Tiered or inclining block pricing is a rate structure used by many utilities where the cost per kWh goes up as you use more electricity. The first tier covers baseline usage at the lowest rate, while subsequent tiers charge progressively higher prices. This structure is designed to encourage energy conservation and ensure that basic energy needs remain affordable while heavy users pay more. California and other states with high rates commonly use tiered structures.
Tiered Pricing
A rate structure where the price per kWh increases as consumption rises above set thresholds.
Related Terms
Electricity Rate
The price charged per kilowatt-hour of electricity, varying by customer class (residential, commercial, industrial).
Time-of-Use (TOU) Rates
Pricing that varies by time of day, with higher rates during peak demand hours and lower rates off-peak.
Demand Charge
A fee based on the maximum rate of electricity consumption (peak demand in kW) during a billing period.