Benchmarking water retail cost efficiency in England and Wales
journal contributionposted on 2020-05-04, 13:14 authored 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.
- Business and Economics
Published inInternational Journal of the Economics of Business
Pages431 - 467
PublisherTaylor & Francis (Routledge)
- AM (Accepted Manuscript)
Rights holder© Informa UK Limited, trading as Taylor & Francis Group
Publisher statementThis 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.