Why consumer classes have different tariffs

Different consumer classes are given different tariff structures because the cost of supplying each class is different, and because the utility uses tariffs to shape demand and meet social goals.

1. Different cost of service: consumers at high voltage (33/66/132 kV) need no distribution transformers or LV lines and cause fewer losses, so their cost per kWh is lower than for LV domestic consumers.
2. Different load pattern: load factor, diversity factor and time of maximum demand differ. Industries with high load factor use plant better; domestic loads peak in the evening and add to system peak.
3. Size of demand: large consumers need dedicated feeders, and their demand (kVA) is billed separately using a two-part tariff; small consumers get simple flat or block tariffs.
4. Power factor: industrial inductive loads draw reactive power, so they are billed on kVA or penalised for low pf.
5. Metering and billing cost: simple energy meters for small consumers, ToD/demand meters for large ones.
6. Social and economic policy: lifeline (low) rates for poor domestic users, lower rates for irrigation and drinking water, support for cottage industries, encouragement of EV charging.
7. Demand-side management: ToD and seasonal tariffs for industry and commercial users encourage shifting load to off-peak hours.

Example (NEA): domestic consumers pay block (slab) energy charges by ampere rating, while large industries pay a monthly demand charge per kVA plus time-of-day energy charges.