Energy Pricing and Tariffs Questions and Answers

Answer: C

A declining block encourages consumption and reflects the falling average cost, while an inclining block discourages it and is used to protect small consumers. Which direction is chosen is a policy decision, not a costing one.

Answer: D

Correct answer: falls as consumption rises

A telescopic tariff is a declining block tariff: successive blocks are charged at lower rates, so the average price falls as consumption grows. The justification was that fixed costs are spread over more units, and it suits industrial supply. For domestic consumers the incentive runs the wrong way, which is why inclining blocks are used there instead.

Answer: A

Correct answer: keep the price low for small consumers

An inclining block tariff charges the first units cheaply and later ones dearly, so a household using little pays a low average price while a large user pays a high one. It is a social instrument, delivering a subsidy to small consumers without any means test, and it discourages consumption at the margin at the same time.

Answer: B

Correct answer: a demand charge plus an energy charge

The Hopkinson tariff is the classical two-part form: a charge per kW or kVA of maximum demand plus a charge per kWh consumed. The two parts correspond to the two kinds of cost the utility incurs, capacity and energy, which is why it remains the basis of almost every industrial tariff.

Answer: C

Correct answer: the connected load, with no energy metering

A flat demand tariff bills on the connected load alone, with no meter and no measurement of what is actually used, so the consumer pays the same whether the equipment runs or stands idle. It was used for street lighting and similar loads of predictable duration, where metering would cost more than it would save.

Answer: D

Correct answer: the hour at which it is consumed

A time of day tariff charges different rates in different periods - peak, normal and off-peak - so as to pass the cost of meeting the system peak to those consuming at that time. It gives the consumer a reason to shift what can be shifted, which flattens the system load curve and defers investment in peaking capacity.

Answer: A

Power purchase, operation and maintenance, depreciation, interest and a return on equity are added and the total divided among the consumer categories to give the tariffs. The regulator scrutinises each head before allowing it.

Answer: B

A consumer taken at high voltage with a good load factor costs less to serve than one at low voltage with a poor one, and a cost reflective tariff shows it. Departures from it are cross subsidies and must be justified separately.

Answer: C

The regulator approves a tariff on projected figures, and when the audited accounts arrive the difference is recovered from or returned to consumers in a later year. It is why a tariff order carries arrears of earlier years.

Answer: D

Setting a trajectory for several years lets the utility keep part of any saving it makes below the approved path, which annual cost-plus regulation does not. Uncontrollable items such as fuel are passed through separately.