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The Efficient Design of Contracts To Purchase Cogenerated Powers

This paper analyzes long-term power purchase contracts between an electric utility and a cogenerating facility and suggests ways to improve them. It discusses the best way to construct the contract payment structure in light of the given avoided cost structure; analyzing in detail the harmful incentives to low maintenance and how to avoid them. The paper concludes that the method it describes can be used to aid in the better design of contract provisions that will remedy the problem of incentives to low maintenance.

Purchase ( $25 )

Energy Specializations: Electricity – Generation Technologies; Electricity – Markets and Prices ; Electricity – Policy and Regulation

JEL Codes:
Q2 -
D42 - Market Structure, Pricing, and Design: Monopoly
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: Electric utilities, Cogeneration, Power purchase contracts

DOI: 10.5547/ISSN0195-6574-EJ-Vol11-No2-6

Published in Volume 11, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.