Neighborhoods with Underground Wiring are More Valuable

It's interesting when the physical world manifests itself and big-time bloggers notice:

Do underground power lines cost more? My wife tells me that the Russians are laughing at the power blackout in Virginia, they commonly have underground power lines, as do many parts of Europe. Common opinion is that underground lines are more costly, one estimate says $1 million per mile. Some commentators charge that underground lines are better for our health. If I read this advisor to terrorists correctly, underground lines may be less vulnerable to sabotage as well. I am not willing to endorse this idea, but the prospect of two weeks without power in my home naturally leads me to look for alternatives.

One thing to consider on the plus side of the cost/benefeit analysis is that neighborhoods with underground wiring are more valuable. I don't have the hard data to prove it but I know that my house would be more valuable (greater than my share of the undergrounding) if our street did not have ugly overhead power poles.

Why then, you ask, has my block not undergrounded? Good question. The answer lies in transaction costs to organize neighbors to form an Local Improvement District (LID) to pay for it, and part of those transaction costs include governmental resistance to LIDs.

From the other perspective is that there is no incentive for the utility to initate the undergrounding as it cannot capture any of the increase in value and, counter-intuitive as it may seem, utility company employees have told me that the utility actually prefers power-on-poles because of lower maintenance costs.

Comments

[Allan Connery]

A friend in the electric power business told me years ago that underground lines are less susceptible to damage, but hellishly expensive to fix when something does go wrong. (We're talking here about major lines that carry huge quantities of power over long distances).

What's involved in fixing an undergound high-voltage line? There's an entertaining, not-too-technical account of one such job here.

Local power distribution lines aren't as expensive to put underground, and in my home town (Calgary, Canada) they're a selling point for new communities.