Impact of Failure on Business Income

For most service authorities this will be a key consequence of a failure. However the loss in the delivery of a service does not always result in a loss of income to the organization.

Sewerage authorities

Due to the rating system (income) a loss in sewerage service will not result in a loss of income.

Drainage

As with sewerage services loss of income for a drainage facility will be insignificant. The key impacts will be ancillary issues rather than loss of income.

Water authorities

With systems of high redundancy, the failure of a water supply system will not result in a great loss to an organization as most water usages will be deferred for only a relatively short period. Companies dependent on water (e.g. coffee shops) are generally the only businesses affected as most industrial concerns have onsite storage facilities. Minimal impact only.

Electrical supply

A greater impact will be felt on electrical supply systems, as there are more and more passive uses of electricity through the greater number of electronic devices that operate continuously. Although these are generally small consumers of electricity, they are becoming more critical to customers. Time clocks on every type of device, video recorders and computers facilities are becoming common even in residential areas. Other key impacts will be if the supply interruption is of sufficient length for consumers to cook meals or heat houses through the use of a different energy source. This is only likely to happen where the interruption takes considerable time to restore/repair.

Hydro electric generation assets

The total system reliability is a function of:

• Machine reliability
• Transmission/network reliability
• Hydrological reliability.

The failure of base power generating facilities can have an affect on an organization depending on the:

• Redundancy available in the system
• Time to repair and bring back the service
• Amount of water that may be split or bypassed
• Overall economic efficiency or profitability of the facility concerned
• Overall hydrological position (security/availability).

Each facility will include similar assets, which may have a substantially different impact on the economics of the organization depending on their ability to generate income through their overall efficiency or profitability.

This is often the case in hydroelectric schemes where individual facilities have a far greater impact through their failure. Special assets such as canals, river diversions and storages that provide the water volumes (capable of being converted into productive units) are examples.

However, this is only valid if the organization has a demand for power to be generated from that station at that time. This risk will alter depending on redundancy and available interim storage.

The future

In the future, customers will demand some rebate where the service authority has failed to deliver the level of service that has been agreed upon (and published). Failures of drainage, water supply, sewerage, roads and other infrastructure assets could result in a rebate to the customer and therefore the cost of failure should address this issue.

Service authorities don't need to wait for this to occur. A suitable economic cost of minor failure should be incorporated into the fault costing or renewal decision-making processes.

The degree of the failure will determine the value used for the ancillary consequences of failure. This needs to be determined by surveys with customers or through "informed customer” advisory groups.

The organization can assume it is providing services in a competitive market, and ask, at what level of service failure would the customer seek services from our competition? The organization can then include the loss of income from these customers as the ancillary consequences (cost) of failure.

This is something that can be done with existing computer systems (e.g. number of properties effected x their annual rates/costs).

Predictive decay modeling for passive assets together with the reliability of mechanical/electrical assets can predict the type and number of failures. Using these and our knowledge of customer tolerance we can determine when the asset should be renewed.

Perception of Risk

We all have perceptions of risk. They vary according to:

• Controllability and size of risk
• Knowledge or lack of it.

All events fall somewhere between these factors.