COMPARISON OF PRODUCTIVE AND COST EFFICIENCIES AMONG JAPANESE AND US ELECTRIC UTILITIES

Using Data Envelopment Analysis (DEA), this article measures both over all cost efficiency and technical efficiency to compare bilaterally be tween Japanese and US electric utilities in the annual periods from 19 84 to 1993. Nine Japanese and 14 US vertically integrated investor-own ed electric utilities are examined in this study. An intertemporal eff iciency index, measuring the intertemporal shift of an efficiency fron tier, is measured for the examination of productivity improvement over a time period. Country average overall cost efficiency indices are al so proposed and broken down into technical, scale and allocative effic iencies in terms of cross-sectional and time-series performance analys es. The main empirical results include: (1) the overall cost efficienc y of Japanese electric utilities was consistently higher than that of US electric utilities from 1984 to 1993; (2) Japanese utilities were m ore efficient than US utilities in terms of technical, allocative and scale efficiencies; (3) allocative inefficiency was a main source of o verall cost inefficiency for the Japanese utilities. Our empirical res ults indicate that high electricity tariffs are mainly due to an exces sive amount of capital investment, a source of allocative inefficiency , found in Japanese utilities. This finding may imply that electricity prices of Japanese utilities can be reduced by creating a free market where the utilities can increase inexpensive power purchase from inde pendent power producers through competitive bidding, and/or they procu re inexpensive equipments, (C) 1998 Elsevier Science Ltd, All rights r eserved.