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Business Interruption Impacts of a Terrorist Attack on the Electric Power System of Los Angeles: Customer Resilience to a Total Blackout

Regional economies are highly dependent on electricity, thus making their power supply systems attractive terrorist targets. We estimate the largest category of economic losses from electricity outages—business interruption—in the context of a total blackout of electricity in Los Angeles. We advance the state of the art in the estimation of the two factors that strongly influence the losses: indirect effects and resilience. The results indicate that indirect effects in the context of general equilibrium analysis are moderate in size. The stronger factor, and one that pushes in the opposite direction, is resilience. Our analysis indicates that electricity customers have the ability to mute the potential shock to their business operations by as much as 86%. Moreover, market resilience lowers the losses, in part through the dampening of general equilibrium effects.