The Estimation of an Average Cost Frontier to Calculate Benchmark Tariffs for Electricity Distribution

Massimo Filippini and Joerg Wild
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Joerg Wild: Socioeconomic Institute, University of Zurich

No 9803, SOI - Working Papers from Socioeconomic Institute - University of Zurich

Abstract: In this paper we have examined the scale and cost inefficiency of a sample of Swiss electricity distribution utilities. To do so, we have considered estimation of a stochastic frontier average cost model using the approach suggested by Schmidt and Sickles (1984) for panel data. A translog cost function was estimated using panel data for a sample of 30 municipal utilities over the period 1992-1996. The results indicate the existence of economies of output and customer density and economies of scale. Moreover, the findings on cost inefficiency show that a majority of the distribution utilities is not producing at the minimum level of the cost and that a possible application of the frontier methodology employed in this paper relates to the regulation and benchmarking of the delivery rates.

Keywords: electricity; cost frontier; benchmarking; Switzerland (search for similar items in EconPapers)
JEL-codes: Q41 (search for similar items in EconPapers)
Pages: 11 pages
Date: 1998-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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https://www.zora.uzh.ch/id/eprint/51848/1/wp9803.pdf First version, 1998 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:soz:wpaper:9803

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