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Does weather explain cost and quality performance? An analysis of UK electricity distribution companies

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  • Yu, William
  • Jamasb, Tooraj
  • Pollitt, Michael

Abstract

In recent years, a number of empirical studies and energy regulators have applied benchmarking techniques to measuring the efficiency and performance of network utilities. An important issue has been the extent to which the 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. The results echo our previous findings of the importance of extending the basic model to include other inputs such as total expenditure (Totex), customer minutes lost (CML) and network energy losses in regulatory benchmarking.

Suggested Citation

  • Yu, William & Jamasb, Tooraj & Pollitt, Michael, 2009. "Does weather explain cost and quality performance? An analysis of UK electricity distribution companies," Energy Policy, Elsevier, vol. 37(11), pages 4177-4188, November.
  • Handle: RePEc:eee:enepol:v:37:y:2009:i:11:p:4177-4188
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    References listed on IDEAS

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    1. Jamasb, Tooraj & Nillesen, Paul & Pollitt, Michael, 2004. "Strategic behaviour under regulatory benchmarking," Energy Economics, Elsevier, vol. 26(5), pages 825-843, September.
    2. Yu, W. & Jamasb, T. & Pollitt, M., 2007. "Incorporating the Price of Quality in Efficiency Analysis: the Case of Electricity Distribution Regulation in the UK," Cambridge Working Papers in Economics 0736, Faculty of Economics, University of Cambridge.
    3. Sailor, David J. & Muñoz, J.Ricardo, 1997. "Sensitivity of electricity and natural gas consumption to climate in the U.S.A.—Methodology and results for eight states," Energy, Elsevier, vol. 22(10), pages 987-998.
    4. Giannakis, Dimitrios & Jamasb, Tooraj & Pollitt, Michael, 2005. "Benchmarking and incentive regulation of quality of service: an application to the UK electricity distribution networks," Energy Policy, Elsevier, vol. 33(17), pages 2256-2271, November.
    5. Jamasb, Tooraj & Pollitt, Michael, 2007. "Incentive regulation of electricity distribution networks: Lessons of experience from Britain," Energy Policy, Elsevier, vol. 35(12), pages 6163-6187, December.
    6. P. Nillesen & M. Pollitt, 2010. "Using Regulatory Benchmarking Techniques to Set Company Performance Targets: The Case of Us Electricity," Competition and Regulation in Network Industries, Intersentia, vol. 11(1), pages 50-85, March.
    7. Yang, Hongliang & Pollitt, Michael, 2009. "Incorporating both undesirable outputs and uncontrollable variables into DEA: The performance of Chinese coal-fired power plants," European Journal of Operational Research, Elsevier, vol. 197(3), pages 1095-1105, September.
    8. Pardo, Angel & Meneu, Vicente & Valor, Enric, 2002. "Temperature and seasonality influences on Spanish electricity load," Energy Economics, Elsevier, vol. 24(1), pages 55-70, January.
    9. Jamasb, T. & Pollitt, M., 2000. "Benchmarking and regulation: international electricity experience," Utilities Policy, Elsevier, vol. 9(3), pages 107-130, September.
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    Citations

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    Cited by:

    1. Orea, Luis & Growitsch, Christian & Jamasb, Tooraj, 2012. "Using Supervised Environmental Composites in Production and Efficiency Analyses: An Application to Norwegian Electricity Networks," EWI Working Papers 2012-18, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    2. Jamasb, Tooraj & Orea, Luis & Pollitt, Michael, 2012. "Estimating the marginal cost of quality improvements: The case of the UK electricity distribution companies," Energy Economics, Elsevier, vol. 34(5), pages 1498-1506.
    3. Torriti, Jacopo, 2012. "Price-based demand side management: Assessing the impacts of time-of-use tariffs on residential electricity demand and peak shifting in Northern Italy," Energy, Elsevier, vol. 44(1), pages 576-583.
    4. Bai-Chen, Xie & Ying, Fan & Qian-Qian, Qu, 2012. "Does generation form influence environmental efficiency performance? An analysis of China’s power system," Applied Energy, Elsevier, pages 261-271.
    5. Growitsch, Christian & Jamasb, Tooraj & Wetzel, Heike, 2012. "Efficiency effects of observed and unobserved heterogeneity: Evidence from Norwegian electricity distribution networks," Energy Economics, Elsevier, pages 542-548.
    6. J-M- Glachant & H. Khalfallah & Y. Perez & V. Rious & M. Saguan, 2013. "Implementing Incentive Regulation and Regulatory Alignment with Resource Bounded Regulators," Competition and Regulation in Network Industries, Intersentia, vol. 14(3), pages 265-291, September.
    7. Llorca, Manuel & Orea, Luis & Pollitt, Michael G., 2016. "Efficiency and environmental factors in the US electricity transmission industry," Energy Economics, Elsevier, vol. 55(C), pages 234-246.
    8. Llorca, Manuel & Orea, Luis & Pollitt, Michael G., 2014. "Using the latent class approach to cluster firms in benchmarking: An application to the US electricity transmission industry," Operations Research Perspectives, Elsevier, vol. 1(1), pages 6-17.
    9. Haney, Aoife Brophy & Pollitt, Michael G., 2009. "Efficiency analysis of energy networks: An international survey of regulators," Energy Policy, Elsevier, vol. 37(12), pages 5814-5830, December.
    10. Jamasb, T. & Orea, L. & Pollitt, M.G., 2010. "Estimating Marginal Cost of Quality Improvements: The Case of the UK Electricity Distribution Companies," Cambridge Working Papers in Economics 1052, Faculty of Economics, University of Cambridge.
    11. repec:eee:eneeco:v:64:y:2017:i:c:p:373-383 is not listed on IDEAS
    12. Anna Pechan, 2014. "Which Incentives Does Regulation Give to Adapt Network Infrastructure to Climate Change? - A German Case Study," Working Papers V-365-14, University of Oldenburg, Department of Economics, revised May 2014.
    13. Tooraj Jamasb & Magnus Söderberg, 2010. "The Effects of Average Norm Model Regulation: The Case of Electricity Distribution in Sweden," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 36(3), pages 249-269, May.
    14. Jamasb, T. & Orea, L. & Pollitt, M.G., 2010. "Weather Factors and Performance of Network Utilities: A Methodology and Application to Electricity Distribution," Cambridge Working Papers in Economics 1042, Faculty of Economics, University of Cambridge.
    15. repec:eee:rensus:v:81:y:2018:i:p1:p:342-352 is not listed on IDEAS
    16. Torriti, Jacopo, 2013. "The significance of occupancy steadiness in residential consumer response to Time-of-Use pricing: Evidence from a stochastic adjustment model," Utilities Policy, Elsevier, vol. 27(C), pages 49-56.
    17. Ghanem, Dana Abi & Mander, Sarah & Gough, Clair, 2016. "“I think we need to get a better generator”: Household resilience to disruption to power supply during storm events," Energy Policy, Elsevier, vol. 92(C), pages 171-180.
    18. repec:eee:ejores:v:263:y:2017:i:3:p:1078-1094 is not listed on IDEAS
    19. Poudineh, Rahmatallah & Jamasb, Tooraj, 2016. "Determinants of investment under incentive regulation: The case of the Norwegian electricity distribution networks," Energy Economics, Elsevier, vol. 53(C), pages 193-202.
    20. Karim L. Anaya & Michael G. Pollitt, 2014. "Does Weather Have an Impact on Electricity Distribution Efficiency? Evidence from South America," Cambridge Working Papers in Economics 1424, Faculty of Economics, University of Cambridge.
    21. Wang, Yi-Shu & Xie, Bai-Chen & Shang, Li-Feng & Li, Wen-Hua, 2013. "Measures to improve the performance of China’s thermal power industry in view of cost efficiency," Applied Energy, Elsevier, pages 1078-1086.
    22. Leme, Rafael C. & Paiva, Anderson P. & Steele Santos, Paulo E. & Balestrassi, Pedro P. & Galvão, Leandro de Lima, 2014. "Design of experiments applied to environmental variables analysis in electricity utilities efficiency: The Brazilian case," Energy Economics, Elsevier, vol. 45(C), pages 111-119.
    23. repec:cam:camdae:1324 is not listed on IDEAS
    24. Saastamoinen, Antti & Kuosmanen, Timo, 2016. "Quality frontier of electricity distribution: Supply security, best practices, and underground cabling in Finland," Energy Economics, Elsevier, vol. 53(C), pages 281-292.
    25. Greene, William & Orea, Luis & Wall, Alan, 2011. "A one-stage random effect counterpart of the fixed-effect vector decomposition model with an application to UK electricity distribution utilities," Efficiency Series Papers 2011/01, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).

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