Keywords— Electricity, distribution, regulation, quality,

framework.

Abstract-- To supply Quality Service is the main goal of the electricity distribution sector, but the diversity and characteristics of the distribution networks pose a huge problem of regulation to be studied. This paper establishes a theoretical framework for technical-economic analysis on quality regulation in electricity distribution sector. Depending on the regulation model, the Quality of Electricity is simply left to the (good) will of the distributor (rate or return), or is imposed by a command & control regulation (price-cap). If not, we will assume that benchmarking techniques (yardstick competition) will face difficulties to overcome the heterogeneous Distribution Networks. Therefore, the absence of robust incentive quality regulation and the lack of a precise definition of electrical quality in distribution highlight the interest to invest in better mechanisms of incentive regulation of Electric Quality in Distribution.

I. INTRODUCTION HE main task of distribution activity is transporting electrical energy from the transmission or sub-

transmission networks to the points of consumption, in the suitable conditions of quality, i.e. supply Quality Service to the consumers. Waveform characteristics of the electrical energy are very important, as is the capacity of the distribution network whether or not to supply the electricity, as well as the treatment of the consumer himself.

In the last two decades, unbundling, liberalization and privatization have considerably modified the structure of the electricity supply industry. The need to set up adequate frameworks for regulating the unbundled network sectors in

Financial support from the scholarship “Beca Presidente de la República”, of the Planning Ministry of the Government of Chile, is gratefully acknowledged.

978-1-4244-1744-5/08/$25.00 ©2008 IEEE

the restructured electricity market and the discontent with traditional regulation systems like the rate of return system has led regulators to implement schemes such as price-caps and yardstick competition. Distribution is not only a natural monopoly, thus being targeted for regulation, but is also an intense capital business that includes diverse activities, within very heterogeneous conditions. However, in spite of the obvious relevance of the quality of service for the consumers, the distribution activity is regulated but the quality definition and measurement is not in the heart of the regulatory models. Strangely, the regulation remains targeted on the fee of the infrastructure, reduction of costs and economic efficiency of the firms; even the technical side of the quality is poorly treated by the regulatory schemes. The incentive and competition schemes provide strong incentives for efficiency, unlike the traditional regulation. However, these systems mostly focus on cost reduction; thus, the quality of the offered services is at risk. Economically speaking, a decrease in quality is equivalent to a higher price. The European Commission has appointed monitoring responsibilities to the national regulatory body relating to quality of supply. In addition the regulator has to provide adequate economic incentives for the maintenance and construction of the necessary network infrastructure (2003/54/EC). Quality of electricity supply regulation can take many forms [1]. The technical value of the quality is given generally by minimum standards or awaited ranks. The economic value of the quality is given by the minimum cost of the investments to guarantee a quality goal. Against this background, the existence of technical standards of quality without economic endorsement is current practice. Consequently, the existence of penalties for non respect of these standards without economic endorsement is current practice too. Political agreements, between the actors, emulating economic optimums and technical optimums seem to be the norm.

Researches were done on quality regulation in electricity distribution sector; however none establish a framework tackling this problem of quality. Even if several proposals

A framework for Quality Regulation in Electricity Distribution

Rodrigo López1, Jean-Michel Glachant1, Yannick Pérez1

1 Networks research group - GRJM/ADIS

Faculty of Law & Economics, University Paris - Sud XI, France

Bâtiment C, 27 av. Lombart 92260 Fontenay aux Roses, France

Phone : +33 (0)140916974 E-mail: rlopezg@ieee.org

jean-michel.glachant@u-psud.fr yannick.perez@u-psud.fr

T

were made, all of them focus in a solution of the problem of quality but does not establish the basic theoretical trade off and determinant of quality regulation in electricity distribution sector. That is way the added value of this paper it is establish the framework for the technical-economic analysis and research’s of the problem of quality in electrical distribution sector.

Having presented the function and role of the electrical distribution activity, and why it is relevant to the electricity distribution quality, we define Quality in the context of electricity distribution services. Later we survey the literature and models of Quality Regulation, looking at how the quality is considered in some of the classics and latest regulatory models used in electricity distribution (rate-of-return regulation, price-cap regulation and yardstick competition). As well, we discuss the mains problems of these regulatory models and the need to include quality regulation under the new regulation schemes. Finally we draw some conclusions.

II. ELECTRICAL QUALITY Distribution has a local and precise function, bringing

electricity to all the consumers which are not directly connected to the high voltage transmission system, see Fig. 1.

Fig. 1. Electrical power system scheme. 1) Power plant; 2) Transmission or subtransmission system; 3) Distribution substation; 4) Primary distribution system; 5) Distribution transformer; 6) Secondary distribution system. Source: http://www.ameren.com

Outage of supply of the electrical service, i.e. the

unavailability of the provision, is probably the most well-known or visible element for the consumers of electrical quality. It is absolutely comprehensible then that the continuity of supply is the driving force in most of the technical-economic discussions related to quality. Nevertheless, usually, economists have in mind the transport system behavior when they speak of quality. But it is an error to confuse reliability in transport with that in distribution. The strongest argument for this is the security of supply, because most current failures are related to infrastructure failures and not to the lack of the balance between production and

consumption [2]-[3]. However, for electricity distribution, it is also a mistake to think that quality is limited to reliability because it is common to make a distinction between three different quality dimensions (see Fig.2): “Commercial Quality” that is related with the costumer’s treatment, “Power Quality” that takes into account about disturbances to the voltage waveform, and “Reliability” that consider the security and availability of distribution network to supply the electricity service [4]. It is noted that electricity distribution companies have different services and cost structures to fulfill the aforementioned services.

Firstly, Commercial Quality is related to individual agreements between the electricity distribution company and their consumers, as in all commerce in general. Thus “customer service” correspond to “services of commercial logistics”, i.e. metering, billing and collection; and “services contact customer's”, i.e. subscription contracts, achievement of network (re)connections and disconnections, reception of the customers, to respond to problems and complaints and energy advice [5]. Commercial Quality does not depend on planning or maintenance departments' of the distribution firm, usually there is a service specialized on that. On the other hand, Commercial Quality has neither a relation with the natural monopoly of the sector nor with the infrastructure of the network.

Secondly, Power Quality, sometimes called voltage quality, covers a variety of disturbances with the voltage waveform. The relevant technical phenomena are network losses and variations in frequency, fluctuations in voltage magnitude (flickers), short-duration voltage variations (dips, swells, and short interruptions), long-duration voltage variations (voltage regulation), transients (temporarily transient over-voltages), and waveform distortion (harmonics). Each one of these disturbances has its own unit of measurement and can be relatively easily measured. Voltage Regulation is, by far, the most important quality feature in Power Quality. Many of the disturbances measured in Power Quality are caused by the clients or come from the Transmission Network. Several engineering solutions for minimize network losses [6]-[7] or deal with frequency or voltage disturbances [8]-[9] are presented by technical literature, some of them highly sophisticated.

The third quality dimension is Reliability, which is a measure for the ability of the network to continuously meet the demand from consumers. Network reliability can be divided into two main elements namely adequacy and security. Adequacy relates to the availability of sufficient network capacity to ensure supply of electricity to consumers in the long run. That is, no interruptions occur under normal operating and demand conditions. Security relates to the ability of the network to - given that it is adequately designed - withstand disturbances i.e. consumers do not experience an interruption in the electricity service. The reliability theory is not limited to unavailability, unlike what many authors believe, it possesses a complete array of individual and systemic indicators that allow quantifying the phenomena

related to adequacy and security [10]-[11]. Often, Energy Economics authors do not define what

“electrical quality” is [2]-[3]-[28]. They only assume that a certain kind of electrical quality is present [12]. In certain cases, they ignore all technical characteristics (in particular, Power Quality) and focuses only on the reliability dimension of Electricity Distribution Quality [13]. Between Electrical Power Engineers, at the end, quality is mainly understood as a “hybrid feature” given by the “Voltage Regulation” and the “Continuity of the Supply” [14]-[15].

III. REGULATION AND QUALITY IN DISTRIBUTION ACTIVITY The current transformations of the network sectors are

commonly indicated under the generic term of deregulation. This term evokes with accuracy the disappearance of the exclusive rights of exploitation, the removal of entrance legal barriers, disengagement partial or total of the State capital and certain historical operators, as well as a less direct interventionism on the operation of the markets. But it is advisable to keep in mind which the deregulation is regulating at least as much than deregulating, i.e., in order to ensure a harmonious transition towards a competing industrial organization, it also consists in a new framework construction of regulation aiming to make competition effective, to guarantee conditions of equal access to the market and to establish honest rules of the game between competitor operators. Thus the deregulation is not a synonymous of abolition of the regulation, but rather it indicates a change of the total system of competition and regulation, i.e., a transposition of the regulation, rather than a deposition of the regulation.

Electrical Quality in Distribution

Commercial Quality Power Quality Reliability

Reception of customers

To respond to problems and

complaints

Adequacy

Security

Frequency variations

Voltage magnitud fluctuations

Short-duration voltage variations

Long-duration voltage variations

Transients

Waveform distortions

Biling

Meter reading

(re)Connection of new consumers

etc. Fig. 2. Electricity distribution quality dimensions.

Regulation thus faces a problem of finding the balance

between optimal capacity expansion, which requires cost-coverage and stable signals, and optimal capacity utilization, which requires fluctuating prices [16]. Regulators have faced the challenge of developing regulatory models that meet the requirements of different interest groups: customers,

distribution companies, investors and society [17]. 1) From customers’ point of view, the regulatory model should protect them from excess prices of monopoly services. In other words, customers dependent on monopoly services should not be overcharged and the quality of monopoly services should be sufficient. Acting according these principles requires that reasonable prices, the role of power quality in regulation and appropriate quality levels are determined explicitly. 2) From distribution companies’ point of view, the regulatory model should give incentives for optimal capacity expansion and capacity utilizations, and it should treat distribution companies equally. The proper incentives are important in keeping the distribution networks in appropriate shape. To avoid conflicting incentives, the directing signals of regulation should be consistent with the general planning and operating principles of distribution networks. 3) From investors’ point of view, the regulatory model should protect their rights by ensuring reasonable returns on investments. Regulation should not weaken the competitiveness and attraction of distribution industry. In order to fulfill this goal, emphasis has to be put on the methods used in defining regulatory asset bases, reasonable returns on equity and loaned capital, and the risks of distribution business. 4) From society’s point of view, the costs of performing regulatory activities should be in relation with the presumable cost savings. The regulator should not have to interfere with minor company-specific details and the information required by the regulator should be relatively easy for the distribution companies to produce.

The purpose of quality regulation is to ensure that the development of the networks is focused on the most rational targets from social-economic point of view. This requires that quality issues are dealt with extensively, so that every perspective is considered. Regulators face a challenging task when deciding proper solutions for the implementation of quality incentive schemes taking into account pressures of different interest groups in electricity distribution business. The issue of quality is therefore sensitive because all the stakeholders in the process of decision have different needs and have different value quality requirements.

The regulator aims to ensure reasonable tariffs and sufficient quality of supply for the monopoly customers by setting regulations to the companies. These regulations usually contain objectives for efficiency improvements in order to decrease costs and hence reduce tariffs. Sufficient quality level is obtained through necessary investments in the network. According to the Directive issued by the European Council “…Member States may impose on undertakings operating in the electricity sector, in the general economic interest, public service obligations which may relate to security, including security of supply, regularity, quality and price of supplies and environmental protection… Such obligations must be clearly defined, transparent, non-discriminatory, verifiable…” [1]. Based on the expectations described above, quality of supply regulation should focus on parameters that are important to the customers and at the same time are such that companies can control them. This way a

socio-economic optimum is reached. The regulation also has to be feasible i.e. the performance level has to be measurable by the regulator. Regulator has many opportunities to determine by which way it wishes to approach quality issues. Historically, several ways for determining standards for the distribution companies’ performance measurement has been experienced: Rate-of-return regulation, price-cap regulation, and benchmarking. Rate-of-return regulation was dominant in many countries for years. However, with the introduction of the regulation, often following the privatization of nationalized industries, some countries have adopted other systems, such as price-cap regulation and revenue-cap regulation, and later benchmarking, which are seen as having better incentive properties. The quality problems resulting from the change towards price-cap regulation or benchmarking, today increase the attention for quality regulation [4].

Following [4], we have defined quality in distribution as the combination of three dimensions: “commercial quality”, “power quality” and “reliability” and we now will estimate the impact of the three regulatory schemes of these dimensions.

A. Traditional regulation (rate of return) and quality Rate-of-return regulation is a system for setting the prices

charged by regulated monopolies. The central idea is that monopoly firms should be required to charge the price that would prevail in a competitive market, which is equal to efficient costs of production plus a market-determined rate of return on capital. Criticisms addressed to this formula of regulation are begun with Averch-Johnson [29], because it encourages cost-padding, and because, if the allowable rate is set to high, it encourages the adoption of an inefficiently high capital-labor ratio. Newbery [30] shows that this system encouraged the use of the most capital intensive technologies, introduced a tariff based on average cost and not at the marginal cost which allowed redistributional effects of revenues, and finally, that with this structure, the accent was placed on the increase in the capacity and not on the search for profits of productivity. However, this regulation proves to be efficient when the system faces the principal problem of the lack of investment [31]-[32]. Nevertheless this system is not also any more satisfactory when the principal problem becomes the reduction of the costs of operation and the search for profits of productivity.

In terms of quality of distribution, Kahn [18] said that the supplying company have the primary responsibility for quality of service and that the service standards are often much more difficult to specify by the promulgation of rules, reason why regulatory agencies have focused their attention on the price. Kahn suggests that the perceived difficulties of regulating quality have been the reason for regulators to “leave quality to the firms”. The natural tendency to oversupply quality under rate-of-return regulation, by the Averch-Johnson effect, makes that if the fair rate-of-return is set higher than the firm's costs of capital, then quality levels will automatically tend to be high. This way, regulators recognize the relevance of quality,

but at the same time did not see an explicit need for quality regulation, i.e. the quality it is not directly regulated but established by the distributor. For Spence [19] rate-of-return regulation can be considered as a substitute for quality regulation.

However, overcapitalization does not necessarily mean that quality is at optimal level. Under the rate-of-return regulation an oversupply of quality can be supposed, i.e. a quality level higher than the optimum. This would be equivalent to additional costs, therefore to a higher price; in other words, consumers will be paying too much for a too high quality level [20]. From a theoretical point of view, quality would only be optimal if its production costs and its consumers’ demand would be marginally equal.

No empirical proof in France or Italy allows supporting this concern about oversupply of quality. But different empirical studies that use US data, with too high reliability standards, to compare the costs of supplying higher system reliability against the benefits of doing so. The results show that, at given existing reliability levels, the former is substantially higher than the latter [4]. E.g. the reliability in New York State should be reduced by a factor five to arrive at optimal levels. The aforementioned studies seem to confirm the view that rate-of-return regulation not only resulted in low productivity but also led to inefficiently high quality levels in the electricity industry.

In conclusion of this point, we will assume that for the quality of electrical distribution activity, Rate of Return simply left quality concern to the will of the distributor.

B. Incentive regulation (price–cap) and quality In a nutshell, Price-cap regulation introduced in practice by

Littlechild early work is designed to give incentives to efficiency and therefore reduce spending levels, it also known as “Retail Price Index – X efficiency factor”, after the basic formula employed to set price caps. This takes the rate of inflation, measured by the Consumer Price Index and subtracts expected efficiency savings X. The system is intended to provide incentives for efficiency savings, as any savings above the predicted rate X can be passed on to shareholders, at least until the price caps are next reviewed. A key part of the system is that the rate X is based not only a firm's past performance, but on the performance of other firms in the industry: X is intended to be a proxy for a competitive market, in industries which are natural monopolies. As Laffont and Tirole [33] underline the price to pay to profit from this strong incentive to lower the costs is the possibility offered to the owners to preserve a significant share of the profits carried out by the innovation. This situation is not always well understood by the regulators which seem to discover the side effects of this choice of mechanism on the profits of the companies. These profits considered to be excessive then push the regulator with a modification of the value of X, which could go until an annual modification of X. In this case, a RPI–X mechanism would produce only weak incentives in term of reduction of costs, because the operators

would not be sure to preserve the profits of productivity which they produced and would undergo a "ratchet effect”.

Price-cap regulation has been criticized because that cost reductions may be achieved through adverse quality reductions. Spence [19] and Sheshinski [21] already showed that where price is fixed or taken as given, the monopoly firm will always set quality too low. Newbery [30] underlines the choice of the X implies redistributional effects between the consumers, the shareholders and the managers who can pose a political problem and leads to renegotiations. It seems that considerations concerning the value of the credits, the cost of the capital, the estimates of the growth rate of the productivity and the request and progress of competition are taken into account to fix the X in practice [34]-[35]-[36].

In terms of Quality in distribution activity, the relationship between price-cap regulation and the reliability of supply of a monopolist is studied by Fraser [22]. He suggest that when the firm is allowed to transfer to the consumers a proportion of increasing costs that is enough to maintain the expected profits of the firm, then reliability will be increased. But, practically, this would correspond to rate of return regulation. If the firm is forced to absorb the increasing costs in detriment of its level of expected profits, the answer of the firm will be to reduce to the minimum the loss of expected profit by decreasing the reliability. This way, the protection of the consumers against the increase of the cost will be at expense of reliability. For Fraser, the X-factor represents the authorized degree to transfer to the consumers any specific cost increases of the firm as higher prices. For that reason, if the X-factor is set too high and the firm cannot reach the regulatory objectives of cost, to maintain sufficient benefits the strategic reaction of the firm will be to lower the reliability: « don’t touch my profit ». In the same way, Weisman [23]-[24] shows that the regulated firm's incentive to invest in service quality increases with the level of the price-cap, also that the incentive to reduce investment in quality can be mitigated by the regulated firm's participation in complementary competitive markets. Because, a poor quality reputation of the monopoly can negatively affect sales in the competitive markets.

Unfortunately, there are only a few studies for the electricity industry available that collected empirical evidence of quality effects under price-cap regulation. Ter-Martirosyan [25] studies the effects of price-cap regulation on reliability in 78 electricity firms from 23 states of the US during the period 1993 – 1999. She argues that price-cap regulation has a negative impact on quality if no quality safeguards are established. She maintains that price-cap regulation immediately affects the cost structure of the firm, while the consequence on the quality potential of the existing equipment is a long-term effect. Therefore related changes in reliability may not be noticed in the short run. However, enforcement of quality standards appears to reduce the negative impact on quality under price-cap regulation. Her analyze confirms that quality standards help to mitigate this problem. Then, Ter-Martirosyan studies firms’ reductions in spending with and

without quality standards. She finds that spending levels have fallen in both cases, which supposes more efficiency from the firms. However, the firms with quality standards have reduced less their costs than those without. Since 1993, spending levels for firms with quality standards decreased by 17%, while for firms without quality standards this reduction has been ~ 37%. This important difference supports the concern that price-cap regulation without quality safeguards produce bad incentives to under-spend on quality, then problem of quality degradation. However, it does not tell how define optimal quality level and tends to keep standards existing before price-caps reform as the best benchmarking. It establishes price-capping as a defacto “Quality Floor” method where quality existing under Cost Plus regulation is used as optimal quality.

In conclusion of this point we will assume that for the quality of electrical distribution activity Price–cap Regulation is administratively imposed by a Command & Control Regulation.

C. Regulation by yardstick competition (benchmarking) and quality

In very general terms, in the yardstick competition mechanism, the regulation of monopolistic activities is determined through the comparison (benchmarking) of costs and performance of similar companies or mirror companies or the reduced comparison of heterogeneous companies corrected for differences [15]. I.e. under yardstick competition individual companies’ prices are made dependent to the relative performance of others. This is done by setting prices equal to the “yardstick”, which can be the mean costs of all companies. Companies that are able to perform better than the average generate’ profits, while those who do not, suffer losses. The cost reduction effort of individual companies results in lower mean costs and ultimately in lower prices for customers. Under such framework, efficiency is revealed through the virtual competition process. Yardstick competition is in theory a method to overcome the information problems faced by the regulator [26]-[4]. In broader terms, Yardstick competition has been criticized because it requires a complex implementation. Weyman-Jones [27] raises three problems: commitment, collusion and comparability. For electricity network regulation, the problem of comparison is by far the most difficult. Given the scope of our paper, the commitment and collusion problems are beyond our research horizon. As yardstick competition for price regulation has already proven to be difficult, including reliability elements into yardstick competition is an even more challenging issue. It can be meaningless to simply calculate mean costs as each individual company’ costs may be driven by a series of company-specific factors. Clearly, the ability to generate a valid yardstick is a necessary precondition for yardstick competition to be successful. Failing to consider each company-specific factors would generate a blind yardstick which benefits some companies while disadvantaging others. This increases unpredictability and ultimately reduces effectiveness of the system. When reliability is included in the comparison, the

issue gets even more complicated as factors beyond the companies' control can influence the level of reliability.

Under yardstick competition, if the costs’ production functions are enough homogeneous a sound benchmarking can be done, but if the costs’ production functions are heterogeneous the comparisons between firms become difficult. Glachant [5] say that under yardstick competition, the problem is to relate the costs to the quality, i.e., even if with parametric and non-parametric methods of benchmarking we can make comparisons of homogeneous or heterogeneous costs’ production functions, we do not know how these one influence the level of quality for each firm. Costs give us the economic structure of the network (number of transformers, lines’ length, consumption limits, etc.) but not the electrical structure of the network (topology). Networks can have equivalent economic structures with a strongly different topology. The economic structure is a too fuzzy approximation of the electrical structure; nevertheless the quality is done by the electrical structure and particular contingencies.

The level of quality depends on the technical reasons as the precise location of the client, the topology of the network, the age of each component of the network, etc. Consequently, the electrical quality is hardly uniform, as currently established in standards. Then, if the quality is locally produced by both the economic structure and the electrical structure of the network, plus unavoidable hazards introducing troubles, the incentive policies must take into account this segmentation as well as the differentiation of quality levels.

In conclusion of this point, we will assume that for the quality of electrical distribution activity, Benchmarking is challenged by the strong heterogeneity of the Distribution Networks which make them hardly comparables.

IV. CONCLUSION The models of economic regulation of the electricity

distribution do not consider, or do not consider correctly, the quality of electricity. Currently, it is considered that the regulation system for distribution can be tremendously improved. Therefore, the absence of robust incentive quality regulation of electrical quality in distribution highlights the interest to establish mechanisms of economic incentive regulation for Electrical Quality in Distribution.

Depending on the regulation model, the Quality of Electricity Distribution is simply left to the will of the distributor (case of the rate or return regulation), or is administratively imposed by a command & control regulation (case of the price-cap regulation), or if not, is hardly comparable due to the heterogeneity of the Distribution Networks (case of the yardstick competition).

V. REFERENCES [1] K. Tahvanainen, S. Viljainen, S. Honkapuro, J. Lassila, J. Partanen, P.

Järventausta, K. Kivikko and A. Mäkinen, “Quality regulation in electricity distribution business”, Working paper, Lappeenranta University of Technology, Finland, 2007.

[2] R. López and J-M. Glachant, "Quality Regulation in Electricity Distribution. Illusion or Hope? ", 9th IAEE European Energy Conference on Energy Market and Sustainability in a Larger Europe, IAEE/EU 2007, Florence, Italy, 2007.

[3] R. López and J-M. Glachant, "Electricity Distribution. Distribution. Is Quality really regulated Is Quality really regulated or just given? ", Symposium EAEPE in collaboration with PRESOM / EU on Privatisation and regulation of core transactions in critical infrastructures, EAEPE / PRESOM 2007, Delft, Netherlands, 2007.

[4] V. Ajodhia, “Regulating Beyond Price”, Ph.D. Thesis, Delft University of Technology, Delft, Netherlands, 2006

[5] J.M. Glachant, S. Saussier, R. Sacaplan, G. Levy and R. López, “Etude de l’économie de la gestion des réseaux publics de distribution d’électricité”, Fédération Nationale des Collectivités Concédantes et Régies FNCCR, France, 2006.

[6] R. López, J. Mendoza, D. Morales, E. López and C. Coello Coello, “Probabilistic Minimal Loss Reconfiguration for Distribution Systems using Monte Carlo Method and Genetic Algorithms: Real Application”, submitted to IEEE Transaction on Power Systems, Apr 2007.

[7] J. Mendoza, R. López, D. Morales, E. López, Ph. Dessante and R. Moraga, “Minimal Loss Reconfiguration Using Genetic Algorithms With Restricted Population and Addressed Operators: Real Application”, IEEE Transactions on Power Systems, Volume 21, Issue 2, May 2006, Page(s): 948 - 954.

[8] J. Mendoza, R. López, D. Morales, E. López and M. Meunier, "Un modèle de reconfiguration pour la minimisation de l'énergie non fournie utilisant des algorithmes génétiques", Electrotechnique du Futur, EF'2005, Grenoble, France, 2005.

[9] J. Mendoza, D. Morales, R. López, E. López, J-C. Vannier and C. Coello Coello, “Multiobjective Location of Automatic Voltage Regulators in a Radial Distribution Network Using a Micro Genetic Algorithm”, IEEE Transactions on Power Systems, Volume 22, Issue 1, Feb. 2007, Page(s): 404 - 412.

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[27] T. Weyman-Jones, “Problems of Yardstick Regulation in Electricity Distribution”, in M. Bishop, J. Kay, C. Mayer (Eds.) The Regulatory Challenge, Oxford University Press, Oxford, 1995.

[28] R. López, “Why an Electricity Distribution Firm Would Fell Incentive to Improve its Operational Quality? Fundamental Reasons”, Working Paper, Networks research group – GRJM/ADIS, Faculty of Law & Economics, University Paris – Sud XI, 2006.

[29] H. Averch and L. Johnson, “Behaviour of the Firm under Regulatory Constraint”, The American Economic Review, Vol. 52, No. 5, 1962, pp. 1052-1069.

[30] D. Newbery, “Privatisation Restructuring, and Regulation of Network Utilities”, MIT Press, 1999.

[31] P. Joskow, D. Bohi and F. Gollop, “Regulatory Failure, Regulatory Reform, and Structural change in the Electrical Power Industry”, Microeconomics, Vol. 1989, (1989), pp. 125-208.

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[33] J.J. Laffont and J. Tirole, “Competition in Telecommunications”, MIT Press, 2000.

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[36] G. MacKerron, “Organisation and regulation of the electricity supply industry in the United Kingdom”, The Electricity Industry in Transition: Organisation, Regulation and Ownership in EU Member States, ed. FrancoAngeli, 2001, pp. 529-585.

VI. BIOGRAPHIES Rodrigo López received the Electrical Engineering diploma and M.Sc. degree from the University of Concepción, Chile. He was professor and head of the Engineering School at Concepción of Las Américas University, Chile. Currently, he is Ph.D. candidate at the Networks Research Group – GRJM/ADIS, from the University Paris XI, France. He is member of the Institute of Electrical and Electronics Engineers (IEEE) and the International Association for Energy Economics (IAEE). He holds a scholarship from the

Planning Ministry of the Government of Chile for his Ph.D. studies. His research areas are economy and regulation, reliability, power quality, planning and optimization of electrical systems.

Jean-Michel Glachant is Professor and Head of the Department of Economics at University Paris XI, France, and Head of the Networks Research Group (GRJM) at ADIS Research Center. He got his Ph.D. and his M.Sc. degree in Economics at La Sorbonne University. He is former Director of the Research Centre in “Analysis and Theory of Organizations & Markets” at La Sorbonne University, Paris. He is founder of the Master Erasmus Mundus “Master Course on Economics and Management of Network

Industries” (EMIN) at University Paris XI, Delft University and Comillas University. He is founder of the Master “Economics and Management of Information and Network Industry” (EGIR) at University Paris XI. He is founder of the European branch of the International Society for New Institutional Economics (ISNIE) and a member of the Faculty of the European School in New Institutional Economics (ESNIE). His main competences are in the European network industry liberalization: making of national and European competitive markets, regulation of networks and competition policy, companies’ behaviors and strategies, comparative analysis of competitive reforms, indicators of behavior and of performances.

Yannick Perez is Professor of Economics at University Paris XI, France and member of the Networks Research Group (GRJM) at ADIS Research Center. He received the Master degree in Economics at La Sorbonne University and the Ecole Normale Supérieure de Fontenay St Cloud, and he got his Ph.D. degree in Economics at La Sorbonne University, France. He was assistant-professor of the University Cergy-Pontoise. He is member of the Scientific Interest Group LARSEN (GIS LARSEN). He is head at University Paris XI of the Master

Erasmus Mundus “Master Course on Economics and Management of Network Industries” (EMIN), in partnership with Delft University and Comillas University. He is head of International Relations of the Technology Center of Sceaux. Head of the economy branch in the Professional Master of Power systems Management at L’Ecole Supérieur d’Electricité (Supélec). His research areas are analysis of the reforms of network industries and positive political economy.