Measuring Cost Efficiency of Electricity Distribution Companies in Khorasan Province

Using Battese and Coelli (1992) Error Component Frontier Model, the cost function of four electricity distribution companies in Khorasan Province is estimated by maximum likelihood method for the period 1372-1381. The results indicate that load factor and customer density are negatively whereas number of distributed electricity is positively correlated with costs of the companies. In addition, based on estimated coefficients of cost model, there is diseconomies of scale in the electricity distribution companies. Estimated average efficiency cost is 3.98 which denotes high inefficiency in cost allocation of the companies.