A comprehensive eco-efficiency analysis of wastewater treatment plants: estimation of optimal operational costs and greenhouse gas emissions.

Producción CientíficaThe transition to a neutral carbon and sustainable urban water cycle requires improving eco-efficiency in wastewater treatment processes. To support decision-making based on eco-efficiency evaluations, reliable estimations are fundamental. In this study, the eco-efficiency of a sample of 109 WWTPs was evaluated using efficiency analysis tree method. It combines machine learning and linear programming techniques and therefore, overcomes overfitting limitations of non-parametric methods used by past research on this topic. Results from the case study revealed that optimal costs and greenhouse gas emissions depend on the quantity of organic matter and suspended solids removed from wastewater. The estimated average eco-efficiency is 0.373 which involves that the assessed WWTPs could save 0.32 €/m3 and 0.11 kg of CO2 equivalent/m3. Moreover, only 4 out of 109 WWTPs are identified as eco-efficient which implies that the majority of the evaluated facilities can achieve substantial savings in operational costs and greenhouse gas emissions.Junta de Castilla y León - UE-FEDER (CL-EI-2021-07

Productivity change and its drivers for the Chilean water companies: a comparison of full private and concessionary companies

The privatization of the water industry has aroused interest in comparing the performance of public vs. private water companies. However, little research has been conducted to compare the performances of full private (FPWCs) and concessionary water companies (CWCs). This study estimates and compares the productivity growth and its drivers (efficiency, technical and scale change) for a sample of Chilean FPWCs and CWCs over the 2007–2015 period using the input distance function. Both types of water companies showed deteriorations in productivity growth, with CWCs exhibiting higher rates of negative productivity growth than FPWCs. For FPWCs, any gains in efficiency and scale were outstripped by negative technical change. CWCs did not improve their performance in any of the three components of productivity change. The comparison of productivity change between FPWCs and CWCs is essential to support decision-making therefore, this study is of great interest for policymakers worldwide who are developing policies aimed at privatizing water companies

Price-cap regulation in the English and Welsh water industry:a proposal for measuring productivity performance

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

Adequacy of DEA as a regulatory tool in the water sector. The impact of data uncertainty

[EN] The regulation of water services shares many similarities with that of other utilities such as electricity or telecommunications. As a result, similar methods are often used by regulators to assess the efficiency of companies in those sectors. Data Envelopment Analysis (DEA) is one of those widely applied methods. This paper aims to determine the adequacy of DEA as a regulatory tool for urban water services, with a special focus on the quality of the available data. In order to obtain useful conclusions, two DEA simulations were performed with audited data from 194 water utilities, officially made available by the Portuguese water regulatory authority (ERSAR). Both simulations will demonstrate that the inherent inaccuracies found in some of the key data provided by water utilities represent a significant obstacle to obtain meaningful results with the DEA technique. This could represent a paradigm shift for some of the regulatory authorities currently using DEA or similar techniques, as the complexity of the method does not seem to be justified by a better analysis of the comparative performance of the different services.Cabrera Rochera, E.; Estruch-Juan, ME.; Molinos-Senante, M. (2018). Adequacy of DEA as a regulatory tool in the water sector. The impact of data uncertainty. Environmental Science & Policy. 85:155-162. https://doi.org/10.1016/j.envsci.2018.03.028S1551628

Profit, productivity and price performance changes in the water and sewerage industry:an empirical application for England and Wales

This paper aims to analyse the impact of regulation in the financial performance of the Water and Sewerage companies (WaSCs) in England and Wales over the period 1991–2008. In doing so, a panel index approach is applied across WaSCs over time to decompose unit-specific index number-based profitability growth as a function of the profitability, productivity and price performance growth achieved by benchmark firms, and the catch up to the benchmark firm achieved by less productive firms. The results indicated that after 2000 there is a steady decline in average price performance, while productivity improves resulting in a relatively stable economic profitability. It is suggested that the English and Welsh water regulator is now more focused on passing productivity benefits to consumers, and maintaining stable profitability than it was in earlier regulatory periods. This technique is of great interest for regulators to evaluate the effectiveness of regulation and companies to identify the determinants of profit change and improve future performance, even if sample sizes are limited

Impact of regulation on English and Welsh water-only companies: an input-distance function approach

The assessment of productivity change over time and its drivers is of great significance for water companies and regulators when setting urban water tariffs. This issue is even more relevant in privatized water industries, such as those in England and Wales, where the price-cap regulation is adopted. In this paper, an input-distance function is used to estimate productivity change and its determinants for the English and Welsh water-only companies (WoCs) over the period of 1993–2009. The impacts of several exogenous variables on companies’ efficiencies are also explored. From a policy perspective, this study describes how regulators can use this type of modeling and results to calculate illustrative X factors for the WoCs. The results indicate that the 1994 and 1999 price reviews stimulated technical change, and there were small efficiency gains. However, the 2004 price review did not accelerate efficiency change or improve technical change. The results also indicated that during the whole period of study, the excessive scale of the WoCs contributed negatively to productivity growth. On average, WoCs reported relatively high efficiency levels, which suggests that they had already been investing in technologies that reduce long-term input requirements with respect to exogenous and service-quality variables. Finally, an average WoC needs to improve its productivity toward that of the best company by 1.58%. The methodology and results of this study are of great interest to both regulators and water-company managers for evaluating the effectiveness of regulation and making informed decisions

Cost and quality of service performance in the Chilean water industry: A comparison of stochastic approaches

Producción CientíficaThe evaluation of efficiency can be of great value to water companies and regulators to adopt policies and design incentives to enhance performance. This study delves into the implications of employing distinct methodologies, namely the classical Stochastic Frontier Analysis (SFA), Bayesian SFA, and Stochastic non-parametric Envelopment of Data (StoNED), to evaluate cost and quality of service efficiency within the water industry. Chilean water companies reported average efficiencies of 0.623, 0.583, and 0.522 using the SFA, BSFA, and StoNED approaches, respectively. Furthermore, the SFA analysis suggested that the performance of water companies experienced a decline of −0.59% per year from 2010 to 2018. In contrast, the BSFA and StoNED estimations indicated an opposite trend, with annual performance improvements of 0.51% and 0.17% respectively, over the same period. These findings underscore the critical role of selecting appropriate methodologies when interpreting and comparing efficiency results for making informed long-term decisions

Accounting for service quality to customers in the efficiency of water companies: evidence from England and Wales

This paper investigates the role of service quality to customers in the efficiency assessment of water companies in England and Wales. To achieve this, data envelopment analysis techniques are employed to compute the technical efficiency of the water companies following two approaches: (i) traditional assessment based on quantity variables (without the inclusion of service quality variables) and (ii) alternative assessment considering quantity and service quality variables as undesirable outputs. The analysis covers 22 water and sewerage companies and water only companies providing drinking water services. The results indicate that the traditional efficiency assessment reveals a high level of technical efficiency, suggesting that the English and Welsh water industry is mature and that one of the challenges it faces is improving service quality. When introducing service quality variables in the evaluation, the average scores of technical efficiency slightly decrease. This suggests that, on average, water companies do not necessarily provide high quality of service, meaning that the traditional efficiency assessment favours their performance. Quality of service supplied to customers within a water sector matters and should be taken into account during the benchmarking process as it could assist regulated companies and regulators to improve performance and incentives, respectively

Carbon efficiency analysis in the provision of drinking water: Estimation of optimal greenhouse gas emissions

Producción CientíficaAssessing carbon efficiency (CE) in the provision of drinking water services is essential to achieve a net-zero greenhouse gas (GHG) urban water cycle. Previous studies evaluating the CE of water companies are very scarce and employed parametric and non-parametric. Both methodological approaches present limitations such as overfitting issues or require assumptions about the production technology which could lead to less reliable efficiency scores. To overcome these limitations, in this study, and for the first time, we estimated CE of English and Welsh water companies using the Efficiency Analysis Trees (EAT) approach. This technique brings together machine learning and non-linear programming techniques to estimate production frontier and efficiency scores. It also allowed us to quantify the optimal level of GHG emissions in the provision of water services and estimate potential GHG savings. Bootstrap truncated regression methods were employed to quantify the impact of operating characteristics on CE of water companies. The optimal level of GHG emissions was estimated to be between 0.062 and 133.03 tons of CO2 equivalent (CO2eq) per year and per connected property. The average CE was at the level of 0.632. This means that GHG emissions could reduce by 36.8% to maintain the same level of water services. Equivalently, this corresponds to a reduction of 488,321 tons of CO2eq per year. Water only companies exhibited a better performance than water and sewerage companies with an average CE of 0.785 and 0.540, respectively. The performance of the English and Welsh water companies decreased over time. In 2011 the average CE was 0.772 whereas it went down to 0.534 in 2020. It was also estimated that on average water companies could reduce 0.034 tons of CO2eq per cubic meter of drinking water supplied and 16.16 tons of CO2eq/ connected property per year. The regression results showed that topography and water treatment complexity had a significant impact on CE. The conclusions of this study are relevant for policy makers to define policies toward a low-carbon urban water cycle

Eco‑efficiency assessment under natural and managerial disposability : an empirical application for Chilean water companies

Getting a good understanding regarding the economic and environmental performance of water utilities is of great importance to achieve the goal of an efcient and sustainable industry. In this study, we apply the range adjusted measure (RAM) data envelopment analysis (DEA) model to evaluate the integrated (production and environmental) efciency of several water utilities located in Chile. Integrated efciency is evaluated using the concepts of natural and managerial disposability. This approach further allows us to quantify the contribution of each input and undesirable product on efciency scores. The results highlighted that the Chilean water industry showed high levels of production and environmental efciency over time. Under natural disposability, water utilities could control production costs to reduce water leakage and unplanned water supply interruptions by 3.3% on average. Under managerial disposability, water utilities could further cut down undesirable outputs by 1.4% on average by adopting best managerial practices. On average, potential savings in operating costs, employment, water leakage, and unplanned water supply interruptions were higher for concessionary utilities as they showed slightly lower efciency scores than full private utilities