Yardstick and Ex-post Regulation by Norm Model: Empirical Equivalence, Pricing Effect, and Performance in Sweeden
Following the liberalisation of network industries there has been a number of innovations in incentive regulation. This paper examines the effects of the application of norm models within an ex-post incentive regulation of electricity distribution networks in Sweden. We first examine the empirical equivalence of norm models to real utilities. Next, we estimate the effect of regulation on pricing behaviour and performance of utilities in average costs, quality of service, and network energy losses. The norm models seem to reflect the main network features, demand characteristics, and capital stocks of real utilities. However, the price of labour affects relative performance. Also, quality of service has not affected the relative performance of utilities, indicating that incentives may be weak. Moreover, on the whole, utilities respond to norm models and incentives and reduce their average prices. However, investor-owned utilities that perform better than their norm models behave strategically and increase their prices. We also find that investor-owned utilities reduce (inflate) their average cost if they perform worse (better) than the benchmark. Public utilities have not adjusted their costs significantly in response to the incentives. Furthermore, we do not find evidence of improvement in quality of service and reduction in network energy losses although less efficient investor-owned networks seem to have improved on both fronts. Finally, efficient investor-owned utilities seem to have reduced their quality of service in terms of outage length.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jiro Nemoto & Mika Goto, 2006. "Measurement of technical and allocative efficiencies using a CES cost frontier: a benchmarking study of Japanese transmission-distribution electricity," Empirical Economics, Springer, vol. 31(1), pages 31-48, March.
- Hammond, Christopher J & Johnes, Geraint & Robinson, Terry, 2002.
"Technical Efficiency under Alternative Regulatory Regimes: Evidence from the Inter-war British Gas Industry,"
Journal of Regulatory Economics,
Springer, vol. 22(3), pages 251-270, November.
- Hammond, C.J. & Jones, G. & Robinson, T., 2000. "Technical Efficiency Under Alternative Regulatory Regimes: Evidence from the Inter-War Britich Gas Industry," Papers 280, Universite de Nantes - Economie Internationale et de l'Entreprise.
- Christian von Hirschhausen & Astrid Cullmann & Andreas Kappeler, 2006. "Efficiency analysis of German electricity distribution utilities - non-parametric and parametric tests," Applied Economics, Taylor & Francis Journals, vol. 38(21), pages 2553-2566.
- von Hirschhausen, Christian R. & Cullmann, Astrid, 2005. "Efficiency Analysis of German Electricity Distribution Utilities : Non-Parametric and Parametric Tests," Dresden Discussion Paper Series in Economics 06/05, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
- Christian Growitsch & Thomas Wein, 2005. "Negotiated Third Party Access—An Industrial Organisation Perspective," European Journal of Law and Economics, Springer, vol. 20(2), pages 165-183, September.
- 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.
- Massimo Filippini & Jörg Wild, 2000. "Regional Differences in Electricity Distribution Costs and their Consequences for Yardstick Regulation of Access Prices," CEPE Working paper series 00-05, CEPE Center for Energy Policy and Economics, ETH Zurich.
- Blom-Hansen, Jens, 2003. "Is Private Delivery of Public Services Really Cheaper? Evidence from Public Road Maintenance in Denmark," Public Choice, Springer, vol. 115(3-4), pages 419-438, June.
- Rolf Färe & Carlos Martins-Filho & Michael Vardanyan, 2010. "On functional form representation of multi-output production technologies," Journal of Productivity Analysis, Springer, vol. 33(2), pages 81-96, April.
- R. Fare & C. Martins-Filho & M. Vardanyan, 2010. "On functional form representation of multi-output production technologies," Post-Print hal-00800130, HAL.
- Peter Romilly, 2001. "Subsidy and Local Bus Service Deregulation in Britain: A Re-evaluation," Journal of Transport Economics and Policy, University of Bath, vol. 35(2), pages 161-193, May.
- Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, Elsevier.
- Sanford Berg & Chen Lin & Valeriy Tsaplin, 2005. "Regulation of State-Owned and Privatized Utilities: Ukraine Electricity Distribution Company Performance," Journal of Regulatory Economics, Springer, vol. 28(3), pages 259-287, November.
- Paul L. Joskow & Roger Noll & William Niskanen & Elizabeth E. Bailey, 1994. "Economic Regulation," NBER Chapters,in: American Economic Policy in the 1980s, pages 367-452 National Bureau of Economic Research, Inc.
- Mehdi Farsi & Massimo Filippini & William Greene, 2006. "Application Of Panel Data Models In Benchmarking Analysis Of The Electricity Distribution Sector ," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 77(3), pages 271-290, 09.
- Mehdi Farsi & Massimo Filippini & William Greene, 2005. "Application of Panel Data Models in Benchmarking Analysis of the Electrivity Distribution Sector," CEPE Working paper series 05-39, CEPE Center for Energy Policy and Economics, ETH Zurich.
- Simon Hall & Mark Walsh & Anthony Yates, 1997. "How do UK companies set prices?," Bank of England working papers 67, Bank of England.
- Goto, Mika & Tsutsui, Miki, 2008. "Technical efficiency and impacts of deregulation: An analysis of three functions in U.S. electric power utilities during the period from 1992 through 2000," Energy Economics, Elsevier, vol. 30(1), pages 15-38, January.
- Cécile Aubert & Arnaud Reynaud, 2005. "The Impact of Regulation on Cost Efficiency: An Empirical Analysis of Wisconsin Water Utilities," Journal of Productivity Analysis, Springer, vol. 23(3), pages 383-409, July.
- Burns, Philip & Weyman-Jones, Thomas G, 1996. "Cost Functions and Cost Efficiency in Electricity Distribution: A Stochastic Frontier Approach," Bulletin of Economic Research, Wiley Blackwell, vol. 48(1), pages 41-64, January.
- Sherrill Shaffer, 1998. "Functional Forms and Declining Average Costs," Journal of Financial Services Research, Springer;Western Finance Association, vol. 14(2), pages 91-115, October.
- Sherrill Shaffer, 1997. "Functional forms and declining average costs," Working Papers 95-13/R, Federal Reserve Bank of Philadelphia.
- Emili Grifell-Tatjé & C. A. Knox Lovell, 2003. "The Managers versus the Consultants," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(1), pages 119-138, March.
- 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.
- Jamasb, T. & Pollitt, M., 2007. "Reference Models and Incentive Regulation of Electricity Distribution Networks: An Evaluation of Sweden’s Network Performance Assessment Model (NPAM)," Cambridge Working Papers in Economics 0747, Faculty of Economics, University of Cambridge.
- Jamasb, T. & Pollitt, M., 2000. "Benchmarking and regulation: international electricity experience," Utilities Policy, Elsevier, vol. 9(3), pages 107-130, September.
- Álvaro Bustos & Alexander Galetovic, 2004. "Monopoly Regulation, Chilean Style: The Efficient-Firm Standard In Theory And Practice," Documentos de Trabajo 182, Centro de Economía Aplicada, Universidad de Chile. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:cam:camdae:0908. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jake Dyer)
If references are entirely missing, you can add them using this form.