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Productivity in Electricity, Gas and Water: Measurement and Interpretation

Author

Listed:
  • Topp, Vernon

    (Productivity Commission)

  • Kulys, Tony

    (Productivity Commission)

Abstract

This staff working paper examines productivity trends in the Australian utilities industry and highlights some significant issues relating to the measurement and interpretation of changes in measured productivity over time. Multifactor productivity (MFP) growth in Australia's market sector has been considerably below average since 2003-04. Utilities (Electricity, Gas, Water and Waste services), have played a significant role in this, with MFP growth being strongly negative between 1997-98 and 2009-10 (MFP falling, on average, by 3.2 per cent per year). To better understand why, this study examined MFP at the subdivision level, with a particular focus on the two largest subdivisions - Electricity supply (ES), and Water supply, sewerage and drainage services (WSSD). MFP growth between 1997-98 and 2009-10 was negative for both ES (on average, -2.7 per cent per year) and WSSD (-4.3 per cent per year). This study highlights some of the challenges involved in measuring and interpreting estimates of MFP growth in utilities. A particular concern is the influence of changes in capacity utilisation arising from either cyclical investment patterns, or changes in the structure of electricity demand. Also, government policies, regulatory settings and external shocks (especially the weather) can impact on the quantity or quality of measured output, and on the choice of production technology, thereby influencing estimates of MFP. The views expressed in this paper are those of the authors and are not necessarily those of the Productivity Commission, or of the organisations or people who provided assistance.

Suggested Citation

  • Topp, Vernon & Kulys, Tony, 2012. "Productivity in Electricity, Gas and Water: Measurement and Interpretation," Staff Working Papers 121, Productivity Commission, Government of Australia.
    • Handle: RePEc:ris:prodsw:2012_001
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    File URL: http://www.pc.gov.au/research/staff-working/electricity-gas-water
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    Citations

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    Cited by:

    1. Mountain, Bruce R., 2019. "Ownership, regulation, and financial disparity: The case of electricity distribution in Australia," Utilities Policy, Elsevier, vol. 60(C), pages 1-1.
    2. Vernon Topp & Tony Kulys, 2014. "On Productivity: The Influence of Natural Resource Inputs," International Productivity Monitor, Centre for the Study of Living Standards, vol. 27, pages 64-78, Fall.
    3. Derek Burnell & Amani Elnasri, 2020. "Does Measurement of Digital Activities Explain Productivity Slowdown? The Case for Australia," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 517-518-5, pages 123-137.
    4. Evan Capeluck, 2016. "A Comparison of Australian and Canadian Productivity Performance: Lessons for Canada," CSLS Research Reports 2016-07, Centre for the Study of Living Standards.
    5. Lynne Chester, 2015. "The privatisation of Australian electricity: Claims, myths and facts," The Economic and Labour Relations Review, , vol. 26(2), pages 218-240, June.

    More about this item

    Keywords

    productivity trends; measured productivity; utilities industry; electricity; gas; water; multifactor productivity (MFP);
    All these keywords.

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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