---
title: "Why consumer classes have different tariffs"
subject: "Utilization of Electrical Energy"
chapter: 6
key: "semester_7/utilization_of_electrical_energy:different-tariff-consumer-classes"
source: https://www.bctengineer.com/q/semester_7/utilization_of_electrical_energy/different-tariff-consumer-classes
site: BCT Engineering
---

# Why consumer classes have different tariffs

Utilization of Electrical Energy · Chapter 6: Demand Side Management

- Asked in: 2081 Baisakh, 4 marks
- Video: [Tariff | electrical tariff | electricity tariff | what is tariff |tariff in power system| #tariff](https://www.youtube.com/watch?v=Gt3UY-oRz9Q) — Mind of Engineer 
- Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14
- Page: https://www.bctengineer.com/q/semester_7/utilization_of_electrical_energy/different-tariff-consumer-classes
- Whole chapter: https://www.bctengineer.com/md/semester_7/utilization_of_electrical_energy/chapter-6

## Question

Why different consumer class have different tariff structure?

## Short answer

Different consumers have different supply costs (voltage, losses, load pattern, demand size, power factor) and social/economic goals. Tariffs reflect these through two-part, block, time-of-day and seasonal rates to recover costs and manage demand.

## Answer

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.

## Check yourself

The answer's key points as multiple-choice questions, with the correct option and why.

1. Why do HV consumers have a lower cost per kWh than LV domestic consumers?
   A. They need no distribution transformers or LV lines and cause fewer losses
   B. They use more energy at peak
   C. They have lower power factor
   D. They are subsidised only by law
   Answer: A. Cost of service differs with supply voltage and network use. (Key point: Cost of service)

2. How are large consumers typically billed?
   A. Flat rate per bulb
   B. Two-part tariff with separate kVA demand charge plus energy charge
   C. Single block rate by ampere rating
   D. Free energy up to a limit
   Answer: B. Large consumers need dedicated feeders, so demand is billed separately. (Key point: Large consumers billing)

3. Which tariff reflects social and economic policy?
   A. Penalty for low pf
   B. ToD rates at peak
   C. Lifeline low rates for poor domestic users and lower rates for irrigation
   D. kVA demand charge
   Answer: C. Policy goals lead to subsidised classes. (Key point: Social policy)

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- [Which motor is more economical (two-part tariff)](https://www.bctengineer.com/question.md?key=semester_7%2Futilization_of_electrical_energy%3Aeconomical-motor-two-part-tariff) — Utilization of Electrical Energy, chapter 6
- [Electrical energy; classes of consumers and demand](https://www.bctengineer.com/question.md?key=semester_7%2Futilization_of_electrical_energy%3Aelectrical-energy-consumer-classes) — Utilization of Electrical Energy, chapter 1, asked 2×

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