scholarly journals Benchmarking of Electricity Distribution Licensees Operating in Sri Lanka

2016 ◽  
Vol 2016 ◽  
pp. 1-10 ◽  
Author(s):  
K. T. M. U. Hemapala ◽  
Lilantha Neelawala
Keyword(s):  
Sri Lanka ◽  
Relative Efficiency ◽  
Stochastic Frontier Analysis ◽  
Least Squares Method ◽  
Ordinary Least Squares ◽  
Electricity Sector ◽  
Regulatory Regime ◽  
Electricity Distribution ◽  
Factor X ◽  
Frontier Analysis

Electricity sector regulators are practicing benchmarking of distribution companies to regulate the allowed revenue. Mainly this is carried out based on the relative efficiency scores produced by frontier benchmarking techniques. Some of these techniques, for example, Corrected Ordinary Least Squares method and Stochastic Frontier Analysis, use econometric approach to estimate efficiency scores, while a method like Data Envelopment Analysis uses linear programming. Those relative efficiency scores are later used to calculate the efficiency factor (X-factor) which is a component of the revenue control formula. In electricity distribution industry in Sri Lanka, the allowed revenue for a particular distribution licensee is calculated according to the allowed revenue control formula as specified in the tariff methodology of Public Utilities Commission of Sri Lanka. This control formula contains the X-factor as well, but its effect has not been considered yet; it just kept it zero, since there were no relative benchmarking studies carried out by the utility regulators to decide the actual value of X-factor. This paper focuses on producing a suitable benchmarking methodology by studying prominent benchmarking techniques used in international regulatory regime and by analyzing the applicability of them to Sri Lankan context, where only five Distribution Licensees are operating at present.

scholarly journals Performance Effects of Network Structure and Ownership: The Norwegian Electricity Distribution Sector

Energies ◽  
2021 ◽  
Vol 14 (21) ◽  
pp. 7160
Author(s):  
Wenche Tobiasson ◽  
Manuel Llorca ◽  
Tooraj Jamasb
Keyword(s):  
Vertical Integration ◽  
Stochastic Frontier Analysis ◽  
Low Voltage ◽  
Distribution Networks ◽  
Electricity Sector ◽  
Economies Of Scope ◽  
Economic Regulation ◽  
Electricity Distribution ◽  
Frontier Analysis ◽  
Electricity Networks

Transmission and distribution networks are capital intensive segments of the electricity sector and are generally considered natural monopolies. Due to their non-competitive nature, these are subject to independent regulation to prevent the abuse of monopolistic power and to induce competitive behaviour. Effective economic regulation of the electricity networks has become a key target in most developed economies after the 1980s. In Norway, incentive regulation and efficiency benchmarking were introduced in 1997. In Norway, the electricity grid is divided into three levels, namely, central, regional and distribution networks. In this paper, we study two overlooked aspects when analysing the performance of electricity networks: vertical integration and ownership structure. We use a stochastic frontier analysis approach to analyse the performance of Norwegian electricity distribution utilities for the period 2007–2014. We observe that vertical integration between distribution and regional transmission implies higher cost inefficiencies. This indicates that the efficiency gains due to separate management of the networks exceed the economies of coordination from vertical economies of scope. In addition, we find that council ownership entails higher efficiencies. This could be explained by the state having an interest in high-voltage electricity networks, rather than low-voltage ones, and the decentralised model from which the now centralised system was once developed.

Performance analysis of electricity distribution sector post the implementation of electricity act 2003: empirical evidence from India

2020 ◽  
Vol 17 (5) ◽  
pp. 669-696
Author(s):  
Pavan Khetrapal
Keyword(s):  
Stochastic Frontier Analysis ◽  
Corporate Strategy ◽  
Unobserved Heterogeneity ◽  
Stochastic Frontier ◽  
Operational Efficiency ◽  
Electricity Distribution ◽  
Content Type ◽  
Frontier Analysis ◽  
Explanatory Variables ◽  
Utility Managers

PurposeThe objective of the present study is to evaluate and analyse the performance of Indian electricity distribution utilities post the implementation of landmark Electricity Act 2003.Design/methodology/approachStochastic frontier analysis (SFA) that incorporates exogenous influences on operational efficiency is adopted in the present study. Specifically, a stochastic frontier production function model with a technical inefficiency effects model (Battese and Coelli, 1995) is chosen as a preferred model. In this model, the function that explains the inefficiency scores is estimated in a single stage with the production technology. This avoids the problem of inconsistency which is possible in the two-stage approach.FindingsThe sample involved 52 Indian electricity distribution utilities for seven-year period from 2006 to 2013. Major findings of SFA show that Indian electricity distribution utilities post the implementation of Electricity Act (2003) had, on average, experienced efficiency improvement during the observed period. The overall mean technical effciency score is estimated as 78.5% which indicates that there exist wide scope for effciency improvement in the sector. Further, the empirical findings also indicate that publicly owned distribution utilities obtain average technical efficiencies of 71.3%, which is lower than privately owned distribution utilities, which achieve average technical efficiencies of 85.7%.Research limitations/implicationsPower supply quality indicators such as SAIFI, SAIDI, CAIFI, etc. and unobserved heterogeneity also influence the efficiency analysis of electricity distribution utilities. Hence, these parameters as explanatory variables can be incorporated in the future work.Practical implicationsThe results obtained from this empirical study would likely be helpful for utility managers and policymakers to know how well they are performing, and how a better corporate strategy a particular utility can formulate to improve its operational efficiency and also its position in the marketplace.Originality/valueThis paper is amongst the first significant attempts that implement SFA approach to the panel dataset over a longer period of time – 2006 to 2013, so, as to evaluate and analyse the operational efficiency of Indian electricity distribution utilities in a single framework after the enactment of Electricity Act (2003). Unlike previous studies, this study investigates the degree to which various exogenous (or environmental) factors influence efficiency levels in these utilities.

scholarly journals The Cost Efficiency of the Brazilian Electricity Distribution Utilities: A Comparison of Bayesian SFA and DEA Models

2010 ◽  
Vol 2010 ◽  
pp. 1-20 ◽  
Author(s):  
Marcus Vinicius Pereira de Souza ◽  
Madiagne Diallo ◽  
Reinaldo Castro Souza ◽  
Tara Keshar Nanda Baidya
Keyword(s):  
Cost Efficiency ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Fundamental Aspect ◽  
Data Envelopment ◽  
Electricity Distribution ◽  
Frontier Analysis ◽  
Dea Models ◽  
The Cost ◽  
Analysis Models

The purpose of this study is to evaluate the efficiency indices for 60 Brazilian electricity distribution utilities. These scores are obtained by DEA (Data Envelopment Analysis) and Bayesian Stochastic Frontier Analysis models, two techniques that can reduce the information asymmetry and improve the regulator's skill to compare the performance of the utilities, a fundamental aspect in incentive regulation schemes. In addition, this paper also addresses the problem of identifying outliers and influential observations in deterministic nonparametric DEA models.

scholarly journals Sensitivity of technical efficiency estimates to estimation methods: an empirical comparison of parametric and non-parametric approaches

2014 ◽  
Vol 8 (1) ◽  
pp. 67-72 ◽  
Author(s):  
Henry de-Graft Acquah
Keyword(s):  
Technical Efficiency ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Ordinary Least Squares ◽  
Estimation Methods ◽  
Strong Positive Correlation ◽  
Production Frontier ◽  
Frontier Analysis ◽  
Parametric Data ◽  
Non Parametric

This paper highlights the sensitivity of technical efficiency estimates to estimation approaches using empirical data. Firm specific technical efficiency and mean technical efficiency are estimated using the non parametric Data Envelope Analysis (DEA) and the parametric Corrected Ordinary Least Squares (COLS) and Stochastic Frontier Analysis (SFA) approaches. Mean technical efficiency is found to be sensitive to the choice of estimation technique. Analysis of variance and Tukey’s test suggests significant differences in means between efficiency scores from different methods. In general the DEA and SFA frontiers resulted in higher mean technical efficiency estimates than the COLS production frontier. The efficiency estimates of the DEA have the smallest variability when compared with the SFA and COLS. There exists a strong positive correlation between the efficiency estimates based on the three methods.  

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