Assessing the dynamic performance of water companies through the lens of service quality

The measurement of performance within the water industry holds significant importance for policymakers, as it can help guide decision-making for future development and management initiatives. In this study, we apply data envelopment analysis (DEA) cross-efficiency techniques to evaluate the productivity change of the Chilean water industry during the years 2010-2018. Water leakage and unplanned interruptions are included in the analysis as quality of service variables. Moreover, we use cluster analysis and regression techniques to better understand what drives productivity change of water companies. The results indicate that the Chilean water industry is characterized by considerable high levels of inefficiency and low levels of productivity change. This is due to the existence of technical regress whereas gains in efficiency were small. Concessionary water companies were found to be more productive than full private and public water companies. Best and worst performers need to make efforts to reduce production costs and improve service quality. Other factors such as customer density and ownership type statistically affect productivity.

Increasing resilience through nudges in the urban water cycle: An integrative conceptual framework to support policy decision-making

Relevant challenges associated with the urban water cycle must be overcome to meet the United Nations Sustainable Development Goals (SDGs) and improve resilience. Unlike previous studies that focused only on the provision of drinking water, we propose a framework that extends the use of the theory of nudges to all stages of the overall urban water cycle (drinking water and wastewater services), and to agents of influence (citizens, organizations, and governments) at different levels of decision making. The framework integrates four main drivers (the fourth water revolution, digitalization, decentralization, and climate change), which influence how customers, water utilities and regulators approach the challenges posed by the urban water cycle. The proposed framework, based on the theory of nudges first advanced by the Nobel Prize in behavioral economics Richard H. Thaler and Cass R. Sunstein (Thaler and Sunstein, 2009), serves as a reference for policymakers to define medium- and long-term strategies and policies for improving the sustainability and resilience of the urban water cycle. Finally, we provide new insights for further research on resilience approaches to the management of the urban water cycle as an element to support the more efficient formulation of policies.

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 efficient 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) efficiency of several water utilities located in Chile. Integrated efficiency 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 efficiency scores. The results highlighted that the Chilean water industry showed high levels of production and environmental efficiency 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 efficiency scores than full private utilities.

Understanding water-energy nexus in drinking water provision: An eco-efficiency assessment of water companies

Understanding water-energy nexus in the provision of drinking water services is a challenge which has outstanding relevance in the current climatic emergency. Environmental efficiency and eco-efficiency assessment of water companies are two useful tools to address this challenge. In this study, we estimated hyperbolic and enhanced hyperbolic distance functions to compute the potential reduction in greenhouse gas (GHG) emissions and energy costs in the provision of drinking water. The empirical application focused on the English and Welsh water companies over 2011-2019. Average environmental efficiency and eco-efficiency scores were 0.920 and 0.962, respectively which indicates that water companies performed well but there is room for improvement. Moreover, due to the economies of scale, the cost of reducing GHG emissions was higher for water and sewerage companies than for water only companies. The results and conclusions of this study allow better understanding of the relationship between the provision of drinking water, energy costs and GHG emissions.

Adoption of water reuse technologies: An assessment under different regulatory and operational scenarios

Water reuse technologies may alleviate the water scarcity problems that affect many world regions, but their adoption is still limited. In particular, key actors in the adoption of water reuse technologies are water utilities, that provide both urban water and wastewater treatment services. Water utilities are embedded in the urban water system, which includes several stakeholders (urban water users, citizens at large, the environment) that may drive or pose barriers to water reuse adoption. Therefore, to ensure a smooth introduction of water reuse technologies, it is fundamental to understand how water reuse interacts with the existing urban water system and impacts its stakeholders. This paper contributes to the ongoing debate on water reuse by conceptualizing the interaction between water reuse technologies and the urban water system and its stakeholders, and addressing the adoption decision of water utilities by assessing its economic and environmental consequences. Based on a review of literature, policy and other secondary documents, and on primary data coming from interviews with experts from a water utility operating in Southern Italy, the study models the utility's response to a shift from urban to reuse water. It then simulates how reuse water introduction impacts on the utility and other stakeholders of the water system, under various regulatory and operational scenarios defined through a thorough analysis of policy documents and literature. Results show that the adoption of water reuse reduces the utility's margin by cannibalizing urban water demand, but appropriate policy measures may enhance the economic sustainability of reuse. System-level performances, such as impact on freshwater savings, costs for users, effects on the public budget, are also assessed, showing how different regulatory options moderate the intensity of impacts for the different stakeholders of the water system. Furthermore, the adoption of reuse water by the most distant users is found to enhance the economic sustainability of reuse and positively impact the utility's margin.

Total factor productivity assessment of water and sanitation services: an empirical application including quality of service factors

Assessing the productivity change of water companies provides relevant information for both water regulators and companies' managers. Past research has illustrated that different indicators and indexes have been applied although not all of them are equally reliable. Thus, this study evaluates the total factor productivity (TFP) change and its drivers employing the Luenberger-Hicks-Moorsteen productivity indicator (LHMPI) including, for the first time, quality of service variables as undesirable outputs. Moreover, unlike the previous studies, LHMPI was decomposed into three drivers; namely technical change, technical efficiency change and scale efficiency change. Our empirical application conducted on a sample of Chilean water companies over 2007-2018 embracing full private water companies (FPWCs) and concessionary water companies (CWCs). Results evidenced that, on average, TFP increased at an annual rate of 2.2%, mainly due to outputs rise. The main driver of productivity growth was scale efficiency change suggesting that adjustments in the water companies' scale of operations could lead to lower operational costs. It was also evidenced that FPWCs performed better than CWCs over the period analyzed.

Preparing for outbreaks - Implications for resilient water utility operations and services

Recent outbreaks have constantly disrupted our global economy and public health in numerous ways, impacting efficiency and prosperity across all sectors. This article focuses on the impacts of outbreaks (epidemics and pandemics) on water - wastewater utilities and water infrastructure and critically evaluates the issues underlining their impact on economic development and highlights the need for preparedness. A perspective on water infrastructure and industry-related impact on our society and economic development in the wake of the pandemic, COVID-19, is presented. Methods that could potentially institute safe, reliable, and efficient procedures for better preparedness and rapid recovery have been explored at length. The purpose of this article is therefore threefold: 1) to discuss the economic and public health impact of outbreaks on water and wastewater utilities and utility workforce; 2) to present case studies demonstrating utilities' preparedness and response to COVID-19, and 3) to review various alternatives for education and training as well as innovative processes and strategies for productivity during and after outbreaks. Strategies discussed in this article could be used as valuable tools for developing resiliency efforts, especially from the context of continuing water and wastewater utility operations and services in emergencies.

Performance Measurement of Water Supply Services: A Cross-Country Comparison between India and the UK

Increased emphasis on efficiency improvements has brought the benefits of internal savings and improved service deliveries of water supplies to the developed countries. However, water supply services in developing countries often exhibit large inefficiencies making it difficult to expand coverage or improve supply services. A comparative assessment of efficiencies in the developed and developing countries is therefore essential to estimate the actual lag that developing countries typically experience, and to arrive at an estimate of their efficiency improvements. This manuscript makes an effort in this direction by undertaking a cross-country benchmarking study on the level of inefficiencies prevailing in Indian urban water supply services (IUWSS) relative to the utilities in the UK-England and Wales. This manuscript uses data envelopment analysis approach to measure relative efficiencies of water supplies for a sample of 30 water utilities in India and the UK-England and Wales for the year 2015. The results indicate that there exist significant technical and scale inefficiencies in water supply operations of Indian municipalities compared with the UK-England and Wales. DEA results also show a significant scope for savings with respect to operating expenditures and non-revenue water, if Indian utilities were to adopt the best practices and managerial tools of the utilities in the UK-England and Wales. Further, it was found that IUWSS need a restructuring of their municipalities to become more efficient. This manuscript discusses the above results in the context of policy implications and suggests few mechanisms that are relevant from a developing country perspective for possible improvement in water supply services.

Impact of environmental variables on the efficiency of water companies in England and Wales: a double-bootstrap approach

An important aspect of the regulatory process is the performance comparison of regulated firms. This exists in regulated industries where tariffs are determined through a benchmarking process such as the English and Welsh water industry. A double-bootstrap data envelopment analysis (DEA) approach was applied to overcome the uncertainty in efficiency scores and to reveal the influence of environmental variables on 18 water companies in England and Wales during the 2001-2016 period. The results showed that bias and bias-corrected efficiency scores lead to changes in the water companies' rankings. This reveals the importance of using reliable methodologies to support the decision-making process. Higher levels of average pumping head, leakage, and abstraction of water from reservoirs lead to lower efficiency. In contrast, increased population density leads to larger efficiency. We also link the results from the efficiency of water companies with the regulatory cycle. Our findings can be useful to policy makers for them to better understand water utilities' performance and to aid them in reshaping their current policies and practices to improve efficiency and provide better service to customers.

Economic and environmental efficiency of UK and Ireland water companies: Influence of exogenous factors and rurality

For water companies, benchmarking their performance relative to other companies can be an effective way to identify the scope for efficiency gains to be made through infrastructure investment and operational improvements. However, a key limitation to benchmarking is the confounding effect of exogenous factors, which may not be factored in to benchmarking methodologies. The purpose of this study was to provide an unbiased comparison of efficiency across a sample of water and sewage companies, accounting for important exogenous factors. Bias-corrected economic and environmental efficiency estimates with explanatory factors were evaluated for a sample of 13 water and sewage companies in the UK and Ireland, using a double-bootstrap data envelopment analysis (DEA) approach. Bias correction for economic and environmental efficiency changed the rankings of nine and eight companies, respectively. On average, companies could reduce economic inputs by 19% and carbon outputs by 16% if they performed at the efficiency frontier. Variables explaining efficiency were: source of water, leakage rate, per capita consumption and population density. Population density showed statistical significance with both economic (p-value 0.002) and environmental (p-value 0.001) efficiency. Consequently, a rurality factor was defined for each company's operational area, which was then regressed against normalised water company performance data. More rural water companies spend more per property (R² of 0.633), in part reflecting a larger number of smaller sewage treatment works serving rural populations (R² of 0.823). These findings provide new insight into methods for benchmarking, and factors affecting, water company efficiency, pertinent for both regulators and water companies.

A meta-analysis of public compliance to boil water advisories

Water utilities that generally provide continuous and reliable service to their customers may sometimes issue an advisory notification when service is interrupted or water quality is compromised. When the contamination is biological, utilities or the local public health agencies issue a 'boil water advisory' (BWA). The public health effectiveness of a BWA depends strongly on an implicit public understanding and compliance. In this study, a meta-analysis of 11 articles that investigated public compliance to BWA notifications was conducted. Awareness of BWA was moderately high, except in situations involving extreme weather. Reported rates of compliance were generally high, but when rate of awareness and non-compliant behavior such as brushing teeth were factored in, the median effective compliance rate was found to be around 68 percent. This does not include situations where people forgot to boil water for some part of the duration, or ingested contaminated water after the BWA was issued but before they became aware of the notification. The two-thirds compliance rate is thus an over-estimate. Results further suggest that timeliness of receipt, content of the advisory, and number of sources reporting the advisory have a significant impact on public response and compliance. This analysis points to improvements in the phrasing and content of BWA notices that could result in greater compliance, and recommends the use of a standard protocol to limit recall bias and capture the public response accurately.

Estimating size and scope economies in the Portuguese water sector using the Bayesian stochastic frontier analysis

This study aims to search for economies of size and scope in the Portuguese water sector applying Bayesian and classical statistics to make inference in stochastic frontier analysis (SFA). This study proves the usefulness and advantages of the application of Bayesian statistics for making inference in SFA over traditional SFA which just uses classical statistics. The resulting Bayesian methods allow overcoming some problems that arise in the application of the traditional SFA, such as the bias in small samples and skewness of residuals. In the present case study of the water sector in Portugal, these Bayesian methods provide more plausible and acceptable results. Based on the results obtained we found that there are important economies of output density, economies of size, economies of vertical integration and economies of scope in the Portuguese water sector, pointing out to the huge advantages in undertaking mergers by joining the retail and wholesale components and by joining the drinking water and wastewater services.

Energy and water quality management systems for water utility's operations: a review

Holistic management of water and energy resources is critical for water utilities facing increasing energy prices, water supply shortage and stringent regulatory requirements. In the early 1990s, the concept of an integrated Energy and Water Quality Management System (EWQMS) was developed as an operational optimization framework for solving water quality, water supply and energy management problems simultaneously. Approximately twenty water utilities have implemented an EWQMS by interfacing commercial or in-house software optimization programs with existing control systems. For utilities with an installed EWQMS, operating cost savings of 8-15% have been reported due to higher use of cheaper tariff periods and better operating efficiencies, resulting in the reduction in energy consumption of ∼6-9%. This review provides the current state-of-knowledge on EWQMS typical structural features and operational strategies and benefits and drawbacks are analyzed. The review also highlights the challenges encountered during installation and implementation of EWQMS and identifies the knowledge gaps that should motivate new research efforts.