Discussion Papers

Gernot Müller, Daniel Schäffner, Marcus Stronzik, Matthias Wissner

Indikatoren zur Messung von Qualität und Zuverlässigkeit in Strom- und Gasversorgungsnetzen

Nr. 273 / April 2006

Summary

The maintenance of a long-term efficient and reliable operation of energy supply networks, i.e. a high-quality provision, is one of the main reasons for the regulation of the German electricity and gas networks according to § 1 (2) EnWG. In the context of implementing an incentive regulation it is additionally required by law (§ 21 a EnWG) that efficiency targets shall be formulated with respect to, among other things, quality of supply and efficiency targets relating to it. This legislation is based on the awareness that a price or revenue cap regulation could result in a lasting reduction in the incentive to invest in quality. It is imperative to work against this reduced incentive with appropriate systems of quality monitoring and quality regulation. Regarding the regulator’s point of view the main problem is the determination of the desired level of quality – in terms of welfare economics: the optimal level of quality. First, quality of supply - in the context of electricity and gas networks - is a multi dimensional problem. Besides the reliability of the network there is the physical quality, the operational security of the networks as well as the service quality. This enumeration brings up the question of an adequate weighting of these single dimensions. Second, there is a considerable asymmetry of information especially regarding network operators on the one hand and the regulator on the other. Last but not least, the optimal level of quality supply is a dynamic phenomenon. Changes according to time arise regarding costs of quality supply (technical progress) as well as regarding the consumers’ willingness to pay (change in income levels).

The implementation process of a quality regulation in Germany should take these preconditions into account. The designated regulatory authority should refrain from implementing an all-embracing system already at the beginning. On the one hand, the level of information is far too deficient. On the other hand, the network operator’s reaction according to the rules of the upcoming incentive regulation is hardly predictable. Thus a step by step proceeding is advisable – this would also correspond to the foreign models described in this study. Before an integrated quality and price/revenue cap regulation is implemented a phase of defining possible quality indicators as well as corresponding methods and procedures for data collection should be carried out in order to dissolve the existing asymmetry of information. Though, from the point of view of welfare economics symmetric approaches with quality bonuses and penalties (usage of a so-called q-factor in the cap formula) are preferred, during the introduction phase of an incentive regulation the application of standards might be an option in order to diminish the risk of a reduction in supplied quality. Nevertheless, concerning the setting of the standards it should be taken into account that the initial situation in Germany is one with an overall very high level of quality in the gas and electricity networks – if not an oversupplied level according to insights from welfare economics. This likely oversupply of quality is due the fact that we face a regime shift coming from a cost oriented regulation with the well-known gold-plating effect of capital investments. [Only German language version available.]

Diskussion Paper is available for download.

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