What is Tariff and it’s basic description in power plant engineering

What is Tariff and it’s basic description in power plant engineering


  • The rate at which electrical energy is supplied to a consumer is known as tariff.
  • Objectives –
    • Recovery of cost of producing electrical energy at the power station
    • Recovery of the cost on the capital investment is transmission and distribution system
    • Recovery of cost of operation and maintenance of supply of electrical energy (e.g., metering equipment, billing etc.)
    • A suitable profit on the capital investment

Desirable Characteristics of Tariff:-

  • Proper Return: The tariff should be such that it ensures the proper return from each consumer. In other words, 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.
  • 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 the small consumer. A consumer whose load conditions do not deviate much from the ideal (i.e., non variable) should be charged at a lower rate than the one whose load conditions change appreciably from the ideal.
  • 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.
  • 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 noncompetition in the market. This calls for the profit to be restricted to 8% or so per annum. 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.

#Power Plant engineering note from our honorable teacher.
Reference Book
Mehta, V.K.,”Principles of Power System
Analysis”;Chapter – 5, pp.87-100

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