What is Tariff in Electricity? and Its Role | New Topic [2024]

In this note, we are going to learn a topic called “What is Tariff in Electricity?” and also about its role. Welcome to Poly Notes Hub, a leading destination for engineering notes for diploma and degree engineering students.

Author Name: Arun Paul.

What is Tariff in Electricity?

Tariffs in the context of energy are the pricing structures for electricity and heat delivered to consumers. Proper tariff structures are required to encourage the use of cogeneration and assure its economic sustainability.

Role of Tariff in Electricity

Here are the roles of tariff in electrical system –

• Incentivizing Efficiency: Tariffs can be designed to reward greater efficiency and lower emissions, so encouraging the use of cogeneration systems.
• Cost Recovery: Tariffs must be structured such that co-generation operators may recoup their investment and operational costs, maintaining financial stability.
• Encouraging Investment: Favorable tariffs might encourage investment in co-generation technology, supporting innovation and progress in the industry.
• Regulatory Support: Tariffs can be used by governments to support energy conservation policies and environmental goals, supporting the use of cleaner and more efficient technologies such as cogeneration.

Examples of Tariff Structure

Here are few examples of tariff structure –

• Delhi: Residential tariffs for consumption up to 200 units are often subsidized, but higher consumption can result in costs exceeding ₹7 per unit.
• Maharashtra: Industrial tariffs may include energy prices ranging from ₹7-9 per unit and demand charges based on kVA.
• Tamil Nadu: Domestic consumers use a slab system, with lower rates for first slabs and progressive rises for higher slabs.