An introduction to electric industry restructuring Page: 51 of 61
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customers preventing the shifting of costs between customer classes as a result of special rate discounts or
other restructuring activities.
Forwards A forward is a commodity bought and sold for delivery at some specific time in the future. It is
differentiated from futures markets by the fact that a forward contract is customized, non-exchange traded, and
a non-regulated hedging mechanism.
FPA - Federal Power Act of 1935. Established guidelines for federal regulation of interstate energy sales. It
is the primary statute governing FERC regulation of the electric sector.
Fuel Diversity - The situation in which a given supply portfolio is made up of plants using several
different types of fuel to generate electricity, for the purpose of avoiding over-reliance on one fuel, and the
related risk of supply interruption and price spikes. A form of hedging by maintaining a diverse portfolio of
fuel inputs.
Functional Unbundling - The functional separation of generation, transmission, and distribution
transactions within a vertically integrated utility without selling or "spinning off" these functions into separate
companies. (See also divestature)
Futures Contract - A standardized financial agreement for the purchase or sale of a commodity or product
at a specified price that is traded in an open auction under the rules of an exchange and that requires delivery on
or settlement through the sale or purchase of an offsetting contract by a specified future date.
Futures Market - Arrangement through a contract for the delivery of a commodity at a future time and at a
price specified at the time of purchase. The price is based on an auction or market basis. Standardized,
exchange-traded, and government regulated hedging mechanism.
Generation Company (Genco) - A regulated or non-regulated entity (depending upon the industry
structure) that operates and maintains existing generating plants. The Genco may own the generation plants or
interact with the short term market on behalf of plant owners. In the context of restructuring the market for
electricity, Genco is sometimes used to describe a specialized "marketer" for the generating plants formerly
owned by a vertically-integrated utility.
Generation Dispatch and Control - Aggregating and dispatching (sending off to some location)
generation from various generating facilities, providing backup and reliability services. Ancillary services
include the provision of reactive power, frequency control, and load following. (Also see "Power Pool" and
"Poolco" below.)
Green Markets / Marketing - Sales and purchases of power from renewable or otherwise
environmentally desirable resources and efficiency services.
Grid A system of interconnected power lines and generators that is managed so that the generators are
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.
Hedging Contracts - Contracts which establish future prices and quantities of electricity independent of theC-8
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Eisenberg, J.F. & Berry, L.G. An introduction to electric industry restructuring, report, September 1, 1997; Tennessee. (https://digital.library.unt.edu/ark:/67531/metadc699338/m1/51/: accessed April 23, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.