Productivity measurement and resource allocation in the operation of an electric utility
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Abstract
The simplest and, perhaps, most traditional definition of productivity, output divided by input, is still unchallengeable. This study deals with the productivity of an electric utility at the firm level, using the economic production function theory to construct multi-factor productivity (MFP) indexes. These MFP indexes, together with the partial factor productivity (PFP) indexes, can be used as managerial tools to identify the possible inefficient utilization of input resources. They also provide a rough overview of how well these input resources are being managed;In this study, output is defined as the sales of electricity to the ultimate customers and sales for resale. The input resources are capital, labor, fuel, purchased power and miscellaneous materials, which were aggregated by means of the methodology developed using their cost shares as weights. A case study of this productivity model was carried out for the period 1974-1979;A goal programming model, a technique of operations research, was also developed to allocate the input resources in an efficient and effective manner so that a certain percentage growth in productivity can be satisfied and the other objectives (goals) of the electric power system also be fully met. The productivity measures coupled with the goal programming technique are shown to be a very useful tool to assist management in making crucial decisions with respect to input resources in any electric utility company.