Why Utilities have Avoided Disruption Thus Far – Reliability

This is part 2 of a series on disruption of electric utilities.

Disruption of Electric Utilities

1.  Background on Utilities

2.  Why Utilities have Avoided Disruption Thus Far – Reliability

3.  Why Utilities have Avoided Disruption Thus Far – Financial Metrics

4.  Community Choice Aggregation is a Red Herring Disruptor

5.  Distributed Solar is the Real Threat - Trends

6.  Distributed Solar is the Real Threat - The Difficult Position of Utilities

7.  A Survival Strategy for Utilities

-------------------------------------

In the United States, the typical utility consumer experiences loss of power for only 2 hours each year.^[1] That means utilities are reliable 99.98% of the time.  Not bad.

Source: Wikimedia Commons

I mentioned previously that I believe utilities have not been disrupted by innovative new entrants because they do an excellent job serving customers.  They offer electric power, as much and whenever needed.  And with a reliability of 99.98%, they offer a product that is hard to match by other entrants to the electricity market.  There may be certain customers that face more frequent interruptions, such as those in rural areas, but the typical utility customer receives a great service.

Despite the impressive reliability metrics of US utilities, utilities continue to prize reliability above all other measures of performance.  In a 2012 survey of hundreds of utility executives, the top ranked issue facing the industry was reliability.^[2] Furthermore, reliability has been the number 1 or 2 issue in every such annual survey since the surveys began in 2006.^[3] Utilities are not perfect at delivering reliable service, but their employees are oriented to respond to customer outages and have been working against the metric of reliability for over 100 years. Any new market entrant has a difficult task in better addressing this customer need.

 

---

[1] The 2 hour per year figure takes some rough estimation because EIA does not publish this information.  I come up with 2 hours by looking at data from a table on page 19 of LaCommare & Eto.  Including LaCommare & Eto’s own survey data, we get a median SAIDI figure of 107 and a median MAIFI of 5.5.  If we assume an average momentary interruption of 2.5 minutes for the numbers in the MAIFI index, we get an average outage time per year per customer of 121 minutes, or 2 hours.   Having said that, the utility surveys listed above are self-reported, and therefore they may not include all events that a utility is unaware of or neglects to count.  In addition, widespread outages from natural disasters are sometimes not included in the data because SAIDI and MAIFI are meant to measure routine events.

[2] Black & Veatch, “2012 Strategic Directions in the U.S. Electric Utility Industry”, p. 9.

[3] Black & Veatch, “2011 Strategic Directions in the U.S. Electric Utility Industry”, p. 9.