General factors affecting the unification of electricity supply tariffs

It is generally agreed that there should be a greater degree of uniformity in the methods of charging for electricity. The Report of the 1929 Committee on Uniformity of Electricity Charges and Tariffs had only a limited effect in bringing about any improvement, and it is clear that uniformity cannot be achieved by voluntary action. A preliminary need, however, is the formulation of a satisfactory set of tariffs, as there are certain disadvantages and anomalies associated with most of the tariffs now in use. The paper discusses the general requirements of tariffs, and fundamental aspects of the demand for electricity. Modern requirements indicate that the charge for electricity should be based on the value of the service more than on the cost of supply, but there should be suitable controls to safeguard the individual consumer. It is along such lines that electricity supply has developed and no radical departure from present practice is necessary. The limitations of cost analysis in tariff-building are discussed; the need for more information on marginal costs demands more intensive research. The difference in the cost of supply in various undertakings, due to differences in bulk-supply charges and in types of area and load, has an important bearing on tariff unification; and a close examination of the economic and social implications of uniformity of charges throughout the country is desirable before a political decision is made on this matter. Small supplies, i.e. supplies to domestic and business premises, are discussed in relation to the influence of non-monetary factors, also the space-heating load (with a suggestion for price discrimination as an improved method of charge) and the need for improvement in the bases of the fixed charges in two-part tariffs. In conclusion suggestions are outlined for a uniform system of tariffs. An appendix to the paper contains an analysis showing the difference in cost of supply between urban and rural areas.