Estimation and evaluation of productivity change and its drivers in the English and Welsh water sector: a stochastic cost frontier approach

ABSTRACT

Estimating productivity change and its determinants is of great importance when measuring the performance of a firm. A true random effect cost model was employed to measure the cost efficiency of water companies in England and Wales from 1993 to 2016. Subsequently, total factor productivity change was estimated and decomposed into cost-efficiency change, technical change, scale efficiency change, output effect and residual price effect. The results indicate that the English and Welsh water industry increased its productivity over the period examined at a rate of about 2.1%, and it was influenced primarily by technical change. The price reviews appear to have a positive impact on the productivity of water-only companies during the whole period examined. In the case of water and sewerage companies, the 1994 and 1999 price reviews had a positive impact on productivity, whereas the last two price reviews had an adverse impact.     

Assessing productivity changes in water companies: a comparison of the Luenberger and Luenberger-Hicks-Moorsteen productivity indicators

ABSTRACT

Interest in evaluating productivity changes in water companies has increased in recent years. In this paper, for the first time, we employ the Luenberger-Hicks-Moorsteen Productivity Indicator (LHMPI) to evaluate productivity changes in a sample of Chilean water companies from 2010 to 2016. Productivity change estimations obtained by both the Luenberger Productivity Indicator (LPI) and the LHMPI are compared. Moreover, both indicators were computed assuming constant and variable returns to scale technologies. The LHMPI estimates illustrate that productivity in Chilean water companies has slightly improved over the period studied due to the positive trend of outputs, whereas the inputs negatively contributed to productivity changes. Results from the empirical analysis enabled us to verify that the LHMPI and LPI (and their drivers) are statistically different. This conclusion illustrates that water regulators need to pay attention to the indicators used when assessing productivity changes in water companies.     

Assessing the influence of exogenous and quality of service variables on water companies´ performance using a true-fixed stochastic frontier approach

ABSTRACT

Improving the cost efficiency and quality of service across time corresponds to two important targets for regulated water companies. Following a pioneering approach, we have evaluated the influence of a set of exogenous and quality of service variables on the English and Welsh water companies’ costs over the period of 1996–2009. A true-fixed effects stochastic cost frontier model was applied since it also allowed computing of the productivity change of the water companies and their drivers. Results have shown that quality of service has an influence on water companies´ costs. This issue is very relevant for bursts in water mains since investments in reducing them will lead to a reduction in the water supply interruptions and water losses. Results of this study illustrate the importance of developing long-term planning investment programmes in the water industry.     

Assessing the marginal cost of reducing greenhouse gas emissions in the English and Welsh water and sewerage industry: A parametric approach

Reducing greenhouse gas (GHG) emissions involves effort from different sectors of the economy, including the water and sewerage industry. This study estimates the marginal cost of curtailing GHG emissions in the water and sewerage industry using stochastic frontier analysis techniques for a sample of ten English and Welsh water and sewerage companies over the 2010–2019 period. Results illustrated that the average marginal cost of reducing GHG emissions was 0.181 £/Kg CO₂ equivalent. The marginal cost estimated notably differs across companies and over time. Findings further illustrate the impact of water companies' operating characteristics on the marginal cost of reducing carbon emissions.     

Water company productivity change: A disaggregated approach accounting for changes in inputs and outputs

The assessment of the productivity change of water utilities provides essential information to sector managers and regulators. This study uses the Luenberger-Hicks-Moorsteen Productivity Indicator (LHMPI) to evaluate productivity change as it can be further decomposed into three components namely technical change (TC), technical efficiency change (TEC), and scale efficiency change (SEC). This study evaluates the productivity of several water companies in England and Wales from 2001 to 2018. We found that productivity declined 1.2% per year due to the use of inputs that increased by 1.4% per year relative to outputs that increased by 0.2% per year.     

Changes in the total costs of the English and Welsh water and sewerage industry: The decomposed effect of price and quantity inputs on efficiency

Understanding what drives changes in regulated water companies' costs is of great relevance to water regulators. This study decomposes and estimates the change in total costs for a sample of ten water and sewerage companies in England and Wales from 1993 to 2016. The results demonstrate that companies' total costs increased over time due to increases in input prices and input quantity. Any gains obtained from the efficient allocation of resources and technical progress were lost due to mergers and technical inefficiency. Finally, we link our results with the regulatory cycle to evaluate the impact of the regulatory regime on companies' costs and discuss some policy implications.     

Developing the untapped wealth of Britain's 'Celtic Fringe': Water engineering and the Welsh landscape, 1870-1960

This paper focuses on the development of water engineering schemes in Wales in the late 19th and 20th centuries, concentrating mainly on water-supply schemes promoted by large English municipalities such as Birmingham and Liverpool, but also discussing hydro-electricity. It is argued that the first water engineering projects in Wales were informed by certain perceptions of the Welsh landscape and wider discourses regarding Britain's 'Celtic Fringe', and that such concepts were used to promote ideas of water purity. Ideas of 'progress' and 'modernity' surrounding the changing of the landscape through water works are analysed, and how such notions were challenged in the 20th century is explored, particularly from conservationist and nationalist perspectives. In the second half of the 20th century, it is argued, a paradox emerges, whereby different ways of seeing or perceiving the landscape of Wales led to a divergence in the political dynamics surrounding water-supply projects and hydro-electric schemes.     

隐喻、无我之境、入世哲学：理查德·罗杰斯与威尔士国民议会大楼

背景威尔士位于大不列颠岛西南部,东临英格兰,历史上曾是罗马帝国不列颠尼亚省的一部分,在漫长的中世纪一直呈群雄割据之势,至十三世纪始成立公国。1536年第一个＂联合法案＂在英格兰和威尔士通过,威尔士从此受制于英格兰法律,政治上则彻底联合。1964年,威尔士事务部成立,为威尔士的地方管理奠定了基础。1997年英国大选后,威尔士权力下放公民投票以50.3%通过威尔士国民议会的成立,布莱尔领导的工党政府在白皮书＂威尔士之声＂中提议将议会总部设在首府卡迪夫市。     

Developing the untapped wealth of Britain's ‘Celtic Fringe’: Water engineering and the Welsh landscape, 1870 – 1960

This paper focuses on the development of water engineering schemes in Wales in the late 19th and 20th centuries, concentrating mainly on water-supply schemes promoted by large English municipalities such as Birmingham and Liverpool, but also discussing hydro-electricity. It is argued that the first water engineering projects in Wales were informed by certain perceptions of the Welsh landscape and wider discourses regarding Britain's ‘Celtic Fringe’, and that such concepts were used to promote ideas of water purity. Ideas of ‘progress’ and ‘modernity’ surrounding the changing of the landscape through water works are analysed, and how such notions were challenged in the 20th century is explored, particularly from conservationist and nationalist perspectives. In the second half of the 20th century, it is argued, a paradox emerges, whereby different ways of seeing or perceiving the landscape of Wales led to a divergence in the political dynamics surrounding water-supply projects and hydro-electric schemes.     

A strategy for introducing competition in the water sector

The authors took part in an independent review of competition and innovation in the water industry in England and Wales, undertaken for United Kingdom and Welsh government ministers. Privatised twenty years ago, subject to a price control regime which has permitted high levels of investment, and unchanged as a set of vertically integrated regional monopolies, the sector now faces fresh challenges associated in particular with the consequences of climate change. The review identified a programme for the introduction of competition and use of market-type instruments into the sector, beginning with opening up retailing to business customers and reforms of the arrangements for abstraction and discharge which are intended to achieve a more rational use of water resources and to stimulate trading across company boundaries. Then, subject to an appropriate governance structure, competition would be introduced into upstream treatment activities, either by the creation of a single buyer of wholesale water or through a common carriage regime. At the same time, the balance of risk of and return to companies’ remaining regulated activities would be changed to encourage more innovative approaches, especially those which avoid heavy capital investment. Heightened stimuli to investment would also flow from relaxing restrictions on mergers and takeovers, and measures to enhance the innovative capabilities of companies. The paper explains the logic of the proposed measures and of their sequencing.     

From regulatory capture to regulated competition: An interest group analysis of the regulation of housing associations in England

This paper suggests a framework in which the key influences on the regulation of social housing providers can be understood. It draws on a wider literature to locate and describe the types of regulation found in the English social housing sector. It develops an approach based on interest group theories which see regulation as “an exercise among groups and between groups and the state” (Francis, 1993, p. 8). The development of the English regulatory regime is examined over time from the perspective of a number of different interest groups. The regime is shown to have been strongly influenced by the interests of the providers themselves, indicating a degree of ‘regulatory capture’. However, this relationship has been increasingly challenged by external pressures and interests and the promotion of competition by government. Special issues arising from the proposed, but as yet unimplemented, introduction of competition from profit distributing companies are discussed.     

Assessing capital efficiency in the water and sewerage industry in England and Wales: Ofwat's approach

The Water Services Regulation Authority (Ofwat) is the economic regulator of the water and sewerage companies in England and Wales. Ofwat carries out regular annual reviews of relative capital efficiency and periodic reviews of prices charged by the companies to determine maximum price limits. In reaching these determinations, the most recent of which was in December 2004 (PR04), Ofwat assumed that the companies can, going forward, make some capital efficiencies. Ofwat assessed the scope for such efficiencies in each company by analysing their capital and operating expenditure and outputs, comparing their unit capital costs, making econometric comparisons of their capital maintenance costs and assessing the scope for continuing capital productivity improvement in the water and comparator sectors. Three separate tools used by Ofwat for assessing capital efficiency are described; the cost base (for capital unit costs), capital maintenance econometric models and ‘continuing efficiency’. The paper notes how these three tools were used in combination for price limit assumptions in 2004.     

Benchmarking of electricity networks: Practical problems with its use for regulation

Benchmarking is a technique derived for management purposes, intended to identify outliers in any population as possible problems for resolution. Several regulatory agencies have tried to use benchmarking to define the degree of inefficiency of regulated companies, by reference to some target or frontier. This paper identifies the main problem inherent in trying to adapt a management technique to a regulatory purpose – namely that it requires the exercise of subjective judgements. The resulting lack of predictability and objectivity is not conducive to the provision of efficient regulatory incentives.This paper explains where subjective judgement enters into regulatory applications of benchmarking, which is not always apparent. The choice of model and selection of data sets are two obvious areas, but the main problem arises over the assumption that any costs not explained by the model must be due to inefficiency. Such assumptions are simply unsupported by evidence and lead to cost targets (or cost reduction targets defined over several years) that are little better than subjective guesses. There are other, superior ways to set cost reduction targets, based on long-term trends in total factor productivity for the regulated sector, which are used in the US and in other countries. However, some regulators feel obliged to use benchmarking and the paper concludes with recommendations as to how benchmarking should support further and more objective investigations into the costs of regulated utilities.     

An improved understanding of canal hydraulics and flood risk from breach failures

British Waterways (BW) is the largest navigation authority in the UK, managing a network of 3200 km of inland waterway. Central to this function is the management of a complex water supply system, where water is transferred for resource management, to maintain navigation and for sale to third parties. The navigations also provide land drainage, with 30% of the English and Welsh catchments draining, into the network. Understanding the hydraulic mechanisms present is essential to manage the risks to infrastructure, land, property and personnel. This paper describes studies that have reduced the uncertainty of the hydraulic appraisals of canals. A programme of primary research included site surveys, hydraulic trials and modelling. Hydraulic roughnesses for a range of canal channel types were derived and the impact of structures was quantified. The paper then applies these findings to investigate a recent canal breach. Importantly, in terms of the hydraulic appraisal, pound water levels and flows were automatically monitored throughout the event. The breach was modelled via an innovative dual weir approach. The modelled water level drawdown compared very closely with that measured. In conclusion, this paper illustrates the major steps forward that BW has made in developing the understanding of canal hydraulics and breach failures. This paper is of interest to consultants, researchers and other workers who study canal hydraulics and flood risk throughout the UK and overseas.     

Structural efficiency assessment of regional airports: Lessons from India

This study focuses on the structural efficiency of 42 Indian regional airports over five years from 2014 to 2019. A two-stage data envelopment analysis (DEA) was applied to assess the structural efficiencies of airports. We find that distance to the closest airport, distance from the city centre, per capita income, accessibility and profitability of the airport significantly impact the structural efficiency scores. We also calculate the productivity growth of the sample airports over five years using the Malmquist Productivity Index. Airport productivity rankings and sources of inefficiency provide airport authorities and policymakers with valuable insights into the potential for improvement.     

Profitability of UK construction contractors

This paper describes three analyses to examine differences in construction company POT profitability between (1) different financial years and (2) different sizes of companies. In the first analysis, the aggregated profitability of a sample of 80 UK general contractors was found not to differ significantly from 3.23% for each year of the period examined. The size (turnover) of companies, however, was significantly and positively correlated with profitability. The second analysis, of a sub-sample of eight very large companies, showed that profitability enhancement was associated with diversification into house building and other related activities. The third analysis, of 110 speculative house builders, showed profit margins to be around four times those of general contractors but uncorrelated with company size. Systematic changes were found, however, over the period involved.

In all cases, the variability of profitability between companies was found to reduce with company size, implying a greater consistency in the financial performance of larger companies.     

Measuring the productivity growth of Malaysia's water sector: Implications for regulatory reform

We apply the bootstrap Malmquist-Luenberger productivity index (MLPI) to measure the total factor productivity (TFP) growth for 14 water operators in Malaysia during the years 2000–2017. The analysis confirms that Malaysia's water sector experienced a deterioration in average productivity of 1.21% per year, attributed mainly to technological regression. Before the regulatory reform, the average productivity of water operators improved and was positively influenced by efficiency change. After the reform, the water operators suffered a decline in TFP growth due to decreased efficiency and technical change. The inefficient utilization of capital expenditure and aging water infrastructure are possible reasons for this effect. Regulatory reform is necessary but insufficient to improve the productivity growth of Malaysia's water sector.     

Does it pay to be green?

This paper examines the relationships between the environmental performances and financial performances of large U.S. companies. The environmental performance is measured in pollution in pounds per sales revenue and financial performance in profit margins and stock market values. An analysis of more than 230 companies shows that lower pollution per sales revenue has a positive impact on the profit margins and stock market values. Pollution is also found to have a direct impact on environmental compliance, spills and various other legal infractions.     

The application of high resolution spark source mass spectroscopy for the determination of trace elements in mussels

The applicability of high resolution spark source mass spectrometry to the determination of some selected trace elements in dried mussel samples is described. In this study it is shown that when using high resolution mass spectrometry, element spectral lines can be measured which are normally partly or completely overlapped by complex ions, polyatomic ions, etc.Ten trace elements are determined for each mussel sample. The sampling was carried out at various locations along the English and Welsh coast at different times over a period of two years.     

房地产行业信用满意度相关因素灰色关联性分析

当前房地产企业信用缺失现象严重,这对房地产市场的健康发展产生很大的负面影响。文章引入灰色关联分析模型并运用灰色相关分析的原理,借助DPS软件,通过对中国12个典型城市的房地产行业信用满意度与相关因素进行关联实证分析,并按相关程度排列出次序。经过分析研究得出以下结论:良好的房地产行业信用满意度与房地产投资及房价增长呈正相关关系,但是房地产行业利润多少与房地产信用满意程度关系不大。如果房地产诚信缺失,企业不会因为诚信缺失而遭致惩罚,失信成本过低,这也是部分房地产企业漠视企业诚信的原因。