Tariff structure of Japanese electric power companies: An empirical analysis using data envelopment analysis

This research explores a Marginal Cost (MC)-based pricing system, using Data Envelopment Analysis (DEA). This DEA technique is widely applied for performance analysis and efficiency measurement in public and private sectors. This article does not follow such a previous research direction, rather directing itself towards the new measurement of MC and Ramsey prices of multiple electric power services. As an important case study, this research applies the proposed DEA approach to examine how much the current tariffs of Japanese electric power services deviate from these MC and Ramsey prices. This type of research has never been explored in Japan, even though such a research effort is needed by many policy makers and consumers. It is hoped that our empirical findings can serve as a policy-making basis for guiding the Japanese electric power industry. This study believes that this Japanese experience is useful for other nations, such as Asia-Pacific countries, where many public industries are regulated by their governments.