Tariff

Different method of charging a consumer or rates of payments by the

consumer, for consuming electrical energy are known as tariffs.

Objective of Tariff
The main objective of the tariff is to distribute equitably the cost of
supplying energy among the various category of use.
A tariff should cover the following items:
• Recovery of cost of capital investment in generating,
transmitting and distributing equipment.
• Recovery of cost of operation, supplies and maintenance of
equipment.
• Recovery of cost of metering and billing equipment
• Recovery of cost of collection and miscellaneous services .
• A satisfactory return on the total capital investment.

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Dr LB Shilpakar -- KEC
 Factors affecting the framing of tariff
Principal factors involved in fixing of a tariff are
1. Proper return is secured from each type of consumer.
Tariff is fixed such that it will
i. result in a revenue meeting all the expenditure
ii. creates fund for future expansion to meet an anticipated load.

2. The tariff should reflect the cost of the maximum demand of the
consumer type in proportion to the system peak demand.

3. Time at which maximum demand occurs

• encouraged to use power during off peak hours
• penalized for high loads demanded at system peak.

i. The load factor improves when a load is supplied during off-peak

hours. Improved load factor reduces cost per kWh generated.

ii. If the maximum demand of the consumer coincides with the

system peak, additional capacity charge is applied.
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Dr LB Shilpakar -- KEC
 Factors affecting the framing of tariff
4. Power factor is important for plant economics. Causes of low p.f.
(a) Higher plant capacity is needed
(b) Cost of I2R losses increases
(c) Poor voltage regulation.
The cost of generation increases due to p.f. correction
equipment

5. Cost of electrical energy is reduced by using a large amount of

energy for longer periods.
(increased energy consumption spreads the fixed charges over a greater number
of units, reducing cost per kWh.)
A big consumer is charged at a lower rate than a small consumer.

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Dr LB Shilpakar -- KEC
 Factors affecting the framing of tariff
• Type of service rendered also determines the tariff.
• Responsibility of state to provide some basic necessities to its
citizens.
• Electricity supply to a domestic consumer, having light and
fan points, cannot be charged at higher rates.
• Supply of electrical energy to agricultural loads cannot be
charged at a higher rate because of national concern for
agricultural output.
• Higher rate for the consumers using electricity for extra
comforts
air-conditioning,
entertainment,
commercial purposes 4
Dr LB Shilpakar -- KEC
 Important types of tariff
Some of the important types of tariff are as follows:
1. Flat demand rate tariff
2. Simple tariff (Straight-line meter rate tariff)
3. Block meter rate tariff
4. Two-part tariff
5. Power-factor tariff
6. Seasonal rate tariff
7. Peak load tariff
8. Three-part tariff

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Dr LB Shilpakar -- KEC
 Flat demand rate tariff
• The flat demand rate tariff is express in the form, C= Ax.
where x = the number of lamps or load connected in kW
A = rate per lamp or per kW of connected load.
• Electricity bill
depends only on the maximum demand.
independent of the energy consumed.
• The amount of connected load and hours of their use are known
and the rates of charges are made accordingly.
• Street lighting, sign lighting, signal system, and irrigation tube
wells.
• The metering equipment, meter reading, billing costs are
eliminated resulting decrease in total cost.
• It encourages the consumers to keep their appliances connected
to the supply mains even when not required.

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Dr LB Shilpakar -- KEC
 Simple tariff (Straight-line meter rate tariff)
• This type of tariff is given by C=By
where y = kWh of energy consumed, B = cost per kWh of energy
• The bill depends only on the amount of energy consumed.
• It encourages the consumers to disconnect the supply when not required.
• It charges at equal rates to different types of consumers irrespective of their
load factor, diversity factor and power factor.
• Modifications in Simple tariff
 different types of consumers are charged at different rates.
 tariff for each type of consumption consider the LF and DV of the load.
• The domestic consumers is charged at higher rates as compared to power
consumers. (LF of light and fan load is low and the demand is during peak hours of the day.)
• Separate energy meters are to be installed for light and power loads.
• Same rate irrespective of the magnitude of energy consumed.
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Dr LB Shilpakar -- KEC
 Block meter 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 decreases for the
succeeding blocks.
• The first few units of energy at a certain rate, the next few at a slightly
lower rate and the remaining units at a still lower rate.
• Increases the LF of the system and the generation cost is reduced.
• Does not encourage energy conservation.
• The energy crisis in the country has compelled to adopt the reverse form
of this tariff.
 discourage to use more energy,
 the first few kWh are charged at a certain rate, the next few at a
slightly higher rate, the next few at a still higher rate, and so on.

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Dr LB Shilpakar -- KEC
 Two-part tariff (Hopkinson Demand rate)
• In two-part tariff the total charge to be made from the consumer
is split into two components.
1st comp : fixed charge dependent upon the maximum demand.
2nd comp: running charge dependent upon the energy consumed.

• This tariff can be expressed as

where A = charge per kW of maximum demand

B = charge per kWh of energy consumed

• The maximum demand can either be taken as

 a certain fraction of the connected load or
 measured by a maximum demand indicator (hourly or half
hourly or 15 min).

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Dr LB Shilpakar -- KEC
 Two-part tariff (Hopkinson Demand rate)
• The tariff charge made on maximum demand recovers the fixed
charges such as
 Interest on the capital cost (e.g. building and equipment)
 depreciation on the capital cost
 taxes
 insurance charges
 operating cost (independent of energy but varies with maximum demand.)

• The charge made on total energy consumption recovers the

operating cost, which varies with variation in energy supplied.

• The customer has to pay the fixed charge irrespective of the

consumption.

• This tariff is mostly applicable to medium industrial consumers.

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Dr LB Shilpakar -- KEC
 Power factor tariff
• Plants must be operated at the most economical p.f. for utilizing
equipment to the maximum capacity.

• Power factor tariff helps in improving the power factor at plants.

• The tariff in which power factor of the consumer’s load is taken

into consideration is called power factor tariff.
kVA maximum demand tariff
• Maximum demand is measured in kVA instead of in kW.
Total charges = A (kVA) + B (kWh)

• This is also a 2-part tariff.

• Encourages the consumers to operate their machines at improved

p.f. because low p.f. will increases the kVA and will cause more
demand charges.
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Dr LB Shilpakar -- KEC
 Power factor tariff
kWh and kVArh tariff
Total charges = A1 (kWh) + B1 (kVArh)

• Since kVArh decreases with the increase in p.f. this type of tariff
will induce the consumer to improve the p.f.

Sliding scale or average power factor tariff

• An average p.f., say 0.8 lagging is taken as the reference.

• If the p.f. of the consumer is below this reference value, an

additional charge is realized from the consumer for each step
decrease of 0.01 below 0.8.

• Similarly, if the p.f. is above this reference value, a discount is

allowed to the consumer for each step rise of 0.01 above.
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Dr LB Shilpakar -- KEC
 Seasonal rate tariff
• The seasonal rate tariff specifies higher prices per kWh used
during the season of the year in which the system peak occurs
(on-peak season).

• The prices per kWh are lower during the season of the year in
which the usage is lowest (off-peak season).

Peak-load tariff
• The peak load tariff is similar to seasonal rate tariff.
• It specifies
 higher prices per kWh used during the peak period of the day
 lower prices during the off-peak period of the day.

• During off-peak period, a large proportion of the generating and

distribution equipment will be lying idle.

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Dr LB Shilpakar -- KEC
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 Peak-load tariff
• The energy can be supplied without incurring an additional capital
cost and should prove very profitable.

• This type of tariff is very advantageous for certain processes such

as
 water heating by thermal storage,
 pumping,
 refrigeration etc.

• The seasonal rate tariff and peak load tariff are both designed to
reduce the systems peak load and therefore, reduces the system
idle standby capacity.

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Dr LB Shilpakar -- KEC
 Three-part tariff
Total charge is split into three elements, namely
 fixed charge,
 semi-fixed charge
 variable charge.

The bill of the consumer is calculated as

where C = total charge for a certain period (say one month)

x = maximum demand during the period (kw or kVA)
y = total energy consumed during the period (kWh)
A = cost per kW or per kVA of maximum demand
B = cost per kWh of energy consumed
D = fixed charge during each billing period
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Dr LB Shilpakar -- KEC
 Three-part tariff
• Fixed charge recovers the cost of
 expenses in giving a supply service connection
(incurred once only but charged for either by an annum sum or in each billing period)

 office and service expenses including accounting, metering

and establishment charges.

• Semi-fixed charge recovers

 the plant initial cost
 the operating cost
(which is independent of total energy supplied but varies with maximum demand.)

• Variable charge recovers the cost varying with the variation in

energy supplied such as on account of fuels etc.

• The three-part tariff is generally applied to big consumers.

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Dr LB Shilpakar -- KEC
 Tariff system in Nepal
Classification of consumers
1. Domestic consumer
1.1 230 V, 5-60 A Single phase supply domestic consumer
1.2 400 V, 1- 10 kVA Domestic consumer
1.3 400 V, 10-25 kVA Domestic consumer
1.4 230/400 V 1-6 kW Commercial use Domestic consumer
(small shops, religious or social orgnaization, health clinics,
school, college, poultry, logde, hotel, restaurant)

2. Temple/Vihar/Moth/Gumba/Church/Masjid (energy used in

religious activities)

3. Industrial consumer
3.1 230/400 V Rural and cottage industry up to 20 kW.
3.2 230/400 V Small industrial consumer
3.3 11 kV Industrial consumer
3.4 33 kV industrial consumer
3.5 66 kV & above voltage Industrial consumer

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Dr LB Shilpakar -- KEC
 Tariff system in Nepal
4. Commercial consumer
i. 230/400 V Commercial consumer
ii. 11 kV Commercial consumer
iii. 33 kV Commercial consumer
5. Non-commerial consumer
i. 230/400 V non-commercial consumer
ii. 11 kV Non-commercial consumer
iii. 33 kV Non-commercial consumer
6. Street light consumer
i. Street light with metering
ii. Street light without metering
7 Irrigation consumer
i. 230/400 V Irrigation consumer
ii. 11 kV Irrigation consume
iii. 33 kV Irrigation consumer 18
Dr LB Shilpakar -- KEC
 Tariff system in Nepal
8. Water Supply Consumer
i. 230/400 V Community water supply
ii. 230/400 V Other Water supply
iii. 11 kV Community water supply
iv. 11 kV Other water supply

9. Transportation consumer
i. 11 kV Trolley bus consumer
ii. 11 kV Other Transportation consumer
iii. 33 kV Trolly bus consumer
iv. 33 kV Other Transportation consumer

10. Temporary Consumer

230/400 V Temporary consumer
11 kV Temporary consumer

11. Community Wholesale consumer

230/400 V Community wholesale consumer
11 kV Community wholesale consumer

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Dr LB Shilpakar -- KEC
 Tariff system in Nepal

Type of Tariffs used in Nepal

1. Flat energy rate tariff (life line tariff)

2. Simple tariff (Straight-line meter rate tariff)
3. Block meter rate tariff
4. Two-part tariff
5. Power factor tariff : kVA maximum demand tariff
6. Peak-load tariff: time-of-day tariff

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Dr LB Shilpakar -- KEC
 Tariff system in Nepal

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Dr LB Shilpakar -- KEC
 Tariff system in Nepal

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Dr LB Shilpakar -- KEC
 Tariff system in Nepal

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Dr LB Shilpakar -- KEC
 Tariff system in Nepal

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Dr LB Shilpakar -- KEC