Every solar proposal starts with the customer's bill, yet many sales people only read the total. The total hides the most important number for solar: what the last units cost. Solar removes the most expensive units first, so a customer whose average rate is ₹9 may be saving ₹15 or more on each unit solar replaces. This lesson walks through the parts of a bill and how to calculate it.
Who sets the tariff
Each State Electricity Regulatory Commission (SERC) issues a tariff order, usually once a year, after hearing the DISCOM's petition. The order sets energy rates, fixed charges and the rules for surcharges for each consumer category (residential, commercial, industrial, agricultural). Electricity duty is set by the state government, not the SERC. State governments also announce subsidies such as free-unit schemes, which appear as credits on the bill.
Tariffs change, often mid-year, so always work from the customer's latest bill and the current tariff order.
The parts of a residential bill
1. Energy charges and slabs
Most states charge residential energy in slabs: blocks of units at rising rates.
- Telescopic slabs: each block is charged at its own rate. The first 100 units are cheap for everyone, even heavy users. Most states use this.
- Non-telescopic slabs: once consumption crosses a threshold, all units are charged at a higher rate. Kerala uses this above 250 units a month, so crossing the line raises the cost of every unit.
- Flat rate: one rate for all units (Karnataka residential, for example, currently has a flat energy rate).
Tamil Nadu bills bi-monthly, so its slabs are per two months.
2. Fixed (demand) charges
A monthly charge that does not depend on units used. It may be flat per connection, per kW of sanctioned load, or by consumption band. Solar does not reduce it. A 5 kW sanctioned load at ₹150/kW pays ₹750 a month even with zero net units.
3. Fuel and power purchase adjustments
DISCOMs pass changes in their power purchase costs to consumers through a per-unit surcharge with names like FAC (fuel adjustment charge), FPPAS or FPPCA. It changes every month or quarter. In some states it is large (in Gujarat it has been in the range of ₹2–3 per unit), and it applies to every billed unit, so solar saves it too.
4. Wheeling and other per-unit charges
Some states show a separate wheeling or network charge per unit (Maharashtra, for example), or regulatory surcharges (Rajasthan).
5. Electricity duty and taxes
A state levy, either a percentage of the bill or a fixed amount per unit. Maharashtra levies a percentage on the energy, fixed and other charges, for example.
6. Other lines
Meter rent, arrears, interest on security deposit, rebates for online payment, and subsidies.
Worked example: Maharashtra, 350 units a month
Using MSEDCL residential rates from the FY27 notes (verify against the current tariff order and the customer's bill):
| Item | Calculation | ₹ |
|---|---|---|
| Energy 0–100 | 100 × 3.96 | 396.00 |
| Energy 101–300 | 200 × 10.80 | 2,160.00 |
| Energy 301–350 | 50 × 15.03 | 751.50 |
| Wheeling | 350 × 1.60 | 560.00 |
| Fixed charge (single phase) | 130.00 | |
| FAC (assume 0 this month) | 0.00 | |
| Subtotal | 3,997.50 | |
| Electricity duty 16% | 0.16 × 3,997.50 | 639.60 |
| Total | ≈ 4,637 |
Average rate: 4,637 ÷ 350 = ₹13.25 per unit.
Marginal rate (the cost of the 350th unit): (15.03 + 1.60) × 1.16 = ₹19.29 per unit.
Why the marginal rate matters for solar
Suppose a 2 kWp system offsets about 250 units a month (yields vary by city and season). With net metering, the customer's net billed units fall from 350 to 100. Which units disappear? The top ones:
- 50 units at ₹19.29 = ₹964.50
- 200 units at (10.80 + 1.60) × 1.16 = ₹14.38 each = ₹2,876.80
- Saving ≈ ₹3,841 a month, or about ₹15.37 per unit offset
The new bill is about ₹796 (100 units of energy and wheeling, plus fixed charge and duty). Notice how the saving per unit (₹15.37) is higher than the old average rate (₹13.25). Using the average rate would under-state savings here. In a flat-rate state the two are the same; in a state with free units the saving per unit can be lower than the average rate suggests.
Free-unit schemes change the maths
Several states give residential customers free or heavily subsidised units (for example, schemes in Karnataka, Telangana, Rajasthan, Tamil Nadu and Punjab). For a household that already gets 200 units free, solar only saves the units above the entitlement. Model these carefully:
- Find out whether the customer is enrolled, and how the scheme treats net-metered consumption.
- Size solar to the units the customer actually pays for, not their gross consumption.
- Expect lower savings per rupee invested; be honest about it.
Kerala: the non-telescopic cliff
Kerala's residential tariff is telescopic up to 250 units a month, then non-telescopic. Using the current rates in our notes (verify):
- 250 units: 50 × (3.35 + 4.25 + 5.35 + 7.20 + 8.50) = ₹1,432.50 energy
- 260 units: all 260 × 6.75 = ₹1,755.00 energy
Ten extra units cost ₹322.50, about ₹32 each. A solar system that keeps net use under 250 units is worth far more to this customer than the average rate suggests.
Key points
- A bill has energy charges (slabs), fixed charges, fuel/power purchase surcharges, other per-unit charges, duty and adjustments.
- Telescopic slabs charge each block at its own rate; non-telescopic slabs (Kerala above 250 units) charge all units at the higher rate.
- Solar removes the most expensive units first, so use the marginal rate, not the average rate, to estimate savings.
- Fixed charges stay even when net units are zero.
- Free-unit schemes and monthly surcharges can change the savings; check the current tariff order and the customer's bill.
Check yourself
- In a telescopic tariff, does crossing into a higher slab raise the price of the first 100 units?
- A bill has energy ₹2,000, fixed ₹200, FAC ₹150 and 10% duty on all of these. What is the total?
- Why can solar savings per unit exceed the customer's average rate?
Answers
- No. Each block keeps its own rate; only units in the higher block pay the higher rate.
- (2,000 + 200 + 150) × 1.10 = ₹2,585.
- Because solar removes the top-slab units, which cost more than the average (which includes cheap lower-slab units and the fixed charge).