EFFICIENCY IN OPERATING COSTS OF THE BRAZILIAN ELECTRICITY DISTRIBUTION COMPANIES (CDEES):

APPLICATION OF TWO-STAGE (DEA&TOBIT) ANALYSIS

Abstract

The efficient operating costs of the Electric Energy Distribution Companies (CDEEs), which are not observable by the regulator, are vital for the regulation of the Brazilian tariff
system of the electricity distribution sector. The objectives of this study are to obtain and analyze the operational cost efficiency (Opex) scores of Brazilian CDEEs from a yardstick competition perspective, assuming that variables external to the CDEEs management (environmental variables) can affect efficiency levels. We used a two-stage procedure (DEA&Tobit) where in the first stage we obtain efficiency scores by data envelopment analysis (DEA). In the second stage, we estimate the effects of environmental variables on the CDEEs efficiency levels with the Tobit, MQO, truncated regression and bootstrap models. We conclude that it is possible to save 32.18% of the operating costs of Brazilian CDEEs and still maintain the current level of energy distribution. As Brazilian CDEEs are very heterogeneous in terms of efficiency with 91.53% of them operating with inefficient scale, there is room to redesign the incentive
mechanism in place. In addition, as the privately-owned and larger-sized CDEEs are more efficient, there is also room for policies toward privatization and consolidation of the Brazilian
energy distribution sector.