IDEAS home Printed from https://ideas.repec.org/a/eee/soceps/v43y2009i3p201-208.html
   My bibliography  Save this article

A multi-division efficiency evaluation of U.S. electric power companies using a weighted slacks-based measure

Author

Listed:
  • Tsutsui, Miki
  • Goto, Mika

Abstract

Prior to the 1990s, the electric power industry was highly regulated across the world. Under a liberalization policy to open markets and to grow competition commenced in the early 1990s, efficient management has become a necessity for companies in this industry. The current study examines the divisional efficiencies of multi-functional, vertically integrated companies seeking to optimize their overall management efficiency. For this purpose, divisional cost data are used as input into a slacks-based measure (SBM) model. This provides divisional efficiency indices based on slacks, as well as one for the larger firm-level management function. Further, given the important role of cost structure, we introduce a modified SBM, named the weighted SBM (WSBM), which directly incorporates division-specific weights into the objective function. Results reveal that the power generation divisions of the companies studied have significant influence on the overall cost, whereas the impact of the other four divisions - transmission, distribution, sales and general administrative - is limited.

Suggested Citation

  • Tsutsui, Miki & Goto, Mika, 2009. "A multi-division efficiency evaluation of U.S. electric power companies using a weighted slacks-based measure," Socio-Economic Planning Sciences, Elsevier, vol. 43(3), pages 201-208, September.
    • Handle: RePEc:eee:soceps:v:43:y:2009:i:3:p:201-208
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0038-0121(08)00031-1
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Magali Delmas & Yesim Tokat, 2005. "Deregulation, governance structures, and efficiency: the U.S. electric utility sector," Strategic Management Journal, Wiley Blackwell, vol. 26(5), pages 441-460, May.
    2. Thomas Sexton & Herbert Lewis, 2003. "Two-Stage DEA: An Application to Major League Baseball," Journal of Productivity Analysis, Springer, vol. 19(2), pages 227-249, April.
    3. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
    4. Meeusen, Wim & van den Broeck, Julien, 1977. "Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 435-444, June.
    5. Drake, Leigh & Hall, Maximilian J.B. & Simper, Richard, 2006. "The impact of macroeconomic and regulatory factors on bank efficiency: A non-parametric analysis of Hong Kong's banking system," Journal of Banking & Finance, Elsevier, vol. 30(5), pages 1443-1466, May.
    6. Delmas, Magali & Tokat, Yesim, 2003. "Deregulation Process, Governance Structures and Efficiency: The U.S. Electric Utility Sector," Research Papers 1790, Stanford University, Graduate School of Business.
    7. Toru Hattori & Tooraj Jamasb & Michael Pollitt, 2005. "Electricity Distribution in the UK and Japan: A Comparative Efficiency Analysis 1985-1998," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 23-48.
    8. רמסיס גרא וברנדה מורגנשטיין, 2000. "מקבלי גמלת סיעוד 1999," Working Papers 520, National Insurance Institute of Israel.
    9. Battese, George E. & Corra, Greg S., 1977. "Estimation Of A Production Frontier Model: With Application To The Pastoral Zone Of Eastern Australia," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 21(3), pages 1-11, December.
    10. Jamasb, T. & Pollitt, M., 2000. "Benchmarking and regulation: international electricity experience," Utilities Policy, Elsevier, vol. 9(3), pages 107-130, September.
    11. Harold Fried & Shelton Schmidt & Suthathip Yaisawarng, 1999. "Incorporating the Operating Environment Into a Nonparametric Measure of Technical Efficiency," Journal of Productivity Analysis, Springer, vol. 12(3), pages 249-267, November.
    12. Goto, Mika & Tsutsui, Miki, 1998. "Comparison of Productive and Cost Efficiencies Among Japanese and US Electric Utilities," Omega, Elsevier, vol. 26(2), pages 177-194, April.
    13. Morita, Hiroshi & Hirokawa, Koichiro & Zhu, Joe, 2005. "A slack-based measure of efficiency in context-dependent data envelopment analysis," Omega, Elsevier, vol. 33(4), pages 357-362, August.
    14. H. Fried & C. Lovell & S. Schmidt & S. Yaisawarng, 2002. "Accounting for Environmental Effects and Statistical Noise in Data Envelopment Analysis," Journal of Productivity Analysis, Springer, vol. 17(1), pages 157-174, January.
    15. Raad Yahya Qassim & Gilberto Corso & Liacir dos Santos Lucena & Zieli Dutra Thome, 2005. "Application of data envelopment analysis in the performance evaluation of electricity distribution: a review," International Journal of Business Performance Management, Inderscience Enterprises Ltd, vol. 7(1), pages 60-70.
    16. Ruggiero, John & Bretschneider, Stuart, 1998. "The weighted Russell measure of technical efficiency," European Journal of Operational Research, Elsevier, vol. 108(2), pages 438-451, July.
    17. Hjalmarsson, Lennart & Veiderpass, Ann, 1992. " Productivity in Swedish Electricity Retail Distribution," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(0), pages 193-205, Supplemen.
    18. Pastor, J. T. & Ruiz, J. L. & Sirvent, I., 1999. "An enhanced DEA Russell graph efficiency measure," European Journal of Operational Research, Elsevier, vol. 115(3), pages 596-607, June.
    19. אסתר טולידנו, 2000. "מקבלי דמי אבטלה בשנת 1999," Working Papers 505, National Insurance Institute of Israel.
    20. George E. Battese & Greg S. Corra, 1977. "Estimation Of A Production Frontier Model: With Application To The Pastoral Zone Of Eastern Australia," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 21(3), pages 169-179, December.
    21. דר מירי לוין רוזליס & רפי יודלביץ, 2000. "קבוצות לילדי נגמלים מסמים," Working Papers 156, National Insurance Institute of Israel.
    22. Hemphill Ross C. & Meitzen Mark E. & Schoech Philip E., 2003. "Incentive Regulation in Network Industries: Experience and Prospects in the U.S. Telecommunications, Electricity, and Natural Gas Industries," Review of Network Economics, De Gruyter, vol. 2(4), pages 1-22, December.
    23. Tone, Kaoru, 2001. "A slacks-based measure of efficiency in data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 130(3), pages 498-509, May.
    24. Førsund, Finn R. & Kittelsen, Sverre A. C., 1998. "Productivity development of Norwegian electricity distribution utilities," Resource and Energy Economics, Elsevier, vol. 20(3), pages 207-224, September.
    25. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Po-Chi Chen, 2012. "Measurement of technical efficiency in farrow-to-finish swine production using multi-activity network data envelopment analysis: evidence from Taiwan," Journal of Productivity Analysis, Springer, vol. 38(3), pages 319-331, December.
    2. Bi, Gong-Bing & Song, Wen & Zhou, P. & Liang, Liang, 2014. "Does environmental regulation affect energy efficiency in China's thermal power generation? Empirical evidence from a slacks-based DEA model," Energy Policy, Elsevier, vol. 66(C), pages 537-546.
    3. Carlos Serrano-Cinca & Yolanda Fuertes-Callén & Beatriz Cuellar-Fernández, 2021. "Managing for Stakeholders Using Multiple-Criteria Decision-Making Techniques," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 157(2), pages 581-601, September.
    4. Kao, Chiang, 2014. "Network data envelopment analysis: A review," European Journal of Operational Research, Elsevier, vol. 239(1), pages 1-16.
    5. Xinna Zhao & Chongwen Zhong, 2017. "Low Carbon Economy Performance Analysis with the Intertemporal Effect of Capital in China," Sustainability, MDPI, vol. 9(5), pages 1-18, May.
    6. lo Storto, Corrado, 2018. "The analysis of the cost-revenue production cycle efficiency of the Italian airports: A NSBM DEA approach," Journal of Air Transport Management, Elsevier, vol. 72(C), pages 77-85.
    7. 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, vol. 96(C), pages 261-271.
    8. Nelson Amowine & Huaizong Li & Kofi Baah Boamah & Zhixiang Zhou, 2021. "Towards Ecological Sustainability: Assessing Dynamic Total-Factor Ecology Efficiency in Africa," IJERPH, MDPI, vol. 18(17), pages 1-23, September.
    9. Ogunrinde, Olawale & Shittu, Ekundayo, 2023. "Efficiency and productivity of renewable energy technologies: Evidence from U.S. investor-owned utilities across regional markets," Utilities Policy, Elsevier, vol. 82(C).
    10. Ang, Sheng & Chen, Chien-Ming, 2016. "Pitfalls of decomposition weights in the additive multi-stage DEA model," Omega, Elsevier, vol. 58(C), pages 139-153.
    11. Sai, Rockson & Lin, Boqiang, 2022. "Productivity assessment of power generation in Kenya: What are the impacts?," Energy, Elsevier, vol. 254(PA).
    12. Nelson Amowine & Zhiqiang Ma & Mingxing Li & Zhixiang Zhou & Benjamin Azembila Asunka & James Amowine, 2019. "Energy Efficiency Improvement Assessment in Africa: An Integrated Dynamic DEA Approach," Energies, MDPI, vol. 12(20), pages 1-17, October.
    13. Lin, Tzu-Yu & Chiu, Sheng-Hsiung, 2013. "Using independent component analysis and network DEA to improve bank performance evaluation," Economic Modelling, Elsevier, vol. 32(C), pages 608-616.
    14. Ming-Chung Chang & Chiang-Ping Chen & Chien-Cheng Lin & Yu-Ming Xu, 2022. "The Overall and Disaggregate China’s Bank Efficiency from Sustainable Business Perspectives," Sustainability, MDPI, vol. 14(7), pages 1-16, April.
    15. Guo, Xiaoying & Lu, Ching-Cheng & Lee, Jen-Hui & Chiu, Yung-Ho, 2017. "Applying the dynamic DEA model to evaluate the energy efficiency of OECD countries and China," Energy, Elsevier, vol. 134(C), pages 392-399.
    16. Ching-Cheng Lu & Liang-Chun Lu, 2019. "Evaluating the energy efficiency of European Union countries: The dynamic data envelopment analysis," Energy & Environment, , vol. 30(1), pages 27-43, February.
    17. S P Santos & C A F Amado & J R Rosado, 2011. "Formative evaluation of electricity distribution utilities using data envelopment analysis," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 62(7), pages 1298-1319, July.
    18. Sánchez-González, Carlos & Sarto, José Luis & Vicente, Luis, 2017. "The efficiency of mutual fund companies: Evidence from an innovative network SBM approach," Omega, Elsevier, vol. 71(C), pages 114-128.
    19. Dan Wu & Ching-Cheng Lu & Xiang Chen & Pei-Chieh Tu & An-Chi Yang & Chih-Yu Yang, 2021. "Evaluating the Dynamic Energy Production Efficiency in APEC Economies," Energies, MDPI, vol. 14(14), pages 1-20, July.
    20. Plácido Moreno & Sebastián Lozano, 2014. "A network DEA assessment of team efficiency in the NBA," Annals of Operations Research, Springer, vol. 214(1), pages 99-124, March.
    21. Kelly D.T.Trinh & Valentin Zelenyuk, 2015. "Bootstrap-based testing for network DEA: Some Theory and Applications," CEPA Working Papers Series WP052015, School of Economics, University of Queensland, Australia.
    22. Miki Tsutsui & Kaoru Tone, 2009. "An epsilon-based measure of efficiency in DEA," GRIPS Discussion Papers 09-13, National Graduate Institute for Policy Studies.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mota, R.L., 2004. "‘Comparing Brazil and USA electricity performance; what was the impact of privatisation?’," Cambridge Working Papers in Economics 0423, Faculty of Economics, University of Cambridge.
    2. Miki Tsutsui & Kaoru Tone, 2007. "Separation of uncontrollable factors and time shift effects from DEA scores," GRIPS Discussion Papers 07-09, National Graduate Institute for Policy Studies.
    3. Avkiran, Necmi K. & Rowlands, Terry, 2008. "How to better identify the true managerial performance: State of the art using DEA," Omega, Elsevier, vol. 36(2), pages 317-324, April.
    4. Tovar, Beatriz & Javier Ramos-Real, Francisco & de Almeida, Edmar Fagundes, 2011. "Firm size and productivity. Evidence from the electricity distribution industry in Brazil," Energy Policy, Elsevier, vol. 39(2), pages 826-833, February.
    5. Luis R. Murillo-Zamorano & Juan Vega-Cervera, "undated". "The Use of Parametric and Non Parametric Frontier Methods to Measure the Productive Efficiency in the Industrial Sector. A Comparative Study," Discussion Papers 00/17, Department of Economics, University of York.
    6. Canay, Iván, 2002. "Eficiencia y Productividad en Distribuidoras Eléctricas: Repaso de la Metodología y Aplicación," UADE Textos de Discusión 35_2002, Instituto de Economía, Universidad Argentina de la Empresa.
    7. Zhou, P. & Ang, B.W. & Poh, K.L., 2008. "A survey of data envelopment analysis in energy and environmental studies," European Journal of Operational Research, Elsevier, vol. 189(1), pages 1-18, August.
    8. Hall, Maximilian J.B. & Kenjegalieva, Karligash A. & Simper, Richard, 2012. "Environmental factors affecting Hong Kong banking: A post-Asian financial crisis efficiency analysis," Global Finance Journal, Elsevier, vol. 23(3), pages 184-201.
    9. Kristof De Witte & Laura López-Torres, 2017. "Efficiency in education: a review of literature and a way forward," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 68(4), pages 339-363, April.
    10. Murillo-Zamorano, Luis R. & Vega-Cervera, Juan A., 2001. "The use of parametric and non-parametric frontier methods to measure the productive efficiency in the industrial sector: A comparative study," International Journal of Production Economics, Elsevier, vol. 69(3), pages 265-275, February.
    11. Iglesias, Guillermo & Castellanos, Pablo & Seijas, Amparo, 2010. "Measurement of productive efficiency with frontier methods: A case study for wind farms," Energy Economics, Elsevier, vol. 32(5), pages 1199-1208, September.
    12. Mai, Nhat Chi, 2015. "Efficiency of the banking system in Vietnam under financial liberalization," OSF Preprints qsf6d, Center for Open Science.
    13. Luis R. Murillo‐Zamorano, 2004. "Economic Efficiency and Frontier Techniques," Journal of Economic Surveys, Wiley Blackwell, vol. 18(1), pages 33-77, February.
    14. Chiu, Yung-Ho & Chen, Yu-Chuan, 2009. "The analysis of Taiwanese bank efficiency: Incorporating both external environment risk and internal risk," Economic Modelling, Elsevier, vol. 26(2), pages 456-463, March.
    15. Thoraneenitiyan, Nakhun & Avkiran, Necmi K., 2009. "Measuring the impact of restructuring and country-specific factors on the efficiency of post-crisis East Asian banking systems: Integrating DEA with SFA," Socio-Economic Planning Sciences, Elsevier, vol. 43(4), pages 240-252, December.
    16. Liu, Fangmei & Li, Li & Ye, Bin & Qin, Quande, 2023. "A novel stochastic semi-parametric frontier-based three-stage DEA window model to evaluate China's industrial green economic efficiency," Energy Economics, Elsevier, vol. 119(C).
    17. Lampe, Hannes W. & Hilgers, Dennis, 2015. "Trajectories of efficiency measurement: A bibliometric analysis of DEA and SFA," European Journal of Operational Research, Elsevier, vol. 240(1), pages 1-21.
    18. Vaneet Bhatia & Sankarshan Basu & Subrata Kumar Mitra & Pradyumna Dash, 2018. "A review of bank efficiency and productivity," OPSEARCH, Springer;Operational Research Society of India, vol. 55(3), pages 557-600, November.
    19. Moritz Flubacher & George Sheldon & Adrian Müller, 2015. "Comparison of the Economic Performance between Organic and Conventional Dairy Farms in the Swiss Mountain Region Using Matching and Stochastic Frontier Analysis," Journal of Socio-Economics in Agriculture (Until 2015: Yearbook of Socioeconomics in Agriculture), Swiss Society for Agricultural Economics and Rural Sociology, vol. 7(1), pages 76-84.
    20. Maruyama, Eduardo & Schollard, Phoebe, 2021. "Geographic prioritization of agricultural investments: Prioritization of agricultural and nutrition investments," 2021 Conference, August 17-31, 2021, Virtual 315292, International Association of Agricultural Economists.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:soceps:v:43:y:2009:i:3:p:201-208. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/seps .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.