IIMB Management Review, page(s): 9
Q (T L Sankar): Why do utilities charge different rates to different consumers?
A (Rafiq Dossani): Firstly, the cost-to-serve for each category of consumer varies depending on several factors. There are technical reasons such as power factor, voltage of supply and so on which are set out in the Electricity Supply Act, 1948. There are also commercial reasons. In some situations, the total quantity of power available could not be sold, unless some categories of consumers we are charged a lower tariff. There are also considerations of equity or the need to meet the merit wants of the poorer population, which prompted differential pricing.