A Multi-Period Regulation Methodology for Reliability as Service Quality Considering Reward-Penalty Scheme

In distribution systems, reliability insurance and financial performance are often hard to reconcile due to a natural monopoly. While many studies have proposed regulatory design of reward-penalty scheme (RPS) as an effective performance-based regulation framework to compensate for this natural monopoly, little attention is devoted to consideration of RPS in reliability as service quality. In this paper a novel methodology is proposed for considering an RPS in regard to reliability assessment problems to ensure a reasonable balance between reliability improvement and financial performance. In the proposed methodology, the impact of the utilities’ financial and reliability performance in one regulation period is considered as to how it influences the next periods, i.e., multi-period modeling. The implementation results in an IEEE test system are utilized to reveal possible improvements in both reliability and financial performance, which lead to the delivery of a satisfactory level of service quality to customers in both the short- and long-term. The proposed methodology can be regarded as a performance-based standard for reliability improvement and efficient investment in distribution systems.