ToD Tariff Mechanism: A Tool To Lower Electricity Bills While Managing Demand

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In a revision to Electricity (Rights of consumers) Rules, 2020, the Government introduced two changes to the electricity tariff system in June 2023.

These changes are introduction of Time of Day (ToD) Tariff, and rationalization of smart metering provisions. As per the tariff system introduced, tariff during high-solar hours of the day should be 10%-20% less than the normal tariff, while the tariff during peak hours should be 10%-20% higher. ToD tariff would be applicable for commercial and industrial customers having maximum demand of 10 kW and above, from 1st April, 2024 and for all other customers (except agricultural), latest from 1st April, 2025. ToD tariff should be made effective immediately after installation of smart meters. Under the ToD scheme, separate tariffs for peak hours, high-solar hours, and normal hours will be communicated to consumers in advance to manage their load according to the tariff.

Most of the State Electricity Regulatory Commissions (SERCs) have already implemented ToD tariffs for large commercial and industrial consumers in the country.

Pilot Study 

The Indian Smart Grid Forum had undertaken a study project titled “Design of a Robust Time of Use Framework for Electricity Tariff in Gujarat” in 2019-2020 looking at the feasibility and potential impacts of implementing Time of Use (ToU) tariff scheme in the state of Gujarat.

Under this, ISGF developed a specialized ToU tool that utilities, regulators, and other stakeholders can utilize to simulate various “what-if” scenarios with real-time tariffs. These scenarios included evaluating the extent to which peak load can be shifted and the consequential effects on utility revenue, reductions in peak power purchase costs, and impacts on customer bills.

Furthermore, the project provided a comprehensive implementation framework and a practical roadmap for the adoption of ToU tariffs in the state. The study also delved into the utilization and consequences of the policy on peaking power plants and the reduction in the reliance on DG sets, which are typically employed to meet peak loads.

Findings 

ISGF undertook the pilot demonstration of ToU tariff scheme to a set of customers in Lucknow City having smart meters (or AMR) who participated voluntarily in the pilot project. This included 50 customers (residential-30, commercial -17, and industrial-3) with a cumulative load of 24 MW.

ISGF found that there was surplus power on the northern region grid and rebates of Rs 1.00 to Rs 4.00 per kWh; and during evening/morning peaks we applied surcharges of Rs 1.00 to Rs 4.00 per kWh could be offered.

From the results of the pilot demonstration, it was estimated that 5% of the peak load can be shifted and about 30% of the total load can be moved to ToU scheme. Based on these, an annual benefit to the tune of Rs 690 crore for UPPCL was estimated. Similar benefits would have accrued to the customers as well in savings on their monthly electricity bills.

Benefits of ToD Tariff Mechanism 

The ToD tariff mechanism can enable to bring down their electricity bills by shifting their interruptible loads to high-solar hours. As solar power is cheaper, the tariff during the high solar hours will be less, which will help curb the bills.

As for non-solar hours, this is when thermal and hydro power and gas-based capacity is used. The costs for these are higher than solar power, which will have an impact on ToD tariff.

With the new tariff scheme proposed, customers can plan their energy consumption. At the same time, they can plan more activities during high-solar hours, when the power cost is less and reduce them during non-solar hours.

ToD Tariff as DSM Tool 

ToD tariff is an important Demand Side Management (DSM) tool which is used as a means of incentivizing consumers to shift a portion of their loads from peak times to off-peak times. This, in turn, will help take the load off the system during peak periods by reducing demand. This will also improve system load factor.