Energy Pricing and Tariffs Questions and Answers

Answer: A

Correct answer: maximum demand and energy separately

A two-part tariff splits the bill to match the way costs arise. The demand charge, in rupees per kVA or kW of maximum demand, recovers the cost of the capacity held ready for the consumer, which does not depend on use; the energy charge recovers the cost of the units actually delivered, which does.

Answer: B

Generation, transmission and distribution assets must be built for the peak whether or not they are used the rest of the year, and that cost does not vary with the units sold. It is therefore recovered per kilovolt ampere rather than per unit.

Answer: C

Correct answer: fixed customer charge

The third part is a fixed sum per connection per month, covering the costs that vary neither with demand nor with consumption - metering, billing, meter reading and the account itself. So a three-part tariff has one charge for each kind of cost: customer-related, capacity-related and energy-related.

Answer: D

All the equipment is never on together, so the contract demand agreed with the utility is a fraction of the connected load. Exceeding the contract demand attracts a penalty even though the connected load has not changed.

Answer: A

Correct answer: fifteen or thirty minute interval

Demand is measured as the highest average power sustained over a defined block, not as an instantaneous peak, because it is sustained load that determines the capacity the network must provide. A momentary starting surge lasting a second heats nothing and is ignored; a half hour at high load does, and is charged for.

Answer: B

Correct answer: a stated fraction of the contract demand at minimum

A ratchet sets a floor under the billing demand, typically 75 or 80 per cent of the contract demand, so that a consumer who has asked the utility to hold capacity available pays for it even in a month when little is drawn. The capacity cost is incurred whether the consumer uses it or not, which is what the clause recognises.

Answer: C

Correct answer: a penal rate on the excess

Exceeding the contract demand means drawing on capacity that was never reserved and that the network may not have available, so the excess is charged at a penal rate - commonly twice the ordinary demand rate. Only the excess is penalised; the demand within contract is billed normally.

Answer: D

Correct answer: makes a poor power factor costly automatically

Apparent energy in kVAh includes the reactive component, so a consumer at 0.8 power factor is billed for 25 per cent more than one at unity drawing the same real energy. No separate penalty clause is needed - the incentive to correct the power factor is built into the measurement itself, which is why kVAh billing has largely displaced explicit penalties.

Answer: A

Correct answer: above a stated power factor

A power factor incentive rebates part of the bill when the consumer operates above a threshold, typically 0.95, and it is the counterpart of the penalty applied below it. Both exist because reactive current loads the network and causes losses without delivering useful energy, so the utility has a real interest in the consumer correcting it.

Answer: B

Correct answer: a single price for every unit consumed

A flat rate tariff charges the same amount per unit however much is consumed and whenever it is taken. It is simple to understand and to administer, which is its whole merit, but it recovers no fixed cost from a consumer who uses little and gives no signal about the time or the manner of consumption.