Efficiency assessment and managerial ability analysis of the regional electricity transmission sector with the presence of contextual variables

The electricity industry plays a pivotal role in a country's economic growth and development. Therefore, it is imperative to assess its performance and identify the strengths and weaknesses of its different sectors, such as production, transmission, and distribution, to enhance economic growth in diverse areas. Given the significance of the transmission sector, this research focuses on analyzing and evaluating the performance of 16 regional electricity companies in Iran from 1390 to 1398, with the aim of comprehending the impact of contextual variables on efficiency. To achieve this, the study will utilize two techniques - Data Envelopment Analysis (DEA) and Ordinary Least Squares (OLS) - to determine the efficiency score and estimate the effect of contextual variables on efficiency, respectively. In the first stage, the DEA technique is employed to calculate the technical efficiency of each company, considering their specific inputs and outputs. In the second stage, the logarithm of the efficiency scores obtained is regressed on contextual variables to establish their effect on efficiency. The residual derived from the regression is referred to as managerial ability. Finally, the companies are ranked based on their modified efficiency after removing the impact of contextual variables.