Final Report: Recommendations for the Regulation of Quality of Supply; Electricity Distribution and Retail Supply

In competitive markets, quality levels are generally a result of competition and addressed by the general customer protection legislation and competition law. The need to establish quality regulations and measures can generally be linked to two areas: regulated network operators may respond to regulatory incentives/targets for (cost) efficiency by reducing their level of quality, and (retail) suppliers operating in liberalized competitive electricity retail markets may respond to price competition by reducing their quality of service. The regulatory framework for quality of supply in Bosnia and Herzegovina has been analyzed in detail in a separate report. Based on this analysis, gaps in the regulatory framework have been identified and described for both distribution and retail supply. This document presents recommendations for the regulatory framework for quality of supply in Bosnia and Herzegovina. The identified gaps in the regulatory framework for quality of supply include tasks, rights, and obligations of the regulatory authority, monitoring, reporting, and publishing of quality of supply data/indicators, definition and application of guaranteed standards for quality of supply, introduction and specification of penalties in case of non-compliance, and implementation of quality of supply incentive schemes within the general regulatory assessment of allowed costs and revenues. For electricity distribution, the table below provides a summary of the gaps identified for quality of supply regulation in Bosnia and Herzegovina. The color coding of the table indicates which elements are already in place and applied (green), somewhat applied or already defined but not yet applied (yellow), or not yet applied (red). Feedback from the different electricity sector stakeholders in Bosnia and Herzegovina indicated that improvements with regards to continuity of supply levels are particularly needed. Data for a number of continuity of supply indicators is already collected by all three regulatory authorities, and a range of commercial quality indicators are collected by the regulatory authorities for the Republika Srpska and the Brčko district. The "Draft Rulebook on Regulation of the Quality of Electricity Supply" for the Republika Srpska would establish a comprehensive set of quality standards in that entity. However, only a very limited set of quality of supply standards are yet defined and applied in Bosnia and Herzegovina, even more so in relation to penalties or other direct (financial) implications in case of non-compliance. The implementation of quality of supply incentive schemes may only be considered once the other elements of quality of supply regulation have been implemented and sufficient experience with their application has been made. The regulatory framework for quality of supply in Bosnia and Herzegovina should be improved to adequately protect customers in the open market and contribute to increased levels of security of supply. The recommendations provided in this document are based on international experience and best practice rather than legal requirements. The implementation of quality of supply regulation should follow a step-wise approach and consider the actual need for measures in a specific area.