Quality regulation impact on investment decisions in distribution system reliability

Performance-based regulations accompanied by quality regulations are gaining ground. Quality regulations imply new financial risks for the distribution system operator (DSO). In fact, the development of the regulatory model has been identified as a key factor in operations planning for a DSO. Lifetimes of distribution system components are very long and how the quality regulation might develop in the future is unknown. This paper develops a method - the regulation impact method - that can be used to investigate how changes in the quality regulation parameters affect the economic performance of an investment strategy. The proposed regulation impact method is based on net present value calculations of the total reliability cost. The new method is applied to the current Swedish quality regulation in a case study. In the case study, possible future parameter changes and their effect on the DSO´s financial risk when adopting different investment strategies are investigated. With the new method it is possible to analyze how robust an investment strategy is to changes in quality regulation design.