Facebook LinkedIn Twitter

IAEE Members and subscribers to The Energy Journal: Please log in to access the full text article or receive discounted pricing for this article.

Economies of Scale and Scope in Multi-Utilities

This paper explores the economies of scale and scope in the electricity, gas and water utilities. These issues have a crucial importance in the actual policy debates about unbundling the integrated utilities into separate entities, a policy which has often been supported by the ongoing reforms in the deregulation of network industries. This paper argues that the potential improvements in efficiency through unbundling should be assessed against the loss of scope economies. Several econometric specifications including a random-coefficient model are used to estimate a cost function for a sample of utilities distributing electricity, gas and/or water to the Swiss population. The estimates of scale and scope economies are compared across different models and the effect of heterogeneity among companies are explored. While indicating considerable scope and scale economies overall, the results suggest a significant variation in scope economies across companies due to unobserved heterogeneity.

Purchase ( $25 )

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: Distribution utilities, panel data, economies of scale and scope, electricity, Switzerland, deregulation

DOI: 10.5547/ISSN0195-6574-EJ-Vol29-No4-6

Published in Volume 29, Number 4 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.