Flat rate tariff is the type of tariff in which consumers are categorized into different classes and each class of consumer is charged at different uniform rate. Diversity and load factors are considered while categorizing different consumers. Once categorized each consumer is being charged at flat rate tariff despite of units consumed.
The key feature of flat rate tariff is that different types of consumers are charged at different uniform per unit rates. In flat rate tariff, irrespective of the number of units being used, a particular class of consumer is always charged at same rate. This is disadvantageous since it discourages the use of electricity.
Apart from above, one other disadvantage of flat rate tariff is that separate meters are required for different types of loads, thus making the overall system complex and uneconomical.
Advantages of Flat Rate Tariff
- Calculations are simple
- Is easy to understand
Disadvantages of Flat Rate Tariff
- Since loads are categorized based on diversity and load factors or according to way the supply is used, separate meters are required for lighting and power loads which might be uneconomical
- The rates are flat, means a consumer using 10 kilowatts will be charged same as a consumer using 500 kilowatts. This discourages use of power, a consumer who is using more power should be charged at lower rate