Third Benchmarking Report on Quality of Electricity Supply

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THE USE OF STANDARDS AND INCENTIVES IN QUALITYREGULATION2.1 Introduction: what is quality regulation and why is it needed?In recent years, a growing number of countries have adopted price-cap as the form of regulationfor electricity distribution, and sometimes also transmission, services. Price-cap regulation withoutany quality standards or incentive/penalty regimes for quality may provide unintended andmisleading incentives to reduce quality levels. Incentive regulation for quality can ensure that costcuts required by price-cap regimes are not achieved at the expense of quality.The increased attention to quality incentive regulation is rooted not only in the risk of deterioratingquality deriving from the pressure to reduce costs under price-cap, but also in the increasingdemand for higher quality services on the part of consumers. For these reasons, a growing numberof European regulators have adopted some form of quality incentive regulation over the lastfew years. Moreover, quality is multidimensional and some aspects of quality have a long recoverytime after deterioration. Hence, quality of service is usually regulated over more than one regulatoryperiod to address numerous issues, including continuous monitoring of actual levels ofperformance.The objective of this chapter is to provide relevant and comparable information on the regulation ofquality in the electricity distribution and transmission services, as enforced in CEER-member countries.This chapter deals with standards and incentive/penalty regimes related to continuity of supply12 . It is the first time that the CEER’s Quality of Electricity Supply <strong>Benchmarking</strong> report reviewsexisting incentive regulations for quality. Therefore, this chapter should be regarded as a first andgeneral-purpose comparison, while more focused comparisons could be developed in future.Incentive Regulation (IR) for quality comprises essentially three aspects:· measuring actual and perceived levels of quality – a necessary and preliminary step, sincesetting continuity standards and/or incentive/penalty regimes requires robust and reliable dataon the service actually provided and on customers’ perception. The subject of continuitymeasurement was extensively discussed in Chapter 1 and is only briefly summarized inSection 2.2; the same section describes customer surveys, through which regulators can collectadditional information on quality as perceived by customers, which is extremely valuablefor regulatory decision-making;· promoting continuity improvement, which means giving utilities signals and incentives toevaluate their investment and management decisions not only in light of their costs but alsotaking into account the effects on actual quality levels. Regulators can promote continuityimprovement especially by introducing incentive/penalty schemes, generally based on system-levelquality standards that refer to the average quality level in a geographical area.Section 2.3 describes such incentive/penalty regimes and, whenever possible, their effects;12For commercial quality standards, please refer to Chapter 3. For voltage quality, please refer to Chapter 4.31<strong>Third</strong> <strong>Benchmarking</strong> <strong>Report</strong> on Quality of Electricity Supply – 2005 · Chapter 2
·ensuring good continuity levels to consumers, especially worst-served ones; regulatorscan do this through guaranteed standards that refer to the quality level experienced by eachsingle customer connected to the network. Single-customer guaranteed standards are associatedwith the payment of compensations to the affected customers where the company fails tomeet the standard. Section 2.4 deals with continuity standards at single-customer level andcustomer compensations.At the end of each section, a number of findings identified from the comparison are summarised.Some recommendations for future work, from the surveyed experience, are given as conclusionsof the chapter. The findings and recommendations, together with this introduction, can be read asan executive summary of the chapter. Furthermore, space has been devoted to the more detaileddescription of some regulatory experiences of special interest, through boxes containing additionalinformation. There are also some comparative tables that analyse the most substantive issues.The survey is based on data provided by 19 countries: Austria (AT), Belgium (BE) 13 , CzechRepublic (CZ), Estonia (EE), Finland (FI), France (FR), Great Britain (GB), Greece (GR), Hungary(HU), Ireland (IE) Italy (IT), Latvia (LV), Lithuania (LT), Norway (NO), Poland (PL), Portugal (PT),Slovenia (SI), Spain (ES) and Sweden (SE).Note that quality standards and incentive/penalty regimes might be issued by legal bodies differentfrom regulatory authorities. In some countries regulators do not have the legal power to setquality standards, however, generally they can at least make proposals on the subject to the competentinstitution. More detailed information can be found in Annex 2 (Competencies of regulatorswith regard to quality regulation).The data were collected through a questionnaire containing about one hundred open-answerquestions and through a series of clarifications made by the single countries at the request of theauthors of this chapter. The findings and final recommendations have been discussed and agreedby the CEER Member Authorities.2.2 Quality measurement: a prerequisite for standards and incentivesSetting continuity standards and incentive/penalty regimes requires firstly robust and reliable dataand secondly that the outputs to be regulated are relevant and important for consumers. Thismeans that there are two main prerequisites for setting standards and incentives:· continuity measurement systems;· customer surveys on satisfaction, expectations and willingness to pay.In the two following paragraphs these prerequisite are briefly illustrated; for a more comprehensivediscussion of continuity measurement systems, see Chapter 1. A summary of the most relevantissues concludes the section (Findings I).13Belgium has a federal organization for regulation activities. The national regulator (CREG) is only concerned with the nationaltransmission network, while 3 regional regulators are concerned with local transmission and distribution networks. Only regionaldata from the regions Wallonia and Flanders are available and included in this report.32Council of European Energy Regulators – Ref: C05-QOS-01-03
Page 1: Council ofEuropeanEnergyRegulatorsT
Page 4: Council ofEuropeanEnergyRegulatorsE
Page 10: CHAPTER 1 - Continuity of SupplyCON
Page 13 and 14: ··utes are defined as “short in
Page 15 and 16: interruptions is very small. AIT is
Page 17 and 18: Interruptions shorter than three mi
Page 19 and 20: 1.6.1 Weighting methods used for co
Page 21 and 22: ADDITIONAL INFORMATION 1.3 - NOTICE
Page 23 and 24: and in Italy the integration of the
Page 25 and 26: 1.6.3 Rules for recording short int
Page 27 and 28: ADDITIONAL INFORMATION 1.8 - AUDITS
Page 29: SAIDI1.7.1 Unplanned SAIDI not attr
Page 34 and 35: FIG 1.7 UNPLANNED INTERRUPTIONS Sho
Page 36: ···There is some evidence to sup
Page 42 and 43: 2.2.1 Continuity measurement system
Page 44 and 45: Almost all countries having adopted
Page 46 and 47: 2.2.3 Findings I: Quality measureme
Page 48 and 49: The incentive is symmetric and rela
Page 50 and 51: In Sweden, a quality of supply inde
Page 52 and 53: Regulators’ concern with the vola
Page 54 and 55: In Great Britain the regulator (Ofg
Page 56 and 57: ··A regime to avoid overquality i
Page 58 and 59: ··gets”; introduction of an upp
Page 60 and 61: FIG 2.4/b CONVERGENCE EFFECT OF THE
Page 62 and 63: 2.4 Continuity standards at single-
Page 64 and 65: Observation suggests that there is
Page 66 and 67: 2.4.2 Multiple interruption standar
Page 68 and 69: 2.4.3 Single-customer standards rel
Page 70 and 71: E SIStandard for long interruptions
Page 72: introduce single-customer standards
Page 76 and 77: STANDARDS IN COMMERCIAL QUALITY REG
Page 78 and 79: Commercial quality regulation attem
Page 80 and 81: The evaluation of the actual level
Page 82 and 83: TABLE 3.5MOST FREQUENTLY USED COMME
Page 84 and 85: the standards relating to a particu
Page 86 and 87: Quest.2.1.19Supp.1Recomm.✰✰✰
Page 88 and 89: 3.3.3 Problems associated with volt
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the compensation paid by the electr
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Quest.2.1.23Supp.0Recomm.✰✰✰D
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answered (for instance Portugal and
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countries who supplied data have a
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metering problems, customer’s que
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step. CEER recommends that member s
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CHAPTER 4 - Voltage Quality Monitor
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For the rest of the voltage quality
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·In Czech Republic a monitoring sy
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tion point of single customers: in
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ADDITIONAL INFORMATION 4.2 - POWER
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ator must advise clients connected
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ADDITIONAL INFORMATION 4.3 - CUSTOM
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mandatory such values are applicabl
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ANNEXES - ANNEX TO CHAPTER 1.Sectio
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Appendix - BELGIUM - Wallonia1. Acc
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(CONTINUE) SECTION 2 - PLANNED INTE
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TABLE 3.4 - UNPLANNED INTERRUPTIONS
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TABLE 3.10 - ENERGY NOT SUPPLIED AS
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TABLE 4.2 - VOLTAGE LEVEL ANALYSIS
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The classification of continuity da
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The same pattern emerges with the i
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ANNEX TO CHAPTER 2.Annex 2.1 - Comp
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Quest.2.1.18Supp.0Recomm.✰✰DSO5
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Quest.1.1.9Supp.0Recomm.✰✰✰DS
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3.3.10.4 HungarySupply level in the
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TABLE 3.2INDICATORS1.1.1. Average w
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TABLE 3.3.AINDICATORS2.1.1. Respond
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TABLE 3.3.BINDICATORS2.1.1.Respondi
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TABLE 3.4INDICATORSAustriaBg Flande
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TABLE 3.6 ESTIMATING CHARGES (WORKI
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TABLE 3.10 CONNECTING (SUPPLY AND M
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TABLE 3.14 AVERAGE TIME TO PROVIDE
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TABLE 3.18 METER PROBLEMS (WORKING
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TABLE 3.22 RESPONSE TO CUSTOMER LET
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TABLE 3.27 AVERAGE WAITING TIME IN
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TABLE 3.32 NUMBER OF COMPLAINTS PER
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TABLE 3.38PREPAYMENT METER FAULT (W
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TABLE 3.43NUMBER OF REVISED BILLS P
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ANNEX TO CHAPTER 4.ANNEX 4.1 Voltag
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TABLE 2: NORWAY: Flicker severity l
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TABLE 5: PORTUGAL: for EHV and HV,
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Third Benchmarking Report on Quality of Electricity Supply

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