Service target performance incentive scheme - 2018 amendment

Sector: 
Segment: 
Status: 
Category: 
Service target performance incentive scheme
Date completed: 
14 November 2018
Date initiated: 
5 January 2017
Effective date: 
14 November 2018
Contact: 
AER General inquiries AERInquiry@aer.gov.au
AER reference: 
60666

Overview

After consultation with stakeholders, the AER released its revised Service Target Performance Incentive Scheme (STPIS) that applies to electricity distribution networks on 14 November 2018.

The STPIS provides these networks with incentives for maintaining and improving network performance, to the extent that consumers are willing to pay for such improvements. The STPIS is intended to ensure that distributors’ service levels do not reduce as result of efforts to achieve efficiency gains.

The AER has adjusted the STPIS formula to better balance the weight given to the frequency and duration of supply interruptions. The modified STPIS will increase the incentive for distributors to reduce the average duration of supply interruptions for all customers, while keeping the number of outages at low levels.

The AER has found that the STPIS has delivered improvements in the reliability of electricity supply, but that distributors have focused on reducing the numbers of short interruptions to supply, rather than also reducing the number of longer interruptions. As a result, the average length of supply restoration time has increased, meaning that customers, particularly at the end of networks (often in rural or remote areas) may not receive the same supply improvements as customers in urban areas. The changes to the STPIS are designed to achieve better reliability outcomes for all customers, including those in rural areas.

This review of the STPIS follows a 2016 Australian Energy Market Commission (AEMC) review of the framework for measuring reliability performance in the National Energy Market (NEM). The AEMC proposed a number of changes to the current method for measuring interruptions to supply, including changing the definition of “momentary interruption” from less than one minute to less than three minutes. Along with other recommended changes, this  resulted in alterations to the measurement method for the System Average Interruption Duration Index (SAIDI) and the System Average Interruption Frequency Index (SAIFI). Given SAIDI and SAIFI are the key reliability components of the STPIS, the STPIS itself has been amended in order to reflect the revised measurement methods.

In conjunction with the STPIS review, the AER completed a review of new distribution reliability measures guidelines, which will provide greater consistency and transparency of distribution reliability measurements. This guideline outlines common definitions for distribution reliability measures across the National Electricity Market (NEM).

Background

On 5 January 2017, the AER published an issues paper on its intention to review the Service Target Performance Incentive Scheme (STPIS) and the establishment of a Distribution Reliability Measures Guideline. This issues paper sought stakeholders’ feedback on issues we identified in implementing the STPIS since 2009 and outlines our position on setting up uniform distribution reliability measures across all jurisdictions.

On 14 December 2017, the AER released the draft amended Service Target Performance Incentive Scheme (STPIS) for consultation.

Accompanying the draft amended STPIS is an explanatory statement outlining our reasons for amending the STPIS and seeks stakeholders’ responses on adopting these changes.

Energy consumers and other interested parties were invited to make submissions on the draft amended STPIS by 9 February 2018. We received 14 submissions that are listed under the 'draft decision' milestone.