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The importance of incorporating reliability of supply criteria in a regulatory system of electricity distribution: An empirical analysis for Austria

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Author Info

  • Reichl, Johannes
  • Kollmann, Andrea
  • Tichler, Robert
  • Schneider, Friedrich

Abstract

Grid tariffs are the main source of income for distribution system operators (DSOs). Reductions of tariffs increase the cost pressure on DSOs; assuming they work efficiently, tariff reductions potentially lead to a decrease of the electricity system's quality if no reliability of supply criteria are incorporated in the regulatory system. Our statistical analysis shows that the correlation between grid tariffs and electricity supply interruptions in a regulatory regime neglecting this incorporation is significant and that furthermore decreasing tariffs harm the reliability of supply even in the short run. Our econometric analysis of the influence of tariffs on reliability of supply shows a significant correlation between the grid tariffs and the duration of power outages in the Austrian electricity grid; an annual average interruption duration per installed capacity of a specific grid increases ceteris paribus by 1.36Â min if the grid tariff of this specific grid is decreased in the previous year by 1[euro]/MWh.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Policy.

Volume (Year): 36 (2008)
Issue (Month): 10 (October)
Pages: 3862-3871

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Handle: RePEc:eee:enepol:v:36:y:2008:i:10:p:3862-3871

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Web page: http://www.elsevier.com/locate/enpol

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Keywords: Regulation Grid tariffs Security of supply;

References

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  1. Giannakis, Dimitrios & Jamasb, Tooraj & Pollitt, Michael, 2005. "Benchmarking and incentive regulation of quality of service: an application to the UK electricity distribution networks," Energy Policy, Elsevier, vol. 33(17), pages 2256-2271, November.
  2. Mehdi Farsi & Massimo Filippini & William Greene, 2006. "Application Of Panel Data Models In Benchmarking Analysis Of The Electricity Distribution Sector ," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 77(3), pages 271-290, 09.
  3. Carlsson, Fredrik & Martinsson, Peter, 2004. "Does it Matter When a Power Outage Occurs? - A Choice Experiment Study on the Willingness to Pay to Avoid Power Outages," Working Papers in Economics 155, University of Gothenburg, Department of Economics.
  4. Carlsson, Fredrik & Martinsson, Peter, 2004. "Willingness to Pay among Swedish Households to Avoid Power Outages - A Random Parameter Tobit Model Approach," Working Papers in Economics 154, University of Gothenburg, Department of Economics.
  5. Klaus Moeltner & David F. Layton, 2002. "A Censored Random Coefficients Model For Pooled Survey Data With Application To The Estimation Of Power Outage Costs," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 552-561, August.
  6. Jamasb, T. & Pollitt, M., 2007. "Incentive Regulation of Electricity Distribution Networks: Lessons of Experience from Britain," Cambridge Working Papers in Economics 0709, Faculty of Economics, University of Cambridge.
  7. Noel Uri, 2003. "The Impact of Incentive Regulation on Service Quality in Telecommunications in the United States," Journal of Media Economics, Taylor & Francis Journals, vol. 16(4), pages 265-280.
  8. Beenstock, Michael & Goldin, Ephraim & Haitovsky, Yoel, 1998. "Response bias in a conjoint analysis of power outages," Energy Economics, Elsevier, vol. 20(2), pages 135-156, April.
  9. Yu, W. & Jamasb, T. & Pollitt, M., 2007. "Incorporating the Price of Quality in Efficiency Analysis: the Case of Electricity Distribution Regulation in the UK," Cambridge Working Papers in Economics 0736, Faculty of Economics, University of Cambridge.
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Citations

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Cited by:
  1. Fenrick, Steve A. & Getachew, Lullit, 2012. "Cost and reliability comparisons of underground and overhead power lines," Utilities Policy, Elsevier, vol. 20(1), pages 31-37.
  2. Silvestre, Bruno & Hall, Jeremy & Matos, Stelvia & Figueira, Luiz Augusto, 2010. "Privatization of electricity distribution in the Northeast of Brazil: The good, the bad, the ugly or the naïve?," Energy Policy, Elsevier, vol. 38(11), pages 7001-7013, November.

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