Parametric and nonparametric approaches to benchmarking the regulated firm

Rewarding regulated firms based on their relative performance requires benc hmarks that reflect how performance is affected by regulation. This paper d emonstrates how parametric and nonparametric efficiency measures can be emp loyed to produce benchmarks that account for the effects of regulation. We apply measurement techniques to an eleven-year panel of 20 U.S. interstate natural gas transmission companies and use our benchmarking measures to dis tinguish firms that perform well owing to a superior management of technolo gy from firms that perform well owing to the effective management of the re gulatory mechanism.