Glossary Of Terms
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I
IEA
See International Energy Agency
IMBALANCE ENERGY
The difference between hourly scheduled electricity deliveries and hourly metered deliveries. Typically, energy imbalances are eliminated during a future period by returning energy in kind under conditions similar to those when the initial energy was delivered. When energy imbalances exceed a prespecified threshold (eg, +/- 1.5% of the scheduled transaction), imbalances are resolved through monetary payments.
IMPLIED VOLATILITY
A measurement based on the premiums of market traded options of the expected price range of the underlying commodity.
INADVERTENT ENERGY
The imbalance of energy flows back and forth that are ongoing and routine between a generator of power and the centres of demand. These imbalances are typically settled through exchanges of physical product.
INDEPENDENT POWER PRODUCER
A non-utility power generating company
INTEGRATED HEDGE
A hedge which combines more than one distinct price risk. For example, a German utility trading a UK gas contract would be exposed to both the gas contract risk plus the currency risk.
INTERDELIVERY SPREAD
Futures or options trading techniques that entail buying one month of a contract and selling another month of the same contract –for instance, buying a March electricity contract and simultaneously selling a October electricity contract. A market participant can profit (or lose out) as the price difference between the two contracts widens or narrows.
INTERMEDIATE GENERATION (CYCLING GENERATION)
Electric generating equipment that can vary its level of output in response to changes in electric demand. Normally operated on a daily cycle to serve on-peak loads during the day but not off-peak loads during nights and weekends.
INTERNATIONAL ENERGY AGENCY (IEA)
A Paris-based organisation of leading oil-consuming nations mainly in the West, which co-ordinates its members’ energy policies. It also compiles energy statistics including forward supply/demand projections for countries both within and outside its membership.
INTERRUPTIBLE SERVICE
Gas or electricity sales that are subject to interruption for a specified number of days or hours during times of peak demand or in the event of system emergencies. In exchange for inter-ruptability, buyers pay lower prices.
IN-THE-MONEY
An option that can be exercised and immediately closed out against the underlying market for a cash credit. The option is in-the-money if the underlying futures price is above a call option’s strike price, or below a put option’s strike price.
