TARRIF

                                TARIFF                                

 Tariff

The rate at which electrical energy is supplied to a consumer is known as a tariff.

Although tariff should include the total cost of producing and supplying electrical energy plus the profit, yet it cannot be the same for all types of consumers. It is because the cost of producing electrical energy depends to a considerable extent upon the magnitude of electrical energy consumed by the user and his load conditions. Therefore, in all fairness, due consideration has to be given to different types of consumers (e.g., industrial, domestic and commercial) while fixing the tariff. This makes the problem of suitable rate-making highly complicated.

 Types of Tariff

There are several types of tariffs. However, the following are the commonly used types of tariff.

1. 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 an increase or decrease in the 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.

2. 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 maybe 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 such a tariff is that it is fairer to different types of consumers and is quite simple in calculations.

3. 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 such a 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.

4. Two-part tariff.

 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 a 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 at a certain amount per kW of maximum†† demand plus a certain amount per kWh of energy consumed.

 5. Maximum demand tariff.

 It is similar to a two-part tariff with the only difference that the maximum demand is actually measured by installing a maximum demand meter in the premises of the consumer. This removes the objection of a 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.

 6. 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 AC system, the power factor plays an important role. A low power factor increases the rating of station equipment and line losses. Therefore, a consumer who has a low power factor must be penalized. The following are the important types of power factor tariff:

. k VA 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 the power factor, therefore, a consumer having a 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 an improved power factor.

.Sliding scale tariff:

 This is also known as the 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 a low power factor will draw more reactive power and hence shall have to pay more charges.

7. Three-part tariff.

When the total charge to be made from the consumer is split into three parts, fixed charge, semi-fixed charge, and running charge, it is known as a three-part tariff.

 Total charge = Rs (a + b × kW + c × kWh)

where a = fixed charge made during each billing period. It includes interest and depreciation on the cost of secondary distribution and labor cost of collecting revenues,

 b = charge per kW of maximum demand,

c = charge per kWh of energy consumed