Productivity change and innovation in Norwegian electricity distribution companies

Abstract

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.

Cost Efficiency Analysis Based on the DEA and StoNED Models: Case of Norwegian Electricity Distribution Companies

“…One advantage of this approach is that we can obtain information about the shape of the frontier, e.g., local returns to scale for the companies. Alternative approaches to incorporating environmental factors in DEA are discussed by [5] and [19].…”

“…The conditions, such as forest, snow and so on, depend on the geographic areas where the companies operate, and are very different, e.g., for urban and rural companies. Hence, many papers, e.g., [12], [19]- [20], pay attention to the operating conditions, which play a key role in the regulatory process. To make the regulation more effective, the operating conditions should be taken into account.…”

Evolução Da Proxy Qualidade Para Modelos De Eficiência Baseados Em Benchmarking:

“…Na próxima seção serão apresentados os resultados encontrados na revisão de literatura sobre a inserção de variáveis de qualidade em modelos de fronteira baseados em benchmarking. Incentive regulation, service quality, and standards in U.S. electricity distribution 14 Azadeh et al (2010) An integrated multivariate approach for performance assessment and optimization of electricity transmission systems 15 Jamasb et al (2012) Estimating the marginal cost of quality improvements: The case of the UK electricity distribution companies 16 Miguéis et al (2012) Productivity change and innovation in Norwegian electricity distribution companies 17 Coelli et al (2013) Estimating the cost of improving quality in electricity distribution: A parametric distance function approach 18 Cambini et al (2013) Output-based incentive regulation in electricity distribution: evidence from Italy 19 Xavier et al (2015) How Efficient are the Brazilian Electricity Distribution Companies?…”

Using Data Envelopment Analysis to support the design of process improvement interventions in electricity distribution

“…To our knowledge, there is no published study documenting such calculation. On the contrary, there are several published studies which calculate the MPI with weight restrictions, under the CRS assumption (see for example, Santos et al 2010;Miguéis et al 2011). In this respect, in order to keep an average product interpretation of the results, and considering that we will include weight restrictions in our model, we have decomposed the MPI scores by using the Färe et al (1994) decomposition method, despite its potential drawbacks as discussed by Lovell (2003).…”