Water Utility Efficiency Assessment Using a Data Envelopment Analysis Procedure

Abstract

Data envelopment analysis is used to compare the relative efficiencies of potable water utilities using the United States Environmental Protection Agency community water system survey data. Three ownership types (private for profit, private not for profit, and public), and two types of supply sources (ground and surface) are compared. Statistically significant results indicating efficiency advantages of certain utility types are found, and clear trends towards certain utility types are identified. The findings indicate that public utilities are most efficient overall, followed by private not-for-profit utilities, with private for-profit utilities being least efficient. Except for a few cases of very large supply demands, utilities employing groundwater sources were generally more efficient than those using surface water sources. A brief investigation into the marginal return on information obtained from using additional measurement variables to measure utility performance is presented. Additional ranking information can be obtained by using more discrete measurement variables, but with diminishing marginal returns. This presentation of public water utility efficiency evaluation should prove useful as a tool for guiding ownership policies and water source development strategies and demonstrates the utility of publicly available data sets.