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Customer Demand for Service Reliability in the Electric Power Industry: A Synthesis of the Outage Cost Literature

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  • Caves, Douglas W
  • Herriges, Joseph A
  • Windle, Robert J

Abstract

The purpose of this paper is to review and synthesize recent North American research into the demand for service reliability and to draw conclusions of general interest to the utility industry. The electric power industry has, over the past 15 years, experienced increasing pressures to become more efficient, that is to provide greater value to its customers for the same resource utilization. The industry's response to these pressures has given rise to the potential for major changes in the theory and practice of utility planning, operations and pricing. A common thread running through many of these changes is a recognition that the consumer's demand for service reliability plays a key role in designing prices and services. To date the demand for service reliability has been characterized almost exclusively in terms of `outage costs', which refer to loss in value to the customer resulting from a sudden interruption of power. In the case of industrial and commercial customers, these costs may take the form of lost sales, idle labor, or product and input spoilage. While residential outage costs may also include spoilage, the less tangible costs of inconvenience are likely to play a more dominant role.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Bulletin of Economic Research.

Volume (Year): 42 (1990)
Issue (Month): 2 (April)
Pages: 79-119

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Handle: RePEc:bla:buecrs:v:42:y:1990:i:2:p:79-119

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Cited by:
  1. David F. Layton & Klaus Moeltner, 2000. "A Censored Random Coefficients Model for Pooled Survey Data with Application to the Estimation of Power Outage Costs," Econometric Society World Congress 2000 Contributed Papers 0912, Econometric Society.
  2. Pepermans, Guido, 2010. "The Value of Continuous Power Supply for Flemish Households," Working Papers 2010/24, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
  3. Asher A. Blass & Saul Lach & Charles F. Manski, 2008. "Using Elicited Choice Probabilities to Estimate Random Utility Models: Preferences for Electricity Reliability," NBER Working Papers 14451, National Bureau of Economic Research, Inc.
  4. World Bank, 2002. "India : Power Sector Reform and the Poor," World Bank Other Operational Studies 15286, The World Bank.
  5. Diboma, B.S. & Tamo Tatietse, T., 2013. "Power interruption costs to industries in Cameroon," Energy Policy, Elsevier, vol. 62(C), pages 582-592.
  6. Klytchnikova, Irina & Lokshin, Michael, 2007. "Measuring welfare gains from better quality infrastructure," Policy Research Working Paper Series 4217, The World Bank.
  7. Yu, W. & Jamasb, T. & Pollitt, M., 2007. "Incorporating the Price of Quality in Efficiency Analysis: the Case of Electricity Distribution Regulation in the UK," Cambridge Working Papers in Economics 0736, Faculty of Economics, University of Cambridge.
  8. Aygul Ozbafli & Glenn Jenkins, 2013. "Estimating Willingness To Pay For Reliable Electricity Supply: A Choice Experiment Study," Development Discussion Papers 2013-01, JDI Executive Programs.
  9. Ajodhia, Virendra & Hakvoort, Rudi, 2005. "Economic regulation of quality in electricity distribution networks," Utilities Policy, Elsevier, vol. 13(3), pages 211-221, September.
  10. Merz, Carina, 2008. "Monetaere Bewertung der Netzzuverlaessigkeit fuer eine effiziente Qualitaetsanreizregulierung," EWI Working Papers 2008-1, Energiewirtschaftliches Institut an der Universitaet zu Koeln.
  11. Luise Röpke, 2013. "The Development of Renewable Energies and Supply Security: A Trade-Off Analysis," Ifo Working Paper Series Ifo Working Paper No. 151, Ifo Institute for Economic Research at the University of Munich.
  12. Beenstock, Michael & Goldin, Ephraim, 1997. "Priority pricing in electricity supply: An application for Israel," Resource and Energy Economics, Elsevier, vol. 19(3), pages 175-189, August.

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