Defined term

Avoided utility cost

Avoided utility cost is the charge a customer does not incur because onsite generation, storage, or a load change reduces a billable utility quantity under the applicable tariff.

Also known as avoided electricity purchase cost

economics · Concept code GS-CONCEPT-070 · Last verified August 20, 2026

Definition and boundaries

Definition

Avoided utility cost is the charge a customer does not incur because onsite generation, storage, or a load change reduces a billable utility quantity under the applicable tariff.

Definition claim verification: Verified August 20, 2026

In plain language

Use Avoided utility cost only after the cash-flow perspective, timing, contract structure, included costs, and omitted items are made explicit.

What it is not

It is not automatically equal to export compensation, wholesale avoided cost, or the entire pre-solar bill.

Decision context

Why it matters

Calculate it from the counterfactual bill and actual tariff components rather than multiplying all generated energy by an average rate.

Decision-context claim verification: Verified August 20, 2026

Information boundary

This page provides general educational context, not a site design, production guarantee, utility determination, contract interpretation, legal opinion, tax conclusion, or individualized financial advice. Verify property, equipment, utility, jurisdiction, program, and agreement details before acting.

Concept relationships

Affects

  • Payback periodPublished conceptAvoided utility cost can affect how Payback period is evaluated

Primary sources

What to do next

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