A combined heat and AC power generating system is disclosed having black start capability for the full time, simultaneous production of both electricity and heat. Heat generated within the system is captured and used for heating applications such as heating building air and tap water. The power generating system comprises an engine, generator, rectifier, variable frequency drive inverter, and inverter control electronics. The system provides improved efficiency and prolonged engine life by always operating the engine with its throttle fully open to obtain maximum efficiency and the engine is normally operated near its stall point. In this operating state the inverter control electronics adjust the power output from the inverter to control the speed of the engine. This is done by increasing the power output from the inverter when the power drawn by the load decreases. This causes the engine to operate closer to its stall point and it slows down. The power from the inverter is decreased when the power drawn by the load increases. This causes the engine to operate further from its stall point and it speeds up. The slight power changes to facilitate this operation will always be drawn from or distributed to the electric utility grid so there is no wasted power. The inverter control electronics are responsive to signals from loads such as refrigeration loads to cause the frequency of the inverter output to change to permit the refrigeration load to operate more efficiently.