Avoided costs as a method to calculate effective

The basic concept of avoided costs in electric utility has been considered for many years. As a method was formulated and applied at the end of the seventies. In 1978 US Congress passed the Public Utility Regulatory Act (PURPA), as amended by The Energy Policy Act of 1992 (EPAct) which in fact has promoted independent producers (qualifying facility-qf) generating energy in cogeneration. PURPA has imposed the obligation an utilities to purchase electricity from self-sufficient producers at „avoided costs” prices and by this PURPA has put small – non-conventional sources and environmentally friendly companies in the way to enter the former monopolistic energy market. The calculation of avoided costs was originally applied mainly in order to compute the costs of alternative sources of electricity and to define the market values of electricity generated by various sources. As the result of the recent market liberalisation, the calculation of avoided costs is now commonly applied by the electric companies as an important supporting method enabling to take economic decisions in electricity investment and investments plans.