WICS information papers on efficiency analysis

WICS consultation (20 pages, 2.6M PDF, plus four appendices) on a proposed approach to efficiency issues for the review of Scottish Water's prices from 2010. The proposal follows closely the approach used in the 2001 and 2005 reviews.

Use of panel data analysis or data envelopment analysis is deemed “problematic, given the new organisational structure of the Scottish water industry”:

It may prove difficult to determine whether differences in the assessment of the scope for efficiency using this approach are due to the change in technique or to the change in the organisational structure of the industry. Uncertainty of this nature would not be in the interests of customers. We are therefore minded not to pursue this approach at this time ...

WICS proposes to adjust the data used in the modelling to take account of lower levels of service in Scotland compared to the highest levels achieved in England and Wales, as follows:

We therefore propose to ask Scottish Water to set out the annual operating costs (and, if necessary, capital expenditure) that it would need to achieve the level of service provided to customers by the leading companies south of the border.

Responses by Friday 19 October 2007.

For further information or advice please contact Franck Latrémolière.

Filed under Price controls, Water, WICS.

Reckon LLP is an economics consultancy with expertise in data analysis, economic regulation and competition law.

About Reckon