What is the difference between two-part tariff and maximum demand tariff?

Two Part Tariff: When the rate of electrical energy is charged based on maximum demand of the consumer and the units consumed, it is called a two-part tariff

In this method, the total charge is divided into two components: fixed charges and running charges

The fixed charges depend upon the number of units consumed by the consumer.

The consumer is charged at a certain amount per kW of maximum demand plus a certain amount per kWh of energy consumed.

This type of tariff is mostly applicable to industrial consumers who have appreciable maximum demand

Total charges = Rs (b × kW + c × kWh)

b = charge per kW of maximum demand

c = charge per kWh of energy consumed

Advantages:

- It is very easy to understand

- It recovers the fixed charges which depend upon the maximum demand of the consumer but independent of the units consumed

Disadvantages:

- The consumer must pay the fixed charges irrespective of the fact that whether he has consumed or not

- There is always an error in assessing the maximum demand of the consumer

Maximum Demand Tariff:

- It is similar to the two-part tariff with the only difference that the maximum demand is actually measured by installing maximum demand meter in the premises of the consumer

- It is mostly applied to big consumers

- It is not suitable for small consumer as a separate maximum demand meter is required