Taking a Fresh Look at Standby Rates for Combined Heat and Power Systems

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Combined heat and power (CHP) systems offer industrial and commercial owners stable energy prices, lower overall energy costs, and reliable power during grid outages. Although CHP and other distributed resources have proven to be reliable and to pose little risk to utility operations, many standby rates are designed with overly conservative assumptions on system reliability, which create barriers to widespread adoption of CHP resources. Public service commissions should review standby rates in their jurisdictions to ensure that these rates actually match utility costs with the services customers use, and do not otherwise disincentivize CHP.

RAP presents the study Standby Rates for Combined Heat and Power Systems, which:

• Examines the efficacy of standby tariffs for CHP applications in five states,
• Showcases sound applications of regulatory principles, and
• Recommends steps to improve rate design with the goal of encouraging deployment of cost-effective CHP resources.

Co-authors of the report, Jim Selecky and Ali Al-Jabir of Brubaker & Associates, Inc., will illustrate how other jurisdictions can apply these analytical methods, recommendations, and sound regulatory principles to better match utility costs with the services customers use. Getting standby rates right — sending the right price signals and charging CHP customers for the grid services they actually receive — will unlock private investment in these cleaner, more efficient resources and reinforce the emergence of customers as a power system resource.

Published in: Government & Nonprofit
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