Glossary of electric industry, energy & cooperative terms

R

R-Factor
Measurement of a material’s resistance to heat transfer; used to indicate efficiency of insulation. The higher the R-factor, the greater the material’s ability to retard heat flow.

R-Valve
Number which measures the resistance of insulation to heat. In installation of any kind, judge effectiveness by R-valve.

Rafter
One of a series of structural members of a roof designed to support roof loads. The rafters of a flat roof are sometimes called roof joists.

Ratchet
A rate based on the maximum past or present electric demand so that a wholesale customer is billed for the costs of maintaining generating capacity even during months when capacity isn’t entirely drawn on by the customer.

Rate Base
The accumulated capital cost of facilities purchased or installed to serve the utility’s customers and on which the utility is allowed to earn a return.

Rate Design
The process of establishing prices for utility services. Rates must be designed to collect authorized revenues, allowing the utility to earn a fair and reasonable rate of return. Utility rates are set in two steps: first, the revenue requirement is determined; second, rates are designed to recover this revenue requirement.

The revenue requirement estimates the amount of revenues needed over a specific period of time to cover operating expenses, taxes, debt service, fixed interest expense, and a reasonable return for investor-owned utilities or contribution to the city for municipally owned utilities. Generally, the revenue requirement is forecast for a "future test year."

Rate design is subject to changing goals and fluctuating energy and financial conditions. The primary function of rate design is to recover the revenue requirement. Rates can also be used to achieve other desired aims – be they those of a utility or the Public Service Commission (PSC). In the 1950s and early 1960s, rates were designed to promote increased consumption of electricity for, in those days, the costs of supplying energy decreased as usage increased. Since the early 1970s, however, this trend has been reversed. Rates are now designed to encourage efficient use of resources.

The cost allocation and rate base portions of any rate case proceeding are frequently the most controversial, subject to extensive review by the PSC staff and rate case intervenors. Moreover, state and federal legislators have taken an aggressive role in utility rate design issues.

Rate of Return
The amount of money earned by a regulated utility, over and above operation costs, expressed as a percentage of the rate base.

In setting an authorized rate of return, regulators attempt to strike a balance between the interest of the investor and the interests of the ratepayer. The rate of return must be high enough to equal the firm’s cost of capital – so that the firm can maintain its credit rating and attract additional investors – but not so high as to be unfair to ratepayers. The concept of a fair rate of return, then, represents a delicate balance.

In rate cases, estimates of the rate of return on rate base are often calculated as weighted averages of the cost of capital; the cost of long-term debt; the cost of preferred stock, and the cost of, or return on, common stock equity.

It is important to remember that the rate of return authorized by a regulatory commission is not guaranteed to the utility; the utility must earn that figure to the best of its ability. The earned rate of return can vary from the authorized rate of return for a variety of reasons. Interest rate fluctuations, inflation, attrition and other economic conditions, as well as the management of the firm, can all affect the return finally earned by the utility.

Rate Schedule, Tariff
The raters, rules for service and other regulations, as filed with an approved by the Florida Public Service Commission; also called tariff.

Rate Structure
The general format for utility pricing. Elements of the rate structure include the amount of revenue allocated to each customer class and the relationship and form of various prices within particular customer classes, which join to produce rates that meet the utility’s revenue requirement. The rate structure must also maintain equity between and within customer classes, ensuring that there is no discrimination against or referential treatment of any particular customer group.

When determining rate structures, utilities, commissions and lawmakers must consider such issues as the costs of providing service to customers; the history, development and level of existing rates, the laws that require certain types of rate structures; and conservation goals and attitudes.

Ratemaking Authority
A utility commission's legal authority to fix, modify, approve, or disapprove rates, as determined by the powers given the commission by a State or Federal legislature.

Reactor
A complex machine that heats water to boiling, producing steam to turn a turbine that generates electricity. The heat for boiling the water is produced by the fission, or splitting, of uranium atoms.

Refrigerant
A substance used to produce a refrigeration effect by its absorption of heat while expanding or vaporizing.

Regional Transmission Group
A utility industry concept that the Federal Energy Regulatory Commission embraced for the certification of voluntary groups that would be responsible for transmission planning and use on a regional basis.

Regulation
The government’s right to oversee and govern business as provided for by law. This right was originally granted in the U.S. Constitution’s commerce clause (Article I, Section 8). The Tenth Amendment cleared the way for state regulation as well.

The concept of public utility regulation emerged in 1877 with the U.S. Supreme Court’s landmark Munn V. Illinois decision. With this decision, the Court affirmed the State of Illinois’ right to enforce maximum-price legislation for business whose operations were critical to the community as a whole – That is, attributed with a significant public interest.

Public utility regulation via state commissions developed more slowly. In fact, it was not until 1907, when Wisconsin and New York each created its own regulatory commission, that the first state commissions were established. By 1920, nearly two-thirds of the states had created regulatory commissions for public utilities, although most had only limited power and jurisdiction.

Before World War 1, most cities felt regulation to be unnecessary, since competition was thought to keep prices down. As a result, several electric companies were allowed to operate in the same city. In most cases, however, this did not result in healthy competition and lower rates, but rather in the strongest companies taking over the more inefficient ones.

Today the Florida Public Service Commission, among its duties, regulates the rates of investor-owned utilities in Florida and oversees rate structures for municipal and cooperative utilities. In addition, the Federal Energy Regulatory Commission, formerly the Federal Power Commission, controls the wholesale rates at which electricity is sold to other utilities for resale.

Another major government agency that regulates some Florida electric utilities is the Nuclear Regulatory Commission.

In addition, the Securities and Exchange Commission (SEC) has significant regulatory influence over investor-owned utilities. Because stock is publicly offered, certain SEC reporting requirements must be met. The SEC sets forth rules specifying the content and format of such reports and prescribes the manner of accounting for certain financial transactions. Under SEC regulations, investor-owned utilities must file an annual report and also the 8-K, 10-K and 10-Q reports.

Cooperatives that have loans with the Rural Electrification Administration or the Cooperative Finance Corporation are required by those organizations to provide numerous financial reports (for example, Form 7). The reports include balance sheets, operating statements, statistical data, debt service ration and other data that indicate financial conditions.

Reliability
An electric utility’s ability to deliver uninterrupted electricity to its customers upon demand, to whatever degree required. Reliability consists of two criteria: generation system reliability and transmission/distribution system reliability.

Generation system reliability is calculated on both a short-and long-range basis. Short-range reliability is measured as the total existing generating capacity of the system, plus firm purchase agreements, minus loss due to scheduled maintenance or known restrictions. The difference between system demand and generation capacity is the reserve margin. Short-term system reliability is the responsibility of the system operator; it is usually planned on one year’s operation.

Long-range reliability is the responsibility of the system generation planning group. An important responsibility of this group is to consider the timing and characteristics of new3 power plant additions required to maintain long-range reliability standards. The long-range standard for generation reliability is "one day in 10 years" loss of load probability; that is only one day in 10 years will load not be met due to insufficient generation capability. The generation planner attempts to maintain a minimum percent reserve margin to account for maintenance and scheduled outages.

From a reliability standpoint, the electric distribution system cannot give consumers any more continuous service that it receives from the transmission system. It can only contribute additional outages. Minimizing distribution outages is a product of automatic devices, system operator or dispatcher control, and computer modeling.

Computers are used to compile data on power consumption so that load growth, load levels and voltage can be modeled. This allows upgrading the system slightly ahead of growth. System operators or dispatchers monitor the moment-to-moment fluctuations in the distribution and transmission system. They can isolate faults by opening and closing switches and circuits. In addition, the system is constructed to serve customers by lines coming from more than one direction. Therefore, if one line should fail, power is available from another direction. Automatic relaying, circuit reclosers and other protective devices are installed throughout the distribution system to clear faults, provide backup protection and minimize losses of services.

The transmission system is the backbone of the energy supply grid. Since transmission lines carry large quantities of power, their reliability is enhanced by the construction of alternate routes or backup for power supply delivery.

Renewable Resources
Naturally, but flow-limited resources that can be replenished. They are virtually inexhaustible in duration but limited in the amount of energy that is available per unit of time. Some (such as geothermal and biomass) may be stock-limited in that stocks are depleted by use, but on a time scale of decades, or perhaps centuries, they can probably be replenished. Renewable energy resources include: biomass, hydro, geothermal, solar and wind. In the future, they could also include the use of ocean thermal, wave, and tidal action technologies. Utility renewable resource applications include bulk electricity generation, on-site electricity generation, distributed electricity generation, non-grid-connected generation, and demand-reduction (energy efficiency) technologies.

Residential Class
The classification of customers to who electricity is sold for household purposes. It includes service for heating, lighting, cooking and other domestic uses in houses, apartments and mobile homes. The residential class is the largest customer class in Florida.

Reserve Margin (Operating)
The amount of unused available capability of an electric power system at peakload for a utility system as a percentage of total capability.

Residential
The residential sector is defined as private household establishments which consume energy primarily for space heating, water heating, air conditioning, lighting, refrigeration, cooking and clothes drying. The classification of an individual consumer's account, where the use is both residential and commercial, is based on principal use. For the residential class, do not duplicate consumer accounts due to multiple metering for special services (water, heating, etc.). Apartment houses are also included.

Residual Fuel Oil
The topped crude of refinery operation, includes No. 5 and No. 6 fuel oils as defined in ASTM Specification D396 and Federal Specification VV-F-815C; Navy Special fuel oil as defined in Military Specification MIL-F-859E including Amendment 2 (NATO Symbol F-77); and Bunker C fuel oil. Residual fuel oil is used for the production of electric power, space heating, vessel bunkering, and various industrial purposes. Imports of residual fuel oil include imported crude oil burned as fuel.

Resistance Heating (Strip Heating)
A form of electric heating used in climates where heat is seldomly used, like Florida. Air is blown over electrically heated metal coils and circulated into the living space.

Restructuring
The process of replacing a monopoly system of electric utilities with competing sellers, allowing individual retail customers to choose their electricity supplier but still receive delivery over the power lines of the local utility. It includes the reconfiguration of the vertically-integrated electric utility.

Retail
Sales covering electrical energy supplied for residential, commercial, and industrial end-use purposes. Other small classes, such as agriculture and street lighting, also are included in this category.

Retail Competition
The concept under which multiple sellers of electric power can sell directly to end-use customers and the process and responsibilities necessary to make it occur.

Retail Market
A market in which electricity and other energy services are sold directly to the end-use customer.

Retail Wheeling
The process of moving electric power from a point of generation across one or more utility-owned transmission and distribution systems to a retail customer. The competitive practice in which utilities no longer have regulated service territories, and consumers may purchase power from any utility.

Retrofit
Refers to either thermal and/or equipment improvements made to an existing home in order to increase the structure’s energy efficiency.

Revenue
The total amount of money received by a firm from sales of its products and/or services, gains from the sales or exchange of assets, interest and dividends earned on investments, and other increases in the owner's equity except those arising from capital adjustments.

Ridge Board
A board placed on edge at the ridge of a roof into which the upper ends of rafters are fastened.

Ridge Vent
Vent used as an exhaust system, mounted along the entire ridgeline of a roof.

Rigid Insulation Board
Made from lightweight plastic foam and used to insulate wall, the perimeters of floor slabs, and underneath siding.

Roof Louver
Small dome-like vent made of aluminum, plastic, steel, or wood, mounted near the ridgeline of a roof. Slit openings are recommended over screened louvers.

Roof Sheathing
Boards or sheet material fastened to roof rafters on which the shingle of other roof covering is laid.

Rural Electric Cooperative
Generally a non-profit, customer-owned electric utility responsible for distributing power in mostly rural areas. There are more than 1,000 electric cooperatives existing in the U.S. These cooperatives were developed under the Rural Electrification Act of 1936. The purpose of this Act was to bring electricity to farms, small communities and rural residential areas. Each cooperative is incorporated under state statutes and is locally owned, operated and controlled. Policy direction oversight are provided by a board of trustees, elected by the members/consumers who received their electric service from the cooperative.

Currently in the U.S. there are 60 power generation and transmission cooperatives supplying electricity to distribution cooperatives. There are 16 rural electric distribution cooperatives in Florida served by two generation and transmission cooperatives.

Rural Electrification Administration (REA), now the Rural Utilities Service, (RUS)
A federal agency within the Department of Agriculture that administers insured and guaranteed loan programs and provides technical assistance to rural electric systems. The Rural Electrification Administration was created by Executive order of President Franklin D. Roosevelt in 1935. In l936 Congress passed the Rural Electrification Act to establish a loan program to finance qualified entities willing to provide electric services to rural areas.

The Rural Electrification Administration was created by Executive order of President Franklin D. Roosevelt in 1935. In l936 Congress passed the Rural Electrification Act to establish a loan program to finance qualified entities willing to provide electric services to rural areas.

The Pace Act in 1944 indefinitely extended REA as a lending agency and established a fixed rate of interest (two percent) on a fixed payment schedule (maximum 35 years). Since 1950 all loan contracts have contained "area coverage" agreements requiring the borrower to serve all customers within its area, no matter how sparsely settled.

The direct loan program was replaced in 1973 by two loan programs – the Rural Electric and Telephone Revolving Fund, primarily for use by distribution cooperatives, and a guaranteed loan program, primarily for generation and transmission cooperatives (commonly called G&Ts).

The Revolving Fund’s "insured" loans carry a standard interest rate of five percent. The REA administrator requires most borrowers to seek supplemental funds, customarily 30 percent, from private, non-government sources.

G&Ts use the guaranteed loan program, obtaining money from the private money market at essentially market rates, but with the guarantee of the federal government. Almost all of these non-REA loans have been channeled through the Federal Finance Bank (FFB). The FFB was established in 1973 to bring order to the government’s entry into money markets. FFB facilitates the pooling of the loan needs of government lending agencies and scheduling of federal borrowing to optimize economic arrangements. G&Ts borrow from the FFB at the cost of money to the Treasury plus a handling fee of one-eighth of one percent. Additionally, in 1969 the National Rural Utilities Cooperative Finance Corporation was organized to provide supplemental financing for cooperatives from private, non-government sources.

Rural Electrification Act
Legislation that established the Rural Electrification Administration in 1936 as a lending agency for electric cooperatives. Telephone cooperatives were included in an amendment to the act in 1949.

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Page last updated: Friday, March 5, 2010