Benchmarking and incentive regulation of quality of service: an application to the UK electricity distribution networks

Dimitrios Giannakis, Tooraj Jamasb, Michael Pollitt
2005 Energy Policy  
Quality of service has emerged as an important issue in post-reform regulation of electricity distribution networks. Regulators have employed partial incentive schemes to promote cost saving, investment efficiency, and service quality. This paper presents a quality-incorporated benchmarking study of the electricity distribution utilities in the UK between 1991/92 and 1998/99. We calculate technical efficiency of the utilities using Data Envelopment Analysis technique and productivity change
more » ... time using quality-incorporated Malmquist indices. We find that cost efficient firms do not necessarily exhibit high service quality and that efficiency scores of cost-only models do not show high correlation with those of quality-based models. The results also show that improvements in service quality have made a significant contribution to the sector's total productivity change. In addition, we show that integrating quality of service in regulatory benchmarking is preferable to cost-only approaches.
doi:10.1016/j.enpol.2004.04.021 fatcat:gqayf7sjkzbfhobvcs3rgkligq