Anne-Kathrin Faust

The cost structure of water utilities in Switzerland

This paper estimates a translog cost function for Swiss water utilities. From the cost function, we are able to estimate measures of marginal costs as well as economies of production density, customer density and scale, which are important determinants in water policies, such as planning and water tariffs. In order to explore the determinants of water supply costs, their structure and composition, the translog cost function does not only include output and input prices, but further integrates environmental factors such as the proportion of households among customers and water losses. We find moderate returns to production density, which decrease with the size of the utility.

Water Supply: Costs and Performance of Water Utilities: Evidence from Switzerland

In this paper, we assess the economic efficiency of Swiss water utilities. To reach this aim, we accessed a new and unexploited database, which counts 330 water utilities, representing about 55% of the drinking water distributed in Switzerland. The database spans over six years (2000-2005) and offers information on the type of the water production process, the characteristics of the network and the costs of water supply. This database presents an original opportunity to analyse the cost of water supply and to determine the efficiency of the water utilities. Such a study has never been done for Switzerland. We apply a stochastic cost function approach to measure cost inefficiency and to investigate the impact of environmental characteristics outside the control of the water utilities (e.g. type of water and customer density) on costs and inefficiency measures. Our results show that environmental factors have a significant influence on costs. Including exogenous variables in the analysis lowers industry inefficiency scores and provides indicators of managerial performance.