IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Frontier Analysis of UK Distribution Networks and the Question of Mergers: A Critique of Ofgem

  • Ziver Olmez

    ()

    (Independent researcher)

Registered author(s):

    Since privatization, the 14 UK electricity distribution network operators (DNOs), being natural monopolies, have been subject to RPI-X regulation by the UK regulator (Ofgem). Mergers between the 14 DNOs have formed 7 identifiable ownerships (management teams). It is argued in this research that Ofgem has not used a sufficiently robust approach to benchmarking, and has therefore failed to accurately assess network efficiency gains. Furthermore, Ofgem has used invalid arguments against further mergers. By using more informative panel datasets, as well as a more robust estimation technique (Stochastic Frontier Analysis), this research reveals two crucial facts. Firstly, there is almost no more room for the DNOs in question to become more cost efficient, as the industry is operating close to minimum efficient scale. This suggests that Ofgem needs to widen its scope of benchmarking and regulation (e.g. quality-incorporated benchmarking). Secondly, there seems to be no increasing returns to scale in the industry, a more appropriate reason why further mergers should not take place.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.seec.surrey.ac.uk/Research/SEEDS/SEEDS122.pdf
    Download Restriction: no

    Paper provided by Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey in its series Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) with number 122.

    as
    in new window

    Length: 26 pages
    Date of creation: Dec 2008
    Date of revision:
    Handle: RePEc:sur:seedps:122
    Contact details of provider: Postal: Guildford, Surrey GU2 5XH, UK
    Phone: +44(0)1483 686956
    Fax: +44(0)1483 689548
    Web page: http://www.seec.surrey.ac.uk
    Email:


    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:sur:seedps:122. 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: (Lester C Hunt)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.