Assessing the Quality of Service of Water Companies: a ‘Benefit of the Doubt’ Composite Indicator

Abstract

Evaluating the quality of service (QS) provided by water companies is essential to benchmark and regulate them. Composite indicators (CIs) are a useful tool for this as they consist of aggregated multiple performance indicators in a single index, providing a holistic assessment of the QS of water companies. In this study, the novel ‘benefit of doubt’ methodology was used in order to evaluate the QS of a sample of Chilean water companies, by computing CIs that integrate both direct and reverse indicators. Moreover, the estimation of the Nerlove–Luenberger super-efficiency CI allowed for the ranking of water companies based on their QS. Results showed that, on average, Chilean water companies provide water and sewerage services with high quality, as the mean CI of the QS estimated was 0.93. Nevertheless, the QS of 2 of the 24 water companies evaluated stood out remarkably. The second-stage analysis conducted revealed that the ownership and peak factor of water companies and water consumed by customers affects the QS of water companies. The methodological approach followed in this study to evaluate the QS of water companies would be very useful for water regulators, as the CI computed integrates both desirable and undesirable outputs.