The Hidden Size Assumption in Interruption Cost Data: How the Normalization Basis Reverses Distribution System Investment Priorities

A utility builds a reliability project only when the outage costs it saves its customers are larger than the cost of the project. In the United States, these outage costs usually come from one study of customer surveys. That study lists each cost in three ways: per outage, per kilowatt of average demand, and per kilowatt-hour of energy not served. Planners often treat the three numbers as the same cost written in different units. We show that the cost per outage equals the cost per kilowatt multiplied by the average demand of the typical survey customer. Using it therefore assumes that every customer in a group is the same size as that survey customer. We find the exact condition under which this hidden assumption changes which customer group a utility should protect first, when groups are ranked by their share of total outage cost. This condition does not depend on how long the outage lasts. In data for 1,989 U.S. utilities, the group with the largest outage cost changes at 29.0% of them. The total cost of a four-hour outage is also overstated at 66.8% of them. We close with reporting steps that make the hidden assumption easy to check.