Efficiency Analysis of German Electricity Distribution Utilities : Non-Parametric and Parametric Tests
AbstractThis paper applies parametric and non-parametric and parametric tests to assess the efficiency of electricity distribution companies in Germany. We address traditional issues in electricity sector benchmarking, such as the role of scale effects and optimal utility size, as well as new evidence specific to the situation in Germany This paper applies parametric and non-parametric and parametric tests to asses the efficiency of electricity distribution companies in Germany. We use labor, capital, and peak load capacity as inputs, and units sold and the number of customers as output. The data covers 307 (out of 553) German electricity distribution utilities. We apply a data envelopment analysis (DEA) with constant returns to scale (CRS) as the main productivity analysis technique, whereas stochastic frontier analysis (SFA) with distance function is our verification method. The results suggest that returns to scale play a minor role; only very small utilities have a significant cost advantage. Low customer density is found to affect the efficiency score significantly in the lower third of all observations. Surprisingly, East German utilities feature a higher average efficiency than their West German counterparts. The correlation tests imply a high coherence of the results. --
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Bibliographic InfoPaper provided by Dresden University of Technology, Faculty of Business and Economics, Department of Economics in its series Dresden Discussion Paper Series in Economics with number 06/05.
Date of creation: 2005
Date of revision:
Efficiency analysis; econometric methods; electricity distribution; benchmarking; Germany;
Other versions of this item:
- Christian von Hirschhausen & Astrid Cullmann & Andreas Kappeler, 2006. "Efficiency analysis of German electricity distribution utilities - non-parametric and parametric tests," Applied Economics, Taylor & Francis Journals, vol. 38(21), pages 2553-2566.
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
- L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
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