Determining the contribution of technical change, efficiency change and scale change to productivity growth in the privatized English and Welsh water and sewerage industry:1985-2000

The water and sewerage industry of England and Wales was privatized in 1989 and subjected to a new regime of environmental, water quality and RPI+K price cap regulation. This paper estimates a quality-adjusted input distance function, with stochastic frontier techniques in order to estimate productivity growth rates for the period 1985-2000. Productivity is decomposed so as to account for the impact of technical change, efficiency change, and scale change. Compared with earlier studies by Saal and Parker [(2000) Managerial Decision Econ 21(6):253-268, (2001) J Regul Econ 20(1): 61-90], these estimates allow a more careful consideration of how and whether privatization and the new regulatory regime affected productivity growth in the industry. Strikingly, they suggest that while technical change improved after privatization, productivity growth did not improve, and this was attributable to efficiency losses as firms appear to have struggled to keep up with technical advances after privatization. Moreover, the results also suggest that the excessive scale of the WaSCs contributed negatively to productivity growth. © 2007 Springer Science+Business Media, LLC.

The comparative impact of privatisation and regulation on productivity growth in the English and Welsh water and sewerage industry, 1985-99

After the 10 regional water authorities of England and Wales were privatized in November 1989, the successor WASCs (water and sewerage companies) faced a new regulatory regime that was designed to promote productivity growth while simultaneously improving drinking water and environmental quality. As legally mandated quality improvements necessitated a costly capital investment programme, the industry's economic regulator – the Office of Water Services – implemented a RPI + K pricing system, designed to compensate the WASCs for their capital investment programme while also encouraging faster rates of productivity growth. This paper considers the relative effects of privatization and regulation on productivity growth in the industry using both non-parametric and parametric methods to provide a crosscheck on the robustness of the results. While there is evidence that labour productivity improved after privatization, there is no evidence that privatization led to a growth in TFP (total factor productivity). However, there is some evidence of a small increase in the rate of TFP growth in the aftermath of a substantial tightening of the regulatory regime that took place in 1995. These results, therefore, are consistent with evidence from other research that privatization, in the absence of effective competition and/or regulation, is not necessarily associated with improved economic performance.

Productivity and price performance in the privatized water and sewerage companies of England and Wales

After its privatization in 1989, the water and sewerage industry of England and Wales faced a new regulatory régime and implemented a substantial capital investment program aimed at improving water and environmental standards. A new RPI + K regulatory pricing system was designed to compensate the industry for its increased capital costs, encourage increased efficiency, and maintain fair prices for customers. This paper evaluates how successful privatization and the resulting system of economic regulation has been. Estimates of productivity growth, derived with quality adjusted output indices, suggest that despite reductions in labor usage, total factor productivity growth has not improved since privatization. Moreover, total price performance indices reveal that increases in output prices have outstripped increases in input costs, a trend which is largely responsible for the increase in economic profits that has occurred since privatization. * We would like to thank Emmanuel Thanassoulis, Joshy Easaw, Jim Love, John Sawkins, and an anonymous referee for helpful comments on earlier drafts of this paper. The usual disclaimer applies.

Stand-alone groundwater desalination system using reverse osmosis combined with a cooled greenhouse for use in arid and semi-arid zones of India

In many areas of northern India, salinity renders groundwater unsuitable for drinking and even for irrigation. Though membrane treatment can be used to remove the salt, there are some drawbacks to this approach e.g. (1) depletion of the groundwater due to over-abstraction, (2) saline contamination of surface water and soil caused by concentrate disposal and (3) high electricity usage. To address these issues, a system is proposed in which a photovoltaic-powered reverse osmosis (RO) system is used to irrigate a greenhouse (GH) in a stand-alone arrangement. The concentrate from the RO is supplied to an evaporative cooling system, thus reducing the volume of the concentrate so that finally it can be evaporated in a pond to solid for safe disposal. Based on typical meteorological data for Delhi, calculations based on mass and energy balance are presented to assess the sizing and cost of the system. It is shown that solar radiation, freshwater output and evapotranspiration demand are readily matched due to the approximately linear relation among these variables. The demand for concentrate varies independently, however, thus favouring the use of a variable recovery arrangement. Though enough water may be harvested from the GH roof to provide year-round irrigation, this would require considerable storage. Some practical options for storage tanks are discussed. An alternative use of rainwater is in misting to reduce peak temperatures in the summer. An example optimised design provides internal temperatures below 30EC (monthly average daily maxima) for 8 months of the year and costs about €36,000 for the whole system with GH floor area of 1000 m2 . Further work is needed to assess technical risks relating to scale-deposition in the membrane and evaporative pads, and to develop a business model that will allow such a project to succeed in the Indian rural context.