Autorità per l`energia elettrica e il gas

Public Service Obligations
in the Electricity and Gas Service
Roberto Malaman
Director - Quality and Consumer Affairs
Autorità per l’energia elettrica e il gas (Italy)
October 2004
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Public Service Obligations:
Definition
Specific requirements that are imposed by public authorities
on the provider of the service in order to ensure that certain
public interest objectives are met, for instance, in the matter
of air, rail and road transport and energy. These obligations
can be applied at Community, national or regional level
(EC White Paper on Services of General Interest – May 2004)
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Reconciling liberalization and public
service obligations
 The objective of an open and competitive internal market and
of developing high-quality, accessible and affordable services
of general interest are compatible
 The definition of public service obligations and missions
remains a task for the public authorities at the relevant level
 The relevant public authorities are also responsible for market
regulation and for ensuring that operators accomplish the
public service missions entrusted to them
 It is necessary for the relevant public authorities to have
adequate instruments and expertise at their disposal
 The Commission intends to clarify and simplify the legal
framework for the compensation of PSOs
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Public Service Obligations
in the electricity and gas sector
 “…Member States, may impose […], in the general economic interest,
PSOs which may relate to security, including security of supply,
regularity, quality and price of supplies and to environmental
protection. Such obligation must be clearly defined, transparent, non
discriminatory and verifiable…”(Directives 96/92/EC and 98/30/EC,
Art. 3).
 “Having full regard to the relevant provisions of the Treaty, in particular
Article 86 thereof, Member States may impose on undertakings […], in
the general economic interest, public service obligations which may
relate to security, including security of supply, regularity, quality and
price of supplies and environmental protection, including energy
efficiency and climate protection. Such obligations shall be clearly
defined, transparent, non-discriminatory and verifiable…” (New
Directives 2003/54/EC and 2003/55/EC, Art. 3)
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Directives 2003/54/EC and 2003/55/EC
More details on PSOs:
 MS shall ensure the provision of universal service to all household
customers and, where appropriate, to small enterprises (electricity)
 MS may appoint a supplier of last resort
 MS shall take appropriate measures to protect final customers and
in particular vulnerable customers, including appropriate measures
to help them avoid disconnection
 MS shall ensure high levels of consumer protection, particularly
with respect to transparency regarding contractual terms and
conditions, general information and dispute settlement
mechanisms
 MS shall implement appropriate measures to achieve the
objectives of social and economic cohesion, environmental
protection, which may include energy efficiency/demand side
management and security of supply
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PSOs must be transparent
The legislative or regulatory instrument or a contract or
instruction must specify:
the nature of the PSOs
the undertakings and territory concerned
the nature of any exclusive or special rights
assigned to the undertakings
the amount of any compensation granted to the
undertakings and any revision clauses
the period covered by these obligations
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PSOs must be verifiable and
non-discriminatory
The following principles will be applied:
 the measures must be the least restrictive possible for
competition and trade between the Member States
 PSOs must be reported to the Commission
 a competitive tender should be introduced to carry out
certain obligations
 the Commission will evaluate the need and the scope of
the proposed measures to carry out the objectives
pursued
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Directives 2003/54/EC and 2003/55/EC
 MS shall designate one or more competent bodies with the
functions of regulatory authorities, responsible for ensuring
non-discrimination, effective competition and the efficient
functioning of the market
 MS shall take measures to ensure that regulatory
authorities are able to carry out their duties in an efficient
and expeditious manner
 Governments and regulators share responsibilities in
the supervising of PSOs fulfilment by electrical and
gas companies
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Monitoring and reporting
 MS shall inform the Commission of measures adopted to fulfil
universal service and public service obligations, including
consumer protection and environmental protection and their
possible effect on competition whether or not such measures
require a derogation from the provisions of the Directives
 The Commission shall monitor and review the application of the
Directives: every two years the report shall cover an analysis of
the measures taken in the MS to meet PSOs and it may include
recommendations
 MS shall ensure the monitoring of security of supply issues.
They may delegate this task to the regulatory authorities. The
competent authorities shall publish every two years a report
outlining the findings resulting from the monitoring
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Monitoring and reporting
The Commission is collecting information from MS on:
 universal service (electricity) and/or supplier of last resort (gas)
 measures to guarantee eligible customers’ ability to switch to a
new supplier
 regulation of end user prices
 the treatment of disadvantaged customers and measures to
avoid their disconnection
 the standard of network performance
 the standard of service to retail customers and dispute
settlement between customers and suppliers
 labelling of the energy mix used by electricity companies
 the promotion of energy efficiency
 primary fuels used for electricity generation
 diversity of sources of natural gas
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Clarifying and simplifying the legal
framework for the compensation of public
service obligations
The Commission
 will adopt a Decision on the application of Article 86 of the
Treaty to state aid in the form of public service compensation
granted to certain undertakings entrusted with the operation of
services of general economic interest by July 2005
 will adopt a Community framework for state aid in the form of
public service compensation by July 2005
 will adopt an amendment of Directive 80/723/EEC on the
transparency of financial relations between Member States and
public undertakings by July 2005
 will further clarify under which conditions public service
compensations may constitute state aid within the meaning of
Article 87 (1) by July 2005
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A comparison of the main PSOs in
different European countries
A CEER survey was conducted among participating
countries:
Austria
Luxembourg
Finland
Netherlands
France
Norway
Great Britain
Portugal
Ireland
Spain
Italy
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PSOs main dimensions
 Security including security of supply
 Access to electricity and gas supply
 Quality of supply
 Price of electricity and gas supply
 Environmental protection
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PSO Questionnaire Assumptions
 Situation in each country at the beginning of the year
2003 (changes announced were not considered)
 Affirmative answers (marked with ) means that a
specific public service obligation is into force in one
country
 Negative or non-applicable answers correspond to a
blank cell in the tables
 Due to a lack of consistency in the information
collected, five questions were not considered in the
analysis
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Access to electricity supply
 Obligation to connect
 Obligation to supply
 Last resort supplier
 Supply to customers in isolated rural areas
 Minimum services
 Prior notice to customers before interruption of supply
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Access to electricity supply
AUS ESP


Obligation to connect

Obligation to supply

Last resort distributor/supplier
(default supplier who assures
supply if nobody else wants to
do it)
Supply to customers in
isolated rural areas
Minimum services (measures

that are in place to guarantee
a minimum level of electricity
supply, namely during winter)

Prior notice to customers 
before interruption of supply
(?) Lack of information
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FIN

IRL





ITA


NL





NOR POR













UK



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Interruptions
prior notice
Minimum
services
Supply
isolated areas
Last resort
supplier
Obligation to
supply
Obligation to
connect
Affirmative answers (%)
Access to electricity supply
100
80
60
40
20
0
Security of supply
 Security of supply monitoring
 Reserve capacity margins
 Obligation to invest in the extension and reinforcement
of networks
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Security of supply
AUS ESP
Reserve capacity margins
Security of supply monitoring
Obligation to invest in the
extension and reinforcement
of networks

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
FIN

IRL


ITA


NL


NOR POR






UK



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Obligation to
invest in
networks
Security
supply
monitoring
Reserve
capacity
margins
Affirmative answers (%)
Security of supply
100
80
60
40
20
0
Quality of supply
 Continuity of supply standards
 Voltage quality standards
 Customer services (commercial quality) standards
 Penalty payments in case of non-fulfilment guaranteed
standards
 Outage repairing maximum delays
 Services for elderly and disabled people
 Customers complaints procedures
 Customer information (leaflets, codes of practice, websites,
etc.)
 Resolution of conflicts (fast and cheap mechanisms)
 Actions to reduce disconnections
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MAIN QUALITY FACTORS
Electricity Service
DEBT
• COMPLAINTS
• READING
• BILLING (METERING)
• NEW SUPPLY ESTIMATES
• CONNECTIONS TO
COMMERCIAL
QUALITY
ELECTRICITY
SERVICE
OTHER PARAMETERS
OF POWER QUALITY
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NETWORK
• PROVING SUPPLY
• RICONNECTIONS AFTER
NON-PAYMENT
DISCONNECTIONS
• APPOINTMENTS
• VOLTAGE AND METERS
INVESTIGATIONS
• LONG, SHORT AND
TRANSIENT NON PLANNED
SUPPLY INTERRUPTIONS
• PLANNED SUPPLY
INTERRUPTIONS
• VOLTAGE LIMITS
• VOLTAGE DIPS
• HARMONICS
• FLICKER
DISTRIBUTION
CONTINUITY
OF SUPPLY
SUPPLY
CUSTOMER SERVICE
ISSUES
• SECURITY DEPOSITS
• TOOLS FOR PAYING BILLS
• NON PAYMENT HANDLING
• DISCONNECTIONS FOR
MAIN QUALITY FACTORS
Gas Service
DEBT
• COMPLAINTS
• READING
• BILLING (METERING)
• NEW SUPPLY ESTIMATES
• CONNECTIONS TO
COMMERCIAL
QUALITY
GAS
SERVICE
GAS QUALITY
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NETWORK
• PROVING SUPPLY
• RICONNECTIONS AFTER
NON-PAYMENT
DISCONNECTIONS
• APPOINTMENTS
• METERS INVESTIGATIONS
• NETWORK SAFETY RULES
• GAS COMPOSITION
• CALORIFIC VALUE
DISTRIBUTION
SAFETY/CONTINUITY
SUPPLY
CUSTOMER SERVICE
ISSUES
• SECURITY DEPOSITS
• TOOLS FOR PAYING BILLS
• NON PAYMENT HANDLING
• DISCONNECTIONS FOR
Quality of supply
AUS
Continuity of supply standards
Voltage quality standards
Customer services
(commercial quality)
standards
Penalty payments in case of
non-fulfilment guaranteed
standards
Outage repairing maximum
delays
Services for elderly and
disabled people
Customers complaints
procedures
Customer information
(leaflets, codes of practice,
websites, etc.)
Resolution of conflicts (fast
and cheap mechanisms)
Actions to reduce
disconnections

ESP



FIN


IRL



ITA





NL


NOR POR




UK

































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


0
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Redution of
disconnections
Resolution
conflicts
Customer
information
Complaints
procedures
Elderly and
disable people
Outage repairing
maximum delays
Penalty
payments
Customer
services
standards
Voltage
standards
Continuity
standards
Affirmative answers (%)
Quality of supply
100
80
60
40
20
LV customer minutes lost (yearly actual levels)
Regulation of continuity of supply in
Italy: The effects/1
250
225
228
209
200
improvement
1999 - 2002:
43%
188
175
171
157
150
130
118
100
98
CUSTOMER
MINUTES LOST
TOTAL
50
0
1998
1999
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2000
2001
2002
CUSTOMER
MINUTES LOST NET
(UNDER
REGULATION)
Regulation of continuity of supply in
Italy: The effects/2
TOTAL CUSTOMER MINUTES LOST - all causes
400
376
356
350
328
291
Minutes lost per year, LV users
300
250
225
200
214
228
224
NORD
209
CENTRO
195
188
171
ITALIA
150
126
136
131
130
111
115
100
103
92
50
0
1998
1999
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2000
2001
SUD
2002
Price of electricity supply
 Regulated prices for captive customers
 Social tariffs for low income consumers
 National equalisation mechanisms (networks/end users
tariffs uniformity)
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Price of electricity supply
Regulated prices for captive
customers
Social tariffs for low income
customers
National equalisation
mechanisms (network/access
tariffs)
National equalisation
mechanisms (end users
tariffs)
AUS ESP

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

FIN
IRL

ITA

NL

NOR POR

UK










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0
Equalisation
mechnisms - end
users
Equalisation
mechnisms networks
Social tariffs
Regulated prices
for captive
customers
Affirmative answers (%)
Price of electricity supply
100
80
60
40
20
Environmental protection
 Incentives for renewables and CHP
 Environmental mandatory objectives placed on
electricity companies (standards, limits, environmental
taxes, participation in emissions trading markets)
 DSM mechanisms (advice and assistance with energy
efficiency measures, subsidies to high efficiency
equipments, etc.)
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Environmental protection
Incentives for renewables and
CHP
Environmental mandatory
objectives placed on
electricity companies
(standards, limits,
environmental taxes,
participation in emission
trading markets, etc.)
DSM mechanisms (advice
and assistance with energy
efficiency measures,
subsidies to high efficiency
equipments, etc.)
AUS

ESP

FIN

IRL

ITA

NL










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
NOR POR


UK





0
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DSM
mechanisms
Environmental
mandatory
objectives
Incentives for
RES and CHP
Affirmative answers (%)
Environmental protection
100
80
60
40
20
Responsibility for PSOs fulfilment
Environment
Price
Quality supply
Security supply
Access Electricity supply
0%
20%
40%
Regulator
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60%
80%
Government
100%
PSOs financing
AUS


Tariffs
Special funds
ESP

FIN

IRL

ITA

NL

NOR POR


UK

Special f unds
Tarif f s
0
20
40
60
Affirmative answers (%)
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80
100
PSOs penalties
Fine/penalties
Loss of license/authorisation
AUS ESP FIN



IRL


ITA

NL NOR POR UK






Loss of
license/authorisation
Fine/penalties
0
20
40
60
Affirmative answers (%)
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80
100
Conclusions
 PSOs help to make compatible competition with
accessible and affordable services
 Similarities emerge in the list of PSOs introduced in
each country; national models prevail in defining
specific PSOs
 PSOs may be imposed both on monopolistic
activities and with regard to competitive supply
issues (universal service and vulnerable consumers
protection)
 When PSOs are introduced on competitive
activities, economic compensation issues become
critical
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