Outage Compensation

Requiring utilities to provide compensation to their customers for prolonged and/or frequent outages can reduce the financial effects of outages on customers, especially energy-burdened households.

Table Of Contents
  1. Why This Matters
  2. Policy Solution
  3. Model Policy Features
  4. Potential Limitations & Pitfalls
  5. Complementary Policies
  6. Examples
COMMUNITY BENEFITAffordability, Empowerment, Energy reliability
KEYWORDSUtility bills
REGIONState, Local
AFFORDABILITY STRATEGYHousehold Protections/Utility Reform: Accountability
OVERSIGHTPublic utility commissions
POLICY MECHANISMLegislation, Regulation

Why This Matters

The frequency and duration of utility outages has been increasing in recent years for several reasons, including:

  • Severe weather-related events (e.g., hurricanes, snowstorms);
  • Preventive shutoffs (e.g., during red flag warnings and other circumstances in which power lines are more likely to spark wildfires);
  • Increased demand from electrification, power needs associated with extreme weather, and new major loads, leading to blackouts; 
  • Utility deferred maintenance.1

For example, the annual average number of major power outages was 112% higher in 2021 than the annual average from 2000–2021. Approximately 83% of the outages between 2000 and 2021 were associated with climate events.2  In California, for example, “Public Safety Power Shutoffs” to prevent wildfires have totalled over nine billion minutes for customers from 2013–2020, an average of over an hour annually for about 15 million customers—but affecting some customers for more than six days in a row.3
Such outages have financial, health, and safety consequences for utility customers. Outages pose health and safety risks to vulnerable individuals, including children, older adults, disabled individuals, and those reliant upon electricity-dependent medical devices. Those experiencing prolonged and/or frequent outages can lose food, breast milk, or medications due to the loss of refrigeration or suffer from anxiety or other mental health impacts. Financially, outages caused by severe weather are estimated to cost customers between $2-3 billion annually.4

Policy Solution

Considering that utilities enjoy monopoly privileges in return for, in part, providing reliable energy services, requirements that utilities provide compensation to their customers for prolonged and/or frequent outages are fair and reasonable. Compensation can reduce the financial effects of outages on customers, especially energy-burdened households, including the costs of spoiled foods and medications or temporary relocation. Such regulations can also provide an incentive for utilities to meet their public obligations to provide reliable service in exchange for monopolistic control of energy distribution.

Model Policy Features

  • Requires that utility customers be compensated for long-lasting (e.g., 48 hours) or frequent power outages.
  • Features automatic bill credits (e.g., $50) for each day (or portion of a day) that a power outage persists to reduce barriers to customers eligible for compensation.
  • Offers compensation for spoiled food, breast milk, and medication, based on true costs, with ample time for documentation (e.g., 21 days) and simplified documentation requirements.
  • Includes provisions that require compensation for outages regardless of declared emergencies.
  • Prohibits compensation costs to utilities from being passed on to ratepayers or otherwise recovered.
  • Includes an appeals process for households that are not automatically credited for outages, particularly in communities without advanced metering (i.e. smart meters to record regular usage).

Potential Limitations & Pitfalls

  • May be difficult to implement in communities without advanced metering. 
  • Some existing policies provide compensation for slow responses to declared weather warnings or emergencies but do not provide compensation for otherwise unreliable utility service.
  • Existing policies that allow utilities to apply for waivers in order to avoid penalties for service outages based on the severity of a weather emergency or workforce safety issues do not fully consider impacts to customers dependent upon reliable utility service.

Complementary Policies

Complementary policies that enhance outage compensation policies include:

  • Data reporting and transparency to regularly track outages at a sufficiently granular spatial and temporal scale to rack and improve upon inequities.
  • Performance-based regulation and incentive mechanisms to incentivize improved reliability performance over time, and in particular to reduce outages for vulnerable communities.

Examples

1. New York Compensation to Customers Experiencing Widespread Prolonged Outages – New York Public Service Law §73 (2024): Compensation to Customers Experiencing Widespread Prolonged Outages

Details:

  • Requires utilities to provide a $25 credit to residential customers’ accounts for each full day of service outage exceeding 72 consecutive hours after a widespread outage.
  • Includes provisions that the cost of spoiled food be reimbursed to customers.
  • Customers providing an itemized list of spoiled items can receive up to $235; customers providing proof of loss of those items can be reimbursed up to $540.
  • Prescription medications that are spoiled due to loss of refrigeration can be reimbursed for the actual value of the medications lost.
  • Costs to the utilities associated with the compensation requirements cannot be passed on to ratepayers.

LIMITATIONS:

  • Customers are required to go without power for more than three days before they can receive compensation.
  • In order to be reimbursed for the cost of spoiled food, customers are required to provide itemized lists of lost items and proof of loss to the utility within 14 days.

2. Connecticut Residential Customer Compensation for Service Outages – CT Gen Stat § 16-32m. (2025). Residential customer compensation for expiration of medicine and food due to distribution-system service outage. Recovery of costs. Waiver of requirements.

Details:

  • Requires that residential customers receive a bill credit of $25 for each full day that the outage persists beyond 96 hours, following the emergency.
  • Further requires utilities to pay residential customers $250 for spoiled food and medication due to service outages lasting more than 96 consecutive hours after an emergency. 
  • Costs to the utilities associated with the compensation requirements cannot be passed on to ratepayers.
  • Emergencies, including hurricanes, storms, floods, and snowstorms, that trigger compensation are defined as outages affecting fewer than 69% of customers during a period of peak demand. 
  • Connecticut’s Public Utilities Regulatory Authority (PURA) determines when the emergency ends and the 96-hour time period begins, based on considerations of safety, official declarations, or the expiration of National Weather Service warnings.5 
  • Those submitting claims for spoiled food or medicine are not required to provide proof of the value of the spoiled goods; approval results in a fixed $250 payment.6

LIMITATIONS:

  • Authorizes utilities to apply for a waiver under certain circumstances based on the severity of the emergency and workforce safety considerations in responding to the emergency.7
  • Only applies to emergencies and not other periods in which customers may experience outages.
  • Customers are required to go without power for more than four days before they can receive compensation.

3. Michigan Public Service Commission Power Outage Bill Credits –CT Gen Stat § 16-32m. (2025). Residential customer compensation for expiration of medicine and food due to distribution-system service outage. Recovery of costs. Waiver of requirements.

Details:8

  • Requires that a $42-per-day utility bill credit be applied when:
    • Between 1% and 10% of utility customers experience an outage lasting 48 hours during “gray sky conditions” (i.e. severe weather).
    • More than 10% of utility customers experience an outage lasting 96 hours during “catastrophic conditions”.
    • Customers experience more than six sustained power interruptions lasting five minutes or more in one year.

    LIMITATIONS:

    • Only applies to emergencies or more than six periods in a year in which customers may experience outages.
      • Offers a fixed rate payment that does not take into account greater costs to customers associated with spoiled food or medications.

      Written: November 2025

      1. Gibbs, A. (2025). Map Shows Where Power Outages Are Most Common in the US. Newsweek. ↩︎
      2. Climate Central. (2022). Surging Power Outages and Climate Change. ↩︎
      3. Murphy, P. (2021). Preventing Wildfires with Power Outages: the Growing Impacts of California’s Public Safety Power Shutoffs. PSE Healthy Energy. ↩︎
      4. Sanstad, A., Zhu, Q., Leibowicz, B., Larsen, P., and Eto, J. Case Studies of the Economic Impacts of Power Interruptions and Damage to Electricity System Infrastructure from Extreme Events. ↩︎
      5. Conn. Pub. Acts 2023,  No. 23-102, An Act Strengthening Protections for Connecticut’s Consumers of Energy. ↩︎
      6. Pate, A. and Miller, K. (2024). Power Outage Compensation. Connecticut Office of Legislative Research. ↩︎
      7. Conn. Gen. Stat. §§ 16-32l-16-32m ↩︎
      8. Michigan Public Services Commission. (2025). MPSC raises bill credit to $42 for customers experiencing long or repeat outages, raises fines for gas safety standards violations. ↩︎