Electricity distribution in Brazil: a microeconomic analysis of the sector’s operating costs

Abstract

The study had as research problem the estimation of an operating costs function of companies in the electricity distribution sector in Brazil. The results showed that the sector operates with increasing returns to scale and, consequently, economies of scale and size. It was also observed that the sector is in fact a natural monopoly, with decreasing average and marginal costs. In terms of variables, it was observed that the number of shutdowns per consumer unit, salaries paid in the activity of maintenance of energy networks, company size and technical losses in energy distribution systems positively impacted the operating costs of distributors of electricity. It is also noteworthy that the geographic location of such distributors influenced such costs.