India Moves Towards Dynamic Power Pricing: Govt Introduces Time Of Day Tariff With Substantial Savings During Solar Hours


The Central government has introduced two changes to the prevailing power tariff system, through an amendment to the Electricity (Rights of Consumers) Rules, 2020.

The changes include introduction of Time of Day (ToD) tariff, and rationalisation of smart metering provisions.

Under the newly introduced Time of Day (ToD) tariff, consumers will be charged varying rates for electricity based on the time of day.

During solar hours, which are eight hours specified by the State Electricity Regulatory Commission, the tariff will be 10-20 per cent lower than the normal rate.

Conversely, during peak hours, the tariff will be 10-20 per cent higher.

The ToD tariff will be applicable to commercial and industrial consumers with a maximum demand of 10 KW and above starting from 1 April 2024, and for all other consumers except agricultural consumers, starting from 1 April 2025.

Once smart meters are installed, the Time of Day tariff will be implemented immediately for consumers with smart meters.

Union Power Minister R K Singh said that the ToD is a win-win for consumers as well as the power system.

“The TOD tariffs comprising separate tariffs for peak hours, Solar hours and normal hours, send price signals to consumers to manage their load according to the tariff. With awareness and effective utilization of ToD tariff mechanism, consumers can reduce their electricity bills,” Singh said.

“Since solar power is cheaper, the tariff during the solar hours will be less, so the consumer benefits. During non solar hours thermal and hydro power as well as gas based capacity is used – their costs are higher than that of solar power – this will be reflected in Time of Day Tariff,” he added.

The Power Minister added that consumers can now plan their consumption in order to reduce their power costs – planning more activities during solar hours when power costs are less.

The Union Minister said that the ToD mechanism will also ensure better grid integration of renewable energy sources thereby facilitating faster energy transition for India.

“The ToD tariff will improve the management of renewable generation fluctuations, incentivise demand increase during the periods of high RE generation hours and thereby increase grid integration of larger quantity of renewable power,” Singh said.

According to a Power Ministry statement, most State Electricity Regulatory Commissions (SERCs) in India have already implemented ToD tariffs for large commercial and industrial consumers. The installation of smart meters will enable the introduction of ToD metering for domestic consumers in accordance with the Tariff Policy mandate.

Time of Day (TOD) tariff, is recognised globally across electricity industries, as an important Demand Side Management (DSM) measure which is used as a means of incentivising consumers to shift a portion of their loads from peak times to off-peak times, thereby improving the system load factor by reducing the demand on the system during peak period, the ministry said.

In addition to the ToD Tariff, the government has simplified the rules for smart metering to improve consumer convenience. Penalties for exceeding the maximum sanctioned load or demand have been reduced to avoid inconvenience and harassment.

As per the amendment in metering provision, after 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 installation date.

Load revision procedure has also been rationalised in a way that maximum demand shall be revised upwards only if sanctioned load has been exceeded at least three times in a financial year, the ministry said.

Moreover, smart meters will be read remotely at least once in a day and the data shall be shared with consumers in order to enable them to take informed decision about consumption of electricity.

The Electricity (Rights of Consumers) Rules, 2020, were initially notified by the government on 31 December 2020, with the aim of ensuring reliable and quality electricity services for consumers. The rules seek to ensure timely provision of new electricity connections, refunds, and other services, imposing penalties on service providers and requiring compensation for consumers in case of willful disregard for consumer rights.

“The current amendment to the Rules is a continuation of the measures taken by the government, to empower power consumers, to ensure 24X7 reliable electricity supply at affordable cost, and to maintain a conducive ecosystem for investment in the power sector,” the ministry said.