Cost Efficiency Assessment of Electricity Distribution Companies in Western Iran (Stochastic Frontier Analysis Approach)

Document Type : applicative

Authors

1 Associate Professor, Department of Economics, Razi University, Kermanshah, Iran.

2 PhD student in Economics, Razi University, Kermanshah, Iran,

10.30473/jier.2025.74468.1495

Abstract

This study examines the cost function and cost efficiency of electricity distribution companies in Kermanshah Province within the framework of Stochastic Frontier Analysis (SFA) using the maximum likelihood method. The central objective of this research is to measure the cost inefficiency coefficient. For this purpose, panel data from 19 electricity distribution companies in Kermanshah Province from 2017 to 2021 were used.  The findings indicate that the Harsin Electricity Distribution Company, with a cost efficiency of 63%, ranked first among the 19 companies, while the Eslamabad-e Gharb Electricity Distribution Company ranked last. The low cost efficiency of the latter suggests a significant deviation from the efficient frontier. Additionally, the result of cost efficiency estimation reveal that the overall cost efficiency of the electricity distribution industry in Kermanshah Province is relatively low. The general performance and ranking of the companies have remained relatively stable, indicating no significant improvement in cost efficiency or performance among the 19 electricity distribution companies during the study period.

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References

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Journal of Industrial Economics researches
Volume 8, Issue 30
February 2026
Pages 1-14

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History

  • Receive Date: 03 May 2025
  • Revise Date: 16 June 2025
  • Accept Date: 16 June 2025

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