Verandah, Lahz House, Spring Hill

Winner of the Robin Dods Award RAIA Queensland Chapter 1990

Verandah, Lahz House, Spring Hill

Winner of the Robin Dods Award RAIA Queensland Chapter 1990

Verandah, Lahz House, Spring Hill

Winner of the Robin Dods Award RAIA Queensland Chapter 1990

Side boundary gate, Lahz House, Spring Hill

House beyond with skylight to bathroom visible on left. Winner of the Robin Dods Award RAIA Queensland Chapter 1990

Side boundary fence, Lahz House, Spring Hill

House beyond with skylight to bathroom visible on left. Winner of the Robin Dods Award RAIA Queensland Chapter 1990

Side boundary fence, Lahz House, Spring Hill

Winner of the Robin Dods Award RAIA Queensland Chapter 1990

Street elevation, Lahz House, Spring Hill

Winner of the Robin Dods Award RAIA Queensland Chapter 1990

Sitting room, Lahz House, Spring Hill

Kitchen and dining area extension beyond. Winner of the Robin Dods Award RAIA Queensland Chapter 1990

Side boundary pathway, Lahz House, Spring Hill

Lahz House on left. Winner of the Robin Dods Award RAIA Queensland Chapter 1990

Side boundary fence, Lahz House, Spring Hill

Winner of the Robin Dods Award RAIA Queensland Chapter 1990

Verandah alcove, Lahz House, Spring Hill

Double hung window and sculpture in verandah alcove. Winner of the Robin Dods Award RAIA Queensland Chapter 1990

Lahz House, Spring Hill

Winner of the Robin Dods Award RAIA Queensland Chapter 1990

Bathroom, Lahz House, Spring Hill

Bathroom vanity with glass skylight above. Winner of the Robin Dods Award RAIA Queensland Chapter 1990

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.

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.