Consistency in efficiency benchmarking: Urban water utility regulation with performance improvement

Abstract

For more than 20 years, urban water utility (UWU) regulators have been using key performance indicators to monitor water supply services. In many circumstances, the empirical methods used to rank UWU performance are different between regulators of different countries, although the benchmarking basics are the same. The diversity of benchmarking methods limits the sharing of management strategies between countries. Using data envelopment analysis (DEA), this paper presents a consistency analysis of the performance score method used by the Energy and Water Utilities Regulatory Authorities of Tanzania. DEA is appropriate for this purpose because of its demonstrated flexibility in applications with diverse production environments. Thus, this paper proposes methods for benchmarking strategies to assess UWU efficiency- and management-specific goals within and between countries. The assessment shows that network DEA (NDEA) outperforms empirical methods; regulators using the proposed NDEA technique will benchmark UWU efficiency under a yardstick competition regime and, at the same time, identify the most efficient and weak UWUs using pure variable values. This innovation monitors UWU performance progress and promotes sharing of quality management strategies between UWUs and countries.