S. Honkapuro, J. Lassila, and J. Partanen (Finland)
Electricity distribution, Economic regulation, Software development
Regulators around the world are using efficiency benchmarking as a tool to provide companies with efficiency incentives. However, without appropriate design, efficiency benchmarking can cause unwanted effects for instance on the investment strategies of the companies. Thereby it is essential to analyse the directing effects of the efficiency benchmarking when developing the benchmarking method for the economic regulation of the electricity distribution companies. The development of the software application for analysing these directing effects is presented in this paper. The software application is based on the efficiency benchmarking method called Data Envelopment Analysis (DEA). Therefore, also the DEA method and its major properties are presented in this paper. In addition, problematic issues discovered in the DEA benchmarking as well as some solutions for these problems are presented. The developed software application has been used successfully in several research projects. Some examples of the results achieved with the software application are presented in the end of this paper.
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