Economies of scale in community water systems

Abstract

Data sets from the U.S. Environmental Protection Agency's 1995 and 2000 Community Water Systems surveys were used to examine the production costs of water supply systems. The authors estimate water supply economies of scale by estimating the elasticities of both the total unit cost and the individual component costs. For total unit cost, they found that a 1% production increase reduced unit costs by a statistically significant 0.16%. For individual component costs, higher economies of scale in capital, materials, outside services, and other costs and lower, but still positive, economies of scale in labor and energy costs were found. These economies of scale may reflect production economies or suggest that larger systems are better than smaller systems at bargaining and receiving services and materials at a lower unit cost. Importantly, bargaining gains and some production economies do not necessarily depend on water systems becoming physically interconnected.

A meta-regression analysis of benchmarking studies on water utilities market structure

“…For the US, as in the two previous decades, strong economies of scale were found (Bhattacharya et al, 1994;Shih et al 2006). However, Torres and Morrison Paul (2006) observed economies of scale for small utilities but diseconomies of scale for the largest utilities.…”

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

“…Using data collected from the American Water Workers Association, a number of studies that implemented either parametric or non-parametric techniques failed to ascertain whether private operators are more efficient than public ones. For instance, Mann and Mikesell [20] found that private operator owned utilities had higher costs than government utilities, and findings from many empirical studies support the idea that public providers are more efficient than private ones [21][22][23]. However, a different stream of studies showed that-on the contrary-public operators are less efficient, having higher costs than private ones [15,24,25].…”

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

“…Most studies confirm the presence of economies of scale in the water industry [11][12][13], but others highlight diseconomies of scale in various countries [14][15][16][17][18][19][20].…”