Power Trading Glossary

Ancillary Services Market

Provides regulation and reserves for grid operators to preserve electricity flow, balance supply and demand, and maintain consistency within the power system.

Base Load

The minimum amount of power for consistent production over a specified period of time during off-peak hours.

Capacity Markets

Offers payments for generation capacity. The idea is that it incentivizes power generation that might not always be used.

Congestion Revenue Rights (CRR)

An awarded financial instrument that represents the difference in real-time power prices at two different nodes. It’s called a CRR in ERCOT and would be broadly equivalent to an FTR or TCR in other markets.

Clearing Price

The final settled price for a specific instrument, i.e. in physical electricity markets. The market price per megawatt hour of power generated.

Day-Ahead Market (DAM)

Financial forward energy market that closes on the date prior to the day of flow.

Distributed Energy Resources (DER)

Small-scale generation units (typically under 10MW) that are connected to the power grid, such as solar or wind power units.

Generation Forecast

A prediction of how much power will be generated on a particular date.

FTR (Financial Transmission Rights) Obligation

A financial contract that compensates holders based on LMP differences between two different nodes.

This is similar to a CRR, or a TCR which are broadly similar but different in fundamental ways.

Independent Power Producers (IPP)

Also referred to as Non-Utility Generators (NUGs), IPPs are organizations that are privately owned and operated, and sell and distribute electricity within a wholesale power market.

Independent System Operator (ISO)

A term used to describe the various wholesale electricity markets across different regions in North America. The nine North American ISOs include:

  • Alberta Electric System Operator (AESO)
  • California Independent System Operator (CAISO)
  • Electric Reliability Council of Texas (ERCOT)
  • Midcontinent Independent System Operator, Inc. (MISO)
  • ISO New England (ISO-NE)
  • New York Independent System Operator (NYISO)
  • Ontario Independent Electricity System Operator (IESO)
  • PJM Interconnection (PJM)
  • Southwest Power Pool (SPP)

Intraday Power Trading

The purchase and sale of power for the current day of delivery on a rolling basis.

Locational Marginal Pricing (LMP)

The cost to buy and sell power at different locations within an ISO, including PJM, NYISO, ISO New England, MISO, and SPP.

Most North American ISO LMPs comprise three reporting components:

  • Marginal Energy Cost (MEC)
  • Marginal Congestion Cost (MCC)
  • Marginal Losses Cost (MLC)

ERCOT operates differently than other North American ISOs because they use one LMP reporting method, SPP (Settlement Price Point), which excludes MLC. For many practical purposes, an PP and an LMP are roughly equivalent.

On-Peak / Peak

A block of hours that represents the normal period where electricity used is higher, i.e. daylight hours.

In terms of days, the US peak typically represents 16 hours:

  • In most ISOs, weekday peak hours occur on five days
  • In CAISO, Saturdays are included in weekday peak blocks


The electricity that is used outside of the on-peak schedule. In some cases, off-peak refers to 7x8 (evening hours, 7 days a week). In other cases, off-peak refers to a “wrap,” which is 7x8 (evening hours, 7 days a week) + 2x16 (daylight hours, 2 days a week).

Power Purchase Agreement (PPA)

A long-term electricity supply agreement between power producers and their customers.

The PPA outlines the expectations from both parties, including prices, accounting, amount of power supplied, and more. PPAs tend to be used to reduce market price risk.

Real-Time Market (RT)

A market in which the remaining power from the day-ahead market is traded for immediate delivery. Real-time market prices are generally more volatile than day-ahead market prices.

Regional Transmission Operators (RTO)

Often used interchangeably with ISOs, RTOs are the wholesale electricity markets that transfer grid power to regional distribution areas.

Reserve Margin

A measure for monitoring power supply and maintaining reliability by ensuring the demand doesn’t exceed the supply/capacity value.

  • Reserve Margin = (Capacity — Demand)/Demand


A source of electricity that increases the capacity market, such as a generator.

Retail Electric Providers (REP)

Also referred to as a Retail Energy Provider, REPs are either pronounced phonetically as “rep” or by the acronym, REP. They refer to organizations that purchase wholesale electricity from generators to sell to consumers based on utility service areas. REPs typically operate in deregulated power markets.

Retail Power Market

A market in which consumers have the choice of companies from which they might buy their electricity. Also referred to as a market with consumer choice.

Security-Constrained Dispatch (SCD)

When system operators transmit units of power by merit order to balance supply and demand.

Security-Constrained Unit Commitment (SCUC)

In day-ahead markets, a scheduling technique that combines:

  • Unit Commitment (UC)
  • Economic Dispatch (ED)
  • Security

Ensures generators are able to run securely to balance supply and demand.

Supply Stack

A ranking of generators by different factors, including the marginal cost of production, in electricity markets.

Transmission System Operators (TSO)

Handles the transfer of power from grids to regional Distribution System Operators (DSOs) in Europe. These are analogous to ISOs in the US.

Transmission / Distribution Service Providers (TDSP)

Sometimes referred to as Transmission Distribution Utility (TDS), TDSPs distribute wholesale electricity from generators to consumers and maintain the flow of electricity. TDSPs operate in regulated power markets.

Wholesale Power Market

The buying and selling of power between the companies in bulk. This is the opposite of a retail power market, which typically involves consumers of electricity.

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