Differential Pricing: New electricity rule amendments aim to promote ToD tariffs

The policy and regulatory developments in the past couple of years demonstrate the government’s foc­us on integrating larger volumes of re­newable energy sources and strengthening the distribution segment to improve end-user satisfaction. In line with this, the Ministry of Power (MoP) has recently issued the Electricity (Rights of Consu­mers) Amendment Rules, 2023, introducing time-of-day (ToD) tariffs and rationalising smart metering provisions. Under the new rules, during solar hours, the tariff will be lower than the normal tariff, while tariff during peak hours will be higher. While provisions for ToD tariffs are already there in the existing policy and regulatory framework, inclu­ding the tariff policy and the national electricity policy, its applicability has be­en limited to certain categories of industrial consumers. With the latest amendment to the right of consumer rules, ToD will be applicable to all electricity consumers by 2025.

ToD tariff system

As per the amendment to the rights of consumers rules, during solar hours, that is, eight hours specified by the state electricity regulatory commissions (SERCs), the tariff will be 10-20 per cent lower than the normal tariff. Meanwhile, tariff during peak hours will be 10-20 per cent higher. The ToD tariff regime will be applicable to commercial and industrial (C&I) consumers with a maximum de­ma­nd of 10 kW and above, starting from April 1, 2024. For all other consumers, ex­cept agricultural consumers, the ToD tariff will come into effect from April 1, 2025. The ToD tariff will be applicable to consumers with smart meters as soon as these meters are installed.

Notably, most of the SERCs have already implemented ToD tariffs for large C&I consumers in the country. The latest amendment reinforces the mandate for ToD tariffs and expands the scope of its implementation. “While the ToD tariff was already implemented by most of the SERCs for large C&I consumers, the re­ce­nt amendment makes ToD tariffs applicable to C&I consumers with more than 10 kW load by April 1, 2024,” expla­ins Sachin Gupta, executive director and chief rating officer, CARE Ratings.

The ToD tariff offers several benefits to electricity consumers and supports grid management. Sabysachi Majumdar, se­ni­or vice president, ICRA Limited, explains, “Given the growing share of renewables in the energy generation mix driven by solar, there is a need to undertake various measures, including dema­nd side measures, for effective integration of renewable energy sources into the grid. The introduction of ToD tariff is one such measure, whereby the load can be mapped with the higher generation during solar hours. This will also bring in savings for consumers. The implementation of the smart metering programme will enable consumers to monitor their energy consumption on a daily basis and make use of the ToD tariff mechanism in an effective manner.”

The ToD tariff system will encourage consumers to undertake energy-intensive activities during off peak hours, leading to improved grid management and greater integration of renewable energy sources. “The dynamic power pricing could help reduce peak demand on the power grid by encouraging consumers to shift their energy-intensive activities away from peak hours when demand is at its highest. This apart, ToD tariffs can significantly enhnce the integration of larger amounts of renewable power sources by incentivising consumers to consume electricity during so­lar hours. Combined with demand re­s­­ponse programmes, ToD tariffs could help utilities manage fluctuations of green energy supply by encouraging consumers to adjust their power consu­mption with periods of high renewable energy supply,” says Gurinder Bir Singh, COO, IntelliSmart.

Rationalising smart metering provisions

The government has rationalised smart metering provisions. In order to prevent harassment and inconvenience to consumers, the amended rules now state that after the installation of a smart meter, no penal charges will be imposed on a consumer based on maximum de­mand recorded by the smart meter for the period before the installation date. “This addresses the issue of penalties anticipated by consumers for higher load discovered vis-a-vis the sanctioned load after the installation of the smart meter,” says Gupta.

The new rules have also rationalised the load revision provision, whereby the maximum demand will be revised up­wards if the sanctioned load is exceeded at least three times in a financial year. Moreover, smart meters will be read remotely at least once in a day and the data will be shared with consumers in order. This enables them to take infor­m­ed decisions about electricity consumption. Besides, consumers will receive such data through various ch­annels such as websites, mobile ap­p­lications and SMSs, providing them with the necessary information to make informed decisions.

Progress on smart metering infrastructure

Undoubtedly, the accelerated development of smart meter infrastructure is a necessity to transition to an advanced ToD tariff system. Over the years, significant progress has been made on the smart metering front, primarily under various government schemes and programmes. As of July 14, 2023, 6.68 million smart meters have been installed ac­ross the country. The government latest’s flagship programme, the Rs 3 trilli­on Revamped Distribution Sector Sche­me (RDSS), places a strong emphasis on smart metering. A total of 204.6 million smart prepaid meters, 5.4 million smart system meters for distribution transformers (DTs) and 0.2 million feeder meters have been sanctioned across st­ates under the scheme. As per the dash­bo­ard of the National Smart Grid Mission, states/UTs such as Chan­digarh, Delhi, Karnataka, Odisha and Telangana have awarded 100 per cent of the consumer smart meters san­ctioned under the scheme. The progress on sm­art metering, particularly regarding sm­art meter contracts awarded vis à vis sm­art meter sanctions, varies significantly across states. This is expected to form the basis for ToD tariff implementation in the future across all states.

Issues, challenges and the way forward

The implementation of the ToD tariff sy­s­tem offers several benefits, but it also presents challenges. Gupta explains, “While extending the ToD tariff to other consumer categories is a welcome step, the key challenge would be effectively im­plementing this rule, especially given the weak state of utility finances. Effec­tive ToD tariff implementation reli­es heavily on sizeable investments in crucial metering infrastructure within a reasonable timeframe. However, with the growing adoption of smart/prepaid me­ters, primarily led by private sector installations, this issue is also likely to be addressed over time. The discoms, aided by financial support under the RDSS, ha­ve been actively awarding contrac­ts/in­viting bids for smart metering projects to private parties. As of July 14, 2023, out of the RDSS-sanctioned 205.30 million consumer smart meters, contracts for 43.50 million have been awarded. This accounts for about 21 per cent of the total number of smart meters sa­nctioned. Considering that the sche­me was introduced in financial year 2022, the progress appears satisfactory.”

“The first challenge is the ground-level implementation of the smart metering programme. There is a need to make pe­ople aware about the benefits of smart meters by adopting a consumer-centric approach for widespread implementation. Another serious challenge is ad­dre­ssing cybersecurity threats to smart meter data, which contains sensitive information about consumers’ power consumption behaviour. It is important to safeguard this data and implement robust cybersecurity measures not just for widespread adoption of smart me­te­rs, but also to build people’s trust in sm­art metering technology,” says Singh.

Net, net, the introduction of the ToD tariff regime will be highly beneficial for electricity consumers and grid managers. It will not only enhance consumer satisfaction and encourage responsible electricity consumption, but also bring the country closer to its green energy goals. That said, for successful on-grou­nd implementation, it is essential to fast-track smart meter deployment in the country while maintaining data priva­cy and cybersecurity.

Priyanka Kwatra