The Estimation of an Average Cost Frontier to Calculate Benchmark Tariffs for Electricity Distribution
AbstractIn this paper we have examined the scale and cost inefficiency of a sample of Swiss electricity distribution utilities. To do so, we have considered estimation of a stochastic frontier average cost model using the approach suggested by Schmidt and Sickles (1984) for panel data. A translog cost function was estimated using panel data for a sample of 30 municipal utilities over the period 1992-1996. The results indicate the existence of economies of output and customer density and economies of scale. Moreover, the findings on cost inefficiency show that a majority of the distribution utilities is not producing at the minimum level of the cost and that a possible application of the frontier methodology employed in this paper relates to the regulation and benchmarking of the delivery rates.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Socioeconomic Institute - University of Zurich in its series SOI - Working Papers with number 9803.
Length: 11 pages
Date of creation: Sep 1998
Date of revision:
electricity; cost frontier; benchmarking; Switzerland;
Find related papers by JEL classification:
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Schmidt, Peter & Sickles, Robin C, 1984. "Production Frontiers and Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(4), pages 367-74, October.
- Hsiao,Cheng, 2003.
"Analysis of Panel Data,"
Cambridge University Press, number 9780521522717, December.
- SIMAR, Léopold, .
"Estimating efficiencies from frontier models with panel data: a comparison of parametric, non-parametric and semi-parametric metods with bootstrapping,"
CORE Discussion Papers RP
-995, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Simar, L., 1991. "Estimating efficiencies from frontier models with panel data: a comparison of parametric, non-parametric and semi-parametric methods with boot strapping," CORE Discussion Papers 1991026, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Randy A. Nelson. & Walter J. Primeaux, Jr., 1988. "The Effects of Competition on Transmission and Distribution Costs in the Municipal Electric Industry," Land Economics, University of Wisconsin Press, vol. 64(4), pages 338-346.
- Filippini, Massimo & Maggi, Rico, 1993. "Efficiency and Regulation in the Case of the Swiss Private Railways," Journal of Regulatory Economics, Springer, vol. 5(2), pages 199-216, June.
- Battese, George E., 1992. "Frontier production functions and technical efficiency: a survey of empirical applications in agricultural economics," Agricultural Economics, Blackwell, vol. 7(3-4), pages 185-208, October.
- Paul W. Bauer, 1988. "Decomposing TFP growth in the presence of cost inefficiency, nonconstant returns to scale, and technological progress," Working Paper 8813, Federal Reserve Bank of Cleveland.
- Burns, Philip & Weyman-Jones, Thomas G, 1996. "Cost Functions and Cost Efficiency in Electricity Distribution: A Stochastic Frontier Approach," Bulletin of Economic Research, Wiley Blackwell, vol. 48(1), pages 41-64, January.
- Jamasb, Tooraj & Nillesen, Paul & Pollitt, Michael, 2004. "Strategic behaviour under regulatory benchmarking," Energy Economics, Elsevier, vol. 26(5), pages 825-843, September.
- Jamasb, T. & Nillesen, P. & Pollitt, M., 2003. "Strategic Behaviour under Regulation Benchmarking," Cambridge Working Papers in Economics 0312, Faculty of Economics, University of Cambridge.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marita Kieser).
If references are entirely missing, you can add them using this form.