Glossary Of Terms

The arrival of competition to Michigan's electric utility industry brings with it a new vocabulary.

Alternative Electric Supplier (AES) - The name given to competitive suppliers of retail electric services in Michigan who make retail sales of electric energy to customers on the distribution company's distribution system and in doing so procure power for customers and cause that power to be supplied to the distribution company for delivery to the customer. An AES operating in Michigan must be licensed by the MPSC. A current list of licensed Michigan AESs is maintained on the MPSC Web site at: http://www.michigan.gov/mpsc/

Billing Cycle - Under the MPSC rules, each "billing month" will be "not less than 26, nor more than 35, days." Using "cycle billing," utilities typically create, based upon the geographic location of meters, usually about 20 different groups and bill each such group of customers on a different day of the month so customers receive a bill on or about the same day of each billing month.

Bundled Service - Customers receive electric generation, transmission, distribution and related customer service and support functions as a combined service.

Capacity - A measure of the quantity of instantaneous energy produced or required to be produced. The term is also applied to the amount of electric power capability of a generator, turbine, transformer, transmission circuit, station or system as rated by the manufacturer. See also Demand and Load.

Capacity Charge - see Demand Charge.

Code of Conduct - All electric utilities regulated by the MPSC and AESs must follow the Commission's Code of Conduct, which is intended to promote fair competition by establishing measures to prevent cross-subsidization, information sharing and preferential treatment.

Cramming - Adding services and charges to a customer's bill without the customer's knowledge or consent.

Customer - For purposes of Customer Choice, a person, partnership, corporation, association or other legal entity with electrical load facilities connected to the distribution company's system. All customers regardless of the voltage of the service are considered to be connected to the distribution system and, therefore, are required to take service from the electric utility under either a Standard Service or Open Access Service Tariff.

Customer Charge - see Service Charge.

Customer Choice - The opportunity for retail customers to choose their suppliers and specific services for purchase. With respect to electricity, this is sometimes called "electric customer choice," "direct access," "open access" or "retail open access."

Customer Choice and Electricity Reliability Act - The title of Michigan's Public Acts 141 and 142 of 2000.

Default Service - Electric generation service available to customers in the event that the primary source of supply is disabled or becomes unavailable for any reason. This is sometimes called "standby generation service." Indiana Michigan Power distribution service customers in Michigan taking generation service from an AES and who default to the electric utility do so at rates set forth in Indiana Michigan Power's Standard Service Tariff and under certain circumstances are required to remain on Standard Service for a period of 12 months.

Demand - The amount of power required to meet the customer's load at a given instant or averaged over any designated interval of time, expressed in kilowatts or megawatts. See also Capacity. For an explanation of how demand is measured, see Electric Meter.

Demand Charge - One element of a pricing method used in capacity transactions (Energy Charge and Service Charge are other elements). The demand charge, sometimes called "capacity charge", is assessed on the maximum or peak amount of demand required by the customer during the billing cycle.

Deregulation - see Restructuring.

Distribution - The delivery of electricity to a retail customer's home or business through distribution lines. Generally speaking, the transmission system refers to the high-voltage, long-distance wires and associated equipment used to move electricity from large generators to a utility distribution system. The distribution system is the lower-voltage, shorter-distance wires and associated equipment that moves electricity from the transmission system to the retail customer's point of delivery. Michigan Public Act 141 of 2000 states in part, "Only investor-owned, cooperative, or municipal electric utilities shall own, construct, or operate electric distribution facilities used in the distribution of electricity in this state." The MPSC provides regulatory oversight for the distribution systems that are owned and operated by the utilities it regulates.

Distribution Charge - As electric utility services are unbundled, utilities will separate the fees associated with each major component of electric service, including generation, transmission and distribution. For MPSC-regulated electric utilities, the MPSC approves the rates that utilities charge customers for distribution services. A utility distribution charge is a charge for delivering electricity from a customer's chosen supplier to their residence or business, and may include a Customer Charge, Demand Charge and Energy Charge.

Distribution Company - A regulated utility company that is responsible for maintaining and operating a distribution system and providing other services to end-use customers. This kind of company may also be called a "local distribution company (LDC)."

Electric Meter - Generally, a device that measures the amount of electricity a customer uses. The primary types of electric meters are energy meters, demand meters, interval demand meters, and time-of-use meters. An energy meter is the simplest type of electric meter. It measures electricity use, referred to as kilowatt-hours. A demand meter measures kilowatt-hours used, and also the maximum electric use referred to as peak capacity or demand. An interval demand meter records the demand used in each measuring period. The periods are typically every 15 minutes, half-hour or hour, depending on the specific meter and the manner in which the utility rates are calculated. Some utilities offer "time-of-use" rates, where customers pay different charges for electricity used during different times. The price might vary depending on the time of day, week, season, or year, or even depending on the hourly market price of electricity. A time-of-use meter measures customer electricity use and sometimes demand and records that data, along with the time of day, so the utility can bill the customer according to the charges established in the customer's time-differentiated rates.

Electric Utility - A person, partnership, corporation, association, or other legal entity whose transmission or distribution of electricity is regulated by the MPSC.

Energy - The capacity for doing work. In the context of electricity rates and services, the word "energy" refers to electrical energy. In this sense, energy is a measure of the quantity of units of electricity used in a given time period, measured in kilowatt-hours.

Energy Charge - The charge for the electricity used by an electric customer during the billing period, measured in kilowatthours. The energy charge will normally contain a fixed level of fuel and purchased power (power supply) costs.

Federal Energy Regulatory Commission (FERC) - The US government agency that regulates the price, terms and conditions of transmission services and wholesale sales of electricity. For example, FERC sets and enforces the wholesale electric rates that investor-owned utility generators charge their wholesale customers. FERC also licenses hydroelectric projects.

Franchise - A consent or permission from a municipality (a township, village, city, or other local government unit) that authorizes a public utility company to conduct business within its jurisdiction.

Full Requirements Service - see Bundled Service.

Generation - The process of producing electricity by converting other forms of energy into electricity.

Interval Meter - see Electric Meter.

Investor-Owned Utility (IOU) - A stockholder-owned utility company that provides public utility services to retail customers at a regulated rate of return.

Kilowatt (kW) -One thousand watts, a standard measure of demand for power or capacity.

Kilowatthour (kWh) - The standard unit of measure for electric energy. One kilowatthour is one kilowatt of electricity supplied for one hour.

Load - This is the general term used for any end-use device or group of devices drawing energy from the electric system. See also Capacity and Demand.

Load Profile - An allocation of electricity usage to discrete time intervals over a period of time, based on individual customer data or averages for similar customers. A load profile may be used to estimate electric supply requirements and determine the cost of service to a customer. Generally speaking, customers with small demand requirements may participate in electric Customer Choice using a load profile rather than interval demand meter data.

Megawatt (MW) - One thousand kilowatts (1,000 kW), or one million (1,000,000) watts.

Megawatthour (MWh) - One thousand kilowatts supplied for a period of one hour.

Merchant Plant - An electric generator not owned and operated by an electric utility, the output of which is sold into the wholesale electricity market. Merchant plants may also be called non-utility generators or independent power producers.

Michigan Public Service Commission (MPSC) - The state government agency that regulates investor-owned electric utilities, rural electric cooperatives, and Alternative Electric Suppliers.

Minimum Charge - The total of all the payments a customer will owe for electric services regardless of how much electricity the customer uses, if any, during a billing period. Typically, it is the total of all customer service charges, demand charges, and any other fees that are assessed regardless of energy used during any one billing period.

Net Merger Savings Reduction Rider - A monthly billing credit approved by the MPSC applicable to Indiana Michigan Power distribution service customers reflecting a share of the estimated savings achieved by the June 15, 2000, merger of Indiana Michigan Power's parent company and Central and Southwest Corporation of Dallas, Texas. The credit will increase slightly over the eight years following the merger. Customers receive this credit regardless of whether generation service is taken under a Standard or Open Access Service Tariff. 

Nuclear Decommissioning Surcharge - A monthly billing charge approved by the MPSC enabling an electric utility to recover from customers the costs relating to the ultimate safe dismantlement and disposal of a nuclear generating facility. Indiana Michigan Power, first authorized to bill a nuclear decommissioning surcharge in Michigan in 1987, deposits the funds collected from customers into trust funds external to the company for future use in decommissioning the Donald C. Cook Nuclear Plant at the end of its useful life. Indiana Michigan Power distribution service customers incur this charge regardless of whether generation service is taken under a Standard or Open Access Service Tariff.

Open Access Service Tariff - A tariff approved by the MPSC allowing customers to purchase generation service from a licensed AES for delivery over the local distribution company system.

Open Access Transmission Tariff (OATT) - A tariff on file with the FERC, and amended from time to time as required, of an entity owning or controlling transmission facilities.

Peak Demand or Peak Load - see Demand and Demand Charge.

Power Supply Cost Recovery (PSCR) - The amount billed monthly to customers to reconcile projected fuel and purchased power (power supply) costs to the level of power supply costs embedded in the energy charge. This amount may be a charge or credit depending on whether projected costs are more or less than the level of power supply costs in the energy charge.

Price to Compare - The price a customer pays an electric utility for generation service and, therefore, the price a customer uses to compare with offers from AESs. For Indiana Michigan Power customers in Michigan, the price to compare is the sum of the Indiana Michigan Power charges for generation service, PSCR, and OATT transmission service.

Restructuring -The process of changing regulation to permit the price of electric generation to be determined in retail, competitive markets. This is also called "industry restructuring" or "utility restructuring" and has sometimes been referred to as "deregulation," but it is more correctly understood as a process of changing the form of regulation. Restructuring allows customers to purchase electricity from an AES and pay their local distribution company to deliver the electric power to their home or business. The delivery or distribution charge is regulated by the MPSC. To facilitate competition, utility costs are separated (unbundled) into categories such as generation, transmission, distribution and customer services. In Michigan, customers do not have to choose an AES and may remain customers of their existing electric utility under fully regulated rates.

Retail Access or Retail Open Access - see Customer Choice.

Retail Transmission Charge - The component of a customer's bill from an electric utility for transmission service. Indiana Michigan Power customers incur this charge regardless of whether generation service is taken under a Standard or Open Access Service Tariff.

Service Charge - A recurring charge for the basic administrative activities associated with a utility maintaining a customer account. This may also be referred to as a customer charge. Typically, these activities include billing, metering, and meter reading, the costs of which do not change with the level of energy usage. In most cases, a monthly service charge is one component of a customer's minimum charge.

Slamming - The unauthorized switching of a customer's account to an AES or between AESs without the customer's consent.

Standard Service Tariff - A tariff under which generation, transmission, distribution and related customer service and support is provided to customers by electric utilities at rates regulated by the MPSC.

Switch - A change authorized by a customer from one provider of generation service to another.

Switch Date - The date on which a customer is assigned to a new generation service provider.

Switch Request - A request made by an AES to an electric utility or another AES to switch a customer to the requesting AES for generation service.

Switch Rescission - A request, pursuant to receipt of a switch response, by a customer to the electric utility to ignore or cancel a switch request.

Switch Response - The notice received by a customer from an electric utility acknowledging the receipt of a switch request from an AES on behalf of the customer.

Switching Fee - A fee charged by an electric utility to a customer under certain circumstances to process a switch.

Transition Charge - A fee, as authorized by the MPSC, paid by customers to their local distribution company (utility) when they elect to purchase generation services from an AES allowing the utility to recover stranded costs and implementation costs. Stranded costs are utility charges that were to be recovered over time through regulated rates that would not otherwise be collected from customers buying their generation services from AES. Implementation costs are utility expenses required to facilitate retail access.

Transmission - The bulk transport of high-voltage power, typically over longer distances, between generating plants and distribution systems.

Unbundled Services - Unbundling refers to the process of disaggregating electric utility services into basic components. Some services may be regulated and others subject to competition. Some services may be mandatory (meaning all customers must buy them) and others may be optional (customers have a choice whether or not to buy them, and often from whom). Once unbundled, various electric utility and competitive services may be listed on customer bills as separate line items (see Bundled Services).

Watt - A unit of measure of electric power (see Kilowatt and Megawatt)

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