Tariff And Its Types

A certain amount of money rate is charged to the consumer for consumption of electrical energy. This money rate is known as Tariff orthe tariffis the rate at which the electrical energy is sold.

The tariff rates are decided based upon the different types of consumers.

As we know, there are various types of consumers such as:-

  1. Residential
  2. Commercial
  3. Industrial
Figure 1

The fig(1) shown is of various consumers and tariff used for particular group of consumers.
The tariff is mostly decided upon the paying ability of a consumer.
Tariff is made keeping the following points in forward:-

  1. Total running and fixed charges.
  2. Service given.
  3. Consumer paying capability
  4. Simple calculations of tariff.

Types of Tariff:-

  1. Simple tariff
  2. Flat rate tariff
  3. Block rate tariff
  4. Two part tariff
  5. Maximum demand tariff
  6. power factor tariff
  7. Three part tariff


  1. Simple rate tariff:-

Definition: When there is a fixed rate per unit of energy consumed, it is known as simple tariff (Uniform Rate Tariff).

  • This is the most simplest of all tariff.
  • It is the tariff in which a consumer is charged for per unit used.
  • In this type, the price charged per unit is constant.
  • It means, the price will not vary with increase or decrease in number of units used.
  • Bill of the month in rupees= Rate of per unit energy consumed.
  • In this type of tariff, there is no difference for small and big consumers.
  • Same amount of rate is applicable for both the consumers. This is the disadvantage of this tariff rate.


  • The cost per unit delivered is high.
  • There is no discrimination among various types of consumers.
  1. Flat rate tariff: –

Definition:When different types of consumers are charged at different uniform per unit rates, it is said to be Flat rate Tariff.

  • In this type, the consumers are grouped into different classes.
  • Each class is charged at different uniform rate.
  • The different classes of consumers may be taken into account of their diversity and load factors.
  • It is the tariff in which different types of consumers are charged at different rates according to their consumption.
  • The consumer has to pay two different rates for different loads (i.e. power and lighting loads) plus the rent of the meter to be installed in the consumer premises.
  • Total bill of month= (amount of money per kWh used + amount of money per light loads energy consumed + rent of meter).
  • This tariff is not in use as it is difficult to calculate the load factor and diversity factor for calculating the rate of tariff.
  • Since this type of tariff varies according to the way of supply used, separate meters are required for lighting load, power load etc.
  1. Block rate tariff:-

Definition:  When a given block of energy is charged at a specified rate and the succeeding blocks of energy are charged at progressively reduced rates is called as block rate tariff.

  • In this type, the energy consumption is divided into many blocks and price per unit is fixed in each block.
  • The amount for consumption of energy decreases as the units consumed by the consumer increases.
  • There is an advantage for industry people to use the bulk power at low tariff rates.
  • This type of tariff encourages the consumer to use high amount of energy.
  1. Two part tariff:-

Definition: When the rate of electrical energy is charged on the basis of maximum demand of the consumer and the units consumed it is called two-part tariff.

  • In this type, the total charge to be made from the consumer is split into two components.
  • One is for the annual fixed charge (whether consumer uses the electricity or not, the charges have to pay, these charges are based upon the total connected load) and the other is the amount to be paid for the actual consumption of power.
  • The fixed charges depend upon the number of units consumed by the customer. Thus the consumer is charged at a certain amount per kW of maximum demand + a certain amount per kWh of energy consumed.
  • Total charges = Rs (X*kW + Y*kWh)


  • It is easily understood by the consumer.
  • It recovers fixed charges which depend upon the maximum demand of the consumer independent of the units consumed.


  • Consumer has to pay the fixed charges irrespective of the fact whether he has consumed or not the electrical energy.
  • There is always error in assessing the maximum demand of the consumer.
  1. Maximum demand tariff:
  • It is similar to two-part tariff.
  • The only difference is the maximum demand of the consumer is calculated by installing a maximum demand meter at his premises.
  • This type of tariff is mostly applied to the bulk consumers.
  1. Power factor tariff:

Definition:The tariff in which the power factor of the consumers is taken into account is known as power factor tariff.

  1. Three part Tariff:

Definition:When the total charges to be made from the consumer is split into three parts, fixed charge, semifixed charge and running charge, it is known as three-part tariff.

  • This type of tariff is applied to big consumers.
  • The principle objection of this type of tariff is the charges are split into three components ( fixed charge, charge per kW of maximum demand, charge per kWh of energy consumed)


  • Adapted from Electrical power systems by Sunil S. Rao and Dr. Uppal
  • http://www.electricalbasicprojects.com

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