{"62667":{"#nid":"62667","#data":{"type":"event","title":"Regulating Local Monopolies in Electricity Transmission: A Real-world Application of the StoNED Method","body":[{"value":"\u003Cp\u003E\u003Cstrong\u003ETITLE: \u003C\/strong\u003ERegulating Local Monopolies in\nElectricity Transmission: A Real-world Application of the StoNED Method \u003C\/p\u003E\u003Cp\u003E\u003Cstrong\u003ESPEAKER:\u003C\/strong\u003E\u0026nbsp; Andrew Johnson\u003C\/p\u003E\u003Cp\u003E\u003Cstrong\u003EABSTRACT:\u003C\/strong\u003E\u003C\/p\u003E\u003Cp\u003EThe Finnish electricity market\nhas a competitive energy generation market and a monopolistic transmission\nsystem. To regulate the local monopoly power of network operators, the\ngovernment regulator uses frontier estimation methods (e.g., Stochastic\nFrontier Analysis (SFA) and nonparametric Data Envelopment Analysis (DEA)) to\nidentify excessive transmission costs, taking into account outputs and the\noperating environment. We describe the new regulatory system developed for the\nFinnish regulator, which is based on the method Stochastic Non-smooth\nEnvelopment of Data (StoNED) and utilizes panel data to detect the excessive\ncosts from random noise.\u003C\/p\u003E\n\n\u003Cp\u003EThe literature of\nproductive efficiency analysis is divided into two main branches: the parametric\nSFA and nonparametric DEA. StoNED is a new frontier estimation framework that\ncombines the virtues of both DEA and SFA in a unified approach to frontier\nanalysis. StoNED follows the SFA approach by including a stochastic component. In\ncontrast to SFA, however, the proposed method does not make any prior\nassumptions about the functional form of the production function. In that\nrespect, StoNED is similar to DEA, and only imposes free disposability,\nconvexity, and some returns to scale specification. \u003C\/p\u003E\n\n\u003Cp\u003EThe main advantage of\nthe StoNED approach to the parametric SFA approach is the independence of the ad\nhoc parametric assumptions about the functional form of the production function\n(or cost\/distance functions). In contrast to the flexible functional forms, one\ncan impose monotonicity, concavity and homogeneity constraints without\nsacrificing the flexibility of the regression function. Additionally, the main\nadvantage of StoNED to the nonparametric DEA approach is robustness to\noutliers, data errors, and other stochastic noise in the data. In DEA the\nfrontier is spanned by a relatively small number of efficient firms, however,\nin our method all observations influence the shape of the frontier. Also many\nstandard tools from parametric regression such as goodness of fit statistics\nand statistical tests are directly applicable in our approach. This is collaborate\nwork with Timo Kuosmanen of Aalto University in Finland.\u003C\/p\u003E\n\n\u003Cp\u003E\u0026nbsp;\u003C\/p\u003E\n\n\u003Cp\u003E\u003Cstrong\u003E\u0026nbsp;Andrew L Johnson \u003C\/strong\u003Eis an Assistant\nProfessor in the Department of Industrial and Systems Engineering at Texas\nA\u0026amp;M University. He obtained his B.S. in Industrial and Systems Engineering\nfrom Virginia Tech and his M.S. and Ph.D. from the H. Milton Stewart School of\nIndustrial and Systems Engineering from Georgia Tech. His research interests\ninclude productivity and efficiency measurement, warehouse design and\noperations, material handling and mechanism design. He is a member of the\nINFORMS, National Eagle Scout Association, and German Club of Virginia Tech. \u003C\/p\u003E","summary":null,"format":"limited_html"}],"field_subtitle":"","field_summary":"","field_summary_sentence":[{"value":"Regulating Local Monopolies in Electricity Transmission: A Real-world Application of the StoNED Method"}],"uid":"27187","created_gmt":"2010-11-10 14:10:15","changed_gmt":"2016-10-08 01:53:24","author":"Anita Race","boilerplate_text":"","field_publication":"","field_article_url":"","field_event_time":{"event_time_start":"2010-11-19T10:00:00-05:00","event_time_end":"2010-11-19T11:00:00-05:00","event_time_end_last":"2010-11-19T11:00:00-05:00","gmt_time_start":"2010-11-19 15:00:00","gmt_time_end":"2010-11-19 16:00:00","gmt_time_end_last":"2010-11-19 16:00:00","rrule":null,"timezone":"America\/New_York"},"extras":[],"groups":[{"id":"1242","name":"School of Industrial and Systems Engineering (ISYE)"}],"categories":[],"keywords":[],"core_research_areas":[],"news_room_topics":[],"event_categories":[],"invited_audience":[],"affiliations":[],"classification":[],"areas_of_expertise":[],"news_and_recent_appearances":[],"phone":[],"contact":[],"email":[],"slides":[],"orientation":[],"userdata":""}}}