Divestiture Policy and Operating Efficiency in U.S. Electric Power Distribution

John Kwoka, Sanem Ozturk and Michael Pollitt

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: This study examines the effects of divestiture policy on the operating efficiency of US distribution utilities. We focus on the decisive 1994-2003 period when state utility commissions required or pressured utilities to create standalone generation facilities, and thereby almost incidentally standalone distribution systems. The analytical foundation of this study is the measurement of the operating efficiency of 73 distribution units of major U.S. electric utilities in each of those ten years through the use of data envelopment analysis (DEA). Using this panel of data and controlling for other possible influences, we then evaluate the effects on measured efficiency from the divestitures that many of the utilities underwent during the study period. We find that while all divestitures as a group do not significantly affect distribution efficiency, those mandated by state public utility commissions have resulted in large and statistically significant adverse effects on efficiency.

Keywords: Divestiture; electricity distribution; efficiency analysis (search for similar items in EconPapers)
JEL-codes: L94 (search for similar items in EconPapers)
Date: 2008-07
New Economics Papers: this item is included in nep-eff and nep-ene
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Divestiture policy and operating efficiency in U.S. electric power distribution (2010)
Working Paper: Divestiture Policy and Operating Efficiency in US Electric Power Distribution (2008)
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