Establishing quality performance of distribution companies based on yardstick regulation

This paper proposes a procedure and methodology for performance target setting related to continuity metrics in electricity distribution networks. This proposal deals with one of the key issues in the monopoly regulation, which is either the reduction of the information asymmetry among economic agents or the emulation of a competitive environment in industry segments usually considered as natural monopolies. This paper develops an approach toward standard definitions for Customer Average Interruption Duration Index (DEC) and Customer Average Interruption Frequency Index (FEC) based on inter-companies comparative analysis. This approach introduces productive efficiency concepts to the definition of network performance. In order to do so, the data envelopment analysis (DEA) technique, used for defining the efficiency frontier, was combined with the dynamic cluster technique, oriented toward models of identification of similar networks. A technique for comparative analysis was used for the definition of the network expected performance. Examples with the Brazilian electric systems are provided to clarify the methodology suggested by this paper.