# A fair deal?

**Source**: https://www.lboro.ac.uk/research/spotlights/fair-deal/
**Parent**: https://www.lboro.ac.uk/research/spotlights/

Influencing water price caps using efficiency benchmarking

##### [Ofwat](https://www.ofwat.gov.uk/) – the UK Water Services Regulation Authority – protects customers by setting price caps on water companies in England and Wales.

However, balancing a fair deal for consumers with enough company revenue to support public service responsibilities – including flood defence and leak prevention – is a complex task.

Our research has made a significant contribution to the pricing process for the latest five-year business cycle for water companies (PR19, 2020-25) – guiding the modelling conducted by [Economic Insight](https://www.economic-insight.com/), Ofwat and five water companies, Affinity, Bristol, Thames, Wessex and Yorkshire.

## Our impact

### Benefits for Economic Insight

- We provided training on econometric measures of efficiency, putting the organisation in a stronger position to secure further work with water companies.
- We also advised on accurately measuring retail efficiencies, a new element in the price determination.

### Guiding Ofwat

- We commented on Ofwat’s Cost assessment for PR19: a consultation on econometric cost modelling.
- We also provided technical advice on how to model a company’s dual service customers.

### Supporting water companies

- We helped to produce the retail cost models for Affinity, Bristol, Wessex and Thames water companies.
- We similarly supported Yorkshire Water around cost efficiency modelling.

## The research

Drawing on our knowledge of econometric efficiency measurement, we contributed to the use of two approaches – time invariant efficiency (persistent cost performance) and time-varying efficiency (transient cost performance).

Our research spanned several areas including the calculation of persistent productive efficiencies of decision-making units such as countries and companies, and the calculation of transient retail cost efficiencies of water companies.

We also expanded and successfully applied a method for calculating persistent efficiency spillovers between decision-making units.

Our research underpinned the efficiency measurement of five regulated water companies.

More than 10.7 million households across the country will benefit from our work.

### Development partners

- Affinity Water
- Bristol Water
- Economic Insight
- Ofwat
- Thames Water
- Wessex Water
- Yorkshire Water

## Meet the experts

### [Professor Karligash Glass (Kenjegalieva)](https://www.lboro.ac.uk/schools/business-school/our-people/karligash-glass/)

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Professor of Financial Economics

- [+44 (0)1509 222708](tel:+44 (0)1509 222708)
- [Send email](mailto:K.Glass@lboro.ac.uk)

### Professor Anthony Glass

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Professor of Managerial Economics at the University of Sheffield