What’s the Cost of a Power Failure?

Measuring the impact on customers

This year, New England had one of its worst late season storms in recent history. Heavy snow brought down trees, which in turn, brought down many power lines. Some people were out of power for more than a week. In March, a fire in a substation shut off power to the historic Back Bay section of Boston for several days. The blackout left hotels, office buildings, and subway stations dark and shuttered some of the most exclusive shops in the city.

Utilities have faced outage problems since Thomas Edison strung wire from his Pearl Street station in New York City to 80 customers in 1882. Although restoration costs are expensive and disruptive to the utility, they are part of doing business. Utilities plan and budget for power failures. It always snows in New England. Hurricanes always hit Florida. Restoration costs are minimal when compared to the cost of permanently eliminating blackouts.

In the midst of an outage, most customers would probably say they are willing to pay more for power that doesn’t go out during a heavy snowstorm or a substation fire. A week after power is restored, about 30 percent fewer customers would agree to the higher payment. Why is that? No one calculates the cost of power failures to the customers.

Nearly every utility has a GIS. However, most utilities use GIS for keeping track of assets—wires and poles and such. Imagine using GIS to estimate commercial, industrial, and residential business and property losses incurred during a power failure based on the demographic and business activity in the area. GIS can do that. Once the model is established, spatial analysis could be run continuously before and during an outage. The results could be shared with everyone. Then they would know. We all would know.

If we knew the costs, would we make different decisions about the value of electric reliability?

Bill Meehan

About Bill Meehan

Bill Meehan, P.E., heads the worldwide utility industry solutions practice for Esri. Author of Enhancing Electric Utility Performance with GIS, Modeling Electric Distribution Performance with GIS, Empowering Electric and Gas Utilities, Power System Analysis by Digital Computer, and numerous papers and articles, Bill has lectured extensively and taught courses at Northeastern University and the University of Massachusetts. Bill is a registered professional engineer. Follow Bill on Twitter.
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  1. Sonny Ngei says:

    Increased knowledge results in better decisions,the model development will no doubt result to better electricity acquisition decision,especially a more sustainable option.the value of electric reliability should fall,which still leads to a more sustainable electricity.

  2. Dave Twichell says:

    Berkeley Lab completed a study that concluded that power outages and blackouts in the US cost the nation $80 Billion. Seventy-three percent of the cost is seen in the commercial sector, with 25% coming from the industrial sector and the remaining 2% attributed to residential losses. More information on this study can be found at http://www.lbl.gov/Science-Articles/Archive/EETD-power-interruptions.html