This paper discusses the procedure used in determining the possible economies to be obtained on an electric utility system through the establishment of an expansion policy for power production facilities wherein a certain amount of decentralized peak-shaving capacity is periodically installed. Many factors are considered in determining the amount of peak-shaving capacity and the possible effect of changes in future conditions. A simplified equation of cost savings under a stated peak-shaving policy is presented. Also included is a theoretical analysis which indicates the portion of savings attributable to the peak-shaving function as contrasted with that attributable to reduction in average reserve margins possible with the use of the smaller sized units under a decentralized peak-shaving policy.