Service Quality Plans

1. Service Quality Plans Consumer Affairs Staff Sub-Committee Annual Meeting Derek D. Davidson Director, Consumer Assistance Division Maine Public Utilities Commission

2. Statutory Requirement • Title 35-A §301 • “Every utility shall furnish safe, reasonable and adequate service”

3. Statutory Requirement • Must define “safe, reasonable, and adequate service” • Quality of service provided by other similarly structured and sized utilities’ • Historical quality of service provided by that utility • Quality of service provided by other utilities in same geographic region

4. Service Quality • Three primary ways to effect quality of service • Traditional rate-making process • Enforcement Action • Performance-based Ratemaking Plans (PBR)

5. Traditional Ratemaking Process • Tie service quality improvements or standards to approval of rate increases • Find costs associated with service activities imprudent (for poor-performing utilities) • Consider quality of service when setting utility’s cost of capitol and rate of return.

6. Enforcement process • Formal Investigation, Title 35-A §§1303, 1304 • The Commission may, on its own motion, with or without notice, summarily investigate [a utility] when it believes that, among other things, a service is inadequate or cannot be obtained.

7. Enforcement • Investigation of Northern Utilities (Northern) • Commission noted problems over a two year period with Northern’s call center performance, billing performance, and meter read performance • Commission opened formal investigation of all Northern’s customer service practices • Initiated management audit of all Northern’s customer services

8. Enforcement • Management Audit: • Examined the quality of service provided in comparison to similarly-sized and structured utilities, as well as to recognized industry standards • Made recommendations for appropriate service quality standards for each customer service area • Recommended appropriate penalty amounts for failure to meet service quality standards

9. Enforcement • Customer service areas examined by management audit • Call center performance • Meter reads • Accuracy of bills • Response to service calls/gas odor • Service appointments

11. Performance Based Rate Plans (PBR) • Often established through quid pro quo arrangement: utility agrees to cap rates and provide quality of service at agreed upon levels in return for right to retain all or a portion of savings realized through improved efficiencies • Critical to establish service quality metrics that address the services important to regulators and consumers • Typical metrics address customer satisfaction with utility personnel (call centers), utility operations (billing), quality of service provided (CAIDI, SAIFI, MAIFI), and field services (repairs, installations, etc).

12. Performance Based Rate Plans • Verizon • Central Maine Power • Bangor Hydro Electric

13. PBRs • How many metrics? • Large number covers more areas important to regulators and consumers • Drawback: Difficult for regulators to manage because potential trade-offs among indices may not be readily apparent • A utility may trade poor performance on one index for superior performance elsewhere. • Reduces the importance of each metric

14. PBRs • How many metrics? • Small number of Indices • Increases the importance of each index • Drawback: May not cover some aspects of service that are important to regulators and consumers • Can substitute reporting requirements for metrics • CMP and BHE Service Quality reports

15. PBRs • Metric Types • Customer Contact Indices • Outage Indices • Power Quality Indices • Safety Indices • Quality of service provided to other utilities

16. PBRs • Customer Service Metrics • Call answer time • Appointments met • Estimated vs. actual meter readings • Average time from order to installation • Average time from order to repair • Bill errors • Complaint ratio

17. PBRs • Outage Metrics • SAIDI • SAIFI • CAIDI • MAIFI

18. Outage Metrics • SAIDI • System Average Interruption Duration Index SAIDI = ∑ Customer interruption durations Total number of customers served • Average number of minutes of sustained interruptions experienced by the average customer • Calculated by dividing the sum of all customer interruption durations by the number of customers served • Considers only sustained interruptions

19. Outage Metrics • SAIFI • System Average Interruption Frequency Index SAIFI = Total number of customer interruptions Total number of customers served • Average number of sustained interruptions experienced by the system’s average customer • Calculated by dividing the number of customer interruptions by the number of customers served • Considers only sustained interruptions

20. Outage Metrics • CAIDI • Customer Average Interruption Duration Index CAIDI = ∑ Customer interruptions durations Total number of customers interrupted • Measures the average time required to restore power to the average customer who experiences an outage • Calculated by dividing the sum of customer interruption durations by the total number of customer interruptions • Considers only sustained interruptions

21. Outage Metrics • MAIFI • Momentary Average Interruption Frequency Index (MAIFI) MAIFI = Total Number of Momentary Outages Total Number of customers served • Measures Average number of momentary (less than 5 min.) interruptions experienced by the system’s average customer • Calculated by dividing the number of momentary interruptions by the number of customers served • Becoming important due to digital equipment that is sensitive to power irregularities

22. Safety Metrics • Workplace safety is critical under PBR • Lost Time Frequency Standard (LTFS) • Measures employee absence due to accidents • Measured by the number of lost time accidents per total number of hours worked (200,000 hrs standard)

23. Quality of service provided to other utilities • Distribution utilities in a competitive generation environment will serve competitive energy suppliers, marketers, brokers, aggregators, meter co.’s, billing co.’s, etc. • Can measure timeliness and accuracy of billing information provided, or other indices that track quality of service provided to other utilities.

24. Computing Benchmarks • Consider: • Historical quality of service • Desired level of service

25. Computing Benchmarks • Average of past three years performance • Average performance of the worst three of the past five years • Long –term average minus one standard deviation • A level at which minimum customer satisfaction can be inferred

26. Penalties • Penalty must exceed the cost of compliance • Verizon has failed to meet its “Residential Trouble Reports Cleared” metric every year since the inception of its current AFOR (2001) • Verizon has incurred the following penalties: • 2001 - $524,905 • 2002 - $876,670 • 2003 - $576,404 • 2004 - $629,136*

27. Potential Pitfalls • Utilities may seek to achieve the minimum level of performance to satisfy SQM’s • Utilities may allow areas not covered by SQP to deteriorate. • Grid Investigation

28. Grid Investigation • Circuits with low number of customers possibly being neglected • SAIFI impact method vs. circuit SAIFI method • Number of outages have increased • Restoration times have increased

29. Year CMP BHE MPS 2001 55.97 11.33 4.63 2002 70.60 11.33 7.18 2003 39.18 8.06 5.66 Worst Performing Circuits – SAFI

30. Year CMP BHE MPS 2001 13.34 9.20 3.89 2002 25.80 19.23 2.67 2003 9.30 19.56 5.66 Worst Performing Circuits – CADI

31. Service Quality • Summary • Three primary ways to effect quality of service • Traditional rate-making process • Enforcement Action • Performance-based Ratemaking Plans (PBR)