Electricity distribution in Italy : microeconomic efficiency analysis of local distributing units with methodological cross-checking
This thesis analyses technical efficiency of local electricity distribution in Italy (1994, 1996) by using both econometric (deterministic frontier, stochastic frontier) and linear programming (Data Envelopment Analysis) tools. Cross-sectional data was examined with respect to (a) ENEL - the Italian electricity monopolist whose restructuring and privatisation is now under way - and its local distribution branches (Chapters 2, 3, and 5); (b) municipal authorities (MUNIs), i.e. town-based electric utilities which sometimes hold franchises for electricity distribution within city limits (Chapters 4 and 5). Estimation results from Chapters 2 and 3 highlighted non-exhaustion of scale economies at sample-mean values. Scope economies between medium and low-voltage distribution were also detected (Ch. 2). Efficiency score series stemming from both econometric and linear programming techniques in Chapters 3 and 5 showed that Southern distributors were relatively under-represented among top units even after allowing for several exogenous environmental variables. The external effects which proved to influence technical efficiency in electricity distribution were consumer density, the percentage of industrial customers, the geographical nature of areas served (metropolitan areas, mountains, etc.), and the interaction between ENEL's units and municipal utilities in those towns featuring ENEL and MUNIs bordering each other. Pooled ENEL-MUNI analysis from Chapter 4 failed to spot any systematic superiority of ENEL's units over municipalities. Generalisation on the ENEL-MUNI efficiency dispute was then discarded, in favour of case-by-case comparison. Paired-samples statistical testing (both parametric and non-parametric) from Chapter 5 showed limited agreement between Stochastic Frontier Estimation (SFE) and Data Envelopment Analysis (DEA) efficiency outcomes. Statistical concordance was more often found when comparing SFE and DEA models sharing the same input-output specification. Again, no apparent superiority of ENEL over MUNIs was found out by DEA linear programs. One-to-one comparisons confirmed that the outcomes were mixed, with ENEL's local branches outperforming MUNIs in metropolitan and (sometimes) rural areas, and MUNIs faring better in medium-sized, Po Valley towns (Northern Italy). Results were not clear-cut for Alpine and rural distributors. The latter however - should be considered on a separate basis in that they will probably need permanent subsidies to meet universal service obligations, irrespective of the future structure of electricity distribution in Italy. Comparable (e.g., urban) units might - on the other hand - be subject to yardstick regulation based upon DEA's 'efficient peer' outcomes. Apart from the main empirical work, this thesis also features institutional and theoretical overviews (Chapters 2 to 5) with relevant literature surveys, a DEA Numerical Appendix (Chapter 5), and a regional map of the Italian territory (end of thesis).