Tariff

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

Although tariff should include the total cost of producing and supplying electrical energy plus the profit, yet it can not 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 users and his load conditions. Therefore.,in all fairness, due consideration has has to be given to different types of consumers (e. g., Insustrial, domestic and commercial) while fixing the tariff. This makes the problem of suitable rate making highly complicated.

Obejectives of tariff. Like other commodities, electrical energy is also sold at such a rate so that it not only returns to the cost but also reasonable profit. Therefore, a tariff should include the filling items :

(1).Recovery of cost of producing electrical energy at the power station

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

(3).Recovery of cost operation and maintenance of supply of electrical energy e. g., metering equipments, billing etc.

(4).A suitable profit on the capital investment.

Desirable characteristics of a tariff 

A tariff must have the following desirable characteristics

(1)Proper return : The tariff should be such that such that it ensures the proper return from each consumer. In other words, the total energy receipts from the consumers must be equal to cost of producing and supplying electrical energy plus reasonable profit.This will enable the electric supply company to ensure continuous and reliable service to the consumers.

(2).Fairness :Tariff must be fairness so that different types of consumers are satisfied with rate of charge of electrical energy. This a big consumer should be charged at a lower rate than a smaller consumers. It is because increased energy consumption spread the fixed charges over the greater number of units, thus reducing the overall cost of producing electrical energy. Similarly, a consumer whole lead condition do no deviate much from the ideal (i.e., non variable) should be charged at lower rate than the one whose load condition changes appreciably from the ideal.

(3).Simplicity :The tariff should be simple so that any ordinary consumer can easily understand it. A complicated tariff may cause an opposition from the public which is generally distrust ful of supply companies.

(4). 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 investment is relatively safe due to non competition in the market,. This call for the profit to be restricted to 8%or so per annum

(5)Attractive :The tariff should be attractive so that a large no of consumer are encouraged to use electrical energy. Efforts should be made to fix the tariff in such a way so that consumers can pay easily.

Types of Tariff :

There are several types of tariff. However, the following are 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 types of tariff, the price of charged per unit is constant i.e., it dost not vary with increase or decrease in number of unit consumed. The consumption of electrical energy at the consumers terminal is recorded by means of energy meter. This is simplest of all tariff and is readily understood by the consumers. 

Disadvantages.

(1).There is no discrimination between different types of consumers since every consumer has to pay equitably for fixed charges.

(2). The cost per unit delivered is high

(3). It does not encourage the use of electricity.

2.Flat rate tariff. When different types of consumers are changed at different uniform per unit rates, it is compounded 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 60paise, where may be slightly less (say55 paise per hour kwh) for power load. This different classes of consumers are made taking into account their diversity and load factors. The disadvantage of such a tariff is that it is more fair to different types of consumers and is quite simple calculations

Disadvantages.

(1). Since the flat rate tariff varies according to the way the supply is used separates meters are required for lighting load, power load etc. This makes the application of such a tariff expensive and complicated.

(2).A particular class of consumer is charged at the same rate irrespective of magnitude of energy consumed. However, a big consumer should be charged at a lower rate as in his case the fixed charges per unit are reduced. 

(3).Block rate tariff. When a given block of energy is charged at a specified rate and the succeeding block of energy are charged at progressively reduced rates, it is called a block rate tariff. 

 In block rate tariff, the energy energy consumption is divided into the blocks and price per unit is fixed in each block. The price per unit in the first block is highest mountain and it it progressively reduced for 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 the rate of 55paise per unit and the remaining additional units may be charged at the rate of 30 paise per unit. 

The advantages of such a tariff is that consumer gets an incentive to consume more electrical energy. This increases the the load factor of system and hence the cost of generation is reduced. However, it's principal defect is that it lacks a measure of consumers demand. This type of tariff is being used for 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 unit 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 depends upon the maximum demand of the consumer while the running charges depends upon the number of units consumed by the consumer. Thus the consumer is charged at the certain amount per kW of maximum demand plus a certain amount per kwh of energy consumed i. e., 

Total charges =Rs(b*kW+ckWh) 

b= charges per kW of maximum demand 

c= charge per kWh of energy consumed 

This type of tariff is mostly applicable to industrial consumers who have appreciable maximum demand. 

Advantages 

(1).It is easily understood by the consumers. 

(2). It recovers the fixed charges which depends upon the maximum demand of the the consumer but are independent of unit consumed. 

Disadvantages 

(1) The consumers has to pay fix charges irrespective of the fact whether he has consumed or not consumed the electrical energy. 

(2).There is always error in assessing the maximum demand of consumer. 

5.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 premises of consumers. This removes the the objection of two part tariff where the maximum demand is assessed merely on the basis of reteable value. This type of tariff is mostly applied to big consumers. However, it is not suitable for small consumers(e. g., residential consumer) 7 as a separate maximum demand meter is required. 

6.Power factor tariff. The tariff in which power factor of the consumers load is taken into considerations is known as power factor tariff.