Incorporating nonrevenue water in the efficiency assessment of water supply utilities: A parametric enhanced hyperbolic distance function

This study assesses the technical efficiency of water utilities incorporating an undesirable output, nonrevenue water, and allowing a proportional input reduction. A parametric enhanced hyperbolic distance function was applied to Malaysia's 14 state water utilities from 2000 to 2017. Overall, Malaysia's water utilities can increase the water volume delivered while decreasing nonrevenue water and making further input reductions. Water utilities, on average, experienced higher technical efficiency after the regulatory reform. Network density and regulatory reform significantly influenced the technical inefficiency of water utilities in Malaysia.     

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.     

Impact of external costs of unplanned supply interruptions on water company efficiency: Evidence from Chile

Conventional performance assessments of water companies ignore the external costs due to water supply outages. To overcome this gap, we evaluate the impact of external costs of unplanned supply interruptions on the efficiency of water companies. Two efficiency metrics, internal technical efficiency (ITE), and total technical efficiency (TTE), were estimated based on data envelopment analysis (DEA). The results evidence that the external costs of unplanned water supply interruptions impact, on average, 7.9% of the efficiency of water companies. We also explored the impact of a set of environmental variables on water company efficiency.     

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.     

Understanding embodied greenhouse gas emissions in the water and sewerage sectors

Embodied (or embedded) greenhouse gas emissions are commonly overlooked in corporate carbon accounting, although they can represent a large proportion of overall emissions. In this paper, we utilise embodied emission data submitted to Ofwat, the economic regulator of water and sewerage companies in England and Wales, as part of their review of price limits. This is the first time that water and sewerage companies have presented embodied emissions associated with their capital programmes. In total, embodied emissions add an extra 50% on top of companies' operational greenhouse gas emissions. We consider the drivers for embodied emissions and show that capital maintenance programmes are the largest source. We highlight the relationship between capital expenditure and embodied emissions, and discuss why there are significant differences in embodied emission intensities between companies. Many of the differences arise from the way the common methodology for estimating embodied emissions is applied.     

Paths to universalize water and sewage services in Brazil: The role of regulatory authorities in promoting efficient service

The 2007 institution of a regulatory framework established ways to overcome deficits in Brazil's sanitation services, including economic efficiency. This study analyzes the performance of regulatory authorities in promoting the efficiency of water and sewage service providers in Brazil. The study was developed in three stages: analysis of efficiency with Data Envelopment Analysis (DEA) for 2006 and 2011; assessment of productivity using the Malmquist Index (MI); and document analysis of regulatory standards. Among the results, significant inefficiencies were detected and the mean for pure technical efficiency was higher among unregulated providers both for 2006 and in 2011. The MI showed gains in productivity from 2006 to 2011. The decomposed analysis of the index indicated a shift in the efficiency frontier to a higher level, but with a decrease in the providers' pure efficiency. From the analysis of the regulatory activity, we identified regulators that had not issued regulatory standards related to the promotion of allocative or productive efficiency. Analysis of the results shows that the regulatory performance has not ensured that providers achieve better performance.     

Occupational rehabilitation in the construction industry of Victoria

A survey of construction companies' secondary disability management practices was undertaken in the state of Victoria, Australia. The results indicate that formal rehabilitation and return‐to‐work programmes and practices are not adopted in many companies. Smaller construction firms were less likely to have adopted formal programmes or practices than medium‐to‐large firms. In particular, construction companies reported difficulties in the provision of suitable alternate or light duties for workers returning to work following an injury. Most companies regarded disability management practices to have increased operating costs while yielding little or no benefit in terms of reducing lost workdays. Strategies to overcome some of these impediments to rehabilitation and return‐to‐work in construction are recommended.     

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.     

Charting corporate greening: environmental management trends in Sweden

In order to understand the long-term change processes, a longitudinal study of the Swedish construction industry is presented. This examines the long-term environmental attitudes and practices within this industry, particularly the trends and significant changes in corporate environmental management and performance. The results from three surveys undertaken in 2002, 2006 and 2010 indicate that environmental work is becoming institutionalized as a strategic part of the companies' business, environmental management activities and integrated within the companies' work practices. Also evident is a greater maturity and raised ambitions in companies' environmental actions. Legislative pressures have become a reduced driver; instead there is increased pressure from, and need for cooperation with, a larger variety of stakeholders and across disciplines. Environmental management systems have been widely adopted, meaning that practice relies on self-surveillance and voluntary actions. A consolidation of environmental management is observed within the companies, as well as an emerging business niche of environmental expert consultancy. The perceived effects on competitiveness and financial performance remain unclear, implying that there are other motivations for environmental change than financial and legal justifications.     

Pump scheduling and cost optimization

The paper describes a step-by-step approach to the implementation of procedures for ensuring efficient operation of the Loch Lomond Water Supply Scheme. The implementation involved the installation of a Telemetry and Telecontrol system to allow real-time operational control of the full scheme to be exercised from the Board's Headquarters at Balmore. On site Pump Efficiency Determination was carried out which enabled technical appraisals to be made and rational decisions taken on which pumps required to be used to produce water at minimal cost. The energy costs were further reduced by a computer based scheduling program which used the results of the Pump Efficiency Tests.     

Eco-EAR: A method for the economic analysis of urban water systems providing services

In the context of new challenges and emerging needs for transparency regarding users, urban water management is obliged to forge links between different technical fields. This implies managing interfaces between multiple stakeholders on the one hand, and ensuring the adaptability and sustainability of technical infrastructures on the other hand. In a period dominated by public spending cuts, the optimisation and efficiency of the system's infrastructures and the organisation of the stakeholders involved has become important for guaranteeing the continuity of the services provided. From the economic viewpoint, this challenge is related to tracking and reducing costs. Moreover, it also concerns the need to communicate arguments related to service costs to both users and stakeholders. Consequently, the “Eco-EAR” method was developed by adapting Functional Analysis (FA), Activity Based Costing (ABC) and Whole Life Costing (WLC) approaches in view to describing how the direct costs of the sewerage service provided by wastewater utilities are structured. The cost structure is analysed according to the activities and physical flows comprising the primary and secondary functions of an urban water management system. Three goals are targeted: i) to explain the costs of the system to the local authority (owners) and users; ii) to identify the activities that have the greatest impact on costs in order to plan cost reduction actions; and iii) to assess the apportionment of costs per activity and per physical flow, in order to better understand the system by combining both its economic and technical dimensions. The performance indicators proposed by the “Eco-EAR” method could also be used for benchmarking. The method is implemented in a real case study: the sub-system territory around the city of Mulhouse (northeast France) under the responsibility of a water management authority.     

Exploring urban mines: pipe length and material stocks in urban water and wastewater networks

Networks for water and wastewater transport represent large capital assets and material stocks within cities. A better understanding of how their material content changes with population and size of the city may help to design networks with lower resource demand and lower construction and maintenance costs. We estimated the total length and mass for the wastewater networks of 25 cities in five different countries using a fractal network model that only requires the cities' size and population as input data. We found that most of the network mass is concentrated in the main trunk lines. The model results showed efficiency of scale: For a catchment area of constant size, both network length and mass per capita would decline if population grew. However, if the population of a city grew while the population density remained constant or decreased (urban sprawl), the per-capita network mass would increase.     

Do mergers and acquisitions create shareholder value in the infrastructure and utility sectors? Analysis of market perceptions

Through an analysis over a 20-year period from 1997 to 2017 for a global sample of listed infrastructure companies, 80% of which were utilities, this study shows that target companies' Cumulative Average Abnormal Returns (CAARs) are positive and statistically significant, while acquirer firms earn positive but not statistically significant CAARs. The results obtained must be viewed in light of the restructuring that has distinguished the last 20 years by strongly modifying the infrastructure environment and facilitating the diffusion of mergers and acquisitions (M&A). Our results support the financial reasonableness and potential efficiency of M&A transactions in the infrastructure and public utility sectors, with specific reference to target companies.     

Beyond the public–private controversy in urban water management in Spain

This paper critically analyzes the Spanish privatization model of urban water management implemented over the last three decades. The high concentration of private participation in the industry, the absence of competition, and regulatory deficiencies appear to have put the interests of water customers at risk. Improvement of governance is not guaranteed simply by changing water-system management from public to private. In Spain, an array of institutional reforms are needed to rationalize a change in management structure for this service, reorganize technical operations, improve the administrative framework, increase transparency, and promote citizen participation. This paper moves beyond the simple public–private controversy and contributes to the literature by using fieldwork conducted by the authors to assess private participation in the management of urban water services in Spain; by identifying gaps in the privatization processes as well as failures in the industry; and, above all, by proposing reforms to Spain's institutional and regulatory frameworks for the industry.     

Economies of scale and scope in Australian urban water utilities

This paper estimates economies of scale and scope for 55 major Australian urban utilities over the period 2005/06 to 2008/09. The models used specify operating and capital costs as a function of chemical and microbiological compliance, water losses, water quality and service, water main breaks, total connected properties, and urban water supplied. The input variables used to help determine water utility costs include the density of properties served and the sourcing of water from bulk suppliers, groundwater, recycling and surface water. In terms of economies of scale, the evidence suggests strong economies of scale at relatively low levels of output (50–75% of current mean output). In terms of product-specific economies of scale (increasing the scale of a specific output in isolation), there is substantially stronger evidence that the operating costs of urban water utilities would benefit from increasing scale with regard to chemical compliance, water quality and service complaints, and the number of connected properties. In contrast, capital costs would benefit from scale increases with regard to the management of water losses and water main breaks. For economies of scope, it is clear that there are substantial cost benefits from the joint production of treated quality water delivered across a network with minimal water losses and main breaks. The main cost advantage at all levels of output is decreasing water losses, and this would benefit both operating and capital costs.     

住宅小区给水方式技术经济分析研究

给水方式的选择关系到整个给水系统的供水可靠性、工程投资、运行费用、维护管理及使用效果。文章从技术方面分析了住宅小区的给水方式的选择,并详细通过造价、占地面积、施工难易度以及运行维护费用等方面进行了经济分析,建立了工程投入使用后的经济评估指标。     

Service quality,technical efficiency and total factor productivity growth in Pakistan's post-reform electricity distribution companies

Pakistan's energy sector has undergone substantial reforms during the last three decades with the aim to improve its operational performance and to cater to the growing energy needs of the economy. In the wake of these reforms, the WAPDA Act was passed in 1998 to achieve operational and financial efficiencies. Pakistan's electricity market is still hampered by issues like extended blackouts, electricity thefts, high circular debt and poor service quality. The electricity distribution sector is thus an interesting case to investigate its efficiency in the post-reform period by examining the impact of service-quality parameters (SQPs), which have generally been neglected in the literature. Stochastic frontier analysis has been used to estimate technical efficiency, while the Malmquist Productivity Index is implemented to decompose total factor productivity (TFP) into scale change, technical change and efficiency change from 2006 to 2016. We conclude that the technical efficiency score declines from 98 percent to 36 percent with the inclusion of SQPs in the models. The results also indicate a negative trend in scale change, implying that distribution companies are not operating at the technically optimal scale. We propose that the regulatory body should change its governance regime and focus on incentive-based regulation instead of rate-of-return regulation.     

The welfare costs of non-marginal water pricing: evidence from the water only companies in England and Wales

The evaluation of the economic efficiency of regulatory schemes is essential for regulators and utilities. In this study it is analysed for the first time the welfare costs of non-marginal cost pricing in the water supply in England and Wales, by computing the deadweight loss of the water only companies (WoCs) that existed over the period of 1993–2009. The results indicate that the current price schemes can have substantial efficiency costs. Our estimates show that the loss of efficiency for the WoCs lies between 15 and 60 million GBP over the period 1993–2009. These amounts could have been redistributed either to the companies in terms of profits or to the consumers via price reductions. The methodology and results of this study are of great interest for both regulators and water utilities managers to evaluate the effectiveness of price regulation and make informed decisions.     

Cost–benefit analysis of constructing a filtration plant for the National Water Carrier in Israel

The paper presents an economic cost–benefit analysis (CBA) of the construction of a filtration plant for the Israeli National Water Carrier (NWC). Its main contribution lies in the comparison between the costs and the benefits of filtration in the context of a concrete policy choice. The first part of the paper presents a cost analysis of two alternative engineering systems: central filtration and localized filtration. The analysis shows that the costs of constructing and operating a central filtration plant are significantly lower than those of a system of local plants. The second part of the paper presents a two‐stage method for assessing the benefits of filtration. First, we valuate the damages caused by consumption of unfiltered water; then we estimate consumers' willingness to pay (WTP) for improved water quality, taking into account households' potential risk aversion. The main result is that total WTP significantly outweighs the costs of constructing and operating the plant.