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- Performance evaluation in Portuguese electricity distribution utilitiesPublication . Santos, Sérgio Pereira dos; Amado, Carla; Rosado, Joaquim; Rodrigues, Paulo M. M.; Santos, Sérgio Pereira dos; Ferreira, F. A. F.The Portuguese electricity system has undergone a major transformation in recent years due to its integration in the liberalised Iberian market. The group responsible for the electricity generation and distribution in Portugal (EDP) has been consistently focusing in service quality and efficiency. In the last 3 years, a stringent cost cutting and efficiency improvement program was implemented. This paper conducted a Data Envelopment Analysis (DEA) study to measure the relative efficiency of the 14 electricity distribution units belonging to EDP. A dynamic analysis using Malmquist Indices was also conducted in order to evaluate the changes in productivity from 2002 to 2005. Our results show that, on average, we can find evidence of 2% productivity gains in the Portuguese electricity distribution sector. Furthermore, we found evidence of significant discrimination among regional areas, suggesting that a benchmarking exercise based on the DEA results could be valuable for performance improvement in some regions.
- Formative evaluation of electricity distribution utilities using data envelopment analysisPublication . Santos, Sérgio Pereira dos; Amado, Carla; Rosado, JoaquimThe use of Data Envelopment Analysis (DEA) in the electricity distribution sector has been prolific in the number of papers published in research journals. However, while numerous studies have been documented, they have mostly been summative. Their aim has been predominantly descriptive and classificatory. This paper argues that evaluations of a formative nature are more effective than summative studies in promoting a better understanding of the structures and processes of electricity distribution utilities and, consequently, are more appropriate to contribute to performance improvement. To illustrate the use of DEA for formative evaluation, and highlight some of the difficulties of using DEA in practice, this paper compares the cost-efficiency of the Portuguese electricity distribution companies from 2002 to 2006. A dynamic analysis using Malmquist Indices is also conducted in order to evaluate the changes in productivity over this period. Our analysis shows that the application of DEA for formative purposes meets some difficulties. In particular it shows that while the modelling of productivity/efficiency scores using DEA is relatively straightforward, it is comparatively more difficult to develop models that are economically valid and that produce results with face validity. On the basis of the insights derived from this analysis, the paper provides some recommendations regarding the successful application of DEA for performance improvement.
- Using data envelopment analysis to support the design of process improvement interventions in electricity distributionPublication . Amado, Carla; Santos, Sérgio Pereira dos; Sequeira, J.A significant number of studies have documented the use of Data Envelopment Analysis (DEA) for efficiency measurement in the context of electricity distribution, particularly at the level of the distribution utilities. However, their aim has been predominantly descriptive and classificatory, without any attempt to ‘open’ the black box of the transformation process. In contrast, our aim is to explore the potential of DEA to contribute to the design of effective process improvement interventions within a distribution utility. In particular, in this paper, we study an important question within the context of DEA analysis: that is, to investigate whether differences in efficiency can be attributed to a particular managerial programme or design feature. We use two different methodologies to undertake this type of analysis. Firstly, we apply Mann–Whitney rank statistics to the scores obtained from DEA in order to evaluate the statistical significance of the differences observed between an intervention programme and its control group programme. Secondly, we undertake dynamic analysis with the Malmquist Productivity Index in order to study the impact of the introduction of a new technology on a group of units. Our case study focuses on the performance evaluation of medium-voltage power lines belonging to one of the service areas in the Public Electricity Distribution System in Portugal. The results from our case study show that the application of DEA for process improvement interventions has great potential and should be explored in other contexts.