Incentives and security in electricity distribution networks

Saurabh Amin, Galina A. Schwartz, Hamidou Tembine

Research output: Chapter in Book/Report/Conference proceedingConference contribution


We study incentive problems in electricity distribution when customer energy usage is imperfectly observable by the utility. Thus, we assume that each customer has private information about the amount of his consumed energy. Imperfect observability of individual user demand results is non-technical energy losses. In developing countries, these losses amount to 20 - 30% per year, and are largely attributed to theft by residential customers. Reducing these losses will allow a marked increase in efficiency of the electricity distribution. Usage of smart energy management devices enables new functionalities and brings the potential for such increased efficiency. However, employing smart energy management devices also entails a new set of problems. Typically, such devices are commercially produced, and employ off-the-shelf information technology (IT) solutions with inherent security vulnerabilities. Thus, due to technology limitations and cost constraints, smart devices are vulnerable to tampering and may enable systemic energy theft, threatening to reduce, or even erase the gains in efficiency. In this paper, we address incentives of utility company to combat theft (i.e., non-technical losses), when utility is subject to rate (tariff) regulation. From our analysis, such regulated utilities invest less than socially optimal in theft reduction. We suggest that regulators should include explicit targets for the allowable losses to remedy the problem of incentive misalignment.

Original languageEnglish (US)
Title of host publicationDecision and Game Theory for Security - Third International Conference, GameSec 2012, Proceedings
Number of pages17
StatePublished - 2012
Event3rd International Conference on Decision and Game Theory for Security, GameSec 2012 - Budapest, Hungary
Duration: Nov 5 2012Nov 6 2012

Publication series

NameLecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)
Volume7638 LNCS
ISSN (Print)0302-9743
ISSN (Electronic)1611-3349


Other3rd International Conference on Decision and Game Theory for Security, GameSec 2012

ASJC Scopus subject areas

  • Theoretical Computer Science
  • General Computer Science


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