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Cost Efficiency of English and Welsh Water Companies: a Meta-Stochastic Frontier Analysis

Author

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  • María Molinos-Senante

    (Pontificia Universidad Católica de Chile
    Centro de Desarrollo Urbano Sustentable CONICYT/FONDAP/ 15110020)

  • Alexandros Maziotis

    (Foundazione Eni Enrico Mattei
    New York College)

Abstract

In regulated industries it is important to identify appropriate performance benchmarks to incentivize companies’ performance. This study applies a stochastic metafrontier approach to estimate the cost efficiency of the English and Welsh Water and Sewerage companies (WaSCs) and Water only companies (WoCs) over the period 1998–2009. The results indicate that the UK water industry is a mature and efficient sector in which WaSCs perform more efficiently than WoCs since cost efficiency scores are 0.965 and 0.958 on average, respectively. We found that water companies can become more cost efficient by managing assets more efficiently, extracting water from reservoirs, and investing in technologies that reduce water leakage and predict more accurately bursts in networks. The results of our study should be of great interest to water regulators and utility managers who want to make more informed management decisions to minimize costs, allocate resources efficiently and improve environmental performance. Future research will extend the years considered to assess the impact of recent regulatory reforms in the cost efficiency of the English and Welsh water companies.

Suggested Citation

  • María Molinos-Senante & Alexandros Maziotis, 2019. "Cost Efficiency of English and Welsh Water Companies: a Meta-Stochastic Frontier Analysis," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 33(9), pages 3041-3055, July.
    • Handle: RePEc:spr:waterr:v:33:y:2019:i:9:d:10.1007_s11269-019-02287-8
    DOI: 10.1007/s11269-019-02287-8
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    References listed on IDEAS

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    Cited by:

    1. Molinos-Senante, María & Villegas, Andres & Maziotis, Alexandros, 2019. "Are water tariffs sufficient incentives to reduce water leakages? An empirical approach for Chile," Utilities Policy, Elsevier, vol. 61(C).
    2. Massarutto, Antonio & Grassetti, Luca & Lambardi di San Miniato, Michele & Moletta, Mattia, 2023. "Efficient firms are all alike, but every inefficient firm is such in its own way: Heterogeneity of costs determinants in the Italian water sector," Utilities Policy, Elsevier, vol. 84(C).
    3. Molinos-Senante, María & Maziotis, Alexandros & Sala-Garrido, Ramón, 2020. "Changes in the total costs of the English and Welsh water and sewerage industry: The decomposed effect of price and quantity inputs on efficiency," Utilities Policy, Elsevier, vol. 66(C).
    4. Maziotis, Alexandros & Villegas, Andrés & Molinos-Senante, María & Sala-Garrido, Ramon, 2020. "Impact of external costs of unplanned supply interruptions on water company efficiency: Evidence from Chile," Utilities Policy, Elsevier, vol. 66(C).
    5. 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).

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