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Economies of Scale and Scope in Multi-Utilities

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  • Mehdi Farsi
  • Aurelio Fetz
  • Massimo Filippini

Abstract

This paper explores the economies of scale and scope in the electricity, gas and water utilities. These issues have a crucial importance in the actual policy debates about unbundling the integrated utilities into separate entities, a policy which has often been supported by the ongoing reforms in the deregulation of network industries. This paper argues that the potential improvements in efficiency through unbundling should be assessed against the loss of scope economies. Several econometric specifications including a random-coefficient model are used to estimate a cost function for a sample of utilities distributing electricity, gas and/or water to the Swiss population. The estimates of scale and scope economies are compared across different models and the effect of heterogeneity among companies are explored. While indicating considerable scope and scale economies overall, the results suggest a significant variation in scope economies across companies due to unobserved heterogeneity.

Suggested Citation

  • Mehdi Farsi & Aurelio Fetz & Massimo Filippini, 2008. "Economies of Scale and Scope in Multi-Utilities," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 123-144.
    • Handle: RePEc:aen:journl:2008v29-04-a06
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    4. Mehdi Farsi & Aurelio Fetz & Massimo Filippini, 2007. "Economies of Scale and Scope in Local Public Transportation," Journal of Transport Economics and Policy, University of Bath, vol. 41(3), pages 345-361, September.
    5. Sing, Merrile, 1987. "Are Combination Gas and Electric Utilities Multiproduct Natural Monopolies?," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 392-398, August.
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    JEL classification:

    • F0 - International Economics - - General

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