MPSC Glossary of Terms on Electric Customer Choice

This glossary is intended as a general informational guide. The definitions in the glossary have been drawn from many sources and are meant to promote universal understanding regarding Customer Choice. However, this glossary does not supercede or modify definitions used in statutes, administrative rules, MPSC orders, tariff provisions, or contracts.

Affiliate – A person or business with a business or ownership association to another person or business. The term affiliate is commonly used to refer to the corporate partner companies of regulated utility companies. Many regulated utility companies have affiliate relationships with unregulated alternative electric suppliers (AESs), other power marketers, and/or energy service companies. In order to assure that all competitive suppliers have equal opportunities in the emerging marketplace, regulators often establish a "Code of Conduct," which governs relationships between regulated and unregulated affiliates.

Aggregator – A person or group that combines multiple retail customers or single customers with multiple sites or some of each into one or more buying groups or pools for the purpose of purchasing power. An Alternate Energy Supplier can provide this function, but a separate entity that may be called a broker or aggregator can also provide this function and then negotiate a service contract with an AES on behalf of an aggregated customer group.

Alternative Electric Supplier (AES) – The name given to certain competitive suppliers of retail electric services in Michigan. Act 141 of 2000, Section 10g(a), defines AES as “a person selling electric generation service to retail customers in this state. Alternative electric supplier does not include a person who physically delivers electricity directly to retail customers in this state.” An AES may also be known as a marketer. Under Act 141, Sections 10a(2) and 10q, an AES operating in Michigan must be licensed by the MPSC. Also, Act 141, Section 10e(2), indicates that a merchant plant making sales to retail customers is an AES and must be licensed as such. A current list of licensed AESs in Michigan is maintained on the MPSC Web site at:,4639,7-159-16377_17111_17114-413939--,00.html .

Billing Cycle – The period of days in which a utility or supplier totals customer energy use and produces the customer bill, the regular schedule when the bill will be delivered to the customer, and the due date for the customer’s payment to be received by the utility is commonly called the “billing cycle.” Michigan utility customers who enter into retail open access service may experience a change in their billing cycle because retail open access customers may be placed into a different billing group.

Biomass Energy – The energy embodied in organic matter (“biomass”) that is released when chemical bonds are broken by microbial digestion, combustion, or decomposition. For purposes of Section 10r(3)(a) of Act 141, biomass energy is produced from dedicated crops grown for energy production or through the use of organic waste.

Broker – An agent or intermediary that arranges for the purchase and sale of electricity, transmission, and other services between buyers and sellers. A broker does not take title to the energy involved in the transaction.

Brownout – see "Voltage Reduction"

Bundled Service – Customers receive electric generation, transmission, distribution, and related customer service and support functions as a combined service.

Capacity – A measure of the quantity of instantaneous energy use. The term is applied to the amount of electric power delivered or required for which a generator, turbine, transformer, transmission circuit, station, or system is rated by the manufacturer. See also “Demand” and “Load.”

Capacity Charge – An element in a two-part pricing method used in capacity transactions (energy charge is the other element). The capacity charge, sometimes called “demand charge” or “system use charge,” is assessed on the maximum or peak amount of electricity used. Often, the charge is based on the maximum amount of electricity used at any time in the previous 12 months.

Carbon Dioxide – Colorless, odorless, non-poisonous gas that is a normal component of the air. Carbon dioxide, also called CO2, is exhaled by humans and animals and is absorbed by plants via photosynthesis and by the sea. Carbon dioxide is a product of the combustion of hydrocarbon fuels and is generally considered to be a significant contributor to concerns about the greenhouse effect and global climate change. Act 141, Section 10r(3), requires all Michigan electric suppliers, beginning January 1, 2002, to disclose to customers the environmental characteristics of the average fuel mix used to produce the electricity products purchased by the customers. This disclosure will include the average air emissions, in pounds per megawatt-hour, of sulfur dioxide, carbon dioxide, and oxides of nitrogen.

Code of Conduct – A series of requirements applicable to electric utilities and alternate electric suppliers engaged in retail marketing and other transactions, as approved by the Commission in case No. U-12134. The Commission’s Code of Conduct promotes fair competition by establishing measures to prevent cross-subsidization, information sharing, and preferential treatment. (see December 4, 2000 Order in U-12134 ).

Cooperative – see “Electric Cooperative

Cramming – Adding services and charges to a customer’s bill without the customer’s knowledge or consent.

Customer Charge – A recurring charge for the basic administrative activities associated with a utility maintaining a customer account. This may also be referred to as a service charge. Typically, these activities include billing, metering, and meter reading. In most cases, a monthly customer charge is one component of a customer’s minimum charge.

Customer Choice– The opportunity for retail customers of a public utility to select from among competing suppliers of electric, gas, and associated services. A customer's selection of a supplier will not affect the delivery of those services, which will continue to be performed by the local utility. With respect to electricity, this is sometimes called “electric customer choice,” “direct access,” “open access,” or “retail open access.”

Customer Choice and Electricity Reliability Act – The title of Michigan’s Public Acts 141 and 142 of 2000.

Demand – The amount of power required to meet the customer's load at a given instant or averaged over any designated interval of time, expressed in kilowatts or megawatts. See also “Capacity.” For an explanation of how demand is measured, see “Electric Meter.”

Demand Charge – see “Capacity Charge

Deregulation – see “Restructuring

Distributed Generation (DG) – Any small scale electric generation that is located at or near the point of end use. It may be interconnected with a local utility company's distribution system or not. It may be owned and operated by a customer, a utility, or a non-utility company.

Distribution – The delivery of electricity to a retail customer’s home or business through distribution wires or facilities of regulated public utilities.

Distribution Charge – As electric utility services are unbundled, utilities will separate the fees associated with each major component of electricity service, including generation, transmission, and distribution. For MPSC-regulated electric utilities, the MPSC approves the rates that utilities charge customers for distribution services. A utility distribution charge is a charge for delivering electricity from a customer’s chosen supplier to their residence or business, and may include a customer charge, demand charge, or energy charge.

Distribution Company – A regulated utility company that is responsible for maintaining and operating a distribution system and providing other services to end-use customers. (Though this term may apply to both natural gas and electric utilities, here it means only electric utilities.) This kind of company may also be called a “local distribution company (LDC).”

Electric Generation – see “Generation

Electric Meter – Generally, a device that measures the amount of electricity a customer uses. The primary types of electric meters are energy meters, demand meters, interval demand meters, and time-of-use meters. An energy meter is the simplest type of electric meter. It measures electricity use, referred to as kilowatt-hours. A demand meter measures kilowatt-hours used, and also the maximum electric use referred to as peak capacity or load. An interval demand meter records the demand used in each measuring period. The periods are typically every 15 minutes, half-hour, or hour, depending on the specific meter and the way that the utility rates are calculated. Some utilities offer “time-of-use” rates, where customers pay different charges for electricity used during different times. The price might vary depending on the time of day, week, season, or year, or even depending on the hourly market price of electricity. A time-of-use meter measures customer electricity use and sometimes demand and records that data, along with the time of day, so the utility can bill the customer according to the charges established in the customer’s time-differentiated rates.

Electric Utility – A person, partnership, corporation, association, or other legal entity whose distribution of electricity is regulated by the MPSC. For the specific purposes of defining the term “electric utility,” or “public utility,” with respect to MPSC regulation, this does not include municipal utility companies. The MPSC regulates investor-owned utilities and electric cooperatives.

Energy – The capacity for doing work. In the context of electricity rates and services, the word “energy” refers to electrical energy. In this sense, energy is a measure of the quantity of units of electricity used in a given time period, measured in kilowatt-hours.

Energy Charge or Electric Charge – The charge for the electricity used by an electric customer during the billing period, measured in kilowatt-hours (see also “Capacity Charge”).

Federal Energy Regulatory Commission (FERC) – The U.S. government agency that regulates the price, terms, and conditions of transmission services and wholesale sales of electricity. For example, FERC sets and enforces the wholesale electric rates that investor-owned utility generators charge their wholesale customers. FERC also licenses hydroelectric projects.

Franchise – A consent or permission from a municipality (a township, village, city, or other local government unit) that authorizes a public utility company to use the public streets and alleys for the construction of utility facilities or to conduct business within its jurisdiction.

Full Requirements Service – see “Bundled Service

Generation – The process of producing electricity by converting other forms of energy into electricity.

Green Power – see “Renewable Energy Resources

High-Level Nuclear Waste – High-level radioactive waste is irradiated reactor fuel which includes the mass of uranium in the fuel assemblies and does not include the total weight of the fuel assemblies. Act 141, Section 10r(3), requires all Michigan electric suppliers, beginning January 1, 2002, to disclose to customers the environmental characteristics of the average fuel mix used to produce the electricity products purchased by the customers. This includes the average of the high-level nuclear waste generated in pounds per megawatt hour.

Hydroelectric Generator – An electric generation system that is powered by falling water. Some hydroelectric facilities are operated as pumped storage facilities, where electricity is used to pump water uphill into a reservoir during times when demand is low and electricity is cheap to produce. During times when demand is high and electricity is more expensive to produce, the stored water is allowed to flow through hydroelectric generators. For some purposes, pumped storage facilities may not be categorized as hydroelectric generators.

Implementation Costs – see “Transition Charge

Independent System Operator (ISO) – A neutral party responsible for the management and control of the electric transmission grid in a state or region.

Interval Meter – see “Electric Meter

Investor-Owned Utility (IOU) – A stockholder-owned utility company that provides public utility services to retail customers for a profit. In Michigan, investor-owned electric utilities are regulated by the MPSC. For a directory, see,4639,7-159-16377-41399--,00.html.

Kilowatt (kW) – One thousand watts, a standard measure of demand for power or capacity.

Kilowatt-hour (kWh) – The standard unit of measure for electric energy. One kilowatt-hour is one kilowatt of electricity supplied for one hour.

Load – This is the general term used for any end-use device or group of devices drawing energy from the electric system. See also “Capacity” and “Demand.”

Load Profile – An allocation of electricity usage to discrete time intervals over a period of time, based on individual customer data or averages for similar customers. A load profile may be used to estimate electric supply requirements and determine the cost of service to a customer. Generally speaking, customers with small demand requirements may participate in electric customer choice using a load profile rather than interval demand meter data. For an explanation of interval demand meter, see “Electric Meter.”

Marketer – see “Alternative Electric Supplier

Megawatt (MW) – One thousand kilowatts (1,000 kW), or one million (1,000,000) watts.

Megawatt-hour (MWh) – One thousand kilowatts supplied for a period of one hour.

Merchant Plant – An electric generator not owned and operated by an electric utility and that sells its output to wholesale and/or retail customers. Merchant plants may also be called non-utility generators, or independent power producers. Merchant plants that sell all of their output wholesale must receive authorization from FERC to sell their output at market-based rates. As defined in Act 141 of 2000, Section 10g(d), a merchant plant means electric generating equipment and associated facilities with a capacity of more than 100 kW located in this state that are not owned and operated by an electric utility. Act 141, Section 10e(2), indicates that a merchant plant making sales to retail customers is an AES and must be licensed as such.

Meter – see “Electric Meter

Michigan Public Service Commission (MPSC) – The state government agency that regulates investor-owned natural gas and electric utilities and alternative electric suppliers. It also regulates rural electric cooperatives, as well as some telecommunications and motor carrier services.

Minimum Charge – The total of all the payments a customer will owe for electric services no matter how much electricity the customer uses during a billing period. Typically, it is the total of all customer service charges, demand charges, and any other fees that are assessed regardless of energy used during any one billing period.

Municipal Utility – A provider of utility services owned and operated by a city government. The MPSC does not regulate municipal utilities. Act 141, Section 10y, establishes electric utility restructuring provisions for municipal utilities and their customers. 

Oxides of Nitrogen – Air emissions produced during the high temperature combustion of all fossil fuels. Oxides of nitrogen are chemically identified as NO, NO2 and NO3 or generically as NOx. In addition to contributing to ozone formation, some nitrogen oxides, such as NO2, are corrosive, acid rain precursors, and can cause respiratory problems. Act 141, Section 10r(3), requires all Michigan electric suppliers, beginning January 1, 2002, to disclose to customers the environmental characteristics of the average fuel mix used to produce the electricity products purchased by the customers. This disclosure will include the average air emissions, in pounds per megawatt-hour, of sulfur dioxide, carbon dioxide, and oxides of nitrogen.

Peak Demand or Peak Load – see “Capacity” and “Capacity Charge

Provider of Last Resort – A legal obligation, traditionally assigned to utilities, to provide service to any customer who requests it at any time. Also known as “default service provider.” In the context of Customer Choice, a utility assigned to this obligation must serve customers who have chosen to receive service from an alternative electric supplier, but for any reason seek to return to utility service.

Regional Transmission Organization (RTO) – An organization that is independent from all generation and power marketing interests and has exclusive responsibility for electric transmission grid operations, short-term electric reliability and transmission services within a multi-state region. To achieve those objectives, the RTO manages transmission facilities owned by different companies and encompassing one, large, contiguous geographic area.

Renewable Energy Resource – A source of electricity generated from solar, wind, biomass, small hydroelectric facilities, and other resources that can be naturally replenished and the rate of use does not exceed the rate of replenishment. These resources are often referred to as “Green” options. The term “Renewable Energy Source” is defined in Act 141, Section 10g(f).

Restructuring – The process of changing regulation to permit the price of electric generation to be determined in retail, competitive markets. This is also called “industry restructuring” or “utility restructuring.” This has sometimes been referred to as “deregulation,” but it is more correctly understood as a process of changing the form of regulation. Restructuring allows customers to purchase electricity from an AES and pay their local distribution company to deliver the electric power to their home or business. The delivery or distribution charge is regulated by the MPSC. To facilitate competition, utility costs are separated (“unbundled”) into categories such as generation, transmission, distribution, and customer services. In Michigan, customers do not need to choose an AES. They may remain customers of their existing electric utility under fully regulated rates.

Retail Access or Retail Open Access – see “Customer Choice

Retailer – see “Alternative Electric Supplier

Rural Electric Cooperative or Electric Cooperative – A member-owned electric utility company serving retail electricity customers. Electric cooperatives may be engaged in the generation, wholesale purchasing, transmission, and/or distribution of electric power to serve the demands of their members on a not-for-profit basis. The MPSC may regulate electric cooperatives in Michigan. Electric cooperatives are sometimes called “distribution cooperatives.” See,4639,7-159-16377-41399--,00.html​.

Self-Service Power – Act 141, Section 10a(6), defines self-service power. Generally, it means electricity that is generated and consumed on a customer’s premises without the use of an electric utility’s transmission and distribution facilities. This may also be called self-generation or on-site generation.

Slamming – The unauthorized switching of a customer’s account to another utility or AES without the customer's consent.

Standby Service – A customer or AES may at their option contract with a utility or a competitive supplier to provide electric generation service in the event that the primary source of supply is disabled or becomes unavailable for any reason. This is sometimes called “standby generation service.” The MPSC establishes the rates regulated electric suppliers can charge for providing standby service. Competitive suppliers may provide standby service under market-based rates.

Stranded Costs – see “Transition Charge

Sulfur Dioxide – A colorless gas having a sharp, pungent odor. Chemically identified as SO2, sulfur dioxide is formed by burning fossil fuels that include sulfur compounds in their makeup. Sulfur dioxide is an air pollutant and an acid rain precursor. Act 141, Section 10r(3), requires all Michigan electric suppliers, beginning January 1, 2002, to disclose to customers the environmental characteristics of the average fuel mix used to produce the electricity products purchased by the customers. This disclosure will include the average air emissions, in pounds per megawatt-hour, of sulfur dioxide, carbon dioxide, and oxides of nitrogen.

Supplier – Any person or company that sells electric generation and/or distribution services to retail customers in this state. The term "supplier" may include an aggregator, an AES, a broker, a distribution company, an electric utility, a marketer, a municiple utility, a retailer, or a rural electric cooperative as defined in this glossary.

Time-of-Use Meter – see “Electric Meter

Time-of-Use Rates – see discussion under “Electric Meter

Transition Charge – A fee paid by customers to their local distribution company (utility) when they elect to purchase generation services from an AES. It allows the utility to recover stranded costs and implementation costs. Stranded costs are utility charges that were to be recovered over time through regulated rates that would not otherwise be collected from customers that buy their generation services from an AES. Implementation costs are utility expenses required to facilitate retail access. The MPSC will set the transition charge for each Michigan utility after a hearing process to determine stranded costs and implementation costs. The transition charges will be adjusted based on the results of annual true-up proceedings to make sure that the utilities recover the amounts approved by the MPSC. This charge may also be referred to as a “Competitive Transition Charge,” or “CTC.”

Transmission – The bulk transport of high-voltage power, typically over longer distances, between generating plants and distribution systems.

Unbundled Services – Unbundling refers to the process of disaggregating electric utility services into basic components and offering each component for sale, with separate charges for each component. Some services may be regulated and others are subject to competition. Some services may be mandatory (meaning all customers must buy them) and others may be optional (customers have a choice whether or not to buy them, and often from whom). Once unbundled, various electric utility and competitive services may be listed on customer bills as separate line items (see “Bundled Services”).

Voltage Reduction – Any intentional reduction of system voltage by 3% or more for maintaining the continuity of service of the bulk electric power supply system. This may be referred to as a “brownout.”

Watt – A unit of measure of electric power (see “kilowatt” and “megawatt”).

Winter Protection Plan – A plan designed to provide shutoff protection for eligible low-income customers or senior citizen customers. In Act 141, “eligible low-income customer” means a customer whose household income does not exceed 150% of the poverty level, as published by the United States Department of Health and Human Services, or who receives any of the following: (1) assistance from a state emergency relief program, (2) food stamps, or (3) Medicaid. In Act 141, “eligible senior citizen customer” means a utility or supplier customer who is 65 years of age or older and who advises the utility of his or her eligibility. The Winter Protection Plan protects low-income and senior customers from service shutoff and high utility payments during the winter months. Customers enroll through their utility company or AES.

See also Glossary of Utility Terms from the National Association Of Regulatory Utility Commissioners.