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Economies of Scale and Scope in Multi-Utilities

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  • Mehdi Farsi
  • Aurelio Fetz
  • Massimo Filippini

Abstract

This paper explores the economies of scale and scope in the electricity, gas and water utilities. These issues have a crucial importance in the actual policy debates about unbundling the integrated utilities into separate entities, a policy which has often been supported by the ongoing reforms in the deregulation of network industries. This paper argues that the potential improvements in efficiency through unbundling should be assessed against the loss of scope economies. Several econometric specifications including a random-coefficient model are used to estimate a cost function for a sample of utilities distributing electricity, gas and/or water to the Swiss population. The estimates of scale and scope economies are compared across different models and the effect of heterogeneity among companies are explored. While indicating considerable scope and scale economies overall, the results suggest a significant variation in scope economies across companies due to unobserved heterogeneity.

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Bibliographic Info

Article provided by International Association for Energy Economics in its journal The Energy Journal.

Volume (Year): Volume 29 (2008)
Issue (Month): Number 4 ()
Pages: 123-144

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Handle: RePEc:aen:journl:2008v29-04-a06

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Cited by:
  1. Massimo Filippini & Martin Koller & Urs Trinkner, 2010. "Do opening hours and unobserved heterogeneity affect economies of scale and scope in postal outlets?," Quaderni della facoltà di Scienze economiche dell'Università di Lugano 1007, USI Università della Svizzera italiana.
  2. Ferro, Gustavo & Lentini, Emilio & Mercadier, Augusto & Romero, Carlos A., 2010. "Retornos a escala en agua y saneamiento: estimaciones para América Latina
    [Returns to scale in water and sanitation: estimates for Latin Amercia]
    ," MPRA Paper 20324, University Library of Munich, Germany, revised Jan 2010.
  3. Massimo Filippini & Martin Koller, 2012. "Cost Efficiency Measurement in Postal Delivery Networks," Quaderni della facoltà di Scienze economiche dell'Università di Lugano 1206, USI Università della Svizzera italiana.
  4. Vassiliev, M. & Filatov, A., 2011. "The Models of Strategic Interaction between Network and Generating Companies at Electricity Transmission Market," Journal of the New Economic Association, New Economic Association, issue 10, pages 54-73.
  5. Milan Vondráček & Tomáš Skuček, 2010. "Unbundling costs in the energy sector: competitive environment for the customers´ benefits or too costly experiment?," Ekonomika a Management, University of Economics, Prague, vol. 2010(3).
  6. Farsi, Mehdi & Filippini, Massimo, 2009. "An analysis of cost efficiency in Swiss multi-utilities," Energy Economics, Elsevier, vol. 31(2), pages 306-315, March.
  7. Walter, Matthias & Cullmann, Astrid & von Hirschhausen, Christian & Wand, Robert & Zschille, Michael, 2009. "Quo vadis efficiency analysis of water distribution? A comparative literature review," Utilities Policy, Elsevier, vol. 17(3-4), pages 225-232, September.

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