Standby Rates for Combined Heat and Power Systems
Improvements in technology, low natural gas prices, and more flexible and positive attitudes in government and utilities are making distributed generation more viable. With more distributed generation, notably combined heat and power, comes an increase in the importance of standby rates. Standby, or partial requirements, service is the set of retail electric products for customers who operate onsite, non-emergency generation. These rates represent the cost of services utilities provide when customer generation is not operating or is insufficient to meet full load. Trends show that distributed generation is not rare anymore and that old ideas about risk have been replaced by utility operator confidence in anticipated performance. This paper presents the results of an analytical assessment of the rates, terms, and conditions for standby service in five states: Arkansas, Colorado, New Jersey, Ohio, and Utah. Specifically the study evaluated the efficacy of standby tariffs for combined heat and power (CHP) applications. It uses these existing rates and terms to showcase practices that demonstrate a sound application of regulatory principles and ones that could use improvement. Although the study and recommendations targeted participating states, the analytical methods, spreadsheets, and recommendations can be adapted for use by other jurisdictions.