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Benchmarking water retail cost efficiency in England and Wales

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journal contribution
posted on 04.05.2020, 13:14 by Sam Williams, Christopher Pickard, Karligash GlassKarligash Glass, Anthony Glass
Privatised water companies in England and Wales are subject to economic regulation by the industry regulator (Ofwat). Ofwat sets 5-year caps on the prices’ companies can charge their customers. These caps are in part based on the benchmarking of companies’ costs. Ofwat has not previously used econometrics to benchmark domestic retail costs, but it undertook such modelling in its 2019 price review analysis. This is the first journal article to present an efficiency analysis of domestic water retail costs in England and Wales. Our approach is different from Ofwat’s, as we propose two new ways of accounting for differences in the effect on cost of the number of single and dual service customers (water/sewerage-only and water and sewerage). Some companies’ cost efficiencies vary greatly between the two ways. Depending on the approach to price capping, this could possibly have non-negligible implications for companies’ caps.

History

School

  • Business and Economics

Department

  • Economics

Published in

International Journal of the Economics of Business

Volume

27

Issue

3

Pages

431 - 467

Publisher

Taylor & Francis (Routledge)

Version

AM (Accepted Manuscript)

Rights holder

© Informa UK Limited, trading as Taylor & Francis Group

Publisher statement

This is an Accepted Manuscript of an article published by Taylor & Francis in International Journal of the Economics of Business on 21 July 2020, available online: http://www.tandfonline.com/10.1080/13571516.2020.1790979.

Publication date

2020-07-21

Copyright date

2020

ISSN

1357-1516

eISSN

1466-1829

Language

en

Depositor

Prof Karligash Glass Deposit date: 1 May 2020