How Much Does a Service Outage Really Cost an Electric Company?
All businesses rely on electricity to function. So when the power goes out, any business experiences loss of operations that can cost thousands to millions of dollars. An unplanned electrical outage, especially a long one, can lead some businesses to a point where it’s too difficult to recover.
What is an electrical outage?
Both short- and long-term power outages can happen anywhere and at any time. A large-scale electrical outage affects both homes and businesses, and can potentially close entire cities. Here are three types of electrical outages that can occur:
- Something causes the voltage to drop, resulting in lights dimming. When the voltage drops, electrical equipment can malfunction.
- A blackout is a complete loss of power that can last anywhere from a few minutes to a much longer period of time.
- Permanent fault
- This power outage results from a fault on a power line that causes a widespread loss of electricity.
What causes an electrical service outage?
While some power outages are planned for maintenance and upgrades, the following can cause power outages on a wide scale:
- As expected, weather is the biggest cause of electrical outages. Climate Central performed a study that found 80% of all outages between 2003 and 2012 were caused by inclement weather. Some of the most common weather patterns that result in a power outage are cold weather, storms, floods, lightning strikes, hurricanes, tornadoes, natural disasters, and wildfires. While some can be anticipated, most are unexpected and cause the most damage.
- Vehicles can accidentally strike power poles, causing lines to fall and electricity outages.
- Squirrels are notorious reasons for electrical outages. They climb electrical equipment and come in contact with fuses and transformers, resulting in a shutdown.
- Sometimes electricity equipment fails or malfunctions. Some climate conditions can cause equipment failure, like humid or salty air or heavy dust in the air. And weather strongly influences equipment failure.
What a service outage costs your customers
Information Technology Intelligence Consulting (ITIC) performed a survey that found 98% of respondents claim one hour of electricity outage costs $100,000 on average. Consider how a loss of electricity immediately stops business operations for most organizations, affecting the bottom line.
ITIC also reported that 81% of survey respondents said a power outage lasting one hour costs their business over $300,000, and 33% reported an hour costs between $1 and $5 million.
To calculate how much your customers are actually losing, find the total labor costs per hour of downtime and add that to the total revenue lost per hour. But that’s only the monetary losses they’re suffering. In some cases, a loss of data from a power outage could cause a company to go out of business.
Consider how certain industries are adversely affected by power outages or service interruptions.
Industries most affected by electrical service outages
Even a short loss of power can adversely affect some industries, leading to significant loss. The following industries are especially vulnerable:
- Big Data
- Data centers storing hundreds – or even thousands – of customers’ IT operations, equipment, and data can be crippled by a power outage. Data centers store their customers’ critical data, and the possibility of losing that data and its long-term effect is unthinkable.
- Medical facilities like hospitals rely on electricity to support patients’ lives. Consider the medical equipment in a hospital that keeps patients alive during surgeries, in ICUs, and in ERs. Most hospitals and medical facilities have back-up generators to mitigate the risk of a power outage.
- Financial transactions require electricity to move money around in today’s electronically connected marketplace. For example, the stock market can lose millions of dollars in just a fraction of a second during a power outage because millions of transactions happen every second.
- Retailers who lose electricity can’t sell anything because most transactions are electronic. In addition, electricity is required to even use the cash registers. Just a few minutes of a power outage can cost hundreds of thousands – or even millions – of lost sales revenue. Grocery stores are most likely to suffer significantly when the power goes out.
- Thankfully, our military equipment and weapons are protected by back-up generators because it’s inconceivable to consider the country being left defenseless in the event of a power outage.
E-Source market research found the following financial costs of a power outage segregated by business sector:
E-Source also reported that, “Only 30 percent of customers gave their utilities high marks for using advanced technologies to quickly pinpoint outages, making appropriate investments in the power grid, and communicating with customers during outages.”
An electric outage, even a short one, can have devastating effects on people’s lives, on businesses, and even on governments. Without power, virtually everything grinds to a halt. Use your customers’ perspective to justify spending money on solutions that help you mitigate and manage power outages.