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Scale and cost efficiency in the Swiss electricity distribution industry: evidence from a frontier cost approach

Author

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  • Massimo Filippini

    () (Center for Energy Policy and Economics CEPE, Department of Management, Technology and Economics, ETH Zurich, Switzerland)

  • Jörg Wild

    (Center for Energy Policy and Economics CEPE, Department of Management, Technology and Economics, ETH Zurich, Switzerland)

  • Michael Kuenzle

    (Center for Energy Policy and Economics CEPE, Department of Management, Technology and Economics, ETH Zurich, Switzerlan)

Abstract

The deregulation of the electricity industry is currently on the political agenda in many countries. In most countries, the deregulation of the sector is combined with a (re-) regulation of the electricity networks in most of the countries. In this paper, we analyze the costs structure of 59 Swiss electricity distribution network operators with respect to cost and scale efficiency of the industry. A stochastic frontier model is applied to estimate the average costs of efficient network operators as a benchmark for the industry. Moreover, the heterogeneity of service areas is taken into account. The Swiss authorities might use our results to regulate the prices for the access to the distribution networks.

Suggested Citation

  • Massimo Filippini & Jörg Wild & Michael Kuenzle, 2001. "Scale and cost efficiency in the Swiss electricity distribution industry: evidence from a frontier cost approach," CEPE Working paper series 01-08, CEPE Center for Energy Policy and Economics, ETH Zurich.
  • Handle: RePEc:cee:wpcepe:01-08
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    File URL: http://www.cepe.ethz.ch/publications/workingPapers/CEPE_WP08.pdf
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    References listed on IDEAS

    as
    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. Coelli, Tim J. & Battese, George E., 1996. "Identification Of Factors Which Influence The Technical Inefficiency Of Indian Farmers," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 40(02), August.
    4. Mark J. Roberts, 1986. "Economies of Density and Size in the Production and Delivery of Electric Power," Land Economics, University of Wisconsin Press, vol. 62(4), pages 378-387.
    5. Massimo Filippini & Paola Prioni, 1994. "Is Scale and Cost Inefficiency in the Swiss Bus Industry a Regulatory Problem? Evidence from a Frontier Cost Approach," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 1(2), pages 219-232.
    6. Simar, L., 1991. "Estimating efficiencies from frontier models with panel data: a comparison of parametric, non-parametric and semi-parametric methods with boot strapping," CORE Discussion Papers 1991026, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    7. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
    8. 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.
    9. Battese, George E., 1992. "Frontier production functions and technical efficiency: a survey of empirical applications in agricultural economics," Agricultural Economics, Blackwell, vol. 7(3-4), pages 185-208, October.
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    Citations

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    Cited by:

    1. Reinhard Madlener & Stefan Vögtli, 2006. "Diffusion of bioenergy in urban areas: socio-economic analysis of the planned Swiss wood-fired cogeneration plant in Basel," CEPE Working paper series 06-53, CEPE Center for Energy Policy and Economics, ETH Zurich.
    2. Silvia Banfi & Massimo Filippini & Andrea Horehájová, 2007. "Hedonic Price Functions for Zurich and Lugano with Special Focus on Electrosmog," CEPE Working paper series 07-57, CEPE Center for Energy Policy and Economics, ETH Zurich.
    3. Hamidreza Hajibabaei & Davood Manzoor, 2014. "Regional Electricity Pricing With Ramsey Approach: Tehran Case Study," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(3), pages 182-186, July.
    4. Madlener, Reinhard & Koller, Martin, 2007. "Economic and CO2 mitigation impacts of promoting biomass heating systems: An input-output study for Vorarlberg, Austria," Energy Policy, Elsevier, vol. 35(12), pages 6021-6035, December.
    5. Marco Semadeni, 2003. "Energy storage as an essential part of sustainable energy systems," CEPE Working paper series 03-24, CEPE Center for Energy Policy and Economics, ETH Zurich.
    6. Filippini, Massimo & Pachauri, Shonali, 2004. "Elasticities of electricity demand in urban Indian households," Energy Policy, Elsevier, vol. 32(3), pages 429-436, February.
    7. Silvia Banfi & Massimo Filippini & Andrea Horehájová, 2007. "Using a Choice Experiment to Estimate the Benefits of a Reduction of Externalities in Urban Areas with Special Focus on Electrosmog," CEPE Working paper series 07-58, CEPE Center for Energy Policy and Economics, ETH Zurich.
    8. Reinhard Madlener & Carlos Henggeler Antunes & Luis C. Dias, 2006. "Multi-Criteria versus Data Envelopment Analysis for Assessing the Performance of Biogas Plants," CEPE Working paper series 06-49, CEPE Center for Energy Policy and Economics, ETH Zurich.
    9. Marco Semadeni, 2002. "Long-Term Energy Scenarios: Information on Aspects of Sustainable Energy Supply as a Prelude to Participatory Sessions," CEPE Working paper series 02-17, CEPE Center for Energy Policy and Economics, ETH Zurich.
    10. Shermeh, H. Ebrahimzadeh & Najafi, S.E. & Alavidoost, M.H., 2016. "A novel fuzzy network SBM model for data envelopment analysis: A case study in Iran regional power companies," Energy, Elsevier, vol. 112(C), pages 686-697.
    11. Kumbaroglu, Gürkan & Madlener, Reinhard & Demirel, Mustafa, 2008. "A real options evaluation model for the diffusion prospects of new renewable power generation technologies," Energy Economics, Elsevier, vol. 30(4), pages 1882-1908, July.
    12. Kopsakangas-Savolainen, Maria & Svento, Rauli, 2008. "Estimation of cost-effectiveness of the Finnish electricity distribution utilities," Energy Economics, Elsevier, vol. 30(2), pages 212-229, March.
    13. Shonali Pachauri & Daniel Spreng, 2003. "Energy use and energy access in relation to poverty," CEPE Working paper series 03-25, CEPE Center for Energy Policy and Economics, ETH Zurich.
    14. Nitin Gupta, 2012. "The Evolution of Manufacturing Efficiency: Evidence from Indian States," ASARC Working Papers 2012-13, The Australian National University, Australia South Asia Research Centre.
    15. Adrian Müller, 2002. "Finding Groups in Large Data Sets," CEPE Working paper series 02-18, CEPE Center for Energy Policy and Economics, ETH Zurich.
    16. Daniel Spreng & Marco Semadeni, 2001. "Energie, Umwelt und die 2000 Watt Gesellschaft," CEPE Working paper series 01-11, CEPE Center for Energy Policy and Economics, ETH Zurich.
    17. Kentaka Aruga, 2003. "Differences in Characteristics ofReligious Groups in India: As Seen From Household Survey Data," CEPE Working paper series 03-26, CEPE Center for Energy Policy and Economics, ETH Zurich.
    18. Gürkan Kumbaroglu & Reinhard Madlener, 2001. "A Description of the Hybrid Bottom-Up CGE Model SCREEN with an Application to Swiss Climate Policy Analysis," CEPE Working paper series 01-10, CEPE Center for Energy Policy and Economics, ETH Zurich.
    19. Reinhard Madlener & Carmenza Robledo & Bart Muys & Bo Hektor & Julije Domac, 2003. "A Sustainability Framework for Enhancing the Long-Term Success of LULUCF Projects," CEPE Working paper series 03-29, CEPE Center for Energy Policy and Economics, ETH Zurich.

    More about this item

    Keywords

    stochastic frontier analysis; electricity distribution; efficiency measurement; regulation; benchmarking; returns to scale; returns to density;

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation

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