Electricity Tariff

Definition: The amount of money frame by the

supplier for the supply of electrical energy to various
types of consumers in known as an electricity tariff.
 In other words, the tariff is the methods of charging
a consumer for consuming electric power.
 The tariff covers the total cost of producing and
supplying electric energy plus a reasonable cost.
 Electricity Tariff
The actual tariffs that the customer pay depends on
the consumption of the electricity.
The consumer bill varies according to their
requirements.
The industrial consumers pay more tariffs because
they use more power for long times than the
domestic consumers.
The electricity tariffs depends on the following
factors
 Simple Tariff

Simple tariff. In this type of tariff, a fixed rate is

applied for each unit of the energy consumed. ...
Flat rate tariff. ...
Block rate tariff. ...
Two part tariff. ...
Maximum demand tariff. ...
Power factor tariff. ...
Three part tariff.
 Simple Tariff

When there is a fixed rate per unit of energy consumed,

it is called a simple tariff or uniform rate tariff.
In this type of tariff, the price charged per unit is
constant i.e., it does not vary with increase or decrease
in a number of units consumed.
The consumption of electrical energy at the consumer’s
terminals is recorded by means of an energy meter.
This is the simplest of all tariffs and is readily
understood by the consumers
 Flat rate tariff.
When different types of consumers are charged at different
uniform per unit rates, it is called a flat rate tariff.
In this type of tariff, the consumers are grouped into
different classes and each class of consumers is charged at
a different uniform rate.
For instance, the flat rate per kWh for lighting load may be
60 paise, whereas it may be slightly less(say 55 paise per
kWh) for power load.
The different classes of consumers are made taking into
account their diversity and load factors.
The advantage of tariff is that it is fairer to different
types of consumers and is quite simple in calculations.
 Block rate tariff
 When a given block of energy is charged at a specified rate and the
succeeding blocks of energy are charged at progressively reduced rates, it is
called a block rate tariff.
  In block rate tariff, the energy consumption is divided into blocks and the
price per unit is fixed in each block.
The price per unit in the first block is the highest and it is progressively
reduced for the succeeding blocks of energy.
For example, the first 30 units may be charged at the rate of 60 paise per
unit; the next 25 units at the rate of 55 paise per unit and the remaining
additional units may be charged at the rate of 30 paise per unit.
  The advantage of tariff is that the consumer gets an incentive to consume
more electrical energy.
This increases the load factor of the system and hence the cost of generation
is reduced.
However, its principal defect is that it lacks a measure of the consumer’s
demand.
This type of tariff is being used for the majority of residential and small
commercial consumers.
 Two-part tarif

When the rate of electrical energy is charged on the basis of

maximum demand of the consumer and the units consumed,
it is called a two-part tariff.
In two-part tariff, the total charge to be made from the
consumer is split into two components viz., fixed charges and
running charges.
The fixed charges depend upon the maximum demand of the
consumer while the running charges depend upon the
number of units consumed by the consumer.
Thus, the consumer is charged a certain amount per kW of
maximum demand plus a certain amount per kWh of energy
consumed i.e.,
 Two-part tarif

 
 Two-part tarif

This type of tariff is mostly applicable to industrial consumers who

have appreciable maximum demand.
Advantages:
(i) It is easily understood by the consumers.
ii) It recovers the fixed charges which depend upon the maximum
demand of the consumer but are independent of the units consumed.
Disadvantages:
(i) The consumer has to pay the fixed charges irrespective of the fact
whether he has consumed or not consumed the electrical energy.
(ii) There is always error in assessing the maximum demand of the
consumer.
 Maximum demand  tariff
It is similar to the two-part tariff with the only
difference that the maximum demand is actually
measured by installing maximum demand meter in
the premises of the consumer.
This removes the objection of two-part tariff where
the maximum demand is assessed merely on the
basis of the rateable value.
This type of tariff is mostly applied to big
consumers.
However, it is not suitable for a small consumer (e.g.,
residential consumer) as a separate maximum
demand meter is required.
 Power factor tariff

The tariff in which power factor of the consumer’s

load is taken into consideration is known as power
factor tariff.
In an a.c. system, power factor plays an important
role.
A low power factor increases the rating of station
equipment and line losses.
Therefore, a consumer having low power factor must
be penalised
.The following are the important types of power
factor tariff :
 Power factor tariff

i) KVA maximum demand tariff:  It is a

modified form of a two-part tariff.  In this case, the
fixed charges are made on the basis of maximum
demand in kVA and not in kW.
As kVA is inversely proportional to power factor,
therefore, a consumer having low power factor has to
contribute more towards the fixed charges.
This type of tariff has the advantage that it
encourages the consumers to operate their
appliances and machinery at improved power factor.
 Power factor tariff

 Sliding scale tariff: This is also known as

average power factor tariff.  In this case, an average
power factor, say 0·8 lagging, is taken as the reference.
 If the power factor of the consumer falls below this
factor, suitable additional charges are made.
 On the other hand, if the power factor is above the
reference, a discount is allowed to the consumer.
 KW and KVAR tariff: In this type, both active power
(kW) and reactive power (kVAR) supplied are charged
separately.
 A consumer having low power factor will draw more
reactive power and hence shall have to pay more charges.
 Three-part tariff

 When the total charge to be made from the consumer is

split into three parts viz., fixed charge, semi-fixed charge
and running charge, it is known as a three-part tariff.
i.e.,
It may be seen that by adding a fixed charge or
consumer’s charge (i.e., a) to the two-part tariff, it
becomes three-part tariff.
The principal object of this type of tariff is that the
charges are split into three components.
 This type of tariff is generally applied to big
consumers.          
Three-part tariff