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Econometric Benchmarking of Cost Performance: The Case of U.S. Power Distributors

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  • Mark Newton Lowry
  • Lullit Getachew
  • David Hovde

Abstract

Benchmarking of cost efficiency has growing use in energy utility regulation. The state of the art has been limited in many countries by the small size of available national data sets and poor data on capital cost. Data available in the United States place fewer constraints on benchmarking methods. This paper develops an econometric cost benchmarking model for power distribution that is based on U.S. data. The model can address total cost and its major components. Numerous cost drivers are identified. Statistical tests of efficiency hypotheses are performed. The cost performances of utilities are compared to the industry norm. The suitability of the alternative frontier standard in regulatory applications is discussed.

Suggested Citation

  • Mark Newton Lowry & Lullit Getachew & David Hovde, 2005. "Econometric Benchmarking of Cost Performance: The Case of U.S. Power Distributors," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 75-92.
  • Handle: RePEc:aen:journl:2005v26-03-a04
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    Cited by:

    1. Maria Corton, 2011. "Sector fragmentation and aggregation of service provision in the water industry," Journal of Productivity Analysis, Springer, vol. 35(2), pages 159-169, April.
    2. Hess, Borge & Cullmann, Astrid, 2007. "Efficiency analysis of East and West German electricity distribution companies - Do the "Ossis" really beat the "Wessis"?," Utilities Policy, Elsevier, vol. 15(3), pages 206-214, September.
    3. Nepal, Rabindra & Jamasb, Tooraj, 2015. "Incentive regulation and utility benchmarking for electricity network security," Economic Analysis and Policy, Elsevier, vol. 48(C), pages 117-127.
    4. Lowry, Mark Newton & Getachew, Lullit, 2009. "Statistical benchmarking in utility regulation: Role, standards and methods," Energy Policy, Elsevier, vol. 37(4), pages 1323-1330, April.

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    JEL classification:

    • F0 - International Economics - - General

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