The Cost of Electric Power Interruptions in the Industrial Sector: Estimates Derived from Interruptible Service Programs

Douglas W. Caves, Joseph Herriges and Robert J. Windle

Land Economics, 1992, vol. 68, issue 1, 49-61

Abstract: The electric power industry has become increasingly interested in the value customers place upon service reliability, with the demand for reliability couched in terms of outage or shortage costs. The survey-based method of eliciting these costs dominates the literature. This paper explores and demonstrates a method for estimating outage and shortage costs based upon behavioral data. A discrete choice model is developed for estimating shortage costs using observed decisions of industrial customers regarding participation in interruptible service programs. The resulting shortage cost estimates of $4 per kWh unserved for a one-hour interruption are consistent with previous survey-based estimates.

Date: 1992
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Persistent link: https://EconPapers.repec.org/RePEc:uwp:landec:v:68:y:1992:i:1:p:49-61

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