Tariff of Electricity in India

An electricity tariff is the approved schedule of charges and conditions for supplying or transporting electricity. A consumer bill can include fixed or demand charges, energy charges, taxes, duties, surcharges, rebates and time-based rates. The applicable schedule depends on state or union territory, licensee, consumer category, connection voltage, sanctioned load and metering.
India’s electrical power system includes generation, transmission, system operation, trading and distribution. Generation of electrical power includes central and state companies, private generators, captive plants and renewable projects. The Electrical transmission system includes inter-state and intra-state networks owned by several licensees. CTUIL has performed the statutory Central Transmission Utility functions since April 2021; POWERGRID remains a major transmission owner and operator.
Load dispatch operates through NLDC, five RLDCs and SLDCs under the applicable grid code. Distribution licensees supply retail consumers. State or Joint Electricity Regulatory Commissions set retail tariffs, while CERC regulates specified inter-state generation and transmission matters.

Retail billing and wholesale power procurement use different contracts, markets and regulatory orders. A distribution licensee may buy power through long-term agreements, exchanges and other approved routes rather than under one universal generator tariff.
For a consumer, the tariff of electricity is the current schedule approved by the relevant State or Joint Commission. Some categories use a three-part billing model, but structures and rates vary by jurisdiction and category.

In the illustrated model, a is a fixed charge independent of metered demand and energy. It helps recover the fixed costs specified in the tariff order.
The term b multiplied by billed kW or kVA demand gives a demand charge. This reflects capacity reserved across the network and supply chain, not only the size of one power plant.
The term c multiplied by metered kWh gives an energy charge. Fuel-cost adjustments, power-purchase adjustments, time-of-day rates, duties and other approved items may appear separately.

A consumer’s bill can therefore depend on fixed charges, billed demand, energy, time band and adjustments in the applicable tariff order.
One billing unit of electrical energy equals 1 kilowatt-hour, or 1 kW used for one hour.
IMPORTANT: Power-factor clauses are category-specific. There is no nationwide rule that every consumer must maintain a power factor of 0.8. Check the current tariff order and supply code for the connection.
Availability Based Tariff, or ABT, introduced scheduling, capacity and energy accounting with deviation settlement for inter-state operation. The current framework is governed by the CERC Indian Electricity Grid Code 2023, CERC Tariff Regulations 2024 and CERC Deviation Settlement Mechanism Regulations 2024, including later amendments.
Modern deviation settlement is not simply a frequency-based tariff. It compares scheduled and actual injection or drawal and applies entity-specific formulas, reference charges and frequency-linked conditions.
The historical three-part ABT diagram is:
Current regulated generating-station tariffs can include capacity and energy charges under the applicable tariff regulations. The former Unscheduled Interchange, or UI, charge terminology has been replaced at inter-state level by deviation charges under DSM.

Mechanism of ABT

• Sellers, buyers and other grid entities submit declarations, requisitions or schedules through the process and timelines set by the Grid Code and detailed procedures.
• RLDCs coordinate inter-state schedules for regional entities. SLDCs perform scheduling and accounting for intra-state entities under the applicable State Grid Code and procedures.
• Schedules are revised, despatched and accounted for through coordinated NLDC, RLDC and SLDC functions. Market transactions, bilateral contracts, reserves and transmission constraints also affect final schedules.

System operators continuously balance aggregate generation and demand around the nominal 50 Hz frequency while respecting transmission limits and security criteria. Individual entities can deviate from schedule even when system frequency remains within its operating band. Reserves, real-time markets, security-constrained despatch and deviation settlement address different parts of this balancing process.

DSM deviation charges are commercial settlement amounts, not a simple reward or penalty applied only to generating stations. The 2024 regulations distinguish sellers and buyers and define charges by deviation volume, direction, entity type, reference charge rate and specified frequency conditions. Grid Code compliance, reserve obligations and despatch instructions remain separate from the financial settlement.

Time of Day: Time-of-day tariffs vary charges by defined time bands to reflect system conditions and encourage load shifting. Under the Electricity (Rights of Consumers) Amendment Rules 2023, State Commissions specify solar and peak periods. The rules set lower energy charges during solar hours and higher energy charges during peak periods for covered categories. The exact times, rates, implementation status and exemptions must be checked in the current state tariff order.