Are Public-Private Partnerships a Source of Greater Efficiency in Water Supply? Results of a Non-Parametric Performance Analysis Relating to the Italian Industry (original) (raw)

Economies of Scale, Scope, and Density in the Italian Water Sector: A Two-Stage Data Envelopment Analysis Approach

Water Resources Management, 2013

Public utilities could improve their efficiency by pursuing specific strategies, such as growth, diversification of investments, or serving mainly high densely areas. For example, in the water sector, economies of scope and scale both appear possible, but extant literature does not offer clear or consensual findings. To address this lack of clarity, this article investigates the potential for efficiency improvement in the diverse Italian water sector, which comprises utilities of various sizes, operating in areas with various population densities and organized as mono-or multi-utilities. Technical and financial data from 64 different utilities were collected and then analyzed with a two-stage data envelopment analysis approach to reveal the impacts of different operational and exogenous variables on efficiency, including firm size, the degree of investment diversification, and customer density. The results obtained confirm the existence of all three types of economies (scale, scope and density), albeit with different impacts for each DEA score.

Water utility efficiency assessment in Italy by accounting for service quality: An empirical investigation

Utilities Policy, 2017

In Italy's water industry, publicly owned utilities (PWCs) coexist with public-private partnerships (PPPWCs), that could contribute expertise for operations, funds, and relationships. This paper examines the effect of ownership structures on efficiency by comparing Veneto (with almost all PWCs) and Tuscany (with almost all PPPWCs). This comparison is highly debated, with possible economic, social, environmental, and political implications. A Data Envelopment Analysis approach, that uses both quantitative and qualitative variables to represent the lack of service quality, was adopted. Results suggest that PWCs perform slightly better when quality issues are excluded, while PPPWCs perform better when considering both variable types.

Efficiency, Conflicting Goals and Trade-Offs: A Nonparametric Analysis of the Water and Wastewater Service Industry in Italy

This paper presents a benchmarking study of the water and wastewater industry in Italy. A three-stage modeling approach was implemented to measure the efficiency of 53 utility operators. This approach is based on the implementation of network and conventional data envelopment analysis (DEA) to model the production process of the water service utility operators. In comparison to the conventional black-box or one-stage production model generally adopted in previous studies, the proposed approach provides information relative to the different efficiency components of the stages and blocks of the water service production process and its overall efficiency. Further, by shifting the efficiency analysis to a two-dimensional performance space, i.e., resource and market-efficiency, it offers a more comprehensive view of the water service industry and allows accounting for different business goals at the same time and for an investigation of industry trade-offs. Results show that the operators' efficiencies in the Italian water service industry are generally variable and low. There are no water service utilities which are 100% efficient from the resource-efficiency perspective, and the maximum efficiency score is 0.545. Efficiency measurements suggest that there is a general orientation of the Italian water industry to not invest in upgrading and improving the infrastructure assets, and achieving an acceptable efficiency in the operations is critical to delivering water services to market in an efficient way. Only one utility operator is 100% efficient from the market-efficiency perspective. The low tariffs adopted by the water service operators do not allow the gaining of satisfactory service remuneration and the achievement of long-term business sustainability. The joint analysis of the resource and market efficiency scores indicates that there is a trade-off between the corresponding business goals. Recently, the sustainable management of water resources has become an important policy issue in Europe. The access to clean and good-quality drinking water and adequate sanitation service is of primary importance to ensure human well-being, protection of public health and ecosystems, energy production, industry and agriculture development, and economic growth. Hence, any disruption in the supply of water and wastewater services and scarcity of water resources have negative impacts on the quality of human life and economic activity [1]. The provision of water and wastewater services requires considerable investment to comply with the European Union Urban Waste Water Treatment and Drinking Water directives and the various national laws. Thus, in the near future, the main water management challenges in Europe will be the operations, maintenance, upgrading, and renovation of the infrastructure. This implies that water and wastewater services should be managed in an economically and environmentally sustainable fashion.

Benchmarking operational efficiency in the integrated water service provision Does contract type matter?

Purpose – This is a benchmarking study and the purpose of this paper is to investigate if there is any association between operational efficiency in the integrated water management industry in Italy and the typology of service providers, and as a consequence, the nature of concession contract. Design/methodology/approach – The study is focussed on 38 optimal territorial areas (ATOs), e.g. a circumscribed geographical area where the provision of integrated water services is considered efficient. It uses Data Envelopment Analysis (DEA) to calculate ATO efficiency and a stepwise regression procedure performed to investigate the effect of contract type on the operational efficiency rate of the ATO. Findings – This study shows that there are some inefficiencies in the water service supply industry in Italy. The estimated average pure technical and scale efficiency of ATOs are 92.62 and 93.91 percent, respectively, while the average technical efficiency is 87.61 percent and the lowest is slightly higher than 13 percent. Operational inefficiencies might not be determined by size only. In fact, results show that the water service provider and contract agreement typologies are associated with efficiency. In particular, operational efficiency is higher in those ATOs where the water service supply concession contracts that fit the schemes of the new legislative framework prevail or where the service is mostly provided by a private equity owned or by mixed public-private companies. Research limitations/implications – It was assumed that any incremental level of water quality beyond the minimum acceptable threshold as required by law is not important to increase the operation efficiency score; henceforth, no variables measuring the water quality were introduced in the DEA model. The result of the study may be not fully representative of the Italian water service sector, because the unavailability of accurate and consistent public databank in Italy did not allowed to have a larger sample. Practical implications – This paper is one of the first in Italy to investigate the association between the operational efficiency of the ATOs and the nature of water service providers and contract agreements used. Originality/value – This paper is one of the first in Italy to investigate the association between the operational efficiency of the ATOs and the nature of water service providers and contract agreements used. Keywords - Benchmarking, Efficiency, Contracts, DEA, Water management, Service providers, Water service provision, Waste water Paper type - Research paper

The cost efficiency of water utilities: when does public ownership matter?

Local Government Studies, 2016

This study explores the impact of different ownership types on the efficiency of water utilities. Theories and evidence have shown a puzzling relationship between ownership and performance. Moreover, relatively recent contributions (Andrews et al., 2011) have argued that this relationship can be further convoluted by the effect of organisational and environmental variables. The current study aims to contribute to this literature by providing some empirical evidence for Italy, by proposing a methodology that combines nonparametric efficiency estimation and cluster analysis. Our main findings indicate that privately owned utilities indirectly controlled by a public organisation reach the highest level of efficiency but, when size and geographical location enter the analysis, ownership has a stronger significant effect on efficiency, and mixed utilities gain higher cost efficiency. Therefore, we may conclude that administrative reforms about privatisation and the institutional setting should consider a set of variables that characterise each individual organisation.

Article The Effects of Operational and Environmental Variables on Efficiency of Danish Water and Wastewater Utilities

2016

Efficiency improvement is one of three patterns a public utility should follow in order to get funds for investments realization. The other two are recourse to bank loans or to private equity and tariff increase. Efficiency can be improved, for example, by growth and vertical integration and may be conditioned by environmental variables, such as customer and output density. Prior studies into the effects of these variables on the efficiency of water utilities do not agree on certain points (e.g., scale and economies of scope) and rarely consider others (e.g., density economies). This article aims to contribute to the literature by analysing the efficiency of water utilities in Denmark, observing the effects of operational and environmental variables. The method is based on two-stage Data Envelopment Analysis (DEA) applied to 101 water utilities. We found that the efficiency of the water sector was not affected by the observed variables, whereas that of wastewater was improved by smaller firm size, vertical integration strategy, and higher population density.

Issues of Efficiency for Public-Private Partnerships in the Water Sector

STUDIES AND SCIENTIFIC RESEARCHES. ECONOMICS EDITION

The water resources are critical for the economic development in a country or region, since the pollution and depletion of the waters are raising concerns for the environmental and economic efficiency of their management. This outlook calls for analysis on economic and financial issues and risks associated with specific investment projects in water supply and sanitation infrastructure WSS. In previous research outcomes we have shown successful models of Public-Private Partnerships (PPP) used to manage and mitigate the risks and improve performance in providing the public services of Water Supply and Sanitation (WSS). The main objective of this paper is to reiterate the PPP as an efficient business model for the water sector, by employing several methodologies: literature review, case studies, performance indicators, analysis and synthesis. Some features and experiences of PPP in the water sector are resumed and analysed, considering recent developments and leading to conclusions and...

Performance Evaluation of Water Services in Italy: A Meta-Frontier Approach Accounting for Regional Heterogeneities

Water, 2022

Data relative to the water services industry in Italy indicate that there is a serious infrastructure gap between the southern regions and isles and the rest of the country. In these geographical areas, water utilities are provided with substantial public grants from the central and local governments to support investments necessary to mitigate the infrastructure divide by increasing capacity and improve service quality. This paper implements a meta-frontier non-parametric approach based on a data envelopment analysis (DEA) to evaluate the efficiencies of 71 Italian water utilities, accounting for the differentiated contexts in which they operate. A short-term perspective was assumed to estimate efficiency, considering the production factors associated with the infrastructure assets as non-discretionary inputs in the specification of the meta-frontier model. The results showed that water utilities operating in the southern regions and isles suffer from an efficiency gap in comparison to those in the northern and central regions. The average efficiency gap was 9.7%, achieving 24.9% in the worst case. Moreover, a more in-depth analysis focusing on the water utilities in the southern regions and isles indicated that scale inefficiencies might be an important determinant of such an efficiency gap. Indeed, slightly more than 69% of the water utilities operated at increasing returns to scale. Evidence from this study raises concern about the appropriate structure of the Italian water service industry and, particularly, the optimal size of the utilities and the financial sustainability of water services in the southern regions and isles.

Governance, strategy and efficiency of water utilities: the Italian case

Water Policy, 2017

The determinants of the performance of water utilities are a topical issue worldwide. This paper analyzes the relationship between efficiency and corporate governance in Italian water utilities, measured through data envelopment analysis. Using an M-quantile regression model, efficiency estimations are ranked considering relevant governance (board size and composition; firm size) and strategy features (membership of a corporate group; provision of wholesale services) in order to provide decision-makers with indications regarding the best corporate governance and strategic choices to improve the efficiency. Results show that fully publicly owned firms reach lower levels of efficiency than their counterparts with an ownership structure that also includes private partners. Moreover, higher levels of efficiency are reached by utilities with more than six board members and by firms in which the presence of politically connected directors is substantial (more than two-thirds of board memb...

Measuring the efficiency of water utilities: a cross-national comparison between Portugal and Italy

Water Policy, 2012

All over the world, governments are compelling water utilities to improve their efficiency and productivity through reforms and tougher regulatory tools. Despite the different strategies and approaches, the goals remain the same: to make the whole sector more efficient, to curb the profits and ‘quiet life’ of water utilities and pass the productivity gains to customers through reduced prices or better environmental protection and quality of service. The water sectors in Portugal and Italy underwent deep reforms in the 1990s, in pursuit of higher levels of performance. Therefore, there is added interest in measuring the performance of water utilities in these two Mediterranean countries. We assess their performance using composite (global) indicators on a sample of 88 water utilities, for the year 2007. While we compare the performance of the two countries in this sector we also try to identify the impact of the ownership structure on efficiency. Finally, this paper discusses the ben...