The numbers say "yes," adding weight to last year's benchmarking survey.
Does productive efficiency help determine an electric utility's prospects in regulated or competitive markets? Is productive efficiency a better marker of real-world success than simple financial attributes, such as cash flow, dividend ratio or operating income?
In unregulated markets, higher productivity translates directly into relative declines in costs and prices, and by extension, greater ability to compete and prosper. In the regulated arena, it improves the utility's earning potential through more favorable regulatory treatment, especially under performance-based ratemaking regimes. Now, however, in financial markets too, there is ample evidence that productive efficiency can secure high marks for a utility.
Prompted by competitive pressures emanating from open access on the one hand and induced by the potential rewards of performance ratemaking on the other hand, in recent years electric utilities have begun to pay increased attention to the efficiency with which they conduct their business. Productive efficiency of U.S. utilities in the production and delivery of electric power was examined in two recent studies, the results of which were published in two issues of Public Utilities Fortnightly.fn1 Using different analytic procedures, these studies produced indices of productive efficiency for about 100 investor-owned utilities, and explored patterns underlying the observed variations in efficiency in terms of geography, utility size, resource composition and other relevant dimensions.