The poetics of corporate reporting:evidence from the UK water industry

This paper is predicated upon the assumption that the annual accounts of companies constitute important corporate artefacts in their own right that are both image and rhetoric intensive. The objective is to import concepts from structural poetics and bring them to bear on annual corporate reports. The understanding of the poetics of corporate reporting in this manner is of importance as it allows the consideration of the relationship between the audience and the authors of the script to be explored. We do this by analysing the annual reports of various water companies in the UK.

Productivity change in the water industry in England and Wales:application of the meta-Malmquist Index

This paper uses a meta-Malmquist index for measuring productivity change of the water industry in England and Wales and compares this to the traditional Malmquist index. The meta-Malmquist index computes productivity change with reference to a meta-frontier, it is computationally simpler and it is circular. The analysis covers all 22 UK water companies in existence in 2007, using data over the period 1993–2007. We focus on operating expenditure in line with assessments in this field, which treat operating and capital expenditure as lacking substitutability. We find important improvements in productivity between 1993 and 2005, most of which were due to frontier shifts rather than catch up to the frontier by companies. After 2005, the productivity shows a declining trend. We further use the meta-Malmquist index to compare the productivities of companies at the same and at different points in time. This shows some interesting results relating to the productivity of each company relative to that of other companies over time, and also how the performance of each company relative to itself over 1993–2007 has evolved. The paper is grounded in the broad theory of methods for measuring productivity change, and more specifically on the use of circular Malmquist indices for that purpose. In this context, the contribution of the paper is methodological and applied. From the methodology perspective, the paper demonstrates the use of circular meta-Malmquist indices in a comparative context not only across companies but also within company across time. This type of within-company assessment using Malmquist indices has not been applied extensively and to the authors’ knowledge not to the UK water industry. From the application perspective, the paper throws light on the performance of UK water companies and assesses the potential impact of regulation on their performance. In this context, it updates the relevant literature using more recent data.

Price-cap regulation in the English and Welsh water industry:a proposal for measuring productivity performance

Privately owned water utilities typically operate under a regulated monopoly regime. Price-cap regulation has been introduced as a means to enhance efficiency and innovation. The main objective of this paper is to propose a methodology for measuring productivity change across companies and over time when the sample size is limited. An empirical application is developed for the UK water and sewerage companies (WaSCs) for the period 1991-2008. A panel index approach is applied to decompose and derive unit-specific productivity growth as a function of the productivity growth achieved by benchmark firms, and the catch-up to the benchmark firm achieved by less productive firms. The results indicated that significant gains in productivity occurred after 2000, when the regulator set tighter reviews. However, the average WaSC still must improve towards the benchmarking firm by 2.69% over a period of five years to achieve comparable performance. This study is relevant to regulators who are interested in developing comparative performance measurement when the number of water companies that can be evaluated is limited. Moreover, setting an appropriate X factor is essential to improve the efficiency of water companies and this study helps to achieve this challenge.

Comparative performance measurement in regulation: The case of English and Welsh sewerage services

This paper discusses the use of comparative performance measurement by means of Data Envelopment Analysis in the context of the regulation of English and Welsh water companies. Specifically, the use of Data Envelopment Analysis to estimate potential cost savings in sewerage is discussed as it fed into the price review of water companies carried out by the regulator of water companies in 1994. The application is used as a vehicle for highlighting generic issues in terms of assessing the impact of factors on the ranking of units on performance, the insights gained from using alternative methods to assess comparative performance, and the issue of assessing comparative performance when few in number but highly complex entities are involved. The paper should prove of interest to those interested in regulation and, more generally, in the use of methods of comparative performance measurement.

The effect of catchment characteristics on sewage settling velocity grading

A procedure has been developed which measures the settling velocity distribution of particles within a complete sewage sample. The development of the test method included observations of particle and liquid interaction using both synthetic media and sewage. Comparison studies with two other currently used settling velocity test procedures was undertaken. The method is suitable for use with either DWF or storm sewage. Information relating to the catchment characteristics of 35 No. wastewater treatment works was collected from the privatised water companies in England and Wales. 29 No. of these sites were used in an experimental programme to determine the settling velocity grading of 33 No. sewage samples. The collected data were analysed in an attempt to relate the settling velocity distribution to the characteristics of the contributing catchment. Statistical analysis of the catchment data and the measured settling velocity distributions was undertaken. A curve fitting exercise using an S-shaped curve which had the same physical characteristics as the settling velocity distributions was performed. None of these analyses found evidence that the settling velocity distribution of sewage had a significant relationship with the chosen catchment characteristics. The regression equations produced from the statistical analysis cannot be used to assist in the design of separation devices. However, a grading curve envelope was produced, the limits of which were clearly defined for the measured data set. There was no evidence of a relationship between settling velocity grading and the characteristics of the contributing catchment, particularly the catchment area. The present empirical approach to settling tank design cannot be improved upon at present by considering the variation in catchment parameters. This study has provided a basis for future research into the settling velocity measurement and should be of benefit to future workers within this field.

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.

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.

Regulatory price performance, excess cost indexes and profitability:how effective is price cap regulation in the water industry?

In this study we apply an index number approach to allow for cross sectional comparisons of relative profitability, productivity and price performance of the regulated Water and Sewerage companies (WaSCs) in England and Wales during the years 1991-2008. In order to better analyse the impact of regulation on WaSC performance, we decompose actual economic profits into spatial multilateral Fisher productivity (TFP) index, the inverse of which is demonstrated to be a regulatory excess cost index that measures the deviation of a firm’s actual costs from benchmark costs, and a newly developed regulatory total price performance (TPP) index, which measures the excess of regulated revenues relative to benchmark costs. Increases (decreases) in regulatory price performance are indicative of the loosening (tightening) of price cap regulation. Moreover, we also show that the relationship between actual economic profitability, regulatory excess costs and regulatory price performance indices can be used to categorize regulatory price caps as “weak”, “powerful” or “catch-up promoting”. The results indicated that throughout the entire 1991-2008 period, price caps were never “powerful”, in the sense that they required less productive firms to immediately and fully catch-up to the most productive firm to regain economic profitability. More specifically, during the years 1991-2000 price caps were “weak” as prices were high enough for the firms to achieve economic profits despite their low productivity levels. However, after 2001 prices became “catch up promoting” as they required less productive companies to eliminate at least some excess costs in order to eliminate economic losses. Finally, we emphasize that as our results also clearly demonstrated a much closer alignment between allowed revenues and benchmark costs after 2001, Ofwat’s approach during this period was not only appropriate, but should also be continued in the 2009 price review.

The impact of privatisation and regulation on the water and sewerage industry in England and Wales:a translog cost function approach

After the ten Regional Water Authorities (RWAs) of England and Wales were privatized in November 1989, the successor Water and Sewerage Companies (WASCs) faced a new regulatory regime that was designed to promote economic efficiency 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 (Ofwat), implemented a retail price index (RPI)+K pricing system, which was designed to compensate the WASCs for their capital investment programme while also encouraging gains in economic efficiency. In order to analyse jointly the impact of privatization, as well as the impact of increasingly stringent economic and environmental regulation on the WASCs' economic performance, this paper estimates a translog multiple output cost function model for the period 1985–1999. Given the significant costs associated with water quality improvements, the model is augmented to include the impact of drinking water quality and environmental quality on total costs. The model is then employed to determine the extent of scale and scope economies in the water and sewerage industry, as well as the impact of privatization and economic regulation on economic efficiency.

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

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.

Adaptive edge analytics for distributed networked control of water systems

Over the last decade, there has been a trend where water utility companies aim to make water distribution networks more intelligent in order to improve their quality of service, reduce water waste, minimize maintenance costs etc., by incorporating IoT technologies. Current state of the art solutions use expensive power hungry deployments to monitor and transmit water network states periodically in order to detect anomalous behaviors such as water leakage and bursts. However, more than 97% of water network assets are remote away from power and are often in geographically remote underpopulated areas, facts that make current approaches unsuitable for next generation more dynamic adaptive water networks. Battery-driven wireless sensor/actuator based solutions are theoretically the perfect choice to support next generation water distribution. In this paper, we present an end-to-end water leak localization system, which exploits edge processing and enables the use of battery-driven sensor nodes. Our system combines a lightweight edge anomaly detection algorithm based on compression rates and an efficient localization algorithm based on graph theory. The edge anomaly detection and localization elements of the systems produce a timely and accurate localization result and reduce the communication by 99% compared to the traditional periodic communication. We evaluated our schemes by deploying non-intrusive sensors measuring vibrational data on a real-world water test rig that have had controlled leakage and burst scenarios implemented.