The determinants of the cost efficiency of electric generating plants: A stochastic frontier approach

This article provides a detailed analysis of generation plant operating cost efficiency over the period 1988-1997. I estimate a stochastic frontier cost function together with a model of plant inefficiencies to measure the operating efficiencies of individual plant: and identify factors that are associated with variations in plant efficiencies. I find evidence that plant efficiencies are associated with capacity utilization of the plant, die number of plants under utility management, and ownership form. I also find that regulatory restructuring activity in certain states is associated with improvements in plant operating performance.