Quality and Efficiency — A DEA Based Analysis of the Austrian Electricity Distribution Sector

This paper analyses the impact of including quality of supply in a DEA analysis of a sample of Austrian electricity distribution system operators (DSOs). We outline the current Austrian regulatory regime, conduct a DEA-based analysis with various model specifications which is followed by a second stage analysis, carry out a sensitivity analysis regarding the price of quality and determine the shadow price for quality. We conclude that the definition of capital costs (book values versus annuities) exerts a much stronger influence on efficiency scores than the inclusion of quality (outage costs). Shadow prices might not lead to a social optimum if the present quality level is already too low or too high. Quality should be preferably treated as an integral part of the input cost base, i.e. by adding outage costs to network total costs (TOTEX) and not as a separate input. This should be done even if global test statistics suggest that the inclusion of quality has a non-significant impact on the mean of efficiency scores.