A study of the operation efficiency and cost performance indices of power-supply companies in China based on a dynamic network slacks-based measure model

• Economic development level influences the performance of the power companies.
• Macro-environment influences the decision on the separation policy.
• The separation policy greatly influences the efficiencies of power companies.
• Managers should improve the efficiency of distribution divisions after separation.

This paper applies the dynamic network slacks-based measure model with free links and fixed links (hereafter referred to as DNSBM-Free and DNSBM-Fixed respectively) to evaluate the operational performance of 31 electric power-supply companies (hereafter referred to as EPCs) in China from 2010 to 2012. This approach allows for the consideration of the group heterogeneity of electric power transmission. This approach also considers the new structural reform in the power grid of China in the near future, i.e., the separation of the transmission division (hereafter referred to as T) and the distribution division (hereafter referred to as D). We extend several performance indices to measure the cost efficiency and technology gaps in electric power supply. We estimate the efficiencies of the EPCs under different policies. The results indicate that regional economic development level has a significant impact on the performance of the EPCs. Under the DNSBM-Free and DNSBM-Fixed models, while the efficiency of D was a slightly higher than that of T before separating T and D, however, the efficiency of D was significantly lower than that of T after separation. Conversely, divisional efficiencies of some companies show a significant gap between T and D. This suggests that policy-makers should seriously balance the pros and cons of separation policy before making decisions, and the EPCs in China focus on enhancing operating efficiency of D when deciding to separate T and D in the future. Furthermore, this paper speculates that the macro-economic environment influences the policy of separation of T and D.