Regulating Quality of Supply

Submitted by Hans De Keulenaer on Mon, 2007-06-18 15:20.

In several European countries, the liberalisation process has progressed at varying speeds. Despite the fact that no straightforward path to success has emerged, there is a general lesson to be learned: Electricity market liberalisation is not an event. It is a long process that requires strong and sustained political commitment, extensive and detailed preparation, and continuous development to allow for necessary improvements while sustaining ongoing investment. It is, in fact, a process that has not yet been completed anywhere in the world – nor will it be in the foreseeable future.

Regardless of the approach to liberalisation, the process requires strong government involvement. In fact, the level of ongoing political commitment invested significantly influences the outcome. Nowadays, many markets are showing renewed interest in introducing specific quality parameters in their models for network tariff regulation. For example, the United Kingdom, Norway, Italy and the Netherlands have already introduced such elements in their regulation policies.

Quality of supply often depends on distribution networks: most instances of customers being disconnected from the grid are due to mishaps in distribution networks. Liberalisation of electricity markets has not changed distribution network activities. Networks are still natural monopoly. Thus, quality of supply is not really related to liberalisation. However, liberalisation often prompts a greater focus on cost cutting in the economic regulation of local networks, which may ultimately lead to a lower quality of service. Finding ways to strike a balance between the short-term emphases on cost-cutting without undermining quality is a specific challenge for efficient, incentive-based economic regulation.

ECI has asked KEMA to contribute general guidelines for regulators in Europe regarding the regulation of Quality of Supply (QoS) within distribution networks. These guidelines are subdivided into four reports and aims to provide regulators within Europe comprehensive guidelines for QoS regulation issues. The information in the guide is concise, yet complete and directly applicable, but some parts might need regular updates.