Energy Pricing and Tariffs Questions and Answers

Answer: C

Correct answer: reducing the maximum demand

If the demand charge dominates, that is where the money is, and it depends on the highest half-hour average rather than on total consumption. Staggering the starting of large motors, avoiding coincident operation and improving the power factor all cut the peak without cutting output. Reducing units consumed attacks the smaller half of the bill.

Answer: D

Wheeling, transmission, the cross-subsidy surcharge and any additional surcharge are added to the market price, and together they commonly exceed the gap. Comparison must be made on the delivered cost, not the market price.

Answer: A

The network and the generating plant are built for the peak whether it lasts an hour or a day, so the same capacity cost is recovered from fewer units. A two-part tariff achieves the outcome directly through its demand charge.

Answer: B

The bill does show an average, but a unit saved is a unit removed from the highest slab or the peak register, so it is worth the marginal price. Using the average understates the saving on an inclining tariff and overstates it on a telescopic one.

Answer: C

Netting the export against the import means it displaces a unit that would have been bought at retail, whereas a gross arrangement pays a separately determined and usually lower rate. The choice is often fixed by state regulation rather than by the consumer.

Answer: D

Correct answer: the wheeling charge for use of the distribution system

An open access consumer buys energy elsewhere but still uses the local network, so it pays a wheeling charge for that use, together with a cross subsidy surcharge and any additional surcharge. The other three are components of the licensee’s own revenue requirement or a tax in another state, and none appears as a charge on this consumer.