Tariff for electricity consumption, its types

2. Tariff is defined as the rate of consumption of
electrical power. The main objectives of tariff are
to distribute the cost among different of the
consumer. The Tariff must recover the cost of
capital investment. The cost of operation,
maintenance cost and a satisfactory return on the
total capital investment. Different rates are
maintained for a different level of consumers.
What is ‘Tariff’

3. The electric rate is the
price you pay per unit of
electricity to your energy
utility or retailer. The
electricity tariff (or rate)
structure is the
combination of rates,
additional charges, and
other rules that determine
how your electricity bill is
calculated.
What is a tariff/rate structur

4. The various type of tariff structures is as follows:
Types of
‘Tariff’
 Simple Tariff
 Flat demand tariff
 Block Rate tariff
 Flat rate tariff
 Two part tariff
 Maximum Demand tariff
 Power factor tariff
 Three part tariff
 Peak tariff

5. This is the simplest type of tariff structure. In this
structure, the cost of electrical energy is charged
only on the basis of units consumed. This is also
known as uniform rate tariff. This type of tariff
encourages the consumer to disconnect the
equipment after being used.
In Simple Tariff
C=BY
Where C = total cost
B = kWh of energy consumed
Y = rate of kWh
Simple Tariff

6. Flat demand tariff
In this type of tariff structure, different consumers are charged at the
same rate but the total demand and the energy consumption were
fixed. Electricity bill depends only on maximum demand and
independent of energy consumed. In the early phase of electricity
generation, energy consumption is confined in few applications such
as in light and hour of electricity used is also fixed. They used to be
charged on the basis of a number of a lamp installed and the hour of
usage.
Block Rate tariff
In this type of tariff, consumers are charged blockwise. One block is
charged at higher rated and other blocks are charged at relatively
reduced rate. This type of tariff structure increases the Load factor so
the generation cost is reduced.

7. Two part tariff
In this type of tariff structure, the charged rate is split into two
components which are fixed charge and running charge. Fixed
charge is proportional to the maximum demand whereas running
charge is proportional to the unit consumed. This tariff structure is
also called as Hopkinson Demand rate. In this tariff type, consumers
have to pay the bill on maximum demand irrespective of their
consumption.
In this type of tariff, different consumers are charged at a different
rate. Usually, higher rates are charged for power load than normal
load. This type of rate is defined on the basis of load factor and
diversity factor. This type of method is usually employed in public. In
this type of tariff, the different meter is used for a different load. It is
based on diversity factor which is difficult to derive.
Flat rate tariff

8. Two part tariff charges fixed rate on the maximum demand which is
not actually measured so consumers have to pay the unnecessary
price. These disadvantages are removed using a maximum
demand tariff structure in which the maximum demand is actually
measured. This type of tariff structure is usually applied to bulk
supply and industrial consumer
Maximum Demand tariff
Peak tariff
The load can be divided into three parts which are normal load,
peak load, and off-peak load. Peak load is that load at which the
amount of consumption is high which causes stress on generation
station. So tariff rates are different for different load type. Tariff
rates are higher for peak load and lower for the off-peak load.

9. Power factor tariff
The efficiency of the system depends on the power factor of the
system. Low power factor means high loss which leads to the poor
efficiency. So consumers are charged for poor power factor in
order to increase the utility of plant and equipment to be
maximum. KVA maximum demand, kWh and kVARh tariff and
average power factor tariff are the methods of power factor tariff.
KVA maximum tariff is same as two-part tariff but instead of KW,
KVA is measured. Power factor increases with a decrease in
KVARh so it is charged separately. In average power factor tariff,
one reference power factor is taken as reference and rate is
charged. More rate is charged for low power factor then reference
and discount is given for high power factor than the reference
value.