After 10 years of incentive regulation, reliability has declined in Ontario. Regulators failed to enforce service-quality standards, and consumers are suffering as a result.
T&D Reliability: The Next Battleground in Re-Regulation
it is capital spending, except for tree trimming and the operations and maintenance charges associated with capital work.
Utilities may find that auditors look at the spending by category and relate it to outages by cause. Note the recent service quality assessment by the Florida PSC staff on the four major IOUs it regulates. Two of the four companies showed a pattern of falling expenditures on vegetation management and increasing vegetation-caused outages. Having noted the trend themselves, the companies volunteered to boost their spending by approximately 50 percent each.
This case underscores a nationwide trend: Companies that cut their tree trimming activity drastically in the last few years, in order to cut costs, are ramping back up in 1999. Of course, what matters is not just spending but the activity and its impact on reliability. Companies that cut costs through better management of contractors may find (if the contractors do not try to take back the savings in poorer service) that they can cut costs and still maintain reliability. One of the practice areas that we have developed in the last few years is the application of decision analysis tools to T&D reliability in order to optimize the "bang per buck" in reliability spending. With more than $100 million at stake in annual budgets, a little extra planning can go a long way. Regulators recognize this fact, and are beginning to ask not just how much is being spent, but how.
Here again, some commissions are satisfied with reporting on reliability programs, while others will insist on setting a standard and enforcing it with penalties. Of note is the recent $1 million fine levied by the California PUC for violations of its new tree-clearance standards.
5. Customer service. Some new regulations focus on efficiency of customer contacts, which may or may not relate to reliability. Call handling is one example. Rules may focus on the average speed of answers or the percent of calls answered within 15 seconds. A second example is new service connections (em the cycle time between order and completion. Still a third example concerns billing errors (em estimates or errors in reading or rating usage.
The Ratchet Effect
If the past is any indication, these changes in regulatory control are a ratchet. With a few exceptions, enhanced reporting requirements instituted years ago have not been relaxed. Perhaps what is needed is more and better dialogue between utilities and the public about what reliability is and how it can best be achieved. As traditional return-on-rate-base regulation gives way to rate caps and performance-based incentives, utilities and regulators must find innovative ways to insure that reliability is maintained without raising cost.
Recently, a New York PUC advisor commented that the commission first saw PBR as a two-way street, with upside rewards for better performance. He added, however, that when the commission polled customers and found no evidence they were willing to pay more for better service, the PUC dropped the upside incentive.
More information may come to light on this tradeoff, as competition moves beyond experiment. In the meantime, utilities