Concentration in the electricity market: a return to the old paradigm?

Abstract

The market structure of the electricity distribution segment is delineated through mergers and acquisitions. These movements are affected by the current regulatory model, which may favor a certain scale size over another. Although several papers analyze the Brazilian electricity distribution segment, Business Groups (BGs) are usually neglected in efficiency analysis. In this context, the paper evaluates the efficiency of the BGs that make up the Brazilian electricity distribution segment. To this end, three models - based on the Data Envelopment Analysis - were developed to evaluate global, technical, and scale efficiency. On average, the groups obtained the value of 0.60 for global efficiency, 0.76 for technical efficiency, and 0.80 for scale efficiency. Under the technical efficiency frontier, approximately 24% of operating costs could be reduced, translating into an average drop in the tariff of R$ 65 in the year 2017. This study contributes, in an empirical manner, to a greater understanding of the phenomenon of market concentration in natural monopolies.