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(Showing results 1 to 7 of 7)



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

Toru Hattori, Tooraj Jamasb and Michael Pollitt

Year: 2005
Volume: Volume 26
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol26-No2-2
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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.



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

Necmiddin Bagdadioglu, Catherine Waddams Price, Thomas Weyman-Jones

Year: 2007
Volume: Volume 28
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No2-4
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Abstract:
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.



Is Productivity Growth in Electricity Distribution Negative? An Empirical Analysis Using Ontario Data

Dimitri Dimitropoulos and Adonis Yatchew

Year: 2017
Volume: Volume 38
Number: Number 2
DOI: 10.5547/01956574.38.2.ddim
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Abstract:
Electricity industries are experiencing upward cost pressures in many parts of the world. This paper focuses on productivity trends in electricity distribution. We apply two methodologies for estimating productivity growth - an index based approach, and an econometric cost based approach - to data on 73 Ontario distributors for the period 2002 to 2012. The resulting productivity growth estimates are approximately -1% per year, suggesting a reversal of the positive estimates that have generally been reported in previous periods. We implement flexible semi-parametric specifications to assess the robustness of these conclusions and discuss the use of such statistical analyses for calibrating productivity and relative efficiency within a price-cap framework.



Yardstick Regulation of Electricity Distribution – Disentangling Short-run and Long-run Inefficiencies

Subal C. Kumbhakar and Gudbrand Lien

Year: 2017
Volume: Volume 38
Number: Number 5
DOI: https://doi.org/10.5547/01956574.38.5.skum
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Abstract:
In this paper we estimate the short-run, long-run and overall efficiency of Norwegian electricity distribution companies for the period 2000-2013 controlling for both noise and company effects. Short-run inefficiency is the part of inefficiency that is allowed to adjust freely over time for each company, but long-run (persistent) inefficiency remains constant over time, although it is allowed to vary across companies. For robustness check we also consider two additional models in which either company effects are not controlled or these are treated as inefficiency. The production technology is represented by a translog input distance function in all three models. We find that technical change and returns to scale are quite robust across the models. However, the efficiency scores across the three models we consider are not correlated strongly. We conclude that the regulators and practitioners should take extra caution in using the proper model in practice, especially when the efficiency measures are used to reward/punish companies through incentives for better performance.



A Spatial Stochastic Frontier Model with Omitted Variables: Electricity Distribution in Norway

Luis Orea, Inmaculada C. Álvarez, and Tooraj Jamasb

Year: 2018
Volume: Volume 39
Number: Number 3
DOI: 10.5547/01956574.39.3.lore
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Abstract:
An important methodological issue in efficiency analysis for incentive regulation of utilities is how to account for the effect of unobserved cost drivers such as environmental factors. We combine a spatial econometric approach with stochastic frontier analysis to control for unobserved environmental conditions when measuring efficiency of electricity distribution utilities. Our empirical strategy relies on the geographic location of firms as a source of information that has previously not been explored in the literature. The underlying idea is to utilise data from neighbouring firms that can be spatially correlated as proxies for unobserved cost drivers. We illustrate this approach using a dataset of Norwegian distribution utilities for the 2004-2011 period. We show that the lack of information on weather and geographic conditions can be compensated with data from surrounding firms. The methodology can be used in efficiency analysis and regulation of other utilities sectors where unobservable cost drivers are important, e.g. gas, water, agriculture, fishing.



Cost Efficiency Analysis of Electricity Distribution

Kamil Makiela and Jacek Osiewalski

Year: 2018
Volume: Volume 39
Number: Number 4
DOI: 10.5547/01956574.39.4.kmak
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Abstract:
This paper discusses a Bayesian approach to analyzing cost efficiency of Distribution System Operators when model specification and variable selection are difficult to determine. Bayesian model selection and inference pooling techniques are adopted in a stochastic frontier analysis to mitigate the problem of model uncertainty. Adequacy of a given specification is judged by its posterior probability, which makes the benchmarking process not only more transparent but also much more objective. The proposed methodology is applied to one of Polish Distribution System Operators. We find that variable selection plays an important role and models, which are the best at describing the data, are rather parsimonious. They rely on just a few variables determining the observed cost. However, these models also show relatively high average efficiency scores among analyzed objects.



Impact of High-Powered Incentive Regulations on Efficiency and Productivity Growth of Norwegian Electricity Utilities

Livingstone Senyonga and Olvar Bergland

Year: 2018
Volume: Volume 39
Number: Number 5
DOI: 10.5547/01956574.39.5.lsen
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Abstract:
This study examines the hypothesis that changes to high-powered incentive regulations have a positive efficiency and productivity growth effects in a regulated electricity distribution industry. We estimate an input distance function using the stochastic frontier analysis method to compute technical efficiency scores for 121 Norwegian utilities over the period 2004-2012. We explore sources of productivity growth by parametrically decomposing the Malmquist productivity index into efficiency change, technical change, and scale change. Unlike previous studies, we examine the difference in performance across two regulatory regimes: yardstick competition (2007-2012) and RPI-X incentive regulation (2004-2006). Results show significant efficiency and productivity growth improvements with embodied technical change as the main driver.Keywords: Yardstick competition, Productivity growth, Efficiency, Input distance function, Stochastic frontier analysis, Electricity distribution, True fixed effects model





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