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Reform and Efficiency: An Application to Iranian Regional Electricity Companies

Author

Listed:
  • Mohsen Pourebadollahan Covich

    (Department of Economics, Faculty of Social Sciences and Humanities, University of Tabriz, Tabriz, Iran)

  • Archana Aggarwal

    (Center for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University, New Delhi, India)

Abstract

The electricity in Iran, like many other countries, has undergone a reform. This reform which separated the distribution sector from the regional electricity companies took place in 1993. The main objective of this paper is to analyze the cost structure of Iranian regional electricity companies with respect to scale and cost efficiency, in order to evaluate the changes in the performance of these companies through the reform. To that end, a translog average cost function was estimated for a panel of 16 Iranian regional electricity companies over the period 1989–1990 to 2002–2003, using the time–varying cost efficiency frontier model suggested by Cornwell, Schmidt and Sickles (1990). The results indicate the existence of economies of scale pre and post–reform for all companies; however, it is more evident after the reform. In addition, the findings on cost efficiency show that most of these companies were suffering from the low efficiency, and the reform has improved the efficiency of the majority of companies.

Suggested Citation

  • Mohsen Pourebadollahan Covich & Archana Aggarwal, 2010. "Reform and Efficiency: An Application to Iranian Regional Electricity Companies," Iranian Economic Review, Economics faculty of Tehran university, vol. 15(2), pages 83-104, spring.
  • Handle: RePEc:eut:journl:v:15:y:2010:i:2:p:83
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    References listed on IDEAS

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    1. Massimo Filippini, 1998. "Are Municipal Electricity Distribution Utilities Natural Monopolies?," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 69(2), pages 157-174, June.
    2. Filippini, Massimo & Wild, Jorg, 2001. "Regional differences in electricity distribution costs and their consequences for yardstick regulation of access prices," Energy Economics, Elsevier, vol. 23(4), pages 477-488, July.
    3. Farsi, Mehdi & Filippini, Massimo, 2009. "An analysis of cost efficiency in Swiss multi-utilities," Energy Economics, Elsevier, vol. 31(2), pages 306-315, March.
    4. Sadjadi, S.J. & Omrani, H., 2008. "Data envelopment analysis with uncertain data: An application for Iranian electricity distribution companies," Energy Policy, Elsevier, vol. 36(11), pages 4247-4254, November.
    5. Ali Emami Meibodi, 1998. "Efficiency Considerations in the Electricity Supply Industry; The Case of Iran," Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) 95, Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey.
    6. 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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