Economic Analysis of Structural Reforms of Electricity Industry-Investigation of Cost Structure of Japanese Electricity-
This paper examines cost structure of the Japanese electric power industry to discuss issues of the structural reforms of the industry from a perspective of cost efficiency. For this purpose, this study estimates a model of composite cost function system using a panel data set consisting of the nine electric power companies in Japan, which covers the period from 1990 to 2008. Using the estimation results, we calculate measures of economies of scale and economies of vertical integration. In addition, this study conducts a cost subadditivity test or natural monopoly test for the industry. The results indicate that the Japanese electric power companies enjoy economies of scale in terms of the transmission/distribution function and the operation as a whole, but they lose the economies for the generation function. From the results, we expect that widening the operation area of the transmission/distribution and promoting the competition in the generation and wholesale power market improves cost efficiency of the industry. Furthermore, this study reveals there are economies of vertical integration by the degree ranging from 19% to 29% in average of the nine electric power companies from 1990 to 2008, although we do not obtain evidence for cost subadditivity of the industry. Consequently, this study provides policy implications for a desirable industrial structure of the Japanese electricity, in particular we suggest importance to evaluate not only the expected benefit of the reform but also the cost of unbundling incurred by lost economies of vertical integration.
|電気事業||Electric Power Industry|
|事業構造改革||Industrial Structural Reforms|