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UNIT-III
Economics of power generation
Introduction
 The function of a power station is to deliver power to a large number of
consumers. However, the power demands of different consumers vary in
accordance with their activities.
 The result of this variation in demand is that load on a power station is never
constant, rather it varies from time to time. Most of the complexities of modern
power plant operation arise from the inherent variability of the load demanded by
the users.
 Unfortunately, electrical power cannot be stored and, therefore, the power
station must produce power as and when demanded to meet the requirements of
the consumers.
 On one hand, the power engineer would like that the alternators in the power
station should run at their rated capacity for maximum efficiency and on the other
hand, the demands of the consumers have wide variations.
 This makes the design of a power station highly complex. So, we shall focus our
attention on the problems of variable load on power stations.
 The load on a power station varies from time to time due to uncertain demands of
the consumers and is known as variable load on the station.
Load Curves
 The curve showing the variation of load on the power station with respect to (w.r.t)
time is known as a load curve.
 The load on a power station is never constant; it varies from time to time. These
load variations during the whole day (i.e., 24 hours) are recorded half-hourly or
hourly and are plotted against time on the graph.
 The curve thus obtained is known as daily load curve as it shows the variations of
load w.r.t. time during the day.
 Fig. 3.2. shows a typical daily load curve of a power station. It is clear that load on
the power station is varying, being maximum at 6 P.M. in this case.
 It may be seen that load curve indicates at a glance the general character of the
load that is being imposed on the plant.
 The monthly load curve can be obtained from the daily load curves of that month.
For this purpose, average values of power over a month at different times of the
day are calculated and then plotted on the graph.
 The monthly load curve is generally used to fix the rates of energy.
 The yearly load curve is obtained by considering the monthly load curves of that
particular year.
 The yearly load curve is generally used to determine the annual load factor.
Load Curve
PS-I UNIT-3 power system operation and control
Important Terms and Factors
 The variable load problem has introduced the following terms and factors in power plant
engineering:
 (i) Connected load. It is the sum of continuous ratings of all the equipments connected to
supply system. A power station supplies load to thousands of consumers. Each consumer has
certain equipment installed in his premises. The sum of the continuous ratings of all the
equipments in the consumer’s premises is the “connected load” of the consumer.
 For instance, if a consumer has connections of five 100-watt lamps and a power point of 500
watts, then connected load of the consumer is 5 100 + 500 = 1000 watts.
⋅
 The sum of the connected loads of all the consumers is the connected load to the power
station.
 (ii) Maximum demand : It is the greatest demand of load on the power station during a given
period. The load on the power station varies from time to time.
 The maximum of all the demands that have occurred during a given period (say a day) is the
maximum demand.
 Thus referring back to the load curve of Fig. 3.2, the maximum demand on the power station
during the day is 6 MW and it occurs at 6 P.M.
 Maximum demand is generally less than the connected load because all the consumers do not
switch on their connected load to the system at a time.
 The knowledge of maximum demand is very important as it helps in determining the installed
capacity of the station.
 The station must be capable of meeting the maximum demand.
PS-I UNIT-3 power system operation and control
PS-I UNIT-3 power system operation and control
PS-I UNIT-3 power system operation and control
PS-I UNIT-3 power system operation and control
PS-I UNIT-3 power system operation and control
PS-I UNIT-3 power system operation and control
PS-I UNIT-3 power system operation and control
PS-I UNIT-3 power system operation and control
PS-I UNIT-3 power system operation and control
PS-I UNIT-3 power system operation and control
PS-I UNIT-3 power system operation and control
Load Curves and Selection of Generating Units
 The load on a power station is seldom constant; it varies from time
to time.
 Obviously, a single generating unit (i.e., alternator) will not be an
economical proposition to meet this varying load.
 It is because a single unit will have very poor* efficiency during the
periods of light loads on the power station. Therefore, in actual
practice, a number of generating units of different sizes are installed
in a power station.
 The selection of the number and sizes of the units is decided from
the annual load curve of the station. The number and size of the
units are selected in such a way that they correctly fit the station
load curve.
 Once this underlying principle is adhered to, it becomes possible to
operate the generating units at or near the point of maximum
efficiency.
Important Points in the Selection of Units
 While making the selection of number and sizes of the generating
units, the following points should be kept in view :
 (i) The number and sizes of the units should be so selected that they
approximately fit the annual load curve of the station.
 (ii) The units should be preferably of different capacities to meet the
load requirements. Although use of identical units (i.e., having same
capacity) ensures saving* in cost, they often do not meet the load
requirement.
 (iii) The capacity of the plant should be made 15% to 20% more than
the maximum demand to meet the future load requirements. (iv)
There should be a spare generating unit so that repairs and
overhauling of the working units can be carried out.
 (v) The tendency to select a large number of units of smaller capacity
in order to fit the load curve very accurately should be avoided. It is
because the investment cost per kW of capacity increases as the size
of the units decreases.
Base Load and Peak Load on Power Station
 The changing load on the power station makes its load curve of
variable nature. Fig. 3.13. shows the typical load curve of a
power station.
 It is clear that load on the power station varies from time to
time. However, a close look at the load curve reveals that load
on the power station can be considered in two parts, namely; (i)
Base load (ii) Peak load
 (i) Base load. The unvarying load which occurs almost
the whole day on the station is known as base load.
Referring to the load curve of Fig. 3.13, it is clear that 20
MW of load has to be supplied by the station at all times of
day and night i.e. throughout 24 hours. Therefore, 20 MW
is the base load of the station. As base load on the station
is almost of constant nature, therefore, it can be suitably
supplied without facing the problems of variable load.
 (ii) Peak load. The various peak demands of load over
and above the base load of the station is known as peak
load. Referring to the load curve of Fig. 3.13, it is clear
that there are peak demands of load excluding base load.
These peak demands of the station generally form a small
part of the total load and may occur throughout the day.
Method of Meeting the Load
 The total load on a power station consists of two parts viz., base
load and peak load. In order to achieve overall economy, the best
method to meet load is to interconnect two different power stations.
 The more efficient plant is used to supply the base load and is
known as base load power station.
 The less efficient plant is used to supply the peak loads and is
known as peak load power station.
 There is no hard and fast rule for selection of base load and peak
load stations as it would depend upon the particular situation.
 For example, both hydro-electric and steam power stations are
quite efficient and can be used as base load as well as peak load
station to meet a particular load requirement.
 The interconnection of steam and hydro plants is a beautiful
illustration to meet the load. When water is available in sufficient
quantity as in summer and rainy season, the hydroelectric plant is
used to carry the base load and the steam plant supplies the peak
load as shown in Fig 3.14 (i).
However, when the water is not available in
sufficient quantity as in winter, the steam plant
carries the base load, whereas the hydro-electric
plant carries the peak load as shown in Fig. 3.14
(ii).
Interconnected Grid System
The connection of several generating stations in
parallel is known as interconnected grid system.
The various problems facing the power engineers
are considerably reduced by interconnecting
different power stations in parallel.
Although interconnection of station involves extra
cost, yet considering the benefits derived from
such an arrangement, it is gaining much favour
these days.
Some of the advantages of interconnected system
are listed below :
 (i) Exchange of peak loads : An important advantage of
interconnected system is that the peak load of the power station can
be exchanged. If the load curve of a power station shows a peak
demand that is greater than the rated capacity of the plant, then the
excess load can be shared by other stations interconnected with it.
 (ii) Use of older plants : The interconnected system makes it
possible to use the older and less efficient plants to carry peak loads
of short durations. Although such plants may be inadequate when
used alone, yet they have sufficient capacity to carry short peaks of
loads when interconnected with other modern plants. Therefore,
interconnected system gives a direct key to the use of obsolete plants.
 (iii) Ensures economical operation : The interconnected system
makes the operation of concerned power stations quite economical. It
is because sharing of load among the stations is arranged in such a
way that more efficient stations work continuously throughout the
year at a high load factor and the less efficient plants work for peak
load hours only.
 (iv) Increases diversity factor : The load curves of different
interconnected stations are generally different. The result is that
the maximum demand on the system is much reduced as compared
to the sum of individual maximum demands on different stations.
In other words, the diversity factor of the system is improved,
thereby increasing the effective capacity of the system.
 (v) Reduces plant reserve capacity : Every power station is
required to have a standby unit for emergencies. However, when
several power stations are connected in parallel, the reserve
capacity of the system is much reduced. This increases the
efficiency of the system.
 (vi) Increases reliability of supply : The interconnected system
increases the reliability of supply. If a major breakdown occurs in
one station, continuity of supply can be maintained by other
healthy stations.
PS-I UNIT-3 power system operation and control
Tariff
Introduction
 The electrical energy produced by a power station is delivered to a
large number of consumers. The consumers can be persuaded to use
electrical energy if it is sold at reasonable rates.
 The tariff i.e., the rate at which electrical energy is sold naturally
becomes attention inviting for electric supply company.
 The supply company has to ensure that the tariff is such that it not
only recovers the total cost of producing electrical energy but also
earns profit on the capital investment.
 However, the profit must be marginal particularly for a country like
India where electric supply companies come under public sector and
are always subject to criticism.
 Here, we shall deal with various types of tariff with special
references to their advantages and disadvantages.
 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 energy 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 :
(i) Recovery of cost of producing electrical energy at the
power station.
 (ii) Recovery of cost on the capital investment in
transmission and distribution systems.
 (iii) Recovery of cost of operation and maintenance of
supply of electrical energy e.g., metering equipment,
billing etc.
 (iv) A suitable profit on the capital investment
Characteristics of a Tariff
A tariff must have the following desirable characteristics :
(i) Proper return : The tariff should be such that it ensures the proper return from each
consumer. In other words, the total receipts from the consumers must be equal to the cost of
producing and supplying electrical energy plus reasonable profit. This will enable the electric
supply company to ensure continuous and reliable service to the consumers.
(ii) Fairness : The tariff must be fair so that different types of consumers are satisfied with the
rate of charge of electrical energy. Thus a big consumer should be charged at a lower rate than
a small consumer. It is because increased energy consumption spreads the fixed charges over a
greater number of units, thus reducing the overall cost of producing electrical energy.
Similarly, a consumer whose load conditions do not deviate much from the ideal (i.e.,
nonvariable) should be charged at a lower* rate than the one whose load conditions change
appreciably from the ideal.
(iii) Simplicity : The tariff should be simple so that an ordinary consumer can easily understand
it. A complicated tariff may cause an opposition from the public which is generally distrustful
of supply companies.
(iv) Reasonable profit : The profit element in the tariff should be reasonable. An electric supply
company is a public utility company and generally enjoys the benefits of monopoly.
Therefore, the investment is relatively safe due to non-competition in the market. This calls
for the profit to be restricted to 8% or so per annum.
(v) Attractive : The tariff should be attractive so that a large number of consumers are
encouraged to use electrical energy. Efforts should be made to fix the tariff in such a way so
that consumers can pay easily.
Types of Tariff
 There are several types of tariff. However, the following are the
commonly used types of tariff :
1. Simple tariff. When there is a fixed rate per unit of energy
consumed, it is called a simple tariff or uniform rate tariff. In this
type of tariff, the price charged per unit is constant i.e., it does not
vary with increase or decrease in number of units consumed. The
consumption of electrical energy at the consumer’s terminals is
recorded by means of an energy meter. This is the simplest of all
tariffs and is readily understood by the consumers.
Disadvantages
(i) There is no discrimination between different types of consumers
since every consumer has to pay equitably for the fixed charges.
(ii) The cost per unit delivered is high.
(iii) It does not encourage the use of electricity.
2. Flat rate tariff.
 When different types of consumers are charged at different uniform per
unit rates, it is called a flat rate tariff.
 In this type of tariff, the consumers are grouped into different classes and
each class of consumers is charged at a different uniform rate.
 For instance, the flat rate per kWh for lighting load may be 60 paise,
whereas it may be slightly less† (say 55 paise per kWh) for power load.
 The different classes of consumers are made taking into account their
diversity and load factors.
 The advantage of such a tariff is that it is more fair to different types of
consumers and is quite simple in calculations.
 Disadvantages (i) Since the flat rate tariff varies according to the way the
supply is used, separate meters are required for lighting load, power load
etc. This makes the application of such a tariff expensive and complicated.
 (ii) A particular class of consumers is charged at the same rate irrespective
of the magnitude of energy consumed. However, a big consumer should be
charged at a lower rate as in his case the fixed charges per unit are
reduced.
3. 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.
 In block 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 is progressively
reduced for the succeeding blocks of energy.
 For example, the first 30 units may be charged at the rate of 60 paise per
unit ; the next 25 units at the rate of 55 paise per unit and the remaining
additional units may be charged at the rate of 30 paise per unit.
 The advantage of such a tariff is that the consumer gets an incentive to
consume more electrical energy.
 This increases the load factor of the system and hence the cost of
generation is reduced.
 However, its principal defect is that it lacks a measure of the consumer’s
demand.
 This type of tariff is being used for majority of residential and small
commercial consumers.
4. 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.
In two-part tariff, the total charge to be made from
the consumer is split into two components viz., fixed
charges and running charges.
 The fixed charges depend upon the maximum
demand of the consumer while the running charges
depend upon the number of units consumed by the
consumer.
Thus, the consumer is charged at a certain amount
per kW of maximum demand plus a certain amount
per kWh of energy consumed i.e.,
PS-I UNIT-3 power system operation and control
PS-I UNIT-3 power system operation and control
 It may be seen that by adding fixed charge or consumer’s
charge (i.e., a) to two-part tariff, it becomes three-part tariff.
 The principal objection of this type of tariff is that the
charges are split into three components.
 This type of tariff is generally applied to big consumers.
PS-I UNIT-3 power system operation and control

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PS-I UNIT-3 power system operation and control

  • 2. Introduction  The function of a power station is to deliver power to a large number of consumers. However, the power demands of different consumers vary in accordance with their activities.  The result of this variation in demand is that load on a power station is never constant, rather it varies from time to time. Most of the complexities of modern power plant operation arise from the inherent variability of the load demanded by the users.  Unfortunately, electrical power cannot be stored and, therefore, the power station must produce power as and when demanded to meet the requirements of the consumers.  On one hand, the power engineer would like that the alternators in the power station should run at their rated capacity for maximum efficiency and on the other hand, the demands of the consumers have wide variations.  This makes the design of a power station highly complex. So, we shall focus our attention on the problems of variable load on power stations.  The load on a power station varies from time to time due to uncertain demands of the consumers and is known as variable load on the station.
  • 3. Load Curves  The curve showing the variation of load on the power station with respect to (w.r.t) time is known as a load curve.  The load on a power station is never constant; it varies from time to time. These load variations during the whole day (i.e., 24 hours) are recorded half-hourly or hourly and are plotted against time on the graph.  The curve thus obtained is known as daily load curve as it shows the variations of load w.r.t. time during the day.  Fig. 3.2. shows a typical daily load curve of a power station. It is clear that load on the power station is varying, being maximum at 6 P.M. in this case.  It may be seen that load curve indicates at a glance the general character of the load that is being imposed on the plant.  The monthly load curve can be obtained from the daily load curves of that month. For this purpose, average values of power over a month at different times of the day are calculated and then plotted on the graph.  The monthly load curve is generally used to fix the rates of energy.  The yearly load curve is obtained by considering the monthly load curves of that particular year.  The yearly load curve is generally used to determine the annual load factor.
  • 6. Important Terms and Factors  The variable load problem has introduced the following terms and factors in power plant engineering:  (i) Connected load. It is the sum of continuous ratings of all the equipments connected to supply system. A power station supplies load to thousands of consumers. Each consumer has certain equipment installed in his premises. The sum of the continuous ratings of all the equipments in the consumer’s premises is the “connected load” of the consumer.  For instance, if a consumer has connections of five 100-watt lamps and a power point of 500 watts, then connected load of the consumer is 5 100 + 500 = 1000 watts. ⋅  The sum of the connected loads of all the consumers is the connected load to the power station.  (ii) Maximum demand : It is the greatest demand of load on the power station during a given period. The load on the power station varies from time to time.  The maximum of all the demands that have occurred during a given period (say a day) is the maximum demand.  Thus referring back to the load curve of Fig. 3.2, the maximum demand on the power station during the day is 6 MW and it occurs at 6 P.M.  Maximum demand is generally less than the connected load because all the consumers do not switch on their connected load to the system at a time.  The knowledge of maximum demand is very important as it helps in determining the installed capacity of the station.  The station must be capable of meeting the maximum demand.
  • 18. Load Curves and Selection of Generating Units  The load on a power station is seldom constant; it varies from time to time.  Obviously, a single generating unit (i.e., alternator) will not be an economical proposition to meet this varying load.  It is because a single unit will have very poor* efficiency during the periods of light loads on the power station. Therefore, in actual practice, a number of generating units of different sizes are installed in a power station.  The selection of the number and sizes of the units is decided from the annual load curve of the station. The number and size of the units are selected in such a way that they correctly fit the station load curve.  Once this underlying principle is adhered to, it becomes possible to operate the generating units at or near the point of maximum efficiency.
  • 19. Important Points in the Selection of Units  While making the selection of number and sizes of the generating units, the following points should be kept in view :  (i) The number and sizes of the units should be so selected that they approximately fit the annual load curve of the station.  (ii) The units should be preferably of different capacities to meet the load requirements. Although use of identical units (i.e., having same capacity) ensures saving* in cost, they often do not meet the load requirement.  (iii) The capacity of the plant should be made 15% to 20% more than the maximum demand to meet the future load requirements. (iv) There should be a spare generating unit so that repairs and overhauling of the working units can be carried out.  (v) The tendency to select a large number of units of smaller capacity in order to fit the load curve very accurately should be avoided. It is because the investment cost per kW of capacity increases as the size of the units decreases.
  • 20. Base Load and Peak Load on Power Station  The changing load on the power station makes its load curve of variable nature. Fig. 3.13. shows the typical load curve of a power station.  It is clear that load on the power station varies from time to time. However, a close look at the load curve reveals that load on the power station can be considered in two parts, namely; (i) Base load (ii) Peak load
  • 21.  (i) Base load. The unvarying load which occurs almost the whole day on the station is known as base load. Referring to the load curve of Fig. 3.13, it is clear that 20 MW of load has to be supplied by the station at all times of day and night i.e. throughout 24 hours. Therefore, 20 MW is the base load of the station. As base load on the station is almost of constant nature, therefore, it can be suitably supplied without facing the problems of variable load.  (ii) Peak load. The various peak demands of load over and above the base load of the station is known as peak load. Referring to the load curve of Fig. 3.13, it is clear that there are peak demands of load excluding base load. These peak demands of the station generally form a small part of the total load and may occur throughout the day.
  • 22. Method of Meeting the Load  The total load on a power station consists of two parts viz., base load and peak load. In order to achieve overall economy, the best method to meet load is to interconnect two different power stations.  The more efficient plant is used to supply the base load and is known as base load power station.  The less efficient plant is used to supply the peak loads and is known as peak load power station.  There is no hard and fast rule for selection of base load and peak load stations as it would depend upon the particular situation.  For example, both hydro-electric and steam power stations are quite efficient and can be used as base load as well as peak load station to meet a particular load requirement.  The interconnection of steam and hydro plants is a beautiful illustration to meet the load. When water is available in sufficient quantity as in summer and rainy season, the hydroelectric plant is used to carry the base load and the steam plant supplies the peak load as shown in Fig 3.14 (i).
  • 23. However, when the water is not available in sufficient quantity as in winter, the steam plant carries the base load, whereas the hydro-electric plant carries the peak load as shown in Fig. 3.14 (ii).
  • 24. Interconnected Grid System The connection of several generating stations in parallel is known as interconnected grid system. The various problems facing the power engineers are considerably reduced by interconnecting different power stations in parallel. Although interconnection of station involves extra cost, yet considering the benefits derived from such an arrangement, it is gaining much favour these days. Some of the advantages of interconnected system are listed below :
  • 25.  (i) Exchange of peak loads : An important advantage of interconnected system is that the peak load of the power station can be exchanged. If the load curve of a power station shows a peak demand that is greater than the rated capacity of the plant, then the excess load can be shared by other stations interconnected with it.  (ii) Use of older plants : The interconnected system makes it possible to use the older and less efficient plants to carry peak loads of short durations. Although such plants may be inadequate when used alone, yet they have sufficient capacity to carry short peaks of loads when interconnected with other modern plants. Therefore, interconnected system gives a direct key to the use of obsolete plants.  (iii) Ensures economical operation : The interconnected system makes the operation of concerned power stations quite economical. It is because sharing of load among the stations is arranged in such a way that more efficient stations work continuously throughout the year at a high load factor and the less efficient plants work for peak load hours only.
  • 26.  (iv) Increases diversity factor : The load curves of different interconnected stations are generally different. The result is that the maximum demand on the system is much reduced as compared to the sum of individual maximum demands on different stations. In other words, the diversity factor of the system is improved, thereby increasing the effective capacity of the system.  (v) Reduces plant reserve capacity : Every power station is required to have a standby unit for emergencies. However, when several power stations are connected in parallel, the reserve capacity of the system is much reduced. This increases the efficiency of the system.  (vi) Increases reliability of supply : The interconnected system increases the reliability of supply. If a major breakdown occurs in one station, continuity of supply can be maintained by other healthy stations.
  • 28. Tariff Introduction  The electrical energy produced by a power station is delivered to a large number of consumers. The consumers can be persuaded to use electrical energy if it is sold at reasonable rates.  The tariff i.e., the rate at which electrical energy is sold naturally becomes attention inviting for electric supply company.  The supply company has to ensure that the tariff is such that it not only recovers the total cost of producing electrical energy but also earns profit on the capital investment.  However, the profit must be marginal particularly for a country like India where electric supply companies come under public sector and are always subject to criticism.  Here, we shall deal with various types of tariff with special references to their advantages and disadvantages.
  • 29.  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.
  • 30. Objectives of tariff. Like other commodities, electrical energy 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 : (i) Recovery of cost of producing electrical energy at the power station.  (ii) Recovery of cost on the capital investment in transmission and distribution systems.  (iii) Recovery of cost of operation and maintenance of supply of electrical energy e.g., metering equipment, billing etc.  (iv) A suitable profit on the capital investment
  • 31. Characteristics of a Tariff A tariff must have the following desirable characteristics : (i) Proper return : The tariff should be such that it ensures the proper return from each consumer. In other words, the total receipts from the consumers must be equal to the cost of producing and supplying electrical energy plus reasonable profit. This will enable the electric supply company to ensure continuous and reliable service to the consumers. (ii) Fairness : The tariff must be fair so that different types of consumers are satisfied with the rate of charge of electrical energy. Thus a big consumer should be charged at a lower rate than a small consumer. It is because increased energy consumption spreads the fixed charges over a greater number of units, thus reducing the overall cost of producing electrical energy. Similarly, a consumer whose load conditions do not deviate much from the ideal (i.e., nonvariable) should be charged at a lower* rate than the one whose load conditions change appreciably from the ideal. (iii) Simplicity : The tariff should be simple so that an ordinary consumer can easily understand it. A complicated tariff may cause an opposition from the public which is generally distrustful of supply companies. (iv) Reasonable profit : The profit element in the tariff should be reasonable. An electric supply company is a public utility company and generally enjoys the benefits of monopoly. Therefore, the investment is relatively safe due to non-competition in the market. This calls for the profit to be restricted to 8% or so per annum. (v) Attractive : The tariff should be attractive so that a large number of consumers are encouraged to use electrical energy. Efforts should be made to fix the tariff in such a way so that consumers can pay easily.
  • 32. Types of Tariff  There are several types of tariff. However, the following are the commonly used types of tariff : 1. Simple tariff. When there is a fixed rate per unit of energy consumed, it is called a simple tariff or uniform rate tariff. In this type of tariff, the price charged per unit is constant i.e., it does not vary with increase or decrease in number of units consumed. The consumption of electrical energy at the consumer’s terminals is recorded by means of an energy meter. This is the simplest of all tariffs and is readily understood by the consumers. Disadvantages (i) There is no discrimination between different types of consumers since every consumer has to pay equitably for the fixed charges. (ii) The cost per unit delivered is high. (iii) It does not encourage the use of electricity.
  • 33. 2. Flat rate tariff.  When different types of consumers are charged at different uniform per unit rates, it is called a flat rate tariff.  In this type of tariff, the consumers are grouped into different classes and each class of consumers is charged at a different uniform rate.  For instance, the flat rate per kWh for lighting load may be 60 paise, whereas it may be slightly less† (say 55 paise per kWh) for power load.  The different classes of consumers are made taking into account their diversity and load factors.  The advantage of such a tariff is that it is more fair to different types of consumers and is quite simple in calculations.  Disadvantages (i) Since the flat rate tariff varies according to the way the supply is used, separate meters are required for lighting load, power load etc. This makes the application of such a tariff expensive and complicated.  (ii) A particular class of consumers is charged at the same rate irrespective of the magnitude of energy consumed. However, a big consumer should be charged at a lower rate as in his case the fixed charges per unit are reduced.
  • 34. 3. 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.  In block 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 is progressively reduced for the succeeding blocks of energy.  For example, the first 30 units may be charged at the rate of 60 paise per unit ; the next 25 units at the rate of 55 paise per unit and the remaining additional units may be charged at the rate of 30 paise per unit.  The advantage of such a tariff is that the consumer gets an incentive to consume more electrical energy.  This increases the load factor of the system and hence the cost of generation is reduced.  However, its principal defect is that it lacks a measure of the consumer’s demand.  This type of tariff is being used for majority of residential and small commercial consumers.
  • 35. 4. 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. In two-part tariff, the total charge to be made from the consumer is split into two components viz., fixed charges and running charges.  The fixed charges depend upon the maximum demand of the consumer while the running charges depend upon the number of units consumed by the consumer. Thus, the consumer is charged at a certain amount per kW of maximum demand plus a certain amount per kWh of energy consumed i.e.,
  • 38.  It may be seen that by adding fixed charge or consumer’s charge (i.e., a) to two-part tariff, it becomes three-part tariff.  The principal objection of this type of tariff is that the charges are split into three components.  This type of tariff is generally applied to big consumers.