Electricity metering - Pricing fundamentals

With the advent of electrification at the end of the 19th century, electricity production and distribution companies were immediately faced with the problem of how to bill their customers for electricity. In the absence of appropriate measuring equipment, they were forced to resort to flat-rate tariffs based, for example, on the power installed at the consumer's home, or on the surface area of the dwelling. Clearly, apart from its simplicity, such a primitive pricing method is unsatisfactory, as it does not reflect the image of the services provided to the customer. It was only with the invention of sufficiently accurate and inexpensive electricity meters that more satisfactory pricing and billing methods could be introduced. This is where the fundamental role of the electricity meter comes in, as it enables the billing of the service provided; its invention thus played a fundamental role in the rapid development of electrification.

However, simply measuring electrical energy consumption is not enough to establish bills in line with the economic and social environment of the country concerned. It turns out that developing a satisfactory electricity tariff structure is a highly complex operation, involving a large number of factors, but whose complexity must not detract from its purpose.

Invoicing is therefore generally based on contractual terms and conditions that reflect the characteristics of electricity delivery. Metering should enable electricity to be billed according to these characteristics and the energy consumed. When prices are fixed a priori, generally in agreement with or by public authorities, we speak of pricing, a term we frequently use for convenience. Pricing uses the characteristics of electricity delivery. So, by describing the wide variety of pricing techniques, we can define the technical possibilities of a metering package. It goes without saying that metering systems must remain perfectly objective with regard to the electricity consumer and supplier, as well as to other system participants such as generators and network operators.From a practical point of view, and in an increasingly common way, tariffs are established according to the following principles:

• the tariff applied most often includes a component based on power, whether installed, achieved or contracted; the term "power" corresponds to the investment required by the electricity producer and distributor to provide the customer with the requested power;

• the applied tariff always includes an energy consumption component in kilowatt-hours, incorporating in particular fuel costs at the generating plant; this part of the cost price is highly dependent on production conditions.

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