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“Investments to guarantee network reliability ” Robert Haffner Office for Energy Regulation DTe The Hague, 6 October 2004 comment on David Newbery Outline presentation Reliability of electricity markets Short term reliability of Dutch networks Instruments for regulation of quality

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investments to guarantee network reliability

“Investments to guarantee network reliability”

Robert Haffner

Office for Energy Regulation DTe

The Hague, 6 October 2004

comment on David Newbery

outline presentation
Outline presentation

Reliability of electricity markets

  • Short term reliability of Dutch networks
  • Instruments for regulation of quality
  • Role of DTe

Long term security of supply

  • Security of supply in the Netherlands
  • Key policy issues
netherlands has high reliability
Netherlands has high reliability

Average interruption duration per client (unplanned and planned, minutes, 2001)

quality regulation on 3 levels
Quality regulation on 3 levels

Instrument

  • N-1 /power quality
  • Decisions DTe
  • Capacity and quality plans
  • Measurement outages
  • Intervention Minister
  • Liability (BW)
  • Compensation (technical codes)
  • Tariff adjustment (q-factor)

Kind

Input

Process

Output

ladder of outputregulation

Advantage - `right` price through negotiation

- works well for large customers

Disadvantage - high costs of legal procedures

Ladder of outputregulation:

Liability

Market price through negotiation for each client with damages

ladder of outputregulation7

Advantage - `right` price through negotiation

- works well for large customers

Disadvantage - high costs legal procedures

Ladder of outputregulation:

Liability

Market price through negotiation for each customer with damages

Compensation

Standard price for each

customer with damages

Advantage - transparent

Disadvantage - link between administration

outages and clients

- high administrative costs

ladder of outputregulation8

Advantage - `right` price through negotiation

- works well for large customers

Disadvantage - high costs legal procedures

Ladder of outputregulation :

Liability

Market price through negotiation for each customer with damages

Compensation

Standard price for each

customer with damages

Advantage - transparent

Disadvantage - link between administration

outages and clients

- high administrative costs

Advantage - works well for smaller customers/outages

Disadvantage - no direct relation between

compensation and damages

Tariff adjustment (q-factor)

Standard average price for

each customer

ladder of outputregulation9

Advantage - `right` price through negotiation

- works well for large customers

Disadvantage - high costs legal procedures

Ladder of outputregulation :

Liability

Market price through negotiation for each customer with damages

DTe takes care of compensation and tariff adjustment;

liability claims are individual responsibility

Compensation

Standard price for each

customer with damages

Advantage - transparent

Disadvantage - link between administration

outages and clients

- high administrative costs

Advantage - works well for smaller customers/outages

Disadvantage - no direct relation between

compensation and damages

Tariff adjustment (q-factor)

Standard average price for

each customer

optimal level of quality
Optimal level of quality

Depends on:

  • Preferences consumers for quality
  • Costs of network operators to improve quality
  • Internalise external effect in regulation (q—factor)
  • Companies compete on quality
  • Equalize marginal costs and benefits of reliability
long term security of supply policy issues
Long term security of supply: policy issues
  • Allow markets to signal need for new investments
  • Develop demand responses
  • Beware of wholesale market manipulation
  • Improve functioning gas market
  • Provide predictable investment environment

=> Zero risk of black-outs very costly

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