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

Abstract

The assessment of relative efficiency of water companiesis essential for managers and authorities. This is evidentin the UK water sector where there are companies withdifferent services such as water and sewerage companies(WaSCs) and water-only companies (WoCs). Therefore, it isa critical limitation to estimate a common production frontierfor 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 efficiencyof water companies providing different services. Theresults 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.