Energy Glossary
We have assembled a very extensive industry wide glossary for your free use. A lot of care and attention has been taken with regards to it’s accuracy, but mistakes do happen. If you happen to spot one then please let us know.
A
AAR
Additional Account Representative, responsible for checking transactions in an account in a national registry but unable to initiate or carry out transactions.
ACI Model
A code written by ACI recommending ethical and operational principles for trading staff, covering areas such as personal conduct, controls and authorisation, and encouraging the swift settlement of contracts, and the use of master agreements and standard terms. (ACI was founded in Paris in 1955 as Association Cambiste Internationale.)
APX
Amsterdam Power Exchange
APX ENDEX
Netherlands exchange, separated into two companies from March 2013 – the power spot exchange APX and the gas spot, gas derivatives and power derivatives exchange ENDEX, now called ICE Endex.
Arbitrage
The practice of exploiting price differentials between different markets, products or locations when trading.
Argus
An independent media organisation with HQ in London and world-wide offices. It publishes energy price assessments, market commentary, news, and business intelligence reports.
B
Back Office
The part of the organisation that takes responsibility for a deal once it has been agreed, checking that all the information about the deal has been correctly captured, confirming the details of the deal with both parties, and ensuring that the contract is properly executed and paid for.
Banking
Carrying forward allowances from one trading period into another.
Basel II
An international banking accord that recommends standards for financial institutions in terms of minimum capital, supervision of banks, and market discipline.
Basis
The price differential between different markets, products or locations.
BAU
Business as usual
BDS
Bid Data Sheet
Bilateral Aggreement
An agreement between two parties to net off payments owed between themselves.
BOD
Basis of Design
Broker
A party that mediates between a buyer and a seller, in return for a commission fee (normally from the seller).
C
°C
Centigrade
CCC
Committee on Climate Change Advises the UK and devolved Governments on tackling and preparing for climate change
CEER
The Council of European Energy Regulators – exists to facilitate the creation of a single, competitive, efficient and sustainable EU internal energy market that works in the public interest.
CER (With ref to Ireland)
The Commission for Energy Regulation is the independent body responsible for overseeing the liberalisation of Ireland’s energy sector.
CFR
Cost and Freight
Churn Rate
An independent media organisation with HQ in London and world-wide offices. It publishes energy price assessments, market commentary, news, and business intelligence reports.
CIA
Central Intelligence Agency, USA – publishes a World Factbook including statistics about the energy industry, and covering most countries in the world.
CIF
Cost, Insurance and Freight
CIP
Carriage and Insurance Paid to (named place or destination)
Collateral
Security pledged by a buyer as a guarantee of performance of a contract.
Counterparty
A broker, investment bank or other securities dealer that serves as the contracting party when completing “over the counter” securities transactions.
CPD
Continuing Professional Development (See www.icaew.com/en/members/cpd) Points awarded for attendance at training courses by the ICAEW.
CPM
Critical Path Method – a tool for project management
CPT
Carriage Paid to
Credit limit
The maximum amount of credit that a party is prepared to extend to a particular counterparty.
D
DAF
Delivery at Frontier
DAT
Delivery at Terminal
DBERR
The Department for Business Enterprise and Regulatory Reform in UK, where most of the responsibility of UK energy policy rests. Former DTI (Department of Department of Trade & Industry)
DDP
Delivered Delivered Duty Paid (named place of destination)
DDU
Delivered Duty Unpaid
DEQ
Delivered Ex Quay
DES
Delivered Ex Ship
E
EEX
Operates a market platform for a broad range of energy and related products in Germany including power, natural gas, CO2 emission rights and coal.
EFET
The European Federation of Energy Traders. Also used to refer to the various commodity trading master agreements created by EFET.
EFETnet
A system for electronic data exchange based on EFET standards, which facilitates energy trading.
EFP
Exchange-of-futures-for-physical. The substitution of offsetting futures market positions for an existing physical market position by a buyer and a seller.
EFS
Exchange-of-futures-for-swap. The substitution of offsetting futures market positions for an existing OTC swaps position by a buyer and a seller.
EMR
Electricity Market Reform – UK Government initiative to make sure the UK remains a leading destination for investment in low-carbon electricity.
EPC
Energy Performance Certificate which states the energy efficiency of a home as part of Home Information Packs
EPC
Engineering Procurement and Construction.
ETRM
Energy trading, transaction and risk management software supporting the business processes associated with energy trading.
EU10
The 10 countries which acceded to the EU in May 2004: Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia.
EU15
The 15 countries which formed the EU up until May 2004: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, UK.
EUAA
European Union Aviation Allowances
EXW
Ex factory, ex works or ex warehouse.
F
°F
Fahrenheit
FAS
Free alongside Ship
FCA
Free Carrier
FIDIC
Fédération Internationale des Ingénieurs Conseils (International Federation of Consulting Engineers)
FOB
Free on Board
Four eyes principle
A risk control procedure that requires two people, ideally from separate parts of the business, to cross-check key processes.
Front Office
The part of the organisation that is responsible for preparing for, negotiating and capturing deals.
Futures exchange
A regulated market for trading futures contracts and options in commodities and other derivative financial instruments. Futures exchanges provide a central counterparty for every trade and positions are marked-to-market every day.
G
G / g
Giga 10⁹ or 1,000,000,000
GCC
General Conditions of Contract.
GDP
Gross Domestic Product
H
HSE
Health, Safety and Executive, UK
I
ICAEW
The Institute of Chartered Accountants in England and Wales. Professional membership organisation for over 140,000 chartered accountants worldwide. It provides qualifications and professional development, and protects the quality and integrity of the accountancy and finance profession.
ICC
International Chamber of Commerce
ICIS/HEREN
Large petrochemical and energy market information provider across all continents. Provides independent pricing data, analysis and consultancy for the oil, gas, liquefied natural gas, carbon and coal sectors.
ICO
The Information Commissioner’s Office – independent advice and guidance about data protection and freedom of information.
IEA
International Energy Agency – an autonomous organisation which works to ensure reliable, affordable and clean energy for its 28 member countries and beyond.
IFB
Invitation for Bids
ISDA
International Swaps and Derivatives Association.
ITB
Instructions to Bidders.
J
JOA
Joint Operating Agreement.
JVCA
Joint Venture, Consortium or Association.
K
Kwh
Kilowatt hours, equal to 3,600,000 J
L
LDC
Local District Company
LOC
Letter of Credit
Lower 48
Name for the 48 states in the USA all connected within the continent – Alaska and Hawaii are detached.
M
Mark-to-market
The practice of revaluing deals every day to reflect current prices so that profits and losses are realised immediately.
Master Agreement
A single over-arching contract between two parties. This means that any individual deal between those parties becomes a transaction under the terms of that single master agreement. The two main types of master agreements widely used in energy trading are provided by ISDA and EFET.
Maturity
The date at which contract obligations are due.
mega-, M
unit prefix for one million (1,000,000 OR 10⁶)
Micro-generation
Small-scale generation of heat and electric power as an alternative to centralised suppliers from the grid. Term common among individuals and small concerns who aspire to zero or low-carbon footprints.
Middle Office
The part of the organisation that is responsible for risk management, reporting and counterparty credit control.
MOU
Memorandum of Understanding
Multi-lateral clearing and settlement systems
Operated by some brokers or exchanges to reduce counterparty risk by enabling all parties to net off payments due.
N
N2EX
Market for UK energy contracts including the UK physical power market, technical trading and clearing, a regulatory framework, and clearing procedures. NASDAQ OMX Commodities and Nord Pool Spot operate in the UK under this name.
NASDAQ OMX
The National Association of Securities Dealers Automated Quotation set up in 1971. Now a global electronic marketplace for the buying and selling of stock. NASDAQ OMX Commodities Europe offers cash-settled derivatives contracts in the Nordic, German, Dutch, and UK power markets with futures, forward, option, and CfD-contracts of up to six years’ duration, including contracts for days, weeks, months, quarters, and years. The reference price for the power derivatives contracts is the underlying day-ahead price as published by Nord Pool Spot (Nordics), the EEX (Germany), APX ENDEX (Netherlands), and N2EX (UK).
NCC
National Contracts Commission
NEP
National Energy Policy
Netting statement
A statement summarising all the long and short positions held with a particular counterparty, and calculating the net position relative to that counterparty.
Nordpool (Nordics)
Nord Pool Spot runs the leading power market in Europe, offering both day-ahead and intraday markets to its customers.
O
OT
Open Tender
OTC
Over-the-counter – a bilateral contract for commodities or any financial instrument agreed between two counterparties either directly or through a broker. This is trading directly between companies rather than in an exchange or futures market.
OUR
Office of Utilities Regulation
P
PAR
Primary Account Representative, one of two people responsible for the operation of an account in a national registry.
PEP
Project Execution Plan
Position limits
A predetermined limit on the maximum position that a company or a particular trader can take on a contract.
Q
QA/QC
Quality Assurance/Quality Control.
R
Reference price
Some contracts (particularly long-term contracts) are indexed to prices of other commodities, particularly oil and oil products, or, in the UK, to short-term gas market prices. In such a contract a reference price is the price (or one of the prices) on which this indexation is based.
RFP
Request for Proposal
RHI
The Renewable Heat Incentive helps businesses, the public sector and non-profit organisations meet the cost of installing renewable heat technologies.
Risk Management Committee
A committee typically made up of senior management, which has overall responsibility for risk management, control and compliance.
RMR
Retail Market Review
S
SAR
Secondary Account Representative – one of two people responsible for the operation of an account in a national registry.
Sarbanes-Oxley
The Sarbanes-Oxley Act (2002) is a piece of US legislation, passed after the Enron collapse, requiring US public companies to maintain high standards of internal control and record-keeping making the Directors personally responsible for financial reports.
SBD
Standard Bidding Document
SBLC
Standby Letter of Credit
SCC
Special Conditions of Contract
Seasonal normal temperature
The average temperature that might be expected on any particular day, based on historical data.
SND
Seasonal normal demand. Forecast demand based on seasonal normal temperatures.
Spark green spread
See ‘Clean spark spread’
SPV
Special Purpose Vehicle
SRA
Solicitor’s Regulation Authority
SSIs
Standardised settlement instructions – a system used to facilitate the settlement of transfers of funds or financial instruments.
STP
Straight-through processing. Functionality on computer systems designed to enable deals to be captured, confirmed, risk managed and settled automatically.
T
T / t
Ton or Tonne. An American ton is 2,000 pounds. In non-U.S. ton is 2,240 pounds. A metric ton, or tonne, is 1,000 kilograms.
Term contract
A contract negotiated between parties, typically for several or many years’ duration, as contrasted to a short-term OTC contract.
TJ
Terajoule – a unit of energy = 10¹² joules
TPES
Total Primary Energy Supply – net result of summing imports, exports and storage, as applied to coal, oil, gas and electricity.
Trayport
Electronic trading and order matching software widely used by brokers, exchanges and traders in commodity and financial derivative markets.
U
UKCS
UK Continental Shelf – those areas of the sea bed and subsoil beyond the territorial sea, over which the UK exercises sovereign rights of exploration and exploitation of natural resources.
UVDB
Utility Vendor Database – EU Procurement Legislation.
V
VaR
Value-at-Risk – a standard method for measuring the financial risk associated with any investment portfolio.