An Analysis of the Malmquist-DEA Productivity Index Applied to the Segment of Electric Power Transmission in Brazil

The Malmquist productivity index is used in the segment of Electric Power Transmission in Brazil to adjust the Allowed Annual Revenue (AAR) by reducing the costs of operation and maintenance of companies. The regulator, the National Electric Power Agency (in Portuguese, Agência Nacional de Energia Eletrica—ANEEL), intends to capture productivity gains arising from technological evolution to reduce tariffs. The methodology and parameters to be used in the calculation of productivity gains are defined quinquennially by ANEEL after public discussion. The last discussion occurred in 2021 and the productivity index was established as zero in 2022. In the current regulatory model, the Data Envelopment Analysis (DEA) is adopted to calculate the Malmquist distance functions, which are obtained using data from 2013 to 2019. Productivity is segregated between: (i) technological change; and (ii) efficiency change (segregated between scale change and pure efficiency change). This methodology also considers the estimation of confidence intervals for technological gains, which are obtained using bootstrap. In this article, we propose to update the information used in Malmquist to verify whether there have been changes in productivity. We also aim to make a diagnosis of the capture of technical and scale change in transmission auction concessions in Brazil. Since these concessions have the regulatory revenue determined by the lowest bid offered in the auction, it is important to understand whether the capture productivity gains are consistent considering the Malmquist interpretation.