Improving service reliability in the deregulated environment
Hahn Tram and Larry Engelken
Convergent Group
6399 South Fiddler's Green Circle, Suite 600
Englewood, CO 80111-4915
Meet today's distribution utility challenge
Utility deregulation and competition, along with increasing customer demand, have forced
distribution utilities to improve service quality while trying to cut costs. The utilities are pressed
on all sides: internal business pressure due to competition, more stress on the bulk power system
due to energy trading, higher customer demands of power and power quality, and greater
regulatory and public scrutiny. Utilities have to respond to these pressures in a proactive manner
and rethink their approach to improving service reliability.
Internal Business PressureTo achieve customer differentiation and branding that their energy
service affiliates can leverage, many corporate parents are calling upon their distribution
companies to improve customer service "at all costs." Some have self-imposed pressure by
promising state utility commissions specific levels of reliability improvements to gain the
commissions' approval for their mergers and acquisitions. Scottish Power's pending acquisition
of PacifiCorp is such an example. Some have promised no rate increases for a number of years,
resulting in reductions of capital investment and operational costs. To add revenue opportunities,
some utilities are offering programs like wire-warranty or power monitoring services, which add
complications to day-to-day distribution operations.
Stress in the Bulk Power SupplyCompetition and deregulation have put American utility
reliability on a downward trend according to a recent EPRI study, "Electricity Technology
Roadmap." Generation capacity investments have gone overseas for better rates of return,
resulting in lower generation reserves nationwide. Increase in energy trading, resulting in
transmission transactions with a faster pace over longer distances, has put greater stress on
operations of the bulk power transmission system. On the other hand, deployment of new
engineering technologies is also delayed due to a lack of financial returns.
Higher Customer DemandsConsumers today have more and more computers and other
electronic appliances that are more sensitive to small power disturbances such as voltage sag and
surges. Furthermore, utilities have to deal with the varied cost of energy service delivery to
different service areas and the disparities among different types of customers in their perceived
value of service reliability and power quality.
Greater Regulatory and Public ScrutinyDistribution utilities are seeing the effects of
deregulation. Governments and the public are more leery of degraded utility service caused by
open competition and demand more reliability and service quality reports than ever. Local
distribution companies take the blame for service interruptions regardless of the cause. Many
states have set performance targets for distribution utilities, ranging from a cap on customerinterruption
minutes to the maximum wait time before customer calls are answered. State
regulation requires utilities to reimburse ratepayers and pay other penalties when their
performance falls short of those targets.
