Give five desirable characteristics of a tariff.
Give five desirable characteristics of a tariff.
People pay the government money in exchange for having ample electricity in all of our homes. Let's now talk about the monthly/annual cost of supplying electricity to each house. An expression for this is the word tariff.
Tariff refers to the price at which energy produced is given to a consumer. The tariff cannot be the same for all sorts of consumers, even though it should reflect the full cost of producing & supplying electrical energy as well as the profit. It's because the amount of electricity a user consumes and the conditions of his load have a significant impact on the price of producing electricity. In order to be fair, different customer categories (such as industrial, domestic, and commercial) must be taken into account while setting the tariff. This makes the issue of determining an appropriate fee extremely challenging.
The following desirable traits of a tariff must be present:
(1) Proper return:
The tariff should indeed be set up to guarantee that each consumer will receive the right amount of return.To put it another way, the total amount collected from customers must cover the expense of creating and delivering electrical energy as well as a suitable profit.This will make it possible for the electric supply provider to offer consumers consistent and dependable service.
(2) Reasonable profit:
The tariff's profit component needs to be fair. As a public utility, an electric supply company typically profits from monopoly. As a result of the absence of market rivalry, the investment is comparatively safe. This necessitates capping the profit at around 8% annually.
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