TARIFF • The rate at which electrical energy is supplied to a consumer is known as “Tariff”. • Tariff should include the total cost of producing and supplying electrical energy (i.e. cost of generation, transmission and distribution) plus the profit. • Tariff is different for different types of consumers since cost of generation of electrical energy depends on the magnitude of electrical energy consumed by the consumers and their load conditionsto a considerable extent. • Thus, types of consumers (e.g., industrial,domestic and commercial) are taken into consideration while fixing the tariff. OBJECTIVES OF TARIFF: Like other commodities, electrical energy is also sold at such a rate so that it not only returns the cost but also earns reasonable profit. And hence, a tariff should include the following items : (1) Recovery of cost of electrical energy generation at the power station. (2) Recovery of cost on the capital investment in transmission and distribution systems. (3) Recovery of cost of operation and maintenance of supply of electrical energy e.g., metering equipment, billing etc. (4) A suitable profit on the capital investment. DESIRABLE CHARACTERISTICS OF A TARIFF: A tariff must have the following desirable characteristics: (i) (ii) Proper returns: • The tariff should be such that it ensures the proper return from each consumer. • Total amount of bill received from the consumers must be equal to the cost of generation, transmission and distribution of electrical energy plus reasonable profit. • This will enable the electric supply company to ensure continuous and reliable service to the consumers. Fairness: • The tariff must be fair so that different types of consumers are satisfied with the rate of charge of electrical energy.
(iii) (iv) (v) • A big consumer should be charged at a lower rate than a small consumer since the increased energy consumption spreads the fixed charges over a greater number of units, thus reducing the overall cost of generation of electrical energy. • Similarly, a consumer whose load conditions do not deviate much from the ideal should be charged at a lower rate than the one whose load conditions change appreciably from the ideal. Simplicity: • The tariff should be simple so that an ordinary consumer can easily understand it. • A complicated tariff may cause an opposition from the public which is generally distrustful of supply companies. Reasonable profit: • The profit element in the tariff should be reasonable. An electric supply company is a public utility company and generally enjoys the benefits of monopoly. • Therefore, the profit is generally restricted to approx. 8%per annum. Attractive: • The tariff should be attractive so that a large number of consumers are encouraged to use electrical energy. • The tariff should be made such that the consumers can pay the bills easily. TYPES OF TARIFF: There are several types of tariff. The following are the commonly used types of Tariff:  Simple tariff / Uniform rate tariff  Flat rate tariff  Block rate tariff  Two-part tariff  Maximum demand tariff  Power factor tariff (i) kVA Maximum Demand Tariff (ii) Sliding scale tariff (iii) kW and kVAR tariff  Three-part tariff
 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 two-part tariff, the total charges are split into two components: (a) Fixed charges; (b) Running charges. • The Fixed charges depend upon the Maximum Demand of the consumer. • 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 i.e., Total charges = Rs (b × kW + c × kWh) where, b = charge per kW of maximum demand c = charge per kWh of energy consumed • This type of tariff is mostly applicable to industrial consumers. 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 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. • It is not suitable for a small consumer (e.g., residential consumer) as a separate maximum demand meter is need to be installed for the separate consumer.
 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 AC 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: (i) kVA Maximum Demand Tariff: • It is a modified form of 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. (ii) 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 the reference, suitable additional charges are made. • And if the power factor is above the reference, a discount is allowed to the consumer. (iii) kW and kVAR tariff: • In this type, both active power and reactive power (kW and 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: • By adding fixed charge or consumer’s charge (i.e., a) to the two-part tariff, it becomes three-part tariff. • When the total charges are split into three parts viz., (a) Fixed charges; (b) Semi-fixed charges; and (c) Running charges Then it is known as a three-part tariff.