Quality of supply regulation is becoming more and more important as cost-decreasing incentives may have a mid- and long-term effect on the quality provided. This session explains how quality of supply is defined, measured and regulated. * Quality definition: Reliability / Commercial quality / Technical quality * Quality measurement * Relevance of quality regulation * Regulatory quality control * Indirect controls * Minimum standards * Incentive schemes * Design of incentive schemes for quality * Parameters / Controllability / Incentive function (shape, dead bands, cap and floors) * Outage cost.

1. Training on Regulation A webinar for the European Copper Institute Webinar 7: Quality of Supply Regulation Dr. Konstantin Petrov / Dr. Daniel Grote 22.1.2010

2. Agenda 22/01/2010 4. Regulatory quality control 3. Relevance of quality regulation b) Technical quality a) Reliability 2. Quality measurement c) Commercial quality 5. Design of incentive schemes for quality 6. Outage cost a) Indirect controls 1. Quality definition c) Incentive schemes b) Minimum standards 7. International examples

3. 1. Quality definition 22/01/2010 Customer 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)

5. 2. Quality measurement 22/01/2010 Reliability 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)

6. 2. Quality measurement 22/01/2010 Reliability 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 r i : Restoration time for interruption event i P i : Interrupted Power for interruption i N i : Number of interrupted customers for interruption i N t : Total number of customers served N a : 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

11. 4. Regulatory quality control 22/01/2010 Groups of regulatory quality measures Incentive Schemes Indirect quality controls Minimum Performance Standards

16. 5. Design of incentive schemes for quality 22/01/2010 Incentive function – Shape Penalty Reward Quality high low continuous capped dead band

21. 7. International examples 22/01/2010 Development 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

22. 7. International examples 22/01/2010 Application of quality regulation in some European countries Incentive scheme Quality indicator Quality target Italy Continuous SAIDI Annual improvement of 16% Hungary Discrete with caps SAIFI and SAIDI Annual improvement of 16% Netherlands Continuous SAIDI Annual average improvement of industry Norway Continuous ENS Historic performance Great Britain Continuous with caps Customer Interruption and Minutes Lost Historic performance

23. 7. International examples 22/01/2010 Application of commercial quality standards in Europe Source: 4th CEER benchmarking report on quality of electricity supply 2008 Compensations due if commercial quality guaranteed standards are not fulfilled Automatic Upon customer’s request Voluntary or bilateral agreements Austria X Cyprus X Czech Republic X Hungary X X Italy X Portugal X Slovenia X (proposal) Spain X X UK X

25. 7. International examples 22/01/2010 Application 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 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 customer’s 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

26. 7. International examples 22/01/2010 Application of quality regulation in UK – Incentive Scheme 2008/09 Customer Interruptions (per 100 customers) as a Percentage of Respective 2008/09 Targets Source: Ofgem, 2008 / 2009 Electricity Distribution Quality of Service Data Tables DNO 2008/09 Target Performance Performance / Target (%) CN West 104.6 92.8 89 CN East 76.7 68.5 89 ENW 57.1 48.3 85 CE NEDL 74.5 64.2 86 CE YEDL 68.5 76.4 112 WPD S Wales 95.3 66.1 69 WPD S West 84.5 58.4 69 EDFE LPN 36.2 28.7 79 EDFE SPN 84.5 82.7 98 EDFE EPN 85.7 84.8 99 SP Distribution 60.8 55.7 92 SP Manweb 46.7 49.3 106 SSE Hydro 95.2 75.8 80 SSE Southern 88.3 64.3 73 GB average 66.6

27. 7. International examples 22/01/2010 Application of quality regulation in Italy Source: Autorità per l'energia elettrica e il gas Development of quality regulation

28. 7. International examples 22/01/2010 Application of quality regulation in Italy Source: Autorità per l'energia elettrica e il gas Quality levels versus customer satisfaction