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Title: An alternative benchmarking approach for electricity utility regulation using maximum entropy
Author: Silva, Elvira
Macedo, Pedro
Soares, Isabel
Keywords: DEA
Electricity distribution
Maximum Entropy
Technical efficiency
Issue Date: 28-Jul-2016
Publisher: IEEE
Abstract: The main purpose of this study is to present an alternative benchmarking approach that can be used by national regulators of utilities. It is widely known that the lack of sizeable data sets limits the choice of the benchmarking method and the specification of the model to set price controls within incentive-based regulation. Ill-posed frontier models are the problem that some national regulators have been facing. Maximum entropy estimators are useful in the estimation of such ill-posed models, in particular in models exhibiting small sample sizes, collinearity and non-normal errors, as well as in models where the number of parameters to be estimated exceeds the number of observations available. The empirical study involves a sample data used by the Portuguese regulator of the electricity sector to set the parameters for the electricity distribution companies in the regulatory period of 2012-2014. DEA and maximum entropy methods are applied and the efficiency results are compared.
Peer review: yes
DOI: 10.1109/EEM.2016.7521250
ISBN: 978-1-5090-1298-5
ISSN: 2165-4093
Appears in Collections:CIDMA - Comunicações

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