An econometric model of electricity distribution systems in urban areas

The purpose of this paper is to analyze the production structure of electricity distribution systems in urban areas. Under the assumption that electric utilities minimize their distribution capital and operating costs, input demand functions are developed for the various distribution facilities (for example, poles, wires, streetlights) and are econometrically estimated, using cross-sectional data on communities served by a major utility. These functions are then used to allocate total costs on the basis of marginal costs and to assess the extent of economies of scale and density in electricity distribution.