Reference : Estimating The Cost of Improving Quality in Electricity Distribution: A Parametric Di...
Scientific journals : Article
Business & economic sciences : Production, distribution & supply chain management
Estimating The Cost of Improving Quality in Electricity Distribution: A Parametric Distance Function Approach
Coelli, Tim [University of Queensland > > > >]
Gautier, Axel mailto [Université de Liège - ULiège > HEC-Ecole de gestion : UER > Economie industrielle >]
Perelman, Sergio mailto [Université de Liège - ULiège > HEC-Ecole de gestion : UER > Economie publique appliquée >]
Saplacan-Pop, Roxana [Electricité de France > > > >]
Energy Policy
Elsevier Science
Yes (verified by ORBi)
[en] benchmarking ; electricity distribution ; parametric distance function ; quality ; shadow prices
[en] The quality of electricity distribution is being more and more scrutinized by regulatory authorities, with explicit reward and penalty schemes based on quality targets having been introduced in many countries (France, Germany, Italy, UK,...). It is then of prime importance to know the cost of improving the quality for a distribution system operator. In this paper, we focus on one dimension of quality, the continuity of supply, and we estimated the cost of preventing power outages. For that, we make use of the parametric distance function approach, assuming that outages enter in the firm production set as an input, an imperfect substitute for maintenance activities and capital investment. This allows us to identify the sources of technical inefficiency and the underlying trade-­‐off faced by operators between quality and other inputs and costs. For this purpose, we use panel data on 92 electricity distribution units operated by ERDF (Electricité de France - Réseau Distribution) in the 2003–2005 financial years. Assuming a multi-output multi-input translog technology, we estimate that the cost of preventing one interruption varies substantily among the distribution units from 2.7 € to 15.7 €. Furthermore, as one would expect, marginal quality improvements tend to be more expensive as quality itself improves.
Centre de Recherche en Économie Publique et de la Population - C.R.E.P.P
Electricité de France
Researchers ; Professionals

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