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-may ex-teed average costs . .The latter comain embedded 'cos'ts <br />.which- -:.are Lower than current costs.' only ,current and f~th~re <br />costs can he "avoided," Historical costs cannot. <br />' ThP simultaneous purchase and .sale:. option allows the .QF ` t© <br />make investment decisions on a competitive bas.s° with ,the c~~°fl,~".= <br />ities. When utilities add-.new facilities- their costs: are in- .. <br />creased. Rates charged to their customers are then raised to <br />Ct~ver. this cost increase. Thus, for the utilities, rat,~s'~ they <br />charge must cover increased costs. Avoided .costs are incl-ude <br />these increases. When QFs are paid utilities'" av©ide~,, costs, <br />." there- is an incentive to produce- "for any QF with lower incremen- <br />tal or increased costs than the utility. QFs with incremental or <br />increased costs higher than utilities,cannot`and shoukd nat exist <br />if: they are paid avoided costs. <br />A sec©nd problem overcome by the s"imultane~us purchase $nd <br />.sale- rule is an organizational one. Without the ruler ;if the <br />rates customers are charged for electric power are less ,than tk~e <br />avoided costs :that QFs are paid, QF owners would: have an ncen- <br />five to separate their consumption from- proc~uctfon. Resources-" <br />wou3.d be ,wasted it QFs tried to hide the fact that they are both" <br />` consumers and producers, by installing duplicate.interconneetion <br />equipment, maintaining sepa-rate Legal identities,: etc. <br />"As available" sales. would normally be made b~ QF`s". which <br />consume pazt~ the power -they. generate and, sell any excess. <br />Utilities,-are- obliged to buy power and. to pay gates b"used upon <br />their avoided ccysts at the time of power. delivery. The pr unary <br />advantage to QFs in pursuing this option is that m~eteri.nq and <br />interconnection costs axe' simplified. 'Meters- which..: ;run backwarc] <br />and forward: could. be used, as could a double.:meteri"~, system- <br />. which measures" the tset power .flow on a periodical basis. QFs` ,. <br />would. either pay or:be paid at the- end of a bTlir~: period <br />depending; upon- whether the balance was positive or negative. - <br />QFs selling power "as avail-able" may wish" the rate to be <br />paid for their power to be based upon- 'the utilities`' avoids ea~.t <br />at time- of deli-very: The PUC decision supports this .basis gc~r <br />rates- but gives nb guidance as to how they are to tx~ determined. <br />A major point in contract negotiation must' therefore deal -with <br />the formula by which rates at time' of delivery are to be deter= <br />mined, <br />Rates paid to QFs might differ by season" or by time:-"Qf day. <br />y Seasonally differentiated rates require `only one meter and:..' the QF' <br />and utility need simp3y agree upon. when a meter' ba1"ance is <br />recorded to separate rating per,i}ods. If .QFs wish t© sell power <br />"as available.," yet take- advantage of differences in time-of-day <br />rates,. at leask two meters would be needed . ©ne would ''re~rd a <br />"net" balance dur.:nq off-peak hours, the second mete"r ; would <br />rec~xrd. "net":.:balance during on-peak hours. ©vez the course of 'a <br />bill3:ng period it is possible that a QF" would. receive a payment <br />from the- utility even-though" the QF..consumed more power. than it <br />10 <br />