SERVICE QUALITY REGULATION: an introductory overview
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1 SERVICE REGULATION: an introductory overview Luca Lo Schiavo Autorità per l energia elettrica e il gas, Italy Service Quality and Consumer Affairs, deputy director CEER EQS TF, member CEER Workshop, Lisbon 11 September 2008 Autorità per l'energia elettrica e il gas 1
2 SERVICE REGULATION MEANS PERFORMANCE (OUTPUT) REGULATION ELECTRICITY SERVICE COMMERCIAL CONTINUITY OF SUPPLY VOLTAGE CALL CENTERS BILLING COMPLAINTS RECONNECTIONS AFTER NON-PAYMENT DISCONNECTIONS READING APPOINTMENTS NEW SUPPLY ESTIMATES CONNECTIONS TO NETWORK PROVIDING SUPPLY METER INVESTIGATIONS UNPLANNED SUPPLY INTERRUPTIONS (LONG AND SHORT) PLANNED (NOTIFIED) SUPPLY INTERRUPTIONS VOLTAGE INVESTIGATIONS VOLTAGE VARIATIONS VOLTAGE DIPS / SWELLS RAPID VOLTAGE CHANGES FLICKER HARMONICS UNBALANCE SU UPPLY TRANSM DISTR MISSION a RIBUTION and N Autorità per l'energia elettrica e il gas 2
3 MULTIDIMENSIONALITY OF OUTPUTS IS AN ISSUE FOR REGULATORS Regulators generally find it easier to regulate price than quality. Price has the greatest advantage a ag of being (in certain markets at least) both one-dimensional and objectively measurable. Quality, on the other hand, is hard to pin down. It has many dimensions, some of which typically rest upon subjective evaluations by the consumer. R. Baldwin and M. Cave, Understanding Regulation, 1999 Autorità per l'energia elettrica e il gas 3
4 SERVICE REGULATION OBJECTIVES REGULATION OF MAKE INFORMATION AVAILABLE PROTECT WORST-SERVED CUSTOMERS PROMOTE IMPROVEMENT FAVOUR AND TEST MARKET MECHANISMS SET RELIABLE MEASUREMENT RULES FOR FACTORS PUBLISH ACTUAL LEVELS SET AND MAINTAIN GUARANTEED STANDARDS DETERMINE INDIVIDUAL COMPENSATIONS FOR STANDARD MISMATCHING SET AND MAINTAIN OVERALL STANDARDS LINK AND REVENUES (TARIFFS) PREFER CUSTOMER CHOICE WHENEVER POSSIBLE AND SAFE PREREQUISITE INCENTIVE REGULATION (P.B.R.) COMPETITION Autorità per l'energia elettrica e il gas 4
5 A CONCEPTUAL MAP FOR SERVICE REGULATION MAKE INFORMATION AVAILABLE PROTECT WORST- SERVED CUSTOMERS PROMOTE IMPROVEMENT FAVOUR AND TEST MARKET MECHANISMS COMMERCIAL Publication actual quality levels Guaranteed quality standards Telephone response incentives CONTINUITY OF SUPPLY VOLTAGE Regulatory measurement guidance Volt.Qual. Monitoring systems Multiple interruption ti standard Volt.Qual. minimum standards Incentive and penalty mechanism Power quality contracts Autorità per l'energia elettrica e il gas 5
6 CONDITIONS FOR SUCCESSFUL SERVICE REGULATION Preliminary requirement: quality data measurement Regulatory instruments must be fair and simple to implement Adjust regulatory schemes to account for specific industrial and institutional factors of the country Quality regulation greatly benefits from a gradual approach to the implementation process Quality regulation is never a permanent solution: periodic evaluation and revision i An open dialogue across all interested parties is a fundamental part of an efficient regulation Autorità per l'energia elettrica e il gas 6
7 THE NEED FOR HIGH LEVEL COMMITTMENT Liberalisation is often opposed on the grounds that it could damage public service and weaken national industry. We have taken quality of service as one of the main targets of regulatory action, the aim being to demonstrate that liberalisation plus regulation will produce better quality than did the previous regime. Pippo Ranci, former AEEG President [P. Ranci, Regulating Energy in Italy, in: C. Henry et al. (editors), Regulation of network Utilities. The European Experience, Oxford University Press, 2001, p ] Autorità per l'energia elettrica e il gas 7
8 Output regulation ELECTRICITY SERVICE COMMERCIAL CONTINUITY OF SUPPLY Focus: interruptions in distribution networks VOLTAGE CALL CENTERS BILLING APPOINTMENTS RICONNECTIONS AFTER NON-PAYMENT DISCONNECTIONS READING COMPLAINTS NEW SUPPLY ESTIMATES CONNECTIONS TO NETWORK PROVIDING SUPPLY METER INVESTIGATIONS UNPLANNED SUPPLY INTERRUPTIONS (LONG AND SHORT) PLANNED (NOTIFIED) SUPPLY INTERRUPTIONS VOLTAGE INVESTIGATIONS VOLTAGE VARIATIONS VOLTAGE DIPS / SWELLS RAPID VOLTAGE CHANGES FLICKER HARMONICS UNBALANCE SU UPPLY DISTR RIBUTION TRANSM MISSION AND GENE ERATION, Autorità per l'energia elettrica e il gas 8
9 INCENTIVE/PENALTY SCHEMES Comparing Regulations in EU MAIN EXPERIENCES: DISTRIBUTION Italy (started in 2000, renewed in 2004 and 2008) Norway (started in 2001) Great Britain (started in 2002, renewed in 2005) Ireland (started in 2002) Hungary (started in 2003) Sweden (started in 2003) Portugal (started in 2004) Estonia (started in 2006) Netherlands (started in 2007) All these incentive schemes have been compared in the 3rd CEER Benchmarking Report on Quality of Supply Autorità per l'energia elettrica e il gas 9
10 A CONCEPTUAL MAP FOR SERVICE REGULATION MAKE INFORMATION AVAILABLE PROTECT WORST- SERVED CUSTOMERS PROMOTE IMPROVEMENT FAVOUR AND TEST MARKET MECHANISMS COMMERCIAL Publication actual quality levels Guaranteed quality standards Telephone response incentives CONTINUITY OF SUPPLY VOLTAGE Regulatory measurement guidance Volt.Qual. Monitoring systems Multiple interruption ti standard Volt.Qual. minimum standards Incentive and penalty mechanism Power quality contracts FOCUS ON A CASE STUDY: INCENTIVE/PENALTY SCHEME IN ITALY Autorità per l'energia elettrica e il gas 10
11 A case study of service quality regulation: Italy (1) MONITORING CONTINUITY INDICATORS (SAIDI/SAIFI) UTILITY: ENEL Distribuzione Spa INTERRUPTIONS: UNPLANNED, LONG YEAR: 2004 TERRITORY: ALL AGGREGATE UP TO MONTH: 12 DURATION (CML, SAIDI) NUMBER (CIs, SAIFI) VOLTAGE LEVELS CAUSE TRASM. HV MV LV TOTAL Force Majeure 0,0 0,0 14,9 1,1 16,0 Users' or third parties' respons. 2,3 0,1 11,2 1,5 15,0 Utility's responsibility 0,0 3,0 45,6 14,4 63,1 Total all causes 2,3 3,1 71,7 17,0 94,1 CAUSE TRASM. HV MV LV TOTAL Force Majeure 000 0, , , , ,09 Users' or third parties' respons. Utility's responsibility 0,14 0,01 0,28 0,01 0, , , , , ,11 Total all causes 0,14 0,11 2,23 0,15 2,64 Autorità per l'energia elettrica e il gas 11
12 Std t [CML-SAIDInet] LivPart A case study of service quality regulation: Italy (2) LivOb k t FIRST STEP SETTING STANDARDS AND REWARD/PENALTIES PARAMETERS Ex-ante for 4 years Reference to long-term objectives Reward/penalty parameters are based on WTP customer survey Q t [ ] +Max -Min price _ cap = RPI X ± Q Std t Act t [CML] Qt FURTHER STEPS COMPARING ACTUAL LEVELS AND STANDARDS AND REWARD/PENALISE Each year t, companies are rewarded or penalised according to their performance Tariff is consequently adjusted d ±Qt = (reward - penalty)/revenues Autorità per l'energia elettrica e il gas 12
![+Max -Min price _ cap = RPI X ± Q Std t Act t [CML] Qt FURTHER STEPS COMPARING ACTUAL LEVELS AND STANDARDS AND REWARD/PENALISE Each year t, companies](/docs-images/45/7620364/images/page_12.jpg "are rewarded or penalised according to their performance Tariff is consequently adjusted d ±Qt = (reward - penalty)/revenues Autorità per l'energia")
13 DI) d shedding) s lost (SAI ackout and load mer minute ransmission bla Custom xcluded large tr (ex A case study of service quality regulation: Italy (3) CONTINUITY OF ELECTRICITY SUPPLY - ITALY AVERAGE EXTRA-PRICE FOR CUSTOMERS : ABOUT 3 /CUSTOMER/YEAR : ABOUT 4 /CUSTOMER/YEAR INTERRUPTIONS ATTRIBUTABLE TO DNOs INTERRUPTIONS NOT ATTRIBUTABLE TO DNOs Autorità per l'energia elettrica e il gas 13
14 A case study of service quality regulation: Italy (4) 300 CUSTOMER MINUTES LOST PER YEAR years rolling av verage * 2003* NORD CENTRO SUD ITALIA * Excluded blackout and load shedding Autorità per l'energia elettrica e il gas 14
15 A case study of service quality regulation: Italy (5) Millions Euro %»CAGR per»16% year High density (urban) Medium density (sub-urban) Low density (rural) Media 98/ Investments for quality (dedicated); source: response to consultation paper Autorità per l'energia elettrica e il gas 15
16 A case study of service quality regulation: Italy (6) MER MINI IUTES LO OST CUSTO (net of in nterruptions no ot attributable to distributio on companies ) 90 Example: 1 REGULATORY PERIOD URBAN AREAS REGULATORY PERIOD Reference Reference standards standards / / / / / / / / /07 9 TARGETS ACTUAL LEVELS REFERENCE STANDARDS Autorità per l'energia elettrica e il gas 16
17 A case study of service quality regulation: Italy (7) 3rd period proposals for 3rd period Focus: SAIDI, multiple interruptions, ti SAIFI+MAIFI 2nd period regulation proposals for 2nd period Focus: SAIDI + multiple interr. 1st regulatory period first proposals Focus: SAIDI assess initial situation years Autorità per l'energia elettrica e il gas 17
18 A case study of service quality regulation: Italy (8) ASM Bressanone BZ APB Brunico AE-EW Bolzano BL VB LC SO TN ASM Rovereto AGS Riva del Garda PN UD GO AUDITS BY AEEG ON CONTINUITY DATA DEVAL AO TO Torino AEM CN BI AS VC Atena Vercelli AMAIE San Remo SV NO AL VA MI GE - A CO Milano AEM PV ASM Voghera AMPS Seregno GE - B GE - M LO PC SP CR BG PR AMPS Parma MS BS ASM Brescia RE MN MO META Modena VR AGSM Verona VI AIM Vicenza AMI Imola BO PD RO TV - B FE VE - M RA TV - A TV - M VE - A VE - B TS IM LU PT PO FO RN FI PS AR AN PI SI LI PG MC AP GR TR TE - B ASM Terni TE - M VT PE RI CH Legenda RM - M RM - A Roma Acea RM -B AQ Zecca Ortona CB FR IS FG LT SS CE BN AV BA 2000 NU - M NA - A NA - M NA - B PZ AMET Trani BR 2001 OR NU - B SA MT TA - A TA - M TA - B LE 2002 CA 2003 CS 2004 CZ KR 2005 VV 2006 TP PA - M Cefalù Enel Cefalù non Enel PA - B ME RC PA - A EN CT AG CL SR- B RG - B Autorità per l'energia elettrica e il gas 18 RG - M RG - A SR- A SR- M
19 A case study of service quality regulation: Italy (9) (ENS) ost (2 hours) on supply nterruption co Energy no In /kwh E CUSTOMER OUTAGE COST SURVEYS ITALIAN ELECTRICITY LOW-VOLTAGE END-USERS POPULATIONS(2003) Legenda (WTA + WTP)/ 2 WTP Incentive and penalty unit parameter 0 DOMESTIC GLOBAL INDUSTRIES SERVICES SHOPS BUSINESS (N=1.100) 1100) (N=1.500) 1500) (N=500) (N=550) (N=450) WTA: Willingness to accept compensation WTP: Willingness to pay Source: Bertazzi, Fumagalli, Lo Schiavo, CIRED (2005) paper n. 300 Autorità per l'energia elettrica e il gas 19
20 A CONCEPTUAL MAP FOR SERVICE REGULATION MAKE INFORMATION AVAILABLE PROTECT WORST- SERVED CUSTOMERS PROMOTE IMPROVEMENT FAVOUR AND TEST MARKET MECHANISMS COMMERCIAL Publication actual quality levels Guaranteed quality standards Telephone response incentives CONTINUITY OF SUPPLY VOLTAGE Regulatory measurement guidance Volt.Qual. Monitoring systems Multiple interruption ti standard Volt.Qual. minimum standards Incentive and penalty mechanism Power quality contracts Autorità per l'energia elettrica e il gas 20
21 HANDBOOK OF SERVICE REGULATION Product of joint cooperation between CEER and Florence School of Regulation (FSR) Based on the conceptual map (each chapter is a cell of the map) Both handbook for beginners and reference for advanced topics Contents: 1Introduction Introduction.- 2 The basics of service quality regulation.- 3 Commercial quality.- 4 Continuity of supply.- 5 Voltage quality.- 6. References on specific issues. Published in Sept-07 by Springer ISBN: Autorità per l'energia elettrica e il gas 21
22 NEW PERSPECTIVES S Voltage quality standards Revision of CENELEC technical norm Some reluctance from Eurelectric dialogue ongoing Connection technical rules distribution grid code DG development Process regulation / Input regulation Asset management (e.g. UK: PAS 55 certification) Input regulation when outputs are difficult to measure Supply (free market) service quality Market tools /cust.satisf. vs Authority s regulation? Autorità per l'energia elettrica e il gas 22
23 SERVICE IN THE 3rd PACKAGE Regulatory powers initial draft: Article 22c Duties and powers of regulatory authorities g) monitoring network security and reviewing network security and reliability rules Portugal EU Presidency (2nd semester 2007) g) monitoring compliance with network security and reliability rules and monitoring standards and requirements for quality of service and supply Suggested text g) Setting and monitoring standards and requirements for quality of service and supply ppy and monitoring compliance with network security and reliability rules Autorità per l'energia elettrica e il gas 23
24 WEB REFERENCES 3 rd CEER Benchmarking Report on Quality of Electricity Supply can be downloaded freely at: > publications i > 2005 Italian actual quality levels can be queried interactively at: > banche dati qualità (comm./cont.) > dati aggregati (voltage quality) Thank you for your attention lloschiavo@autorita.energia.it Autorità per l'energia elettrica e il gas 24
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