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

This report updates the 2009 meta-analysis that provides estimates of the value of service reliability for electricity customers in the United States (U.S.). The meta-dataset now includes 34 different datasets from surveys fielded by 10 different utility companies between 1989 and 2012. 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-dataset 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 U.S. for industrial, commercial, and residential customers. This report focuses on the backwards stepwise selection process that was used to develop the final revised model for all customer classes. Across customer classes, the revised customer interruption cost model has improved significantly because it incorporates more data and does not include the many extraneous variables that were in the original specification from the 2009 meta-analysis. The backwards stepwise selection process led to a more parsimonious model that only included key variables, while still achieving comparable out-of-sample predictive performance. In turn, users of interruption cost estimation tools such as the Interruption Cost Estimate (ICE) Calculator will have less customer characteristics information to provide and the associated inputs page will be far less cumbersome. The upcoming new version of the ICE Calculator is anticipated to be released in 2015.