Published in:
Publication year: 2007
Co-author 1: Aurelio Fetz
Co-author 2: Massimo Filippini
This paper explores the economies of scale and scope in the electricity, gas and water utilities. These issues have a crucial importance in the actual policy debates about unbundling the inte-grated utilities into separate entities, a policy which has often been supported by the ongoing reforms in the deregulation of network industries. This paper argues that the potential im-provements in efficiency through unbundling should be assessed against the loss of scope economies. Several econometric specifications including a random-coefficient model have been used to estimate a cost function for a sample of utilities distributing electricity, gas and/or water to the Swiss population. The estimates of scale and scope economies have been compared across different models and the effect of heterogeneity among companies have been explored. While indicating considerable scope and scale economies overall, the results sug-gest a significant variation in scope economies across companies due to unobserved heterogeneity.
This paper explores the economies of scale and scope in the electricity, gas and water utilities. These issues have a crucial importance in the actual policy debates about unbundling the inte-grated utilities into separate entities, a policy which has often been supported by the ongoing reforms in the deregulation of network industries. This paper argues that the potential im-provements in efficiency through unbundling should be assessed against the loss of scope economies. Several econometric specifications including a random-coefficient model have been used to estimate a cost function for a sample of utilities distributing electricity, gas and/or water to the Swiss population. The estimates of scale and scope economies have been compared across different models and the effect of heterogeneity among companies have been explored. While indicating considerable scope and scale economies overall, the results sug-gest a significant variation in scope economies across companies due to unobserved heterogeneity.