Colorado Utility Penalized $5.6 Million For Power Outages

Michael Giberson

Xcel Energy has been hit with a $5.6 million penalty for power outages last summer, even as the utility is forecasting a record demand for electricity during this summer’s peak months.

Despite mild temperatures last summer, there were scattered power outages along the Front Range that made Xcel narrowly miss its outage standard.

The penalty, which still needs to be approved by regulators, will show up as a $4 credit on each customer’s July electricity bill.

(From the Rocky Mountain News)

In the long run, consumers would likely be better off having a range of price/reliability options. Such an approach can help get investments in reliability directed to the right places. “Priority insurance” is one approach to the issue.

In the meantime, a bagful of regulatory carrots and sticks may be better than nothing.

By the way, the news story notes that Xcel’s reliability is actually improving. The 94 minutes of power outages in 2004 was just above the 93-minute threshold, and well below the average of 304 minutes of outage in 2003.

SOURCES:

Gargi Chakrabarty, Xcel penalized $5.6 million for outages, Rocky Mountain News, May 11, 2005.

On priority insurance:

Elena Fumagalli, Jason Black, Ingo Vogelsang, Marija Ilic, “Quality of Service Provision in Electric Power Distribution Systems Through Reliability Insurance,” IEEE Transactions on Power Systems, 2004.

Hung-Po Chao and Robert Wilson, “Priority Service: Pricing, Investment, and Market Organization,” American Economic Review, December 1987.

And, of course, Lynne and I have blogged on priority insurance before. See Network Reliability as a Differentiated Product, and Mandatory Reliability.


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