Manuel Llorca

Efficiency and Environmental Factors in the US Electricity Transmission Industry

The electricity industry in most developed countries has been restructured over recent decades with the aim of improving both service quality and firms’ performance. Regulated segments (e.g. transmission) still provide the infrastructure for the competitive segments and represent a notable amount of the total price paid by final customers. However there is a lack of empirical studies that analyze firms’ performance in the electricity transmission sector. We conduct an empirical analysis of the US electricity transmission companies for the period 2001-2009. We use stochastic frontier models that allow us to identify determinants of firms’ inefficiency and to control for weather conditions, potentially one of the most decisive uncontrollable factors in electricity transportation. Our results suggest that there is room for improvement in the performance of the US electricity transmission system. Regulators should also take into account that more adverse conditions generate higher levels of inefficiency and that achieving long-term efficiency improvements tends to deteriorate firms’ short-term relative performance.

Institutions and Performance of Regulated Firms: Evidence from Electric Utilities in the Indian States

It is commonly accepted that institutions influence economic development of countries. But, can we also trace the effect of institutional endowment to specific sectors and regions of a country? There is a significant gap in knowledge and evidence of this issue in the literature. This paper examines this effect in the Indian electricity distribution sector and explores the influence of state-level institutional quality and economic factors on the performance of network utilities in India. Since the 1990s, India has adopted reform steps to improve the efficiency of its electricity sector. However, there remain performance differences among the utilities. We examine the performance of 52 electricity distribution utilities in 24 Indian states for the period from 2006-07 to 2011-12. The findings confirm that the quality of institutions and state-wide economic development affect the performance of the electricity distribution utilities in different states. Additionally, we simulate the cost savings from utilities’ performance improvements linked with institutional enhancements. The results indicate the need to strengthen the institutions, for example through regulatory agencies reform to improve the performance of the sector.

Power Sector Reform and Corruption: Evidence from Sub-Saharan Africa

In order to reduce the influence of corruption on electricity sector performance, most Sub-Saharan African countries have implemented sector reforms. However, after nearly two and half decades of reforms, there is no evidence whether these reforms have mitigated or exacerbated corruption. Neither is there evidence of performance improvements of reforms in terms of technical, economic or welfare impact. This paper aims to fill this gap. We use a dynamic panel estimator with a novel panel data set of 47 Sub-Saharan African countries from 2002 to 2013. We analyse the impact of corruption and two key aspects of electricity reform model – creations of independent regulatory agencies and private sector participation – on three performance indicators: technical efficiency, access to electricity and income. We find that corruption can significantly reduce technical efficiency of the sector and constrain the efforts to increase access to electricity and national income. However, these adverse effects are reduced where independent regulatory agencies are established and privatisation is implemented. Our results suggest that well-designed reforms not only boost economic performance of the sector directly, but also indirectly reduce the negative effects of macro level institutional deficiencies such as corruption on micro and macro indicators of performance.