Glossary of Terms

Abatement: Reduction in the degree or intensity of, or elimination of, pollution.

Allocation of allowances: In a regulatory system designed to reduce emissions of particular substances, allowances (or permits or credits) could be created by the government that would entitle holders to emit a specified quantity of the regulated substance. Allocation, or distribution, of these allowances, permits or credits could be gratis according to some established formula or could be accomplished through a marketplace auction or sale at fixed prices.

Cap and trade: A regulatory program under which the government would 1) set a cap on the volume of harmful emissions (such as carbon dioxide, mercury, nitrous oxide and sulphur) that would be permitted, and 2) distribute the rights to allowed emissions. Firms would be free to buy and sell those rights (called allowances, permits or credits) after the initial distribution.

Carbon Emissions: Carbon that enters the atmosphere as a result of burning carbon-based fuels, chiefly coal, oil and natural gas. For a given unit of energy, coal combustion emits roughly twice as much carbon dioxide as natural gas, and oil falls in between. About a third of human-caused carbon dioxide emissions in the U.S. comes from electric power plants, another third from cars and trucks, and the remaining third from other commercial enterprises and households. Nearly 6 million metric tons of carbon dioxide were emitted by human activity in the U.S. in 1999, an amount equivalent to more than 1500 million metric tons of pure carbon.

Electric Utility: A corporation, person, state agency, authority or other legal entity that owns and/or operates facilities for the generation, transmission, distribution or sale of electricity primarily for use by the public. (Non-utilities are privately-owned companies that generate power for their own use and/or for sale to utilities and others.)

Electricity Sector: The portion of the total gross domestic product resulting from the generation, transmission and sale of electrical power, roughly 2 percent. The United States electricity market is in excess of $200 billion annually. The market is generally viewed in three sectors: industrial (large business) users, which accounts for $40 billion annually; commercial (small business) users, who consume $70 billion annually; and residential consumers (over 100 million households), who use $90 billion of electricity annually. Over 3,300 regulated electricity suppliers sell power to U.S. consumers. Of these, approximately 300 large investor-owned utilities account for approximately three-quarters of the industry's revenue. However, even the largest of these are generally geographically isolated and have less than 5% of the national market.

Emission Allowance: Also emission permit, emission credit. The permission to discharge into the atmosphere a specific quantity, generally a ton, of a regulated substance, such as carbon dioxide, sulphur dioxide or nitrous oxide.

Generation Performance Standard: Allocation method under which the government would determine firms allowance allocations based on their current level of production (also referred to as output based allocations). A GPS for the electricity generating sector in the year 2010 would work as follows: the government would define the allowed amount of carbon per unit of electricity produced (the GPS) by dividing a carbon emission target for the electricity sector in 2010 by the projected amount of electricity production in that year. Firms with emissions in excess of the GPS would need to buy allowances from firms with emissions below the GPS.

Grandfathering Allowances: Allocation method under which the government would give (not sell) allowances to entities based on their historic production, emission or consumption levels. This is the primary method of allocating allowances for sulphur dioxide emissions under the acid rain program. A mixed system would sell some allowances and grandfather other allowances.

• Consumer grandfathering: the value of allowances would be transmitted to consumers of electricity;
• Energy producer grandfathering: allowances would be given to producers of electricity or firms that extract or import carbon-based fossil fuels;
• Industry grandfathering: allowances would be given to industrial and other exceptionally heavy users of power generated by fossil fuels.

Greenhouse gases (GHGs): Carbon dioxide, methane, nitrous oxide, chlorofluorocarbons and aerosols. Of these, carbon dioxide is the most abundant and important of the greenhouse gases generated by human activity. GHGs function like a “greenhouse” by trapping some of the suns energy that reaches the earth, preventing it from being reflected back out of the earths atmosphere, and thereby warming the earths climate.

Individual Power Generators: A station containing prime movers, electric generators and auxiliary equipment for converting electrical, mechanical and/or fission energy into electric energy. Generators can be utility- or non-utility-owned. Prime movers are the engine, turbine, water wheel or similar machines that drive an electric generator.

KWH (Kilowatt Hour): A watt-hour (Wh) is an amount of energy. It is defined as one watt of power sustained for one hour. A 13-watt lamp operating for 6 hours would consume (13 W) x (6 hrs) = 78 Wh. A larger unit of measurement is the kilowatt-hour (kwh), which is 1000 Wh.

Market value (for emission allowances): The price for which emissions allowances are sold by their owners and purchased by entities with emissions.

Power plant: As used here, any electric generating facility with nameplate capacity of 15 megawatts or more. Nameplate capacity is the maximum design production capacity specified by the manufacturer of a processing unit or the maximum amount of product that can be produced running the manufacturing unit at full capacity. Fossil-fuel steam electric units typically have large capacities with many over 1,000 megawatts. Gas turbines, combustion turbines and combined-cycle units are typically less than 200 megawatts.

Public Utility Commission (PUC): A state commission, also sometimes called Public Service Commission, that regulates all types of utilities, including electricity generators. State PUCs have jurisdiction over intrastate trade of electricity, regulate retail rates for customers, approve sites for generation facilities, and issue State environmental regulations.

Utility deregulation: The relaxation or elimination of state regulation and government oversight of the previously regulated electric power industry monopolies. Restructuring or changes in the electric utility industry resulting from deregulation trends include sale by utilities of their generation and transmission facilities, purchase and sale of power to highest bidders by non-utility power generators, unbundling of utility operations into separate generation, transmission and distribution businesses, and allowing utility retail customers a free choice of energy suppliers.

Utility rate-of-return (ROR) regulations: The return earned or allowed to be earned by a utility enterprise, calculated as a percentage of its fair value or rate base. Under the traditional regulatory system, state public utility commissions (PUCs) set retail rates for electricity, based on the cost of service, which includes the cost to the utility for generated and purchased power, the capital costs of power, transmission and distribution plants, all operations and maintenance expenses, taxes and the costs to provide programs often mandated the PUC for consumer protection and energy efficiency.