Performance Evaluation of Power Distribution Sector of Srilanka based on Data Envelopment Analysis

Abstract

Performance benchmarking is very important for any type of organization. Results of such benchmarking studies allow the organization or the unit to compare themselves with the best organization or unit and to develop strategic plans for improvements in their performance. This paper studies how to carry out Data Envelopment Analysis (DEA) analysis to evaluate constant return to scale (CRS), variable return to scale (VRS) and scale efficiency scores and slack analysis in order to find efficient input targets and output targets. Then DEA analysis was carried out with different models and justified the selected base model for the analysis. The main objective of this study is to evaluate the electric distribution units in Sri Lanka. Presently there is no proper method for finding performance in Ceylon Electricity Board (CEB). In this paper, performance of 20 areas within Distribution Division 02 (DD2) of CEB is evaluated using Data Envelopment Analysis. Relative efficiency scores and methods to improve efficiencies are identified for each area. The relative efficiencies of each area in DD2 are evaluated using DEA and the best performing areas within DD2 is identified. Then it is determined the ways to improve each area’s performance, if it is not one of the top performing areas. A common algorithm is proposed to evaluate the performance of any type of organization. This paper also discusses the classification of Decision Making Units (DMUs) according to the sensitivity analysis. The algorithm which can be followed by top managers of any organization to evaluate and improve relative performance is discussed. Relative performance of 20 areas within Distribution Division 02 (DD2) of Ceylon Electricity Board is evaluated using DEA. Relative efficiency scores and methods to improve efficiencies are identified for each area.