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The paper describes the new model for quality dependent revenue caps (the CENS arrangement), introduced by the Norwegian regulator from 2001. The arrangement takes into account all incidents in networks with voltage levels above 1 kV that results in interruptions of duration above 3 minutes. Based on estimates of energy not supplies (ENS) and average specific interruption costs for each customer category, interruption costs (IC) are calculated for each company annually. The expected level of ENS is calculated for each company and hence the expected level of IC. At the end of the year the regulator calculates the difference between expected and actual IC. If the difference is positive, i.e. the quality of supply has been better than expected, the difference will be added to the company's revenue cap. The difference will be subtracted from the revenue caps if the quality has been worse than expected.

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This paper describes the extended incentive based regulation on continuity of supply adopted in Norway as of 2009. The new interruption cost assessment methodology is described incorporating short interruptions and time dependency of interruption costs. Previous studies have shown that annual costs of short interruptions are in the same order as costs of long interruptions, and that the costs are highly time dependent on a weekly and daily basis. Technical and economic consequences of the extended regulation for the network companies are also described.

Balancing cost-effectiveness and quality of service is one of the most important tasks for network companies in the deregulated environment. It is widely recognized that interruption costs is a relevant expression for the inconvenience customers feel when service is interrupted and that adequate assessment of such costs is crucial when they are used quantitatively in cost-benefit analyses. In this paper we demonstrate by a distribution system example that typical time variations of component failure rate, repair time, load and specific interruption costs can have a significant impact on the estimated annual interruption cost for delivery points in the system. This observation is possible by a model that can handle such time variations including correlation between the parameters. An interesting application of this model is to quantify the consequence of for example moving planned maintenance to periods when the load and the interruption cost is low.Index Terms--energy not supplied, interruption costs, power system economics, power system reliability

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