The English and Welsh water and sewerage industry was privatised in 1989 and is characterised by a series of regional monopolies. The majority of consumers currently have no choice in their supplier. The industry is regulated by Ofwat to guarantee the best value for customers whilst enabling the companies to undertake their activities. The motivation of this thesis is to examine the effectiveness of regulation. The aim is to examine five research questions. Firstly, has regulation encouraged convergence amongst the efficiency scores? Secondly, have the 1999 and 2004 price reviews been effective in improving efficiency? Thirdly, is there a capex bias in the industry? The final two aims come from a methodological perspective: firstly, to allow for the incorporation of environmental variables within the measurement of efficiency and secondly, to incorporate the long asset life of capital by incorporating capital as an intertemporal factor of production. Data Envelopment Analysis (DEA) is employed to measure efficiency which is a non-parametric technique that creates a linear frontier over the data. Convergence is examined by drawing from the growth literature to examine -and -convergence. A three-stage DEA model is applied to examine the influence of environmental variables and to obtain an environmental adjusted DEA efficiencey score. Finally, the intertemporal nature of capitala is incorporated through a dynamic DEA model. This thesis reports that whilst regulation has produced limited improvements in the average efficiency, regulation has been effective in encouraging the least efficient firms to catch up with the frontier companies. Ofwat's tightening of the price review in 1999 has produced significant improvements in efficiency, whereas the 2004 price review was relatively lax and had no significant influence. Finally, the thesis highlights that the current regulatory framework induces a preference towards capital expenditure which can have implications on the consumer's bill.
| Identifer | oai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:642505 |
| Date | January 2014 |
| Creators | Pointon, Charlotte |
| Publisher | Cardiff University |
| Source Sets | Ethos UK |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
| Source | http://orca.cf.ac.uk/72007/ |
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