The failure rate is essential in power system reliability assessment and thus far, it has been commonly assumed as constant. This is a basic approach that delivers reasonable results. However, this approach neglects the heterogeneity in component populations, which has a negative impact on the accuracy of the failure rate. This paper proposes a method based on risk functions, which describes the risk behavior of condition measurements over time, to compute individual failure rates within populations. The method is applied to a population of 12 power transformers on transmission level. The computed individual failure rates depict the impact of maintenance and that power transformers with long operation times have a higher failure rate. Moreover, this paper presents a procedure based on the proposed approach to forecast failure rates. Finally, the individual failure rates are calculated over a specified prediction horizon and depicted with a 95% confidence interval.