Efficiency of Electricity Distribution

  • Maria Kopsakangas-Savolainen
  • Rauli Svento
Chapter
First Online:
Part of the Green Energy and Technology book series (GREEN)

Abstract

In this chapter we show that, because of utility heterogeneities efficiency measurement is a demanding task. Electricity distribution is a natural monopoly industry and consequently there is a need for regulation. Efficiency measurement of distribution utilities is essential to achieve accurate information of ingredients for the efficient regulation. Unless heterogeneities are explicitly modeled inaccurate information can be produced for the regulators to use. We present Data envelopment analysis (DEA) and Stochastic frontier analysis (SFA) models, which are the basic models of frontier efficiency analysis. We show by using consistency measurement techniques how these models produce inconsistent results. We also show by testing traditional Cobb–Douglas and flexible form Translog frontier specifications that the frontier functional form specification is not crucial in identifying the inefficiencies once observed heterogeneity is included into the model.

Keywords

Data Envelopment Analysis Efficiency Score Data Envelopment Analysis Model Stochastic Frontier Analysis Electricity Distribution 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
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Copyright information

© Springer-Verlag London 2012

Authors and Affiliations

  • Maria Kopsakangas-Savolainen
    • 1
  • Rauli Svento
    • 2
  1. 1.Finnish Environment Institute and Thule Institute, University of OuluMartinniemiFinland
  2. 2.Department of EconomicsMartti Ahtisaari Institute of Global Business and Economics, University of OuluOuluFinland

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