Benchmarking Electric Utility Annual Performance: Performance Criteria that Include Resilience

This is a blog post about describing an electric utility’s performance over the previous year.  In capitalism, higher quality products command a price premium and attract customers.  What is “quality” electric power delivery?  This blog post explores this. 

While nobody directly gains pleasure from buying electricity, it is a key input in producing key goods that every person needs.  Right now, my EV is recharging and so is my phone. The computer I’m typing on is plugged into an electric socket.  The lights are on in my condo and the toaster is plugged in.  I am using the Grid!  The Reiss and White 2002 Restud paper provides some details showing how households produce key goods such as leisure and comfort using electricity as an input.

When we purchase coffee, we have many choices. We can buy a coffee maker on Amazon and then buy beans at the store and brew our own, or we can shop at countless different stores including Starbucks.  In contrast, when we buy electricity we face a much more limited choice.  Once one moves to Northern California, one is locking in with PGE as one’s power supplier.  Once one opens an account, one does have options concerning opting into one plan or another.  Interesting economics research has studied how opt in versus opt out designs affect who chooses what plan.

Industrial organization economists model the demand for products ranging from cars to televisions to yogurt as the demand for a bundle of attributes.  A product such as a Tesla is  a substitute but not a perfect substitute for a Toyota Tercel. Both have 4 wheels and move but they also differ.  In a free market, consumers know the attributes including the price of each product and choose the right one for them.  Elon Musk’s team thinks about what to bundle into the Tesla Y.

With this background, what are the attributes of your electric power consumption for the last year of service delivery?

First, there is the power itself.

Second, there is your average price and the standard deviation of this price. If the price distribution you face is right skewed then the utility could also report to you the 95th and 99th percentile of the average price you paid each day.  So, on the 4 days when power was most expensive over the previous year, what was the average price you paid per KWH on those 4 days?

Third, there is the carbon footprint of the utility’s power delivery.  Of course, the NERC grid factor determines this but the utility can boast to its customers if it has signed deals with low carbon generators of it has encouraged customers to sign up for solar power.

Fourth, there is the resilience of service. On how many hours of the year did the customer experience  a blackout such that service was not available.

SUPPOSE that every customer is required by law to receive this information and every electric utility must provide aggregate statistics to the DOE that are pooled across utilities and released to the public.  This would allow for benchmarking as corporations such as Amazon and households would know which are the most reliable electric utilities in the nation.  Such information would be incorporated into locational decisions of households and firms. In our emerging Work from Home economy, this becomes even more likely.

Climate change adaptation would be enhanced by holding electric utilities accountable for poor service delivery. Information about past service delivery will create a type of competition similar to what Yelp Reviews achieve.