Electricity Terms and Definitions. Deregulation of the retail electricity market has opened up a host of new decisions for electricity customers. Whether you're new to electric choice or a seasoned veteran, the terms highlighted in this glossary will help decipher electricity industry terms, abbreviations, acronyms, and electricity industry players' roles and responsibilities.

Glossary Sections:

Shopping For Electricity

The terms shown in this section of the glossary can help electricity customers navigate unfamiliar terminology and gain confidence about electricity shopping decisions.

Advanced Meter Charge

A PUC-authorized charge for electric delivery companies to recover the costs for their Advanced Metering Systems. This charge is shared among all electricity users who receive an Advanced Meter. This charge is typically included in the fixed monthly delivery fee charged by your utility or it may be broken out separately on your bill.

Average Billing

Average billing is a billing method that electricity providers use to smooth out fluctuations in monthly electric bills. To learn about how average billing works and determine if it is right for you, see How Does Average Billing Work?

Delivery Charge

The charge to deliver electricity to your home or business. This charge includes the distribution and transmission of electricity.


The process of removing or reducing state or governmental regulations, in our case related to energy. Energy deregulation has created competition and choice in the marketplace. See also What is deregulation?

Early Termination Fee or Cancellation Fee

A fee charged to a customer if the contracted rate plan terminated prior to its end date.

Electric Supply

The portion of electric service that consumers are able to shop around for in a deregulated market. Electric supply is the actual power produced from the generation of electricity.

Electricity Facts Label (EFL)

In Texas this is the required information, such as contract terms and prices, to be disclosed to consumers. For EFL details, see our article on how to read an Electricity Facts Label (EFL).

Fixed Rate (or Price)

A plan with a fixed rate for the energy supply that cannot be changed for the duration of the contract. See also Understanding Electricity Plan Types: Fixed, Variable, and Indexed.

Inclining Block Rates

A common electricity rate structure that offers higher rates for higher usage levels. An example is 12 cents per kWh for the first 600 kWh, then increasing to 14 cents per kWh above 600 kWh. Inclining block rates tend to create a larger financial incentive for customers to use less electricity.

Price to Compare

The price for an electric supplier to beat in order for you to save money. You can use this amount to compare with prices offered by other electricity suppliers.

Renewable Energy Certificates (RECs)

Tradable energy certificates that represent proof that 1,000 kWh of electricity was generated from a renewable energy resource. REC’s provide a way to purchase renewable energy that is added to or taken from the electric grid. Also known as Renewable Energy Credits, Renewable Electricity Certificates, or Tradable Renewable Certificates (TRCs). See It’s Easy Being Green with 100% Renewable Energy Electricity Plans.

Standard Service Generation

The generation service supply rate provided by the state's deregulated utilities. It is the supply rate that is available to all residential customers served by these utilities if these customers do not choose a competitive retail electric supplier. In Connecticut, the standard service generation rates change on January 1st and July 1st and are fixed for six months. Also referred to as: Standard Service Rate (SSR) or Standard Service Offer (SSO).

Supply Charge

The charge related to the amount of electricity actually used.

Teaser Rates

The rates some electricity suppliers use to attract customers, later increasing prices once they have signed on. See How to Sniff Out a Texas Teaser Electric Rate.

Terms of Service (TOS)

Contract between an electricity provider and a customer that outlines fees, length of service, and other important information.

Terms and Conditions

A contract between an electricity provider and a customer that outlines fees, length of service and other important information.

Transmission Charge

Charge for transporting electricity from the generation plant to the local electric utility's distribution facility. Transmission can be included in the delivery charge.

Variable Rate (or Price)

A plan with rates that vary month to month based on fluctuations in market activity and prices. See also Understanding Electricity Plan Types: Fixed, Variable, and Indexed.

Your Rights as a Customer Disclosure (YRAC)

For customers in Texas, this is a document that informs you of your rights as mandated by the Public Utility Commission of Texas.

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Electricity Industry and Infrastructure

The electricity industry has many components and participants. In this section of the glossary, we highlight terminology to help electricity customers understand the roles and responsibilities surrounding the business of deregulated electricity.

Advanced Metering Systems (Smart Meter)

A digital meter that records electric consumption in 15 minute intervals and communicates the usage information directly from the meter to the consumer through in-home display devices. The usage data is also transmitted to the utility eliminating the need for a meter reader.

Certified Retail Electric Service Provider (CRES)

An Ohio PUCO term for anyone who is certified in the state of Ohio to be an aggregator, power broker, power marketer, or governmental aggregator.


Technology to easily connect solar panel to homes. The ConnectDER “collar” plugs into the meter socket, typically on the outside of the house, and then the meter plugs into the ConnectDER, meaning that the solar panels’ inverter connects directly with the meter without having to go through the household service panel. ConnectDER generally eliminates the need to enter a home and reduces the amount of electrical work to connect solar panels. Also known as "plug and play solar".


The illegal practice of adding to a bill charges that a customer did not order. See also Slamming.

Dark Spread

Common metric for estimating the profitability of fuel costs of coal-fired electric generators. A dark spread is the difference between the price received by a generator for electricity produced and the cost of coal needed to produce that electricity. Dark spreads can be calculated using current spot prices or forward prices. See also An Introduction To Dark Spreads.


The process where the local utility company delivers electricity to homes and businesses via power substations and power lines.

Electric Distribution Company (EDC)

A common name for the company responsible for delivering electricity and maintaining the utility poles and power lines that distribute electricity to your residence or business.

Electric Infrastructure

The physical structures needed to distribute and transmit energy. This would include power lines, utility poles, meters, wires and substations.

Electric Utility

The company responsible for delivering electricity and maintaining the utility poles and power lines that serve your residence or business.

Electricity Provider or Electric Supplier

The company that you can choose to provide the generation, or supply, portion of your electricity in a deregulated electricity market.

Also referred to as: Alternative Electricity Supplier (AES), Certified Retail Electric Service Providers (CRES), Energy Service Company (ESCO), Electricity Service Provider (ESP), Retail Electric Provider (REP), or Retail Electricity Supplier (RES). See also What’s the difference between an electricity provider and an electric utility?

Energy Supply

The actual energy produced from the generation of energy. Energy supply can refer to electric supply as well as natural gas supply.


The Electricity Reliability Council of Texas (ERCOT) operates the Texas electricity grid by managing the flow of electricity to 24 million Texas customers and scheduling power on a grid that connects more than 46,500 miles of transmission lines and 550 generating units. ERCOT is a membership-based 501(c)(4) nonprofit corporation subject to oversight by the Public Utility Commission of Texas. ERCOT is a Regional Transmission Organization (RTO).


An “Electric Service Identifier” ID number that identifies your electric service location. This is pronounced "easy I.D." It's unique to the Texas electricity market.


An interconnected system of electric cables and power stations that distributes electricity over a large area.

Grid-integrated Water Heating (GIWH)

A new technology used by utilities to load-shift up from 40-60% of electricity usage for electric hot water heaters. Water heaters are mainly used in the morning and evenings. GIWH is used by utilities to heat water in homes at night when wind generation is high and during the day when solar generation is high. This shifts water heating loads from the more expensive morning and evening hours.

Independent System Operator (ISO)

An entity created to manage electricity grids and provide scheduling and monitoring of electricity transmission across the electricity grids of defined regions throughout North America. Also called Regional Transmission Organizations (RTO).


A device used to measure, display and record the amount of power used by a customer.

Operating Reserve Demand Curve (ORDC)

Operating Reserve Demand Curve (ORDC) is a scarcity pricing model used primarily in ERCOT and PJM to incentivize electricity generators to provide extra power when supplies are tight. To accomplish this, a real-time Reserve Price Adder is added to rates This is intended to ensure that a certain amount of electricity is always in reserve to support grid reliability during periods of high demand.


A temporary suspension or interruption of electric power.

Peak Load

The amount of power drawn from an electric power system at the time of highest demand, measured in kilowatts or megawatts.

Provider of Last Resort (POLR)

A back-up electric service provider in each area of Texas open to competition. POLR service is a safety net for customers whose chosen REP is unable to continue service. This service is intended to be temporary and used only under rare circumstances when a REP is unable to provide service, or when a customer requests POLR service. See the Public Utility Commission of Texas for updated information on Texas POLRs. POLR's tend to be relatively high-priced, due to the costs associated with planning and the risk of serving an uncertain number of customers with uncertain electricity loads. Read What Is A Provider of Last Resort (POLR)? for more information.

Regional Transmission Organization (RTO)

An independent organization created to manage electricity grids and provide scheduling and monitoring of electricity transmission across the electricity grids of defined regions throughout North America. Also called Independent System Operators (ISO).

Retail Electric Provider (REP)

A Texas PUC term for licensed companies that compete with each other to sell electricity supply to residential and business customers.

Reserve Margin

The difference between the amount of power generation capacity that is available, versus the amount of power demand that is expected.


Refers to the illegal practice of switching customers to a different supplier without actual approval. See also Cramming.

Smart Meter

An electronic meter that has remote, two-way communication and information storage capability that records and stores your electricity usage in 15 minute intervals and communicates that information back to your utility company for monitoring or billing.

Spark Spread

Common metric for estimating the profitability of natural gas-fired electric generation. The spark spread is the difference between the price received by a generator for electricity produced and the cost of the natural gas needed to produce that electricity. It is typically calculated using daily spot prices for natural gas and power at various regional trading points. See also An Introduction To Spark Spreads.

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General Electricity Terms

This section of the glossary includes terms about electricity, how it's measured, and how it's made.


The capability to generate electrical power, measured in megawatts (MW) or kilowatts (kW).


The measurement of the maximum energy use of a customer over a specific amount of time. Generally measured in MW or kW.

Energy Source

Materials that can be used to create energy, such as: coal, natural gas, wind and solar.

Fossil Fuel

Materials such as coal, oil and natural gas that are used to produce heat or power. Also called conventional fuels.

Green Energy

Environmentally friendly energy generated from sustainable or renewable sources such as solar, wind or water.

Kilovolt (kV)

1,000 volts. Primarily used to measure high-voltage electric power transmission lines.

Kilowatt (kW)

1000 watts of electric power.

Kilowatt Hour (kWh)

1,000 watts measured over a period of one hour. This is the most common way suppliers charge residents and businesses. See also What Is A Kilowatt-hour (kWh) And What Can It Power?

Megawatt (MW)

1,000,000 watts or 1,000 kilowatts of electric power.

Megawatt Hour (MWh)

1,000,000 watts or 1,000 kilowatts measured over a period of one hour. Sometimes providers use this measurement for charging larger companies.

Renewable Energy

Energy that is derived from naturally occurring, replenishable sources of energy such as wind, water, and sunlight.

Solar Power

Energy from the sun’s radiance converted into heat or electricity.

Watt (W)

The base unit used to measure power. Defined as 1 joule per second, a watt expresses the rate of energy transferred with respect to time.

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