Technical Inefficiency in Electricity Distribution : An Application of the Stochastic Distance Function

This paper evaluates the performance of the Colombian electricity distribution companies during the period from 1999 to 2003, using stochastic distant functions. This methodology allows measuring the levels of technical efficiency of the different companies. The results indicates that significant differences exist among companies, suggesting that important earning of technical efficiency can be obtained if companies were operating, or approaching those operation levels of the most efficient ones. Earnings could generate saving of resources, better quality of the services and/or lower levels of tariffs to final users. It was also found that the performance of the companies can be affected by exogenous factors such as the geographical conditions, the number of users attended, and the population density. In particular, companies operating in large populated regions and/or with high levels of consumption by user are benefited when these variables affect directly the production technology