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 $4.00 per kWh unserved for a one-hour interruption are consistent with previous survey-based estimates.
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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number
10789.
Length: Date of creation: 20 Oct 2003 Date of revision: Publication status: Published in Land Economics, 1992, Vol. 68, No. 2, pp. 49-61. Handle: RePEc:isu:genres:10789
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