Service target performance incentive scheme for Victorian electricity distribution businesses (2006-10)

The Essential Services Commission (ESC) of Victoria developed a service incentive scheme in its 2006-10 Price Review. This encourages Victoria’s electricity distributors to meet and exceed target levels of reliability. The incentives of the scheme are in the form of:

• A service term (S factor) in the price control formula, giving it the form of (1+CPI )(1− X)S.
  If a distributor provides an average level of reliability above the target levels, then its distribution tariffs will rise in subsequent years. If reliability is worse than the target levels, the tariffs will fall.
• Guaranteed service level (GSL) payments to customers for low reliability.
  Customers are entitled to receive a credit if they experience more than the specified number of sustained or momentary interruptions in a calendar year, or if they experience a cumulative supply interruption time longer than the specified number of hours.

Under the scheme, a distributor may apply to the ESC (now AER) to have certain supply interruption events excluded from the mechanism when calculating the level of supply reliability. In doing so, they must cite the relevant grounds for exclusion.

Further information on the service incentive scheme is contained in the 2006-10 Price Review final decision papers on the ESC's website.

The AER has developed a national Service Target Performance Incentive Scheme that will be applied to all Jurisdictions of the NEM, as part of its revenue-price determination for each DNSP. Information of the AER’s Service Target Performance Incentive Scheme is available on the AER's website.