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Efficiency Analysis of German Electricity Distribution Utilities : Non-Parametric and Parametric Tests

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  • von Hirschhausen, Christian R.
  • Cullmann, Astrid

Abstract

This 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 Info

Paper 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.

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Date of creation: 2005
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Handle: RePEc:zbw:tuddps:0605

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Postal: 01062 Dresden
Phone: ++49 351 463 2196
Fax: ++49 351 463 7739
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Web page: http://www.tu-dresden.de/wiwi/
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Keywords: Efficiency analysis; econometric methods; electricity distribution; benchmarking; Germany;

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  1. Hjalmarsson, Lennart & Veiderpass, Ann, 1992. " Productivity in Swedish Electricity Retail Distribution," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(0), pages S193-205, Supplemen.
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  15. Laure Latruffe & Kelvin Balcombe & Sophia Davidova & Katarzyna Zawalinska, 2004. "Determinants of technical efficiency of crop and livestock farms in Poland," Applied Economics, Taylor & Francis Journals, vol. 36(12), pages 1255-1263.
  16. Alejandra Mizala & Pilar Romaguera & Dario Farren, 2002. "The technical efficiency of schools in Chile," Applied Economics, Taylor & Francis Journals, vol. 34(12), pages 1533-1552.
  17. Jamasb, T. & Pollitt, M., 2001. "International Benchmarking and Yardstick Regulation: An Application to European Electricity Utilities," Cambridge Working Papers in Economics 0115, Faculty of Economics, University of Cambridge.
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Citations

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Cited by:
  1. Geys, Benny & Moesen, Wim, 2008. "Measuring local government technical (in)efficiency: An application and comparison of FDH, DEA and econometric approaches," Discussion Papers, Research Unit: Market Processes and Governance SP II 2008-21, Social Science Research Center Berlin (WZB).
  2. Astrid Cullmann & Christian von Hirschhausen, 2007. "From Transition to Competition: Dynamic Efficiency Analysis of Polish Electricity Distribution Companies," Discussion Papers of DIW Berlin 716, DIW Berlin, German Institute for Economic Research.
  3. Peter Bönisch & Peter Haug & A. Illy & L. Schreier, 2011. "Municipality Size and Efficiency of Local Public Services: Does Size Matter?," IWH Discussion Papers 18, Halle Institute for Economic Research.
  4. Taniguchi, Mariko & Kaneko, Shinji, 2009. "Operational performance of the Bangladesh rural electrification program and its determinants with a focus on political interference," Energy Policy, Elsevier, vol. 37(6), pages 2433-2439, June.
  5. Lenka Šastná & Martin Gregor, 2011. "Local Government Efficiency: Evidence from the Czech Municipalities," Working Papers IES 2011/14, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised May 2011.
  6. Kuosmanen, Timo, 2012. "Stochastic semi-nonparametric frontier estimation of electricity distribution networks: Application of the StoNED method in the Finnish regulatory model," Energy Economics, Elsevier, vol. 34(6), pages 2189-2199.
  7. Tooraj Jamasb & Magnus Söderberg, 2010. "The Effects of Average Norm Model Regulation: The Case of Electricity Distribution in Sweden," Review of Industrial Organization, Springer, vol. 36(3), pages 249-269, May.
  8. Astrid Cullmann & Hélène Crespo & Marie-Anne Plagnet, 2008. "International Benchmarking in Electricity Distribution: A Comparison of French and German Utilities," Discussion Papers of DIW Berlin 830, DIW Berlin, German Institute for Economic Research.
  9. Jamasb, T. & Söderberg, M., 2009. "Yardstick and Ex-post Regulation by Norm Model: Empirical Equivalence, Pricing Effect, and Performance in Sweeden," Cambridge Working Papers in Economics 0908, Faculty of Economics, University of Cambridge.
  10. Jaunky, Vishal Chandr, 2013. "Divergence in technical efficiency of electric utilities: Evidence from the SAPP," Energy Policy, Elsevier, vol. 62(C), pages 419-430.

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