tariff

TARIFF

The electrical energy produced at the generating station is delivered to a large number of consumers. The rate at which energy is sold to the consumers (called tariff) is fixed by the supplying company .While fixing the tariff, the supply companies are to ensure that they should not only recover the total cost of producing the energy but also earn some profit. However, the profit should be minimum possible so that electrical energy can be sold at reasonable rates and the consumers insured to use more electricity. 

IMPORTANT TERMS

·      Connected load :  The sum of the continuous ratings of all the equipments connected to the power system is called connected load.

·      Maximum Demand :   The load on the power station is not constant, it varies from time to time.The greatest of all the demands (loads) which occur during a given period is called maximum demands.

·      The ratio of maximum demand on the system to the rated connected load to the system is called demand factor.

     Mathematically ,Demand factor  =   Maximum demand  

                                                               Connected load

     The actual maximum demand is always less than the rated load connected to the system , therefore, demand factor is always less than unity.

The rate of electrical energy at which it is sold to the consumers is called tariff .The supply companies invest money to generate, transmit and distribution of electrical energy, a tariff is fixed .The cost of generation depends upon the magnitude of energy consumed by the consumers and his load conditions. Therefore, due consideration is given to different types of consumers (e.g. domestic, commercial and industrial) while fixing a tariff

The main objective of the tariff is to ensure the recovery of the total cost of generation and distribution .Tariff should include the following items:

(1) Recovery of cost of electrical energy generated at the generating system.

(2) Recovery of cost on the capital investment in transmission and distribution system.

(3) Recovery of cost of operation, supplies and maintenance of equipment.

(4) Recovery of cost of metering equipment, billing and miscellaneous services .

(5) A marginal return (Profit) on the capital investment

TYPES OF TARIFF

There are various types of consumers ( domestic, commercial and industrial etc.) and their energy requirements are also different. Accordingly, several types of tariffs have been designed so far, out of which the most commonly applied are described below:

1.      SIMPLE TARIFF

2.      FLAT RATE TARRIF

3.      BLOCK RATE TARIFF

4.      TWO-PART TARIFF

5.      MAXIMUM DEMAND TARIFF

6.      POWER FACTOR TARIFF

1.Simple Tariff: The tariff in which the rate per unit of energy is fixed, is called simple tariff.

This is a simplest possible tariff. The rate per unit of energy consumed by the consumer is fixed irrespective to the quantity of energy consumed by a consumer. This energy consumed is measured by installing an energy meter

The following are the advantages :

            1.         It is in simplest form and easily understood by the consumers.

            2.         Consumer is to pay as per his consumption.

Disadvantages

1.                  Consumer is to pay the same rate per unit of energy consumed irrespective of the number of units consumed by him. Hence, consumers are not encourage to consume more energy.

2.                  The cost of energy per unit delivered is high.

3.                  The supplier does not get any return for the connection given to the consumer if consumer does not consume any energy in a particular month.

Application :

Since it is very simple form of tariff, it is generally applied to tube wells which are operated for irrigation purposes

2. Flat rate tariff.  The tariff in which different types of consumers are charged at different per unit rates is called flat rate tariff. This type of tariff is similar to simple tariff. Only difference is that consumers are grouped into different classes and each class of consumer is charged at a different per unit rate. For example flat rate for fan and light loads is slightly higher than that for power loads.

Advantages

(1) It is fairer to different types of consumers.

( 2) It is quite simple in calculations.

Disadvantages

(1) Consumers are not encouraged to consume more energy because same rate per unit of energy consumed is charged irrespective of the quantity of energy consumed.

(2) Separate meters are required to measured energy consumed for light loads and power loads.

(3) The suppliers does not get any return for the connection given to the consumer if he does not consume any energy in a particular period or month. 

Application :Generally applied to domestic consumers. Since it is simple and easy for explanation  to consumers, therefore this tariff is  

3.block rate tariff:

The tariff in which first block of energy is charged at a given rate and the succeeding blocks of energy are charged at progressively reduced rates is called block rate tariff

In this type of tariff, the energy units are divided into numbers of blocks and the rate per unit of energy is fixed for each block. The rate per unit of energy for the first block is the  highest and reduces progressively with the succeeding blocks. For example, the first 100 units may be charged at the rate of Rs. 3.00 per unit; the next 100 units may  be charged at the rate of Rs.2.50 per unit and the remaining additional units may charged at the rate of Rs. 2.00 per unit. 

Advantages:

(1)   By giving an incentive, the consumers are encouraged to consume more energy. This increases the load factor of the power system and hence reduces per unit cost of generation.

(2)    Only one energy meter is required to measure the energy .

Disadvantages:

(1)   The supplier does not get any return for the connection given to the consumer if consumer does not consume any energy in a particular period.

Application

This type of tariff is mostly applied to domestic and small commercial consumers.

4.Two – Part Tariff

The tariff in which electrical energy is charged  on the basis of maximum demand of the consumer and the units consumed by him is called two- part tariff.

In this tariff, the total charges to be made from the consumer are split into two components namely fixed charges  and running charges. The fixed charges are independent of energy consumed  by the consumer but depend upon the maximum demand, whereas the running charges depend upon the energy consumed by the consumer. The maximum demand of the consumer is assessed on the basis of the kW capacity of all the electrical devices owned by a particular consumer or on the connected load

Thus, the consumer is charged at a certain amount per kW of energy is consumed i.e.

        Total charges= Rs. (a X kW + b X kWh )

where, Rs. a= charges per kW of maximum demand

              Rs. b= charges per kWh of energy consumed

In this tariff basically, the charges made on maximum demand recovers the fixed charges of generation such as interest and depreciation on the capital cost of building and equipment, taxes and a part of operating cost which is independent of energy generated. Whereas, the charges made on energy consumed, recovers operating cost which varies with variation in generated (or supplied) energy.

Advantages

(1)   It is easily understood by the consumers.

(2)   The supplier gets the return in the form of fixed charges for the connection given to the consumer even if he does not consume any energy in a particular period.

Disadvantages

(1)   If a consumer does not consume any energy in a month even then he has to pay the fixed charges .

(2)   Since the maximum demand of consumer is not measured, therefore, there is always conflict between consumer and the supplier to assess the maximum demand.