PR04 scope for efficiency studies

Sector: Competition, Regulation and Business | Productivity, Innovation and New Economy | Regulatory economics | Water and sewerage
Client: Ofwat
Published: November, 2003
Document type: Report 
Tagged: quantitative analysis UK

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.