Enterprise Procurement Glossary    

Aggregators combine the energy demand of multiple customers or business locations to negotiate better rates and contract terms from suppliers. 

Energy auctions are the bidding process where suppliers offer their services, and the buyer chooses the best bid. Reverse auctions flip this model, where suppliers bid to offer the lowest price for energy procurement.  

The average amount of energy a business consumes under normal operating conditions. It’s typically used as a reference point for comparing energy savings or efficiency improvements. 

The process of reducing energy consumption during peak demand periods or when grid reliability is at risk. It usually involves temporarily shutting down non-essential business operations to reduce strain on the electrical grid. 

Energy industry experts who act as an intermediary between businesses and energy suppliers, like Integrity Energy. Energy brokers help businesses find and negotiate competitive energy contracts and offer market insights. 

The process of predicting a business’s future energy needs based on their historical usage patterns and other market factors. Accurate forecasting helps businesses reduce the risk of overpaying for energy. 

An industry expert that helps businesses navigate the market and purchase power at the best possible rates. They analyze the market, negotiate contracts, and help develop a cost-effective energy purchasing strategy tailored to your business.  

A strategy that outlines how a business will buy energy to meet its needs. Each plan accounts for factors like energy pricing trends, contract terms, and usage patterns. A procurement plan helps businesses find the best pricing while minimizing risk. 

Companies that generate and sell electricity or natural gas to businesses in a deregulated market. Energy suppliers offer various pricing plans, contract terms, and ancillary services for energy delivery and management.  

A graph or dataset that represents their energy usage patterns over time. It helps identify peak usage periods and seasonal fluctuations. Load profiles are essential for effective energy management. 

The ratio of a business’s average energy demand to its peak demand. A higher load factor indicates more consistent energy usage while a low load factor indicates fluctuating energy usage. Improving your load factor helps reduce peak demand charges and improves energy efficiency. 

The highest amount of energy consumed by a business during a specific billing period. It typically occurs during periods of high activity or extreme weather conditions. Managing peak demand helps businesses reduce costs and avoid penalties. 

A formal document typically used by municipalities or other large organizations to seek bids from energy suppliers. The document outlines the organization’s energy needs and preferred contract terms and conditions. RFPs help large energy consumers compare offers and pick the best contract for their needs. 

A system that ensures enough energy generation is available to meet future demands. This market allows energy suppliers and utilities to be paid for being prepared to generate electricity, even if they aren’t actively producing it. The capacity market ultimately helps provide electrical grid reliability during peak periods.  

A wholesale energy market where electricity is bought and sold the day before it’s needed.  Prices are set based on forecasted demand and supply so market participants can plan their purchases accordingly. The day-ahead market helps manage daily supply and demand on the grid.  

These programs encourage businesses to reduce their energy use during peak demand periods. Participants typically receive financial incentives for curtailing their consumption, helping utility companies prevent grid overload that could lead to outages.  

This type of market allows buyers and sellers to lock in energy pricing for future use. Contracts are typically agreed upon months or even years ahead of time, helping businesses protect themselves from future market volatility.  

A system used to determine electricity pricing at different locations throughout the grid. LMP reflects the cost of delivering electricity to a specific location, factoring in generation costs, transmission constraints, and regional demand.  

A measure of their specific contribution to overall demand on the electrical grid during peak periods. PLCs help utility companies plan for changing capacity needs based on how their customers’ load factors impact the grid.  

This market is a short-term energy market where electricity is bought and sold for immediate delivery. Energy prices in this market will fluctuate based on the actual demand and supply conditions at the moment.   

This pricing structure splits energy costs into two parts. A bulk block of energy is purchased at a fixed rate while any additional usage will be charged at a variable, market-based rate. 

These charges mean a business pays their capacity charges directly to a utility based on their usage. They reflect the cost of making sure the electrical grid can meet the business’s demands during peak periods. 

These fees are based on the highest level of energy demand a business reaches during a billing period. Demand charges incentivize businesses to reduce usage during peak periods to lower their energy bills. 

This pricing structure locks in your commercial energy rate throughout the duration of your contract. Fixed rate plans protect businesses from unexpected changes in the energy market, stabilizing monthly costs. 

This pricing structure provides businesses with the stability of a fixed rate and the flexibility for slight usage fluctuations. Fixed with swing is ideal for businesses seeking price stability but experience some operational fluctuations in energy consumption. 

This type of contract offers variable energy rates based on the current wholesale energy market. Index plans offer savings when rates or low, but also higher risks when the market changes. 

This type of energy contract offers different energy rates depending on the time-of-day energy is consumed. TOU rates are higher during peak demand periods and lower during off-peak times.  

These are utility company service fees that cover the cost of delivering power to your business. They are separate from supply costs and help utilities maintain power lines and operate the electrical grid. 

This pricing structure offers energy prices that fluctuate based on current market conditions. They offer the flexibility of no contract but also lead to less predictable energy costs since the market changes daily. 

These energy rates reflect the cost of purchasing power directly from the wholesale market, often in bulk. Wholesale rates are typically lower than retail rates, offering large energy consumers competitive rates and cost savings. 

Credits businesses can purchase to offset their greenhouse gas emissions. Each carbon offset represents a reduction or removal of one metric ton of CO2 from the atmosphere, typically from projects like reforestation or renewable energy production. 

Power generation that produces little to no greenhouse gas emissions, like wind, solar, hydro, and nuclear power. Clean energy fights climate change and reduces environmental impact. 

Large scale solar farms that allow multiple participants or an entire community to benefit from renewable energy without needing to install solar panels. 

A combination of multiple energy sources that reduces reliance on a singular energy source, also called an energy mix. DERs improve energy security and grid reliability, at both the business and utility level. 

Renewable energy generation that has minimal environmental impact, like wind, solar, and geothermal. All green energy is renewable; however, not all renewables are green. 

Utilities allow consumers to purchase renewable energy directly from the grid with green tariffs. They help businesses and residents reduce their environmental footprint without having to invest in technology, like solar panels. 

Harmful gases like carbon dioxide (CO2) and methane (CH4) that trap heat in Earth’s atmosphere. They are the largest contributors to climate change, often released during industrial processes or fossil fuel power generation. 

Utility companies offer net metering programs to allow consumers with solar panels to sell excess energy back to the grid. In return, they receive credit on their utility bills to offset future costs. 

A long-term contract in which a business agrees to buy renewable energy directly from a supplier at a fixed price. PPAs include installation, maintenance, and cost savings without the need for upfront investments. 

These credits certify that one megawatt-hour of electricity was generated from renewable sources. Businesses purchase RECs to meet their sustainability goals and support clean energy development. 

Customers with solar panels in a deregulated market can choose a supplier that offers solar buyback programs. Similar to net metering, energy suppliers will offer bill credits for excess solar sold back to the electrical grid. 

Like RECs, solar renewable energy credits represent one megawatt-hour of solar energy generated. SRECs can be sold to either utility companies or individual businesses to meet their clean energy targets. 

Resources that can meet a region’s current energy needs without harming the environment. Sustainable energy sources are primarily renewables like solar, wind, and hydro, but also include carbon-free sources like nuclear. 

When there’s a difference between the market price of energy and the prices defined in a hedge or forward contract. Basis risk represents the potential financial loss due to price disparities.  

A financial strategy used to secure fixed energy prices or offset market price fluctuations. This strategy helps businesses stabilize energy costs while managing financial risk.  

How an organization plans to purchase energy to meet their needs while minimizing costs and risks. Procurement strategies consider factors like pricing models, market conditions, and long-term budgetary or sustainability goals.  

An agreement to purchase or sell energy at a predetermined price for a specific future date. Forward contracts help businesses establish budget certainty by protecting themselves against future market volatility.  

A standardized agreement to buy or sell energy at a set price in the future. Unlike forward contracts, futures are highly regulated, offering increased liquidity. 

The proportion of a business’s energy usage that is covered by financial hedges. A well-calculated hedging ratio balances cost protection with exposure to market fluctuations.  

When a company’s operations naturally offset financial risk without requiring contracts or other financial tools. For example, a business with flexible energy usage can adjust their operations to avoid expensive peak demand charges. 

The frequency and magnitude of energy price fluctuations caused by market changes. High volatility leads to uncertainty and unpredictable costs, making risk management essential for stabilizing costs. 

The potential financial impact of energy industry regulatory changes, policies, or compliance requirements. Organizations must consider regulatory risk when creating long-term energy strategies. 

Identifying and minimizing potential financial risks associated with energy procurement. Effective risk mitigation strategies use tools like hedging, forward contracts, and diversified energy resources to stabilize costs. 

Often included in fixed with swing contracts, this clause provides businesses with flexibility in the amount of energy they can consume without receiving a penalty. 

The financial uncertainty caused by weather conditions or natural disasters that impact energy demand and/or generation. For example, extreme winter weather increases heating demand which can increase energy costs.  

When an organization balances their carbon dioxide emissions with an equivalent number of carbon offsets or RECs. This is often achieved through renewable energy generation, carbon capture systems, or reforestation efforts. 

A policy that requires energy suppliers to generate a specific percentage of their energy mix from clean or renewable sources. These policies are designed to reduce greenhouse gas emissions and promote clean energy production. 

Programs and strategies that help businesses reduce or shift their energy use to improve grid reliability. These efforts lower demand during peak periods and improve energy efficiency. 

A tradable credit earned by improving energy efficiency in a business’s building or operations. Businesses can buy or sell these credits to meet regulatory requirements. 

A measure of how much energy is used to produce a specific level of output or activity. Low energy intensity indicates that a business uses energy efficiently. 

A designation awarded to buildings, appliances, and equipment that meet strict energy efficiency standards set by the U.S. Environmental Protection Agency. It helps businesses save on energy costs and reduce their environmental impact. 

An online tool that helps businesses track and measure energy and water use in their buildings. It’s often used for commercial energy benchmarking, which compares energy data with comparable buildings in your industry. 

Leadership in Energy and Environmental Design (LEED) certification recognizes buildings designed to meet high standards of sustainability, energy efficiency, and environmental impact. Buildings are certified at silver, gold, and platinum levels. 

A building or facility that produces as much energy as it consumes over a given period, typically through on-site renewable energy systems.  

A statewide regulation requiring energy suppliers to source a specific percentage of their electricity from renewable energy. RPS policies encourage renewable energy development, reducing dependence on harmful fossil fuels. 

A measurement of heat energy often used for natural gas consumption. One BTU is the amount of energy needed to raise one pound of water by one degree Fahrenheit.  

A measurement of a power plant’s efficiency and how consistently it operates, usually expressed as a percentage. Capacity Factor compares a plant’s actual energy output to its maximum capacity over a set period. 

A measurement of how efficiently a power plant converts fuel into electricity. Heat rate is calculated as the amount of fuel energy (in BTUs) required to generate one kilowatt-hour of electricity. 

A unit of power equal to 1,000 watts. It’s used to measure electricity generation or the power demands of a business or device. 

A unit of energy representing one kilowatt of power used over an hour. It’s the standard unit for measuring usage on electric bills. 

A unit of power equal to 1,000 kilowatts or one million watts. Megawatts are used to describe the output of power plants or the demand for large industrial facilities.  

Mcf stands for “thousand cubic feet,” and is often used to measure natural gas volume. Suppliers Use Mcf to calculate natural gas usage on energy bills. 

A measurement of natural gas energy. It is equivalent to 100,000 BTUs and is commonly used on natural gas utility bills.