Improving efficiency performance of the electric utility industry in Ghana: The role of ownership restructuring and regulatory reform

John Kofi Turkson, University of Pennsylvania

Abstract

Efficient performance of the electric utility industry in Ghana has been a major concern to policy makers. Among several factors contributing to inefficient operations of the firm, government regulation is hypothesized as adversely affecting the cost-minimizing behavior of the firm; ownership structuring and reform of the regulatory system will improve efficiency performance of the firm. The former concerns the regulatory environment provided by the government, and the latter involves moving from government ownership to private sector participation within a more incentive regulatory framework. Employing the translog cost function, the empirical analysis attempts to analyze the effects of the regulatory environment on cost-minimizing behavior of the firm (i.e. resource allocation within the firm). The results show a weak effect of the regulatory environment on the performance of the firm. Estimates were determined for productivity growth over the study period. Productivity growth averaged 0.32 percent per annum. Using simple optimization models, efficiency criteria such as allocative efficiency, X-efficiency and social welfare were determined. With these criteria, alternative ownership structures and regulatory regimes were evaluated. The evaluation shows that allocative and X-efficiency are achieved under a competitive industry structure, and X-efficiency is achieved under fully privatized/partially privatized regulated monoplist. Overall social welfare gain is highest under a competitive scenario followed by a fully privatized regulated scenario.

Subject Area

Economics|Business costs|Energy

Recommended Citation

Turkson, John Kofi, "Improving efficiency performance of the electric utility industry in Ghana: The role of ownership restructuring and regulatory reform" (1996). Dissertations available from ProQuest. AAI9628016.
https://repository.upenn.edu/dissertations/AAI9628016

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