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Impact of regulation on English and Welsh water-only companies: an input-distance function approach

Author

Listed:
  • María Molinos-Senante
  • Simon Porcher

    (IAE Paris - Sorbonne Business School)

  • Alexandros Maziotis

Abstract

The assessment of productivity change over time and its drivers is of great significance for water companies and regulators when setting urban water tariffs. This issue is even more relevant in privatized water industries, such as those in England and Wales, where the price-cap regulation is adopted. In this paper, an input-distance function is used to estimate productivity change and its determinants for the English and Welsh water-only companies (WoCs) over the period of 1993–2009. The impacts of several exogenous variables on companies’ efficiencies are also explored. From a policy perspective, this study describes how regulators can use this type of modeling and results to calculate illustrative X factors for the WoCs. The results indicate that the 1994 and 1999 price reviews stimulated technical change, and there were small efficiency gains. However, the 2004 price review did not accelerate efficiency change or improve technical change. The results also indicated that during the whole period of study, the excessive scale of the WoCs contributed negatively to productivity growth. On average, WoCs reported relatively high efficiency levels, which suggests that they had already been investing in technologies that reduce long-term input requirements with respect to exogenous and service-quality variables. Finally, an average WoC needs to improve its productivity toward that of the best company by 1.58%. The methodology and results of this study are of great interest to both regulators and water-company managers for evaluating the effectiveness of regulation and making informed decisions.
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Suggested Citation

  • María Molinos-Senante & Simon Porcher & Alexandros Maziotis, 2017. "Impact of regulation on English and Welsh water-only companies: an input-distance function approach," Post-Print hal-02146495, HAL.
    • Handle: RePEc:hal:journl:hal-02146495
    DOI: 10.1007/s11356-017-9345-2
    Note: View the original document on HAL open archive server: https://hal.science/hal-02146495
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    1. 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.
    2. Mocholi-Arce, Manuel & Sala-Garrido, Ramon & Molinos-Senante, Maria & Maziotis, Alexandros, 2022. "Performance assessment of the Chilean water sector: A network data envelopment analysis approach," Utilities Policy, Elsevier, vol. 75(C).
    3. 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).
    4. Adriana Cobas & Alexandros Maziotis & Andrés Villegas, 2023. "Measurement of Efficiency and its Drivers in the Chilean Banking Industry," Working Papers Central Bank of Chile 987, Central Bank of Chile.
    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.
    6. Ramon Sala-Garrido & Manuel Mocholi-Arce & Maria Molinos-Senante & Michail Smyrnakis & Alexandros Maziotis, 2021. "Eco-Efficiency of the English and Welsh Water Companies: A Cross Performance Assessment," IJERPH, MDPI, vol. 18(6), pages 1-17, March.
    7. 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).
    8. Heesche, Emil & Asmild, Mette, 2022. "Controlling for environmental conditions in regulatory benchmarking," Utilities Policy, Elsevier, vol. 77(C).
    9. 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).
    10. 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).
    11. Mocholi-Arce, Manuel & Sala-Garrido, Ramon & Molinos-Senante, Maria & Maziotis, Alexandros, 2023. "Profit productivity change in the English and Welsh water sector: Impact of the price reviews," Utilities Policy, Elsevier, vol. 82(C).
    12. Maria Molinos-Senante & Alexandros Maziotis, 2021. "The Cost of Reducing Municipal Unsorted Solid Waste: Evidence from Municipalities in Chile," Sustainability, MDPI, vol. 13(12), pages 1-14, June.

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    JEL classification:

    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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