--- title: "Forms of tariff with merits and demerits" subject: "Utilization of Electrical Energy" chapter: 6 key: "semester_7/utilization_of_electrical_energy:tariff-forms-merits-demerits" source: https://www.bctengineer.com/q/semester_7/utilization_of_electrical_energy/tariff-forms-merits-demerits site: BCT Engineering --- # Forms of tariff with merits and demerits Utilization of Electrical Energy · Chapter 6: Demand Side Management - Asked in: 2071 Shrawan - Video: [L34: Power Factor Tariff System | Types of Tariff | Power System Series | In Hindi](https://www.youtube.com/watch?v=ZIRG2Klf0Y0) — TechInsight - 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-forms-merits-demerits - Whole chapter: https://www.bctengineer.com/md/semester_7/utilization_of_electrical_energy/chapter-6 ## Question What is tariff? Explain the various forms of tariff with their merit and demerits. ## Short answer Tariff is the schedule of charges for electrical energy, designed to recover fixed, running and profit. Forms are simple, flat, block, two-part, maximum demand, power factor, three-part, and time-of-day tariffs, each with merits and demerits: simple is easy but unfair, two-part/three-part recover costs but need demand metering, TOD shifts load but needs special meters. ## Answer **Tariff** is the rate (schedule of charges) at which electrical energy is sold to a consumer. It must recover the fixed cost, the running cost and a reasonable profit. It should also be simple and fair, and should encourage good use of the plant. #### 1. Simple (flat rate per unit) tariff A fixed rate per kWh, e.g. Rs 10/kWh, for all units. - Merits: simple to understand and bill. - Demerits: does not separate fixed and running costs; small and large consumers pay the same rate; no incentive for a high load factor. #### 2. Flat rate tariff Different per-unit rates for different types of consumers (lighting, power). - Merits: fairer than the simple tariff between consumer classes. - Demerits: needs separate meters and wiring for each class; the rate is fixed for a class whatever the consumption. #### 3. Block rate tariff Energy is divided into blocks, with a different rate for each block (the rate falls for later blocks, or rises, as in Nepal's domestic tariff). - Merits: large consumers get a lower average rate (declining block); a rising block (as used by NEA) protects poor users and discourages waste. - Demerits: takes no account of maximum demand or time of use. #### 4. Two-part tariff Bill = a × kW (or kVA) maximum demand + b × kWh. - Merits: fixed cost is recovered from the demand charge and running cost from the energy charge; fair; suits industries. - Demerits: the maximum demand is often assessed (estimated) rather than measured, which is hard to do fairly; the consumer pays the fixed part even when little energy is used. #### 5. Maximum demand tariff Like the two-part tariff, but the maximum demand is actually measured by an MD meter. - Merits: removes the objection to an assessed demand. - Demerits: costly metering; suitable only for big consumers. #### 6. Power factor tariff Charges depend on pf: kVA maximum demand tariff, sliding scale tariff, or kW and kVAR tariff. - Merits: penalises low pf, encourages pf correction, reduces plant size. - Demerits: extra metering; complex. #### 7. Three-part tariff Bill = a (fixed per consumer) + b × kW + c × kWh. - Merits: recovers customer, demand and energy costs separately; the most scientific form. - Demerits: complicated for ordinary consumers; used only for big consumers. #### 8. Time of day (TOD) tariff Different energy rates for peak, normal and off-peak periods. - Merits: shifts load to off-peak hours and improves load factor; a DSM tool. - Demerits: needs TOD meters; may be inconvenient for consumers. ## Check yourself The answer's key points as multiple-choice questions, with the correct option and why. 1. What is a tariff? A. The schedule of charges at which electrical energy is sold, covering fixed cost, running cost and a profit B. A tax on equipment C. The cost of generation only D. A meter type Answer: A. Tariff must recover fixed and running cost and a reasonable profit. (Key point: Meaning of tariff) 2. What is the form of a two-part tariff and its main demerit? A. a x kW + b x kWh; the fixed part is paid even with little energy use B. b x kWh only; no demerit C. a per consumer + c x kWh; complex D. Different rates for peak and off-peak Answer: A. Fixed cost is recovered by the demand charge and running cost by energy, but the fixed part is payable regardless of use. (Key point: Two-part tariff) 3. What is the three-part tariff? A. a + b x kW + c x kWh, with a fixed per consumer B. Rates by consumer class C. Declining blocks only D. Rates by time of day Answer: A. It recovers customer, demand and energy costs separately and is used only for big consumers. (Key point: Three-part tariff) 4. What is the merit of the time of day tariff? A. It shifts load to off-peak and improves load factor B. It needs no special meter C. It has one rate all day D. It ignores demand Answer: A. Different rates for peak, normal and off-peak periods push consumers to off-peak, making it a DSM tool. (Key point: TOD tariff) ## Related in Utilization of Electrical Energy - [Types of electric drives with merits and demerits](https://www.bctengineer.com/question.md?key=semester_7%2Futilization_of_electrical_energy%3Aelectric-drive-types-merits) — Utilization of Electrical Energy, chapter 2 - [Merits and demerits of DC track electrification](https://www.bctengineer.com/question.md?key=semester_7%2Futilization_of_electrical_energy%3Adc-track-electrification-merits) — Utilization of Electrical Energy, chapter 4 ## Related in other subjects - [Cofferdam types, uses, merits and demerits](https://www.bctengineer.com/question.md?key=semester_5%2Ffoundation_engineering%3Acofferdam-types-merits) — Foundation Engineering, chapter 5, asked 7× - [Incineration: merits and demerits](https://www.bctengineer.com/question.md?key=semester_6%2Fsanitary_engineering%3Asolid-waste-incineration) — Sanitary Engineering, chapter 10, asked 7× - [Merits and demerits of river and ridge routes](https://www.bctengineer.com/question.md?key=semester_6%2Ftransportation_engineering_i%3Ariver-ridge) — Transportation Engineering I, chapter 5, asked 7× - [Distribution layouts, merits and demerits](https://www.bctengineer.com/question.md?key=semester_5%2Fwater_supply_engineering%3Adistribution-layouts-merits-demerits) — Water Supply Engineering, chapter 7, asked 6×