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This paper describes a suggested tariff or payment for the local supply of reactive power from distributed energy resources. The authors consider four sample customers, and estimate the cost of supply of reactive power for each customer. The power system savings from the local supply of reactive power are also estimated for a hypothetical circuit. It is found that reactive power for local voltage regulation could be supplied to the distribution system economically by customers when new inverters are installed. The inverter would be supplied with a power factor of 0.8, and would be capable of local voltage regulation to a schedule supplied by the utility. Inverters are now installed with photovoltaic systems, fuel cells and microturbines, and adjustable-speed motor drives.