Appropriateness and feasibility of various methods of calculating avoided costs
Recent developments in federal law and regulatory rulings require the state public service commission to get rates for utility purchase of power from cogenerators and small power producers. The rates are to be based on the costs avoided by the utility because of its reduced need to generate electricity or to purchase power from another source. An idealized method of calculating avoided costs is presented based on marginal costing concepts. It accounts for the avoided costs of generating capacity and of energy generation. To determine avoided costs, load forecasts and capacity expansion planning models are employed. The idealized method requires elaborate computer programs, access to computer facilities, and specialized personnel. Additionally, the idealized method is dependent on the collection of a rather extensive data base. These efforts are undertaken in an attempt to realize a high level of precision in estimates. While the theoretical appropriateness of the idealized method is perhaps its strongest point, the sophistication of its application may present limitations to public service commissions. This method may not be limited data collection capabilities, or lacks access to computer facilities. For such a commission, the idealized method is a useful reference for judging other, more practical methods.
- Research Organization:
- National Regulatory Research Inst., Columbus, OH (USA)
- OSTI ID:
- 6676541
- Report Number(s):
- NP-3900344; ON: DE83900344
- Resource Relation:
- Other Information: Portions of document are illegible
- Country of Publication:
- United States
- Language:
- English
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