Estimating the Effects of China’s Market-oriented Reform in 2015 on the Technical Efficiency of Power Grid Companies

With the implementation of China's market-oriented electricity reform in 2015, China's power industry is under a new round of power system reform. To evaluate the effects of the reform on the technical efficiency of China's 30 provincial power grid companies, a fixed-effect stochastic frontier analysis model is selected, sale incomes and the proportion of electricity for market transaction are considered as two environmental heterogeneity variables. Results show that technical efficiency improves with the decrease of sale incomes and increase in proportion of electricity for market transaction, which means that both the reform on transmission and distribution side and retail side make positive impacts on the technical efficiency improvement of power grid companies. The government should further implement the market-oriented electricity reform, power grid companies should change profit mode and enhance competitiveness to improve their technical efficiency under the reform.