Cost efficiency analysis of electricity distribution networks: Application of the StoNED method in the Finnish regulatory model
نویسنده
چکیده
Electricity distribution network is a prime example of a natural local monopoly. In many countries, electricity distribution firms are regulated by the government. In Finland, the regulator estimates the efficient cost frontier using the data envelopment analysis (DEA) and stochastic frontier analysis (SFA) methods. This paper reports the main results of the research project commissioned by the Finnish regulator for further development of the efficiency estimation in their regulatory model. The key objectives of the project were to integrate a stochastic SFA-style noise term to the nonparametric, axiomatic DEA-style cost frontier, and take into account the heterogeneity of firms and their operating environments. To estimate the resulting stochastic semi-parametric cost frontier model, a new method called stochastic nonparametric envelopment of data (StoNED) is proposed. Based on the insights obtained in the empirical analysis using real data of the regulated networks, replacing the currently used DEA and SFA methods by the StoNED method is recommended.
منابع مشابه
Economic Regulation Design for the Electricity Distribution Companies of Iran
In addition to the necessity of liberalizing the price of the various sectors of electricity, the regulation of sectors that still maintain their own monopoly structure is mandatory. In order to improve the efficiency of these sectors and encourage their cost reduction, incentive-based regulatory approaches are used which rely on performance evaluation. Due to the monopolistic structure of Iran...
متن کاملCost Efficiency Evaluation via Data Envelopment Analysis Approach for Undesirable Outputs based on the Weak Disposability Axiom (Case Study: 56 Electricity Producing Thermal Power Plants in Iran)
Cost efficiency evaluation is a very important and applicable issue in Data Envelopment Analysis (DEA). In this paper, the classical cost efficiency model in which all the input prices are known and fixed for each decision making unit is developed via undesirable outputs with the weak disposability axiom. The proposed model is a nonlinear model under the variable returns to scale condition,...
متن کاملA Robust Two-stage Data Envelopment Analysis Model for Measuring Efficiency: Considering Iranian Electricity Power Production and Distribution Processes
This paper presents a new robust two-stage Data Envelopment Analysis (DEA) for efficiency evaluation of the electricity power production and distribution companies. DEA has been widely used for benchmarking the electricity companies. Traditional studies in DEA consider systems as a whole when measuring the efficiency, ignoring the operation of individual processes within a system. To tackle thi...
متن کاملEvaluating the Efficiency and Benchmarking of Regions in an Electricity Distribution Company Using a Public Lighting Asset Management Model
Public lighting networks are constructed and maintained to provide social security and traffic safety. Due to the expansion of cities, the development in public lighting is inevitable. In addition to new investment, the public lighting service and maintenance program imposes high costs on distribution companies. Since performance assessment methods focus on a combination of key performance indi...
متن کاملThermo-economic analysis and optimization of cogeneration systems by considering economic parameters fluctuations
A successful cogeneration system design project needs an estimation of the economical parameters of the project, including capital investment, costs of fuel, expenses in maintenance and operating, and the proper cost for the products. This study describes the economic consideration of the benchmark cogeneration systems, called CGAM system located in the United States. To evaluate the profitabil...
متن کامل