CEP Energy Market Fundamentals 5

Question 1

In deregulated electricity markets, what is the role of the 'load-serving entity' (LSE)?

Accepted Answer

To procure adequate electricity supply to meet its customers' load obligations

Answer

An LSE (utility, co-op, or retail supplier) is responsible for securing sufficient generation resources to serve its retail or wholesale load obligations.

Question 2

What is a 'financial transmission right' (FTR) used for in electricity markets?

Accepted Answer

Hedging congestion cost exposure between two grid locations

Answer

FTRs pay holders the congestion revenue between two nodes, hedging the LMP spread risk for parties with physical positions on congested paths.

Question 3

Which natural gas market index is most commonly used as the North American benchmark for long-term pricing?

Accepted Answer

NYMEX Henry Hub

Answer

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.

Question 4

A supplier offering a 'green tariff' program allows a large commercial customer to:

Accepted Answer

Procure utility-delivered renewable energy with associated RECs through a regulated rate schedule

Answer

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.

Question 5

What does 'demand response' allow electricity customers to do in wholesale markets?

Accepted Answer

Reduce or curtail consumption during grid stress in exchange for payments or bill credits

Answer

Demand response programs compensate customers for voluntarily reducing load during peak or emergency conditions, functioning like a virtual generation resource.

(CEP) Certified Energy Procurement Professional Practice Test

(CEP) Certified Energy Procurement Professional Practice Test

CEP Energy Market Fundamentals 5