Is DEA useful in the regulation of water utilities? A dynamic efficiency evaluation (a dynamic efficiency evaluation of water utilities)

Abstract

The discussion about public utilities efficiency and its management has become increasingly important in the last decades. We focus on the distribution of water, which is one of the most important natural resources (Marshall, 1879). This research shows the relationship between efficiency and institutional factors such as management system. For this purpose, we have data about some Spanish water utilities under different provision systems, during the period 1985 to 2000. Using Data Envelopment Analysis (DEA), we estimate potential cost savings in this context. We will extend the results obtained by Thanassoulis (2000a, b), in attempt to guide the regulation of this sector.

Notes

¹ Price Commissions are very heterogeneous organizations. Several agents take part in the price authorization process, such as members of the Regional administration, the water sector or consumer organizations.

² Price-cap regulation could be proposed as a minimum or maximum ceiling, depending on the objective set by the supplier. For more details, see Bös (1994).

³ See, for example, Charnes et al . (1980), McCarty and Yaisawarng (1993), Ruggiero (1998) or Muñiz (2002).

⁴ For specific details, see Lewin et al . (1982), Charnes et al . (1985) and Smith and Mayston (1987).