Abstract
Electricity is a vital source of energy for modern economies. It is particularly essential for developing economies whose national growth plan needs an efficient electricity supply, especially for industry, residential and the services sectors. To ensure the sustained growth of the Ghanaian economy's service and industry or manufacturing sector, there is a need for efficient electricity supply. Unfortunately, power supply to these sectors has been erratic. The operations of the distribution utilities have been characterised by inefficiency and high level of losses for the past decade.
This study examines the operational performance of Electrical Distribution Regions that supply power to various categories of consumers using nonparametric two-stage Electrical Distribution Regions techniques. This was accomplished by assessing the efficiency and productivity using the Slacks-based Measure and the proposed Slacks-based Measure incorporated into the Biennial Malmquist Productivity Index Further the study investigated the drivers of productivity change. The environmental variables were regressed on the first stage SBM efficiency results to ascertain their impact on efficiency of the Electricity Distribution Utilities. Scale elasticity, a DEA pre-estimation requirement hypothesis test, was utilised to analyse the nature of the production borders under which the electricity distribution regions (EDRs) function. This hypothesis test is required to avoid statistical discrepancies and produce unbiased results. The productivity indices were decomposed into managerial or efficiency change, technological change, and scale efficiency change, which highlighted the drivers of the productivity change. The study used seven years panel data from 2012 to 2018 sourced from the Electricity Company of Ghana for all the nine EDRs in the country.
The outcome of the technical efficiency scores study reveals that EDRs are operating at an appreciable level of managerial efficiency. Productivity index shows that EDRs grew at a rate of 16.23% annually. Technological change was the main driver of productivity change. It was also found that rural EDRs significantly outperform the urban EDRs in terms of managerial efficiency and approaching an ideal scale of operation. Therefore, EDRs need sound management strategies to improve the level of operational efficiency.
In general, the study's outcome revealed that Ghana's EDRs are relatively efficient. However, all regions have low managerial efficiency, with 2016 and 2017 being the best performing years. The second-stage results also showed that recent economic downturns, accompanied by the non-regulatory implementation of policies were another distribution sector failure. It was also noted that the general productivity of EDRs experienced growth. Productivity change was also driven by technological change and not managerial efficiency change.
Keywords: Biennial Malmquist Productivity Index; Data Envelopment Analysis; Efficiency; Electrical Distribution Regions; Environmental variables; Fractional regression; Productivity; Slack-Based Measure; Second-stage analysis.