Changing times: incentive regulation, corporate reorganizations, and productivity growth in the Great Britain’s gas networks

Abstract

The gas industry in Great Britain has witnessed periodic regulatory reviews and large corporate reorganization over the last few decades. We assess how these changes have impacted total factor productivity growth using a data envelopment analysis (DEA) approach by setting out different models, each for gas transmission and distribution network. We also construct a combined single series for distribution and transmission using financial data to show whether productivity growth can be attributed to corporate reorganizations. Our results show a negative productivity growth of −1.6% p.a. for gas transmission over the sample period, but reversed to a positive TFP growth once quality is included. For gas distribution, we find productivity regress at −6.2% p.a. over the sample period, with a negative productivity trend observed across all the models, despite the inclusion of quality variables. However, the findings reveal a slightly higher productivity growth of 1% p.a. using corporate data, with pre-restructuring period having a positive productivity growth compared with the post-restructuring era with a negative productivity growth.