Relationship between quality of service demanded and tariff

Restructuring of electric sectors in Latin America has been characterized by the concession of service supply, establishing: (a) the quality conditions under which such service should be provided; (b) a penalty regime in the case of verifying noncompliance with such conditions; and (c) maximum tariffs to be charged for the service. An implicit relationship between the price paid by the customer and the service and the related quality was established. Concerns started to arise as to whether it was possible to provide the service according to the quality demands established and if tariffs really reflected the service supply under those conditions. Some countries have undertaken studies to determine if the typical circuits enabled provision of the service according to the requirements established in the quality standards, as well as the economic impact of the standard application regarding the necessary resources for the execution of the requested controls and their relationship with tariff. The results obtained prove that quality requirements might not be in agreement with tariffs in some of the served areas. In some cases, they are even impossible to comply with considering the network configuration considered in tariff determination. This situation has led to more in-depth studies about the actual companies´ networks in order to determine their relationship with the typical circuits considered for tariff determination and with the quality of service levels demanded. These studies have yielded different results depending on the characteristics of the area served. These results are presented in this paper