Understanding the Consumer Electricity Bill
By Hanumanth Raju G V, CSTEP.
This is the 3rd article in the Empower blog series that CSTEP initiated to breakdown the power sector for a non-technical audience. In the first article, we began decoding the journey of electricity and in the second article we explained the costs incurred in generating electricity — the first step of the journey. In this, the 3rd article of the series, the author explains different components of your monthly electricity bill to help consumers make informed decisions.
Every month, a piece of paper listing the charges for the electricity used up for lighting our homes, running appliances, and charging our laptops and phones, arrives at our doorstep. It is the consumer electricity bill. Though well received, it is often not well understood.
This article simplifies the electricity bill, while detailing the aspects relevant for the consumers, to enable them to understand their bills better.
DISCOMs and Cost of Power Supply
The distribution company (DISCOM) plays an important role in ensuring a reliable power supply to its end consumers. To supply electricity to its consumers, a DISCOM incurs an average cost of supply (power-purchase cost, operation and maintenance cost, manpower cost, office expenses, etc.). To recover this cost of supply and sustain its operations, DISCOMs need to bill the consumers. It is important that bills reflect the total amount that needs to be recovered from the consumers. Similarly, consumers need to properly understand the components of a bill to be able to spot any errors in the bill, as well as to make payments promptly.
Electricity bills are generated for all consumer categories, such as domestic, industrial, commercial, and industrial. Here we present a domestic consumer’s bill for illustration purposes. The DISCOM creates a consumer identity through two unique numbers — ‘Revenue Registration’ (RR) number and ‘Account Identity’ number. The connection and billing details provide the sanctioned load for the consumer, the billing period, and the bill number.
Bill components and calculation of charges
A consumer’s electricity consumption is calculated on a monthly basis. The difference between current month’s reading and previous month’s reading provides the monthly electricity consumption by the consumer. In the example, the difference between the previous and present reading (1571–1511=60) is multiplied with the Meter Constant (MC) — which is ‘1’ in this case — and so the total consumption is 60 units. MC is a fixed value of each individual meter, which is used to convert or multiply meter consumption into actual consumption.
Based on the consumption and the sanctioned load, the following charges are levied:
1. Fixed Charge (FC): FC is based on a consumer’s sanctioned load, which refers to the sum of the load of all electrical appliances within consumer premises. FC is levied to recover the overall cost of the network infrastructure laid by a DISCOM (poles, electric lines, electricity meters, etc.). The fixed charges vary with consumer categories, based on the sanctioned load and paying capacity. Here, the FC is INR 60/KW for the initial ‘1KW’ and INR 70/KW for the remaining KW.
2. Energy Charge (EC): EC is calculated on the amount of energy consumed, and is levied to recover the cost of electricity purchased by the DISCOM. It is calculated slab wise (Table 1), and the charges increase as the number of consumed units increases.
3. Fuel Cost Adjustment Charge (FAC): FAC refers to the increase in cost — brought about by a hike in price of fuel/coal every month — that is passed on by the electricity-generation utilities to DISCOMs (who further pass it on to the consumers). FAC is levied on consumers each month and revised once in a quarter, jointly by State Electricity Regulation Commissions (SERCs) and DISCOMs.
4. Tax/Electricity Duty: The state governments have fixed a 9% tax on EC for each consumer. The application of this charge varies between states, since some states apply ‘tax’ for electricity consumption as a percentage of energy charges, while others apply ‘duty’ as INR/unit.
5. Rebate: To encourage consumers to conserve energy/use energy efficiently, and to promote renewable-energy initiatives and usage, a rebate of 50 paisa/unit of electricity consumed (subject to a maximum of INR 50/-per installation/month) is allowed by DISCOMs if solar water-heaters are used.
6. Penalty: A surcharge of 2 paisa/unit is levied as penalty if the power factor (PF) is found to be less than 0.85 lag. PF is the fraction of total power supplied to the actual power consumed by a consumer. It is monitored on a monthly basis during the billing process.
7. Interest: A simple interest rate of 1% per month is levied for late payments, depending on the number of days by which it is delayed.
8. Incentives: An incentive of 0.25% is given if:
· Bills are paid through the Electronic Clearing System.
· Bills exceeding INR one lakh are paid 10 days before the due date.
· Consumers pay INR 1000 in advance towards the next month’s bill.
9. Other Charges: Some DISCOMs levy ‘Urban Cess’ on behalf of municipal bodies, and collect ‘Water Conservation Cess’ from industries and large consumers.
10. Arrears: Any pending payments relating to the previous month are added in the current month’s bill.
A consumer bill is reflective of the total cost incurred by the generation, transmission, and distribution companies in supplying power. It is important that consumers understand the economics involved in the electricity-supply chain. Such understanding will, on one hand, build confidence in consumers about the charges levied by DISCOMs, and on the other, help them appreciate the significance of making timely payments, so that power entities can recover their costs and are able to provide reliable power supply.
The author is Research Engineer at CSTEP and may be contacted on Twitter @HanumanthRajuGV
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