Interrelationship analysis of DEA scores, performance measures, and correlated factors: Development of a functional model for selected electric cooperatives in the Philippines

• Main Author: Abelinde, Christopher B.
• Format: text
• Language: English
• Published: Animo Repository 2015
• Subjects: Electricity; Electric cooperatives > Philippines; Business
• Online Access: https://animorepository.dlsu.edu.ph/etd_doctoral/462
• Institution: De La Salle University

People and processes have been largely dependent on electricity for the obvious reason that there is virtually no single day in which electricity is not needed. Thus, electricity has become indispensable. Reliable supply of electricity is a must and power distribution is handled primarily by electric cooperatives (ECs) in most provinces of the country. Operational and financial performance of these electric cooperatives is essential to their viability to continue delivering stable power supply to their consumers. Thus, the study investigated the relationship of internal and external factors with efficiency of electric cooperatives. Furthermore, the study investigated the relationship of efficiency to financial and other non-financial measures of performance. Results show that electric cooperatives performed fairly in terms of efficiency and profitability is low. As to liquidity, the ECs are generally well and they had satisfactory performance in terms of debt management with majority of the ECs meeting the threshold. As to effectiveness measures, the ECs found their customers to be generally satisfied and the system average interruption generally within the threshold. Moreover, the study found that efficiency helps the ECs have a better financial performance, specifically in terms of profitability, liquidity, and debt management, as suggested by the positive relationship, albeit weak which would also indicate that there are other factors that influence financial performance. Moreover, no significant evidence was found that would indicate a trade-off between efficiency and effectiveness. Furthermore, the functional models indicated that efficiency is influenced by both internal and external factors. The model covering all selected ECs shows that good governance and average consumption of commercial-type customers tend to improve efficiency. Good governance is an internal factor that is shaped by the board of directors and the general manager. Meanwhile, the average consumption of commercial customers is an external factor that is beyond the control of the board or the management. The models by location and size also indicated that internal and external factors contribute to the level of efficiency. Thus far, regulators, policy makers, and even the ECs are enjoined to make use of DEA efficiency to supplement financial performance analysis. Moreover, good governance should be promoted to drive the ECs to better performance. Further investigation of factors that influence efficiency would provide guidance on ECs in becoming more efficient, thereby reducing the distribution charge passed on to consumers. Other studies can include other DEA models like cost efficiency and Malmquist index. Other factors may be explored as to their influence on efficiency. It would also be worthwhile to study other factors that contribute to better profitability, liquidity, and debt management of electric cooperatives. Secondary data were taken from the National Electrification Administration (NEA), Department of Interior and Local Government (DILG), and Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA), while primary data were gathered through a survey questionnaire sent to the General Managers of selected electric cooperatives. The data were analyzed using Data Envelopment Analysis (DEA), cluster analysis, correlation, and forward selection regression.