Evaluating the Total Cost

of Outages

Josh Schellenberg, M.A.

Consultant

Freeman, Sullivan & Co.

Distribution Reliability Working Group

IEEE Power & Energy Society General Meeting

July 22-26, 2012

San Diego, CA

Since Finalizing the ICE Calculator…

FSC has received many inquiries regarding the Interruption Cost

Estimate (ICE) Calculator (icecalculator.com)

Mostly about how to apply the estimates to distribution planning,

including smart grid investments

Prepared NARUC report on evaluating smart grid reliability benefits:

http://www.naruc.org/Publications/SERCAT_Illinois_2010.pdf

Conducted 2012 Expected Unserved Energy Cost Study for

Southern Company

Results to be factored into its 2013 Integrated Resource Plan

Conducted 2012 Value of Service Study for Pacific Gas & Electric

Co. (PG&E)

Results to be factored into its 2014 General Rate Case

Page 1

Presentation Overview

Value-based Reliability Planning in Theory

Value-based Reliability Planning in Practice

At the Generation Level

At the Transmission Level

At the Distribution Level

FSC’s Recent Interruption Cost Survey for Pacific Gas &

Electric Co. (PG&E)

Methodological Improvements

How does Region Affect Power Interruption Costs?

How does Power Interruption Timing Affect the Costs?

Summary of Presentation

Page 2

Page 3

What is the Optimal Level of Reliability?

Cost

Reliability

Utility Costs

Page 4

What is the Optimal Level of Reliability?

Cost

Reliability

Utility Costs

Perfect

Reliability

Page 5

What is the Optimal Level of Reliability?

Cost

Reliability

Utility Costs

90%

Availability

Perfect

Reliability

Page 6

What is the Optimal Level of Reliability?

Cost

Reliability

Utility Costs Interruption Costs

90%

Availability

Perfect

Reliability

Page 7

What is the Optimal Level of Reliability?

Cost

Reliability

Utility Costs Interruption Costs Total Costs

90%

Availability

Perfect

Reliability

Page 8

What is the Optimal Level of Reliability?

Cost

Reliability

Utility Costs Interruption Costs Total Costs

90%

Availability

Perfect

Reliability

R*

Value-based Reliability Planning in Practice –

Generation Level

In this 2011 study, VBRP is used to

determine the optimal generation

reserve margin

FSC recently completed an

interruption cost survey for this

utility in June 2012

As part of its 2013 Integrated

Resource Plan, this utility will

incorporate the results of FSC’s

survey into the cost-benefit analysis

for its updated generation reserve

margin recommendation

Source: Kevin Carden, Johannes

Pfeifenberger and Nick Wintermantel.

The Value Resource Adequacy: Why

reserve margins aren’t just about

keeping the lights on. Public Utilities

Fortnightly. March 2011, 35-40.

Page 9

Value-based Reliability Planning in Practice –

Transmission Level

In this 1996 study, VBRP is used to

determine the optimal year of

investment for a transmission line

This study uses results from a 1993

interruption cost survey conducted

by FSC

Although the rules in place at the

time recommended installing the

new transmission line immediately

in 1994, the projected interruption

costs did not offset the benefits of

deferring the investment until 7

years later in 2001

FSC is also currently conducting a

study that assesses the benefits

associated with reinforcing a key

transmission line

Page 10

Source: Dalton, J.G., D.L. Garrison, and C.M. Fallon

(1996). "Value-based Reliability Transmission Planning."

IEEE Transactions on Power Systems 11(3): 1400-1408.

Value-based Reliability Planning in Practice –

Distribution Level

Page 11

Applications of interruption costs at the distribution level have

mainly focused on cost-benefit analysis that incorporates the

reliability benefits that customers experience

Estimated annual customer benefit of $127.7 million resulting from

distribution automation investment in California ● Source: California Energy Commission (2009). “The Value of Distribution Automation.”

Research Project CEC-500-2007-103.

Estimated annual customer benefit of $1.758 million resulting from AMI

investment in Vermont ● Source: George, S.S., J.L. Bode, and M. Wiebe (2008). "Benefit-Cost Analysis for Advanced

Metering and Time-Based Pricing." Prepared for Vermont Department of Public Service.

As part of its 2014 General Rate Case, PG&E has incorporated the results

of FSC’s recent interruption cost survey into the cost-benefit analysis for

proposed distribution investments

FSC has received many inquiries regarding how to apply the Interruption

Cost Estimate (ICE) Calculator (icecalculator.com) to distribution planning

Methodological Improvements Have Made Survey

Results More Applicable to Distribution Planning

In most prior studies, outage scenarios were primarily limited to

summer weekday afternoons, which was useful for generation

planning, but not directly applicable to distribution planning

For PG&E, we found that no hour accounts for more than 6.5% of outages

In a recent FSC study for PG&E:

Each respondent was randomly assigned to 1 of 24 different outage onset times

(for 24 hours of the day)

Each respondent reported costs for a weekend scenario with a randomly

assigned outage duration from 5 minutes to 24 hours

This design produced the data necessary for understanding how

outage costs vary across different times of the day and week, for

outages from 5 minutes to 24 hours

This study also accounted for regional differences, which is a very

important consideration for distribution planning

Page 12

2012 Cost per Outage by Region – Residential

At 5 minutes, Bay Area residential cost per outage event is 17.5% higher

The percentage difference between regions increases with duration and at 24 hours,

Bay Area residential cost per outage event is 45.3% higher

Page 13

2012 Cost per Outage by Region – SMB

Percentage difference between Bay Area and non-Bay Area small & medium business

(SMB) cost per outage event is substantially greater than in the residential segment

Across all outage durations, Bay Area SMB customers report 2.4 to 4 times higher costs

Page 14

2012 Cost per Outage by Region – Large Business

The variability and magnitude of outage costs was particularly high in the Bay Area,

which had a subset of large business customers with extremely high costs, even for a 5-

minute outage

Page 15

Relative Outage Cost Estimates by Onset Time

and Customer Class – Weekdays

Page 16

Relative Outage Cost Estimates by Onset Time

and Customer Class – Weekends

Page 17

Does Outage Timing Matter? Yes.

Outage costs for small & medium business (SMB) customers

are the most sensitive to onset time

Vary from 82.5% lower than average on a weekend evening to 85.5%

higher on a weekday morning

Weekday mornings have the highest cost because these outages likely

start and end during normal business hours, potentially disrupting an

entire day of work

Only weekday outages with lower costs than average are those with an

evening onset time because these outages begin after normal business

hours and likely end before business resumes the next day

Although some SMB customers such as retail stores likely have higher

costs on a weekend day, SMB is the only customer class that has lower

relative outage costs for all weekend onset times

Page 18

Does Outage Timing Matter? Yes. (cont’d)

Interestingly, residential and large business customers exhibit a

similar trend in outage costs:

Lower costs during the morning and afternoon and higher costs during the

evening and night throughout the week

Outage costs are higher during the evening and night for residential customers

because they are more likely to be home at these times

Considering that many large business customers operate 24 hours per day, 7

days per week, outages with different onset times likely have a similar impact on

production, but the overall outage cost may be greater during the evening and

night because outage response may require overtime or emergency staff.

Outage costs for agricultural customers vary more than those of

residential and large business customers, but less than SMB

Agricultural outage costs during the morning and afternoon are higher than

average on weekdays and weekends, which is not surprising considering that

much agricultural work is conducted during daylight hours throughout the week

Page 19

Summary of Presentation

Value-based reliability planning suggests that:

Customer interruption costs matter

Determining the level of reliability based on utility costs and/or

benchmarking alone is unlikely to lead to an optimal outcome

This planning approach has been applied to generation and

transmission planning by some utilities, but not directly to

distribution planning

Methodological improvements have made survey results more

applicable to distribution planning

These survey results for PG&E suggest that interruption costs

vary substantially by region, time of day and week, especially for

small & medium business customers

This is an important consideration for distribution planning because not all

SAIDI minutes are equal

Page 20

Page 21

For Any Comments or Questions, Contact…

Josh Schellenberg, M.A.

Consultant

Freeman, Sullivan & Co.

joshschellenberg@fscgroup.com

415-777-0707