Power Blackout Risks

blackout 2003, u.s./canada
14/15/16
what happened?
On August 14, 2003, large portions of the Midwest and Northeast United States and Ontario, Canada, 
experienced an electric power blackout. The outage affected an area with an estimated 50 million people and 
61,800 MW of electric load in the states of Ohio, Michigan, Pennsylvania, New york, Vermont, Massachusetts, 
Connecticut, New Jersey and the Canadian province of Ontario. The blackout began a few minutes after
4:00 pm Eastern Daylight Time and power was not restored for 4 days in some parts of the United States.
Parts of Ontario suffered rolling blackouts for more than a week before full power was restored. 
causes:
The blackout had several causes or contributory factors:
– Inadequate vegetation management (line contact by trees);
– Failure to ensure operation within secure limits;
– Failure to identify emergency conditions and communicate that status to neighbouring systems;
– Inadequate operator training;
– Inadequate regional-scale visibility over the power system;
– Inadequate coordination of relays and other protective devices or systems;
– Inadequate interregional visibility over the power system;
– Dysfunction of a control area’s system;
– Lack of adequate backup capability to that system. 
impacts:
In Canada, gross domestic product was down 0.7% in August, there was a net loss of 18.9 million work hours, 
and manufacturing shipments in Ontario were down USD 2.3 bn. The losses were mainly related to perishable 
goods spoilage, production and computer equipment shut down and business income losses.
In United-States, Anderson Economic Group estimates the likely total cost to be between USD 4.5 bn and 
USD 8.2 bn. This includes:
– USD 4.2 bn in lost income to workers and investors;
– USD 15 m to to USD 100 m in extra costs to government agencies (e.g. due to overtime and emergency service 
costs);
– USD 1 bn to USD 2 bn in costs to the affected utilities;
– between USD 380 m and and USD 940 m in costs associated with lost or spoiled commodities. >
Source: NOAA
14
U.S.-Canada Power System Outage Task Force Final Report on the August 14, 2003 Blackout in the United States and Canada: Causes and Recommendations
15
The Economic Impacts of the August 2003 Blackout, prepared by the Electricity Consumers Resource Council (ELCON) – February 9, 2004
16
http://www.policyholderperspective.com/2009/06/articles/first-party-property/2003-blackout-held-to-involve-property- 
damage-sufficient-to-support-claim-under-property-policy/

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crobriefing on Power Blackout Risks
The U.S. Department of Energy (DOE) has published a total cost estimate of about USD 6 bn. This number is
the most frequently cited cost estimate in press coverage of the blackout.
A post-blackout study underway by CrainTech (a business news publisher), Case Western Reserve University’s 
Center for Regional Economic Issues and Mirifex Systems LLC has produced some preliminary results based
on a survey of businesses in Ohio, New york, Pennsylvania, Michigan, Wisconsin and Southern Canada.
These findings include:
– A quarter of the businesses surveyed (24%) lost more than USD 50,000 per hour of downtime
(i.e., USD 400,000 for an 8-hour day). And 4% of the businesses lost more than USD 1 m for each hour of 
downtime.
– Almost 11% of firms say the blackout will affect their decision-making with regards to either growth at the 
current location or relocation to another.
An important indirect—and impossible to quantify—cost of the blackout was the “cascading” consequences
on regions outside of the blackout footprint created by manufacturers’ just-in-time (JIT) production scheduling. 
Delivery times for parts and materials to assembly plants are timed to meet scheduled production and thus 
minimize or eliminate the cost of inventory.
On April 22, 2009, the Appellate Division of the New Jersey Superior Court published its March 9, 2009 opinion 
holding that the massive August 14, 2003 electrical blackout of the eastern United States and portions of Canada 
inflicted “property damage” sufficient to support a property insurance claim. The court held that the loss of 
functionality that resulted when protective safety equipment shut down the power grid and caused the blackout 
qualified as “physical damage” for property insurance purposes. As a result, insurers were not entitled to 
summary judgment in their favour on claims (e.g. for food spoilage and business interruption) resulting from
the blackout.