Application of Network DEA Model to Vertically Integrated Electric Utilities

Miki Tsutsui and Kaoru Tone
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Miki Tsutsui: Central Research Institute of Electric Power Industry
Kaoru Tone: National Graduate Institute for Policy Studies

No 07-03, GRIPS Discussion Papers from National Graduate Institute for Policy Studies

Abstract: Liberalization of the electric power industry has been underway in various countries. Under this situation, it is necessary for electric power companies to improve their management efficiency in order to survive in a competitive market. This study examines management efficiency of vertically integrated electric companies, which consist of several divisions, such as generation, transmission, distribution and so forth. Previous studies mainly focused on efficiency of only a specific division independently. However, we should evaluate firm-level management efficiency based on divisional efficiencies, because these divisions are closely linked each other. For measuring firm-level efficiency, we apply a network DEA model that considers a streamlined relationship among divisions under vertical integration. Furthermore we newly proposed a constrained network DEA model to obtain more practical efficiency index.

Keywords: Network DEA; electric utilities; vertical integration (search for similar items in EconPapers)
Pages: 18 pages
Date: 2007-07
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Citations: View citations in EconPapers (1)

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