Using customer outage costs to plan generation reliability

There is a general consensus that the 1990s will be a decade characterized by generation capacity shortages, at least in portions of the U.S. This poses the question “should the utility industry be committed to maintain its reserve margin at the historical level?” To answer this question, we develop and discuss a simple model of reliability planning, which incorporates customer value of service (VOS) information. Next, we describe a more sophisticated approach that was recently implemented.