Limitations of weight restrictions in data envelopment analysis for benchmarking Brazilian electricity distribution system operators

Marcelo Azevedo Costa, Ana Lúcia Lopes-Ahn, Alexander de Carvalho Kilger and Artur Fontenelle Micas

Utilities Policy, 2023, vol. 82, issue C

Abstract: The Brazilian regulator has applied weight restrictions to Data Envelopment Analysis (DEA) for estimating the regulatory expenditures of distribution system operators. An ad-hoc procedure is currently being proposed, using a previous model without weight restrictions to estimate upper and lower boundaries using a data-driven approach. Nevertheless, DEA is subject to multiple solutions that may be achieved with a random switch of the dataset rows. In brief, the proposed methodology is extremely sensitive to multiple solutions. Using a simulation study, we see regulatory operational expenditures may vary close to US$ 42 million, thus compromising the financial integrity of companies.

Keywords: Data envelopment analysis; Weight restrictions; Benchmarking; Electricity distribution; Cost regulation (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0957178723000528
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:juipol:v:82:y:2023:i:c:s0957178723000528

DOI: 10.1016/j.jup.2023.101540

Access Statistics for this article

Utilities Policy is currently edited by Beecher, Janice

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