No differences in efficiency between public and private utilities

Abstract

The increase in municipal economic activity in the utilities sector frequently comes under scrutiny. It is presumed that public utilities have less incentive to provide efficient service than private companies. This could result in excessive costs and prices for end users. New microdata on German energy supply companies allow to conduct an empirical analysis for the whole of Germany for the first time. The findings indicate that there is no difference in efficiency between public and private utilities. This applies to both the competitively structured electricity retail sector and regulated electricity distribution sector. General restructuring in the energy sector such as the increased competitive pressure or the introduction of a more stringent regulatory regime have led to changes in the efficiency of all energy supply companies. The dichotomy between public and private utilities that has been suggested in the (re)municipalization debate therefore appears to be exaggerated.