A 1 kWe micro combined heat and power (CHP) system based on high temperature proton exchange membrane fuel cell (PEMFC) technology is modeled and optimized by formulation and application of a process integration methodology. The system can provide heat and electricity for a single-family household. It consists of a fuel cell stack, a fuel processing subsystem, heat exchangers, and balance-of-plant components. The optimization methodology involves system optimization attempting to maximize the net electrical efficiency, and then by use of a mixed integer nonlinear programming (MINLP) problem formulation, the heat exchange network (HEN) annual cost is minimized. The results show the high potential of the proposed model since high efficiencies are accomplished. The net electrical efficiency and total system efficiency, based on lower heating value (LHV), are 35.2% and 91.1%, respectively. The minimized total annual cost of the HEN is $8,147 year–1.