Measuring the X-factor for Incentive Regulation of Iranian Power Distribution Companies

Achieving high productivity and efficiency in the electricity distribution industry is one of the main missions of Power Distribution Companies in Iran. The main problem in incentive regulation of Power Distribution Companies to fulfill this target is to develop an appropriate benchmark for efficiency and productivity growth dubbed as "X-factor". This paper aims at measuring X-factor for the Iranian power distribution industry. Data of Power Distribution Companies for the period of 2003-2014 and a DEA model including desirable and undesirable outputs and controllable and uncontrollable inputs have been used. According to the results, efficient companies must improve their total factor productivity at an annual rate of 3.06 percent; and inefficient companies most improve it at higher rates. The maximum X-factor is 0.0703 percent belonging to Power Distribution Company of North of Kerman Province, meaning that the Regula