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Performance assessment of water companies: A metafrontier approach accounting for quality of service and group heterogeneities

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  • Mocholi-Arce, Manuel
  • Sala-Garrido, Ramon
  • Molinos-Senante, Maria
  • Maziotis, Alexandros

Abstract

The assessment of water companies’ efficiency, productivity and quality of service is part of the process to set water tariffs and therefore, is relevant for regulators and customers. However, the water industry involves several heterogeneous water companies. Following a pioneering approach, this study estimates productivity change and its drivers considering the non-homogeneous nature of the water companies and incorporating quality of service variables as undesirable outputs. In doing so, the metafrontier Malmquist Luenberger productivity index was estimated for a sample of English and Welsh water and sewerage companies (WaSCs) and water only companies (WoCs) over the years 2001–2018. Results reveal that WoCs performed slightly better than WaSCs as WaSCs did not manage to adopt best industry's practice. By contrast, WoCs exhibited notable technical progress. From a policy perspective, we linked the results from productivity change with the regulatory cycle of the English and Welsh water industry. It is found that the 2004, 2009 and 2014 price reviews appeared to have a positive impact on industry's productivity. The methodological approach followed in this study is of great interest for water regulators as it shows how to integrate both quality of service variables and water companies’ heterogeneity in productivity change assessment.

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  • Mocholi-Arce, Manuel & Sala-Garrido, Ramon & Molinos-Senante, Maria & Maziotis, Alexandros, 2021. "Performance assessment of water companies: A metafrontier approach accounting for quality of service and group heterogeneities," Socio-Economic Planning Sciences, Elsevier, vol. 74(C).
    • Handle: RePEc:eee:soceps:v:74:y:2021:i:c:s0038012120307850
    DOI: 10.1016/j.seps.2020.100948
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    1. Romano, Giulia & Molinos-Senante, María & Carosi, Laura & Llanquileo-Melgarejo, Paula & Sala-Garrido, Ramón & Mocholi-Arce, Manuel, 2021. "Assessing the dynamic eco-efficiency of Italian municipalities by accounting for the ownership of the entrusted waste utilities," Utilities Policy, Elsevier, vol. 73(C).
    2. Tourinho, Marco & Barbosa, Flávia & Santos, Paulo Rosa & Pinto, Francisco Taveira & Camanho, Ana S., 2023. "Productivity change in Brazilian water services: A benchmarking study of national and regional trends," Socio-Economic Planning Sciences, Elsevier, vol. 86(C).
    3. Vilarinho, Hermilio & Pereira, Miguel Alves & D’Inverno, Giovanna & Nóvoa, Henriqueta & Camanho, Ana S., 2024. "Water Utility Service Quality Index: A customer-centred approach for assessing the quality of service in the water sector," Socio-Economic Planning Sciences, Elsevier, vol. 92(C).
    4. Manuel Mocholi-Arce & Ramon Sala-Garrido & Maria Molinos-Senante & Alexandros Maziotis, 2022. "Measuring the eco-efficiency of the provision of drinking water by two-stage network data envelopment analysis," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(11), pages 12883-12899, November.
    5. Ramón Sala-Garrido & Manuel Mocholí-Arce & María Molinos-Senante & Alexandros Maziotis, 2021. "Comparing Operational, Environmental and Eco-Efficiency of Water Companies in England and Wales," Energies, MDPI, vol. 14(12), pages 1-14, June.

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