The type of tariff in which a consumer is penalised or given discount when the power factor falls below or above the reference value respectively is:

Sliding Scale Tariff (Power Factor Tariff)

• The type of tariff in which a consumer is penalised or given a discount when the power factor falls below or above the reference value respectively, is known as a sliding scale tariff.
• In a sliding scale tariff, the electricity charges vary based on the consumer’s power factor.
• Consumers with a higher power factor (closer to unity) receive discounts, while those with a low power factor may face penalties.
• This system encourages industries and large consumers to improve their power factor by installing capacitor banks or power factor correction equipment.

Additional Information 

Different types of tariff in the power system:

• Flat demand rate tariff: The bill is based on the maximum demand of the load.
• Straight-line/uniform meter rate tariff: The bill is based on the energy consumption of the load.
• Block meter rate tariff: The price and energy consumption are divided into three blocks.
• Two-part tariff: The total bill is divided into two parts: a fixed charge and a running charge.
• Power factor tariff: The bill is based on the power factor of the load.
• Three-part tariff: This tariff is mainly applied to large consumers.