Techno-economic Efficiency of Water Utilities: a Peer-Evaluation Estimation

Abstract Water utilities provide water and sanitation services in monopolistic conditions. Hence, assessing their performance through benchmarking is crucial for proper regulation. This research addresses the limitations of self-evaluation Data Envelopment Analysis (DEA) models commonly used for benchmarking water utilities’ efficiency. Given that these models often lead to overestimated efficiency scores, our study introduces a cross-efficiency analysis framework integrating both self and peer-evaluation perspectives. This innovative approach, applied to a representative sample of Chilean water utilities, uniquely considers unplanned water supply interruptions and sewerage blockages as undesirable outputs, emphasizing service continuity. Average techno-economic efficiency scores based on self-evaluation, and peer-evaluation were 0.681 and 0.388, respectively. Hence, significant techno-economic efficiency overestimations in self-evaluation scores are evident, with implications for regulatory challenges and potential service quality compromises. The data also highlights a considerable opportunity for improvement in water and sanitation continuity in Chilean water utilities. The findings not only shine a spotlight on the inherent biases of prevalent benchmarking techniques but also highlight a substantial avenue for bolstering water and sanitation service continuity within water utilities.