Ensuring reliability has and will continue to be a priority for electricity industry restructuring. Assessing the balance between public and private actions to ensure reliability should be guided in part by an understanding of the value of reliability to the nations' residential, commercial and industrial customers. Yet, there is no comprehensive body of information on this topic. This paper begins to address this information gap by analyzing studies conducted by electric utilities over the past 15 years to assess the value of electric service to their customers. Outage cost measurements prepared by 7 electric utilities through 20 studies are assembled and standardized into a national database of customer interruption costs. The database is used to describe trends in interruption costs, and regional (geographic) differences, differences in interruption costs by customer type. It can also be used to estimate customer damage functions. Results from the study are intended to contribute to an improved understanding of the importance of electricity reliability to the nation.

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 lost 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.