EP 35

D Giannakis, Tooraj Jamasb, Michael Pollitt

Benchmarking and Incentive Regulation of Quality of Service: an Application to the UK Electricity Distribution Utilities

EP 35  | Non-Technical Summary | PDF

Abstract: 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 over 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.

Keywords: quality of service, benchmarking, incentive regulation, data envelopment analysis, electricity

Sorry, comments are closed for this post.

We are using cookies on our website

Are you happy to accept our analytics cookies, which help us learn about our website visitors and their use of this site? Learn how to disable all cookies.