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Social Cost Efficient Service Quality: Integrating Customer Valuation in Incentive Regulation—Evidence from the Case of Norway

  • Christian GrowitschEmail author
  • Tooraj Jamasb
  • Christine Müller
  • Matthias Wissner
Chapter
Part of the International Series in Operations Research & Management Science book series (ISOR, volume 238)

Abstract

In order to overcome the perverse incentives of excessive maintenance reductions and insufficient network investments arising with incentive regulation of electricity distribution companies, regulators throughout Europe have started regulating service quality. In this paper, we explore the impact of incorporating customers’ willingness-to-pay for service quality in benchmarking models on cost efficiency of distribution networks. Therefore, we examine the case of Norway, which features this approach to service quality regulation. We use the data envelopment analysis technique to analyse the effectiveness of such regulatory instruments. Moreover, we discuss the extent to which this indirect regulatory instrument motivates a socially desired service quality level. The results indicate that internalising external or social cost of service quality does not seem to have played an important role in improving cost efficiency in Norwegian distribution utilities.

Keywords

Electricity distribution Service quality Willingness-to-pay Data envelopment analysis 

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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  • Christian Growitsch
    • 1
    Email author
  • Tooraj Jamasb
    • 2
  • Christine Müller
    • 3
  • Matthias Wissner
    • 3
  1. 1.University of HamburgHamburgGermany
  2. 2.Durham University Business SchoolDurhamUK
  3. 3.Department Energy Markets and Energy RegulationWIKBad HonnefGermany

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