Page 31 - EPSI Magazine Issue 8 final 2018.indd

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Distribution tariffs

Steps in Tariff Determination

Step 1: Identification of Step 2: Cost Allocation to Step 3: Tariff Step 4: Subsidy and
Cost and Revenue customer Groups (Class Determination and Cross – Subsidization
Requirements level cost responsibility) Tariff Structure)

Equity of costs:
Costs must be Cost reflective tariffs: Adjustments:
reasonable: • Groups that cause
higher costs should • Life line for
• Mimic cost meet a proportionate • Determined based minimal users
on costs, cost
minimization in a share of revenue: allocation, energy • Subsidy for relief
very competitive Bigger consumers, high consumption • Implement
market voltage consumers government policy
associated with lower
costs

Retail tariffs

Involves costs of power purchase in addition to • End-user tariffs are set to recover the revenue
investment and O&M costs requirement of Distribution co.
• Revenue requirement is derived as a sum of
Key cost components to be examined: distribution O&M costs, Bulk power purchase
• Cost of Capital/Rate of Return costs, Lease payments, Taxes, and depreciation
• Regulatory Asset Base (RAB) expenses and return on investment and working
• Regulatory Depreciation capital.
• O&M Cost, Working Capital • The projected energy sales (KWh) for distribution
• Capital Work In Progress, Taxes, Bad Debts, is adjusted for distribution losses and non-collec-
Customer Contribution tion rates.
• Varies by consumer category and TOU (peak, off-
Setting end-user retail tariffs peak and shoulder).
The consumer categories include:
End-user retail tariff is a price paid by the final
consumers of the distribution cost for each unit of Code 10.1 Domestic; Code 10.2/10.3 Commercial;
electricity billed. Code 20 Medium industrial; Code 30 Large industri-
al; Code 40 Extra Large and Code 50 Street lighting.
Made up two components:
• Power supply Price meant to recover the bulk Other key considerations in setting retail
power purchase costs. tariffs include:
• Distribution price component meant to
recover the distribution costs. • Determination of the rate base (investment qual-
ifying for a return on investment)
The elements of the end user tariffs in Uganda • Consumption load profile
include: • Distribution loss profile (technical and non-tech-
a) Fixed standing charges (Shs per month) nical losses). Target set at 14.7%
b) Capacity (demand) charges (Shs per KVA) • Non-collection rates (target set at 1.5%)
c) Energy or usage charge (Shs/KWh) • Demand projections and customer numbers
d) Reactive power charge. • Non-sales revenue