Produce both electricity and heat, used in - geothermal - fossil fuel - nuclear - biomass Plant has equipment: - unique to electricity - unique to heating - common for both Consumers get costs: - unique to electricity - unique to heat - common for both ## Gov't Interventions - Cross subsidies - heating less competitive, firm can raise heating costs - can then lower costs in the more competitive electricity market to attract more customers - discourages competition, reduces social surplus How to split common cost to prevent cross subsidy? - Can include all benefit of CHP in heat or electricity, but no more