Efficiency analysis for performance evaluation of electricity distribution companies
The power distribution segment has characteristics of natural monopoly requiring proper regulation to guarantee the tripod: power supply security; tariff modicity; and universal service. The tariff regulation process is key for providing a higher level of control for the regulator with respect to utilities. In Brazil, the mechanism adopted for tariff regulation is carried out by the National Electric Regulatory Agency (ANEEL). The design of tariffs should guarantee good quality of supply while recognizing sufficient remuneration to cover operational costs and investments necessary to expand capacity. Utilities behave differently from each other and can be distinguished in terms of costs, quality, market and network size, and other factors that ultimately affect their efficiency. As a result, the process to measure and analyze utilities efficiency and evaluate whether they are using resources in the best way have been receiving considerable attention in the literature. In Brazil, the Data Envelopment Analysis (DEA) technique is employed by ANEEL to define a efficiency measure for distribution companies (DisCos). The model has a single input defined by operational expenditures (OPEX), and as outputs: high voltage, overhead and underground distribution grid, weighted market, number of consumers, consumer hour-interrupted (CHI) adjusted and non-technical losses adjusted. The efficiency is measure by weighting these variables such that the ratio of weighted inputs divided by weighted outputs is maximized. In the current model these variables’ weights, which are the decision variables in the DEA model, are restricted to avoid unsuitable weight values. However, these restrictions reduce flexibility and transparency of the DEA. The goal of this paper is to evaluate the influence of weights limits in efficiencies results and to perform a sensitivity analysis of efficiency scores. The methodology was developed through the R&D project “DEA and REA methodologies as an KPI of DisCos efficiency” sponsored by CPFL Energia.