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Title: Price-cap regulation in the English and Welsh water industry: a proposal for measuring productivity performance
Authors: Maziotis, Alexandros
Saal, David S.
Thanassoulis, Emmanuel
Molinos-Senante, Maria
Keywords: Panel index numbers
Productivity decomposition
X factor
Water industry
Issue Date: 2016
Publisher: © Elsevier
Citation: MAZIOTIS, A. ... et al, 2016. Price-cap regulation in the English and Welsh water industry: a proposal for measuring productivity performance. Utilities Policy, 41, pp.22-30
Abstract: Privately owned water utilities typically operate under a regulated monopoly regime. Price-cap regulation has been introduced as a means to enhance efficiency and innovation. The main objective of this paper is to propose a methodology for measuring productivity change across companies and over time when the sample size is limited. An empirical application is developed for the UK water and sewerage companies (WaSCs) for the period 1991-2008. A panel index approach is applied to decompose and derive unit-specific productivity growth as a function of the productivity growth achieved by benchmark firms, and the catch-up to the benchmark firm achieved by less productive firms. The results indicated that significant gains in productivity occurred after 2000, when the regulator set tighter reviews. However, the average WaSC still must improve towards the benchmarking firm by 2.69% over a period of five years to achieve comparable performance. This study is relevant to regulators who are interested in developing comparative performance measurement when the number of water companies that can be evaluated is limited. Moreover, setting an appropriate X factor is essential to improve the efficiency of water companies and this study helps to achieve this challenge.
Description: This article was published in the journal, Utilities Policy [© Elsevier Ltd.] and the definitive version is available at: http://dx.doi.org/10.1016/j.jup.2016.04.002
Sponsor: The authors would like to express their gratitude for the support of the Economic and Social Science Research Council as well as the Office of Water Services (Ofwat).
Version: Accepted for publication
DOI: 10.1016/j.jup.2016.04.002
URI: https://dspace.lboro.ac.uk/2134/21948
Publisher Link: http://dx.doi.org/10.1016/j.jup.2016.04.002
ISSN: 0957-1787
Appears in Collections:Published Articles (Economics)

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