The great standby rate debate: analysis of a key barrier to the influx of needed new alternative energy sources

Increased use of Distributed Generation facilities has the potential to create significant benefits for both the electric utility distribution system and the public as a whole. (1) Distributed generation can relieve the demand for electricity on an already strained distribution system, which can create savings for utility companies that would be, in turn, passed on to ratepayers. (2) However, these benefits do not come without significant costs. (3) Utilities incur certain fixed costs to keep distributed generation customers connected to the distribution system even when these customers consume no electricity. (4) Therefore, it is necessary to design a standby rate structure that is based on strict cost causation principles that will neither inhibit the introduction of new distributed generation nor subsidize new distributed generation at the expense of other ratepayers. (5)