A framework for establishing the technical efficiency of Electricity Distribution Counties (EDCs) using Data Envelopment Analysis

Abstract European Energy market liberalization has entailed the restructuring of electricity power markets through the unbundling of electricity generation, transmission and distribution, supply activities and introducing competition into electricity generation. Under these new electricity market regimes, it is important to have an evaluation tool that is capable of examining the impacts of these market changes. The adoption of Data Envelopment Analysis as a form of benchmarking for electricity distribution regulation is one method to conduct this analysis. This paper applies a Data Envelopment Analysis framework to the electricity distribution network in Ireland to explore the merits of using this approach, to determine the technical efficiency and the potential scope for efficiency improvements through reorganizing and the amalgamation of the distribution network in Ireland. The results presented show that overall grid efficiency is improved through this restructuring. A diagnostic parameter is defined and pursued to account for aberrations across Electricity Distribution Counties as opposed to the traditionally employed environmental variables. The adoption of this diagnostic parameter leads to a more intuitive understanding of Electricity Distribution Counties.