A Framework and Review of Customer Outage Costs: Integration and Analysis of Electric Utility Outage Cost Surveys

A clear understanding of the monetary value that customers place on reliability and the factors that give rise to higher and lower values is an essential tool in determining investment in the grid. The recent National Transmission Grid Study recognizes the need for this information as one of growing importance for both public and private decision makers. In response, the U.S. Department of Energy has undertaken this study, as a first step toward addressing the current absence of consistent data needed to support better estimates of the economic value of electricity reliability. Twenty-four studies, conducted by eight electric utilities between 1989 and 2002 representing residential and commercial/industrial (small, medium and large) customer groups, were chosen for analysis. The studies cover virtually all of the Southeast, most of the western United States, including California, rural Washington and Oregon, and the Midwest south and east of Chicago. All variables were standardized to a consistent metric and dollar amounts were adjusted to the 2002 CPI. The data were then incorporated into a meta-database in which each outage scenario (e.g., the loss of electric service for one hour on a weekday summer afternoon) is treated as an independent case or record both to permit comparisons between outage characteristics and to increase the statistical power of analysis results. Unadjusted average outage costs and Tobit models that estimate customer damage functions are presented. The customer damage functions express customer outage costs for a given outage scenario and customer class as a function of location, time of day, consumption, and business type. One can use the damage functions to calculate outage costs for specific customer types. For example, using the customer damage functions, the cost experienced by an "average" customer resulting from a 1 hour summer afternoon outage is estimated to be approximately $3 for a residential customer, $1,200 for small-medium commercial and industrial customer, and $82,000 for large commercial and industrial customer. Future work to improve the quality and coverage of information on the value of electricity reliability to customers is described.