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TheStreet Open House

Winter Storms Cost the American Economy Billions of Dollars

By Hal M. Bundrick

NEW YORK (MainStreet) Mighty winter storms, often mothered by conflicting hot and cold air masses in the Midwest, lumber cross-country -- slogging the nation into icy disarray. Not only are these blizzards a dangerous threat and a commuter's nightmare, but the inconvenience is easily outweighed by the cost. While the human toll is incalculable, the financial impact is measurable and massive.

Downed power lines and the resulting loss of power due to weather costs the economy $25 to $70 billion annually, according to the Congressional Research Service. This broad guesstimate is due to the varying assumptions and data used, including lost output and wages, spoiled inventory, delayed production, inconvenience and damage to the electric infrastructure.

The rickety American power grid has been pummeled for more than a century. According to a White House report prepared by the President's Council of Economic Advisers and the U.S. Department of Energy, between 2003 and 2012 an estimated 679 widespread power outages affecting at least 50,000 customers each occurred due to severe weather.

Of course, the annual economic impact varies greatly depending on catastrophic events, such as Hurricane Ike in 2008, a year in which cost estimates range from $40 billion to $75 billion, and Superstorm Sandy in 2012, a year in which cost estimates range from $27 billion to $52 billion.

In 2012 alone, the United States suffered eleven separate billion-dollar weather disasters the second-highest of any year on record, behind only 2011, the year of Hurricane Katrina.

America's power grid is aging and frail, with construction that dates back to the late 1880s. The construction of new transmission lines has grown at a rate of only 2,300 new circuit miles for the five years leading up to 2012. Fully 70% of the U.S. grid's transmission lines and power transformers are now over 25 years old. The average American power plant is over 30 years old.

However, there is work underway to bolster the reliability of the U.S. power grid. The American Recovery and Reinvestment Act of 2009 allocated $4.5 billion to the U.S. Department of Energy for investments in modern smart grid technology, which utilizes remote control and automation to better monitor and operate the grid.

But it's not just power outages. Severe weather impacts the economy in other ways, as well. The U.S. Department of Transportation estimates that the cost of weather-related traffic accidents costs Americans $42 billion per year, accounting for nearly one-quarter (24%) of all vehicle crashes.

Winter road maintenance comprises nearly 20% of all state departments of transportation budgets. And trucking companies lose an estimated $2.2 to $3.5 annually due to weather delays.

So as you cling to that cup of hot chocolate and stoke the fire waiting for the lights and the heat to come back on, remember, this blizzard isn't just costing you sleep it's costing you money.

Written by Hal Bundrick for MainStreet

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