Distribution utilities vary in terms of costs, quality of supply, customer segments, and network features which impacts their operational effectiveness. Quality of supply is an important determinant of operational performance. Two-stage data envelopment analysis is used to analyse operational efficiency of 19 unbundled Indian electricity distribution companies from 2016–17 to 2019–20. The first model estimates the operational efficiency of the utilities while the second model uses reliability indices as undesirable outputs in addition to the outputs and inputs used in first model. In the second stage, efficiency scores from first stage are regressed with external environmental variables such as years from unbundling, ownership, and customer structure to analyse their influence on the performance of distribution companies. Coefficients of ownership and customer structure are negative and significant in the regression results.