energy system

Energy Pricing Consideration and methods

Energy pricing is doing for get optimum cost reflective prices and giving energy to users at reasonable price. In addition If you want to know more about energy system goes to main section.

Contents of Energy Pricing

  • Electricity
    • Costing of electricity supply
    • Electricity pricing
  • Petroleum and gas
    • Crude oil and bulk product costing
    • Pricing of petroleum products and gas
  • Discussion

Electricity Costing

All energy commodities have a capacity cost  an energy cost and the above may vary according to  time of day , season (weather) and special occasions/events/festivals and additional dimension is at what voltage level is the supply deliver Also Electricity supply has all the complexities of costs and Electricity prices may or may not reflect costs so depends on pricing policies.

Daily Demand Curve Energy Pricing
Daily Demand Curve

Components of costs

  • Generation: due to capacity cost and energy cost
  • Transmission: due to capacity cost and provision for losses, operations and maintenance costs
  • Distribution: due to capacity cost and provision for losses, operations and maintenance costs
  • Supply: due to metering, billing and other commercial services
  • Other charges for services, due to that are not relevant to the system: Penalties, pole shifting
Energy Distribution energy pricing
Energy Distribution

Customer Burden on the System

Capacity costs in Energy Pricing

The burden impose by each customer on the system is different and If the customer comes up on peak, he is responsible for the entire capacity cost (e.g.: households) and If the customer demand is outside the peak hours, then he is responsible for his demand coincident with the peak only.

Responsibility for Capacity Costs of the System

Responsibility for Capacity Costs of the System

This group of customers have a peak demand occurring almost at the system peak, but slightly diversified. Their contribution to peak is about 90% of the measured maximum demand and If the measured maximum demand of the customer group is 1000 MW, and if the cost of a kW of capacity is Rs 2000 per kW per month, then this group of customers should be charged 90% x 1000 x 2000 = Rs 1.8 million per month

Energy costs in Energy Pricing

These costs are simply pass through from one level of the system to the other, considering Costs of generation during different times of the day and seasons of the year and Adjustments to account for losses.

Responsibility for Energy Costs of the System

Energy costs are not difficult to calculate, for each hour even real time calculations are possible. If smart metering is available, they can be charge for energy on real time, with the meter recording and displaying the true costs of generation (and adjustments for losses up to the customer) every hour and If not, their energy use at different times of the day have to be either, Estimated by conducting load research, and plotting load profiles Using TOU metering, with pre-programming facility to record energy use in several time intervals. Also, many different systems are use in worldwide.

How to Convert Costs to a Price Structure

Meters and their limitations, Political and social demands for subsidies, Conflicts between desire to sell more and the need to conserve energy, Theft of energy, Need to make electricity utilities profitable or at least to breakeven, Energy probably is the most frequently used tool provide subsidies and to charge taxes, without much success.

Features of Metering and Price structure

Energy and demand metering

  • One-part metering for all LV customers (energy only)
  • Two-part metering for LV bulk and MV customers (energy and demand for apparent power)
  • Time-of-use metering for LV bulk and MV customers (presently 3-interval)

Price Structure

  • Increasing block tariff for household and religious customers. Other LV customers on flat tariff
  • Two-part tariff with 3-interval TOU pricing for energy for all LV bulk and MV customers.
  • See pricing sheet separately provided

Many different systems are use in worldwide.

Strengths and Weaknesses of the Electricity Price Structure

complicated it is in most similar developing countries and Very simple some advanced countries. Large cross-subsidies between customer categories and GROSS subsidies are also require, because industry cannot breakeven.

Petroleum Pricing

Less complicate than electricity pricing because Possibility of storage removes the need for demand measurement, TOU measurement and Capacity costs negligible, energy cost is the largest. Possibility to implement through a simple pricing formula to Retail supplier, no individual usage measurement and Inherently prevents subsidies through measurements.

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