A novel power sector restructuring model based on Data Envelopment Analysis (DEA)

Abstract

This paper evaluates relative performance of the Electric Distribution Divisions (EDDs) of an Indian State, Uttarakhand for the period 2005–2008, through application of Data Envelopment Analysis (DEA). To improve the operational efficiency of EDDs, Uttarakhand Power Corporation Limited (UPCL) disintegrated several divisions into smaller ones over this period. However, microlevel examination revealed the ineffectiveness of this process during the period of analysis. Therefore, in the present work an alternative reorganization model for selecting the EDDs for disintegration and for selecting the optimum scale for disintegration is proposed based on the efficiency analysis of 2007. The model is verified by comparing the mean efficiency score of the EDDs derived using proposed model with that of existing ones. It is found that overall efficiency of proposed model is higher than the existing system. Reliability of the overall efficient EDDs is also examined to check the robustness of the CCR result for the same year. This study gives an assessment of UPCL to monitor and diagnose the changes in the efficiency of EDDs, so it will help regulators to formulate more effective policies on deregulation and disintegration and to determine the appropriate efficiency improvement measures when imposing yardstick competition on electric utilities.