Practice area: | Competition & Antitrust | Productivity, Innovation and New Economy | Regulatory economics | Water and sewerage |
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Client: | Ofwat |
Published: | November, 2003 |
Keywords: | quantitative analysis |
This report for OFWAT provides an assessment of the scope for future operating and capital efficiency in the water and sewerage industries by using both a “top-down” and “bottom-up” approach. The top-down approach assesses the scope for future efficiency improvements by analysing past productivity trends in the water and sewerage industries and by undertaking a comparison with “similar” industries. The “similar” industries have been selected by using cluster selection techniques. The component-based, or “bottom-up”, approach estimates efficiency gains for operating expenditure and capital costs for each component activity of water and sewerage. An evaluation of potential savings from the adoption of cost-reducing technologies and management and procurement practices was also undertaken as a part of the study. Overall, our analysis suggests that operating and capital efficiency improvements in the range of 0.1% to 1.3% are achievable in AMP4.