Energy Pricing and Tariffs Questions and Answers

Answer: A

Correct answer: changes in fuel and purchase prices between tariff orders

Fuel and purchased power prices move faster than tariff orders can be revised, and the utility can neither control them nor absorb them. The adjustment passes the difference through, up or down, between one order and the next, which keeps the utility solvent without reopening the whole tariff every quarter.

Answer: B

Correct answer: the energy sold

The average cost of supply is the total cost of serving consumers divided by the units actually sold, not generated. The distinction is substantial, because the difference between the two is the transmission and distribution loss, which the utility must recover on the units it manages to bill.

Answer: C

Correct answer: failure to collect part of what is billed

Average billed tariff is what appears on the bills; average revenue realised is what is actually received. The gap is the collection shortfall - arrears, non-payment and write-offs. Losses and cross subsidy affect the billed figure itself rather than the difference between the two, which is why collection efficiency is tracked separately.

Answer: D

Correct answer: away from the cost of serving it

A cross subsidy exists whenever a category is charged materially above or below what it costs to serve, so that one category pays part of another’s cost. Industrial and commercial consumers typically pay above cost and agricultural and small domestic consumers below it, and the reduction of these gaps is a standing objective of tariff regulation.

Answer: A

Correct answer: use of the distribution network to convey energy

A wheeling charge is paid for the use of the wires by a consumer buying energy from a supplier other than the local licensee. It compensates the licensee for the network it is providing but not the energy, and it is the mechanism that makes open access possible without the network owner losing its cost recovery.

Answer: B

A large industrial consumer leaving the licensee takes with it the surplus that was funding agricultural and domestic tariffs, and the surcharge holds that contribution. It is why open access is often uneconomic despite cheap market power.

Answer: C

Long term power purchase agreements were signed to serve a demand that has now left, and the capacity charges continue. The surcharge is payable only where the licensee demonstrates the obligation actually is stranded.

Answer: D

The rules require a minimum ownership share and a minimum proportion of the output consumed by the owners, which is what distinguishes captive use from a purchase. Meeting both tests is the attraction of a group captive arrangement.

Answer: A

Correct answer: injects energy at one time and draws it later

Banking lets a generator feed energy into the system when it has a surplus and draw an equivalent amount later, the licensee acting as a notional store. It is settled on energy rather than on money, usually with a percentage retained as a banking charge, and it suits intermittent generation whose output does not match its owner’s demand.

Answer: B

Correct answer: the difference between energy imported and exported

Under net metering the meter records import and export separately and the consumer is billed on the difference, so energy exported offsets energy imported unit for unit. It is the simplest arrangement for rooftop solar and gives the exported unit the same value as the imported one, which is generous to the consumer.