Central Idea

The Ministry of Power has recently introduced Time-of-Day (ToD) tariff for electricity, which will be implemented next year for commercial users and in 2025 for home users.
This article aims to explain what ToD tariff is, how it impacts consumers, and why it is important for the power sector.

What is Time-of-Day Tariff?

Amendments: The government has made amendments to the Electricity (Rights of Consumers) Rules 2020, introducing ToD tariff and rationalizing smart meters.
Tariff structure: Under ToD tariff, electricity charges will vary based on the time of day. The current flat rate system will be replaced. During daytime, the tariff may decrease by up to 20%, benefiting consumers. Conversely, during night-time, the tariff will increase by the same amount.
Benefits for consumers: ToD tariff allows consumers to regulate and manage their electricity consumption and control their bills. It gives them the flexibility to take advantage of lower tariffs during off-peak hours.

Impact on different households: For small working couples who primarily use electricity at night, their bills are likely to increase. However, other households can offset the nighttime spike by shifting some of their electricity usage to daytime hours.
Power consumption patterns: Power consumption typically peaks in the morning when schools and offices open, in the late afternoon when children return home, and in the early evening when air conditioners and heaters are in high demand. ToD tariff aims to discourage excessive power consumption during these peak hours.

Identifying power-consuming appliances: Appliances such as air conditioners, coolers, refrigerators, heaters, and geysers are the major contributors to electricity consumption in households. Other significant power-consuming appliances include washing machines, dishwashers, and microwaves.
Energy-efficient alternatives: It is worth noting that energy-efficient versions of most electrical appliances are available in the market, which can help reduce overall electricity consumption.

Requirement of smart meters: To implement ToD tariff, smart meters are necessary. These meters automate the meter-reading process and provide accurate cost estimation, minimizing wastage. They send consumption information to power distribution companies every 15 minutes, which is crucial for calculating ToD charges.
Status of smart meter installation: Currently, over 6.5 million smart meters have been installed in the country, with a target of reaching 250 million by 2026. Approximately 230 million smart meters have been sanctioned so far.

Improved billing efficiency: ToD tariff and smart metering can enhance billing efficiency and reduce transmission and distribution losses.
Differential tariff for renewable power: As the share of renewable power increases, it needs to be blended with coal-based power, requiring differential tariff structures. ToD tariff can facilitate this blending effectively.
Electric vehicles (EVs) and ToD tariff: With the expected surge in EV adoption, ToD tariff can encourage consumers to charge their vehicles during off-peak hours, reducing the strain on the power grid.
Flexibility for discoms: ToD tariff provides flexibility for loss-making distribution companies (discoms) to revise tariffs, addressing their financial challenges.