Energy Market Fundamentals Flashcards
7 cards from real CEP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Energy Market Fundamentals flashcards as text
In deregulated electricity markets, what is the role of the 'load-serving entity' (LSE)?
Answer: To procure adequate electricity supply to meet its customers' load obligations
An LSE (utility, co-op, or retail supplier) is responsible for securing sufficient generation resources to serve its retail or wholesale load obligations.
What is a 'financial transmission right' (FTR) used for in electricity markets?
Answer: Hedging congestion cost exposure between two grid locations
FTRs pay holders the congestion revenue between two nodes, hedging the LMP spread risk for parties with physical positions on congested paths.
Which natural gas market index is most commonly used as the North American benchmark for long-term pricing?
Answer: NYMEX Henry Hub
Henry Hub in Louisiana is the delivery point for NYMEX natural gas futures and serves as the primary North American price benchmark for gas contracts.
A supplier offering a 'green tariff' program allows a large commercial customer to:
Answer: Procure utility-delivered renewable energy with associated RECs through a regulated rate schedule
Green tariffs let large customers source renewable power from the grid through a special utility rate, often bundled with RECs, without constructing their own generation.
What does 'demand response' allow electricity customers to do in wholesale markets?
Answer: Reduce or curtail consumption during grid stress in exchange for payments or bill credits
Demand response programs compensate customers for voluntarily reducing load during peak or emergency conditions, functioning like a virtual generation resource.
A natural gas 'basis swap' is typically used to manage which type of risk?
Answer: Price differential risk between a regional delivery point and the Henry Hub benchmark
A basis swap exchanges the floating spread between a regional hub and Henry Hub, isolating geographic price risk from absolute price-level risk.
Which electricity market product is specifically designed to ensure generator availability during peak demand periods rather than compensating for actual energy delivered?
Answer: Capacity obligations or installed capacity (ICAP) products
Capacity products (ICAP, capacity obligations) compensate generators for being available and committed to the grid, separate from compensation for actual MWh generated.