Electricity Account Balancing

Quite a few societies who work on single point supply have a simple tariff determination mechanism. They just take the total bill and divide by the number of units purchased to determine the average price. They then bill the residents for the electricity consumption based on the average price. The challenge however comes when there are one time or ad-hoc charges such as security deposits, arrears or refunds as a part of the electricity bill. There are also times when the society makes a payment independent of the bills as well. Should all these charges be included in the average rate calculation?

 

The society needs to maintain separate cost accounts for the payments being made to electricity departments. There should be three such accounts:

 

  1. Revenue Account – charges to be paid for the monthly supply of electricity as per the tariff

  2. Capital Account– Any one time or ad-hoc charges such as connection enhancement charges, meter replacement charges. The expenditures related with the infrastructure enhancement in the society such as a new transformer or a new panel would come in this category.

  3. Deposit Account- There are refundable deposits with the electricity department. The society needs to keep a separate account for the refundable deposits.

 

 

 

As far as the recovery of the electricity expenses from the residents is concerned, the revenue account should be balanced against the recovery of the residents and common area electricity bills.

 

Electricity charges under revenue account = residents bill + common area bill

 

For the calculation of the average rate of power, the electricity charges against the revenue account should be considered. Of course, if the society does a slab based billing (the correct billing process), the common area charges should be calculated as per the above formula.

 

The capital account recovery needs to follow a different process. It needs to be handled like any other capital expense of the society. There could be special one-time payments from the residents or the maintenance budget can be used to fund the same.

 

The deposits in general should not be charged to the residents as part of the electricity bill. If a society mandates the residents to maintain electricity deposit, the residents’ deposits may be balanced against the deposit account. Of course, if the society has a cash crunch, the money can be raised from the residents either in the form of deposit or in the form of special payment.

 

Please share your process or thoughts in this area. Please send a mail to This email address is being protected from spambots. You need JavaScript enabled to view it. in case you require additional information.

 

 

 

 

 

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