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The Determinants of the Cost Efficiency of Electric Generating Plants: A Stochastic Frontier Approach

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  • L. Dean Hiebert

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    (Illinois State University, Department of Economics)

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    Abstract

    This article provides a detailed analysis of generation plant operating cost efficiency over the period 1988–1997. I estimate a stochastic frontier cost function together with a model of plant inefficiencies to measure the operating efficiencies of individual plants and identify factors that are associated with variations in plant efficiencies. I find evidence that plant efficiencies are associated with capacity utilization of the plant, the number of plants under utility management, and ownership form. I also find that regulatory restructuring activity in certain states is associated with improvements in plant operating performance.

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    Bibliographic Info

    Article provided by Southern Economic Association in its journal Southern Economic Journal.

    Volume (Year): 68 (2002)
    Issue (Month): 4 (April)
    Pages: 935-946

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    Handle: RePEc:sej:ancoec:v:68:4:y:2002:p:935-946

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    Web page: http://www.southerneconomic.org/
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    Cited by:
    1. Chang, Dong-Shang & Chen, Yi-Tui & Chen, Wen-Den, 2009. "The exogenous factors affecting the cost efficiency of power generation," Energy Policy, Elsevier, Elsevier, vol. 37(12), pages 5540-5545, December.
    2. repec:ise:isegwp:wp162008 is not listed on IDEAS
    3. Assaf, A. George & Barros, Carlos Pestana & Managi, Shunsuke, 2011. "Cost efficiency of Japanese steam power generation companies: A Bayesian comparison of random and fixed frontier models," Applied Energy, Elsevier, Elsevier, vol. 88(4), pages 1441-1446, April.
    4. Margarita Genius & Spyro Stefanou & Vangelis Tzouvelekas, 2009. "Productivity Growth and Efficiency under Leontief Technology: An Application to US Steam-Electric Power Generation Utilities," Working Papers, University of Crete, Department of Economics 0913, University of Crete, Department of Economics.
    5. Supawat Rungsuriyawiboon, 2004. "A Dynamic Approach to Estimate the Efficiency of U.S. Electric Utilities," Econometric Society 2004 Australasian Meetings, Econometric Society 91, Econometric Society.
    6. Barros, Carlos P. & Peypoch, Nicolas, 2007. "The determinants of cost efficiency of hydroelectric generating plants: A random frontier approach," Energy Policy, Elsevier, Elsevier, vol. 35(9), pages 4463-4470, September.
    7. See, Kok Fong & Coelli, Tim, 2014. "Total factor productivity analysis of a single vertically integrated electricity utility in Malaysia using a Törnqvist index method," Utilities Policy, Elsevier, Elsevier, vol. 28(C), pages 62-72.
    8. Du, Limin & He, Yanan & Yan, Jianye, 2013. "The effects of electricity reforms on productivity and efficiency of China's fossil-fired power plants: An empirical analysis," Energy Economics, Elsevier, Elsevier, vol. 40(C), pages 804-812.
    9. See, Kok Fong & Coelli, Tim, 2012. "An analysis of factors that influence the technical efficiency of Malaysian thermal power plants," Energy Economics, Elsevier, Elsevier, vol. 34(3), pages 677-685.
    10. Supawat Rungsuriyawiboon & Spiro E. Stefanou, 2003. "Dynamic Efficiency Estimation: An Application to US Electric Utilities," CEPA Working Papers Series WP052003, School of Economics, University of Queensland, Australia.
    11. Fu, Xiaolan & Yang, Qing Gong, 2009. "Exploring the cross-country gap in patenting: A Stochastic Frontier Approach," Research Policy, Elsevier, Elsevier, vol. 38(7), pages 1203-1213, September.
    12. Barros, Carlos Pestana, 2008. "Efficiency analysis of hydroelectric generating plants: A case study for Portugal," Energy Economics, Elsevier, Elsevier, vol. 30(1), pages 59-75, January.
    13. Kabir Malik & Maureen Cropper & Alexander Limonov & Anoop Singh, 2011. "Estimating the Impact of Restructuring on Electricity Generation Efficiency: The Case of the Indian Thermal Power Sector," NBER Working Papers 17383, National Bureau of Economic Research, Inc.
    14. Genius, Margarita & Stefanou, Spiro E. & Tzouvelekas, Vangelis, 2012. "Measuring productivity growth under factor non-substitution: An application to US steam-electric power generation utilities," European Journal of Operational Research, Elsevier, Elsevier, vol. 220(3), pages 844-852.
    15. Zhao, Xiaoli & Ma, Chunbo, 2013. "Deregulation, vertical unbundling and the performance of China's large coal-fired power plants," Energy Economics, Elsevier, Elsevier, vol. 40(C), pages 474-483.
    16. Zhang, Ning & Zhou, P. & Choi, Yongrok, 2013. "Energy efficiency, CO2 emission performance and technology gaps in fossil fuel electricity generation in Korea: A meta-frontier non-radial directional distance functionanalysis," Energy Policy, Elsevier, Elsevier, vol. 56(C), pages 653-662.
    17. repec:ise:isegwp:wp112008 is not listed on IDEAS
    18. Barros, Carlos Pestana & Managi, Shunsuke, 2009. "Regulation, pollution and heterogeneity in Japanese steam power generation companies," Energy Policy, Elsevier, Elsevier, vol. 37(8), pages 3109-3114, August.

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