(1) (Regulatory) The amount of money that an electric utility would need to spend for the next increment of electric generation to produce or purchase elsewhere the power that it instead buys from a co-generator or small-power producer. Federal law establishes broad guidelines for determining how much a qualifying facility (QF) gets paid for power sold to the utility. (2) The cost the utility would incur but for the existence of an independent generator or other energy service option. Avoided cost rates have been used as the power purchase price utilities offer independent suppliers (see Qualifying Facilities).