrenheit (technically from 60degreesF to 61degrees F). It is used to compare the heat-producing value of different fuels.

BSC

Balancing and Settlement Code for electricity trading under NETA. Rules that govern how the two key functions of NETA (the balancing mechanism and imbalance settlement) are carried out.

Business, Enterprise and Regulatory Reform Committee

Formed in November 2007, the Committee was appointed by the House of Commons to examine the administration, expenditure and policy of the Department for Business, Enterprise and Regulatory Reform (BERR) and its associated public bodies including Ofcom and the Office of Fair Trading (OFT). For more information visit the Committee's website.

BWEA

British Wind Energy Association.

Call option

An option that gives the buyer (holder) the right, but not the obligation, to buy a futures contract (enter into a long futures position) or physical commodity for a specified price within a specified period of time in exchange for a one-time premium payment. It obligates the seller (writer) of the option to sell the underlying futures contract (enter into a short futures position) or commodity at the designated price, should the option be exercised at that price.

Calorific value (CV)

A measure of energy released as heat when a fuel is burned. It may be measured wet (with water vapour) or dry (after the water vapour has been removed). It may also be measured gross or net - gross includes the heat produced when the after vapour is condensed into a liquid, and net does not. Generally, CV is measured gross and dry.

Capacity

The rated load-carrying capability of electrical equipment such as generators of transmission lines, typically expressed in megawatts or megavoltamperes. (Gas) the rated transportation volume of natural gas pipelines, typically expressed in millions of cubic feet per day.

Capacity factor

Ratio of the electrical energy produced by a generating unit relative to the electrical energy that could have been produced at continuous full-power operation during the same period.

Carbon capture

Removal of CO2 from fossil fuels either before or after combustion. In the latter the CO2 is extracted from the fluegas.

Carbon credits

A credit or permit arising from a greenhouse gas emissions reduction scheme, such as emissions trading

Carbon dioxide (CO2)

A colourless, odourless, non-poisonous gas that is a normal part of Earth's atmosphere. Carbon dioxide is a product of fossil-fuel combustion as well as other processes. It is considered a greenhouse gas as it traps heat (infrared energy) radiated by the Earth into the atmosphere and thereby contributes to the potential for global warming. The global warming potential (GWP) of other greenhouse gases is measured in relation to that of carbon dioxide, which by international scientific convention is assigned a value of one (1).

Carbon dioxide equivalent

The amount of carbon dioxide by weight emitted into the atmosphere that would produce the same estimated radioactive forcing as a given weight of another radioactively active gas. Carbon dioxide equivalents are computed by multiplying the weight of the gas being measured (for example, methane) by its estimated global warming potential (which is 21 for methane). "Carbon equivalent units" are defined as carbon dioxide equivalents multiplied by the carbon content of carbon dioxide (i.e. 12/44).

Carbon intensity

The amount of carbon by weight emitted per unit of energy consumed. A common measure of carbon intensity is weight of carbon per British thermal unit (Btu) of energy. When there is only one fossil fuel under consideration, the carbon intensity and the emissions coefficient are identical. When there are several fuels, carbon intensity is based on their combined emissions coefficients weighted by their energy consumption levels.

Carbon Reduction Commitment (CRC)

The Carbon Reduction Commitment (CRC) is an innovative climate change and energy saving scheme for the UK. It will encourage improvements in energy efficiency which can save organisations money. The scheme has been designed to generate a shift in awareness in large organisations especially at senior level, and to drive changes in behavior and infrastructure.

The scheme is also a central part of the UK’s strategy for controlling our carbon dioxide (CO2) emissions. It will tackle CO2 emissions not already covered by Climate Change Agreements and the EU Emissions Trading System. This will help reduce the country’s carbon footprint to deliver the ambitious emissions reduction targets set in the Government’s Climate Change Act. The scheme started in April 2010. For more details see http://www.decc.gov.uk/en/content/cms/what_we_do/lc_uk/crc/crc.aspx.

Carbon sink

A reservoir that absorbs or takes up released carbon from another part of the carbon cycle. The four sinks, which are regions of the Earth within which carbon behaves in a systematic manner, are the atmosphere, terrestrial biosphere (usually including freshwater systems), oceans, and sediments (including fossil fuels).

Carbon Trust

An independent not for profit company set up by the government with support from business to encourage and promote the development of low carbon technologies. Key to this aim is its support for UK businesses in reducing carbon emissions through funding, supporting technological innovation and by encouraging more efficient working practices.

Carbon emissions trading scheme/carbon trading

A scheme in which greenhouse gas emissions are controlled by setting a cap on total emissions and allowing the market sector(s) to reach an economically balanced response via trading of emissions allowances. Allowances are allocated initially, perhaps through a free distribution or through an auction, and the total allocation is adjusted (capped) periodically.

Carbon storage

The long-term storage of carbon or CO2 in the forests, soils, ocean, or underground in depleted oil and gas reservoirs, coal seams, and saline aquifers. Also referred to as engineered carbon sequestration. Carbon Capture and Storage can be referred to as CCS.

Cash out price

The price charged for imbalance (see system buy/sell price).

CBM

Coal Bed Methane, the gas derived from coal seams.

CCAs

Agreements to mitigate climate change impacts linked to concessions under the Climate Change Levy.

CHPA

Combined Heat and Power Association.

CIF (cost, insurance, freight)

This term refers to a type of sale in which the buyer of the product agrees to pay a unit price that includes the f.o.b. value of the product at the point of origin plus all costs of insurance and transportation. This type of a transaction differs from a "delivered" purchase, in that the buyer accepts the quantity as determined at the loading port (as certified by the Bill of Lading and Quality Report) rather than pay based on the quantity and quality ascertained at the unloading port. It is similar to the terms of an f.o.b. sale, except that the seller, as a service for which he is compensated, arranges for transportation and insurance.

Climate Change Agreement

An agreement between the Government and a business user, whereby a reduced rate of Climate Change Levy is payable in return for a commitment by the user to achieve certain pre-determined targets for energy usage or carbon emissions.

Climate Change Levy (CCL)

Climate Change Levy is a charge introduced by the Government on 1st April 2001 on UK non-domestic fuel - the Government’s aim in introducing the levy is to encourage businesses to use less energy, and contribute to the reduction of Carbon Dioxide emissions. The levy is applied as a specific rate per nominal unit of energy. There is a separate rate for each category of taxable commodity. The rates are based on the energy content of each commodity and are expressed in kWh for gas and electricity, and in kgs for liquid petroleum gas. The levy is a single stage tax imposed at the time of supply to industrial and commercial consumers rather than at the time of use.

Climate Change Programme

The Climate Change Programme, published in 2006, sets out our policies and priorities for action in the UK and internationally. We also made a commitment to introduce an annual report to Parliament. Subsequently, the Climate Change and Sustainable Energy Act 2006 placed an obligation on us to report to Parliament on greenhouse gas emissions in the UK and action taken by Government to reduce these emissions. For more details on the Act, see: www.opsi.gov.uk/ACTS/acts2006/60019--a.htm#2

Combined Cycle Gas Turbine (CCGT)

An energy-efficient gas turbine system where the first turbine generates electricity from gas produced during fuel combustion.

Combined Heat and Power (CHP)

The production of two forms of energy, such as high-temperature heat and electricity, from the same process. For example, the steam produced from boiling water could be used for industrial heating.

Clean Spread

The generating margin for Gas and Coal Fired electricity plant after the cost of EU-ETS carbon allowances has been removed.

Crack Spread

A type of commodity-product spread involving the purchase of crude oil futures and the sale of gasoline and heating oil futures.

Clean Development Mechanism (CDM)

A Kyoto Protocol program that enables industrialized countries to finance emissions-avoiding projects in developing countries and receive credit for reductions achieved against their own emissions limitation targets.

Co-firing

Burning of organic matter with fossil fuels (typically in a coal-fired power station).

Collateral

An obligation or security linked to another obligation or security to secure its performance.

Commodity

(1) A physical good, typically produced in agriculture or mining, that can be the object of a commercial transaction.

(2) Any index, rate, security or physical commodity that is or could be the underlying instrument or price determinant of a futures contract or other financial instrument.

Commodity future

A futures contract on a commodity. Unlike financial futures, the prices of commodity futures are determined by supply and demand rather than the cost-of-carry. Commodity futures can, therefore, either be in contango (where futures prices are higher than spot prices) or backwardation (where futures are lower than spot prices.)

Commodity swap

Commodity swaps enable both producers and consumers to hedge commodity prices. The consumer is usually a fixed payer and the producer a floating payer. If the floating-rate price of the commodity is higher than the fixed price, the difference is paid by the floating payer, and vice versa. Usually only the payment streams, not the principal, are exchanged, although physical delivery is becoming increasingly common. Swaps are sometimes done to hedge risks that cannot readily be hedged with futures contracts. This could be a geographical or quality basis risk, or it could arise from the maturity of a transaction.

Connection and Use of System Code (CUSC)

Governs connection and the use of the National Grid Transmission System.

Connection agreement

Contract between electricity consumer and distribution network operator establishing the terms on which the customer's supply is connected to the distribution network.

Consumption energy account

This is the energy account of the trading party to which the contract/trade relates. (In this case it is a consumption account).

Contango

Term used to describe an energy market in which the anticipated value of the spot price in the future is higher than the current spot price. When a market is in contango, market participants expect the spot price to go up. The reverse situation is described as backwardation.

Correlation

A measure to the degree to which changes in two variables are related. Correlation ranges between plus one (perfect correlation - the same amount of movements in the same direction) and minus one (perfect negative correlation - the same amount of movement in opposite directions). Like volatility, it can be calculated from historical data, but such calculations are not necessarily good predictors of behaviour.

If the correlation between markets is known, an option position in one market can be offset against another with similar direction and volatility. This is advantageous, because it can circumvent difficult hedging environments and can reduce costs.

Correlation is also important for the pricing of some options, particularly those offering exposure to more than one market variable. The payout of a spread option or a yield curve option is based on the correlation between two underlying markets separated by space, tie or assets, while that of a quanto product will depend on the extent of the relationship between movements in the underlying and movements in the exchange rate.

Credit risk

Credit risk, or default risk, is the risk that a financial loss will be incurred if counterparty to a (derivatives) transaction does not fulfil its financial obligations in a timely manner. It is therefore a function of the following: the value of the position exposed to default (the credit or credit risk exposure); the proportion of this value that would be recovered in the event of a default; and the probability of default. Credit risk is also used loosely to mean the probability of default, regardless of the value that stands to be lost.

Crude oil

A full-ranging hydrocarbon mixture produced from a reservoir after any associated gas has been removed. Among the most commonly traded crudes are the North Sea’s Brent blend, the US’s West Texas Intermediate and Dubai.

Crude oil stocks

Stocks of crude oil and lease condensate held at refineries, in pipelines, at pipeline terminals, and on leases.

Cubic foot (cf), natural gas

The amount of natural gas contained at standard temperature and pressure (60 degrees Fahrenheit and 14.73 pounds standard per square inch) in a cube whose edges are one foot long.

Curve

Refers to the futures market. Includes everything beyond the current month going forwards.

Daily metered

A gas supply point whose consumption is measured each day by means of a data logger.

Daily metered customer

An interruptible gas supply point or a gas supply point with an annual consumption greater than 58,600,000 kWh which is individually nominated each day by a shipper.

Dark spread

Represents the theoretical margin for a coal fired power plant. If a dark spread is positive, then the price of the power is higher than that of the fuel and the spread is profitable.

Data collector (DC)

The Data Collector or DC is the organisation responsible for collecting, processing and validating the meter reading data, who then passes the information to the Data Aggregator

Data aggregator (DA)

The Data Aggregator or DA is the organisation appointed for aggregating the meter-reading data received from the Data Collectors and forwarded to the suppliers.

Daily balancing

Balancing, on a day-by-day basis, the amount of gas a supplier puts into and takes off a pipeline system.

Data collector

The organisation responsible for collecting, processing and validating the meter reading data which is then passed on to the data aggregator.

Datalogger

Device fitted to a meter that can record, store and transmit readings and measurements.

Day-ahead market (DA)

The traded market for delivery for the following day.

Declared Net Capacity (DNC)

The equivalent capacity of intermittent plant adjusted from the rated capacity using a correction factor to enable comparisons with continuously operating plant.

DEFRA

Department of Environment, Food and Rural Affairs of the UK Government.

Degree-Day

A measure of the variation of one day's temperature against a standard reference temperature, typically 65 degrees Fahrenheit (18 degrees Celsius). Degree-days are used as a base for temperature-related weather derivative deals. There are both cooling degree-days (CDDs) and heating degree-days (HDDs). For example a firm take out a 30-day CDD swap with a reference temperature 65 degrees F, and the average temperature on each day is 70 degrees F. The company is then due 150 (30 x 5) degree-days multiplied by the sum of money agreed for each degree-days. If the firm had taken out an HDD swap, it would have owed the same amount of money.

Demand-side management

Activities carried out to control the level and type of demand for electricity.

Derivative

A financial instrument derived from a cash market commodity, futures contract or other financial instrument. Derivatives can be traded on regulated exchange markets or over-the-counter. For example, energy futures contracts are derivatives of physical commodities, and options on futures are derivative of futures contracts.

Demand level

The consumption of electricity in half-hourly intervals actually used on a national basis.

Demand side management

Refers to measures that can be taken on the customer’s side of the meter to change the amount or timing of consumption.

Distributed generation

Electricity generation usually on a relatively small scale that is connected to the distribution networks rather than directly to the national transmission systems.

Distribution losses

Charges relating to electrical losses that occur as electricity is transmitted through the lines of the DNO (see below).

Distribution network operator

Manages the installation and upkeep of their cabling and the distribution of electricity from the point where it leaves the transmission system to the supply point. They are also often referred to as the host Regional Electricity Company (REC).

Distribution use of system

Charge levied by the DNO for the transmission of electricity through its local network.

Distribution/Distributor

The businesses responsible for maintaining the electricity networks throughout the UK. Each Distribution Company operates within the old Regional Electricity Company areas (i.e. Western Power Distribution covers the SW area) and covers the maintenance of underground and Overhead, low voltage (Iv) and high voltage (hv) cables. The Distributor is responsible for maintenance of the cabling downwards of 132KV and also for the cut outfuses on the customer's premises.

Distribution Network Operators (DNOs)

Companies that are responsible for operating the networks that connect electricity consumers to the national transmission system and provide interconnection with embedded generation.

Distributed generation

A distributed generation system is characterised by a number of smaller, interlinked generators, rather than one central generator. Distributed generation is typically connected at low voltage, ie to the distribution network.

Distribution network

Network for electricity distribution at voltages below that of the transmission network.

DNOs

Distribution network operators.

Dry gas

Gas with a low liquid content, usually below two gallons per 1,000 cubic feet. This may happen naturally, as in most of the fields in the southern North Sea, or the water content may be reduced by a dehydration process. Also known as lean gas.

DTI

Department of Trade and Industry. Now known as the Department for Business, Enterprise & Regulatory Reform (BERR).

DUKES

Digest of UK Energy Statistics, an annual publication from DTI.

EA

Electricity Association.

EDT

Electronic Data Transfer.

EFA Month

The EFA (Electricity Forwards Agreement) Calendar

EFA

Electricity Forward Agreement. A short to medium term electricity swap. EFAs are traded in the over-the-counter electricity forward market.

Elexon

The balancing and settlement code company that procures and provides services to administer and implement the balancing and settlement rules. Signatories to the BSC contribute to the costs of Elexon. Charges are levied to recover the costs of running Elexon.

Electricity Forward Market

A brokered over-the-counter market in the UK for short-to-medium-term electricity derivative instruments, of which the most widely used is the electricity forward agreement.

Electronic Trading

Internet-based trading on a real-time basis that has become a significant addition to the energy and commodities trading market in the past four years.

Emissions allowance

Typically, emissions reduction schemes set a cap for total emissions for each participant over a period and allocate each participant tradable units, called emissions allowances, up to the cap. Participants buy and sell emissions allowances and at the end of the period must hold allowances or credits equal to their actual emissions to be in compliance.

Emissions cap

The limit on emissions applicable to a participant over a period of time used to allocate emissions allowances.

Emissions credit

Countries and companies can earn tradable emissions credits by undertaking projects that reduce emissions over and above what would occur in a business as usual scenario.

Emissions trading

Countries and companies can trade emissions allowances and emissions credits. Emissions trading is one of the Kyoto mechanisms for reducing emissions of greenhouse gases contributing to climate change.

Emissions trading scheme

Scheme for trading of emissions allowances and emissions credits.

Embedded generation

See Distributed generation.

ENERGIE

An EU programme supporting research, development and demonstration aimed at delivering cost effective solutions to key energy related problems on a European scale. In particular the aims are to minimise the environmental impact of the production and use of energy and to increase the share of new and renewable energy sources in EU's energy balance.

Energy Charter Treaty (ECT)

A multilateral treaty to promote trade, investment and transit of energy products between Contracting Parties and sets a standard for non-discriminatory access to energy supplies.

Energy Efficiency Advice Centres

Network of centres across the UK providing free, impartial and locally relevant energy efficiency advice to householders and small businesses. Call free on 0800 512012.

Energy Efficiency Commitment (EEC)

The Energy Efficiency Commitment (formerly known as Energy Efficiency Standards of Performance, EESoP) is an obligation placed on all domestic energy suppliers to achieve a specified energy saving target through the installation of energy efficiency measures in homes across Great Britain. At least 50% of the benefits are focused on disadvantaged households. A similar scheme (Energy Efficiency Levy) operates in Northern Ireland.

Energy intensity

Energy consumed per unit contribution to Gross Domestic Product, ie for business sectors it is the energy per unit Gross Value Added. The equivalent for the domestic sector is energy consumed per household.

Energy Research Network

A new network being developed by the Research Councils to establish interdisciplinary teams addressing all aspect of energy research (scientific, technological, social, economic and health impacts).

Energy Saving Trust (EST)

The Energy Saving Trust is an independent not-for-profit organisation, set up and largely funded by the Government to manage a number of programmes to improve energy efficiency, particularly in the domestic sector.

Enhanced Oil Recovery (EOR)

Increased production of oil from an oil field, brought about by injecting gas (e.g. CO2) or water to raise the oil pressure and force more oil out.

Entry capacity

The quantity of gas that a shipper is entitled to put into the system at a particular input point on a day.

European Union Emissions Trading Scheme (EU-ETS)

The European Union Emission Trading System (EU ETS) is the largest multi-national, emissions trading scheme in the world and is a major pillar of EU climate policy. The ETS currently covers more than 10,000 installations in the energy and industrial sectors which are collectively responsible for close to half of the EU's emissions of CO2 and 40% of its total greenhouse gas emissions.

Energy Information Administration (EIA)

The Energy Information Administration (EIA), created by Congress in 1977, is a statistical agency of the U.S. Department of Energy. It provides policy-independent data, forecasts, and analyses to promote sound policy making, efficient markets, and public understanding regarding energy and its interaction with the economy and the environment.

Energy efficiency

Amount of useful output achieved for each unit of energy delivered. Energy efficiency is increased in two main ways; reducing wasted energy and increasing the power efficiency of appliances.

Energy imbalance

Imbalances derived from the difference between the metered volumes and notified contract volumes aggregated to the energy account level, for any settlement period.

Energy imbalance charges

Charges applied to energy imbalances.

Energy mix

Distribution of different energy sources within the total supply.

Exchange

An electronic platform or open outcry forum for the buying and selling of energy contacts.

Exit capacity

The quantity of gas that a shipper is entitled to withdraw from the national transmission system in order to meet the requirement of its customers on a day.

Exit zone

A geographical gas distribution area wholly contained within a local distribution zone which groups supply points together that, on a peak day, receive gas from the same national transmission system offtake point(s). Supply points in the same exit zone attract the same exit capacity charge rate.

Firm gas

A guaranteed supply of natural gas that will not be subject to interruption.

Fossil fuel

Coal, natural gas and fuels derived from petroleum.

Force Majeure

A contract clause, which allows the supplier to forego his obligation to supply in extreme circumstances such as a political crisis, war, strikes which disturb production, etc. It also applies to a purchaser who is unable to take delivery of product - e.g. a refiner whose refinery is shut down following a fire or disaster.

Forward Price Curve

A projection of the future price of a commodity or financial instrument over time, usually based on actual transactions.

Futures contract

An exchange-traded supply contract between a buyer and a seller, whereby the buyer is obligated to take delivery of a fixed amount of a commodity at a predetermined price at a specified location. Futures contracts are traded exclusively on regulated exchanges are settled daily based on their current value in the market.

Fundamentals

Factors other than psychological or technical that influence the price development on the physical or futures market, e.g. physical supply and demand, stock levels, currency exchange rates, interest rates, weather forecasts etc.

Fuel gas desulphurisation (FGD)

FGD is a type of clean coal technology that removes emissions from coal combustion plant.

Fuel cells

Fuel cells produce electricity from hydrogen and air, with water as the only emission. Potential applications include stationary power generation, transport (replacing the internal combustion engine) and portable power (replacing batteries in mobile phones).

Gas year

Period commencing 06:00 1st October through to 06:00 1st October the following year.

Gate closure

The time limit by which contract information and expected physical positions (FPNs) needs to be notified to the System Operator. Gate closure is now one hour prior to the settlement period.

Generation

The process of producing electrical energy by transforming other forms of energy. The amount of energy produced is expressed in watt hours.

Generator

Producer of electricity.

Gigajoule

1 billion joules, approximately equal to 948,000 British thermal units.

Gigawatt (GW)

A unit of power equal to 1,000,000 megawatts.

Greenhouse gases (ghg)

Greenhouse gases are components of the atmosphere that contribute to the greenhouse effect. The gases include carbon dioxide, methane, nitrous oxide, ozone, water vapour and halocarbons. Under European Union legislation they are defined as gases whose emissions contributes to climate change.

Grid Supply Point

The point at which energy is taken from the National Grid transmission system and into a distribution system, or occasionally direct to a very large consumer.

Grid

The electricity transmission system.

Grid code

The grid code is a technical document describing the interfaces between those parties that connect to and use the electricity transmission network.

GTMA

Grid Trade Master Agreement.

GWh

Gigawatt hours.

Half hourly data (HH data)

Electricity consumption data recorded every half hour and collected by the metering system.

Half hourly metered

Describes measurement of electricity consumption in half hourly intervals through a meter complying with the relevant Code of Practice.

Hedge

The initiation of a position in a futures or options market that is intended as a temporary substitute for the sale or purchase of the actual commodity. For example, the sale of futures contracts in anticipation of futures sales of cash commodities as a protection against possible price declines, or the purchase of futures contracts in anticipation of futures purchases of cash commodities as a protection against the possibility of increasing costs.

Historical Volatility

The annualised standard deviation of percentage changes in futures prices over a specific period. An indication of past market volatility.

Host REC

A historic term used to describe the Regional Electricity Companies in the Electricity Act 1989.

HV

High Voltage. Supply voltage above 1000 volts (1kV).

Hydrogeneration

Electricity generation involving the use of water to turn a turbine.

ICE (Intercontinental Exchange)

Previously the International Petroleum Exchange [IPE], the London-based exchange trading oil, gas oil and natural gas futures oil became a wholly owned subsidiary of Intercontinental Exchange in 2001.

IEA

International Energy Agency. A Paris-based origination of leading oil-consuming nations mainly based in the West, which co-ordinate its members' energy policies. It also compiles energy statistics, including forward supply/demand projections for countries both within and outside its membership.

Interconnector

Gas pipeline linking the UK [Bacton] to mainland Europe [Zeebrügge].

Interruptible gas

Gas supply that may be interrupted by National Grid or a supplier in order to maintain the transmission/distribution system. Customers with an interruptible gas supply must have an alternative power supply should an interruption to the gas supply occur.

I&C

Industrial and Commercial (non-domestic sector).

Imbalance

Situation where there is a difference between the amount of power produced (supply) and the amount of power contracted or sold (demand).

Imbalance cost

Cost to supplier of being in an imbalance situation.

Integrated Gasification Combined Cycle (IGCC)

IGCC plants initially gasify a raw fuel input, before passing the so-called synthesis gas through a conventional combined cycle set up. IGCCs can be designed to use a range of raw fuel inputs, including coal, oil products and wastes.

International Energy Agency (IEA)

An autonomous body, established in 1974 within the framework of the OECD, to implement an international energy programme.

Interconnection

Two or more electric systems having a common transmission line that permits a flow of energy between them. The physical connection of the electric power transmission facilities allows for the sale or exchange of energy.

Intrinsic Value

The difference between the underlying price and the strike price of an option.

Joint Energy Security of Supply (JESS)

The JESS Working Group, set up in July 2001, has brought together BERR [previously DTI] and OFGEM to monitor the security of energy supplies as part of an initiative to keep the reliability of energy supplies under ongoing review.

Joule

A metric unit of energy equal to one watt-second.

Kyoto Protocol

A Protocol to the UN Framework Convention on Climate Change (UNFCCC) agreed in 1997. Developed nations are required to cut overall greenhouse gas emissions by an average of 5.2 per cent below 1990 levels over the period 2008-2012.

Kilowatt (kW)

A unit of power equal to 1,000 Watts

Kilowatt hour (kWh)

Equal to using a constant load of 1 kW for one hour.

kVA

Kilovoltampere. Unit of measurement for electricity available capacity and in some cases maximum demand. Referred to as KVArh when used to measure reactive power.

Langeled Pipeline

Pipeline bringing Norwegian gas into the UK at Easington.

Levy exemption certificate (LEC)

Exemption from the Climate Change Levy on the electricity to which the LEC relates. LECs are issued for electricity generated from renewable sources, good quality CHP and coalmine methane.

Linepack

Method used for providing short-term gas storage in which natural gas is compressed in transmission pipelines, providing additional amounts of gas to meet limited peak demands.

Liquefied natural gas (LNG)

Oilfield or naturally occurring gas, chiefly methane, liquefied for transport or storage.

Local distribution zone (LDZ)

A geographic area for which the total input and output demand for gas can be measured each day. LDZs are supplied by groups of offtakes from the national transmission system.

Line loss factor

Indicator within the electricity supply number of distribution line loss for a meter point.

Liquefied Petroleum Gas (LPG)

Gas usually propane or butane, derived from oil and put under pressure so that it is in liquid form. Often used to power portable cooking stoves or heaters and to fuel some types of vehicle, e.g. some specially adapted road vehicles and forklift trucks.

Liquidity

The ability of market participants to easily enter into or unwind a transaction helping parties to buy or sell relatively close to the previous sale.

Line Losses

The difference between the quantity of electricity generated and the quantity delivered at the same point in the electricity system. Losses vary depending on temperature, voltage level and load levels.

Load Factor

The ratio between average and peak usage for electricity or gas customers. The higher the load factor, the smaller the difference between average and peak demand.

Low Voltage (LV)

Electricity supply voltage below 1,000 volts.

Load

The amount of power carried by a utility system or sub-system, or the amount of power consumed by an electrical device, at a specified time. Load is also referred to as demand.

Load Shape

A combination of electricity contracts covering a period of weeks or months, which reflects the profile of the daily power requirements of a customer.

London Clearing House

A member-owned clearing house. LCH has signed agreements with online trading platform Intercontinental Exchange to provide clearing services for a number of European energy contracts.

Long

The buyer of a financial contract.

Long Position

A position that appreciates in values if the values of the underlying instrument or market prices increases.

Margin

Cash deposits required for a futures contract that serve as good faith deposit guaranteeing that both parties to the agreement will perform the transaction at some point in the future.

Mark-to-market

To mark-to-market is to calculate the value of a financial instrument (or portfolio of such instruments) at current market rates or prices of the underlying. Marking-to-market on a daily (or more frequent) basis is often recommended in risk management guidelines.

Market risk

Market risk is the risk that values will be lost due to a change in some market variable, such as commodity or equity prices, interest rates or foreign exchange rates. The market risk of derivatives position may arise from a change in the value of the underlying market or from other sources such as implied volatility or time decay (theta).

Maximum annual quantity [MAQ]

Annual quantity of gas multiplied by the MAQ percentage.

Maximum daily quantity

Maximum aggregated daily quantity of gas to be delivered to a supply point.

Maximum demand

The highest average electricity demand occurring in a half hour period. Maximum demand tariffs comprise of a) fixed monthly charge, b) an availability charge per kVA of the highest demand expected, c) a price per unit for day and night units, d) a maximum demand charge based on the measured maximum number of units used in one half hour period in the month.

MCF

Million cubic feet.

MCM

Million cubic metres (1 mcm of gas = 358,694 therms).

Megawatt (MW)

A unit of power equal to 1,000,000 watts.

Meter point reference number

Gas meter reference number.

Meter Operator (MO or MOP)

The Meter Operator or MO or MOP is the organisation appointed to install and maintain metering equipment.

Meter operator agreement

Agreement between the customer and the nominated meter operator.

Meter Point Administration Number [MPAN]

Unique 21 digit number assigned to electricity meter(s) by MPAS under PRS (two tier number printed on electricity invoices preceded by an S. Top line referred to as Supplementary, bottom line as Core). Also known as Supply Number.

Metric ton (tonne)

A metric is 2,204.62 pounds (lbs).

Micro-CHP

CHP (as above), but in very small scale, typically below 5kW electrical output, applications (eg in the residential and commercial sectors). It is likely to operate in place of a domestic central heating boiler.

Microgeneration

Microgeneration is the generation of zero or low-carbon heat and power by individuals, small businesses and communities to meet their own needs. Microgeneration refers to a number of different sustainable or highly efficient fossil fuel technologies that can generate heat and/or electricity in the domestic and commercial sector. Some forms of micro power use fuels or energy sources that produce no greenhouse gases and are therefore, classed as renewable energy, thus helping to combat climate change. Wind turbines, micro-hydro systems, heat pumps and Micro-Combined Heat and Power [CHP] are just three of the many types of small scale generation technologies which can help to attain at least two of the energy policy objectives; reductions in CO2 emissions and reliability of supply.

MMJ

Million mega joules (1 MMJ = 9,478 therms)

MPAS

Meter Point Administration Service. Provides information regarding electricity supply to properties in their distribution network areas and regulates the registration process between electricity suppliers.

MtC

Million tonnes of Carbon.

Moving Average

The average of commodity prices contracted for a period as short as a few days or as long as several years, which shows trends for the latest interval. For example, a 30-day moving average includes yesterday's figures; tomorrow, the same average will include today's figures and will no longer show those for the earliest date included in yesterday's average. Every day it records figures for the latest day and drops those for the earliest day.

MW

Megawatts - a million watts.

MWh

Megawatt hour – 1,000 kWh. A 1 MW power-generating unit running for 1 hour produces 1 MWh of electrical energy.

MWe

Megawatt of electricity, a unit of power. The 'e' specifies the electrical output.

MWth

Megawatt thermal.

National Allocation Plan (NAP)

Each participating country in the EU ETS must produce a National Allocation Plan (NAP). The plan shows the overall amount of allowances to be allocated for the EU ETS in that country for any given phase of the scheme, and how those allowances will be allocated to all installations participating in the EU ETS in that country.

Natural Gas

Gas consisting of methane and ethane that occurs naturally in the earth's crust. It is often found in association with crude oil, when it is called associated gas. Futures and options contracts are traded on the New York Mercantile Exchange, International Petroleum Exchange and Kansas City Board of Trade.

National balancing point (NBP)

A notional point in the UK national transmission system (NTS) used as a delivery point for gas that is traded 'entry paid' - i.e., already in the NTS, rather than at the beach. For accounting and balancing purposes, all gas is said to flow through this point.

National Grid (NG)

NG owns, operates and develops the high-voltage electricity transmission network in England and Wales and Great Britain's principal natural gas transportation system. For more information visit the National Grid website: www.nationalgrid.com.

National offtake

A gas metering point defining the boundary between the national transmission system and the Local Distribution Zone.

National Transmission System (NTS)

The UK high-pressure pipeline system, owned by National Grid Transco, used to transport gas between terminals, storage facilities, large consumers and regional sites. When the gas leaves the NTS at an offtake, it goes through a series of pressure-reducing tiers before it reaches the consumer.

Network code

Legal and operational framework that defines the rights and obligations of Transco and gas shippers/suppliers.

New Electricity Trading Arrangements (NETA)

New Electricity Trading Arrangements - in England and Wales these arrangements replaced 'the pool' from 27th March 2001. The arrangements are based on bi-lateral trading between generators, suppliers, traders and customers and are designed to be more efficient, and to provide greater choice for market participants.

New HEES (Wales)

A scheme for the provision of energy efficiency improvements, in Wales. The 'Basic' scheme offers a range of insulation and basic heating improvements. 'HEES +' offers gas or electric central heating and is available to households containing lone parents, sick or disabled persons and those over the age of 60 in receipt of Income Support, Housing Benefit, Council Tax Benefit and income based Job Seekers Allowance.

Net Present Value (NPV)

A technique for assessing the worth of future payments by looking at the present values of those futures cashflows discounted at today's cost of capital.

NGC

National Grid Company, the UK electricity Transmission Operator. Now part of National Grid Transco.

New Gas Trading Arrangements (NGTA)

The new gas trading arrangements were introduced in the UK in October 1999 in an attempt to improve the efficiency of the balancing system. The arrangements consist of the on-the-day commodity market, auctions of entry capacity and improved incentives for shippers to balance their own positions.

Nominated interruption

The designation by National Grid Transco of a gas supply point as being interruptible, allowing Transco the right to interrupt the gas supply for operational reasons.

Nominated consumption

Annual quantity of gas nominated by the customer as their annual estimated consumption requirement.

Non-Fossil Fuel Obligation (NFFO)

A statutory measure that used to require suppliers to purchase electricity from certain renewables plants installed pursuant to a series of bidding processes, ending with NFFO-5 before the introduction of the RO in 2002.

Non-daily metered

Gas supply point whose meter is not fitted with a data logger and is read monthly, six monthly or at longer intervals.

Non-half hourly (NHH)

Properties with an MD under ~100kW. The Data Collector records the readings and other information using special handheld devices. The information from these devices is downloaded into the NHH DC system and forwarded via D10 dataflow to the Supplier.

NordPool

The Nordic Power Exchange - is the world's first international commodity Exchange for electrical power. Nord Pool organises trade in standardized physical (Elspot) and financial power contracts including clearing services to Nordic participants, and provides customer-support in Sweden, Finland, Norway and Denmark. Being the Nordic Power Exchange, Nord Pool plays a keyrole as part of the infrastructure of the Nordic electricity power market and thereby provide an efficient, publicly known price on electricity, both in the spot and the derivatives market.

Nox

Nitrous oxide and other oxides of nitrogen.

Nuclear electric power (nuclear power)

Electricity generated by the use of the thermal energy released from the fission of nuclear fuel in a reactor.

Nuclear Fuel

Fissionable materials that have been enriched to such a composition that, when placed in a nuclear reactor, will support a self-sustaining fission chain reaction, producing heat in a controlled manner for process use.

Office of Gas and Electricity Markets (Ofgem)

A regulatory body set up by the government to ensure that the electricity market companies operate under a single set of conditions. They regulate such things as prices, business terminology and rules for communication between the market players (Customers, Suppliers, Distributors, Generators, Agents etc). Please Ofgem's website for further information: www.ofgem.gov.uk.

Off-peak

Period of relatively low system demand. These periods often occur in daily, weekly, and seasonal patterns; these off-peak periods differ for each individual electric utility.

Offtake

Gas removed from the national transmission system.

Offtake point

Outlet of any control valve at any gas supply meter point.

Ohm

A measure of the electrical resistance of a material equal to the resistance of a circuit in which the potential difference of 1 volt produces a current of 1 ampere.

Ohm’s Law

In a given electrical circuit, the amount of current in amperes is equal to the pressure in volts divided by the resistance, in ohms. The principle is named after the German scientist Georg Simon Ohm.

On-the-day commodity market (OCM)

Part of the new gas trading arrangements introduced in the UK in October 1999, the OCM is a screen-based, within-day gas market that allows shippers to fine-tune their daily gas positions.

Open outcry

Trading my means of shouting bids and offers across a trading floor. This traditional method of trading is increasingly being replaced by electronic trading.

Option

A contract that gives the purchaser the right, but not the obligation, to buy or sell the underlying commodity at a certain price (the exercise, or strike price) on or before an agreed date.

Organisation of the Petroleum Exporting Countries (Opec)

An intergovernmental organisation with 12 participating oil-exporting nations that coordinates the amount of oil available to the international market. Opec's role is to ensure the stabilisation of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital to those investing in the petroleum industry. For more information about the body, visit: www.opec.org.

Organization for Economic Cooperation and Development (OECD)

An international organization helping governments tackle the economic, social and governance challenges of a globalized economy. Its membership comprises about 30 member countries. With active relationships with some 70 other countries, NGOs and civil society, it has a global reach. For details about the organization, visit: www.oecd.org.

Over-the-counter (OTC)

An over-the-counter deal is a customised derivative contract usually arranged with an intermediary such as a major bank or the trading wing of an energy major, as opposed to a standardised derivative contract traded on an exchange. Swaps are the commonest form of OTC instruments.

Peakload

Refers to power delivered during the period of peak system demand, usually working days from 7am to 7pm in the UK and excluding weekends and bank holidays. Due to the increase in demand, the power traded for availability at this time is ordinarily sold at a premium and tends to rely heavily on plant, which can be rapidly brought online, including coal and pumped storage facilities. The introduction of additional gas or electricity to cover this demand is known as peak shaving.

Photovoltaics (PV)

The direct conversion of solar radiation into electricity by the interaction of light with the electrons in a semiconductor device or cell.

Public gas transporters

Licensed gas pipeline operators.

Power factor

The proportion of total electricity supplied to a site that is converted into useful energy output, as opposed to the wasted reactive power.

Power exchange

Trading arena in which electricity can be bought/sold close to real time.

PPG

A Planning Policy Guidance note for England. PPG22 covers renewable energy and the planning system. The guidance notes are in the process of being replaced by Public Planning Statements (PPS).

Prompt market

Essentially the same as the Spot or Short-term Market.

Producer

A company that explores for gas, drills the wells and extracts gas from the seabed.

Public registration system

System for registering electricity supplies using Supply Numbers and MPANs.

PIU

Performance and Innovation Unit of the Cabinet Office. It carried out a major review of energy policy 2001/02 (now the Strategy Unit).

PPA

Power purchase agreement.

Price risk

Potential fluctuations in the price of the underlying energy commodity.

Put option

An option giving the buyer, or holder, the right, but not the obligation, to sell a futures contract at a specific price within a specific period of time in exchange for a one-off premium payment. It obligates the seller, or writer, of the option to buy the underlying futures contract at the designated price, should the option be exercised at that price. In an energy derivatives contract, the settlement price of the contract based on a particular location or particular blend of the commodity.

Reactive power charge

Charge for reactive energy if the average power factor falls below a preset level, normally 0.9.

Real-time pricing

Up-to-date prices for commodities, moving with every purchase or sale.

Reference price

In an energy derivatives contract, the settlement price of the contract based on a particular location or particular blend of the commodity.

Refined products

The products derived from crude oil that has been processed in a refinery.

Refinery

A plant where crude oil is separated into various components, such as usable products or feedstocks. Any form of energy that is replaced by nature, with or without human assistance, including wind, solar, geothermal and tidal energy.

Regional electricity company

Local distribution monopoly.

Regional chambers

In each English region outside London there is a voluntary multiparty body with members drawn from local government and the social, economic and environmental sectors in the region.

Renewables Obligation [RO]

An obligation on electricity suppliers to source a specified percentage of the total electricity supplied to their customers in Great Britain is from eligible renewable sources. This must be evidenced by Renewable Obligation Certificates.

Renewable energy

Renewable energy includes solar power, wind, wave and tide, and hydroelectricity. Solid renewable energy sources consist of energy crops, other biomass, wood, straw and waste, whereas gaseous renewables consist of landfill gas and sewage waste.

Renewable Energy and Energy Efficiency Partnership (REEEP)

An international partnership to promote the growth of renewable energy and energy efficiency systems, launched by the UK at the WSSD. REEEP's aim is to expand the global market for renewable energy and energy efficiency technologies.

Renewables Obligation Certificate (ROC)

The 'currency' of the RO. Eligible renewable generators receive Renewable Obligation Certificates (ROCs) for each MWh of electricity generated. These certificates can then be sold to suppliers. In order to fulfil their obligation, suppliers can either present enough certificates to cover the required percentage of their output, or they can paya 'buyout' price of £30 per MWh for any shortfall. All proceeds from buyout payments are recycled to suppliers in proportion to the number of ROCs they present.

Renewable Energy Association (REA)

Established in 2001 the REA represents British renewable energy producers to promote the use of sustainable energy in the UK. REA’s main objective is to secure the best legislative and regulatory framework for expanding renewable energy production in the UK. For more information visit the body's website: www.r-e-a.net.

Reserves

Back-up power that must be made available at all times to meet fluctuations in system demand within a given range, to ensure smooth, continuous delivery of energy at proper voltage and current levels.

Retail Price Index (RPI)

The general index of retail prices published by the Office for National Statistics each month.

Risk capital

Funds at risk in a company or trading business.

Risk management

Control and limitation of the risks faced by an organization due to its exposure to changes, in financial market variables, such as foreign exchange and interest rates, equity and commodity prices, or counterparty creditworthiness.

It may be necessary because of the financial impact of an adverse move in the market variable (market risk); because the organization is ill-prepared to respond to such a move (operational risk); because a counterparty defaults (credit risk); or because a specific contract is not enforceable (legal risk).

Market risks are usually managed by hedging with financial instruments, although a form may also reduce risk by adjusting its business practices (see natural hedge). While financial derivatives lend themselves to this purpose, risk can also be reduced through judicious use of the underlying assets - for example, by diversifying portfolios.

Risk measurement

Assessment of a firm's exposure to risk.

Rough storage

The UK's largest gas storage facility just offshore in the North Sea which enters the national transmission system via the Easington terminal in East Yorkshire.

Seasonality

All commodity futures markets are affected to some extent by an annual seasonal cycle or 'seasonality'. This cycle of pattern refers to the tendency of market prices to move in a given direction at certain times of the year.

Sector Skills Councils (SSCs)

SSCs are independent, UK wide organisations developed by groups of influential employers in industry or business sectors of economic or strategic significance, to tackle the skills and productivity needs of their sector throughout the UK.

Sector Skills Agency (SSDA)

Development The SSDA funds, supports and champions the new UK-wide network of influential employer-led SSCs to promote effective working between sectors.

Settlement charge

A flat fee to cover the collection of electricity data by the data collector.

Settlement Period

For the UK network each Half-hour during the day to which the system is balanced

Settlement Risk

The risk that arises when payments are not exchanged simultaneously. The simplest case is when a bank makes a payment to a counterparty but will not be recompensed until some time later; the risk is that the counterparty may default before making the counter payment. Settlement risk is most pronounced in the foreign exchange markets, where payments in different currencies take place during normal business hours in their respective countries and can therefore be made up to 18 hours apart, and where the volume of payments makes it impossible to monitor receipts except on a delayed basis.

This type of risk is afflicted counterparties of Germany's Bank Herstatt in 1974, which closed its door between receipt and payment on foreign exchange contracts. As a result, settlement risk is sometimes called Herstatt risk.

Shipper

A company that transports gas along a pipeline system. Shippers need to be registered with the local regulatory body. In the UK gas market terms, a shipper is a company that buys gas 'at the beach' and pays Transco to transport the gas along the pipeline system.

Shipper nominated interruptible

A gas supply that can be interrupted by its shipper to enable it to balance its supply and demand. Site nomination Process by which a shipper informs National Grid Transco it wishes to supply gas to a new customer supply point.

Short

Refers to the NTS or a counterparty holding less gas than necessary to meet their current/future demand.

Short position

A position that increases in values if the value of the underlying instrument or market price decreases in value.

Shrinkage

1) Gas losses in the transportation and distribution systems.

2) Gas volume lost through the extractions of liquid gases and the removal of water and other impurities.

Site nomination

Process by which a shipper informs National Grid Transco it wishes to supply gas to a new customer supply point.

SMEs

Small and medium-sized enterprises.

S-Number

See Supply Number.

SO

System Operator, responsible for matching supply and demand.

SO2

Sulphur dioxide.

Sour crude

Crude oil containing a relatively high percentage of sulphur by weight, typically more than 0.5%.

Sour gas

Natural gas with a high sulphur content, which requires treatment before use.

SOX

Sulphur dioxide and other oxides of sulphur.

Spark spread

The spark spread represents the theoretical profit margin for a gas-fired power plant:

1. A positive spark spread implies that the wholesale price of electricity is higher than that of natural gas and that profit can therefore be made by burning gas for power;
2. A negative spark spread suggests that power is priced below the cost of natural gas and it is therefore not profitable to burn the fuel to produce electricity.

The spark spread can be expressed in dollars per megawatt hour (MWh) or $ per million British thermal units (mmBtu) or other applicable units. To express it in $/MWh, the spread is calculated by multiplying the price of gas, for example (in $/mmBtu), by the heat rate (in Btu/kilowatt hour), dividing by 1,000 and then subtracting the electricity price (in $/MWh). Also called a spark arbitrage.

Specific risk

Specific risk is the portion of a security's market risk that is unique to that security. For example, the risk that an individual stock's price may vary because of its industrial sector rather than the broader equity market.

Speculation

The opposite of hedging. The speculator holds no offsetting cash market position and deliberately assumes price risk in order to reap potential rewards.

Spot market

The market where energy commodities are traded in cash/physically and delivered immediately, not as futures.

Spot price

The price of a security or commodity in the cash market.

Spread

The difference between the bid and ask price. Liquid markets are characterised by narrow bid/ask spreads.

Speculation

To hold a market position with no offsetting hedge to take advantage of anticipated market movements.

SRO

Scottish Renewables Obligation.

SROCs

Scottish ROCs.

SSP

System Sell Price.

Standing charge

A charge designed to average over and recover from all customers on each tariff the elements of cost which are independent of consumption. Includes the costs associated with metering, billing and customer services.

Strike Price

The price at which the underlying futures contract is bought or an option is exercised. Also called an exercise price.

Supply point

Outlet of the gas metering facility at the customer's premises to which an MPR is assigned or point at which electricity meter is fitted and to which MPAN is assigned.

Supplementary number

MPAN top line. Indicates the profile class and meter and time switch details.

Supply number

Unique 21 digit number assigned to electricity meter point(s) by MPAS under PRS. A two tier number printed on electricity invoices preceded by an S – the top line being referred to as supplementary data and the bottom line known as the core MPAN.

Also known as S-Number.

Supply point

Outlet of the gas metering facility at the customer's premises to which an MPR is assigned or point at which electricity meter is fitted and to which MPAN is assigned.

Sustainable Development Commission

The Commission's main role is to advocate sustainable development across all sectors in the UK, review progress towards it and build consensus on the actions needed if further progress is to be achieved.

Swap

An agreement whereby a floating price is exchanged for a fixed price over a specified period. It is an off-balance-sheet financial arrangement involving no transfer of physical energy - both parties settle their contractual obligations by means of a transfer of cash. The agreement defines the volume, duration and fixed reference price.

Differences are settled in cash for specific periods - monthly, quarterly or six-monthly.

Swaps are also known as contracts for differences and fixed-for-floating contracts.

Swing

Variations in gas demand.

Swing producer

A company or country that changes its crude oil output to meet fluctuations in market demand. Saudi Arabia is seen as the world's major swing producer, as it deliberately limits its crude oil production in an attempt to keep supply and demand roughly in balance.

System buy price (SBP)

The weighted average of the Offer prices of those accepted Offers in the settlement period.

System price

The benchmark price for all electricity sold within an integrated grid system, calculated on the basis of all transactions within the area disregarding price fluctuations caused by bottlenecks. The system price is used as a reference for financial settlements.

System sell price

The weighted average of the Bid prices of those accepted bids in the settlement period.

Take-or-Pay

In a buyer's contract, take-or-pay is the obligation to pay for a specified amount of gas, whether this amount is taken or not. Depending on the contract terms. Under-takes or over-takes may be taken as make-up or carry-forward into the next contract period. When it is credited into another contract period, this is called make-up gas.

Tariff

Published standard charges applied to gas and electricity supplies that are not on a bespoke negotiated contract.

Technicals

Factors other than fundamental or psychological ones that influence future price developments e.g. trend indicators, moving averages, support and resistance levels etc.

Therm

The imperial unit of measurement for a quantity of gas, equivalent to 100,000 British thermal units.

Third party access (TPA)

Where the owner of a pipeline or electricity network is obliged to transport gas, crude or electricity in a non-discriminatory way - ie, for any third party at the same rate as all other users. Third-party access can either be regulated by a separate agency or law, or negotiated between the incumbent and the new entrant. Also called open access and common carriage.

Tick

The minimum price movement of a financial contract, expressed in fractions of a point.

Time value

Part of the option premium that reflects the excess over the option's intrinsic value, or the entire premium, if there is no intrinsic value. At given price levels, the option’s time value will decline until expiration.

TO

Transmission Operator of the electricity transmission network. Part of NGT.

Tolling Agreement

An agreement between a power buyer and a power generator, under which the buyer supplies the fuel and receives an amount of power generated based on an assumed heat rate at an agreed cost.

Transco

The gas system operator, part of NG.

Transmission use of System (TuoS) charges

TuoS charges are raised by the National Grid to Suppliers for their use of the national grid transmission network. These charges are normally passed on to the customer as part of the unit price shown on the bill. In the case of Supply Only Billing (SOBS) the TuoS charges are shown separately to the Supply charges and can change during the contract period as they are reviewed annually.

Transmission use of System Reconciliation (TRIAD).

The National Grid (NG) determines the three highest demands on the network between November and February. The average of the three demands is used by NG to calculate demand based transmission charges. Each customer's demand during the three periods of highest demand, as published by the NG, is used to calculate the charge. each period at least 10 days apart, used to calculate the transmission charge for the NGC system.

Transporter – gas

National Grid Transco or any other holder of a public gas transporters licence (including the new distribution networks) granted or treated as granted under the Gas Act 1986.

Transportation

Movement of gas from the beachhead terminal to Local Distribution Zones.

Transportation charge

The charges associated with transporting gas from the beach to Local Distribution Zones. Prices are based on a distance related tariff system and vary depending on interruptible and firm supply.

Transmission

National network for movement of power between power station and local distribution networks.

Transmission losses

Charges relating to electrical losses that occur as power is transmitted via the National Grid.

Transmission network

Electricity transmission system operating at voltages above 132kV (but including 132Kv in Scotland).

Transmission Use of Systems

Charges levied by the NGC for the transmission of electricity through the National Grid.

TTF

(Title Transfer Facility) The Dutch equivalent of the NBP.

TW

Terawatt - one million megawatts.

TWh

Terawatt hour = 1,000 GWH.

UKDCS

UK Data Collection Service. Former name of IM-Serv.

UK Emissions Trading Scheme

A scheme which ran from April 2002 until December 2006, under which 33 organisations voluntarily adhered to legally binding obligations to reduce their greenhouse gas emissions against 1998-2000 levels. The Scheme delivered over 4 million tonnes of additional CO2 equivalent emission reductions in 2006. The next domestic scheme is the CRC.

United Kingdom Continental Shelf (UKCS)

Areas of seabed and subsoil over which UK exercises sovereign rights of exploration and exploitation of natural resources (popularly known as ‘North Sea’ but geographically wider than that).

Value-at-risk (VaR)

The measure of how the market value of a portfolio will decrease over a given period of time with a given probability The VaR of a portfolio is the worst loss expected to be suffered over a given period of time with a given probability. The time period is known as the holding period, and the probability is known as the confidence interval. VaR is not an estimate of the worst possible loss, but the largest likely loss. For example, a firm might estimate its VaR over 10 days to be $100 million, with a confidence interval of 95%. This would mean there is a 1 in 20 (5%) chance of a loss larger then $100 million in the next 10 days. In order to calculate VaR, a firm must model both the way the relevant market factors will change over the holding period and the way, if any, these changes are correlated between market factors. It must then evaluate the potential effects of these changes on its portfolio at the desired level of consolidation (by asset class, group or business line, for example).

Variation margin

The margin on a derivatives contract whose value varies in line with levels of volatility in the market. The higher the fluctuations in daily prices, the higher the variation margin.

Volatility

A measure of the variability of a market factor, most often the price of the underlying instrument. Volatility is defined mathematically as the annualised standard deviation of the natural log of the ration of two successive prices. The actual volatility realised over a period of time (the historical volatility) can be calculated from recorded data.

Wholesale

Price paid on the open markets for energy only i.e. excluding transportation and distribution charges, supplier margins etc.

WTO

World Trade Organisation.

Within-day Market (WD)

The traded market for delivery for the current day.

Working days next week (WDNW)

The traded market for delivery for working days the following week.

Weekend market

The traded market for delivery for the following weekend.

WTI Crude Oil

(West Texas Intermediate) Traded on the NYMEX and the most commonly used oil benchmark.

Watt.

Unit of electrical energy equivalent to the power of one watt operating for one hour.

Zeebrugge Hub

The Belgian equivalent of the UK NBP