First results of performance based regulation of supply quality in Hungary

The paper outlines the reasons of setting supply quality standards based on the experiences learned until 2002. The liberalized electricity market was introduced in 2003 and at the same time a new supply quality regulation regime was introduced. Detailed descriptions of applied procedures are presented. These include setting performance standards for expected level and minimum standards of quality of supply on three-year averages. Improvement targets for continuity of supply are prescribed, as well. The paper presents the first result of performance based regulation in the field of network security, continuity of supply and the quality incentive/penalty system for distribution companies. The performances of the distribution companies show improvement in all fields of the regulated indices of supply quality e.g. the System Minutes Lost improved from 411 in year 1999 to 155 minutes in 2003.