---
title: "Factors of tariff; two-part and time of day tariff"
subject: "Utilization of Electrical Energy"
chapter: 6
key: "semester_7/utilization_of_electrical_energy:tariff-factors-two-part-tod"
source: https://www.bctengineer.com/q/semester_7/utilization_of_electrical_energy/tariff-factors-two-part-tod
site: BCT Engineering
---

# Factors of tariff; two-part and time of day tariff

Utilization of Electrical Energy · Chapter 6: Demand Side Management

- Asked in: 2079 Bhadra, 2+2 marks
- Video: [Electricity Tariff | Types Of Electricty Tariff | Utilization @lakshyapolytechnicclasses | #SBTE |](https://www.youtube.com/watch?v=HeWu2dRNilQ) — CRAZY POLYTECHNIC
- 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/tariff-factors-two-part-tod
- Whole chapter: https://www.bctengineer.com/md/semester_7/utilization_of_electrical_energy/chapter-6

## Question

What are the factors affecting to determine the tariff? Explain about the two-part and time of day tariff.

## Short answer

Factors include fixed and running costs, load factor, power factor, time of use, consumer type, and supply voltage. A two-part tariff charges a fixed demand charge per kVA plus an energy charge per kWh. Time-of-day tariff varies energy rates for peak, normal, and off-peak periods to shift load.

## Answer

#### Factors affecting the tariff
A tariff must recover the full cost of supplying energy and give a fair return. The main factors considered are:

1. **Fixed (capital) cost**: interest and depreciation on generation, transmission and distribution plant; this depends on the maximum demand.
2. **Running cost**: fuel, wages, maintenance; this depends on the energy (kWh) supplied.
3. **Load factor and diversity factor** of the consumer: a high load factor uses the plant better, so it deserves a lower rate.
4. **Power factor**: low pf needs larger plant (more kVA), so it is penalised.
5. **Time of use**: supply at peak hours costs more than at off-peak hours.
6. **Type and size of consumer** (domestic, commercial, industrial, irrigation) and supply voltage (LV, MV, HV).
7. **Quantity of energy used**, profit margin, taxes, and social or government policy (subsidies, lifeline block).

#### Two-part tariff
The total bill is split into two parts:

$$
\text{Bill} = a \times \text{kW (or kVA) of max. demand} + b \times \text{kWh}
$$

- The first part (demand charge) recovers the fixed cost; the second part (energy charge) recovers the running cost.
- Used for industrial and large commercial consumers.
- Merit: fair, since each consumer pays for the plant capacity he reserves. Demerit: needs a maximum demand meter, and the consumer pays the fixed part even if little energy is used.

#### Time of day (TOD) tariff
The energy rate differs with the time at which energy is used.

- The day is divided into **peak**, **normal** and **off-peak** periods; the peak rate is highest and the off-peak rate lowest. In Nepal, NEA's TOD tariff for industries uses peak (about 17:00–23:00), off-peak (about 23:00–05:00) and normal (05:00–17:00) periods.
- It encourages consumers to shift loads (pumping, furnaces, charging) to off-peak hours, which flattens the load curve and improves the utility's load factor.
- It needs a TOD (multi-register) energy meter.

## Check yourself

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

1. In a two-part tariff, what does the demand charge recover?
   A. Running cost
   B. Taxes only
   C. Fixed (capital) cost
   D. Fuel cost
   Answer: C. Energy charge recovers running cost. (Key point: Fixed vs running cost)

2. What is a demerit of the two-part tariff?
   A. It cannot recover fixed costs
   B. It charges only energy
   C. It is unfair to large users
   D. Needs a maximum demand meter and the consumer pays the fixed part even if little energy is used
   Answer: D. It is fair for plant capacity reserved. (Key point: Two-part demerit)

3. Which describes a ToD tariff?
   A. Peak rate highest, off-peak lowest, with a multi-register meter
   B. Same rate all day
   C. Rates depend only on energy used
   D. No meter change
   Answer: A. It encourages shifting to improve load factor. (Key point: ToD structure)

4. Why does low pf raise a consumer's tariff?
   A. It reduces load factor to zero
   B. Low pf needs larger plant (more kVA), so it is penalised
   C. It lowers kWh
   D. It increases voltage
   Answer: B. Larger kVA means higher fixed cost. (Key point: Tariff factors)

## Related in Utilization of Electrical Energy

- [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
- [Schedule speed and factors affecting it](https://www.bctengineer.com/question.md?key=semester_7%2Futilization_of_electrical_energy%3Aschedule-speed-factors) — Utilization of Electrical Energy, chapter 4
- [HV vs LV supply tariff for a factory](https://www.bctengineer.com/question.md?key=semester_7%2Futilization_of_electrical_energy%3Afactory-hv-vs-lv-tariff) — Utilization of Electrical Energy, chapter 6, asked 2×
- [MV vs LV supply tariff for a 2-shift factory](https://www.bctengineer.com/question.md?key=semester_7%2Futilization_of_electrical_energy%3Afactory-mv-vs-lv-tariff) — Utilization of Electrical Energy, chapter 6, asked 2×
- [Load management, tariff in DSM, tariffs in Nepal](https://www.bctengineer.com/question.md?key=semester_7%2Futilization_of_electrical_energy%3Aload-management-tariff-types-nepal) — Utilization of Electrical Energy, chapter 6
- [Annual charge and pf improvement (Rs 1300/kVA tariff)](https://www.bctengineer.com/question.md?key=semester_7%2Futilization_of_electrical_energy%3Apf-improvement-1200kva-1300-tariff) — Utilization of Electrical Energy, chapter 6, asked 3×

## Related in other subjects

- [Optimum pf under two-part tariff (200 kW)](https://www.bctengineer.com/question.md?key=semester_6%2Findustrial_power_distribution_and_illumination%3Atwo-part-tariff-optimum-pf) — Industrial Power Distribution and Illumination, chapter 10
- [Disinfection factors; bleaching powder 5 ML/day](https://www.bctengineer.com/question.md?key=semester_5%2Fwater_supply_engineering%3Ableaching-bk79) — Water Supply Engineering, chapter 6
- [Factors affecting water demand; variation](https://www.bctengineer.com/question.md?key=semester_5%2Fwater_supply_engineering%3Afactors-affecting-demand) — Water Supply Engineering, chapter 3, asked 5×
- [Factors affecting bearing capacity; water table](https://www.bctengineer.com/question.md?key=semester_5%2Ffoundation_engineering%3Abearing-capacity-factors-water-table) — Foundation Engineering, chapter 6, asked 5×