Performance measurement in Australian water utilities. Current state and future directions

Abstract

AbstractEnsuring universal and affordable water supply is a central objective of government. An efficient water supply sector plays a primary role in ensuring this objective is met. Scale economies and capital‐intensive immobile assets means monopoly emerges as the dominant organizational form, and when combined with an essential character, a strong case exists for economic and technical regulation. Yet diversity in water service provider scale means economic regulation, which is costly, is not always viable. A comprehensive performance monitoring and reporting regime for water service providers is thus crucial. It is crucial for oversight of unregulated entities, and for regulated entities in generating competition by comparison. In this article, we undertake an expansive literature review and summarize approaches to performance measurement by the water industry. Academic literature reveals researchers have centered their approach using comprehensive methods such as data envelopment analysis and stochastic frontier analysis. With the exception of the Victorian Essential Services Commission, the Australian Industry persists with partial indicators. Given water and sewerage price increases of more than 100% in real terms from 2005 to 2014, we find a strong case for implementing advanced methods to address the task of providing a holistic picture of utility performance.