DEA and Dynamic Yardstick Competition in Scandinavian Electricity Distribution

Agrell, Per Joakim; Bogetoft, Peter; Tind, Jørgen

doi:10.1007/s11123-005-1327-6

Cited by 109 publications

(55 citation statements)

References 25 publications

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“…As noted by Agrell et al (2005), the Norwegian regulation is considered to be one of the most advanced schemes. The annual revenue caps are determined based on the comparison of actual cost with a cost norm.…”

Section: Introductionmentioning

confidence: 99%

Productivity change and innovation in Norwegian electricity distribution companies

Miguéis

Camanho

Bjørndal

et al. 2012

Journal of the Operational Research Society

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Regulators of electricity distribution networks have typically applied Data Envelopment Analysis (DEA) to cross-section data for benchmarking purposes. However, the use of panel data to analyse the impact of regulatory policies on productivity change over time is less frequent. The main purpose of this paper is to construct a Malmquist productivity index to examine the recent productivity change experienced by Norwegian distribution companies between 2004 and 2007. The Malmquist index is decomposed in order to explore the sources of productivity change, and to identify the innovator companies that pushed the frontier forward each year. The input and output variables considered are those used by the Norwegian regulator. In order to reflect appropriately the exogenous conditions where the companies operate, the efficiency model used in this paper incorporates geography variables as outputs of the DEA model. Unlike the model used by the regulator, we included virtual weight restrictions in the DEA formulation to correct the biases in the DEA results that may be associated to a judicious choice of weights by some of the companies.

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Section: Introductionmentioning

confidence: 99%

Productivity change and innovation in Norwegian electricity distribution companies

Miguéis

Camanho

Bjørndal

et al. 2012

Journal of the Operational Research Society

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“…Since we assume to have a common underlying cost function of the form x(Y ) = y 2 , truth-telling and no inefficiency in production (i.e. i = 1 ∀ i) for all bidders, would imply that the principal picks a quality-price-bid where the quality level is between 3 and 8 (recall that y ∈ U [1,10]). Obviously more extreme quality levels can be selected when we allow for individual inefficiencies in production.…”

Section: Discussion Of the Simulation Assumptionsmentioning

confidence: 99%

“…The applied yardstick principle is known from the regulation of natural monopolies (see e.g. [1]) and [8] has previously suggested yardstick competition as an integrated part of multi-attribute auctions. However, as [8] point out, straightforward use of yardstick competition introduces sophisticated strategic manipulation.…”

Section: Introductionmentioning

confidence: 99%

A Sealed-Bid Two-Attribute Yardstick Auction Without Prior Scoring

2015

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We analyze a two-attribute single item procurement auction that uses yardstick competition to settle prices. The auction simplifies the procurement process by reducing the principal's articulation of preferences to simply choosing the most preferred offer as if it was a market with posted prices. This is done simply by replacing the submitted sealed bids by yardstick bids, computed by a linear weighting of the other participants' bids.We show that there is only one type of Nash equilibria where some agents may win the auction by submitting a zero price-bid. Using a simulation study we demonstrate that following this type of equilibrium behavior often leads to winner's curse. The simulations show that in auctions with more than 12 participants the chance of facing winner's curse is around 95%.Truthful reporting, on the other hand, does not constitute a Nash equilibrium but it is ex post individually rational. Using a simulation study we demonstrate that truthful bidding may indeed represent some kind of

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“…Thakur et al (2006), for example, reporting on a study of the Indian electricity distribution sector, found evidence that part of its inefficiency is due to the large size of the distribution companies, suggesting that restructuring and downsizing the operations may help utilities to improve their performance. Arocena (2008) Other countries where DEA has been used to evaluate the efficiency of distribution utilities include Norway (Førsund and Kittelsen, 1998;Agrell et al, 2005), Philippines (Pacudan and de Guzman, 2002), Finland (Korhonen and Syrjänen, 2003), Chile (Sanhueza et al, 2004), Colombia (Pombo and Taborda, 2006), Iran (Azadeh et al, 2009a,b), Ukraine (Berg et al, 2005) and Portugal (Weyman-Jones et al, 2004, 2008. It is important to emphasise, however, that whilst some studies exist exploring the use of DEA for the evaluation of electricity distribution utilities in Portugal, they are very rare.…”

Section: Single-country Studiesmentioning

confidence: 99%

Formative evaluation of electricity distribution utilities using data envelopment analysis

Santos

Amado

Rosado

2011

Journal of the Operational Research Society

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-The use of Data Envelopment Analysis (DEA) in the electricity distribution sector has been prolific in the number of papers published in research journals. However, while numerous studies have been documented, they have mostly been summative. Their aim has been predominantly descriptive and classificatory. This paper argues that evaluations of a formative nature are more effective than summative studies in promoting a better understanding of the structures and processes of electricity distribution utilities and, consequently, are more appropriate to contribute to performance improvement. To illustrate the use of DEA for formative evaluation, and highlight some of the difficulties of using DEA in practice, this paper compares the cost-efficiency of the Portuguese electricity distribution companies from 2002 to 2006. A dynamic analysis using Malmquist Indices is also conducted in order to evaluate the changes in productivity over this period. Our analysis shows that the application of DEA for formative purposes meets some difficulties. In particular it shows that whilst the modelling of productivity/efficiency scores using DEA is relatively straightforward, it is comparatively more difficult to develop models that are economically valid and that produce results with face validity. Based on the insights derived from this analysis the paper provides some recommendations regarding the successful application of DEA for performance improvement.

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DEA and Dynamic Yardstick Competition in Scandinavian Electricity Distribution

Cited by 109 publications

References 25 publications

Productivity change and innovation in Norwegian electricity distribution companies

Productivity change and innovation in Norwegian electricity distribution companies

A Sealed-Bid Two-Attribute Yardstick Auction Without Prior Scoring

Formative evaluation of electricity distribution utilities using data envelopment analysis

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