Gas Distribution Benchmarking of Utilities from Slovenia, the Netherlands and the UK: an Application of Data Envelopment Analysis

This paper carries out non-parametric relative efficiency comparisons using an international sample of gas distribution utilities from two old and one new EU members, namely the Netherlands, the UK, and Slovenia. By conducting DEA on a cross-sectional sample of gas utilities, we discover that, on av...

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Bibliographic Details
Published in:South East European journal of economics and business 2009-04, Vol.4 (1), p.113-124
Main Authors: Zorić, Jelena, Hrovatin, Nevenka, Scarsi, Gian
Format: Article
Language:English
Subjects:
Benchmarking
Comparative analysis
comparative efficiency analysis
Cross-sectional analysis
Data envelopment analysis
DEA
Distribution
Economic performance
Energy industry
Europe
Gas
gas distribution utilities
international benchmarking
Logistics
Natural gas
Netherlands
price regulation
Production management
Regulation
Regulatory policy
Slovenia
United Kingdom
Utilities
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Summary:This paper carries out non-parametric relative efficiency comparisons using an international sample of gas distribution utilities from two old and one new EU members, namely the Netherlands, the UK, and Slovenia. By conducting DEA on a cross-sectional sample of gas utilities, we discover that, on average, Slovenian utilities perform less efficiently than UK and Dutch utilities. To a large extent, this is due to the less extensive regulation of the Slovenian gas industry as seen in the past. The incentive-based price-cap regulation recently introduced in Slovenia could help close this efficiency gap over time. The authors also find out that different model specifications lead to very similar efficiency scores and rankings, implying that benchmarking can be employed as a useful complementary instrument for monitoring utility performance. In this way, the informational asymmetry between distribution utilities and regulatory authorities can be significantly mitigated. For the wider and more successful implementation of international benchmarking in the future, it is also important that coherent regional and international data is made available to regulators.
ISSN:1840-118X
DOI:10.2478/v10033-009-0008-1