Gas Distribution Benchmarking of Utilities from Slovenia, the Netherlands and the UK: an Application of Data Envelopment Analysis
This paper carries out non-parametric relative efficiency comparisons using an international sample of gas distribution utilities from two old and one new EU members, namely the Netherlands, the UK, and Slovenia. By conducting DEA on a cross-sectional sample of gas utilities, we discover that, on average, Slovenian utilities perform less efficiently than UK and Dutch utilities. To a large extent, this is due to the less extensive regulation of the Slovenian gas industry as seen in the past. The incentive-based price-cap regulation recently introduced in Slovenia could help close this efficiency gap over time. The authors also find out that different model specifications lead to very similar efficiency scores and rankings, implying that benchmarking can be employed as a useful complementary instrument for monitoring utility performance. In this way, the informational asymmetry between distribution utilities and regulatory authorities can be significantly mitigated. For the wider and more successful implementation of international benchmarking in the future, it is also important that coherent regional and international data is made available to regulators.
The paper attempts to synthesize the analytical nucleus of classical political economy and modern ecological economics. In essence this means making a connection between social issues of income distribution, accumulation of capital and economic growth with biophysical limits to economic development. We first model a simple growing system of production and explore its potential to maintain sustainability when using a single natural resource. Taking into consideration the laws of thermodynamics we show that the long-term sustainability of such a simple system is unlikely. When the model is extended to incorporate a wider range of inputs used and commodities produced, such complexity accompanied by knowledge-based structural changes provides necessary conditions for the long-run sustainability of a growing economic system. Since input-output complexity results from the division of labour on the one hand and from intentional R&D policies on the other, this conclusion also brings forward some policy implications regarding income distribution in the society.