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

María Molinos-Senante () and Alexandros Maziotis
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María Molinos-Senante: Pontificia Universidad Católica de Chile
Alexandros Maziotis: Foundazione Eni Enrico Mattei

Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), 2019, vol. 33, issue 9, No 5, 3055 pages

Abstract: 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.

Keywords: Efficiency; Metafrontier; Stochastic frontier analysis (SFA); Water utilities (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s11269-019-02287-8

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