Ownership and Efficiency in Nuclear Power Production Author(s): Michael G.

Pollitt Source: Oxford Economic Papers, New Series, Vol. 48, No. 2 (Apr., 1996), pp. 342-360 Published by: Oxford University Press Stable URL: http://www.jstor.org/stable/2663731 . Accessed: 12/07/2011 12:30
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Oxford EconomicPapers 48 (1996), 342-360

OWNERSHIP

AND EFFICIENCY IN NUCLEAR POWER PRODUCTION

By MICHAEL G. POLLITT SidneySussex College,Cambridge CB2 3HU

This paper uses Data Envelopment Analysisto examinethe relative productive efficiency of a sample of 78 publiclyand privately-owned nuclearpower plantsoperating year 1989. the The sample includes 13 UK nuclearpower plants.Linear programsare used to calculate a variety plantspecific of efficiency scoresincluding measures whichattempt adjustforvintage to effects. Non-parametric Tobit/OLS analysisis employedto testthe null hypothesis and that has ownership no effect productive on efficiency. results The tentatively suggestthatthe UK plantscould expectto reducecosts through significantly lowerstaffing levels.

'In the end, what mattersis how the combinationof ownershipand regulation underprivate ownership compareswithownership (implicit explicit) and or regulation in the public sector'(Vickersand Yarrow 1991,p. 116).

1. Introduction thecontrolofthree state-owned companies, Nuclear Electric, Scottish Nuclear, and BNFL. The UK's fossil in fuelpowerstations wereprivatised 1991 but the high capital cost and environmental risk resultedin nuclear power stations from privatisation the beingwithdrawn proposals.Whilenuclearpowerstations have alwaysbeenstate-owned theUK, in theUS and in Japanlargenumbers in of plants are privately-owned. Nuclear power stations are subject to tight environmental safety and and base load powerto highvoltage regulation supply mostnuclearpowerstations electricity grids.The degreeof competition facing is limited.Nuclear Electricwas establishedas a whollygovernment-owned publiclimited companyin 1990and operates12 oftheUK's 16 nuclearstations. In the six accountingyearsbetween1989-90 and 1994-95 real unit costs in Nuclear Electrichave fallen49% and the companyis expecting breakeven to by 1996 beforereceiptof the subsidy (levy) it currently receives(Nuclear Electric, 1995).In 1995theUK government to announceditsintention privatise thesix newerstations Nuclear Electric of and thetwo Scottish Nuclear stations in a singlecompanyand to continuestateownership the remaining of nuclear powerplants. This paper seeks to compare the relativecost efficiency an international of and sample mainlyfromthe US and the UK of publicly-owned privatelyowned nuclearpower plantsoperating 1989. As Vickersand Yarrow make in clear in the openingquotation,such a comparisonis a joint test:it examines how regulated privately-owned plantscomparewithpublicly-owned plants.In an industry nuclearpowerwherethereis a highdegreeof public interest, like
Press 1996 ?) OxfordUniversity

THE NUCLEAR in powerproduction industry the UK is currently (1995) under

M. G. POLLITT

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can be consideredto be a formof regulation. This suggests public ownership thata comparisonof the relative of forms the in efficiency the two ownership nuclear power industry reduces to a comparison of direct regulation, via of via government ownership the assets,and indirect regulation, a regulatory agencyof privately owned assets.The analysisalso sheds lighton the recent impressive unitcost reductions seen at Nuclear Electric. A decisionmakingunit(DMU) whichcan producethe same amountof the same typeof outputas anotherat a lowercost is said to be moreproductively efficient than the otherDMU. Typicallya DMU is a firm plant. We use or Data Envelopment Analysis(DEA) (Charnes et al. 1978) to analyse ex ante in and ex postproductive efficiency our sampleof nuclearpowerplants.DEA has been used to analysetheeffect ownership productive of in on efficiency the US waterindustry (Brynes1985) the US electricity generation industry (Fare et al. 1985b) and more recently electricity in distribution (Hjalmarsson and Veiderpass1992). This paper adds to the relatively small academic literature on theefficiency nuclearpowerproduction.1 of The paper is in 6 sections.Section2 briefly reviews theory the and evidence on thelinksbetween ownership and productive efficiency. Section3 detailsthe efficiency measuresemployedand the lineqr programsrequiredto generate them.Section4 describes data and theDEA results. the Section5 containsthe resultsfromthe testingof the hypothesis that ownershiphas no effect on productive efficiency. Section6 is a conclusion. 2. Ownership productive and efficiency Privatisation, transfer ownership the of fromthe public sectorto the private has of sector, been a keyelement industrial policyin severalOECD economies in the 1980s;mostnotablyin the UK wherearound 10% of GDP has passed frompublic to privateownership. presentprivatisation a hot political At is issue in the emerging democraciesof easternEurope and the former Soviet Union and in many developingcountries.The decision to go ahead with privatisation should be based on a detailedcost benefit analysis.This analysis must include calculationsof the net benefits each of the various feasible of forms privatisation wellas thenetbenefits alternative alternative of as forms of of government A of ownership. keyelement thisanalysiswillbe thevaluation, ifany,of the lowerproduction costs whichprivatisation induce. will The theoretical literature the link betweenownershipand productive on is has efficiency at least threestrands.The earliestand most prominent the literature. argument The back to Alchian(1965) wherehe property rights goes to underpublic ownership arguesthat the inability transfer ownership rights of the the and prevents capitalisation gainsin efficiency hencereduces incentives of the ownersto seek such gains. A taxpayercannot sell his implicit share in the state-ownedutility of and hence will not monitorthe performance its
' Henderson (1977),Yarrow(1988), and Green(1995) are three thefewacademicpaperswhich of examinenuclearpowercosts in the UK.

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IN NUCLEAR POWER PRODUCTION

managers. second strandis the public choice literature A following Niskanen (1971) whichemphasisthe efficiency associatedwiththe bureaucracy charged withrunning public utility; a bureaucrats and politicians maximisetheirown budgetsand thisrarely leads to minimum cost production. The thirdstrandis drawn fromthe literature regulatedutilities. on This recognises that private utilities often are utilities thatas suchthey and regulated maybe moreinefficient thanpublicmonopolies.The seminalpaper hereis thatofAverch and Johnson (1962) who suggestthat profit-maximising privatemonopoliesfacingrate-ofreturn have an incentive employmorecapitalthanis efficient regulation to (the 'over-capitalisation' hypothesis). More recent literature focuses theefficiency on effects regulationwithina principal-agent of framework and the inefficient incentives inducedby regulation.2 The theoretical resultsare disputedbut on balance theory suggests owned utilities privately should be moreefficient than owned utilities.3 publicly The linksbetween ownership productive and efficiency beenempirically have investigated a numberof industries different for in countries. The evidenceis mixed,the resultsbeing that privatefirms appear to be more efficient than public in some industriesand vice versa in other industries.4 For some industries, such as electricity, studiesindicatecontradictory results. Veryfew studieshave analyseddata forone industry from morethan one country. We note here the shortcomings any cross-sectional of examinationof in productiveefficiency a sample of DMUs characterised a putty-clay by Forsund and Hjalmarsson(1974) point out that optimisation technology. is not a one-periodactivity.Long-terminvestments can only be judged as inefficient based on theirlifetime performance. observation inefficiency The of based on annual data is not sufficient declare that a DMU is capable of to improved performance. anteand ex postinefficiency Ex shouldbe distinguished. Ideallywe would have panel data but thisis unavailabledue to its highcost.6 We settleforan attempt adjust forvintageeffects the calculationof ex to by of We postmeasures inefficiency. further suggest thatwhiletheindividual DMU level resultscannot be treatedtoo seriouslythe sample can still be used to forms compareownership if especially we use regression to analysisto attempt pick up vintageeffects. 3. The efficiency measures In orderto produce measuresof the productive of efficiency a set of nuclear power plants we employthe DEA techniqueof Fare et al. (1985a,b) (hence
See Pollitt(1995) Chapter2 fora recentreview. See Boardmanand Vining(1992) or Pollitt(1995). 5 Al-Obaidan and Scully(1991) analyse the productive efficiency a sample of international of oil companies. 6 Forsundand Hjalmarrson (1979) undertake panel data analysison a sample of Swedishdairy plants. Theydemonstrate therankings theplantschangeovertime-thissuggests that of thatsingle periodanalysiscan be misleading.
3 4

2 See Caillaud et al. (1988) fora review.

M. G. POLLITT

345

FGL).7 The DEA techniqueis essentially comparativein that the overall productive efficiency measurecompares the average cost of productionof a plantto theaveragecosts of least cost plants.We note thatthenon-stochastic errors. DEA methodology however makesno allowanceforshocksor statistical A This makes DEA scoreshighly data dependent.8 major practicaladvantage of the DEA techniqueis that the actual costs incurred the plant are not by least cost plant but againstbest practice comparedagainstsome hypothetical the (least cost) plantsin thesample.It is also possibleto identify best practice plantsagainstwhichinefficient non least cost plants)are beingcompared (i.e., and henceto suggest cost reducing changesbased on the actual behaviourof severalof the inputs successful (i.e.,lowercost) plants.For manyinvestments This to production cannotbe adjustedafter initialinvestment. givesriseto the the possibilityof managers operating an inefficient i.e., plant efficiently, In constrained of inefficiency may optimisation performance. thiscase measured be due to inefficient investment vintage effects of rather than operating Transfer ownership improve of in decisions. to operating performance thiscase, on the basis of measured inefficiency, therefore may not be justified.It is necessary distinguish ante efficiency to ex (whereall inputsare consideredto be under the control of the managers) and ex post efficiency (where the managerfacessome inputswhose usage cannotbe adjusted). partdetails The remainder thissectionis dividedintothree of parts.The first three measuresofex anteproductive Part measures efficiency. two detailsthree ofex postefficiency. three Part plantscan be explainshow relevant bestpractice for identified each plantto be analysed. 3.1. Ex ante efficiency In modellingelectricity generation was assume that a singleoutput (electric is This inadequately energy) producedbythree inputs capital,labour,and fuel. howeverit is natureof electricity capturesthe multi-dimensional production; we In thestandard characterisation in theliterature. whatfollows illustrate used to measureswithreference two inputs(K and the calculationof the efficiency L) and one output.Consider Fig. 1, taken fromFGL, wherethe piecewise an linear curve II represents isoquant of the upper level set L+(u) of the reference technology. Essentially L+(u) is the isoquant the boundaryset of inputcombinations whichcan be combinedto produce a given output (u) definedby the best practiceplantsat the outputactuallyproducedby the plant whose efficiency is beingevaluated.Iftheplantbeinganalysed(at R) wereon theisoquant(e.g.,
7 Fare and Hunsacker(1986) note the similarities betweenthe Charnes et al. (1978) and the of FGL approaches to DEA. Both trace theiroriginsto a seminal paper on the measurment by productive efficiency Farrell(1957). (1972) suggestthat non-parametric techniquesshould be used for 8 Hanoch and Rothschild parametric analysisin orderto testforcertaindata preliminary analysisbeforeusing restrictive outliers.Our use of DEA and subsequent and to identify properties (such as quasi-concavity) regression analysiscan (ratherthan should) be seen in thislight.

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OWNERSHIP AND EFFICIENCY

IN NUCLEAR POWER PRODUCTION

I L+ (u)

A 0 p L

FIG. 1. Overall,allocative, and technical measuresof productive efficiency

at B) itwould be 100% technically efficient. Thus,technical efficiency, x) = K(u, OB/OR. The pp linecorresponds thepricevectorofinputpricesfacedby theplant to beinganalysedat R. Introducing inputpricesmeans that we can identify the point on the isoquant where the plant should be producing(A above). A to correponds thepointat whichR shouldbe producing, giventheinputprices thatit faces,ifit is to minimise costs.If theplantwereat thispointbe said to be 100% overall productivity efficient. Thus, overall productiveefficiency, the O(u, p, x) = OD/OR.The DEA technique a provides methodforidentifying isoquant and measuringthe distanceof an individualplant fromthe 100% efficient to points.Allocateefficiency attempts capturethe inefficiency arising the combinations solelyfrom wrongchoice of technically efficient giveninput prices, thusfora DMU at R, A(u,p,x) = OD/OB. We can see that OD/OR = OB/OR OD/OB or O(u, p,x)
=

(1)

K(u, x) *A(u,p,x)

(2)

this Note the radial nature of the efficiency measuresand the limitations introduces. Consider points on L+(u) to the north of C, these points are in efficient a radialmeasureofefficiency inefficient a Paretian on but technically sense: theyinvolveproducingthe given output strictly more of at least one outputthan at the efficient point C. This point has been recognisedin one strandoftheliterature thedevelopment a non-Archimedian of by approachto ensure'Pareto-Koopmans efficiency' for example Charnes and Cooper (see

M. G. POLLITT

347

1985).This approachcomplicates linearprograms the required and has itsown problems.9 The calculationof the above efficiency measuresinvolvesthe use of linear programming methods.Instead of imposinga functional formand estimating cost and production functions, in parameteric as studies,the observedinputs of the DMUs are used to construct piecewiselinear reference a technology. Linearprograms maythenbe used to calculatetheefficiency measures each for DMU. The assumptions constant of returns scale ofthefrontier to efficient DMU`0 and freedisposal of inputsallow the calculationof O(u, p,x) and K(u, x) and in following identity (2) we can also obtain A(u,p,x). the Overall efficiency
O(u p,x) = Q(u, p)/px

(3)

whereQ(u, p) = min{px: x E L+(u)} and px = observedtotalcost.Q(u,p) is the cost of thecost minimising inputcombination producing givenoutput for the valued at the giveninputpricesfacingthe DMU. It may be calculatedas the solutionto the following linearprogram minpx s.t. u ?zU,zX ?x,zeR'+( Note here that the vectorp can be scaled for an individualDMU making not efficiency dependent relative absoluteprices.In an international on context thiseliminates need forchoosingan appropriate a exchangerate to facilitate a comparison.This represents major technicaladvantage of DEA use in an international costs context againststraightforward comparisons thefinancial of of production. Technicalefficiency defined is as K(u, x) = min{,: AxE L+(u)} (5)

The A parameter used to determine amount by whichobservedinputs is the can be proportionally decreased if they are utilised efficiently (hence the efficiency measureswe calculateare input-based). K(u, x) may be calculatedas thesolutionto thefollowing linearprogram."

min A
z s.t. u < zU, zX < Ax, e Rn+

(6)

DMUs 9 An infinitesimal introduced ? is intothelinearprograms ensurethatParetoinefficient to do not appear to be efficient. Fare and Hunsacker(1986) demonstrate that even this does not Ali to guaranteeParetoefficiency. (1990) pointsout thatDEA scorescan be sensitive thevalue of in work. theinfinitesimal in thelinearprograms thatthevalue is rarely used and reported empirical 10 See Byrnes (1985) formoredetailsof thisassumption. " We utilisedan Apple Macintosh computerprogramcalled FARE/MAC1 written the by LINDO SYSTEMS INC. author.Commercial available suchas LINGO from packagesare readily P.O.B. 148231,Chicago, IL 60614, USA.

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OWNERSHIP AND EFFICIENCY

IN NUCLEAR POWER PRODUCTION

The linearprogram, (6), can be transformed a maximisation into problem'2 wherezo = 1/, [i = zilA max zo s.t. uzo < IU, jX < x, z E Rn+ is Allocativeefficiency thencalculatedfrom as (2) A(u,p,x) = O(u, p,x)/K(u,x) (8) K(u, x) is a measure of aggregateefficiency due to non price related loss mistakes. 3.2. Ex post efficiency In electricity generation capital inputcan be regardedas beingoutsideof the the controlof the operatingmanagersonce the initialinvestment been has made. In themediumtermthesize of thelabour inputmay also be subjectto union agreement politicalinterference. has also been suggested or It thatboth capital and fuelare fixedfactors after initialinvestment been made.13 the has In orderto getsome measureofex postefficiency calculatethree we additional measuresof efficiency: whichassumesthatcapital is an inputwhose level one is fixedand the othersassume thatboth capital and eitherlabour or fuelare fixed. FollowingFare et al. (1994) and Brynes to (1985) we refer thesemeasures as inputsubvectors and define themas follows:'4 KK(u, x) = thecapitalinputsubvector measure. This measureis taken efficiency fromBrynes(1985) who calculatessingleinputsubvector measures efficiency fora sample of US waterutilities. This measurerangesbetween0 and 1. A of figure 0.75 indicates thatgiventhelevelofcapitala plantcould producethe same level of outputwith25% less labour and 25% less fuel. KKL(u, x) = the capital and labour input subvectorefficiency measure is a naturalextension the singleinput subvector of measures.It can be efficiency thoughtof as capturingshortrun technicalefficiency relatingto fuel usage. This measureagain rangesbetween0 and 1. A figure 0.75 indicatesthatat of giventhelevelsof capital and labour a plant could producethe same level of outputwith25% less fuel.
12 In our linear programming package we utilisedequivalentmaximisations all the linear of programs this section.We do not includethe equivalentmaximisations the othercases to in in save space but the changeof variablesrequiredis similarto thatwhichchanges(6) to (7). 13 The authorwould like to thankan anonymous referee suggesting for this. 14 Note thatinputsubvector measuresdo not strictly assume thatfixedvariablesare fixedbut that fixedvariablesare bounded fromabove by the current value. This impliesthat the DMU beinganalysedcan reduceits inputs.Pollitt(1995, Ch. 4) distinguishes measures inputsubvector and environmental efficiency measureswhichdo assume strict of is fixity inputs-the difference to likely be smalland inputsubector measures represent lowerboundson environmental efficiency measures.

(7)

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measure. This KKF(u, x) = the capital and fuel input subvectorefficiency variedin the short measureassumesthatonlylabour inputcan be effectively run. This measurerangesbetween0 and 1. A value of 0.75 forthis measure indicates thatat givenlevelsofcapitaland fuelinputa plantcould producethe same level of outputwith25% less labour. linearprogram KK(u, x) is calculatedas the solutionto thefollowing min
X u ? ZU, ZXk < Xk,ZXI ? X, ZXf < )Xf, <1
Zi =

s.t.

1,z E R'+

(9)

whereXk, X1, Xf are the inputsof capital,labour and fuelof the plant being of Note analysedand Xk,Xl, Xf are thevectors capital,labour and fuelinputs. no thatthecapital inputconstraint longerincludesi as it is no longerfreeto vary. capital and labour inputs The KKL(u, x) measureis calculatedby restricting

min i10 s.t. U <

ZU, ZXk % Xk, ZXI 1 xl, ZXf %)Xf,Zi

1,ZE R +

the calculatedby restricting capitaland fuel The KKF(u, x) measureis similarly inputs 1 min < Xf, zi = 1, z e R+ z xxkz Xl s.t. U <zU, ZXk )xZXf 3.3. Identifying referent firms measuresis thatit is possible One of themajor advantagesof DEA efficiency frontier efficient to obtain the referent to whichan individualfirmis plants beingcompared.Look again at Fig. 1. The plant beinganalysedis actuallyat R (constant returns scale is assumed).The frontier to plantsto whichit is being of the comparedare represented C and A, thepointsdetermining limits the by line whichOR passes. B is a linearcombinarelevant frontier segment through of tionof C and A. B can be thought as thepositionthattheplantrepresented efficient (assumingfixedfactorproporby R would occupyifit werefrontier to C tions).It is possibleto use theK(u, x) linearprogram identify and A and firms B. used theweights to necessary define We could also locate the frontier in theKK(u, x), KKL(u, x), and KKF(u, x) measuresin a similarway. Consider(7) the linearprogramwhichcalculatesK(u, x). For each plant in of a threeinput one outputcase a maximum threeplantscan be in thebasis whichdefinesthe efficient frontier. These plants have non-zerozi weightsin of the finaliteration the linearprogramwhen solved by the simplexmethod efficient plantssuch as C and A (Dantzig 1963). These plantsare the frontier

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IN NUCLEAR POWER PRODUCTION

in Fig. 1. The zi are the weights. These weights may sum to more than one in the linear program(7) so theyneed to be scaled so that theysum to 1. In once the K(u, x) linearprogramhas been solved,thebasis variables summary, represent frontier the firms which R is being compared and the to efficient the of values of the basis variablesrepresent weights thesebasis variablesin the location of the frontier efficient linear combinationB. Standard linear of programming packages allow foreasy extraction the requiredinformation. 4. The datasetand DEA scores in The datasetconsistsof 78 nuclearpowerstationsoperating the accounting ownedand 21 are publicly yearendingin 1989.Fifty-seven plantsare privately owned.The data comes from fivecountries: US (62), UK (13), Canada (1), the thesepowerstations Japan(1), and SouthAfrica Together (1). producedaround in energy 1989. The data consistsof 30% of world outputof nuclearelectric information quantities output, on of capital,fuel, labouras wellas theprices and ofcapital(bothcurrent historic), and labour and fuel.15 These eightdata series all represent thedata required calculatethesix efficiency to measures described and also to calculateseparatecurrent and historic cost of capital measuresof O(u, p,x) and A(u,p,x) (we distinguish thesemeasuresby . currand .hist).This to on attempts reducethedependence theresults cost ofcapitalassumptions. of We also have information thereactortype(PWR, BWR, AGR, PHWR, or on Magnox) and the year in whichthe generating sets enteredservicewhichis used in the regression analysisdetailedin Section5. The data is collectedfroma numberof sources.The US data is compiled fromUS EnergyInformation Agencydata (1991a,b). The restof the data is compiled frominformation supplied by the operatingcompanies and from company reports.Output is measuredin millionsof kWh produced in the accountingyear ending in 1989. Capital is measuredin MW of nameplate labour is measuredas thenumberofemployees thepower (gross)capacity, at stationsite,and fuelis measuredin TBTU (BTU x 1012). The inputpricesare in millionsof unitsof local currency. Two pricesof capital are distinguished: cost ofa MW and thecurrent thehistoric cost ofa MW whichis calculatedby the cost of capital figure. The price of labour is the simplyinflating historic averagecost of an employeein the operating utility and thepriceoffuelis the and averagecost ofa TBTU offuelinput.Detailed definitions sourcesare listed in Appendix1. In whatfollows or IOU refers a privately I to owned plant (or investor owned) and M or MUNI refers a publiclyowned (or municipally to owned) plant. Table 1 givestheaveragesinglefactor productivity privately for owned and owned plants.These productivity measuressuggestthatMUNIs and publicly IOUs have similarsinglefactorefficiencies that IOUs have significantly but higher labour productivity. Acrossthe sample averageplant current costs are
15The data are not listeddue to confidentiality the need to conservespace. and

M. G. POLLITT
TABLE 1

351

factorproductivities Averagesingle Output/capital W mk WhI/M AverageIOUs AverageMUNIs 5.3718 5.2668 Output/labour ink Wh/person 10.9296 6.6657 Outut/fulel mk Wh/TBTU 92.4956 91.6145

TABLE 2 results efficiency scores Summary for O(u,p, x) .Cur1r AV total AV private AV public SD private SD public MAX private MAX public MIN private MIN public MED private MED public 0.7077 0.7151 0.6875 0.1829 0.1580 1.0000 0.9636 0.2347 0.3392 0.7592 0.6975 A(u,p, x) .curr 1 0.7847 0.7860 0.7813 0.1638 0.1612 1.0000 0.9636 0.2906 0.3801 0.8316 0.8421 O(u,p, x) hist 0.7121 0.7281 0.6686 0.1793 0.1641 1.0000 0.9592 0.2658 0.3630 0.7594 0.6456 A(u,p, x) hist 0.7892 0.8010 0.7573 0.1589 0.1567 1.0000 0.9592 0.3291 0.4068 0.8465 0.7804

K(u,x) KK(u,x) 0.8951 0.9003 0.8809 0.0714 0.0810 1.0000 1.0000 0.7793 0.6848 0.8971 0.8896 0.9041 0.9148 0.8749 0.0720 0.1009 1.0000 1.0000 0.7857 0.6936 0.9256 0.8986

KKL(u, x) 0.8987 0.9085 0.8720 0.0746 0.1023 1.0000 1.0000 0.7837 0.6936 0.9162 0.8986

KKF(u, x) 0.5758 0.6128 0.4753 0.2895 0.2246 1.0000 1.0000 0.1352 0.2544 0.6019 0.3771

MIN = minimum, MED = median. AV = average,SD = standarddeviation,MAX = maximum,

divided as follows:capital costs 72.3%, labour costs 9.6% (IOUs = 8.3%, MUNIs = 13.3%),and fuelcosts 18.1%.This suggests thatsubstantially lower in lower in labour productivity MUNIs may not be reflected significantly overalland allocativeefficiencies. The summary results givenin Table 2 and thedetailedplantlevelresults are are givenin Table 3. The summary resultsindicatehigheraverage allocative (K(u, x)). with lower technicalinefficiency inefficiency (A(u,x)) contrasting Private plants outperform public plants on eight out of eight measures of one is averageefficiency including O(u, p,x). Howeverthedifference wellwithin standarddeviationon all measures.On the ex post measuresof efficiencybetween IOUs and MUNIs KK(u, x), KKL(u, x) and KKF(u, x) thedifference measure K(u, x). The range of the is biggerthan for the ex ante efficiency technical measuresis around 30% (minimum K(u, x) is 68.48%). efficiency The plantlevelresults Table 3 indicatethattheUS privately-owned in plant, Nine on measures. Maine Yankee (127),is 100% efficient each of theefficiency on other plants are 100% efficient the K(u, x) measure of overall technical on Fourteenplantsare efficient all threeof the measuresof ex post efficiency. of Theseefficient efficiency. plantsare a mixture PWR, BWR, PHWR and AGR

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plant. The unreportedreferent plants for the K(u, x) show that the UK's Hunterston (M 14) is themostfrequently B occurring referent plant.WolfCreek (121),Maine Yankee (127),Hope Creek(140),and PointBeach (156) also appear for as referent firms severaloftheplants.As an exampleofhow we can interpret the resultsfor an individualplant consider the Japanese plant Ikata (Ii): assumingall inputscan be adjustedthisplant can proportionately reduceits consumptionof all inputs by 2.72% (K(u, x) = 0.9728); historiccosts could further reduced by 4.38% (A(u, p,x.hist)= 0.9562) if the combinationof be in inputswas adjustedoptimally response theinputpricesfacedbytheplant; to multiplying allocative and technicalefficiency scores historiccosts could be reduced by a total of 6.98% (O(u, p,x.hist)= 0.9302) if all inputscould be labour and fuelcould be reducedby adjusted.Looking at et post inefficiency 2.88% (KK(u, x) = 0.9712) ifcapital werea fixedinput;fuelcould be reduced by 3.03% (KKL(u, x) = 0.9697) if capital and labour were fixedinputs,and labour could be reduced by 25.92% if capital and fuel were fixed inputs (KKF(u, x) = 0.7408). The referent plantsforIkata (on K(u,x)) are WolfCreek (121),Maine Yankee (127),and Hunterston (M14). B 5. Hypothesis testing: does ownership effect productive efficiency? of We report appropriate two methods analysing plantlevelresults the obtained in theprevioussectionin orderto undertake statistical hypothesis tests: testing (usinga battery teststatistics) of and censoredregression (Tobit) analysis. The first methodis a setofstatistical testson theefficiency measureresults.'6 Five statistics calculatedan analysisof variance(ANOVA) F statistic are and four rankorderstatistics whichare distributed to according thex2 distribution. The null hypothesis testedis thatpublicly-owned privately-owned and plants If have the the same productive associated withthe efficiency. the probability can at calculatedstatistic less than0.05 thenthenull hypothesis be rejected is the the5% significance level.The ANOVA statistic testswhether samplemeans are significantly different while the rank order statisticstest whetherthe of different.'7 rankings publicand privateplantsare significantly Table 4 reports teststatistics the results the on fromthe eightmeasuresof All ex indicatea generalinability rejectthenull to efficiency. five antemeasures in of betweenthe two ownership classeshypothesis no difference efficiency out of 25 statistics significant less than 15%.18 On theex post are onlythree at measuresthere moresuggestion is in thatthenullcan be rejected favourofthe alternative that privately than owned plants are more efficient hypothesis ownedplants:eightout of 15 testsare significant less than 15% and at publicly fourout of fiveteststatistics rejectthenull at 10% on the KKF(u, x) measure. The secondhypothesis methodthatwe report thatofregression the of test is
16 These statistical testswerecarriedout usingSAS available from SAS Institute Inc.,Box 8000, Cary,NC, 27512-8000, USA. 17 See Lehmann(1975) formoredetailsof thesetests. 18 A 5',' significance is too strong testfora sample of thissize. test a

scores Plant efficiency

Comnpany II 12 123 14 15 16 17 18 19 110 Ill 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 Shikoku Alabama P ArkansasP + L ArizonaPS PacificG + E YAPo Connecticut NE Nuclear E Florida P co Florida P + L Florida P + L Georgia P co Georgia P co Iowa EL + P Comm Edison Comm Edison Comm Edison Comm Edison Comm Edison Comm Edison IllinoisP co WolfCreek GulfStates Pouis P + L Boston Ed Co Yankee A E Baltimore + E G Maine YAP ConsumersP ConsumersP DetroitE Co. Ind + Mich E N States Po N States Po Union E co E System Res Carolina P + L Carolina P + L State Japan AL AR AZ CA CT CT FL FL FL GA GA IA IL IL IL IL IL IL IL KS LA LA MA MA MD ME MI MI MI MI MN MN MO MS NC NC Stationname Ikata JosephM Farley ArkansasNuc One Palo Verde Diablo Canyon Haddam Millstone CrystalRiver St. Lucie TurkeyPoint Edwin I Hatch Vogtle Duane Arnold Braidwood Byron Dresden La Salle Quad Cities Zion Clinton WolfCreek RiverBend Waterford 3 Pilgrim Yankee Rowe CalvertCliffs Maine Yankee Big Rock Point Palisades Enrico Fermi Donald C Cook Monticello PrairieIsland Callaway Grand Gulf Brunswick Harris Age 1980 1979 1977 1987 1986 1968 1981 1977 1980 1973 1977 1988 1975 1988 1986 1971 1984 1973 1974 1987 1985 1986 1985 1972 1961 1976 1972 1963 1971 1988 1977 1971 1974 1984 1985 1976 1987 Type PWR PWR PWR PWR PWR PWR PWR PWR PWR PWR BWR PWR BWR PWR PWR BWR BWR BWR PWR BWR PWR BWR PWR BWR PWR PWR PWR BWR PWR BWR PWR BWR PWR PWR BWR BWR PWR

TABLE 3

O(u,p,x).curr A(u,p, x).curr O(u,p, x).hist A(u 0.9309 0.8566 0.6918 0.3015 0.8850 0.6928 0.8225 0.5071 0.9460 0.5194 0.7688 0.7592 0.7151 0.6834 0.8355 0.8018 0.7744 0.8440 0.8383 0.3924 0.9724 0.6228 0.8294 0.3237 0.8381 0.2347 1.0000 0.6442 0.6028 0.6457 0.7699 0.6253 0.9315 0.8688 0.7434 0.6656 0.7626 0.9569 0.9386 0.7959 0.3601 0.9236 0.7808 0.8225 0.6068 0.9892 0.6664 0.8704 0.8574 0.8316 0.7088 0.8493 0.8955 0.8033 0.9137 0.8613 0.4921 0.9724 0.7607 0.9019 0.3980 0.9342 0.2906 1.0000 0.7638 0.7624 0.7858 0.8157 0.7232 0.9315 0.9180 0.8575 0.7497 0.8726 0.9302 0.8623 0.7257 0.3064 0.8855 0.7734 0.8403 0.5484 0.9468 0.5691 0.7572 0.7594 0.7365 0.6842 0.8400 0.8324 0.7830 0.8842 0.8966 0.3939 0.9689 0.6255 0.8306 0.3246 0.7594 0.2658 1.0000 0.5546 0.6372 0.6461 0.8124 0.6626 0.9568 0.8691 0.7444 0.6935 0.7629

0.95 0.94 0.83 0.36 0.92 0.87 0.84 0.65 0.99 0.73 0.85 0.85 0.85 0.70 0.85 0.92 0.81 0.95 0.92 0.49 0.96 0.76 0.90 0.39 0.84 0.32 1.00 0.65 0.80 0.78 0.86 0.76 0.95 0.91 0.85 0.78 0.87

138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 Ml M2 M3 M4 M5 M6 M7 M8 M9 Ml0 Ml1 Ml 2 M13 M14 M15 M16 M17 M18 M19 M20 M21

Duke P co Jersey + L CP Public S E + G Public S E + G Cons Edis Co Rochester GE PortlandGE Penn E co Penn P + L co Phil E co Phil E co Carolina P + L Duke P co Duke P co S Carolina E + G EP Virginia Virginia EP Vermont Yankee Wisconsin EP WisconsinPS N Brunswick Eskom Nuclear Electric Nuclear Electric Nuclear Electric Nuclear Electric Nuclear Electric Nuclear Electric Nuclear Electric Nuclear Electric Nuclear Electric Nuclear Electric Nuclear Electric Scottish Nuclear ScottishNuclear Nebraska P P Dis Omaha PP Dis Po A of NY Po A of NY TennesseeV Wash'tonPub PSS

NC McGuire NJ OysterCreek NJ Hope Creek NJ Salem NY Indian Point NY Ginna OR Trojan PA Three Mile Isl PA Susquehanna PA Limerick PA Peach Bottom HB Robinson SC SC Catawba SC Oconee SC VC Summer VA NorthAnna VA Surry VT Vermont Yankee WI Point Beach WI Kewaunee Canada Point Lepreau S AfricaKeokberg UK Bradwell UK DungenessA UK DungenessB UK Hartlepool UK Heysham1 UK Heysham2 UK HinkleyPoint UK Oldbury UK SizewellA UK Trawsfynydd UK Wylfa UK B Hunterston UK Torness NE Cooper Nuc Sta NE Fort Calhoun NY Indian Point NY JA Fitzpatrick TN Sequoyah WA WNP

1983 1969 1986 1979 1975 1970 1976 1974 1984 1986 1974 1971 1986 1974 1984 1979 1973 1972 1971 1974 1985 1984 1962 1965 1985 1984 1984 1988 1972 1968 1966 1965 1973 1977 1989 1974 1974 1974 1975 1982 1984

PWR BWR BWR PWR PWR PWR PWR PWR BWR BWR BWR PWR PWR PWR PWR PWR PWR BWR PWR PWR PHWR PWR Magnox Magnox AGR AGR AGR AGR Mag/AGR Magnox Magnox Magnox Magnox AGR AGR BWR PWR PWR BWR PWR BWR

0.8667 0.4585 0.7536 0.8373 0.5826 0.7831 0.6186 0.7449 0.7857 0.6307 0.3410 0.5074 0.8050 0.9277 0.7133 0.7128 0.3602 0.8356 0.9375 0.9135 0.9636 0.7747 0.7264 0.5912 0.6343 0.3392 0.5569 0.5289 0.7552 0.8046 0.6921 0.5119 0.7895 0.8944 0.4139 0.7966 0.7737 0.6619 0.8850 0.6975 0.6455

0.8835 0.5839 0.7536 0.8373 0.7152 0.8514 0.7432 0.7449 0.8356 0.7863 0.4237 0.6346 0.8488 0.9392 0.8444 0.7758 0.4361 0.9084 0.9375 0.9570 0.0636 0.8592 0.8714 0.7696 0.7718 0.3801 0.5954 0.5372 0.8624 0.6737 0.8994 0.7475 0.9554 0.8944 0.4479 0.8421 0.8697 0.7684 0.9224 0.8063 0.7684

0.8736 0.4401 0.7578 0.8670 0.5976 0.8171 0.6405 0.6088 0.7928 0.6331 0.4408 0.5649 0.8092 0.9539 0.7116 0.7307 0.4294 0.8491 0.9881 0.9252 0.9592 0.7900 0.5540 0.5320 0.6401 0.3630 0.5810 0.5325 0.7855 0.8377 0.6005 0.4684 0.7488 0.9442 0.4139 0.8404 0.7378 0.6870 0.8801 0.6997 0.6456

0.89 0.56 0.75 0.86 0.73 0.88 0.76 0.60 0.84 0.78 0.54 0.70 0.85 0.96 0.84 0.79 0.51 0.92 0.98 0.96 0.95 0.87 0.66 0.69 0.77 0.40 0.62 0.54 0.89 0.69 0.78 0.68 0.90 0.94 0.44 0.88 0.82 0.79 0.91 0.80 0.76

M. G. POLLITT
TABLE 4 on Summary testsof theeffect ownership efficiency of of

355

Analysis of variance measure Efficiency O(u, p,x). curr A(u,p,x).curr O(u, p,x).hist A(u,p,x). hist K(u, x) KK(u, x) KKL(u, x) KKF(u, x) F (prob> F) 0.376 (0.5415) 0.013 (0.9093) 1.763 (0.1882) 1.172 (0.2824) 1.045 (0.3100) 3.760 (0.0562) 2.984 (0.0881) 3.866 (0.0529)

KruskalWallis
X2

Median scores (points above median)

x2

Van der Waerden (1-way)

x2

Savage scores (exponential)

x2

(prob >

X2)

(prob

> X2)

(prob

> X2)

(prob

>

X2)

0.7920 (0.3735) 0.0003 (0.9955) 2.5051 (0.1135) 1.7076 (0.1913) 0.4810 (0.4880) 2.0424 (0.1530) 1.5304 (0.2161) 3.1661 (0.0752)

0.5790 (0.4467) 0.0643 (0.7998) 3.1520 (0.0758) 3.1520 (0.0758) 0.5790 (0.4467) 0.0643 (0.7998) 0.0643 (0.7998) 5.2105 (0.0225)

0.5442 (0.4607) 0.0070 (0.9334) 1.9116 (6.1668) 1.5947 (0.2067) 0.8302 (0.3622) 3.3581 (0.0669) 2.7527 (0.0971) 1.9087 (0.1671)

0.9930 (0.3190) 0.1593 (0.6898) 1.9449 (0.1631) 2.0213 (0.1551) 0.5506 (0.4581) 1.8590 (0.1727) 1.5166 (0.2181) 3.3136 (0.0687)

scores'9 on a set of O(u, p,x). curr,A(u,p,x). curr,and K(u, x) efficiency variables.20 The explanatory variablesattemptto captureload, explanatory All and effects. of thesemeasuresare censored size,age, ownership, technology at 1.0000 (nine out of the 78 K(u, x) measuresare 1.0000) and hence Tobit in for Resultsare reported Table 5. analysis21 is moreappropriate thismeasure. OLS resultsindicate that the explanatoryvariables can The unreported in errors scores.The standard explainaround75-95% ofthevariation efficiency in the reportedTobit equations reveal the significance load factor in of is as efficiencythisis hardly surprising theload factor a measure determining in ofthecapital productivity theplant.Age variablesare also significant the of equations.The O(u, p,x). currcoefficients O(u, p,x). currand theA(u,p,x). curr on the age variablessuggestthat maximumefficiency occurs in 15-year-old
19 variables. Regressions werecarriedout usingO(u, p,x). histand A(u,p,x). histas dependent These regressions also indicatedthe insignificance ownership of effects. 20 The regression P.O. analysiswas carriedout usingTSP available fromTSP International, Box 61015,StationA, Palo Alto,CA 94306,USA. 21 See Maddala (1983) formoredetails.

356

OWNERSHIP AND EFFICIENCY

IN NUCLEAR POWER PRODUCTION

TABLE 5 Regression analysisofefficiency scores

Dependent variables O(u,p, x). curr Tobit Parameters Constant MUNI K K2 Load Loadsq Age Agesq BWR PWHR MAG AGR MAGAGR Sigma (tobit parameter) L.R. Tobit R2 OLS -0.14376 (0.043345)t -0.019612 (0.015692) 0.588959E-04 (0.243846E-04)t -0.801945E-08 (0.625099E-08) 1.64953 (0.133997)t -0.595813 (0.119217)t 0.005280 (0.002359)t -0.173275E-03 0.103316E-03)* -0.011199 (0.011101) 0.069458 (0.043248) -0.044389 (0.024532)* 0.096262 (0.023763)t -0.016207 (0.041288) 0.037237 (0.003011)t 142.803 0.9556 A(u,p, x). curr Tobit -0.06055 (0.045057) -0.012152 (0.01631) 0.196904E-04 (0.253458E-04) -0.468973E-08 (0.649738E-08) 2.05578 (0.139305)t -1.09184 (0.123951)t 0.0037494 (0.0024520) -0.141085E-03 (0.107389E-03)t -0.0096967 (0.011539) 0.046398 (0.044954) 0.029308 (0.025500) 0.023725 (0.024700) 0.022018 (0.042916) 0.038705 (0.003110)t 139.869 0.9435 K(u, x) Tobit 0.72380 (0.04806)t -0.01188 (0.01629) 0.51681E-04 (0.25273E-04)t -0.48550E-08 (0.64903E-08) -0.10812 (0.15144) 0.42072 (0.13785)t 0.00207 (0.00250) -0.53087E-04 (0.10807E-03) -0.00264 (0.01153) 0.31075 (0.175847) -0.08283 (0.02542)t 0.12678 (0.02610)t -0.03932 (0.04279) 0.03854 (0.00335)t 117.629 0.7665

Standarderrorsin parentheses. * at Significant 10%//. at t Significant 540. MUNI = Ownershipdummyvariable(1 = publiclyowned,0 = privately owned). K = Capital in MW. K2 = K squared. Load = Load factor (outputin millionsof kWh/(8.76*K)).22 Loadsq= Load squared. sets. Age = 1989 minusaveragefirst yearof serviceof generating Agessq = Age squared. 0 BWR, PWHR, MAG, AGR, MAGAGR = Reactortypedummy variables(1 = type,

other).

22 (8.76*K) is the maximumamount of electricity millionsof kWh) a power stationcould (in at producein a yearifoperatedcontinuously maximum capacity.

M. G. POLLITT

357

plant. This observationis constistent withlearningover the earlieryears of of operationand thenreducedperformance actual depreciation plantoccurs. as In the O(u, p,x) . curr regressionthe coefficients AGRs and Magnox on reactors indicatethatAGRs exhibit superior performance all oftheAGR and is Magnox reactors UK operated.The dummyvariableforownership not are in the significant any oftheregression equations.This seemsto confirm results of the statistical testsin Table 4. 6. Conclusion sample This paper has used DEA to measuretheefficiency an international of ofpublicly ownedand privately ownednuclearpowerplants.Measuresforboth ex ante and ex post efficiency have been calculated.Reference 100% efficient firms have been identified. DEA scores fromthe analysisof a sample of The nuclear power plants were then submittedto statisticaltestingand Tobit on analysis in order to test the hypothesis that ownershiphas no effective was little productive efficiency. DEA and Tobit results The indicated thatthere evidenceof differing cost performance (eitheron a current cost or an historic basis) betweenthe two ownership formsex ante. However when adjustment was made for vintageeffects/poor investment decisions and ex post DEA measures were calculated there was some strongerevidence that privately owned plantsexhibited lowercosts. the The analysis constitutesa joint test of the degree of competition, The hypothesistests indicate an regulatory regimeand ownershipeffects. inability reject null hypothesis the5% levelbut thismaybe due to the to the at smallsample size and thereis a consistent of average relatively pattern higher in efficiency privately owned plants.Howevereven ifthenull would have been in at rejected the 5% levelin a largersample the differences averageefficiency Howeverat are relatively small,at least on the ex ante measuresof efficiency. of the 10% level thehypothesis testswould seem to indicatethatprivatisation the UK's nuclear power plants could be expected to reduce the ex post of lowerstaffing levels.Howinefficiency existing plantsthrough significantly evergiventherelatively percentage totalcostsoriginating labourcosts low of as theoverallcost savingsare likelyto be small. The resultsof the analysisof this paper need to be set against the recent observedimprovement the cost efficiency the UK's nuclear electricity in of our generating companies.There are fourimportant pointsto make. Firstly, results indicatethattherewas some scope in 1989 forUK plantsto improve their relative bestsamplepractice thattheUK plantswerenot but to efficiency owned plant. performing significantly poorlyrelativeto average US privately A large improvement productivity be explainedas a combinationof in can in movement and towardstheproduction frontier ofmovement a new frontier being definedby UK plants. Secondly,Nuclear Electric's 1994-95 Annual Report indicatesthat around half of the registered in unit costs since fall has lowerfuelcostsperunitofoutput.To theextent corporatisation comefrom

358

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IN NUCLEAR POWER PRODUCTION

thatthishas come about through lowerfuelinputcosts,thisdoes not constitute an improvement relative in efficiency measuredby DEA. Thirdly, study as our just looks at plant level efficiency not company level efficiency. Nuclear Electric's 1994-95 Annual Report indicates that labour productivity has improved 117% sincecorporatisation as a lot of staff not employed by but are on site the suggestion that the improvement labour productivity the is in at less than at the companylevel. Finally,our null plant level is substantially is hypothesis that publiclyowned and privately owned plants have the same while Nuclear Electrichas substantially reduced costs productiveefficiency withinthe public sector.Arguably, this strengthens ratherthan weakens the evidenceof thispaper.
ACKNOWLEDGEMENTS The author would like to thankJEPIC, Eskom, New Brunswick and Power, Nuclear Electric, ScottishNuclear fortheirgeneroushelp in providing data. He also wishesto expresshis thanks to George Yarrow,Tom Weyman-Jones, Yvonne Abbott, and fiveanonymousreferees helpful for comments an earlierdraft thispaper; the usual disclaimer on of applies. REFERENCES ALI,A. I. (1990). 'Data Envelopment Analysis: Computational Issues', Computers, Environment the and UrbanSystems, 157-65. 14, A. AL-OBAIDAN, and SCULLY, G. W. (1991). 'Efficiency differences between private and state-owned in enterprises the international petroleum industry', AppliedEconomics, 237-46. 23, AVERCH, H. and JOHNSON,L. L. (1962). 'Behaviour of the Firm under Regulatory Constraint', American Economic Review, 1052-69. 52, in A. BOARDMAN, E. and VINING, A. R. (1992). 'Ownershipversuscompetitition: Efficiency public enterprise', Public Choice,73, 205-39. An BRYNES, P. (1985). Ownership and Efficiency the WaterSupplyIndustry: application the in of Nonparametric Approach Efficiency to Measurement, Ph.D. Thesis,Southern IllinoisUniversity, Carbondale,IL. in CAILLAUD, B., GUESNERIE, R., REY, P., and TIROLE, J. (1988). 'Governmentintervention production incentives and theory: review recent a of contributions', RandJournal Economics, of 19, 1-26. CHARNES,A. and Cooper,W. W. (1985). 'Prefaceto Topics in Data Envelopment Analysis', Annals of Operations Research, 59-94. 2, CHARNES, A., COOPER, W. W., and RHODES, E. (1978). 'Measuring the Efficiency Decision of Making Units',EuropeanJournal Operational of Research, 429-44. 2, DANTZIG, G. B. (1963). LinearProgramming Extensions, and Princeton University Press,Princeton, NJ. FARE, R., GROSSKOPF, S., and LOVELL, C. A. K. (1985a). The Measurement the Efficiency of of Production, Kluwer-Nijhoff, Boston,MA. FARE, R., GROSSKOPF,S., and LOGAN, J. (1985b). 'The Relative Performance of Publicly Owned and Privately Owned ElectricUtilities', Journal Public Economics, 89-106. of 26, FARE, R., GROSSKOPF,S., and LOVELL, C. A. K. (1994). Production Frontiers, Cambridge University Press,Cambridge. and Their Reference Sets', Management FARE, R. and HUNSACKER,W. (1986). 'Notions of Efficiency Science,32, 237-43. of Journal theRoyal Statistical FARRELL,M. J.(1957). 'The Measurement Productive Efficiency' of seriesA, 120,253-81. Society,
ALCHIAN, A. A. (1965). 'Some Economicsof Property Rights',II politico, 816-29 30,

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FEDERATION OF ELECTRIC

359

of POWER COMPANIES (undated).RecentTrends Nuclear Power Generationin Japan,Federationof ElectricPower Companies,Japan. of efficiency', FORSUND, F. R., and HJALMARSSON, L. (1974). 'On the measurement productive Swedish Journal Economics, 251-4. of 76, An FORSUND, F. R. and HJALMARSSON, L. (1979). 'Generalised Farrell Measures of Efficiency: 89, Application Milk Processing SwedishDairy Plants',EconomicJournal, 294-315. to in to GREEN, R. (1995). 'The Cost of Nuclear Power Compared with Alternatives the Magnox Oxford Economic Papers,47, 513-24. Programme', of HANOCH, G. and ROTHSCHILD, M. (1972). 'Testing the Assumptions ProductionTheory:A of 80, Non-parameteric Approach',Journal PoliticalEconomy, 256-75. HENDERSON, P. D. (1977). 'Two British Errors:Their Probable Size and Some Possible Lessons', EconomicPapers,29, 159-205. Oxford and Ownershipin Swedish Electricity HJALMARSSON, L. and VEIDERPASS, A. (1992). 'Efficiency Journal Productivity Analysis, 7-23. 3, RetailDistribution', of IMF (1990). International FinancialStatistics various,International MonetaryFund, Washington, DC. StatisticalMethodsbased on Ranks,Holden Day, San LEHMANN, E. L. (1975). Nonparametrics: Francisco,CA. MADDALA, G. S. (1983). LimitedDependentVariablesand QualitativeVariablesin Economics, CambridgeUniversity Press,Cambridge. Government, Aldine-Atherton, Chicago, NISKANEN, W. A. (1971). Bureaucracy and Representative IL. 1994-95. Nuclear Electricplc, Gloucester. NUCLEAR ELECTRIC (1995). Reportand Accounts OECD (various).Main EconomicIndicators, OECD, Paris. Nucleaires Dans Le Monde 1990, PINEAU, N., MAUBAcQ, F., and MONTICO, L. (1991). Les Centrales de Commissariat L'EnergieAtomique,Paris. OxfordUniversity in and Performance ElectricUtilities, Press, POLLITT, M. G. (1995). Ownership Oxford. US ENERGY INFORMATION AGENCY (1991a). HistoricPlant Cost and AnnualProduction Expenses DC. Printing Office, Washington, for SelectedElectricPlants 1989, US Government US ENERGY INFORMATION AGENCY (1991b). FinancialStatistics SelectedElectricUtilities 1989, of US Government DC. Washington, Printing Office, on Privatisation', Journal of VICKERS, J. S. and YARROW, G. K. (1991). 'Economic Perspectives EconomicPerspectives, 111-32. 5, No. 135, Baltimore, MD. Bulletin WHITMAN, REQUARDT and ASSOCIATES (1992). Handy-Whitman Policy,6, 81-132. YARROW, G. K. (1988). 'The priceof nuclearpower',Economic APPENDIX 1 Data sourcesand approximations fromthe US EIA publicationHistoricalPlant Cost and Annual The US data is constructed for Selected ElectricUtilities1989 (HPC) and fromFinancial Statisticsof Production expenses 1989 (FSTAT). The major sourcesof the non-US data OwnedElectricUtilities SelectedPrivately are as follows: Nuclear communication UK = Nuclear Electric/Scottish Power communication Canada = New Bruswick = Review 1989 South Africa Eskom Statistical Center(JEPIC) Japan= Japan ElectricPower Information the Unless otherwise statedthedata is drawnfrom major source. by of hours.The measureused is netoutputgenerated power OutputMeasuredin millions kilowatt For US plant consumedat powerstations. i.e. stations, grosspowerstationoutputminuselectricity thisis available in HPC.

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OWNERSHIP

AND EFFICIENCY

IN NUCLEAR POWER PRODUCTION

Capital Measured in megawatts (MW). Labour Numberof employees employedat power stations(or in generation). Ideally thisshould be an average fulltimeequivalentfigure, thesefigures not generally but are available. Part time is in working powercompanies notvery significant 5%) whiletheyearend figures (< usuallyquoted introduce a small bias of uncertaindirection.Eskom and Shikoko data was obtained via communication. Fuel Measured in TBTU (BTU x 1012).23 These are calculatedfrom in heat efficiencies recorded data was obtainedby communication. data is calculatedfrom HPC forUS plants.Escorn Shikoku a theoretical of Federation ElectricPower Companies data. grossthermal efficiency 34.8% from of Historicpriceof capital Millionsof unitsof local currency. This is calculatedby multiplying the cost of the plantby an annual interest historic charge.The annual interest chargeis calculatedas the ten yearaveragereal nationalinterest (endingin 1989) rateplus a 3.33% (0.033) depreciation rateused is thenationalgovernment bond charge.For publicly-owned plantsthenominalinterest rateand forprivately-owned rate plantsthenominalinterest used is thenationallending rateboth as reported International in FinancialStatistics (various issues).The inflation ratesare takenfrom and from OECD Main Economic Indicators International FinancialStatistics (South Africaonly). It would be preferable use a current to cost of capital measurebut thesefigures not available. are The historic data forEskomand Shikoku obtainedvia communication. data is in HPC. cost is US Current costofcapital Historiccost of capital multiplied a priceindex.The priceindexused is by theratiooftherelevant nationalmanufacturing investment in or pricedeflator 1989 to thedeflator in thefirst units.US data is takenfrom Whitman al. (1992) et yearof operationof thegenerating and non-US data is takenmainlyfrom OECD Main Economic Indicators.24 Price of labour Measured in millionsof unitsof local currency employee.For US IOUs and per non-US utilities thesefigures calculatedas the result total labour costsin the utility are of divided For US data stateaveragelabour costs are used. AverageUS by the total numberof employees. labour costs are calculatedfromFSTAT. UK data is taken from companyaccountsand Eskom data is obtainedvia communication. PriceoffuelMeasuredin millions local currency of unitsper TBTU. This is calculatedas thefuel costs dividedby fuelinput.The fuelcost figures available forUS plantsin HPC. The data for are AGR plantdata. thetwoScottish Nuclearplantsis an unweighted averageoftheNuclearElectric is Age Measured in years.This figure calculatedby averagingthe year in whichthe generating sets were first commissioned. The commissioning data forthe non-UK stationsare taken from Pineau et al. (1991), the UK dates wereobtainedvia communication withNuclear Electric. ReactortypeThis information taken fromPineau et al. (1991). BWR = boilingwaterreactor, is PWR = pressurised waterreactor, PHWR = pressurised waterreactor, hot AGR = advanced gas on cooled reactor, Magnox = Magnox reactor, Mag/AGR = Magnox and AGR reactors thesame site.

BTU = British ThermalUnit; 1 kWh = 3412.1BTU. See Pollitt(1995), Appendix 1.3, forthe sources of the deflators. For the US data a total nuclearproduction plantdeflator used. is
23 24