Availability based tariff

Imagine you love playing outside in your backyard but sometimes it's too cold or rainy to go outside. Your mom or dad checks the weather forecast and decides to give you an allowance to make sure you have some fun indoor activities to do on those days.

That's what an availability based tariff is like for companies that provide electricity. Sometimes there is a high demand for electricity and the power grid needs to be able to supply it. Other times, not as much electricity is needed.

To make sure there is always enough electricity available, the companies that generate electricity are paid based on how much electricity they can provide, not just on how much they actually end up providing. This means they are also paid to have backup generators and other special equipment ready in case there is a sudden increase in demand for electricity.

By paying for availability, electricity providers can ensure that there is always enough power to meet the needs of households and businesses, even during peak usage times.