sustainability Article Peruvian Electrical Distribution Firms’ Efficiency Revisited: A Two-Stage Data Envelopment Analysis RaúlPérez-Reyes 1 and Beatriz Tovar 2, *   Citation: Pérez-Reyes, R.; Tovar, B. Peruvian Electrical Distribution Firms’ Efficiency Revisited: A Two-Stage Data Envelopment Analysis. Sustainability 2021, 131, 66. https://doi.org/10.3390/ su131810066 Academic Editors: Sameer Al-Dahidi, Mohamed Louzazni and Enrico Zio Received: 15 July 2021 Accepted: 2 September 2021 Published: 8 September 2021 Publisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affil- iations. Copyright: © 2021 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https:// creativecommons.org/licenses/by/ 4.0/). 1 Department of Economics, Universidad de Lima, Lima 15023, Peru; rperezr@ulima.edu.pe 2 Institute of Tourism and Sustainable Economic Development, Universidad de Las Palmas de Gran Canaria (ULPGC), 35017 Las Palmas de Gran Canaria, Spain * Correspondence: beatriz.tovar@ulpgc.es; Tel.: +34-92-845-1794 Abstract: The extent to which the structural reform of the Peruvian electricity market in the 1990s has improved the technical efficiency levels of the distribution companies and whether some firm specific explanatory variables had influenced upon the efficiency was analysed for first time using a second stage Tobit model to study the influence of some firm specific explanatory variables on efficiency. Some authors have argued that the use of Tobit regression is inappropriate in the second stage of DEA and have suggested using other recently developed options. Due to this, it might be worth revisiting this issue and adding those other alternative models to check whether the conclusions obtained with the Tobit model could be upheld. The nine alternative models estimated allow us to confirm that the incentives generated by the reform process led to the firms becoming more efficient. Moreover, private management and the ratio of low voltage sales to medium voltage sales for each company positively affect efficiency, whereas investment per customer is negatively correlated to it. Keywords: two-stage DEA; fractional regression models; bootstrap truncated regression; electricity distribution; efficiency drivers; reform 1. Introduction The situation prior to the 1993 reforms in the Peruvian electricity sector were charac- terised by centralised control of the distribution companies by the Ministry of Energy and Mines. These distribution companies, which were all state owned, had few investment prospects for modernizing or expanding new distribution grids and showed either negative or very low utilities, as well as high levels of technical and commercial losses (Electro Perú and Electro Lima, the two main state distribution companies, registered losses of US $301 and US $95 million in 1990, respectively [1]). In 1992, the general opinion in the country was that the state had not properly fulfilled its role in the process of universal provision of energy, in ensuring energy supplies and in the reliability of the electrical system. In 1993, with the goal of overcoming these problems in the electricity sector, the enactment of an Electricity Concessions Law implemented the following. First, there was a process of vertically separating the industry, in order to divide the generating, transmission, dispatching and distribution into different economic entities. Second, was the privatization of the main assets of generation and distribution. The underlying criterion for the 1993 reforms was the search for an improvement in the efficiency of the electricity distribution companies, combined with the realisation that the institutionalism associated with the state management had not provided efficient contracting of public utilities [2]. Other major problems were the absolute job security of the employees, the incapacity to have long term loans without political guarantees, directors being chosen based on wheeler dealing within the national and local govern- ments, delays in tariff revisions associated with the political agendas of the national and local governments. Sustainability 2021, 131, 66. https://doi.org/10.3390/su131810066 https://www.mdpi.com/journal/sustainability