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Ratepayers’ Dictionary

Ratepayers’ Dictionary

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Common Terms in the World of Energy Policy

Advanced Metering Infrastructure (AMI): A system of smart meters and communication networks that allows two-way communication between the utility and the meters located at customers’ residences.

Air Source Heat Pump (ASHP): An appliance that heats or cools a home by taking warm air from one area and transferring it to another. In summer, an ASHP can move hot air from your house to outside, while in the winter it can heat up air from outside and keep your house warm.
Base Load: The minimum or constant amount of energy needed to meet the needs of consumers.

Base Rate (see also Rate Base): The rates set by the Minnesota Public Utilities Commission that allow the utility to recover the costs of doing business and a return (profit) on its investments. Base rates cover most of the expenses charged to customers, including utility investments, profits, and operations and maintenance costs.

Battery: A technology used to store energy for later use.

Biomass: Plant matter or organic materials used as fuel to create electricity. Biomass typically includes wood, crops, and some types of waste. Block rate: A rate structure where the amount charged to customers for energy changes based on how much they use.

Bond: A form of debt that allows the utility to raise money from investors. When a utility issues bonds, investors give the utility money for a specified amount of time. The investor is able to recover interest on the bond and will be repaid when the bond reaches maturity.
Capacity: The maximum amount of energy that a facility or set of facilities can produce.

Carbon Free: When an activity or combination of activities produces no carbon emissions.

Carbon Neutral: When an activity or combination of activities does not contribute to the net amount of carbon in the atmosphere because the amount of carbon they produce is “offset” by carbon reduction efforts.

Clean Energy: Energy generated from sources and technologies that do not produce greenhouse gas emissions.

Clean Energy Transition: The process of moving away from fossil fuel generation to clean energy resources.

Community Solar Garden (CSG): A solar facility or array (see Solar Array) that operates on a subscription model. Individuals can “subscribe” to the solar garden and receive bill credits from their utility based on the amount of solar energy the facility produces. Specific requirements about where community solar gardens can be located, how big they can be, and more can be found in Minnesota statutes.

Conservation Improvement Program (CIP): A ratepayer-funded program that is designed to help Minnesotans reduce the amount of energy they use. Cooperative (Co-op): A “member-owned” utility that provides electricity or other services to its members. Cooperatives are generally not subject to the same requirements as regulated utilities.

Cost-Benefit Analysis: The process of weighing the expenses and negative effects of an action against the possible benefits it could bring.

Cost-effective: When something provides good value for the amount paid. Oftentimes, this is used when describing actions that may cost more to install initially but will save consumers more money in the long run.
Debt: A financial obligation to pay money to somebody else. Decoupling: Separating a utility’s ability to earn a profit from the amount of energy it sells.

Decoupling adjustment: A mechanism that allows utilities to increase or decrease rates if the amount of money it recovers from customers does not match the amount it is allowed to earn. If the utility recovers too much from customers, it will decrease rates or refund the difference. On the other hand, the utility can increase rates if it recovers less than what is allowed.

Demand: A measurement of how much energy is being used across the energy system at any given point in time.

Demand Response: A method of reducing the amount of energy needed on the grid that involves customers lowering their energy usage during times of high costs or high demand.

Distributed Energy Resources (DER): Smaller-scale electricity resources that generate electricity and are connected to the grid on the consumer side. One primary example of DER is rooftop solar.

Distribution: The power lines connecting your house or business to the larger electric grid.

Dual fuel: When a vehicle, appliance, or energy system uses two types of fuel to operate. For example, an electric heat pump paired with a gas furnace to provide heating and cooling would be a dual-fuel system.
eDockets: The online system used to file comments and share information about ongoing utility dockets and cases. This video from the Public Utilities Commission guides you through the process of navigating the eDockets system. If you are interested in commenting on a docket, more information can be found here.

Electrification: The process of replacing something that uses fossil fuels with something that runs on electricity.

End-user: The person or business that uses electricity.

Energy Assistance Program (EAP): A program that provides energy assistance to income-qualified households and helps reduce the cost of energy bills.

Energy burden: The percentage of a household’s income spent on energy costs.

Energy charge: The price you pay for electricity (or natural gas). This is usually expressed as a per kilowatt hour (kWh) basis for electricity or a per therm basis for natural gas.

Energy Efficiency: Using less energy or electricity to accomplish the same result.

Energy Star: A federal program designed to help consumers and businesses use less energy by identifying energy efficient products and services. Energy transition (see Clean Energy Transition): The process of moving away from fossil fuel generation to clean energy resources.

Equity (and Inclusion): Equity in the energy sector means making sure that everyone–especially underrepresented and low-income communities–is able to access clean, safe, affordable, and reliable energy services.

Equity (Financial): The value of utility assets and investments, minus the cost of debts.
Flat rate: A rate that charges customers the same amount on a per kilowatt-hour basis no matter how much or when energy is used.

Fossil Fuel: Resources such as coal, natural gas, and oil that were formed over millions of years from decaying plants and animals. Burning these fuels to create heat or energy releases significant amounts of carbon and other chemicals into the atmosphere.
Gas Affordability Programs (GAP): An affordability program that is designed to reduce the amount a household spends on natural gas to between 2-4% of their annual household income. The program is offered by several utilities to customers of the Energy Assistance Program that meet certain eligibility criteria and agree to enter into a payment plan.

Generation: How electricity is produced. Electricity is “generated” at facilities before it is carried to homes and businesses to be used.

Gigawatt (GW): A standard measurement of electrical power equal to 1 billion watts or 1 million kilowatts.

Gigawatt-hour (GWh): A unit for measuring the amount of energy used. One GWh is equal to using one gigawatt of energy for one hour.

Grid: The network of power lines that connects where electricity is generated to where it is used.
Home energy audit/assessment: The process of inspecting insulation, heating, and cooling systems to determine if there are ways to make a house more energy efficient and reduce the cost of energy bills.
Independent System Operator (ISO): An organization that oversees and coordinates the operation of the electric grid covering a geographic area.

Infrastructure: The set of physical structures that are part of the energy system. This includes the facilities that produce energy, the power lines or pipelines that carry electricity or gas, and any other equipment that is necessary for the operation of the energy system.

Integrated Distribution Plan (IDP): Planning process for developing the reliability and safety of the distribution grid that brings power to your home.

Integrated Resource Plan (IRP): Planning process for how utilities will produce electricity for the next 15 years. IRPs identify which resources the utility will use to generate electricity and what the costs of those resources are expected to be, among numerous other things.

Interim rate: A temporary rate that goes into effect while a utility is seeking a rate increase.

Intervenor: A person or organization that is permitted to become a formal party to a proceeding.

Investor Owned Utility (IOU) (see Public Utility): A company that provides retail electricity or natural gas service to customers. Investor owned utilities are different from municipal and cooperative utilities because they are owned by investors and are operated for a profit. Investor owned utilities are subject to regulation by state agencies.
Just and reasonable: Statutory requirement that utilities charge rates that are affordable.
Kilowatt (kW): A standard measurement of electrical power equal to 1,000 watts.

Kilowatt Hour (kWh): A unit for measuring the amount of energy used. One kWh is equal to using one kilowatt of energy for one hour.
Load: The amount of energy required at any given point in time on the energy system.

Low Income Home Energy Assistance Program (LIHEAP) or (EAP): A program that provides energy assistance to income-qualified households and helps reduce the cost of energy bills.
Megawatt (MW): A standard measurement of electrical power equal to 1 million watts or 1,000 kilowatts.

Megawatt Hour (MWh): A unit for measuring the amount of energy used or produced. A megawatt hour is equal to consistently using (or producing) 1,000 kilowatts for one hour.

Meter: A device to measure the amount of electricity, natural gas, or other fuel a household uses.

Midcontinent Independent System Operator (MISO): The organization that oversees and coordinates the use of the transmission system and electric grid covering most of the Midwest.

Minnesota Public Utilities Commission (MPUC): The Minnesota Public Utilities Commission is the governing body responsible for regulating electric, gas, and telephone services in the state of Minnesota.

Municipal Utility: A utility owned, operated, or controlled by a city to provide utility services.
Natural Gas: A fossil fuel energy source that is commonly used for heating or electricity generation.

Net-Zero: The process of balancing the amount of emissions produced with the amount of carbon and pollution removed from the atmosphere.
Peak Demand: The maximum amount of energy expected to be used during a given time period.

Pilot: A short-term program designed to test whether a project would be viable or effective on a larger scale.

Public Utility: A company that provides retail electricity or natural gas service to customers. Public utilities are different from municipal and cooperative utilities because they are owned by investors and are operated for profit. Public utilities are subject to regulation by state agencies.

Public Utilities Commission (PUC): The Public Utilities Commission is a governing body responsible for regulating electric, gas, and telephone services.
Rate: The amount charged for electricity or gas. Rates also include various other costs related to energy investments and the cost of delivering electricity or gas to consumers.

Rate Base: The value of a utility’s property and investments that are used in the energy system and are useful to consumers.

Rate Case: The process by which a utility company requests to increase the amount charged to its customers.

Rate of Return: The amount of profit that a utility is authorized to earn over a period of time. In more technical terms, the rate of return is the weighted average cost of both debt and equity.

Ratepayer: Customers of utility companies that pay for electricity or gas.

Renewable Energy: Energy not produced using fossil fuels. In Minnesota, this definition includes energy generated from wind; solar; geothermal; hydroelectric; landfill gas; and trees, vegetation, and other organic materials.

Return on Equity: The amount of profit a company is authorized to make on its assets and investments.

Revenue Requirement: The amount of money the utility needs to cover over a period of time to cover its cost of doing business.

Rider: Riders are additional ways for a utility to cover costs outside of normal rates. Although there are many different types of riders, a common example is when the utility passes on the costs of fuel to utility customers. These costs show up as additional charges on your utility bill.
Securitization: The process of combining assets and “refinancing” them. In the energy sector, securitization allows utilities to extend the amount of time over which the costs of an investment are recovered from customers at a lower overall interest rate. Instead of charging customers a higher rate of return in the short-term, utilities will offer “bonds” to investors at a lower, longer-term interest rate that is then paid by utility customers. The utility is able to recover the costs of its facilities from investors and reinvest that money into other (renewable) resources. Utility customers then pay back investors over a longer period of time (and at a lower interest rate) than if they were to pay the utility’s rate of return. Generally, securitization is used to transition away from fossil fuel investments.

Settlement: An agreement to resolve an issue or proceeding outside of the official process.

Service charge: A minimum fee amount included on your electricity or natural gas bill.

Service Territory: The area where a utility company operates. Shares and Shareholders: Shares are a unit of ownership in a company (such as in the form of stock). Shareholders are the owners of those shares.

Smart Meter (see Meter): A meter is a device used to measure the amount of electricity, natural gas, or other fuel a household uses. A smart meter generally provides a household better insight and control over how they use energy, and also allows two-way communication between the utility and the meter for billing and reliability purposes.

Societal costs: The expenses and negative effects on society caused by an action or series of actions.

Solar Array: A group of connected solar panels used for energy generation.

Solar Panel(s): A panel that absorbs energy from the sun and uses it to generate electricity.

Storage: Using batteries or storage reserves to save electricity or gas for later use.

Stranded Asset: A utility asset or investment that is no longer used or useful, or which can no longer operate economically.
Tariff: A collection of rates that determine how a customer or group of customers will be charged for their electricity or natural gas usage.

Time-of-use rate (TOU): Rather than being charged a flat rate (see Flat Rate) time of use rates allow a customer to pay different amounts for electricity based on when the energy is used.

Transmission: Power lines that carry energy from where it is generated to areas where it is needed. Transmission lines connect to smaller distribution lines that carry energy to your homes and businesses.
Utility: Companies that provide you with electricity, water, or gas.
Weatherization: Protecting a house or building from the elements. This often includes adding insulation, sealing air leaks, and making other changes that will increase energy efficiency and reduce energy bills.

Weatherization Assistance Program (WAP): A federally funded program that provides income-qualified households with weatherization services to increase energy efficiency, reduce energy costs, and create a more comfortable home environment.

Workforce Development: The process of offering training and education programs to provide workers with the skills necessary to participate in a specific sector or type of employment.

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