Efficiency of electricity distribution companies

Abstract

Purpose – After assessing papers on efficiency, most of the studies available are focused on the analysis of efficiency measures, without providing a deep discussion of the factors that determine efficiency. This study
aims to evaluate the efficiency of Brazilian electricity distribution companies based on a structural model that enables the identification of a network of relationships among representative variables that contribute to
efficiency.

Design/methodology/approach – Structural equation modeling was applied in a sample of 62 electricity distribution companies operating in Brazil, forming a balanced panel from 2010 to 2014. Then, the
authors verified the model compliance according to the empirical evidence of the entities analyzed. This verification included a survey of the variables, which was supported by theoretical references related to the
phenomenon studied. The data collected were statistically treated, and benchmarking models and multivariate techniques were used. Once the adjustments were made, the re-specified model was estimated
using the maximum likelihood method.

Originality/value – This study adds to several other papers, and this is one of its main contributions. Relationships among the constructs have been systematized according to literature in the form of a
structural model, which will enable future researchers to have a reference frame of relevant studies and a research foundation in this area of knowledge. A third contribution is the model tested in a sample of
Brazilian electricity distribution companies, whose results can be compared to other utility sectors (e.g. telecommunications) or to other countries’ electrical sectors, thus providing an empirical basis for the
proposed hypotheses. Finally, this study also offers a contribution to the Brazilian Electrical Energy Agency (Aneel, in Portuguese), a regulatory agency, providing mechanisms to guide tariff adjustments,
seeking a balance between costs and the need for investments allied to tariff affordability.