Iranian Energy Economics

Efficiency Correction of Iran's Electricity Distribution Companies by Environmental Factors: An Application of Two-stage (DEA and Tobit) Analysis

Document Type : Research Paper

Authors

Mohsen Pourebadollahan Covich 1
Firouz Fallahi 1
Kioumars Heydari 2
Pouyan Kiani 3

1 Associate Professor, Department of Economic Development and Planning, Faculty of Economics, Management and Business, University of Tabriz, Tabriz, Iran

2 the head of energy and power economics group and adisor of the head of Niroo Research Institute

3 Ph.D. Student, Department of Economic Development and Planning, Faculty of Economics, Management and Business, University of Tabriz, Tabriz, Iran

https://doi.org/10.22054/jiee.2017.8026
Abstract
Since electricity distribution companies operate in various environmental conditions, their relative efficiency scores used for regulation purposes, should be corrected for environmental factors that could influence the underlying efficiency of them. This paper conducts efficiency correction for 39 Iranian electricity distribution companies applying two stage (DEA and Tobit) analysis in 2015. Accordingly, first to the efficiency performances of the electricity distribution companies are determined using DEA. In the second stage, the Tobit model is emploied to determine the environment factors which may explain the calculated efficiency scores. Based on the results, the rainfall level and the customer mix have negative and positive effects on efficiency of electricity distribution companies, respectively. Hence, the primary efficiency scores of DEA are corrected for environmental influences. The comparison of the primary and the corrected efficiencies indicate a significant changes in the efficiency scores and the ranking of the Iranian electricity distribution companies, such that the efficiency of companies with higher rainfall and lower industrial customers relative to their average, have increased, and vice versa.

Keywords

Efficiency
Environmental Factors
Electricity Distribution Companies
Two-Stage Analysis
Iran

  • Receive Date 17 June 2017
  • Accept Date 24 October 2017
  • First Publish Date 24 October 2017
  • Publish Date 22 June 2017

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