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Benchmarking and Regulation of Electricity Transmission and Distribution Utilities: Lessons from International Experience

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  • Jamasb, T.
  • Pollitt, M.

Abstract

Since the early 1980’s, many countries have implemented electricity sector reform, many of which have bundled generation, transmission, distribution and supply activities, and have introduced competition in generation and supply. An increasing number of countries are also adopting incentive regulation to promote efficiency improvement in the natural monopoly activities - transmission and distribution. Incentive regulation almost invariably involves benchmarking or comparison of actual vs. some reference performance. This paper reviews the main approaches to incentive regulation and discusses various benchmarking methods. We also present the finding of a survey of the use of benchmarking methods in the OECD and few other countries. Our survey finds a variety of methods used by the electricity regulators although with a notable preference for the non-parametric methods. We then draw conclusions based on the finding of the survey highlighting the main outstanding issues and lessons for best practice implementation of benchmarking in electricity regulation.

Suggested Citation

  • Jamasb, T. & Pollitt, M., 2001. "Benchmarking and Regulation of Electricity Transmission and Distribution Utilities: Lessons from International Experience," Cambridge Working Papers in Economics 0101, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camdae:0101 Note: IO
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Jamasb, Tooraj, 2006. "Between the state and market: Electricity sector reform in developing countries," Utilities Policy, Elsevier, vol. 14(1), pages 14-30, March.
    2. Rodrigo Taborda & Julieth Santamaría, 2011. "Productivity growth in electric energy retail in Colombia. A bootstrapped malmquist indices approach," DOCUMENTOS DE TRABAJO 009152, UNIVERSIDAD DEL ROSARIO.
    3. Jamasb, Tooraj & Pollitt, Michael, 2008. "Reference models and incentive regulation of electricity distribution networks: An evaluation of Sweden's Network Performance Assessment Model (NPAM)," Energy Policy, Elsevier, vol. 36(5), pages 1788-1801, May.
    4. Supawat Rungsuriyawiboon & Tim Coelli, 2004. "Regulatory Reform and Economic Performance in US Electricity Generation," CEPA Working Papers Series WP062004, School of Economics, University of Queensland, Australia.
    5. Yin-Fang Zhang & David Parker & Colin Kirkpatrick, 2005. "Assessing the Effects of Privatisation, Competition and Regulation on Economic Performance: The Case of Electricity Sector Reform," SCAPE Policy Research Working Paper Series 0511, National University of Singapore, Department of Economics, SCAPE.
    6. 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.
    7. Mehdi Farsi & Massimo Filippini, 2004. "Regulation and Measuring Cost-Efficiency with Panel Data Models: Application to Electricity Distribution Utilities," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 25(1), pages 1-19, August.
    8. 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.
    9. Toru Hattori & Jamasb, T. & Pollitt, M.G., 2002. "Relative Performance of UK and Japanese Electricity Distribution Systems 1985-1998: Lessons for Incentive Regulation," Cambridge Working Papers in Economics 0212, Faculty of Economics, University of Cambridge.
    10. Gustavo Ferro & Omar Chisari, 2010. "Tópicos de Economía de la Regulación de los Servicios Públicos," Working Papers hal-00473038, HAL.
    11. repec:eee:juipol:v:47:y:2017:i:c:p:18-28 is not listed on IDEAS
    12. repec:bdr:ensayo:v::y:2005:i:49:p:88-132 is not listed on IDEAS
    13. Löber, Gerrit & Staat, Matthias, 2010. "Integrating categorical variables in Data Envelopment Analysis models: A simple solution technique," European Journal of Operational Research, Elsevier, vol. 202(3), pages 810-818, May.
    14. Jamasb, T., 2002. "Reform and Regulation of the Electricity Sectors in Developing Countries," Cambridge Working Papers in Economics 0226, Faculty of Economics, University of Cambridge.
    15. repec:bbz:fcpbbr:v:1:y:2004:i:1:p:63-73 is not listed on IDEAS
    16. Çelen, Aydın & Yalçın, Neşe, 2012. "Performance assessment of Turkish electricity distribution utilities: An application of combined FAHP/TOPSIS/DEA methodology to incorporate quality of service," Utilities Policy, Elsevier, vol. 23(C), pages 59-71.
    17. Matthias Staat, 2011. "Estimating the efficiency of general practitioners controlling for case mix and outlier effects," Empirical Economics, Springer, pages 321-342.
    18. Ligia Melo & Néstor Espinosa, 2005. "Ineficiencia en la distribución de energía eléctrica: una aplicación de las funciones de distancia estocástica," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 23(49), pages 88-132, December.
    19. Yin-Fang Zhang & David Parker & Colin Kirkpatrick, 2008. "Electricity sector reform in developing countries: an econometric assessment of the effects of privatization, competition and regulation," Journal of Regulatory Economics, Springer, pages 159-178.
    20. Jamasb, T. & Pollitt, M., 2000. "Benchmarking and regulation: international electricity experience," Utilities Policy, Elsevier, vol. 9(3), pages 107-130, September.
    21. Dassler, Thoralf, 2006. "Combining theories of regulation - Proposing a framework for analysing regulatory systems worldwide," Utilities Policy, Elsevier, vol. 14(1), pages 31-43, March.
    22. Azadeh, A. & Ghaderi, S.F. & Omrani, H. & Eivazy, H., 2009. "An integrated DEA-COLS-SFA algorithm for optimization and policy making of electricity distribution units," Energy Policy, Elsevier, vol. 37(7), pages 2605-2618, July.
    23. Azadeh, A. & Ghaderi, S.F. & Anvari, M. & Saberi, M., 2007. "Performance assessment of electric power generations using an adaptive neural network algorithm," Energy Policy, Elsevier, vol. 35(6), pages 3155-3166, June.

    More about this item

    Keywords

    electricity; benchmarking; incentive regulation; data envelopment analysis; stochastic frontier analysis;

    JEL classification:

    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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