Estimated Value of Service Reliability for Electric Utility Customers in the United States

Information on the value of reliable electricity service can be used to assess the economic efficiency of investments in generation, transmission and distribution systems, to strategically target investments to customer segments that receive the most benefit from system improvements, and to numerically quantify the risk associated with different operating, planning and investment strategies. This paper summarizes research designed to provide estimates of the value of service reliability for electricity customers in the US. These estimates were obtained by analyzing the results from 28 customer value of service reliability studies conducted by 10 major US electric utilities over the 16 year period from 1989 to 2005. Because these studies used nearly identical interruption cost estimation or willingness-to-pay/accept methods it was possible to integrate their results into a single meta-database describing the value of electric service reliability observed in all of them. Once the datasets from the various studies were combined, a two-part regression model was used to estimate customer damage functions that can be generally applied to calculate customer interruption costs per event by season, time of day, day of week, and geographical regions within the US for industrial, commercial, and residential customers. Estimated interruption costs for different types of customers and of different duration are provided. Finally, additional research and development designed to expand the usefulness of this powerful database and analysis are suggested.