In a power sector where the number of customers with on-site, non-emergency electricity generation is on the rise, U.S. regulators are faced with determining what constitutes fair compensation for standby service. In a workshop held as part the New York “Reforming the Energy Vision” project, Rich Sedano tackled this question by defining the components of standby rates and recommending best practices for their design.

Effective standby rates send the right price signal by charging combined heat and power (CHP) customers for the grid services they actually use and providing a simple plan that encourages active demand response. In the long run, properly-implemented standby rates can stimulate private investment in these cleaner, more efficient resources, while also reinforcing the development of customers as a power system resource. Mr. Sedano’s presentation is based on the paper “Standby Rates for Combined Heat and Power Systems.”