Social Cost-efficient Service Quality: Integrating Customer Valuation in Incentive Regulation: Evidence from the Case of Norway

Christian Growitsch, Tooraj Jamasb, Christine Müller, Matthias Wissner

Research output: Contribution to journalJournal articleResearchpeer-review


In order to overcome the perverse incentives of excessive maintenance reductions and insufficient network investments arising with incentive regulation of electricity distribution companies, regulators throughout Europe have started regulating service quality. In this paper, we explore the impact of incorporating customers’ willingness-to-pay for service quality in benchmarking models on cost efficiency of distribution networks. Therefore, we examine the case of Norway, which features this approach to service quality regulation. We use the data envelopment analysis technique to analyse the effectiveness of such regulatory instruments. Moreover, we discuss the extent to which this indirect regulatory instrument motivates a socially desired service quality level. The results indicate that internalising external or social cost of service quality does not seem to have played an important role in improving cost efficiency in Norwegian distribution utilities.
Original languageEnglish
JournalEnergy Policy
Issue number5
Pages (from-to)2536-2544
Number of pages9
Publication statusPublished - 2010
Externally publishedYes


  • Electricity distribution
  • Service quality
  • Willingness-to-pay
  • Data envelopment analysis

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