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

Alexandros Maziotis, David S. Saal, Emmanuel Thanassoulis, María Molinos-Senante*

*Corresponding author for this work

Research output: Contribution to journalArticle

Abstract

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.

Original languageEnglish
Pages (from-to)1005-1018
Number of pages14
JournalClean Technologies and Environmental Policy
Volume17
Issue number4
Early online date21 Sep 2014
DOIs
Publication statusPublished - Apr 2015

Fingerprint

profitability
Profitability
Productivity
productivity
Water
industry
Industry
water
profit
price
economics
Economics
firm
index
regulation

Bibliographical note

The final publication is available at Springer via http://dx.doi.org/10.1007/s10098-014-0852-2

Funding: Economic and Social Science Research Council; Office of Water Services (Ofwat); and Generalitat Valenciana (APOSTD/2013/110)

Keywords

  • panel index numbers
  • price performance
  • profit decomposition
  • regulation
  • total factor productivity
  • water and sewerage industry

Cite this

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abstract = "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.",
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Profit, productivity and price performance changes in the water and sewerage industry : an empirical application for England and Wales. / Maziotis, Alexandros; Saal, David S.; Thanassoulis, Emmanuel; Molinos-Senante, María.

In: Clean Technologies and Environmental Policy, Vol. 17, No. 4, 04.2015, p. 1005-1018.

Research output: Contribution to journalArticle

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