Setting regulatory incentives for continuity of supply in smart distribution grids

Incentive regulation of distribution system operators (DSOs) brought about the need to set additional mechanisms so as to avoid cost reductions at the expense of deteriorating the levels of quality of service. Since continuity of supply is the quality aspect more intimately related with distribution network investment and maintenance costs, regulatory incentives focus on the interruptions suffered by electricity consumers. The transition towards smarter distribution grids can change how network users perceive quality of service as well as the technologies available to DSOs for improving continuity levels. This paper discusses how smart distribution grids can affect the way regulatory incentives to improve continuity of supply have been traditionally determined and identifies several regulatory changes that may be needed in the upcoming future distribution grids.