Energy Terms


The Clean Energy Resource Teams have done our best to provide helpful definitions for common energy-related terms


Alternative Compliance Payment (ACP)—Utilities that have to comply with RPS requirements but find SRECs to be scarce or unavailable can provide an alternative payment (i.e. $300/MWh)

ASHP—Air Source Heat Pump, learn more from our ASHP guide

AFV—Alternative Fuel Vehicle


Biofuels—Alcohols, ethers, esters, and other chemicals made from raw biological material such as herbaceous and woody plants, agricultural and forestry residues, and a large portion of municipal solid and industrial waste.

Biomass—Organic waste from agricultural, livestock, and lumber industry products, dead trees, foliage, etc., and is considered a renewable energy source. Biomass can be used as fuel and is most often burned to create steam that powers steam turbine generators. It is also used to make transportation fuels like ethanol and biodiesel, and chemicals like pyrolysis oil that can be burned like oil to produce energy.

Bottleneck Facility—A point on the electric system, such as a transmission line, through which all electricity must pass to get to its intended buyers. If there is limited capacity at this point, some priorities must be developed to decide whose power gets through. It also must be decided if the owner of the bottleneck may, or must, build additional facilities to relieve the constraint.

Btu—British thermal unit; the amount of heat required to raise the temperature of one pound of water one degree Fahrenheit under stated conditions of pressure and temperature (equal to 252 calories, 778 foot-pounds, 1,005 joules and 0.293 watthours). It is the U.S. customary unit of measuring the quality of heat, such as the heat content of fuel.

Bulk Power Supply—Often this term is used interchangeably with wholesale power supply. In broader terms, it refers to the aggregate of electric generating plants, transmission lines, and related-equipment. The term may refer to those facilities within one electric utility, or within a group of utilities in which the transmission lines are interconnected.


C-BED (Community-Based Energy Development)—C-BED works toward renewable energy development in a way that optimizes local economic development and environmental benefits.

ccASHP—cold climate Air Source Heat Pumps, learn more from our ASHP guide

cf—cubic foot; the U.S. customary unit of measurement of gas volume. It is the amount of gas required to fill a volume of one cubic foot under stated conditions of temperature, pressure and water vapor. One cubic foot of natural gas equals 1,000 British thermal units under standard conditions of atmosphere (one) and temperature (60 degrees Fahrenheit).

CIP—Conservation Improvement Program

Clean Energy—Energy efficiency, energy conservation, and renewable energy are all included within the term.

CO—Carbon Monoxide

CO 2 —Carbon Dioxide

Cogeneration—(also Combined Heat and Power) Production of electricity from steam, heat, or other forms of energy produced as a by-product of another process.

Combined Cycle—An electric generating technology in which electricity and process steam is produced from otherwise lost waste heat exiting from one or more combustion turbines. The exiting heat is routed to a conventional boiler or to a heat recovery steam generator for use by a steam turbine in the production of electricity. This process increases the efficiency of the electric generating unit.

Commodity Price—The portion of a natural gas sales or transportation rate based upon the volume actually shipped or used.

Control Area—An electric system bounded by transmission lines that are equipped with metering and telemetry equipment to track and report power flows with adjacent control areas. A control center for each control area controls the operation of generation within its portion of the transmission grid, schedules interchanges with other control areas, and helps to stabilize the frequency of alternating current in the interconnection. Control centers are currently operated by individual utilities, power pools, ISOs or RTOs.

Cooperative electric association or utility—utility owned and operated by its members.


DC—Direct current.

Demand—The rate at which electric energy is delivered to or by a system or part of a system, generally expressed in kilowatts (kW), megawatts (MW), or gigawatts (GW), at a given instant or averaged over any designated interval of time. Demand should not be confused with Load or Energy.

Demand Charge—A fee based on the peak amount of electricity used during the billing cycle.

Department or DOC—the Minnesota Department of Commerce.

DER—distributed energy resources 

Deregulation—The elimination or restructuring of regulation from a previously regulated industry or sector of an industry.

Distributed Generation (DG)— (Also called distributed energy resources, distributed power, distributed energy, distributed generation, on-site generation) Both electric demand reduction (energy conservation, load management, etc.) and supply generated at or near where the power is used. A distributed generation system involves amounts of generation located on a utility’s distribution system for the purpose of meeting local (substation level) peak loads and/or displacing the need to build additional (or upgrade) local distribution lines.

Distribution—The delivery of electricity to the retail customer’s home or business through low voltage distribution lines.

DSM (Demand Side Management)—Programs to influence the amount or timing of customers’ energy use.

DOE—U.S. Department of Energy.


Economies of Scale—Economies of scale exist where the industry exhibits decreasing average long run costs with increases in size.

EERE—Energy Efficiency & Renewable Energy, U.S. Department of Energy

EIA—The United States Department of Energy’s Energy Information Administration.

Electric Energy—The generation or use of electric power by a device over a period of time, expressed in kilowatt-hours (kWh), megawatt-hours (MWh), or gigawatt-hours (GWh).

Electric System Losses—Total electric energy losses in the electric system. Losses are primarily due to electric resistance within transmission system lines and transformers.

EMF—Electromagnetic fields.

Eminent Domain—The process by which rights to land needed for public interest facilities is acquired regardless of objection by the landowner. Eminent domain is generally applied by or through the power of the relevant siting authority that found the facilities to be in the public interest.

Energy Conservation—Using less energy, either by greater energy efficiency or by decreasing the types of applications requiring electricity or natural gas to operate.

Energy Efficiency—Using less energy (electricity and/or natural gas) to perform the same function at the same level of quality. Programs designed to use energy more efficiently — doing the same with less. For the purpose of this paper, energy efficiency is distinguished from DSM programs in that the latter are utility sponsored and financed, while the former is a broader term not limited to any particular sponsor or funding source.

EPA—U.S. Environmental Protection Agency.

EPBB (Expected Performance-Based Buy-Down)—An EPBB is a type of up-front incentive based on an estimate of your solar system’s expected performance. The performance estimate is based on system size, geographic location, orientation at time of application. The EPBB incentive is offered only to systems smaller than 30 kW AC in California, under the California Solar Initiative.

EV—electric vehicle, learn more about EV options


Federal Energy Regulatory Commission (FERC)—The Federal Energy Regulatory Commission regulates the price, terms and conditions of power sold in interstate commerce and regulates the price, terms and conditions of all transmission services. FERC is the federal counterpart to state utility regulatory commissions.


Gigawatt-hour (GWh)—The unit of energy equal to that expended in one hour at a rate of one billion watts. One GWh equals 1,000 megawatt-hours.

Greenhouse gases—Greenhouse gases are water vapor, carbon dioxide, tropospheric ozone, nitrous oxide, methane, and chlorofluorocarbons (CFCs).

Grid—A system of interconnected power lines and generators that is managed so that power from generators is dispatched as needed to meet the requirements of the customers connected to the grid at various points. Gridco is sometimes used to identify an independent company responsible for the operation of the grid.


Inflation Reduction Act—A federal bill passed in 2022 to curb inflation by reducing the deficit, lowering prescription drug prices, and investing in domestic energy production while incentivizing clean energy.

Infrastructure Investment and Jobs Act (IIJA)—Also known as the Bipartisan Infrastructure Bill and the INVEST in America Act, is a federal statute signed into law in 2021. "A once-in-a-generation investment in our infrastructure that will help grow the economy, enhance U.S. competitiveness, create good jobs, and build our safe, resilient, and equitable transportation future" according to MnDOT.

Investor owned utility (IOU)—Common term for a privately owned (shareholder owned) gas or electric utility regulated by the Minnesota Public Utilities Commission (referred to in statutes as a “public utility”).

Independent System Operator (ISO)—A neutral and independent organization with no financial interest in generating facilities that administers the operation and use of the transmission system. ISOs exercise final authority over the dispatch of electricity from generators to customers to preserve reliability and facilitate efficiency, ensure non-discriminatory access, administer transmission tariffs, ensure the availability of ancillary services, and provide information about the status of the transmission system and available transmission capacity. An ISO may make some transmission investment decisions.

Interconnected System—A system consisting of two or more individual electric systems that have connecting tie lines and whose operations are synchronized.

Interconnection—When capitalized, any one of the five major electric system networks in North America: Eastern, Western, ERCOT (Texas), Quebec, and Alaska. When not capitalized, the facilities that connect two systems or control areas. Additionally, an interconnection refers to the facilities that connect a nonutility generator to a control area or system.

IRP—Integrated Resource Planning.

Investment Tax Credit (ITC)—The federal ITC is a 30% tax credit for installing a solar system in your home. You can apply this credit to your tax bill in the following spring.


KV—A kilovolt equals 1,000 volts.

Kilowatt (kW)—This is a measure of demand for power. The rate at which electricity is used during a defined period (usually metered over 15-minute intervals). Utility customers generally are billed on a monthly basis; therefore, the kW demand for a given month would be the 15- minute period in which the most power is consumed. Customers may be charged a fee (demand charge) based on the peak amount of electricity used during the billing cycle. (Residential customers are generally not levied a demand charge.)

Kilowatt-hour (kWh)—This is a measure of consumption. It is the amount of electricity that is used over some period of time, typically a one-month period for billing purposes. Customers are charged a rate per kWh of electricity used.


Load—An end use device or customer that receives power from an energy delivery system. Load should not be confused with Demand, which is the measure of power that a load receives or requires. See Demand.

Load Center or Load Pocket—A geographical area where large amounts of power are drawn by end-users.

Local Distribution Company (LDC)—Common term for a privately-owned natural gas utility that provides retail natural gas services to end use customers and is usually regulated by the PUC.

Long Range Planning—The process of forecasting long term loads, determining a reasonable set of potential resources to meet these loads (including reduction of loads through energy efficiency), analyzing the costs (sometimes including externality costs) of several possible mixes of such resources, and identifying the resources to be secured to meet such future needs.


Mcf—one thousand cubic feet; a unit of measure of gas volumes.

Minnesota Public Utilities Commission (Commission or PUC)—the state agency with regulatory jurisdiction over certain Minnesota utilities.

MISO—Midwest Independent System Operator.

MAPP—Mid-Continent Area Power Pool.

MVA—A megavolt-ampere equals 1,000 kVA.

Megawatt (MW)—A megawatt equals 1,000 kilowatts or 1 million watts.

Megawatt-hour (MWh)—The unit of energy equal to that expended in one hour at a rate of one million watts. One MWh equals 3,414,000 Btus.

Monopoly—The only seller with control over market sales.


Natural Monopoly—A situation where one firm can produce a given level of output at a lower total cost than can any combination of multiple firms. Natural monopolies occur in industries that exhibit decreasing average long run costs due to size (economies of scale). According to economic theory, a public monopoly governed by regulation is justified when an industry exhibits natural monopoly characteristics.

NEG and NEM—Net Energy Generation and Net Energy Metering; When producing electricity, NEG is the total electricity you produce minus the electricity you use from the grid. NEM means that the electricity you do generate will feed into the grid and earn you credits against the electricity you do pull from the grid. Your utility bill will then reflect only the net energy you’ve pulled from the utility.

NERC—The North American Electric Reliability Council is the coordinating arm of the nine member regional reliability councils. (See also Reliability Councils).

Net Zero—According to the U.S. Department of Energy, at a minimum, a zero emissions building must be energy efficient, free of onsite emissions from energy use, and powered solely from clean energy.

NO x —Nitrogen Oxides


Obligation to Serve—The obligation of a utility to provide nondiscriminatory electric service to any customer who seeks that service, and is willing to pay the rates set for that service. By law, utilities have the obligation to serve in return for exclusive service territories.


Property Assessed Clean Energy (PACE)—Cities are beginning to offer PACE programs which provides a loan for your solar panels. The program pays for the panels and you pay for the solar system on your property tax bill, over approximately 20 years, with interest. PACE provides loans for the cost of the panels, before the federal ITC is rewarded – this means that you will need to make payments on a larger, pre-ITC loan.

Parallel Path Flow—As defined by NERC, this refers to the actual flow of electric power on an electric system’s transmission facilities resulting from scheduled electric power transfers between two other electric systems. (Electric power flows on all interconnected parallel paths in amounts inversely proportional to each path’s resistance.) Contract transmission paths, the electricity contracted for between sellers and buyers, do not define the way electricity actually flows.

Peak Load or Peak Demand—The electric load that corresponds to a maximum level of electric demand within a specified time period, usually a year.

Performance Based Incentive (PBI)—A payment or rebate paid based on actual energy production, compared to a UFI, on a $/kWh basis. A PBI benefits those with larger solar power systems.

Performance Based Regulation (PBR)—Any rate setting mechanism that attempts to link rewards (generally profits) to desired results or targets. PBR sets rates, or components of rates, for a period of time based on external indices rather than a utility’s cost of service. Other definitions include light-handed regulation that is less costly and less subject to debate and litigation. A form of rate regulation that provides utilities with incentives to reduce their costs.

Power Authorities—Quasi governmental agencies that perform all or some of the functions of a public utility.

Power Purchase Agreement (PPA)—A financing option for residential solar in which a solar company owns (and installs, monitors, maintains) your solar panels; you pay for electricity. With PPAs, you avoid the high upfront costs of installing solar and pay a monthly rate that depends on how much energy your panels produce.

Power Pool—Two or more interconnected electric systems planned and operated to supply power for their combined demand requirements.

Production Tax Credit (PTC)—The federal PTC is a per-kilowatt-hour tax credit for generating electricity, for a certain period of the solar system’s operation. Those who are less interested in PTCs can apply for an ITC, and vice versa.

Public Good—A good (or a service) that will not be produced and delivered solely by the free market. Economists call these “public goods” because the public consumes them, but they do not solely benefit a single buyer or group of buyers. There is no way to produce a public good without producing a value to society at large. It is unlikely that an individual would pay out of his or her own pocket to ensure that a public good is produced because the value is not exclusively individual.

Public Interest Goals—Public interest goals of utility regulation include: 1) inter-and intra-class and intergenerational equity); 2) the equal treatment of equals (horizontal equity); 3) balancing long- and short-term goals that have the potential to affect intergenerational balance; 4) protecting against the abuse of monopoly power; and 5) general protection of the health and welfare of the citizens of the state, nation, and world. Environmental and other types of social costs are subsumed under the equity and health and welfare responsibilities.

Public Utility—By Minnesota Statute, an investor owned utility regulated by the PUC. “Public utility” excludes municipal utilities, cooperatives, and power marketing authorities.

PURPA—Public Utility Regulatory Policies Act of 1978.



RDF—Refuse derived fuel, composed of processed garbage, that is used in some electric generation plants.

Real time Pricing—The instantaneous pricing of electricity based on the cost of the electricity available for use at the time the electricity is demanded by the customer.

Regional Reliability Councils (RRC)—Regional reliability councils were organized after the 1965 northeast blackout to coordinate reliability practices and avoid or minimize future outages. They are voluntary organizations of transmission owning utilities and in some cases power cooperatives, power marketers, and nonutility generatos. Membership rules vary from region to region. They are coordinated through the North American Electric Reliability Council (NERC). There are ten major regional councils plus the Alaska Systems Coordinating Council.

REIS—Regional Energy Information System; the Minnesota Department of Commerce’s computerized state energy data collection and information system required under Minnesota Statutes. It includes energy data the DOC collects directly from energy suppliers as well as data collected by other state departments such as the Minnesota Department of Revenue, Petroleum Taxation Division. It also includes energy data specific to Minnesota collected by the U.S. Department of Energy, the U.S. Department of Commerce, Bureau of Census and the U.S. Department of Transportation.

Reliability—Electric system reliability has two components —adequacy and security. Adequacy is the ability of the electric system to supply the aggregate electric demand and energy requirements of the customers at all times, taking into account scheduled and unscheduled outages of system facilities. Security is the ability of the electric system to withstand sudden disturbances such as electric short circuits or unanticipated loss of system facilities. Reliability also refers to the security and availability of natural gas and petroleum supply, transportation and delivery.

Renewable Energy Certificate (REC)—A REC is the property right to the environmental benefits associated with generating renewable electricity. For instance, homeowners who generate solar electricity are credited with 1 solar REC for every MWh of electricity they produce. Utilities that have to fulfill an RPS requirement can purchase these RECs on the open market.

Renewable Resources—Renewable energy resources are naturally replenishable, but flow-limited. They are virtually inexhaustible in duration but limited in the amount of energy that is available per unit of time. Some (such as geothermal and biomass) may be stock-limited in that stocks are depleted by use, but on a time scale of decades, or perhaps centuries, they can probably be replenished. Renewable energy resources include: biomass, hydro, geothermal, solar and wind. In the future they could also include the use of ocean thermal, wave, and tidal action technologies. Utility renewable resource applications include bulk electricity generation, on-site electricity generation, distributed electricity generation, non-grid-connected generation, and demand reduction (energy efficiency) technologies.

RES (Renewable Energy Standard)—(Also called RPS, Renewable Portfolio Standard). In Minnesota, the new Renewable Energy Standard that passed the House on February 20, 2007, will require 25 percent of Minnesota’s electricity to come from renewable sources (such as wind and solar) by the year 2025. Currently, Minnesota imports more electricity from outside sources than any other state.

Research and Development (R&D)—Research is the discovery of fundamental new knowledge. Development is the application of new knowledge to develop a potential new service or product. Basic power sector R&D is most commonly funded and conducted through the Department of Energy (DOE), its associated government laboratories, university laboratories, the Electric Power Research Institute (EPRI), and private sector companies.

Reserve Margin—Capacity over and above anticipated peak loads, maintained for the purpose of providing operational flexibility and for preserving system reliability. Reserve margins cover for planned and unplanned outages of generation and/or transmission facilities.

Restructuring—The reconfiguration of the vertically integrated energy monopolies. Restructuring usually refers to separation of the various utility functions into individually operated and owned entities.

RPS (Renewable Portfolio Standard)—See RES, Renewable Energy Standard

RTO—A regional transmission organization designed to operate the grid and its wholesale power market over a broad region and with independence from commercial interests. An RTO would also have a role in planning and investing in the grid, though how it would conduct these activities remains unresolved. An RTO would also coordinate with other RTOs.


Silicon (Si)—A semiconducting material found in most solar cells. It absorbs photons in sunlight and creates energy.

Societal Benefits Charge (SBC)—Funding for programs that provide benefits to society, such as low-income, energy efficiency, and renewable energy programs

Solar Renewable Energy Certificate (SREC)—See REC, Renewable Energy Certificate

Substation—A facility for switching electric elements, transforming voltage, regulating power, or metering.


Tariff—A document, approved by the responsible regulatory agency, listing the terms and conditions, including a schedule of prices, under which utility services will be provided.

Thermal Rating—The maximum amount of electrical current that a transmission line or electrical facility can conduct over a specified time period before it sustains permanent damage by overheating or before it violates public safety requirements.

Time-of-Use (TOU) Rates—The pricing of delivered electricity based on the estimated cost of electricity during a particular time block. Time-of-use rates are usually divided into three or four time blocks per twenty-four hour period (on-peak, midpeak, off-peak and sometimes super off-peak) and by seasons of the year (summer and winter). Real time pricing differs from TOU rates in that it is based on actual (as opposed to forecasted) prices that may fluctuate many times a day and are weather sensitive, rather than varying with a fixed schedule.

Transmitting Utility (Transco)—This is a regulated entity that owns, and may construct and maintain, wires used to transmit wholesale power. It may or may not handle the power dispatch and coordination functions. It is regulated to provide nondiscriminatory connections, comparable service and cost recovery.


Unbundling—Disaggregating utility service into its basic components and offering each component separately for sale with separate rates for each component. For example in electric service, generation, transmission and distribution could be unbundled and offered as discrete services with separate payment for each.

Universal Service—Energy service sufficient for basic needs (an evolving bundle of basic services) available to and affordable by virtually all members of the population.

Up-Front Incentive (UFI)—A payment or rebate up front for installing solar panels.

Utility—A corporation, person, agency, authority, or other legal entity that owns or operates facilities for the generation, transmission, distribution, or sale of electric energy or natural gas primarily for use by the public and is defined as a utility under the statutes and rules by which it is regulated.

Utility—A regulated entity that exhibits the characteristics of a natural monopoly. For the purposes of the electric industry, “utility” generally refers to a regulated, vertically integrated monopoly electric company. “Transmission utility” refers to the regulated owner/operator of the transmission system only. “Distribution utility” refers to the regulated owner/operator of the distribution system that serves retail customers.


Vertically Integrated Monopoly—A single entity (provider) which performs all of the basic functions of production, transportation and delivery. For example, in the electric industry a vertically integrated electric utility performs all three basic functions of generation (production), long distance transmission (transportation) and local distribution (delivery) of electrical energy to consumers.


Watt—The unit of measure for electric power or rate of doing work. The rate of energy transfer equivalent to one ampere flowing under pressure of one volt.

Weather normalized information—Information adjusted to remove fluctuation due to changes in weather.

Wholesale Competition—Power producers competing to sell their power to a variety of distribution companies.

Wholesale Power Market—The purchase and sale of electricity from generators to resellers (who sell to retail customers and/or other resellers) along with the ancillary services needed to maintain reliability and power quality at the transmission level.

Our friends at Citizens Utility Board have a helpful Ratepayers’ Dictionary with more terms defined.