Electricity market small vocabulary

Since electricity trade became a process freely accessible to anyone in Latvia, customers who had never been actively involved with the nuances of this process have often failed to fully understand the meanings of specific terminology used in this field. Here, we will gladly explain popular, frequently used terms included in an electricity trade agreement according to which customers are supplied with electricity.

  • Automatic electricity meter system: a system that measures hourly electricity consumption and ensures transmission of consumption data to system servers.
  • Balancing service: a service that covers the difference between planned and actual electricity consumption by a market participant (end user).
  • Electricity purchase price: an agreement price for which the electricity trader sells and the market participant (end user) purchases electricity.
  • Electricity supply agreement: a standard agreement between an associated user and a public trader which regulates electricity supply and settlement.
  • Electricity trading agreement: an agreement between an electricity trader and a market participant (end user) on the purchase and selling of electricity.
  • Mandatory procurement: a public trader’s obligation to purchase electricity produced from renewable sources at cogeneration plants compliant with the applicable legislation.
  • Mandatory procurement components: compensate a public trader’s additional expenses arising from the purchase of electricity within the framework of mandatory procurement. Mandatory electricity procurement expenses are covered by all end users in Latvia, in proportion to their electricity consumption.
  • Transmission system operator (TSO): a licensed trader whose function is to provide transmission system services to the users connected to 110 kV and 330 kV networks.
  • Public trader: a function specified in the electricity trading license issued to Latvenergo AS which envisages trading of electricity to associated users for tariffs approved by the PUC and mandatory procurement of electricity from generators of different types.
  • Distribution system operator (DSO): a licensed trader whose function is to provide distribution system services to the users connected to 0.4 kV, 6 kV, 10 kV or 20 kV networks.
  • Associated user:  a user of electricity, purchases electricity for their own needs (end consumption) from the public trader or the relevant distribution system operator, for tariffs approved by the PUC, and has not exercised the option of entering the market.
  • System services agreement: an agreement between the system operator and a market participant (end user) for provision of and payment for system services.
  • System service tariffs: tariffs approved by the Public Utilities Commission (PUC) covering the expenses of the relevant system operator to maintain, update and develop the network infrastructure. PUC approves tariffs for associated users, mandatory procurement components and system service tariffs.
  • Tariffs for associated users: tariffs approved by the PUC according to which associated users pay for electricity; these consist of the price of electricity, mandatory procurement components and system service tariffs;
  • Market participant (end user): a user of electricity, a company which does not meet the criteria of an associated user and employs more than 50 people or has an annual turnover of over 7 million LVL, buys electricity for their own needs (end consumption) from an electricity trader for mutually agreed prices.