petrov quality of supply regulation tariff budapest 2010 eng
TRANSCRIPT
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Experience you can trust.
Quality of Supply
Presentation for ERRA Tariff Committee
Dr. Konstantin Petrov / Dr. Daniel GroteApril 2010
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22/01/2010 1
Agenda
4. Regulatory quality control 3. Relevance of quality regulation
b) Technical qualitya) Reliability
2. Quality measurement
c) Commercial quality
5. Design of incentive schemes for quality6. Outage cost
a) Indirect controls
1. Quality definition
c) Incentive schemesb) Minimum standards
7. International examples
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22/01/2010 2
1. Quality definitionCustomer expectations
Customers have expectations from their electricity supplier
Reliable supply (low frequency of
interruptions)
Timely and reliable
information in case of a problem
Quick restoration time
Quick response to complaints
Good technical quality
(safe operation of electrical
equipment and appliances)
Individual expectations of customers do vary significantly(e.g. depending on individual usage of electricity and the quality levels experienced in the past)
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22/01/2010 3
1. Quality definitionDimensions of quality
Continuity of Supply
Technical Quality
Commercial Quality
Reliability of electricity supply
Performance indicators (number and frequency of interruptions)
Physical properties of electricity
Performance indicators (voltage variation, dips, flickers)
Customer service quality Performance indicators
(complaints from consumers, response time to consumer complaints, appointments with consumers)
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22/01/2010 4
2. Quality measurementReliability indicators (absolute numbers)
Number of interruptions
Number of customers
affected
Duration (cumulative)
Unsupplied energy
Total number of times during a
year that supply to one or more
customers was interrupted
Number of customers
affected for each consecutive
outage in that year(some customers might experience
more than one outage in a year)
Aggregated time that customers
who have experienced an
outage have actually been
interrupted in the year (expressed in minutes or hours)
Aggregated energy not supplied to
customers during the year as a result of the interruptions
(expressed in kWh or MWh)
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22/01/2010 5
2. Quality measurementReliability indicators (normalised indicators)
System Average
Interruption Frequency
Index (SAIFI)
System Average
Interruption Duration
Index (SAIDI )
Customer Average
Interruption Duration
Index (CAIDI)
Average Energy Not
Supplied (AENS)
average number of outages per
customer (probability of experiencing a power outage)
average time of interruption per
customer
average time required to
restore service to an interrupted
customer
average amount of energy not supplied per
customer because of
interruptions
t
ii
N
NSAIFI
=
a
ii
N
NCAIFI
=
t
iii
N
NrSAIDI
=
t
iii
N
PrAENS
=
ri: Restoration time for interruption event iPi: Interrupted Power for interruption i
Ni: Number of interrupted customers for interruption iNt: Total number of customers servedNa: Number of customers affected by at least one outage
Customer Average
Interruption Frequency
Index (CAIFI)
average number of interruptions for a customer who experienced at
least one interruption
=
ii
iii
N
NrCAIDI
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2. Quality measurementReliability indicators (normalised indicators) Potential problems
A reliance on normalised reliability indicators in isolation might lead to several problems SAIDI/SAIFI
Reductions in SAIDI/SAIFI are proportional to the number of affected customers reliability investments based on SAIDI/SAIFI that affect large numbers of customers (e.g. in urban areas) are more likely to be carried out (even though they already experience satisfactory reliability levels) than those affecting only small numbers of customers
CAIDI When the firm reduces the number of small and easy to fix interruptions, the remaining
interruptions will be those taking longer to repair CAIDI will go up even though reliability has actually been improved
Indicators are interdependent on each other: SAIDI = SAIFI * CAIDI or CAIDI = SAIDI/SAIFI
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22/01/2010 7
2. Quality measurementTechnical quality
Stability and safety of the whole power system as well as the functioning of electrical equipment and appliances depend on technical parameters
Frequency stability Voltage stability Harmonics
voltage fluctuation (flickers)
long-term voltage instability:
1 60 minutes(over- / under-
voltage)
short-term / transient voltage instability:
0 30 seconds(dips, swells and short
interruptions)
Symmetry of the three phases and shape of the voltage wave
Standard LV and MV distortion factor 8%
HV distortion factor 3%
For low voltage between 100 V and 250 V, most countries 220-230V
European standard: 230V +/- 10%
USA standard: 120V +/- 5%
Normal frequency value: 50 Hz
North- and parts of South America: 60 Hz
Standard range +/- 0.5 Hz
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2. Quality measurementCommercial quality indicators
Time and Quality Quality of InformationCustomer
Satisfaction Indicators
Estimation of charges
Notification of customers about planned interruptions
Establishment of new connection
Restoration of supply Change of meters Meeting arrangements Reaction in case of meter
reading problems Answering written complaints Answering phone calls Response to invoicing
questions
Number of customer complaints lodged to the regulator
Customer satisfaction indices via surveys
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22/01/2010 9
3. Relevance of quality regulationInterdependencies between price and quality
Customer value of electricity consumption depends on both price and quality Competitive markets produce different price-quality levels, customers select product that
fits their quality preferences, companies that offer inappropriate quality lose customers Natural monopoly companies do not face such a threat of customer losses and might
therefore offer low quality Under price- or revenue cap regulation companies might cut costs und reduce quality
levels
Without additional quality regulation, lower prices might come at the expense of lower quality levels
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4. Regulatory quality control Groups of regulatory quality measures
Incentive Schemes Indirect quality controls Minimum Performance Standards
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4. Regulatory quality control
Indirect controls put external pressure on network companies to pay sufficient attention to network quality (used by many regulators)
Indirect controls
Performance publication Resolution of conflicts
Companies required to publish information about (trends in) own performance or relative to other companies
Name and blame Publication in annual
reports, regulatory publications, or on the firms or regulators website
Relatively simple to implement and limited regulatory involvement Effectiveness is questionable Brand value may matter
Consumer complaint bodies (e.g. hotlines)
Establishment of an Ombudsman
Participation of consumers in the advisory or supervisory boards of the firm
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4. Regulatory quality control
Define minimum levels (floor) for certain performance aspects Violation of standard leads to a fine or tariff rebate Two types of standards
Overall standards: Network quality at system level, e.g. percentage of customers with an outage
Individual standards: Limits to the level of performance delivered to individual customers, e.g. limit the number or duration of outages for any customer
Can provide strong incentives for firms to deliver adequate quality levels Impose a discrete relation between performance and price (achieve target or not),
companies might therefore provide minimum level only
Minimum standards
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4. Regulatory quality control
Can be considered as an extension of a standard Impose a continuous relation between price and quality Each performance level results in a financial incentive, depending on the difference
between the actual performance level and a predefined target Performance below target results in financial penalty Performance above target results in financial reward Inclusion in the price- or revenue-cap formula possible
Reward / penalty increases / decreases the allowed revenue Various mathematical specifications of incentive function Typical indicators for quality incentive schemes
SAIDI, SAIFI, CAIDI, ENS Typical requirements for quality indicators
Important to customers Can be influenced by the company Can be measured by the regulator (feasibility)
Incentive schemes
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5. Design of incentive schemes for quality
Quality targets can be based on Individual historic levels On comparative basis using the performance of other regulated companies Parameters can be determined on system level, for individual or groups of customers
Quality targets can be differentiated by Network operators Voltage level Geographical regions (rural and urban areas) reflecting customer density Warning notice (planned or unplanned) Reasons (force majeuere, third party, own fault) Customer type (household, commercial, industry)
Parameters
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5. Design of incentive schemes for qualityIncentive function Shape
Penalty
Reward
Qualityhighlow
continuous
capped
dead band
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5. Design of incentive schemes for quality
Dead bands Define a tolerance range within which quality is allowed to vary If quality is lower than the target range penalty If quality is higher than the target range reward
Caps and floors Define an upper limit of rewards and penalties that would be charged or given to
companies that exceed or fail to reach a specific quality level Dead bands and caps and floors can be jointly applied
Incentive function Dead bands and caps and floors
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6. Outage cost
Quality changes as a function of costs only Higher quality requires more costs (at the margin)
Customers quality utility is a function of quality level Higher quality provides more benefits (at the margin)
Theoretically, quality is optimal if: Marginal Quality Costs = Marginal Quality Benefits
Trade-off between cost and quality
Reliability costs
Reliability
Costs
Outage costs
Total Social Costs
Optimum
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22/01/2010 18
6. Outage cost
Duration of the interruption Perceived reliability level
The higher the reliability level, the more severe the impact of an interruption will be Perceptions do vary significantly for different customers and different countries
Timing (e.g. time of the day) Advance notice (planned or unplanned outages)
Properly notified planned interruptions are generally rated as less severe by affected users
Nature of customer activities and consumer dependency Some customers may be more dependent than others (ability to shift load or abstain
from usage, e.g. hospitals are more vulnerable for an interruption than a residential consumer)
Factors influencing the costs of an outage
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6. Outage cost
Different measurement techniques: Indirect method
Proxies (Gross National Product) Consumer surplus methods (electricity demand curves) Costs of backup power (costs of preventing interruptions)
Direct method Ex post surveys (collect information after blackout) Ex ante surveys direct cost (ask consumers their direct costs) Ex ante surveys econometrics (willingness to pay for higher reliability or
willingness to accept lower reliability)
Outage costs measurement
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7. International examplesDevelopment of unplanned interruptions in Europe
Unplanned interruptions excluding exceptional events, minutes lost per year
Source: 4th CEER benchmarking report on quality of electricity supply 2008
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7. International examplesApplication of quality regulation in some European countries
Incentive scheme
Quality indicator
Quality target
Italy Continuous SAIDIAnnual
improvement of 16%
Hungary Discrete with caps SAIFI and SAIDI
Annual improvement of
16%
Netherlands Continuous SAIDIAnnual average improvement of
industry
Norway Continuous ENS Historic performance
Great Britain Continuous with caps
Customer Interruption and
Minutes Lost
Historic performance
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7. International examplesApplication of commercial quality standards in Europe
Source: 4th CEER benchmarking report on quality of electricity supply 2008
Automatic Upon customers request
Voluntary or bilateral agreements
Austria XCyprus XCzech Republic XHungary X XItaly XPortugal XSlovenia X (proposal)Spain X XUK X
Compensations due if commercial quality guaranteed standards are not fulfilled
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7. International examplesApplication of quality regulation in UK
Ofgem monitors and controls the following aspects of quality of supply Reliability measured by interruptions Quality of service measured by customer satisfaction Environmental protection
DSOs required to carry out quarterly postal customer surveys on customers whose electricity supply has been subject to an unplanned interruption and customers who have experienced a planned interruption
Questions addressed in the surveys cover the duration of the interruption and the advanced notification of planned interruptions communication from the DSO the skill and professionalism of the people who carried out the work and the overall
quality of the work If performance standards are not met by DSO penalty payments to single customers arise
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Reporting code
Service Performance Level Penalty Payment
GS1 Respond to failure of distributors fuse(Regulation 10)
All DNOs to respond within 3 hours on a working day (at least) 7 am to 7 pm, and within 4 hours on other days between (at least) 9 am to 5 pm, otherwise a payment must be made
20 for domestic and non-domestic customers
GS2* Supply restoration: normal conditions(Regulation 5)
Supply must be restored within 18 hours, otherwise a payment must be made
50 for domestic customers and 100 for non-domestic customers, plus 25 for each further 12 hours
GS2A* Supply restoration: multiple interruptions(Regulation 9)
If four or more interruptions each lasting 3 or more hours occur in any single year (1 April 31 March), a payment must be made
50 for domestic and non-domestic customers
GS3 Estimate of charges for connection(Regulation 11)
5 working days for simple work and 15 working days for significant work, otherwise a payment must be made
40 for domestic and non-domestic customers
GS4* Notice of planned interruption to supply(Regulation 12)
Customers must be given at least 2 days notice, otherwise a payment must be made
20 for domestic and non-domestic customers
GS5 Investigation of voltage complaints(Regulation 13)
Visit customers premises within 7 working days or dispatch an explanation of the probable reason for the complaint within 5 working days, otherwise a payment must be made
20 for domestic and non-domestic customers
GS8 Making and keeping appointments(Regulation 17)
Companies must offer and keep a timed appointment or offer and keep a timed appointment where requested by the customer, otherwise a payment must be made
20 for domestic and non-domestic customers
GS9 Payments owed under the standards(Regulation 19)
Payment to be made within 10 working days, otherwise a payment must be made
20 for domestic and non-domestic customers
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7. International examplesApplication of quality regulation in UK Guaranteed Standards of Performance
* Customers need to claim under these standards, for the remaining standards payments are automatic
Source: Ofgem, Table of Guaranteed Standards
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7. International examplesApplication of quality regulation in UK Incentive Scheme
2008/09 Customer Interruptions (per 100 customers) as a Percentage of Respective 2008/09 Targets
DNO 2008/09 Target Performance Performance / Target (%)CN West 104.6 92.8 89CN East 76.7 68.5 89
ENW 57.1 48.3 85CE NEDL 74.5 64.2 86CE YEDL 68.5 76.4 112
WPD S Wales 95.3 66.1 69WPD S West 84.5 58.4 69EDFE LPN 36.2 28.7 79EDFE SPN 84.5 82.7 98EDFE EPN 85.7 84.8 99
SP Distribution 60.8 55.7 92SP Manweb 46.7 49.3 106SSE Hydro 95.2 75.8 80
SSE Southern 88.3 64.3 73GB average 66.6
Source: Ofgem, 2008 / 2009 Electricity Distribution Quality of Service Data Tables
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7. International examplesApplication of quality regulation in Italy
Source: Autorit per l'energia elettrica e il gas
Development of quality regulation
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7. International examplesApplication of quality regulation in Italy
Source: Autorit per l'energia elettrica e il gas
Quality levels versus customer satisfaction
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Experience you can trust.
Many thanks!
KEMA Consulting GmbHKurt-Schumacher-Str. 8, 53113 BonnTel. +49 (228) 44 690 00Fax +49 (228) 44 690 99
Dr. Konstantin PetrovManaging ConsultantMobil +49 173 515 1946 E-mail: [email protected]