Key Messages

CSTEP launched the Empower series of blog articles to simplify the power sector for non-technical readers. Through the series, we hope to explain how every step of the electricity journey affects the consumer. In the first article, we introduced you to the many actors involved in the electricity journey. In this article, the second of the series, the author explains the costs involved in generation of electricity (the first step of the journey) that is finally reflected in the consumers power bill.

The power sector is a composite group of institutions that work together in a supply chain, to provide reliable and affordable electricity to us - the end-consumers. The setup primarily includes power-generation, transmission, and distribution. Generating companies (GENCOs) produce power and transmit it - over long distances through transmission lines - to distribution companies (DISCOMs). DISCOMs transfer the electricity to our homes, offices, and industries via a system of distribution lines/feeders and transformers. Generating companies incur the cost of generating power, which needs to be recovered through revenue from customers.

Power Generation Tariff Design