Standby Rates for Combined Heat and Power Need a Fresh Look


Combined heat and power (CHP) installations offer industrial and commercial owners stable energy prices, lower overall energy costs, and reliable power during grid outages. Under some electricity rates, CHP customers face confusing and potentially contradictory tariff conditions, leading to excessive costs for the back-up electricity and grid services provided by their local utility and a disincentive to invest in CHP resources.

Standby Rates for Combined Heat and Power Systems examines utility standby rates in Arkansas, Colorado, New Jersey, Ohio, and Utah and showcases sound applications of regulatory principles. Where the authors identify problematic rate designs, they recommend steps to improve the rate design with the goal of encouraging deployment of cost-effective CHP resources. RAP recommends a basic, two-part standby rate consisting of a monthly generation reservation charge and a daily, as used, demand charge as a starting point for standby rates.

State-specific tariff models are available below: