Permission given to US interstate pipelines by the Federal Energy Regulatory Commission (Ferc) allowing for the discontinuation of sales, storage or transportation service along any portion of the pipeline system. The necessity for Ferc permission derives from Section 7 of the Natural Gas Act of 1938. Permission is sought when utility companies want to replace, update or sell their facilities.

   pricing an asset using reference only to its exposure to fundamental sources of risk. Most common in academia. see also relative pricing

   when swaps are used to hedge specific on-balance-sheet exposures, they are often accounted for on an accrual basis. Under the accrual method, the net payment or receipt in each period is accrued and recorded as an adjustment to income or expense. see also hedge accounting, mark-to-market

   forms of precipitation (such as rain, snow or sleet) containing high levels of sulphuric or nitric acids (with pH levels below 5.5–5.6). Also includes dry deposited gases and particles that fall back to earth from the atmosphere. According to the US Environmental Protection Agency, approximately two-thirds of all SO2 and one-quarter of all NOx in the US come from electric power generation that burns fossil fuels such as coal. see also sulphur oxides and nitrogen oxides

   the day during which the greatest demand occurs in a one-year period.

   the physical commodity underlying a futures contract. Also referred to as the cash commodity or the physicals.

    see American Gas Association

   a company that consolidates the energy requirements of a number of buyers and/or sellers in order to buy or sell power in bulk.

   an acronym for the American Institute of Certified Public Accountants, a professional association representing certified public accountants in the US.

   a defined, finite set of steps, operations or procedures that will produce a particular outcome (e.g., computer programs, mathematical formulas and recipes).

   another name for butterfly spread.

   (Gas) independent agents, paid for by shippers, who calculate how much of the gas input at a terminal belongs to each shipper.

   a measure of the difference between a fund’s actual returns and its expected returns given its risk level as measured by its beta. The alpha is a measure of risk-adjusted performance. An alpha is usually generated by regressing the security, portfolio or mutual fund’s excess return relative to a benchmark index. The beta adjusts for the systemic risk (the slope co-efficient). The alpha is the intercept and is also known as the Jensen Index.

   founded in 1918, the AGA represents companies involved in all areas of the transmission and distribution of natural gas in the US.

   the trade association of the US petroleum industry. The API publishes weekly information on US petroleum stock figures, refinery throughput, imports, exports and stock levels. This information is divided into five geographical areas known as Petroleum Administration for Defence Districts. The API established the system for grading crude oils by specific gravity (API gravity). see also Energy Information Administration (EIA)

   an American-style option may be exercised at any time during its lifetime, up to and including on the expiration date. see also European-style option

   Services are designed to maintain the reliability of power supply to end-users. Ancillary services can include regulation, spinning reserve, non-spinning reserve and replacement reserve. Independent system operators create a market for buying and selling ancillary services, which help control the flow of electricity and provide energy ‘reserves’ to maintain reliability.

   in a gas buyer’s purchase agreement, there is often a limit higher than the annual contract quantity (ACQ), above which the seller is not liable to sell. This is the annual cap and is usually stated as a percentage of the ACQ. Also known as the maximum annual quantity. see also MAQ

   the amount of gas specified in a buyer’s nomination purchase contract for one year. Some rights, such as make-up gas and take-or-pay, may need to be taken into account depending on the amount of gas taken versus the amount contracted for.

   a long-term schedule commonly used in the liquefied natural gas industry for optimising inventory and delivery planning (may also be referred to as the annual operating plan).

    see American Petroleum Institute

   All Publications Index #2: a price index for coal supply cost insurance and freight Amsterdam-Rotterdam-Antwerp.

   All Publications Index #4: a price index for coal shipments free-on-board Richards Bay.

   one of the main quality indicators for pricing crude oil – the higher the API gravity, the lighter the crude. API gravity = 141.5/specific gravity of crude at 60° Fahrenheit – 131.5

   also known as Petroleum Administration for Defence Districts (Padds). The US is divided into five Padds for administration purposes: Padd 1, eastern seaboard; Padd 2, Midwest; Padd 3, southern area (Gulf Coast); Padd 4, Rocky Mountains; and Padd 5, far west.

   a company offering access to its software applications over the internet, rather than requiring software to be located on personal computers or internal servers. Often a less costly way of using software and an approach used by some technology vendors for the energy sector.

   APX Group, a European energy exchange, operating markets for electricity and natural gas in the Netherlands, the UK and Belgium. In September 2008 a merger took place between APX and the European Energy Derivatives Exchange (Endex), with Endex becoming a subsidiary of APX B.V. and part of the APX Group.

   Amsterdam-Rotterdam-Antwerp area – a port and refining area in the Belgian-Dutch region. A cargo or barge of a refined product traded on a cost, insurance and freight ARA basis means that ports within this area are covered in the cost. A cargo traded on a free-on-board basis means the oil can come from any of these ports.

   1) A trading strategy to profit from market inefficiencies in price differences of a given commodity either in the same location or in different geographical locations. Grade arbitrage is trading the difference in the price of a commodity in the same location – e.g., the difference in the prices of two sweet crudes in north-west Europe. Geographical arbitrage is trading the difference in the price of the same grade in different locations. Often grade and geographical arbitrage are combined – e.g., in transatlantic arbitrage, which is trading the price difference between, for example, Brent crude in Europe and West Texas Intermediate in the US. This calculation will include the cost-of carry as well as the cost of the alternative crude in the US. 2) A term specific to US stock markets, where a speculative position is built up in shares in a particular company that is thought likely to become a takeover candidate.

   any theoretical model that does not allow arbitrage on the underlying variable.

   an acronym for autoregressive conditional heteroskedasticity.

   the price of electricity in one particular region within an integrated grid, such as Nord Pool. see also system price

   An independent energy news and price reporting agency. www.argusmediagroup.com

   compounds produced by the fractionation of petroleum above 80° Celsius. The most important aromatics are benzene and toluene, which are used as chemical feedstocks and in gasoline production.

   Alaskan Systems Co-ordinating Council – a North American Electric Reliability Corporation affiliate.

   Asian (or average) options have payoffs that depend on an average of prices for the underlying commodity over a period of time, rather than on the price of the commodity on a single date. The averaging period may correspond to the entire life of the option or may be shorter.

   the level at which sellers are willing to sell. see also bid/ask

   increasing the efficiencies of an existing plant in order to avoid the need to build new infrastructure. This strategy was pursued throughout the 1990s in the UK power sector and the oil refining and producing sector in the West.

   natural gas found in a crude oil reservoir, separate from or in solution with the oil.

   (UK) when gas has been brought ashore to a terminal by producers but is not yet in the national transmission system, the gas is called at-the-beach.

   1) At-the-money spot – an option whose strike is the same as the prevailing market price of the underlying rate or price. 2) At-the-money forward – an option whose strike is at the same level as the prevailing market price of the underlying forward contract. see also in-the-money

   the geographical region that can be considered as comprising all land masses (including islands) that lie adjacent to or within the Atlantic Ocean and adjacent waters, including the Baltic Sea, North Sea, Black Sea, Davis Strait, Denmark Strait, part of the Drake Passage, Labrador Sea, Mediterranean Sea, Norwegian Sea, most of the Scotia Sea, Baffin Bay, Hudson Bay, Gulf of St Lawrence, the Gulf of Mexico, Caribbean Sea and the Weddell Sea. As applied to the energy market, the Atlantic Basin liquefied natural gas (LNG) market encompasses LNG producers and consumers in or adjacent to the Atlantic Basin geographical area noted above. The Atlantic Basin LNG markets can be considered to specifically include the LNG producers (current and projected): Abu Dhabi, Algeria, Angola, Egypt, Equatorial Guinea, Iran, Libya, Nigeria, Norway, Oman, Qatar, Russia, Trinidad & Tobago, Venezuela and Yemen. The current and likely future LNG consuming countries: Argentina, Belgium, Brazil, Canada, Cyprus, Dominican Republic, France, Germany, Greece, Italy, Mexico, the Netherlands, Poland, Portugal, Puerto Rico, South Africa, Spain, Turkey, the UK, the US and possibly the Bahamas and Jamaica. Note that an Atlantic Basin LNG producer might not be physically located in the Atlantic Basin itself. see also Pacific Basin

   as applied to the energy sector, auctions as a pricing mechanism have been used or have been planned for liquefied natural gas storage capacity, emission allowances and transmission capacity, in order to manage congestion.

   the correlation between a component of a stochastic process and itself lagged a certain period of time.

   a measure of the transfer capability remaining in the physical transmission network for further commercial activity over and above already committed uses. ATC is defined as the total transfer capability, less the transmission reliability margin, less the sum of existing transmission commitments (which includes retail customer service) and the capacity benefit margin. see also capacity benefit margin

   Average rate option or average price option – a form of Asian option whose payoff is linked to the average value of the underlying asset over a specified period of time. Although somewhat more complex to price relative to traditional European or American option structures, average rate options are popular since they provide a price hedge that better matches price exposures that are based on daily averages, such as purchase/consumption of energy on a daily basis. Also referred to as an APO. see Asian option

   a high-octane aviation fuel used for aircraft and racing cars.