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Objectives of Tariff
Obtains electrical energy from the supply through tariff bills. She includes various expenses in the bill amount for electric energy charges; these expenses are called a tariff.
Therefore, the following objectives and requirements are included in the calculation of a tariff.
(i) The entire annual expenditure on power generation, transmission, and distribution should be included.
(ii) Annual expenses on supply, operation, maintenance cost, and losses should be included.
(iii) Other costs related to electricity supply include preparation of electricity bills, meter expenses, etc.
(iv) The consumer should be able to pay the cost of electricity easily.
(v) It should be easy to calculate the value of electricity expenditure so that the consumer understands the tariff.
(vi) The tariff should be the same even if there are more consumers.
(vii) Whatever amount is spent on electricity generation, transmission and distribution, the electricity supplier meets this expenditure with tariff help.
(viii) Should assure satisfactory net return on capital investment.
(ix) The cost of generation of electric power also depends on the capacity of the station and the total kWh generation. If the maximum demand increases, the station’s capacity also increases, and the tariff rate is likely to remain low.
(x) Power Factor – Power. The multiplier is very useful in determining the tariff. If the power factor is less, then the value of the load current will be high. Increasing the value of this load current will increase the I2R loss and increase the tariff’s value.
Higher the value of power multiplier will reduce I2R loss, and lower loss will result in a lower cost of production and lower tariff.
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Principles for Tariff Determination
The size and cost of the power generating station are decided based on the optimum demand of the consumers. Every consumer expects that at any point in time, he can meet his maximum demand. That is, there is no fixed time limit for meeting his maximum demand.
We know that electrical energy cannot be collected but can be generated as and when required. Therefore, whether the power generation is less or more, a fixed cost has to be incurred on the power generating center, so it is more appropriate for the consumer to pay a fixed price for his fixed demand.
In addition to the above-fixed cost, other expenses like fuel cost, which is proportional to the energy units generated, lubrication of machines, the salary of operation staff, etc. Current expenditure is also distributed on the power units.
Therefore, each consumer should pay a fixed priced and the cost of energy used by him. This method is called a two-part tariff.
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