An investigation into opex productivity trends and causes in water industry in England & Wales - 1992-93 to 2002-03:main report - final

Abstract

This report presents the results of an investigation into trends and causes of opex productivity growth for the water industry in England and Wales. The period of investigation was 1992-93 to 2002-03. The analysis builds upon a similar methodological approach to that employed previously to investigate economies of scale and scope in the industry. The purpose of the analysis has been to: Estimate trends in opex productivity growth over the period 1992-93 to 2002-03; Decompose those trends into the factors contributing to changes in costs over time; namely: The common rate of productivity improvement due to factors such as technical change; Changes in relative price of inputs; Changes in capital inputs; Changes in outputs; Changes in the quality of outputs; and Changes in other characteristics of the operating environment. The extent to which our estimates of historical opex productivity growth should inform judgments at PR04 about the scope for future opex productivity growth is outside the scope of this work. Those judgements will be a matter for Ofwat.