Productivity Development for Norwegian Electricity Distribution Companies 2004-2013

Abstract

Norwegian distribution companies have been subjected to an incentive regulation scheme from 1997, and the efficiency incentives were further strengthened with the introduction of yardstick regulation in 2007. We examine the productivity development for these companies in the period from 2004 to 2013. Using three benchmarking methods, DEA, SFA, and StoNED, we examine productivity change, with the usual decompositions into efficiency change, technical change, and scale efficiency change. Increasing investments and use of accounting-based capital costs in our analysis may lead to a negative bias in the productivity change estimates, and we therefore perform our analysis with and without capital costs. Our results indicate a negative productivity development for the whole period from 2004 to 2013, and we do not observe a positive effect of the change in regulation regime from 2007.