Have regulatory reforms improved the efficiency levels of the Japanese electricity distribution sector? A cost metafrontier-based analysis

Hong-Zhou Li, Maria Kopsakangas-Savolainen, Xing-Zhi Xiao and Sim-Yee Lau

Energy Policy, 2017, vol. 108, issue C, 606-616

Abstract: In order to identify the kinds of impacts that Japanese regulatory reforms in the electric power industry have had on the efficiency levels of the electrical distribution sector, the present study assembles a dataset which spans both pre- and post-regulation periods. Further, to make the estimated efficiency scores from the two sub-periods comparable, the study applies metafrontier frameworks proposed by O’Donnell et al. (2008) and Huang et al. (2014) to the cost function in the longitudinal setting. Estimates from both methods show that the average efficiency score of the electrical distribution sector during the whole sample period is relatively low. Further, findings also demonstrate that the efficiency levels after the regulatory reforms are lower than those before the regulatory reforms. To this surprising and unexpected phenomenon, we argue that cross-subsidization may be one reason for this kind of changing pattern in efficiency levels. In order to deal with the relatively low efficiency problem, we also suggest that Japanese regulators should introduce more incentive-based regulatory tools to replace the current rate-of-return regulation.

Keywords: Japanese electrical distribution sector; Metafrontier technique; Regulatory reform; Efficiency analysis; Cross-subsidization (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0301421517303865
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:108:y:2017:i:c:p:606-616

DOI: 10.1016/j.enpol.2017.06.032

Access Statistics for this article

Energy Policy is currently edited by N. France

More articles in Energy Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().