Regulation of State-Owned and Privatized Utilities: Ukraine Electricity Distribution Company Performance
Journal of Regulatory Economics, Vol. 28, No. 3, pp. 259-87
28 Pages Posted: 5 Feb 2008 Last revised: 26 Aug 2009
Date Written: November 2005
Both ownership and regulation affect the behavior of utility managers. Private ownership rewards managerial decisions that enhance shareholder value. Regulatory incentives reward behavior that affects profits and costs. An empirical analysis of 24 Ukraine electricity distribution companies from 1998 to 2002 indicates that privately owned firms do respond to incentives that add to net cash flows (associated with reducing commercial and non-commercial network losses). However, they also respond more aggressively than do state-owned distribution utilities to mark-up (cost-plus) regulatory incentives that increase shareholder value but decrease cost efficiency.
Keywords: Incentive regulation, state-owned and privatized utilities, Data Envelopment Analysis
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