Recently, the Public Service Commission held a proceeding related to Dominion Energy South Carolina’s avoided cost. If you’re not an expert in utility regulation, you may have not heard the term “avoided cost” before—but with SC Utility Consumer’s help, you can get on the path to becoming an expert.

If you’d like to watch the proceeding, you can do so at www.scetv.org/psc. SC Utility Consumer is here to help you understand the important but often complicated issues before the Public Service Commission, and we’re highlighting some frequently asked questions about avoided costs below. If you have other questions, you can reach out to us on Facebook or Twitter or email robert.bockman@psc.sc.gov.

What is an “avoided cost?”

Per the PURPA definition, avoided cost is “the incremental costs to an electric utility of electric energy or capacity or both which, but for the purchase from the qualifying facility (QF) or qualifying facilities, such utility would generate itself or purchase from another source.”

That’s pretty technical, so we’ll break it down. Think of avoided cost as what a utility who purchases power from a third party would otherwise have to invest in or pay money for to generate electricity (one kilowatt). So, if a utility provider purchases power from a third party, the avoided cost is the lost payment the utility provider would otherwise have to pay to generate the power themselves.

Utility providers may find it easier or more cost-effective to purchase a portion of their power from these qualifying facilities (QF), who generate the power themselves.

Let’s say that you’re baking a pie and the recipe calls for six apples—unfortunately, you just have five on hand. Now, you could plant, fertilize, and water an apple tree and wait for that sixth apple, or you can just walk into any grocery store and purchase an apple for a fee. The cost of planting that tree and harvesting that apple, in this scenario, would be the avoided cost.

Will this affect my bill?

Avoided costs payments are shared by all consumers as a portion of your bill, as they reflect the cost to generate the power that you use. When a company calculates its avoided cost payments and presents them to the PSC, the PSC may choose to accept or deny the costs as presented by the utility company. These changes may be reflected in your bill—not as a direct result of recent hearings, but as an element of the bill you pay each month. 

How can I learn more?

Reach out to the Commission at 803.896.5100 or email contact@psc.sc.gov or find the PSC on Twitter or Facebook!