Social Cost Efficient Service Quality: Integrating Customer Valuation in Incentive Regulation—Evidence from the Case of Norway

Christian Growitsch, Tooraj Jamasb, Christine Müller and Matthias Wissner
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Christine Müller: WIK
Matthias Wissner: WIK

Chapter Chapter 4 in Data Envelopment Analysis, 2016, pp 71-91 from Springer

Abstract: Abstract In order to overcome the perverse incentives of excessive maintenance reductions and insufficient network investments arising with incentive regulation of electricity distribution companies, regulators throughout Europe have started regulating service quality. In this paper, we explore the impact of incorporating customers’ willingness-to-pay for service quality in benchmarking models on cost efficiency of distribution networks. Therefore, we examine the case of Norway, which features this approach to service quality regulation. We use the data envelopment analysis technique to analyse the effectiveness of such regulatory instruments. Moreover, we discuss the extent to which this indirect regulatory instrument motivates a socially desired service quality level. The results indicate that internalising external or social cost of service quality does not seem to have played an important role in improving cost efficiency in Norwegian distribution utilities.

Keywords: Electricity distribution; Service quality; Willingness-to-pay; Data envelopment analysis (search for similar items in EconPapers)
Date: 2016
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Journal Article: Social cost-efficient service quality--Integrating customer valuation in incentive regulation: Evidence from the case of Norway (2010)
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DOI: 10.1007/978-1-4899-7684-0_4

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