ECONOMIES OF SCALE AND FACTOR SUBSTITUTION IN ELECTRICITY SUPPLY INDUSTRY - A CASE-STUDY OF SOUTH AUSTRALIA

The results support the view that there are cost advantages in retaining ETSA's monopoly position. The existing economies of scale and the high degree of substitutability between energy and capital imply that a rise in energy prices may not affect the cost of production significantly, provided other factor costs do not rise at the same rate and provided demand for electricity grows. Further, it has been observed that improvement in load factor can significantly reduce cost.