Glossary
Basic Generation Service (BGS)
BGS refers to the service of customers who are not served by a third party supplier or competitive retailer. This service is sometimes known as Standard Offer Service, Default Service, or Provider of Last Resort Service.
For three years, after NJ implemented retail choice, the four New Jersey EDCs supplied those customers who did not switch to a competitive retailer through supply arrangements specified in restructuring settlements using pre-established rates or rate-making processes. Starting in 2003, the needs of residential and smaller commercial customers, who are on a fixed-price service, were met through a statewide auction called the BGS-FP Auction, while the needs of larger commercial and industrial customers, who are on a mandatory hourly service, were met through a second and concurrent statewide auction called the BGS-CIEP Auction.
The auction was designed to procure supply for BGS customers at a cost consistent with market conditions and would further the transition in New Jersey by providing an opportunity for energy trading and marketing companies to provide BGS supply. (source)
BGS is defined as electric generation service that is provided to any customer that has not chosen an alternative electric power supplier. BGS is not a competitive service and shall be fully regulated by the New Jersey Board of Public Utilities ("NJBPU").
Impact of BGS auctions:
• Provides wholesale competition to the New Jersey energy marketplace, through the BGS auction process
• The BGS auction process leads to lowest possible prices for BGS supply
• Smaller customers (residential & small commercial) who remain on BGS thus receive the benefit of a competitively bid fixed price
• Smaller customers have very limited alternative supplier choice options available at this time
The hourly customer class gains greater control of its energy supply. (source)
The BGS rate is a default price paid by those not buying power in the competitive marketplace. It is a blended index, incorporating power purchased in auctions in 2008 and 2009, when prices were much higher than today. Essentially this means that New Jersey commercial customers - businesses, schools, hospitals, government agencies - on BGS service may pay a higher rate for electricity than they would in the competitive electricity market today. (source)
Board of Public Utilities (BPU)
The Board of Public Utilities is a regulatory authority with a statutory mandate to ensure safe, adequate, and proper utility services at reasonable rates for customers in New Jersey.
Accordingly, the NJBPU regulates critical services such as natural gas, electricity, water and telecommunications and cable television. The Board addresses issues of consumer protection, energy reform, deregulation of energy and telecommunications services and the restructuring of utility rates to encourage energy conservation and competitive pricing in the industry. The Board also has responsibility for monitoring utility service and responding to consumer complaints. (source)
The NJBPU regulates the BGS. (source)
Base Residual Auction (BRA)
BRA is a key market administered by PJM is the capacity market, for which prices are set by the Reliability Pricing Model (RPM). Capacity is the ability to generate electricity when needed. Resources that are paid for capacity obligations commit to being available to PJM to generate or to reduce load when called on.
Most capacity is transacted in the Base Residual Auction (BRA), which is held every May three years preceding the Delivery Year. Following the BRA, additional auctions are held before the Delivery Year to account for changes in the demand forecast, changes in the amount of supply available, and other factors that would cause a variance from conditions expected in the BRA. For each auction, suppliers submit offers to sell capacity to PJM and bids are stacked to form an upward sloping supply curve. Clearing prices are determined by the intersection of that supply curve and the demand curve. (source)
Demand Response (DR)
Measures consumers take to minimize their demand for energy. It includes curtailment of energy or the use of on-site generation of electricity at critical times.
"Demand response programs" pay consumers to reduce power usage when needed.
One of the five goals that the NJ Governor's administration has proposed is to reward energy efficiency and energy conservation and reduce peak demand. One of the ways to do this is to offer demand response programs that lower the cost of doing business in the State, enhances economic development, and advances the State's environmental goals. (source 1, source 2)
Distributed Generation (DG)
Small-scale electricity production that is on-site or close to the primary users and is interconnected to the utility distribution system
DG resources, such as fuel cells and emergency generators, produce power at or near the location where it is consumed, offsetting the host facility's electric load. DG is dispatchable and can lessen the burden on the transmission grid and on generating plants during peak demand hours, thereby reducing wholesale power costs and the price of electricity to all customers, i.e., both participants and non-participants. (source)
Electric Distribution Company (EDC)
The electric power industry is commonly split up into four processes. These are electricity generation such as a power station, electric power transmission, electricity distribution and electricity retailing. Electricity distribution is the final stage in the delivery (before retail) of electricity to end users. A distribution system's network carries electricity from the transmission system and delivers it to consumers (source 1, source 2)
New Jersey has four EDCs (source):
(1) Atlantic City Electric (ACE),
(2) Jersey Central Power & Light (JCP&L),
(3) Public Service Electric & Gas Company (PSE&G), &
(4) Rockland Electric Company (RECO).
Local Distribution Company (LDC)
While some large industrial, commercial, and electric generation customers receive natural gas directly from high capacity interstate and intrastate pipelines (usually contracted through natural gas marketing companies), most other users receive natural gas from their local gas utility, also called a local distribution company (LDC).
LDCs are regulated utilities involved in the delivery of natural gas to consumers within a specific geographic area. There are two basic types of natural gas utilities: those owned by investors, and public gas systems owned by local governments.
Local distribution companies typically transport natural gas from delivery points located on interstate and intrastate pipelines to households and businesses through thousands of miles of small-diameter distribution pipe. (source)
There are four LDCs in New Jersey (source):
(1) Elizabethtown Natural Gas,
(2) New Jersey Natural Gas,
(3) Public Service Electric and Gas, &
(4) South Jersey Gas.
Locational Margin Price (LMP)
The LMP at a specific location is the sum of the cost of generating the next MW to supply load at a specific location (based on marginal generation cost), the cost of transmission congestion, and the cost of losses.
LMP's intended purpose is to determine the delivered energy price at a specific location by calculating and accounting for the relevant energy and transmission congestion prices.
Generally, LMP determines an energy price for each electrical node on the grid as well as the transmission congestion price (if any) to serve that node.
For the above reason, LMP is often referred to as "nodal pricing". (source)
LMPs are wholesale energy prices set by PJM at each node throughout its system based on generator and demand-side energy bids and the expected load. PJM operates a Day-Ahead energy market and a Real-Time balancing energy market. In the predominant Day-Ahead market, all dispatched plants receive the same LMP (with adjustments for losses and congestion) equal to the bid of the last, most expensive dispatched plant, regardless of their own bid prices. (source)
Load-Serving Entity (LSE)
Load-serving Entity (LSE) is the broad term to describe entities that deliver electricity to end-users and wholesale customers. (source)
Load Serving Entity or LSE means any entity (or the duly designated agent of such an entity), including a load aggregator or power marketer, (i) serving end-users within the PJM Region, and (ii) that has been granted the authority or has an obligation pursuant to state or local law, regulation or franchise to sell electric energy to end-users located within the PJM Region. Load Serving Entity includes any end-use customer that qualifies under state rules or a utility retail tariff to manage directly its own supply of electric power and energy and use of transmission and ancillary services. (source)
An LSE provides electric services to customers that do not elect BGS service. LSEs may include regulated EDCs, municipal electric companies and cooperatives, and competitive energy suppliers. (source)
Offshore Wind Renewable Energy Certificate (OREC)
"Offshore wind renewable energy certificate" or "OREC" means a certificate issued by the Board or its designee, representing the environmental attributes of one megawatt hour of electric generation from a qualified offshore wind project.
"Qualified offshore wind project" means a wind turbine electric generation facility in the Atlantic Ocean and connected to the electrical transmission system in this State, and includes the associated transmission-related interconnection facilities and equipment, and approved by the Board of Public Utilities. (source)
PJM (Pennsylvania - New Jersey - Maryland Interconnection)
PJM Interconnection LLC (PJM) is a Regional Transmission Organization (RTO) which is part of the Eastern Interconnection grid operating an electric transmission system serving all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia.
PJM, headquartered in Valley Forge, Pennsylvania, is currently the world's largest competitive wholesale electricity market. More than 650 companies are members of PJM, which serves 51 million customers and has 167 gigawatts of generating capacity.
With 1,325 generation sources, 56,000 miles of transmission lines and 6,038 transmission substations, PJM delivered 682 terawatt-hours of electricity in 2009. (source)
Reliability Pricing Model (RPM)
Reliability Pricing Model (RPM) is PJM's resource adequacy construct.
RPM is part of an integrated approach to ensuring long-term resource adequacy and competitively priced delivered energy.
RPM aligns the price paid for capacity with overall system reliability requirements.
RPM includes pricing to recognize and quantify the locational value of capacity (effective 2007/2008 Delivery Year) and the operational value of capacity (effective 2014/15 Delivery Year).
RPM provides forward investment signals. (source)
RPM is PJM's competitive capacity pricing mechanism that sets market-based capacity prices for different regions based supply-side and demand-side capacity bids submitted in annual auctions. (source)
Renewable Portfolio Standards (RPS)
A renewable portfolio standard is a state policy that requires electricity providers to obtain a minimum percentage of their power from renewable energy resources by a certain date. (source)
An RPS is a state regulation that requires the increased production of energy from renewable energy sources, such as wind, solar, biomass, and geothermal, to meet a specified goal for that state's EDCs. (source)
Regional Transmission Organization (RTO)
A regional transmission organization (RTO) in the United States is an organization that is responsible for moving electricity over large interstate areas. An RTO coordinates controls and monitors an electricity transmission grid that is larger with much higher voltages than the typical power company's distribution grid. (source)
Solar Alternative Compliance Payment (SACP)
The SACP is the fee that energy suppliers must pay if they fail to secure SRECs as required by state regulations called an RPS. A state's ACP therefore generally sets a cap on the value of SRECs because energy suppliers and utilities may simply pay the fee if SREC prices approach the fee level.
In rare cases SREC prices have approached and even surpassed ACP levels because SRECs can sometimes be recovered by charging more to electricity customers (rate basing), while ACP payments are usually precluded.
In many states, the SACP is scheduled to decline over time with the intention of eventually phasing out the solar industry's reliance on SREC sales as an incentive for installing solar. (source)
Solar Renewable Energy Certificate (SREC)
Solar Renewable Energy Certificates (SRECs) or Solar Renewable Energy Credits are a form of Renewable Energy Certificate or "Green tag". SRECs exist in states that have Renewable Portfolio Standard (RPS) legislation with specific requirements for solar energy, usually referred to as a "solar carve-out".
SRECs represent the environmental attributes from a solar facility, and are produced each time a solar system produces one megawatt-hour (MWh) of production.
The additional income received from selling SRECs increases the economic value of a solar investment and assists with the financability of solar technology. In conjunction with state and federal incentives, solar system owners can recover their investment in solar by selling their SRECs through spot market sales or long-term sales (source)