Saturday, 1 June 2019

What is Tariff and types of Tariff ?

What is Tariff and types of Tariff ?


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

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

01. Recovery of cost of producing electrical energy at the power station.

02. Recovery of cost on the capital investment in transmission and distribution systems.

03. Recovery of cost of operation and maintenance of supply of electrical energy e.g., metering equipment, billing etc.

04. A suitable profit on the capital investment.

Types of Tariff

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

01. Simple tariff : When there is a fixed rate per unit of energy consumed, it is called a simple tariff or uniform rate tariff.

02. Flat rate tariff : When different types of consumers are charged at different uniform per unit rates, it is called a flat rate tariff.

03. 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.

04. 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.

05. Power factor tariff : The tariff in which power factor of the consumer's load is taken into consideration is known as power factor tariff.

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