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Assessing the relative efficiency of water companies in the English and welsh water industry: a metafrontier approach

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Abstract

The assessment of relative efficiency of water companies is essential for managers and authorities. This is evident in the UK water sector where there are companies with different services such as water and sewerage companies (WaSCs) and water-only companies (WoCs). Therefore, it is a critical limitation to estimate a common production frontier for both types of companies, as it might lead to biased efficiency estimates. In this paper, a robust and reliable methodology, the metafrontier model, is applied to compare the efficiency of water companies providing different services. The results illustrate the superior performance of WaSCs compared to WoCs. It also confirms the presence of economies of scope in the UK water industry. The methodology and results of this study are of great interest for both regulators and water utility managers to make informed decisions.

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Notes

  1. In August 2009, as part of the wider process of further developing competition in the water industry, Ofwat published new accounting requirements for 2009–2010. Hence, it did not allow us to collect sufficient and consistent data to accurately assess the performance of WaSCs and WoCs in subsequent years.

  2. More information about this software can be consulted at http://www.maxdea.cn/MaxDEA.htm

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Authors and Affiliations

  1. Departamento de Ingeniería Hidráulica y Ambiental, Pontificia Universidad Católica de Chile, Av. Vicuña Mackenna 4860, Santiago, Chile

    María Molinos-Senante

  2. Escuela de Arquitectura e Instituto de Estudios Urbanos, Pontificia Universidad Católica de Chile, El Comendador 1916, Santiago, Chile

    María Molinos-Senante

  3. Centro de Desarrollo Urbano Sustentable CONICYT/FONDAP/15110020, Av. Vicuña Mackenna 4860, Santiago, Chile

    María Molinos-Senante

  4. Foundazione Eni Enrico Mattei, Isola di San Giorgio Maggiore 8, Venice, Italy

    Alexandros Maziotis

  5. Department of Mathematics for Economics, University of Valencia, Avda. Tarongers S/N, Valencia, Spain

    Ramon Sala-Garrido

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  1. María Molinos-Senante
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  2. Alexandros Maziotis
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  3. Ramon Sala-Garrido
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Correspondence to María Molinos-Senante.

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Molinos-Senante, M., Maziotis, A. & Sala-Garrido, R. Assessing the relative efficiency of water companies in the English and welsh water industry: a metafrontier approach. Environ Sci Pollut Res 22, 16987–16996 (2015). https://doi.org/10.1007/s11356-015-4804-0

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