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LA NIÑA
The name given to the periodic cooling of the tropical Pacific Ocean, hence the name: it means ‘little girl’ in Spanish, the opposite of El Niño. La Niña occurs after some, but not all, El Niños. During a La Niña year, US winter temperatures are warmer than normal in the south-east and cooler than normal in the north-west.

LETTER OF CREDIT
Instrument or document issued by a bank guaranteeing the payment of a customer’s drafts up to a stated amount for a specified period. It substitutes the bank’s credit for the buyer’s and eliminates the seller’s risk.

LEVERAGE
The ability to control large amounts of an underlying variable for a small initial investment. Futures and options are leveraged products because the initial premium paid is usually much smaller than the nominal amount of the underlying. Leverage is usually measured as the effective gearing.

LINE LOSSES
The difference between the quantity of electricity generated and the quantity delivered at some point in the electric system. Losses vary based on temperature, voltage level and load levels.

LINE PACKING/FILLING
Raising the pressure within an oil or gas pipeline system in order to increase the system’s storage capability, important for system operation.

LIQUIDATED DAMAGE CLAUSE
The clause allows a counterparty that is owed power to charge the defaulting counterparty for the price of having to buy elsewhere. The higher the price the higher the charge when a company defaults on its supply obligations.

LIQUIDITY RISK
The risk that a firm unwinding a portfolio of illiquid instruments may have to sell them at less than their fair value. An illiquid market may be defined as one characterised by wide bid/ask spreads, lack of transparency and large movements in price after any sizeable deal.

LIQUIFIED NATURAL GAS (LNG)
Natural gas (mainly methane) which has been liquified for ease of storage and transportation. The gas is liquified either by reducing the temperature or by increasing pressure.

LNG
See liquified natural gas

LOAD
The amount of power carried by a utility system or subsystem, or the amount of power consumed by an electric device, at a specified time. Load is also referred to as demand.

LOAD FACTOR
The ratio between average and peak usage for electricity or gas customers. The higher the load factor, the smaller the difference between average and peak demand.

LOAD FOLLOWING
Continuous balancing of generation and load accomplished by committing on-line generation whose output is raised or lowered as necessary to follow moment-by-moment changes in load.

LOAD SHAPE
A combination of electricity contracts covering a period of weeks or months, which reflects the profile of the daily power requirements of a customer.

LOOKBACK OPTION
A lookback call (put) option grants the right to buy (sell) the underlying energy commodity at the lowest (highest) price reached during the life of the option. Effectively, the best price from the point of view of the holder becomes the strike price.

LOOP
Louisiana Offshore Oil Port. A US deepwater port which can accommodate vessels as large as Ultra Large Crude Carriers with a loaded weight in excess of 200,000 deadweight tons.

LOOP FLOWS
Unintended flows on electric transmission systems which occur as a by-product of the dispatch of electricity down an intended path.

LOT
The unit size for transactions on a given futures exchange.