Understanding the Power Outage Cost of Residential Consumers in the City of Dhaka

The objective of this paper is to estimate the welfare cost associated with electric power interruption in the residential sector of the city of Dhaka. Using survey data collected through face-to-face interviews with 400 residential customers in Dhaka, this study estimates a total welfare loss of Tk.24 mn (US$ 0.35 mn) per month as a result of massive power outages during peak summer. The results of the study, furthermore, indicate that the welfare cost depends on the nature and extent of the power outage and the customers’ dependence on electricity in their daily lives. The study provides scientific evidence that residential consumers in Dhaka are willing to pay extra, in addition to their electricity bill, to ensure service reliability. However, the study explicitly detects a lack of customer confidence on the local power service provider. The research provides useful indications for policy makers and prospective future investors to assess reliability worth in household power sector under different management alternatives.