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Measuring Potential Gains from Mergers among Electricity Distribution Companies in Turkey using a Non-Parametric Model

Turkish electricity reform is entering a new phase through the Turkish Government�s proposal to create 21 new distribution companies, 18 of them by merger. Two aspects of merger analysis are the operational cost savings and the potential production efficiency gains. This paper concentrates on the second aspect and uses a recently developed methodology to assess the potential effect of these mergers and whether these mergers are efficiency enhancing. This is performed by comparing the actual efficiency levels of observed distribution companies with the merger of proposed aggregated companies. The model is calibrated on panel data from 1999 to 2003 which include measures of physical capital and labor inputs, as well as customer and energy related outputs. The results indicate potential for considerable efficiency gains from the proposed mergers.

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Energy Specializations: Energy Modeling – Energy Data, Modeling, and Policy Analysis; Electricity – Local Distribution; Electricity – Markets and Prices

JEL Codes:
E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination
D44 - Auctions
D42 - Market Structure, Pricing, and Design: Monopoly

Keywords: Efficiency and productivity analysis, mergers, data envelopment analysis, electricity distribution, Turkey

DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No2-4

Published in Volume 28, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.