The growing frequency of power outages resulting from imbalances between electricity supply and demand has heightened the need to allocate scarce electricity efficiently across competing uses. Although the Value of Lost Load (VoLL) is widely used to measure the cost of outages and assess reliability, it remains unclear whether it can also serve as an operational criterion for allocating scarce electricity. This study adopts a descriptive–analytical approach and uses a mathematical optimization model, simulated in GAMS, to examine the adequacy of VoLL from both economic and legal perspectives. From the economic perspective, the study first shows that, under ideal conditions of complete information and no institutional constraints, allocating electricity on the basis of VoLL can yield an efficient allocation. It then assesses the operational feasibility of VoLL as a basis for centralized decision-making by examining information constraints, the dynamic nature of VoLL, and the simulation results. From a legal perspective, this research examines the legal basis for the reallocation of electricity among consumers during periods of shortage, within the framework of regulations governing electricity supply in Iran. The results indicate that, despite its validity as an indicator of outage costs, VoLL lacks the informational and institutional–legal prerequisites to serve as an operational criterion for allocating scarce electricity. Mechanisms based on consumer choice and tradable rights for utilizing existing capacity represent a potential approach for revealing the value of electricity during periods of scarcity, and they warrant further research.