Service Standards for Electricity Distributors and other Utilities 

The problem

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The costs of creating and operating zero defect utilities and other engineering based systems are prohibitive

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Electricity reliability measures at the high voltage feeder level are critical industry measures

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In the absence of other information, regulating authorities or engineering departments often assume the only acceptable standard is perfection - in other words perfect electric reliability

How good is good enough?

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Consumers don't necessarily value perfection sufficiently to pay for it

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Consumers often expect a certain level of defect in the complex systems that serve them, be they electricity, gas, telephony, roads etc

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Work carried out by the Values Bank (in conjunction with KPMG) indicates there is a service standard threshold:

Services better than the threshold are accepted but incremental improvements are not valued

Service worse than the threshold are not accepted and incremental improvements are valued

Case studies 

 

(Electricity Distribution Networks in conjunction with and as associate research director of KPMG Melbourne)

 

Two independent studies

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Regulator of South Australia

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Integral Energy NSW

 

 

Step 1 Calibrate perception and reality 

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People don't measure (perceive) systems the same way meters do

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System measurement was expressed using scales that humans can answer then calibrated against real system performance

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Consumers also experience electricity at different places from where electric reliability is measured. Usually the system is measured in the high voltage (HV) network while consumers experience supply in the low voltage (LV) network

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The result shows systematic distortions in human perception of the electricity network performance

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Values Bank proprietary 11 step process establishes a mathematical relationship between perceived and actual network performance for frequency (SAIFI), duration (SAIDI) and longest duration outage.

Step 2 Quantify the thresholds 

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Perceptual electricity service standard thresholds were identified

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The perceptual thresholds were translated into actual network thresholds using the calibration curves

 

 

Step 3 Outcomes 

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Strategy and network planners now have a consumer based threshold to plan their service levels

 

References 

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Paper presented to the KPMG Regulators Conference Melbourne Australia 2003

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Paper to be presented at the Electricity Regulators Conference Adelaide Australia 2003

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Richard Hunter, Ronen Melnik, Leonardo Senni: 'What power consumers want'  McKinsey Quarterly Number 3 2003 (using data for the Office of Electricity Regulation GB).

 Comments on the McKinsey Quarterly paper: 

 Provides a good rationale for asking consumers about electricity reliability but fails to calibrate perceived and actual network performance and does not provide a measure of service standards for electricity supply.

While we agree that most people are satisfied with their supply, a significant minority are not. This minority is not randomly distributed through the network but concentrated in substandard supply areas. It is important to establish the threshold network performance so that 'substandard' can be determined. Once the thresholds have been developed, strategies for maintenance and capital expenditure follow (see above).

Detailed comments on McKinsey Quarterly paper

 

 

 

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