Case Studies of the Economic Impacts of Power Interruptions and Damage to Electricity System Infrastructure from Extreme Events

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The risks of long-duration, widespread interruptions (LDWIs) in electrical power are a concern of U.S. regulators, the electric power industry, and stakeholders.  Those responsible for making decisions about increasingly costly investments to prevent such interruptions and to facilitate rapid recovery when they do occur need relevant information on which to base those decisions.  Although a number of studies have examined the physical and engineering impacts of extreme weather and other precipitating events on the bulk power system, decision makers evaluating investments in preventive strategies need information on the costs of past power interruptions and the benefits of preventing them in the future. This paper contributes to addressing this need by offering six case studies that detail the economics, at the level of the utility service territory, of power interruptions caused by extreme weather and lasting from a few days to several weeks.  These intermediate-duration interruptions have been, and will continue to be, the most common type of major electric power disruption. They are longer than the short-term disruptions addressed in utility reliability planning, but not as long or widespread geographically as the national-scale interruptions with durations of many weeks, months, or longer that have been examined in some recent studies.  Through case studies, we are able to address the following five questions that have important policy and long-term planning implications for reducing power system vulnerabilities:

  1.  How do utilities assess the costs of system damage caused by extreme weather and the costs of recovering from this damage?
  2.  How do utilities estimate customer costs of past power interruptions?
  3.  How do utilities or others estimate the costs and benefits of investments to reduce power system vulnerabilities to future extreme weather events?
  4.  How do utilities and regulators use the concept of resilience in economic assessments of extreme weather impacts and the value of preventive investments?
  5.  How do regulatory processes influence utilities’ economic analysis related to power interruptions?

Finally, the case studies reveal a number of areas in which further research could be beneficial to utilities and regulators dealing with risks associated with LDWIs.

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