Cost efficiency in power procurement and delivery service in the electric utility industry

Ten years after Roberts's (1986) study of electric power procurement and delivery utilities, they have evolved into significant players in the industry restructuring debate. This study uncovers new evidence on cost efficiency, and provides evidence on the separability of the stages of production. Analysis of 1977 to 1992 data shows increasing cost efficiency in delivering power to a given customer base. However, the costs of network expansion offset these savings. Tests of the ability to analyze the production stages of vertically integrated firms show that although separability is rejected, it appears that they are evolving separate technologies.