Customers with CHP systems usually require standby service from the utility to provide power when planned (e.g., routine maintenance) or unplanned outages occur. Electric utilities incur certain costs to keep sufficient generation, transmission, and distribution resources in reserve to supply power during these outages, just as they do for their own resources. The utility's concern is that the facility will require power at a time when electricity is scarce or at a premium cost, and that it must be prepared to serve energy loads during such extreme conditions. Nevertheless, the probability that all interconnected CHP systems will need power at the same time is relatively low. Consequently, states are exploring alternatives to standby rates that may more accurately reflect realistic system operating conditions.
Options and Examples from Other States:
The Oregon Public Utilities Commission requires CHP systems in Portland General Electric's and Pacificorp's territory to contract for a backup of only seven percent of the CHP system's "reserve capacity" (not 100%), the same reserve requirement for regular power plants. The "reserve capacity" is either the nameplate capacity of the installed system or the amount of load the customer does not want to lose in case of an unscheduled outage; if the customer is able to shed load at the time its unit goes down, then it will be able to reduce the amount of contingency reserves it must carry.
The Hawaii PUC issued an order in 2008 making standby rates optional for 10 years. CHP owners have the option to take standby service or to decline such service and to remain on the otherwise applicable rate schedule. Furthermore, if customers have an unscheduled outage, they have the option to waive their demand charges for billing purposes once a year. There is no ratchet in place.
The California Public Utilities Commission exempted new onsite generation from standby rates for 10 years, as policy means to encourage CHP. The exemptions applied to all CHP except those fueled by diesel and those over five megawatts.
Connecticut does not allow standby rates for CHP installed after January 1, 2006 as long as the CHP system’s generation is less than the customer’s peak load, and is available during peak periods.