exploration and production.

    see European Commodity Clearing

   European Climate Exchange

   (Gas) estimated daily contract quantity.

   the Washington, DC-based EEI is an association of US shareholder-owned electricity companies, international affiliates and industry associates worldwide. In 2008, its US members served more than 95% of customers in the shareholder-owned segment of the industry and generated almost 70% of the electricity produced by US power utilities in total. It was formed in 1993.

    see European Energy Exchange

   a standardised master agreement developed by the European Federation of Energy Traders for the delivery and acceptance of electricity, providing a similar structure to the International Swaps and Derivatives Association by containing a General Agreement and Election Sheet for agreed revisions to the General Agreement. www.efet.org

    see exchange of futures for physicals

    see exchange of futures for swaps

    see Energy Information Administration

   an acronym for the Emerging Issues Task Force, a unit of the Financial Accounting Foundation that addresses accounting issues not yet addressed by a published Financial Accounting Standards Board Statement of Financial Accounting Standards.

   a periodic warming of the tropical Pacific Ocean that affects weather around the world. Typical consequences of El Niño include increased rainfall in the southern US and drought in the western Pacific. Winter temperatures in the north-central states of the US are typically warmer than normal in El Niño years and cooler than normal in the southeast and southwest of the country. However, its effects outside the tropical Pacific are unpredictable and almost any definition would be disputed by meteorologists. The warmest and coldest winters in the north-east US since 1950 have both occurred during El Niño periods. The name of the phenomenon derives from the fact that it tends to appear around Christmas – El Niño means ‘little boy’ in Spanish, the name commonly given to the infant Christ. A 1997/1998 El Niño winter gave a boost to the weather derivatives market by prompting energy companies to hedge against mild winter weather that would decrease energy demand.

   for trading purposes in designating hours traded, the 24-hour period beginning at midnight and ending at the following midnight.

   a law that was amended in 1995 to open the Japanese electricity market to competition. Implementation of the March 2000 stage, opened up the country’s high-voltage sector – 30% of the electricity market – to competition.

   a brokered over-the-counter market in the UK for short- to medium-term electricity derivative instruments, of which the most widely used is the electricity forward agreement.

   an enterprise engaged in the generation, transmission and/or distribution of electricity primarily for use by the public, which is the major power supplier within a designated service area. Electricity utilities include investor-owned, publicly owned, co-operatively-owned and government-owned entities. see also power marketer

   a system whereby US gas industry participants, such as pipeline companies, advise on their transport, storage and delivery capacity availability. Under Federal Energy Regulatory Commission rules, all pipelines are obliged to post information on electronic bulletin boards in order to allow open access.

   internet-based trading on a real-time basis.

   the cost of all the facilities in an electricity or natural gas supply system.

   within a US accounting context of FAS 133, portions of contracts that meet the definition of a derivative when the entire non-derivative contract cannot be considered a financial instruments derivative. see also FAS 133

   an option, often an interest rate option, embedded in a debt instrument that affects its redemption. Embedded options are usually, but not always, interest rate options; some are linked to the price of an equity index (e.g., Nikkei 225 puts embedded in Nikkei-linked bonds) or a commodity (usually gold, but sometimes oil). Embedded options may be embedded in physical commodity contracts or commodity derivatives such as extendible swaps.

   represents one tonne of CO2 equivalent reduction of greenhouse gas emissions, particularly as achieved through a joint implementation project. ERUs can be used as the unit of trade in greenhouse gas emissions trading systems, or to meet an Annex B Party’s emission commitment.

   the instruments created by regulations in the US market to encourage market-driven reductions of pollution.

   Emissions trading, as set out in Article 17 of the Kyoto Protocol, allows countries that have emission units to spare - emissions permitted them but not ‘used’ - to sell this excess capacity to countries that are over their targets. Thus, a new commodity was created in the form of emission reductions or removals. Since carbon dioxide is the principal greenhouse gas, people speak simply of trading in carbon. Carbon is now tracked and traded like any other commodity. This is known as the ‘carbon market.’

   European Energy Derivatives Exchange

   the Swedish regulatory authority that works for efficient energy markets through supervision and monitoring of markets. www.ei.se

   a Washington, DC-based initiative launched in 2002 with the aim of more clearly defining the role of over-the-counter brokers in energy markets and of recommending and introducing best processes throughout the industry.

   a US government agency that produces reports on US energy supply and demand, most notably a weekly report detailing crude and product inventories in various areas of the US. The report covers US refinery throughput, as well as crude and product imports and exports. Information is also provided on natural gas and electricity. see also American Petroleum Institute

   an integrated approach to risk management For example, defining a framework to identify and anticipate all kinds of risk that can affect an organisation.

   (UK gas) tariff for using the UK’s national transmission system.

   The US Environmental Protection Agency.

   Electric Reliability Council of Texas – a North American Electric Reliability Council for the Texas Interconnection.

   ethyl alcohol (CH3CH2OH), often derived from corn, that can be blended with gasoline to make the fuel burn more cleanly. Several US states are phasing-in the use of ethanol in gasoline to replace methyl tertiary butyl ether, which has been blamed for water pollution incidents. Ethanol may also be referred to as grain alcohol.

   European Union Allowances (EUAs) – nationally secured rights to emit a certain amount of grehouse gases. 1 EUA = 1 tonne CO2

   is the association of the electricity industry in Europe, including electricity producers, suppliers, traders and distributors. The current association was created in December 1999 as a result of a merger in December 1999 of the sister sector bodies Unipede and Eurelectric. www.eurelectric.org

   European Commodity Clearing AG (ECC) operates a clearing house for energy-related commodities and their derivatives. Currently, ECC provides clearing services for contracts traded on the European Energy Exchange, the European Energy Derivatives Exchange and the Powernext SA, as well as for over-the-counter trades registered via these exchanges. ECC is supervised by the German Federal Financial Supervisory Authority. Founded in 2006, ECC currently offers clearing services for the following commodities: German, French, Austrian, Swiss, Belgian and Dutch power, emissions allowances, coal and natural gas.

   represents a permit to emit one tonne of carbon under the European Union Emissions Trading System. Since one EU Allowance Unit of one tonne of CO2, or ‘EUA’, is equivalent to one ‘assigned amount unit’ of CO2 defined under Kyoto, it is possible to trade EAUs and United Nations Framework Convention on Climate Change-validated CERs on a one-to-one basis within the same system.

   the EEX was founded in August 2000 and merged with its rival, the Leipzig Power Exchange, in early 2002. Today, with more than 200 trading participants from 19 countries, the energy exchange has become the most important energy exchange in continental Europe. EEX offers futures and spot markets in electricity and, in March 2005, began trading and settlement of CO2 emissions allowances. In 2008 the merger of EEX and Powernext created a common spot and futures market in power. see also Powernext

   EFET is a group of more than 90 energy trading companies from 23 European countries dedicated to improving conditions for energy trading in Europe and providing an exchange for non-commercially sensitive information between organisations and members of the developing pan-European energy industry. EFET is complementary to existing industry organisations in European organisations as it is solely dedicated to energy trading issues. www.efet.org

   ERGEG is an advisory group of independent national regulatory authorities. ERGEG was established on 11 November, 2003, pursuant to Directive 2003/796/EC, to assist the Commission in consolidating the internal market for electricity and gas. Its members are the heads of the national energy regulatory authorities in the 27 EU Member States. www.energy-regulators.eu

   was created following the development of the Internal Electricity Market for the EU, as an association to support EU-wide harmonisation of network access and conditions for usage, especially for cross-border electricity trading. The networks represented by ETSO supply more than 490 million people with electric energy. The consumption of electric energy amounts to approx. 3,200TWh per year. The length of HV (400 and 220kV) lines covered by ETSO exceeds 290,000km. www.etso-net.org

   the EU is an organisation of 27 Member States designed to promote economic and social progress. Through its executive body, the European Commission, the EU makes policy that is legally binding in its Member States.

   the European parliament and council directive 96/92/EC concerning common rules for the internal market in electricity. Its aim is to ensure the free movement of electricity by defining common rules for production, transmission and distribution across EU Member States. Under the terms of the directive, which came into effect in 1999, customers using 40GWh of electricity a year – about 25% of the market – were able to choose their supplier. From July 2007, at the latest, consumers in all Member States will be able to freely choose their gas and electricity suppliers.

   the European parliament and council directive 98/30/EC concerning common rules for the internal market in natural gas. Its aim is to create a single Europe-wide gas market by reducing barriers to trade and encouraging new entrants into the market. Under the terms of the directive, which came into force in August 2000, customers using 25 million cubic metres a year (cm/y) – about 25% of the market – are able to choose their supplier. The threshold fell to 15 million cm/y – covering 28% of the market – in 2003.

   an option that may only be exercised on its expiration date. see American-style option

   a shipping delivery provision whereby cargo responsibility and risk resides with the shipper until the ship has arrived at designated port and cargo is available for delivery.

   an acronym for Energy Exchange Austria, the Austrian energy exchange that operates an electronic platform for trading the Austrian spot market for electricity. EXAA plans to add over-the-counter clearing for electricity contracts and futures trading.

   as used in the liquefied natural gas (LNG) market, the cargoes in excess of long-term contracted quantities of LNG, which are typically either offered to existing long-term buyers or alternatively auctioned in the spot market.

   a natural gas buyer may ask the seller to deliver above the delivery capacity rate. The seller does not have to do so but, if it does, the buyer will pay a premium over the main contract price.

   any trading arena where commodities and/or securities are bought and sold – for example, Nymex or the International Petroleum Exchange.

   the conversion of a futures position into a physical position via simultaneous buy/sell transactions. Also referred to as exchange of futures for product.

   the conversion of a futures position into a swaps position via simultaneous buy/sell transactions.

   an option giving the buyer the right to exchange one asset for another. For example, the purchaser of a euro-oil exchange option would have the right to exchange a certain amount of euros for a certain number of barrels of oil. see also integrated hedge

   a synthetic agreement for forward exchange, whereby the two counterparties agree a rate based on forward foreign exchange rates. Unlike a forward exchange agreement, it is settled without reference to the spot rate.

   an option traded and cleared on an organised securities or derivatives exchange. Such options are usually, but not always, standardised by strike, maturity and underlying.

   the process of converting an options contract into a futures or physical position.

    see strike price

   (UK) tariff for exiting the national transmission system at a specified exit point and for a certain volume of gas.

   any option whose payout structure is more complicated than a plain-vanilla put or call option. Examples of exotic options include Asian options, barrier options, digital options and spread options. see also option, vanilla options

   the last day on which an option may be exercised.

   a swap with an embedded option constructed on a similar principle to a double-up swap. An extendible swap allows the provider to extend the swap, at the end of the agreed period, for a further predetermined period.

   the amount of money the buyer of an option is willing to pay in anticipation that a change in the underlying futures price will cause the option to increase in value. Also known as time value.