The Technical Efficiency of Slovak Water Companies: An Application of Network DEA

Abstract

The technical efficiency of water companies plays a crucial role in ensuring the reliable and sustainable delivery of clean and safe drinking water. It also influences the effective management of water and wastewater services. Services of this kind, usually provided by a monopoly supplier, offer operators no market incentives to innovate, or improve their efficiency. So, the mission of the regulatory institutions is to simulate a competitive environment. The main aim of this contribution is to use Network Data Envelopment Analysis (N-DEA) to assess and benchmark the technical efficiency of 14 water and wastewater companies offering their services in Slovakia from 2019 - 2021. The methodology of N-DEA allows us to assess the activity’s cost and delivery efficiency, and its overall technical efficiency. We show that full cost efficiency was achieved by two small and one large water companies operating in different regions. Three of the largest suppliers of water and wastewater services and one small company achieved the efficient delivery of water services. Overall efficiency was achieved by one large company in 2021 and one small company in 2019 and 2020. The outcome of our empirical analysis demonstrates the excellent skills of managers in technically efficient companies, regardless of company size and region. That outcome may be of interest to regulatory institutions and the management of individual water companies.