Incorporating Quality of Service into Incentive-based Regulation
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Transcript of Incorporating Quality of Service into Incentive-based Regulation
Incorporating Quality of Service into Incentive-based Regulation
Juan Rivier
Florence School of Regulation Workshop
Improving and Extending Incentive-based Regulation in the Energy Sector
Florence, 24 November 2006
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Contents
• Introduction• Interruptions• EVC functions
• Continuity of supply regulation
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• Introduction• Interruptions• EVC functions
• Continuity of supply regulation
Contents
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Introduction: quality of service
Quality of service• Commercial quality
• Supply technical quality– Power quality– Continuity of supply
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Introduction: continuity of supply
• Continuity = Reliability
• Limit of 3 minutes– To isolate permanent faults (that need some
repair) from the rest
• 95% of total interruptions have their origin within the distribution network– Rest in Generation + Transmission
• Highly linked to the investments and operation and maintenance of the distribution network
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Introduction: new regulatory framework
• Changes in the regulatory framework of power systems
• Distribution: natural monopoly
• New regulatory framework centered in costs reduction and efficiency increase– Price or revenue cap type of regulation– Negative perspective for quality of service
evolution
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• Introduction• Interruptions• EVC functions
• Continuity of supply regulation
Contents
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• Networks are formed by elements
– lines, transformers, isolators, etc.
• Each element has a fault rate
– An element can fail due to several reasons
• The failure of one element implies:
– Fault isolation
– Fault repair
– Supply reconnection
Supply interruption
Interruptions: distribution networks
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• individualsNumber, average duration, ENS
– Advantage: measures the quality level offered to each individual client
– Disadvantage: necessary means to measure them
• systemTIEPI, NIEPI, SAIDI, SAIFI, IKR, ENS
– Advantage: capacity to represent the system quality level in a compact way
– Disadvantages: can hide low quality areas
Interruptions: reliability indexes
Two main type of reliability indexes
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– Continuity depends on the fault rate of each element of the network (quality of each element)
– Operation and maintenance does affect the fault rate
– There are investment in quality improvement
Interruptions: investments
• Continuity Investments
• Distribution company as the main responsible for quality of supply:
Investment and operation and maintenance policy
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Interruptions: Improvement measures
Planning stage
Operation & maintenance
Investments for quality improvement
1) Increase number of substations and reduce distances
2) Reliability improvement of the network elements
3) To mesh the network
4) Increase operation & maintenance crew and the available tools
5) Signalization equipment installation
6) Isolating & switching equipment installation
7) Distribution network automation
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Investment optimization
• Cost curve versus continuity level
• Multi-attribute optimization problem
Continuity
€Distribution
investment costs
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Investment optimization and Network Reference Models
• Network Reference Models can be used to determine such curve
• Regulator can know– what should be the quality of service attainable
with a specific network– Or, what network is needed to provide a pre-
specified quality of service
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Índice
• Introduction• Interruptions• EVC functions• Continuity of supply regulation
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Interruptions: EVC functions
• Most common one: ENS• Costs of the Distribution Company (DISCO)
• + Costs of the customer
– Only takes into account duration and consumption
• Complex EVC: duration + number of int.
The continuity of supply has an economic value:
Customers interruptions costs
EVC Functions(Economic Value of Continuity of supply)
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• Introduction• Interruptions• EVC functions• Continuity of supply regulation
Contents
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• Distribution: natural monopoly
• Regulation has to replace competition– Offered quality of service should be related to
the remuneration– Offered quality of service
= socio-economic optimum– Mimimum guaranteed level to all customers
• It is necessary to have– Transparent, objective and clear rules– Integrated within the DISCOs remuneration
Distribution: objectives
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€.
Quality
Optimum Quality Level (OQL)
Quality DISCOs costs NSC: Quality Net
Social Cost
Customer costs due to lack of quality
Slope = -K at the OQL
Slope = K at the OQL
Distribution: Optimum Quality Level
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• Revenue cap regulatory scheme
• Basic remuneration Basic continuity level
• Adapt remuneration to the offered quality level– Incentives/penalizations scheme
• Guaranteed individual level of continuity– Penalizations in case of non-compliance
• Market zonification– Each market has its own OQL
Distribution: regulatory proposal
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• To adapt remuneration to the offered quality level
• Linear incentives/penalizations with offered continuity of supply
• Incentives/penalizations coefficients should be equal to slope at the OQL = K
Guarantees the Net Social Cost
Assign equitably the benefits between all the agents
Distribution: incentives/penalizations
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Costs (€)
Quality (QUA) Optimum
Quality Level (OQL)
I(QUA): DISCOs investment costs
NSC: Net Social Cost of quality
OQLQUA
CK
Slope of I(QUA) = K at the OQL
Reference Quality Level (RQL)
BSN
RCC
BRC
IT (= Incen)
CID
BRD Incen (= IT)
C(QUA): Customers costs due to lack of quality
Distribution: incentives/penalizations
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• Incentives/penalizations does not guarantee a minimum level to all customers
• Individual indexes– Direct Compensations to customers that did
not have the minimum guaranteed levels– Differentiation between voltage levels and supply
zone– Should be at least equal to immunization costs of
the customer
Distribution: minimum levels
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Customers
Quality
OQL = MB
Guaranteed minimum
level Customers with compensation rights
b) DISCO B with average quality level MB equal to OQL and high standard variation.
c) DISCO C with average quality level MC inferior to OQL and small standard variation.
Customers
Quality
OQL
Guaranteed minimum
level
Customers with compensation rights
MC
QUA
Distribution: schemes combination (i)
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Distribution: schemes combination (ii)
Customers
Quality
OQL = MA
Guaranteed minimum
levels Customers with compensation rights
a) DISCO A with average quality level MA equal to OQL and normal standard variation.
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Distribution: zonification
• Market division into areas defined by objective criteria based on the market
• Urban (municipalities: customers>10.000)
• Semi-urban (municipalities: 1.000>customers>10.000)
• Rural (municipalities: customers<1.000)
• Each zone has its own OQL– DISCO investment costs– Customers lack of quality costs