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rates. If a small QF feels that its particular supply charac- <br />teristics differ from those of the "average" QFs, upon which <br />standard rates are based, it may atte;npt to negotiate its .own <br />contract with a utility. Obviously, this would be done if the QF <br />could convince the utility that purchasing QF power would allow <br />the utility to avoid above-average costs. <br />In some cases, a QF may choose to sell power to a utility- on <br />an "as available" basis,- and this can occur with or without `a' <br />contract. QFs of any size wishing to sell power as available,. <br />might not want a contract since. the law obliges the utility to <br />pay avoided costs at the time of power. delivery.. "As available". <br />sales_ without a contract are inadvisable in most cases., The E <br />Colorado PUC-requires utilities to file estimated avoided energy . <br />costs during daily -and seasonal peak and off-peak, periods, by <br />year, for reporting year, and future five-year period. However, <br />the PUC Rules do ,not- specify how avoided costs at time o€ deliv- <br />ery are to be determined for QFs supplying power "as available ." <br />Thus, this option is more apparent than real, since QFs have no~ <br />way of knowing what rates they are to be paid . Furthermore, PUC <br />rules provide no guidance in resolving the issue. Additionally, <br />problems can arise regarding interconnection and other- issues <br />which could be avoided with a contract . <br />.Most QFs will-seek contracts with Colorado utilities. Only <br />the smallest are likely to operate without them. If questions <br />about non-contracted- "as available" rates are resolved, ss~m~ ` <br />larger QFs may choose to operate without contracts. There may b <br />some advantages in doing so. Not all financial support will re- <br />quire a guaranteed price for electricity sold bit a QF. Financi_al <br />institutions .routinely support projects outside. the field ;of <br />small power product ion for which no guaranteed price.. is offered . - <br />Indeed, a QF has an advantage over other businesses in that utl- <br />ities are obliged to purchase the QF's "product." Also, contract <br />negotiation involves time- and .costly specialized sexvices of <br />attorneys and others. The costs may not be offset. by-thee pay- <br />off. <br />General Contract Options <br />QFs may contract to sell power on a "simultaneous purchase <br />and sale" basis or on an "as available" basis.. Which is chosen <br />will condition the resolution of issues related to retie determi~-: <br />nation. <br />The logic behind the simultaneous purchase and sale rule is <br />not immediately obvious. The rule is designed to overcome the <br />following problem. First, electric rates charged to norm~;a1 <br />utility customers are based upon average production costs. This <br />includes -the costs incurred in the past, the so-called "embedded" <br />costs of production facilities, and the. average f uel- costs in- <br />curred in running generation and distribution equipment:. Rates <br />to be paid to QFs are based upon avoided costs. Avoided costs <br />9 <br />