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Electricity Distribution in the UK and Japan: A Comparative Efficiency Analysis 1985-1998

Abstract:
This paper examines the relative performance of electricity distribution systems in the UK and Japan between 1985 and 1998 using cost-based benchmarking with data envelopment analysis (DEA) and stochastic frontier analysis (SFA) methods. The results suggest that the productivity gain in the UK electricity distribution has been larger than in the Japanese sector. In particular, productivity growth accelerated during the last years when the UK utilities were operating under tightened revenue caps. It also suggests that efficiency scores are higher for UK utilities. The findings also highlight the advantages of using multiple techniques in comparative analysis and in incentive regulation.

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Energy Specializations: Electricity – Local Distribution; Electricity – Markets and Prices ; Electricity – Policy and Regulation

JEL Codes:
D44 - Auctions
D42 - Market Structure, Pricing, and Design: Monopoly
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: Electricity distribution, technical efficiency, efficiency analysis, Incentive regulation, International comparison

DOI: 10.5547/ISSN0195-6574-EJ-Vol26-No2-2


Published in Volume 26, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.