19 January, 2017
Industries
Client
Office of Industrial Relations
Disciplines
Electrical safety switches are now commonplace in most residential premises, but under current regulatory requirements in Queensland, only power and lighting circuits need to have safety protection devices installed. The Office of Industrial Relations (OIR) engaged Synergies, in partnership with DBM Consultants, to assess whether the current regulations should be extended to require safety switches installed on all circuits, thereby eliminating the risk of accidental electrocution in the home. To answer this question, Synergies surveyed Queensland households to find out how much they were willing to pay for eliminating the risk of electrocution.
Currently, almost 96 per cent of residential premises have a safety switch on the main power circuits, but only 14 per cent have safety switches on all electrical circuits. Therefore, a large proportion of households are not completely insulated from the risk of accidental electrocution.
That being said, provided safety switches are installed on both power points and lighting circuits, the risk of electrocution is reduced by 80% to 90%. Extending existing laws to require all circuits to be protected would eliminate the remaining 10% to 20% of risk.
Queensland statistics on the incidence of electrical injuries indicate that between 500 and 1,500 injuries could have been prevented over the last ten years had switches been installed all circuits.
The cost of securing this additional safety is relatively small. OIR has estimated that it would cost approximately $300 to $400 per household to close the gap – that is to have safety switches installed on all circuits.
Nevertheless, for some households, this cost may be viewed as excessive.
Synergies, in partnership with DBM Consultants, conducted a non-market valuation survey to assess how much households were willing to pay to ‘purchase’ complete peace of mind through installation of safety switches on all circuits. A Dichotomous Choice Contingent Valuation survey was administered to a statistically representative population sample of 2,100 households.
The survey method involved presenting respondents with a scenario in which laws would be amended to require all residential premises to install safety switches on all electrical circuits by a specific date. Respondents were informed how much it would cost their household to have the additional safety switches installed at their premises. As part of the experimental design, six different levels of costs were specified and randomly assigned to respondents.
Respondents were divided into four segments based on their living situation (i.e. owner-occupier of a home built more than three years ago, owner-occupier of a home built within the last three years, tenant intending to purchase within the next three years, long-term tenant). The survey also identified respondents that claimed to have safety switches installed on all electrical circuits.
Separate valuation questions were tailored to each segment. We sought to ensure that the questions were plausible and matched the circumstances of each household type.
Statistical modelling was then conducted to estimate the average willingness to pay (WTP) for the reduction in electrocution risk in addition.
There was strong overall support for broadening safety switch regulations to include all electrical circuits. Support was strongest amongst owner-occupiers, but the majority of tenant households also supported the proposal.
On average, we found that households were WTP a once off payment of $1,042 to eliminate all residual risk of electrocution in the home. This compares favourably to the expected cost of installing in an average-sized home, estimated to be around $300 to $400. Regulatory compliance and enforcement costs of the new standards would be additional to this.
While the results suggest a strong appetite from the community to reduce risk, and a preparedness to pay for ‘peace of mind’, the valuation may also be subject to some bias due to information asymmetry. Despite having informed respondents about the scale of safety risks with and without the policy proposal, it is possible that respondents experienced difficulties in comparing the actual quantum of risk reduction to the cost of installing safety switches on all electrical circuits. Debrief questions at the end of the survey found some evidence of this issue.
In the past, the value of lifting electrical safety standards in Queensland have been assessed on the basis of ‘the value of a statistical life (VSL)’ and the value of avoiding injuries (equated to reduced cost of treatment and productivity losses).
This study applied a different approach by eliciting community preferences and WTP to reduce the incidence of electrocution leading to death or injury. While stated preference techniques can be prone to biases, careful survey design enables valid measures to be determined.