Cost Benchmarking of Generation Utilities Using DEA: A Case Study of India

Technical efficiency of electric utility is the critical element for its competitiveness in the electricity market and very relevant in the Indian electricity sector presently. This paper is aimed to measure the efficiencies of 30 state owned electric generation utilities/companies for the year 2007-08 by applying DEA models with single input and two outputs. The input used is total cost and outputs are units of energy generated and total energy sold or consumed. Cost benchmarking has been carried out so that cost controls can be implemented. In addition, the target evaluation for input cost has also been done. The result of this model shows that GENCOs are generally inefficient in cost frontier and there is an urgent need for intro inspection. This will help for GENCOs. The result shows that the total average of overall, technical and scale efficiencies are 46%, 75.1% and 60% respectively. This efficiency measurement assists the utilities by identifying their shortcomings, setting targets and trying to reach the set targets.