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The Determinants of the Cost Efficiency of Electric Generating Plants: A Stochastic Frontier Approach
Author(s) -
Hiebert L. Dean
Publication year - 2002
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/j.2325-8012.2002.tb00467.x
Subject(s) - restructuring , frontier , function (biology) , stochastic frontier analysis , econometrics , operating cost , economics , environmental economics , microeconomics , production (economics) , biology , accounting , archaeology , finance , evolutionary biology , history
This article provides a detailed analysis of generation plant operating cost efficiency over the period 1988‐1997. I estimate a stochastic frontier cost function together with a model of plant inefficiencies to measure the operating efficiencies of individual plants and identify factors that are associated with variations in plant efficiencies. I find evidence that plant efficiencies are associated with capacity utilization of the plant, the number of plants under utility management, and ownership form. I also find that regulatory restructuring activity in certain states is associated with improvements in plant operating performance.