Does Weather Explain the Cost and Quality? An Analysis of UK Electricity Distribution Companies
AbstractIn recent years, a number of empirical studies and energy regulators have applied benchmarking techniques to measure the efficiency and performance of network utilities. An important issue has been the extent to which such results are influenced by contextual factors. Among these, weather factors are frequently discussed as being important. We use Factor Analysis and two-stage Data Envelopment Analysis techniques to examine the effect of a set of important weather factors (gale, hail, temperatures, rainfall and thunder) on the performance of electricity distribution networks in the UK. The results indicate that such factors often do not have a significant economic and statistical effect on the overall performance of the utilities. The weather parameters in some models are significant in terms of economic efficiency. After excluding network length from the outputs, the weather effect becomes less significant in the model. Hence, the network length is counteracting the weather effect. The results echo our previous findings of the importance of extending the basic model to include other inputs such as Totex, CML and network energy losses in regulatory benchmarking.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0858.
Date of creation: Dec 2008
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Data Envelopment Analysis; electricity; weather; quality of service.;
Find related papers by JEL classification:
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-12-14 (All new papers)
- NEP-EFF-2008-12-14 (Efficiency & Productivity)
- NEP-ENE-2008-12-14 (Energy Economics)
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