Productivity improvements in Distribution Network Operators - Final report

Publication date
2nd December 2003
Policy area

<b>CEPAs study on expected productivity improvements for the DNOs 2005-2010</b><b>Background</b>Ofgem appointed consultants Cambridge Economics Policy Associates (CEPA) to undertake analysis to determine expected growth in productivity for the distribution network operators (DNOs) as a sector.Productivity is the relationship (ratio) between a firms or industrys outputs e.g. goods and services and input resources or factors of production. CEPAs analysis considers:<ul><li>Total Factor Productivity (TFP) all factors of production e.g. capital, labour, raw materials, energy etc used to produce goods and services.</li><li>Partial Factor Productivity (PFP) the ratio of a single input to a single output. CEPA have focussed on productivity in operating costs (PFP opex)</li> </ul>CEPAs analysis includes the evaluation of historical productivity trends and also assessment of expected (future) productivity growth. CEPAs study will provide an indication of the scope for future efficiency savings that the DNOs could achieve in the next price control (2005-2010).<b>Purpose of this report</b>CEPAs top down assessment of productivity set out in this report will complement Ofgems other cost assessment work. This includes comparative analysis of performance of DNOs through bottom up modelling as well as top-down benchmarking, and also analysis of the DNOs actual costs and forecast costs. It will be for Ofgem to decide how it uses the results of this study in the overall cost assessment. <b>Responding to this document</b>Any questions or queries regarding CEPAs report should be addressed to Haren Thillainathan, email <a_href="</a>If you wish to comment on any of the issues raised in CEPAs report please include them with your response to the DPCR 2nd Consultation Document intended for publication before 19 December 2003, responses should be sent to:Nienke HendriksOfgem9 Millbank London SW1P 3GE<a_href="</a>The deadline for responses is <b>10 February 2004</b>