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

Molinos-Senante, María, Porcher, Simon and Maziotis, Alexandros (2017) Impact of regulation on English and Welsh water-only companies: an input-distance function approach. Environmental Science and Pollution Research, 24 (20). pp. 16994-17005. ISSN 0944-1344

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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.

Item Type:	Article
Official URL:	https://link.springer.com/journal/11356
Additional Information:	© 2017 Springer-Verlag Berlin Heidelberg
Divisions:	Management
Subjects:	G Geography. Anthropology. Recreation > GE Environmental Sciences H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Date Deposited:	30 Jun 2017 12:36
Last Modified:	15 Nov 2024 00:21
URI:	http://eprints.lse.ac.uk/id/eprint/82972

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