When you look at your electricity bill, chances are that you only look at the amount to be paid and make transactions in a hurry. A question arises that if the amount is the only thing that needs your attention, or are there different components of electricity bills such as tariff details that should be taken care of? It’s a topic that requires a discussion after weighing in different perspectives.
While reading the electricity bill, we must understand its various components. We also need to understand the tariffs which can highly influence the total bill amount. Here, we’ll walk you through the electricity tariff, what it exactly is, the factors affecting the electricity tariff, and finally, its various types.
Before getting into the details of power tariffs, let's quickly glance at tariffs through their definition.
What is an Electricity Tariff?
Electricity tariff is the amount charged for the supply of electricity usage. The charges vary for different customers depending on the season or time of the day when the energy is used. In simple words, an electricity tariff is a method through which the customer is charged a particular amount for energy power consumption. This component of the electricity bill includes the cost of supplying and producing the electricity at a reasonable price.
The tariff that the customer will eventually end up paying is highly dependent on energy consumption, as consumers’ requirements can vary. It usually starts with LT (low tension) or HT (high tension). LT is generally applied for more residential and commercial areas where the energy usage is comparatively low. However, HT codes are used for larger complexes and industries. Bigger consumers pay higher tariffs as their energy needs are much higher than those of other consumers, including the domestic and commercial consumers.
The various factors on which the electricity tariffs are dependent upon:
- The type of the load
- The power of the load
- The time when the maximum load is required
- The total amount of used electric energy
The electricity bill thus generated has three major sections:
- Fixed charge D
- Running charge By
- Semi-fixed charge Ax
The formula: C = Ax + By + D
Where C is the total charge for a period
A – Cost per kW or kVa of maximum demand.
x – Maximum demand during the period (kW or kVA)
B – Cost per kWh of energy consumed.
y – Total energy consumed during the period (kW or kVA)
D – Fixed charge during each billing period.
This process of calculating the tariff is called the three-part electricity tariff. This is majorly applied to industrialists or big customers where the energy usage is relatively higher. The tariff structure significantly reduces your expenses. In the case of residential connections, the slab-based structure is followed wherein the units are charged at a lower rate, unlike the industrial connection where the charges are much higher. In case the number of units consumed increases, energy charges also increase along with it.
Factors Affecting the Electricity Tariff
While deciding the electricity tariff, various factors affect the final results while calculating the appropriate value. Some of these factors are:
The load is further divided into three parts:
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➔ Domestic
➔ Commercial
➔ Industrial
Over the years, it has been noted that industrial consumers use higher energy than domestic or commercial consumers. Therefore, the electric energy tariff varies depending upon their requirements.
Another factor that highly affects the electricity tariff is the demand. The energy supplied by the energy generating station depends on two factors: the kWh generated, and the plant’s installed capacity. The increase in the maximum capacity directly increases the installation power of the generating station.
The next crucial factor showing adequate results for the electricity tariff is the maximum load time required. If the maximum demand generated by the consumer is the same as the maximum demand, it increases the chances of installing another plant. In case the demand of the consumer increases to the maximum limit during off-peak hours, there is no need to establish an additional electric plant. In this case, the cost per kWh generated is reduced.
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The amount of energy used
Next in the list is the amount of energy used, which means that if a large amount of energy is used for a longer time, the total electrical energy generated will be much lesser than otherwise.
The last and most significant factor affecting the electricity tariff is the power factor of load, which plays a crucial role in plant economics. If the power factor is lower than expected, it multiplies the current load, increasing the chances of mishaps. So, the system becomes poor. To improve its functioning, the generating system has the correction equipment, which ultimately increases the cost of the generation.
Types Of Electricity Tariff
Electricity tariff is a broader concept that includes many essential types that are discussed below. Let’s have a look:
- Power factor tariff
- Peak load tariff
- Two-part tariff
- Seasonal rate tariff
- Block meter Rate tariff
- Three-part tariff
- Flat Demand Rate tariff
- Straight-line Meter rate tariff
Let’s discuss each of these in detail-
The equation for the first type of electric tariff is C = Ax. In flat demand rate tariff, the power consumption is solely dependent upon the maximum load demand. Flat demand rate tariff is mostly used on sign lighting, streetlights, irrigation, and so on. In such cases, the performing hours cannot be defined. The metering system, the most common way to calculate power tariffs, is not considered under such tariffs.
The next type of tariff is the power factor tariff, which solely depends upon the load power factor. Furthermore, it is divided into two different types:
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➔ kVA maximum demand tariff, also known as two-part tariff
➔ kWh and kVarh tariff
Similar to seasonal rate tariff, the only significant difference between the two is that the seasonal rate tariff calculates the peak hour of the year. However, the peak tariff talks about the day. In the case of high power consumption, it is referred to as the on-peak tariff. But in case of low power consumption, it is known as off-peak load tariffs.
Seasonal rate tariff, or the peak season tariff, is a type of tariff in which the kWh price is measured, which is used by the consumer in a year. If the consumption is lower in the entire year, it is often termed as off-peak season tariffs.
This is another type of power tariff in which the energy consumption is differentiated into multiple blocks whose per unit is already fixed. The charges of these blocks are placed in decreasing order, which means the first block has the highest cost, and the last block has the lowest cost. Furthermore, it is divided into three blocks based on the energy consumption arranged in decreasing order.
As the name suggests, the two-part tariff means the bill is classified into two parts; the fixed charge and the running charge, which depends upon the energy consumption by the load.
The formula is: C = Ax + By and C = A(kW) + B(kWh)
The last in the list is a three-part tariff presented as C = Ax + By + D. This tariff is mostly applied to bigger customers.
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Straight-Line Meter Rate Tariff
The equation for the straight-line meter rate tariff is C = By. In this type of tariff, there are various types of bills generated by the consumers, directly dependent upon the load’s energy consumption. So, several types of electricity bills are generated by the customers. Their charges are different from each other, which depends on factors such as load and diversity factors of the load. This is also the major reason why there are different meters to measure accurate power consumption.
With Adani Electricity, you can have a closer look at all the power tariffs for customers, which will guide you throughout the process. To know more, visit the Adani electricity page today.
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