I recently came across an interesting infographic from GE's mining division that outlines some of the dangers of arc flash as well as potential costs of an arc flash incident. To my surprise, GE shows that one arc flash can cost up to $15 million USD, which today here in Canada would cost more than $20 million dollars! In this article, we will explore how GE came up with these numbers and how prevention carries economic payoff for employers.
How can you put a price on a person's life?
Great question. My answer is that you can't.
The sad truth about safety is that there are two sides of the coin. On one side is a human life, a person who is a father or mother, brother or sister, son or daughter. This will always be true and should be your number one motivator for improving workplace safety where ever you work. The other side is a business that is in existence to make money and interested in protecting their assets. Some businesses see safety as a function of operational excellence and others not so much, but the reality is when an arc flash happens it's going to costs them money. In order for employers to make educated decisions about where to spend their precious dollars, they need to understand the potential payoff. They need to know the cost of an arc flash.
Does this only apply to mining?
The infographic is specific to mining but the information used to calculate the $15 million comes from a study done in 1999 by the Electric Power Research Institute. The study looks at incidents in Electric Power Generation, Transmission, and Distribution Maintenance and Construction which pretty much covers all industries. So the answer is no, it does not apply only to mining.
How did they come up with $15 million?
Honestly, it's extremely complicated and from what I have read results can vary anywhere from $1.5 million to upwards of $25 million per incident. Also, the data used to determine the costs linked to electrical incidents is a bit skewed because electrical incidents have such a wide range in severity and are often not classified correctly. Burns cases that were the result of an arc flash may have been recorded under a more general burn hazard and a fall from a ladder after an electrician received a shock could be recorded as a working from heights incident.
But the fundamental method seems to be relatively agreed upon. First, calculate the direct costs of the incident then use a multiplier to calculate the indirect costs. Add these two together and you have your total cost of an arc flash incident. The tricky part is what do you use for a multiplier?
What are the direct and indirect costs?
The easiest number to determine is the direct costs. This is typically made up of worker's compensation payments, medical expenditures, and legal expenses. They are relatively easy to extract after the fact and are typically easy to understand.
What is much more difficult to determine are the indirect costs. These are made up of such things like wage costs during a work stoppage, administrative costs related to the incident, property damage, repair costs, training of replacement workers, and fines related to workplace safety violations.
So what do the experts say?
Based on data from the early 1990's the paper I referred to earlier (written in 1999 by Wyzga and Lindroos) estimates the average direct costs to be around $1.55 million. Using an indirect to direct cost ratio of 8.25:1 and adjusting for inflation at the time they wrote the article they calculated the total cost of an arc flash incident to be upwards of $15.75 million. Today you would probably be somewhere closer to $26 million.
Once again I'll say it. You cannot put a price on a person's life. That should be enough for companies and businesses to take the necessary steps to ensuring the safety of all employees faced with electrical hazards. But when that's not enough, when it comes down to dollars and cents, remind the decision maker of what it could end up costing them if things go wrong.
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