Local Electricity Distribution in Italy: Comparative Efficiency Analysis and Methodological Cross-Checking

This paper analyses technical efficiency of local electricity distribution in Italy (1994, 1996) by using both econometric (deterministic frontier, stochastic frontier) and linear programming (Data Envelopment Analysis) tools. Cross-sectional data were examined with respect to:(a) ENEL - the Italian electricity monopolist;(b) municipal authorities (MUNIs), i.e. town-based electric utilities which sometimes hold franchises for electricity distribution within city limits.Estimation results highlighted non-exhaustion of scale economies at sample-mean values. Pooled ENEL-MUNI analysis failed to spot any systematic superiority of ENEL's units over municipalities. One-to-one comparisons confirmed that the outcomes were mixed, with ENEL's local branches outperforming MUNIs in metropolitan and (sometimes) rural areas, and MUNIs faring better in medium-sized, Po Valley towns (Northern Italy). This suggests that a case-by-case approach should be adopted by Italy's regulatory and governmental authorities when dealing with the territorial reform of electricity distribution. Similarly, any ownership transfers and/or mergers involving ENEL's units and MUNIs should depend on the varied efficiency records which were detected according to different regional and economic scenarios.