REGULATION OF GAS QUALITY OF SUPPLY IN ITALY

REGULATION OF

GAS QUALITY OF SUPPLY IN ITALY

Ferruccio Villa

Autorità per l’energia elettrica e il gas

Head of Electricity and Gas Quality of Supply

fvilla@autorita.energia.it

Workshop on the Quality of Gas Supply

Energy Comunity

THE ITALIAN REGULATORY AUTHORITY

FOR ELECTRICITY AND GAS

•

Founded in 1995

•

Operating since 1997

•

Functions:

Price control

Quality standards

Competition

Accounting and administrative unbundling

Monitoring and auditing

Complaints and appeals

Disputes

Information and transparency

Advice to Government on licensing and market structure

•

Fully independent

LEGAL AND REGULATORY FRAMEWORK

Consultation and Decision Process

•

The Autorità issues consultations papers containing

guidelines and proposals

•

Consultation papers are public (on the web site) and

are send to all stakeholders involved:

– companies

– consumers’ associations

– trade unions

– environmental associations

•

Formal hearings are organized with main actors

•

Everybody can formulate questions, comments,

proposals in written

QUALITY LEGAL FRAMEWORK

EVOLUTION - Brief history

•

From 1997 the Authorità is fully in charge of (new) service

quality regulation

•

Before 1997, (old) service quality regulation was under the

“Citizen’s charter” scheme

, that was a “self-regulation”

scheme issued before the Authority was constituted

•

Under the “Citizen’s charter” scheme:

1.

each utility could set its own quality standards

2.

each utility had to identify at least 4 individual standards

subject to refund if they were not met

3.

almost all utilities adopted compensation schemes on

request to customers

4.

only very few companies (only one large in gas sector)

adopted automatic compensation mechanism

•

Since 2000 the Citizen’s charter scheme has been

QUALITY STANDARDS

(guaranteed/overall)

and DIRECTIVES

Art. 2(12)

para. h)

AUTOMATIC

COMPENSATIONS

IN CASE OF STANDARD

NON-FULFILLMENT

Art. 2(12)

para

.

g)

QUALITY-TARIFF

LINK

Art. 2(19)

para

.

a)

Art. 2(12)

para. e)

PROPOSALS FOR

LICENSING

Art. 2(12)

para. b) and o)

Autorità

(vs. licensing admin.)

(vs. customers)

SANCTIONS

IN CASE

OF MISRESPECT OF

REGULATORY ORDERS

Art. 2(20)

para

.

c)

(vs. utilities)

QUALITY LEGAL AND REGULATORY FRAMEWORK

Autorità’s legal powers

•

The law envisages

two types of quality standards

–

Guaranteed standards (GS)

:

have the function of

ensuring that all consumers receive a minimum

quality level and therefore are

oriented to the

protection of (worst-served) customers

through compensations

;

–

Overall standards (OS)

:

have the function to

monitor the company performance at system level

and therefore are

oriented to promoting

improvement through incentive/penalties

schemes

•

It’s up to the Autorità to

choose which type of

standard

apply to different quality issues

LEGAL AND REGULATORY FRAMEWORK

Guaranteed and overall standards

SERVICE QUALITY REGULATION MEANS

MULTIDIMENSIONAL

OUTPUT

REGULATION

Electricity

_Gas

Transmission

(incentive

regulation):

- Energy not supplied

Distribution

(incentive

regulation):

- SAIDI

- SAIFI

- Max number of interruptions

for MV users

- Max duration of interruptions

for MV and LV users

- Voltage quality (first stage)

- Commercial Quality

Storage

Transportation

Distribution

- Gas odorization (incentive

regulation)

- Gas leakages reported by

third parties (incent. regulation)

- Prompt intervention service

- Leakages localized after

planned inspections of pipes

- Cathodic protection

- Cast iron net. replacement

- Continuity of supply

- Commercial quality (inc. reg.)

Customer plant security

THE GAS DISTRIBUTION IN ITALY

(Snapshot 2011)

•

Italgas

•

Enel Rete Gas

•

A2A Reti Gas

•

Hera

•

G6 Rete Gas

•

Compagnia napolet.

•

Toscana energia

•

2iGas Infrastrutt.

5,153,510

2,233,686

1,226,251

1,106,587

1,005,276

743,079

702,015

568,221

•

43 DSOs with no. of

customers between

50,000 and 500,000

6,472,334

24.8%

No. of customers

DSO

% of customers

30.0%

•

78 DSOs with no. of

customers between

10,000 and 50,000

1,829,736

8.5%

•

163 DSOs with no. of

_537,294

_2.5%

23.9%

10.4%

RATIONALS BEHIND GAS QUALITY OF

SUPPLY REGULATION (distribution)

•

Overpassing the Citizen’s charter scheme

•

Guaranteeing homogeneous levels of quality at

Country level

•

Preventing the deterioration of safety levels due

to the Price-cap regime and to the short period

for distribution licenses envisaged by the Italian

law (12 years)

•

Increasing the level of safety at Country level,

through incentive regulation, reducing the gap

among different DSOs/regions

REGULATED ISSUES

•

Gas odorization

•

Localized gas leakages reported by

third parties

•

Prompt intervention service

•

Gas leakages localized after planned

inspections of pipes

•

Cathodic protection

•

Cast iron network replacement

•

Continuity of supply

•

Commercial quality

Safety

Incentive

regulation

Automatic compensations to

consumers

•

Stage 1 (until 2000): safety regulation based on

technical standards and rules

•

Stage 2 (2001-2003): standards on performance

–

measurement rules for leading safety and continuity

factors (since 2001)

–

for each distribution system, safety and continuity

indexes for each distribution plant (since 2002)

–

overall standards (since 2002)

•

Stage 3 (2004-2008): safety regulation based on

both standards and financial incentives

•

Stage 4 (2009-2012): the new safety incentive

regime (rewards/penalties)

SAFETY REGULATION IN ITALY: FROM FIRST

STAGES TO REGIME

–

2006-2008: first application and

testing stage

•

voluntary participation

•

only rewards

•

results’ assessment at the end of 2008

–

from 2009: final incentive scheme

•

compulsory regime (the starting year

depends on the size of DSOs)

•

rewards and penalties

INCENTIVE REGULATION:

SAFETY INCENTIVE REGULATION

Indicators

–

annual number of odorization level measurements

–

annual number of leakages reported by third parties

–

recording at distribution plant level (around 2,900)

Regulation/financial incentives

–

provincial district level (around 550)

–

for additional yearly gas odorization level

measurements with respect to a minimum number

set

ex-ante

by the Autorità

–

for leakages reported by third parties reduction

(annual targets set

ex-ante

by the Autorità for each

LEAKAGES REDUCTION SCHEME

REGULATION (once at the beginning of the reg. period)

SETTING STANDARDS FOR IMPROVEMENT AND SETTING

REWARD/PENALTIES PARAMETERS

•

Ex-ante

for for each year of the regulatory period

•

Reference to long-term objective

•

Improvement baseline

•

Reward/penalty parameters

IMPLEMENTATION AND CONTROL (every year)

COMPARING ACTUAL LEVELS WITH STANDARDS AND APPLY

FORMULA FOR ACTUAL REWARDS AND PENALTIES

•

Each year

t

, DSOs are rewarded or penalised according to their

performance

REGULATION (once at the beginning of the reg. period)

SETTING STANDARDS FOR IMPROVEMENT

•

Ex-ante

for each year of the regulatory period

•

Reference to long-term objective

•

For each provincial district a given improvement is required year

by year (each DSO must improve

α

% each year in each district)

t

0 1 2 3 4 … … … 12

Std

LivPart LivOb n j j

LivPart

LivOb

1

1

_















−

=

α

j: Provincial districts (1...550)

t: Year (regulatory period)

)

1

(

1 , ,t j t j j

Std

Std

=

−

×

−

α

LEAKAGES REDUCTION SCHEME

Temporal horizon

Starting level of

each provincial

district

LEAKAGES REDUCTION SCHEME

t

q

X

RPI

cap

price

_

=

−

±

Act

_t

Q

_t

[€]

Std

_t -Min +Max

IMPLEMENTATION AND CONTROL (every year)

COMPARING ACTUAL LEVELS WITH STANDARDS AND APPLY

FORMULA FOR ACTUAL REWARDS AND PENALTIES

•

Each year

t

, DSOs are rewarded or penalised according to their

performance

Act

_j,t

(unitary reward/penalty parameters are set

ex-ante

at the beginning of the regulatory period)

•

Tariff is adjusted yearly

Conventional leakages reported by third parties per

1,000 customers – provincial districts subject to

incentive regulation

0 2 4 6 8 10 12 14 16 2008 2009 2010 2011 DTconv 10*DT DTA DT -> underground network DTA -> aerial network

No. of customers and plants per “conventional

leakage service class” at 31

st

_{Dec 2011, all}

distribution plants

Correlation between the no. of leakages reported by

third parties per km of network and the % of

inspected network, all distribution plants

2008

2009

2010

2011

Percentuale di rete ispezionata

49,79% (AP/MP: 51,95% BP: 48,28%) 54,24% (AP/MP: 56,22% BP: 52,83%) 54,25% (AP/MP: 57,52% BP: 51,92%) 55,70% (AP/MP: 57,94% BP: 54,10%)

(DT + DTA) / km di rete

0,648 0,673 0,580 0,551

DT / km di rete

0,072 0,067 0,057 0,051

DTA / km di rete

0,576 0,606 0,524 0,500

DTA/DT

7,95 9,07 9,22 9,89

The correlation coefficient between the inspected network and (D The correlation coefficient between the inspected network and (DThe correlation coefficient between the inspected network and (D

The correlation coefficient between the inspected network and (DT+DTA) is T+DTA) is T+DTA) is ––––0,57T+DTA) is 0,570,570,57 The correlation coefficient between the inspected network and DT

The correlation coefficient between the inspected network and DTThe correlation coefficient between the inspected network and DT

The correlation coefficient between the inspected network and DT is is is is ––––0,850,850,850,85 The correlation coefficient between the inspected network and DT

The correlation coefficient between the inspected network and DTThe correlation coefficient between the inspected network and DT

The correlation coefficient between the inspected network and DTA is A is A is A is ––––0,500,500,500,50

Percentage of inspected network

of network

of network

of network

HP/MP BP HP/MP BP HP/MP BP HP/MP BP

No. of “conventional” odorization level

measurements per 1,000 customers, all

distribution plants

1,75 1,80 1,85 1,90 1,95 2,00 2,05 2,10 2,15 2,20 2008 2009 2010 2011

Correlation between the no. of leakages reported by

third parties per km of network and the

conventional no. of odorization level measurements

per 1,000 customers, all distribution plants

2008

2009

2010

2011

N. convenzionale di misure del

grado

di

odorizzazione

per

migliaio di clienti

1,90 2,09 2,08 2,15

(DT + DTA) / km di rete

0,648 0,673 0,580 0,551

DT / km di rete

0,072 0,067 0,057 0,051

DTA / km di rete

0,576 0,606 0,524 0,500

The correlation coefficient between the conventional no. of The correlation coefficient between the conventional no. of The correlation coefficient between the conventional no. of

The correlation coefficient between the conventional no. of odorization odorization odorization odorization level measurements andlevel measurements andlevel measurements and (DT+DTA) level measurements and(DT+DTA) (DT+DTA) (DT+DTA) isisisis ––––0,550,550,550,55 The correlation coefficient between the conventional no. of

The correlation coefficient between the conventional no. of The correlation coefficient between the conventional no. of

The correlation coefficient between the conventional no. of odorizationodorizationodorizationodorization level measurements andlevel measurements andlevel measurements and DT level measurements andDT DT DT is is is is ––––0,840,840,840,84 The correlation coefficient between the conventional no. of

The correlation coefficient between the conventional no. of The correlation coefficient between the conventional no. of

The correlation coefficient between the conventional no. of odorizationodorizationodorizationodorization level measurements andlevel measurements andlevel measurements and DTA level measurements andDTA DTA DTA isisisis ––––0,470,470,470,47

of network

of network

of network

Conventional no. of odorization

level measurements per 1,000 of

REWARDS/PENALTIES FOR ODORIZATION

AND LEAKAGES – 2009/2010

No. of long and short interruptions with notice per

customer (SAIFI) due to DSOs responsibilities

NUMERO MEDIO DI INTERRUZIONI BREVI E LUNGHE CON PREAVVISO PER CLIENTE

0,0010 0,0020 0,0030 0,0040 0,0050 0,0060

Lunghe - Im prese >= 50.000 clienti Brevi - Im prese >= 50.000 clienti Lunghe - Im prese < 50.000 clienti Brevi - Im prese < 50.000 clienti

NUMERO MEDIO DI INTERRUZIONI BREVI E LUNGHE SENZA PREAVVISO PER CLIENTE 0,0000 0,0002 0,0004 0,0006 0,0008 0,0010 0,0012

Lunghe - Imprese >= 50.000 clienti Brevi - Imprese >= 50.000 clienti Lunghe - Imprese < 50.000 clienti Brevi - Imprese < 50.000 clienti

No. of long and short unplanned interruptions per

customer (SAIFI) due to DSOs responsibilities

PROMPT INTERVENTION SERVICE

DSOs have to fulfil the following main obligations:

a)

have one or more telephone numbers exclusively on

PSTN line dedicated to PI service (no other numbers

have to be dialled by customers when calling PI)

b)

publish PI tel. numbers on their web site

c)

communicate PI tel. numbers to suppliers and to the

Authority

d)

send crews on site, following PI calls relevant to some

specific cases

e)

in case of leakage in a customer plant, suspend gas

supply till the leakage is eliminated

f)

record telephone calls in suitable registers

PROMPT INTERVENTION SERVICE

Two overall standards are in force:

a)

minimum percentage of telephone calls to PI with

maximum answer time within 120 seconds: 90%

b)

minimum percentage of telephone calls to PI with

maximum time of arrival of crews at the calling site

within 60 minutes: 95%

2008 2009 2010 2011

N. penalità di cui al comma 24.4, lettera a),

della RQ DG 255 160 9 1

% di chiamate pervenute ai recapiti di Pronto Intervento con tempo di risposta entro il tempo massimo di 120 secondi

96% 95%

Tempo medio di arrivo sul luogo di

chiam ata per interventi sulla rete (min) 32,97 34,99 35,23 33,70 Tempo medio di messa in sicurezza della

rete (min) 70,69 56,44 47,10 59,96

a)

b)

Actual values

Minimum percentage of telephone calls to PI with maximum

answer time within 120 seconds

Average time of arrival of crews at the

calling site (minutes)

PLANNED INSPECTIONS OF PIPES

DSOs have to fulfil the following obligations:

a)

minimum annual percentage of high and medium

pressure pipes to be inspected: 30%

b)

minimum annual percentage of low pressure pipes to

be inspected: 20%

c)

inspection of the overall network:

•

every 4 years (natural gas)

•

every 5 years (non natural gas)

CATHODIC PROTECTION

With reference to the steel network without

cathodic protection at 31

st

_{December 2006, DSOs}

must protect cathodically (or replace or dismantle)

this network:

•

for high and medium pressure networks:

•

100% within 31st December 2011

•

for low pressure networks:

•

10% within 31st December 2010

•

40% within 31st December 2013

CAST IRON NETWORK REPLACEMENT

With reference to the cast iron network with

hemp/lead junctions at 31

st

_{December 2003, DSOs}

must replace this network:

•

30% within 31

st

_{December 2008}

•

50% within 31

st

_{December 2010}

•

100% within 31

st

_{December 2012}

10% 20% 30% 40% 50% 60%

Actual

values

ANNULMENT OF REWARDS

Rewards of a provincial districts are not recognized

in case of:

•

incident due to DSO responsibility in one

distribution plants of the provincial district

•

non fulfilment of the obligations on:

•

prompt intervention

•

planned inspections of pipes

•

cathodic protection

•

replacement of the network in cast iron

with hemp/lead junctions

•

Data on safety performances are provided by

distributors

•

Financial incentives are recognized only after

suitable controls

•

Data must be recorded in a complete and

satisfactory

manner,

according

to

the

measurement rules set by the Autorità

•

A preliminary electronic data processing is

conducted by Autorità’s offices on all DSOs

•

some DSOs, chosen on the base of definite

criteria, are audited on site by Autorità’s

inspectors

AUDITS AND CONTROLS

•

Prompt Intervention: controlled 50 DSOs/year

•

Incentive regulation (odorization and leakages):

audited 3-5 DSOs per year

•

Gas quality (superior calorific power, pressure,

gas odorizing): controlled 60 DSOs/year

Effects depend on the no. of non

conformities:

•

No one

•

Reduction of rewards

•

Annulment of rewards and

application of penalties

•

Increase of penalties

Effects: no one or

annulment of rewards if

the gas odorizing does

not fulfil legislation in

force

COMMERCIAL QUALITY

Guaranteed standards in force:

•

Time for cost estimation of simple work (15 work. days)

•

Time for cost estimation of complex work (40 work. days)

•

Time for the execution of simple work (10-15 work. days)

•

Time for the activation of supply (10-15 work. days)

•

Time for the deactivation of supply on request of the customer

(5-7 work. days)

•

Time for the re-activation of supply after payment (for bad

payers previously disconneted) (2 days excl. Sunday)

•

Time for the pressure verification (10 work. days)

•

Punctuality of appointments with customers (2 hours)

•

Time for getting metering data (after complaint by the

customer) (10-15 work. days)

COMMERCIAL QUALITY

Main overall standards in force:

•

Minimum percentage of execution of complex

works made within 60 working days (85%)

•

Minimum percentage of responses to customer

complaints or queries in written form within 20

working days (90%)

•

An incentive scheme encourages distributors to

exceed the mandatory requirements and aim for

excellence

•

Financial incentives must be recognized only

after specific audits

•

Incentive regulation greatly benefits from a

gradual approach and an open dialogue with all

interested parties

•

Implementation and test of a robust safety data

measurement system are required

•

Adequate incentives can ensure that cost cuts

are not achieved by lower quality and safety

QUESTIONS FOR DISCUSSION

Q1 Are there any obstacles in taking over the quality of service

standards implemented by another country?

A1 Depends on many factors (legal, Regulator’s power, Country

practices, …) among which the actual levels of quality

Q3 How to determine the desired level of quality on the basis of

which the reward and penalty schemes are stipulated?

A3 Requiring improvements starting from actual levels of quality,

that have to be known by the Regulator

Q2 What are the specificities of monitoring reliability of delivery in

gas sector compared to those in electricity sector and

application of specific reliability of delivery indicators

(indicators such as SAIDI and SAIFI are used in electricity

sector)?

A2 Continuity of supply doesn’t seem to be critical in gas

For further information:

www.autorita.energia.it

Ferruccio Villa -

fvilla@autorita.energia.it

This presentation is not an official document of the

“Autorità per l’energia elettrica e il gas”