Evaluating of the Restructuring of the Jordanian Electric Company (1968-2017)
DOI:
https://doi.org/10.35516/jjes.v10i2.1401Keywords:
Economies of Scale, Economies of Scope, Vertical and Horizontal Integration, Natural Monopoly, Vertical Decomposition, Quadratic Cost Function, System of Apparently Unrelated Regression EquationsAbstract
Objectives: This study aims to identify the impact of the restructuring of Jordan's electricity sector on the advantages of vertical integration of the Jordanian Electric Power Company (JEPCO) before restructuring, experimentally verifying the existence of economies of scale and economies of scale (vertical and horizontal integration), and testing the natural monopoly of JEPCO using a time series during the period (2017-1968).
Methods: To achieve the purposes of the study, a multistage and output quadratic cost function was estimated with equations of capital price contribution and work from total costs as a system of equations using the Seemingly Unrelated Regression (SUR) equation system.
Results: Empirical results indicated real economies of scale, a particular product's economies of scale in both household and generating energy sales and non-household. The results also indicated savings in the range and vertical and horizontal integration, that the JEPCO had lost the vertical integration benefits of the company before it stopped generating electricity, and that the company's losses due to the vertical dismantling averaged 12.98 million dinars.
Conclusions: Based on these results, the study emphasized the need to balance the cost of separating the activities that may occur as a result of losing the advantages of vertical integration with the expected benefits of paving the way for competition in the electricity generation activity, which in turn enhances cost savings for consumers.
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