add picture on dark green area (see slide 7 for an example ......• bigggg p y p ( )est independent...
TRANSCRIPT
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Add picture on dark green area(see slide 7 for
Märkte für Wasser –Theorie und Anwendungen(
an example) Prof. Dr. Christian von HirschhausenKOMDAY, 14. Mai 2009
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Background: TUD – DIW – TUB Research Program“Water Economics and Management” (H20)g ( 2 )
- Industrial Organization / Microeconomics:- Regulation theory (yardstick competition, increasing or decreasing block tariffs, regulation and pricing in
developing countries)
- Environment (optimal use of water, external effects)
- Water Management:- Water treatment and sewerage
- Water demand, scenario methods
- "Virtual water", assessment of virtual water flows between nations in relation to international trade
- Accounting rules
- Numeric Modelling:- Economic modelling taking into account network effects
- Scarcity pricing
- Econometrics:- Benchmarking / Efficiency analysis
- Demand estimations
- Institutional / Policy Issues:- Privatization and public-private-partnerships (PPP) in water distribution
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- Organizational reforms in the German and European water sector
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Research Program “Water Economics and Management” (H20)
WP-H20-08 Matthias Walter, Hirschhausen, Christian von, Astrid Cullmann, Robert Wand, and Michael Zschille:Quo Vadis Efficiency Analysis of Water Distribution? - A Comparative Literature Review.
WP-H20-07 Hirschhausen, Christian von, Astrid Cullmann, Matthias Walther, and Michael Zschille: Fallende Preise in der Wasserwirtschaft – Hessen auf dem Vormarsch.
WP-H20-06 Christian von Hirschhausen, Matthias Walter, and Michael Zschille: Effizienzanalyse in der Wasserversorgung Internationale Erfahrungen und Schlussfolgerungen für DeutschlandWasserversorgung – Internationale Erfahrungen und Schlussfolgerungen für Deutschland.
WP-H20-05 Gunnar Gaitzsch: Analyse der Auswirkungen des demografischen Wandels auf die Siedlungsentwässerung mit Hilfe des Realoptionsansatzes
WP-H20-04 Martin Nowack and Edeltraud Günther>Scenario Planning: Managing the Effects of Demographic Change on East Geman Wastewater CompaniesChange on East Geman Wastewater Companies
WP-H20-03 Meran, Georg and Christian von Hirschhausen: A Modified Yardstick Competition Mechanism.WP-H20-02 Jekel, Martin, Georg Meran, and Christian Remy: Sauberes Wasser: Milleniumsziel kaum zu
schaffen: Privatisierungsdebatte entspannt sich.WP H20 01 Water Economics and Management A Research AgendaWP-H20-01 Water Economics and Management – A Research Agenda.
Contact: Astrid Cullmann [email protected] Meran [email protected] Nowack [email protected] Matthias Walter [email protected]
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www.water.sc
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Agenda
1. Einleitung
2 Marktpreise und räumliche Preisdifferenzierung: Nodalpreise2. Marktpreise und räumliche Preisdifferenzierung: Nodalpreise
3. Marktliche Allokation von Wasser
4. Quasi-marktliche Bepreisung in der Wasserverteilung: Regulierung bzw. Kartellaufsicht
5. Marktanreize bei der Wasserversorgung im Entwicklungskontext
6. Schlussfolgerungeng g
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1. Introduction: „Water is Specific … andSubject to Economic and Management Science“
• Water is a time-invariant „mega-topic“, but can be more subject to economic scrutiny
• Water is specific- Vital nutrient- Important ecological implications- Important ecological implications- Network industry, often natural monopoly- Source of conflict, violence, migration
I t di i li h i d• Interdisciplinary approach required:- Economics (~ theory about prices, role of institutions, business strategy)- Management (demand, scenario methods, “virtual water“, accounting)- Engineering (technology of water system, economic-engineering interface)- Political sciences, development (interest groups, collective decisionmaking,
conflict)L d i tit ti (l l l f th l ti )- Law and institutions (legal rules of the game, regulation)
- …Because water is so important, a „more economic approach“ is justified
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Welfare and Rents: Price setting in competitive markets for private goods (e.g. bottled water, groundwater)
• The basic model of a competitive market
• Price formation for private goods in a perfect market ...p g p
Price
SupplyA
Price
SupplyA
Producer Surplus
Consumer SurpluspE
pp y
E E
xE Quantity
DemandB
xS
pS
Quantity
DemandB
Deadweight loss
• ... maximizes social welfare, which is defined as the sum of
xS Quantity
Surplus demand!!!
- Producer surplus (profits)- Consumer surplus (sum over willingness-to-pay minus price paid)
• ... setting prices artificially shifts some rents to consumer
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- but reduces overall rents, and creates distributional quarrels and shortages
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Agenda
1. Einleitung
2 Marktpreise und räumliche Preisdifferenzierung: Nodalpreise2. Marktpreise und räumliche Preisdifferenzierung: Nodalpreise
3. Marktliche Allokation von Wasser
4. Quasi-marktliche Bepreisung in der Wasserverteilung: Regulierung bzw. Kartellaufsicht
5. Marktanreize bei der Wasserversorgung im Entwicklungskontext
6. Schlussfolgerungeng g
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Engpassmanagement und Investitionsanreize:Knotenpreise (nodal prices, LMP) bieten richtige Informationen
• Effiziente Lösung für das Engpassmangament: Knotenpreise (engl. nodal prices oder locational marginal prices, LMPs)g )
• Knotenpreise sind unterschiedliche Preise für jeden Entnahme- bzw. Einspeisepunkt des Netzwerkes (räumliche Preisdifferenzen) und variieren mit dem Zeitpunkt der Entnahme bzw Einspeisung (zeitlichemit dem Zeitpunkt der Entnahme bzw. Einspeisung (zeitliche Preisdifferenzen)
• Der Knotenpreis setzt sich aus mehreren Komponenten zusammen (El kt i ität Üb t l t k Üb t(Elektrizitätserzeugung, Übertragungsverluste, knappe Übertragungs-kapazität, knappe Erzeugungskapazität)
• Der Unterschied des Knotenpreises zwischen zwei benachbarten Knoten im pNetzwerk stellt prinzipiell einen Investitionsanreiz dar (Ausnutzung der Preisdifferenz), aber vernichtet ggf. die Engpassrente
• Um Investitionsanreize zu gewährleisten werden zweigliedrige Tarife• Um Investitionsanreize zu gewährleisten werden zweigliedrige Tarifevorgeschlagen
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Beispiel: Studie für BeNeLux
Preise
< 15
[€/MWh]
< 20
< 25
< 30
> 30
Netzausbau
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Situation 2004Situation 2015Quelle: Freund et al. (2005)
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Locational Marginal Prices in PJM (nodal prices)
• PJM (Pennsylvania, New Jersey, Maryland):• biggest Independent System Operator (ISO) in the worldgg p y p ( )• 134 GW peak load• 165 GW generation capacities
728 TWh l ti• 728 TWh annual consumption• 56000 miles transmission lines• 164000 square miles territoryq y• including 13 states• 19% of US GDP produced in PJM
• LMP =Marginal Costs
+ Transport Costs+ Congestion Costs
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Locational Price Distribution
• Source: Ott, 2005
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Efficient Decisions on Investment Financing Through Nodal Pricing: Example of the Rockies Express Pipeline Project
• I ~ 5 bn. USD, 2,700 km, 15-18 bcm
• FERC-filing, open season, nodal pricing, etc. identification of bottlenecksFERC filing, open season, nodal pricing, etc. identification of bottlenecks
• TPA with „regulated“ ROR, secondary trading, etc. efficient capacity allocation
- 11 -Source map:: IEA Natural Gas Market Review 2008
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Why Not for Water ? Example: Nodal Prices in Water Networks(Raffensperger, et al., forthcoming)
• Map of Marlborough (New Zealand)Zealand)
• Showing wells, MODFLOW grid, rivers, roads,
• A1,B3,C1,D3,E3 are control points
• A1 E3 and B3A1, E3 and B3 ensure stream flows
• C1 and D3 prevent salt water intrusion
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Source: Raffensperger, et al.: p.16
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Example: Nodal Prices in Water Networks(Raffensperger, et al., forthcoming)
• Results of market softwaresoftware
• Positive prices are shown by well; Prices are zero at all other wells
• Circles and three large dots are
ll th t t dwells that trade• Latter three are
major buyers
S R ff t l 17
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Source: Raffensperger, et al.: p.17
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Agenda
1. Einleitung
2 Marktpreise und räumliche Preisdifferenzierung: Nodalpreise2. Marktpreise und räumliche Preisdifferenzierung: Nodalpreise
3. Marktliche Allokation von Wasser
4. Quasi-marktliche Bepreisung in der Wasserverteilung: Regulierung bzw. Kartellaufsicht
5. Marktanreize bei der Wasserversorgung im Entwicklungskontext
6. Schlussfolgerungeng g
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Auctioning of Groundwater Rights and General Pricing(Kirsch and Charaklis, 2006)
• Consumers have option to choose- GroundwaterGroundwater- Reservoir water- River basin water
• Idea: Auction groundwater rights- First allocation is discussed- Secondary trading importantSeco da y t ad g po ta t- Trend towards „efficient“ use
• Model: optimal positioning of waterworks in a priced environment
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Example: Community Choice Between Groundwater and Reservoir Water with Pipeline (North Carolina, Kirsch and Characklis, 2006)
• Affected cities in the CCPCUA
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Source: Kirsch and Characklis (2006): p.7
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Example: Community Choice Between Groundwater and Reservoir Water with Pipeline (Kirsch and Characklis, 2006)
• Affected cities in the CCPCUA• Results of including groundwater permit trading:- a) illustrates results of Goldsboro-NRWASA-Greenville schenario- b) illustrates results of NRWASA-Greenville scenario- c) illustrates results of Greenville –Goldsboro scenario
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Source: Kirsch and Characklis (2006): p.7
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Agenda
1. Einleitung
2 Marktpreise und räumliche Preisdifferenzierung: Nodalpreise2. Marktpreise und räumliche Preisdifferenzierung: Nodalpreise
3. Marktliche Allokation von Wasser
4. Quasi-marktliche Bepreisung in der Wasserverteilung: Regulierung bzw. Kartellaufsicht
5. Marktanreize bei der Wasserversorgung im Entwicklungskontext
6. Schlussfolgerungeng g
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Tariffication for Natural Monopolies:Trade-off Between Different Pricing Schemesg
• Characteristics of a Natural Monopoly- Exclusion is possible so that user charges can be raised- One firm can produce the requested quantity cheaper than two or more companies y
(subadditivity)- Inversions are irreversible (sunk costs !) so that there is no potential competition
• Price Setting / Tariffication for a Natural MonopolyAllocative Efficiency
Cost Reco-very ?
Distri-butional EffectsPrice
E Unregulated Monopoly(Cournot-Price)
(-) Welfare losses (quantity too low)
(+) Yes (even rents)
(-) explota-tion of demands
PC
Demand
M i l RC
D
EDeficit
Marginal-Cost-Pricing
(+) Optimal(maximizes social welfare
(-) No (fixed costs not covered)
(-) Lump Sump payment necesarry
PAC
P
PMC
Average Cost
Marginal Cost
Marginal Revenue
BF
Average Cost Pricing
(?) Welfare losses (too low quantity)
(+) YESQuantity XC XMCXAC
P gA
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World-Wide Use of Benchmarking Studies for Regulatory Purposes
C t i d i
Legend:
Countries covered in cross-border studiesCountries covered in independent studies
- 20 -Sourc: Walter, et al. (2009)
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Development of the UK Water Sector:From >2,500 to 28 …
Water supply Sewerage Resources/ environ. regulation
1940s > 1030 separate water undertakings (1956)
> 1300 sewerage and sewerage disposal authorities
River Boards
Pre-1973 consolidation 198 water Still > 1300 29 River AuthoritiesPre 1973 consolidation 198 water undertakings
-64 local authorities-101 joint boards
Still > 1300 29 River Authorities
-33 SWCs
1973 Water Act 10 multi-purpose Regional Water Authorities (RWAs)
75% f t l- 75% of water supply-100% of sewerage treatment
1989 Water Act 10 RWAs become Water and Sewerage Companies (WaSCs)
DWI and NRA take on regulationp ( ) g
2009 28 companies-10 water and sewerage companies-14 water only companies
…Office of Water Services (OFWAT): RPI
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y p-4 other regulated companies
Se ces (O )+ K
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„RPI + K“ Regulation
• K = Q – X- Traditional RPI-X incentive regulationTraditional RPI X incentive regulation- Q ~ quality factor
• X ~ firm-specific efficiency measure- Quantitative benchmarking- Partial productivity parametersa t a p oduct ty pa a ete s
• Q ~ quality factor- Qualitative and- Capacity incentives
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Regulated Water Tariffs inEngland and Wales
Selected companies (best and worst in benchmarking; 3 people household; 2008/09)
Water and sewerage companiesBill (for 160 m³) (GBP)
Increase from last year (GBP)
Price per m³ (GBP)
K-factor
Anglian Water 2,80 %
-Anglian 219,33 11 1,37-Hartlepool 169,71 14 1,06Dwr Cymru 229,75 15 1,43 4,10 %South West Water
281,08 21 1,76 9,80 %
Thames Water 196,34 14 1,05 1,20%
Wessex Water 274,10 20 1,71 5,60 %
Yorkshire Water 3 60 %Yorkshire Water 3,60 %
-Yorkshire 213,10 13 1,33-York 128,35 8 0,80
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Sourc:http://www.ofwat.gov.uk/consumerissues/chargesbills/household/prs_lft0809_waterseweragebills.pdf; http://www.ofwat.gov.uk/regulating/reporting/rpt_tar2007-08.pdf
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Agenda
1. Einleitung
2 Marktpreise und räumliche Preisdifferenzierung: Nodalpreise2. Marktpreise und räumliche Preisdifferenzierung: Nodalpreise
3. Marktliche Allokation von Wasser
4. Quasi-marktliche Bepreisung in der Wasserverteilung: Regulierung bzw. Kartellaufsicht
5. Marktanreize bei der Wasserversorgung im Entwicklungskontext
6. Schlussfolgerungeng g
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Rate Structure - Water Based Charges (I)
• Uniform rate (“Coase Tariff”)• Favored by economic efficiency criterion
Volumetric charge = tan β
ExpenditureR(q)
ββ
Quantity q
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Quantity q
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Increasing Block Tariffs (IBT)
R(q)• Increasing block rate R(q)• Large users are penalized• Problem: Influence of household size on water consumption
q
Tariff 3Tariff 1 Tariff 2
Volumetric chargecharge R´(q)
Tariff 3Tariff 1 Tariff 2
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Menge q
a 3Tariff 1 a
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Water Tariffs – South Asia
Examples from South Asia
Parameters: number and size of blocks, price level of each block
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Source: Whittington (2003)
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Case-Study Bangladesh - Facts
• 36 % are living below the poverty line (1 USD/day)
• One of the poorest countrys in the ldworld
• Water-rich country
• 74% have access to piped water
• Population: 153 mn. /23 mn Households23 mn. Households
• Average residential water consumption: 87 l/day/capitaconsumption: 87 l/day/capita
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Case-Study Bangladesh - Assumptions
Population 153 mnPopulation Income
Lowest household income: 15 USD• Population 153 mn.
• Access to piped water three fourth: 113.22 mn.
• Lowest household income: 15 USD per month
• Average income: 380 USD per month
• Average household size 4.9 persons per household → 23.1 mn. households
• Average income of the 10 per centmost wealthy people: 1,060 USD
Water Consumption
• Average residential water
Water Supply
• Fixed costs of 20 000 000 USD perAverage residential waterconsumption: 87 l
• Subsistence level: 6 cubic metresper household and month
Fixed costs of 20,000,000 USD per month
• Variable costs of 1 USD per cubic metreper household and month metre
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Total Utility Decreases After a Critical Threshold of Progression
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Comparison Between Coase-Tariff and Increasing-Block Tariff:„Almost Poor“ May Particularly Suffer
Deviation from economic“ pricing does not necessarily lead to higher welfare
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Deviation from „economic pricing does not necessarily lead to higher welfare„Das Gegenteil von gut gemacht „pro-poor Regulation“ ist gut gemeint …“
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Agenda
1. Einleitung
2 Marktpreise und räumliche Preisdifferenzierung: Nodalpreise2. Marktpreise und räumliche Preisdifferenzierung: Nodalpreise
3. Marktliche Allokation von Wasser
4. Quasi-marktliche Bepreisung in der Wasserverteilung: Regulierung bzw. Kartellaufsicht
5. Marktanreize bei der Wasserversorgung im Entwicklungskontext
6. Schlussfolgerungeng g
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Conclusion: „Water is Specific … andSubject to Economic and Management Science“
• Water is a time-invariant „mega-topic“, but can be more subject to economic scrutiny
• Water is specific- Vital nutrient- Important ecological implications- Important ecological implications- Network industry, often natural monopoly- Source of conflict, violence, migration
I t di i li h i d• Interdisciplinary approach required:- Economics (~ theory about prices, role of institutions, business strategy)- Management (demand, scenario methods, “virtual water“, accounting)- Engineering (technology of water system, economic-engineering interface)- Political sciences, development (interest groups, collective decisionmaking,
conflict)L d i tit ti (l l l f th l ti )- Law and institutions (legal rules of the game, regulation)
- …Because water is so important, a „more economic approach“ is justified
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Conclusion on Tariffs
Tariff Structure
M i l T P tI i P i it
Revenue Sufficiency
Marginal Cost Tariff
Two-Part Tariff
Increasing Block TariffFlat Rate Priority
Pricing
+- - +y
Economic Efficiency --
+- -
+
+
Objectives
Equity and Fairness - ++ +
Simplicity ++ -+
Taking into account the poor +- -- +
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Tariff with regard to objectives:positivenegative neutral/depending
Source: own compliation
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Efficient Access Policy: Water Kiosks in Zambia
- The Problems• Zambia has abundant water resources, but only 47% have
access to clean drinking water
• 44% have no access to sanitation
• Desolate water infrastructure in low income areas
• Low service level
• Wastewater pollutes drinking water
- Service Provision• 84% are served by the 10 Commercial Utilities owned by84% are served by the 10 Commercial Utilities owned by
Local Authorities as shareholders
• 16 % are served directly by Local Authorities
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Source: GTZ, http://www.gtz.de/de/dokumente/en-casesheet-regulation-water-sanitation-zambia.pdfhttp://web.mit.edu/urbanupgrading/waterandsanitation/resources/examples-pdf/MonthlyCardPaymentSystem-ZA.pdf
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Efficient Access Policy: Water Kiosks in Zambia
- Regulatory Framework• National Water Supply and Sanitation Council (NWASCO)
regulates urban water and sanitation services
• Solution for poor areas: Water Kiosks (since 1994)
• operated by private individualsoperated by private individuals
• they have concluded an agreement with water utilities and the municipalities
• Charge: 0,50 EUR / m3
• Funding and management support is provided by the Devolution Trust Fund (DTF)
• Incentives for service providers
• Tariffs are designed to stimulate efficiency
− Results• Improved access rate• Improved access rate
• Improved water / service quality and efficiency
• Cost coverage
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• TransparencySource: GTZ, http://www.gtz.de/de/dokumente/en-casesheet-regulation-water-sanitation-zambia.pdfhttp://web.mit.edu/urbanupgrading/waterandsanitation/resources/examples-pdf/MonthlyCardPaymentSystem-ZA.pdf
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Economic Regulation of Water in England and Wales
Water and sewerage companies
Water Sewerage
Band A to E Rank 1-21 Band A to E Rank 1-10
Anglian A (Lower) 3 B (Lower) 4
Dwr Cymru C (Lower) 16 C (Upper) 8
Northumbrian B (Lower) 9 C (Upper) 7
Severn Trent B (Lower) 8 B (Lower) 5
South West C (Lower) 18 C (Upper) 6
S th B (U ) 7 C (L ) 9Southern B (Upper) 7 C (Lower) 9
Thames C (Lower) 15 A (Upper) 1
United B (Lower) 12 C (Lower) 10United Utilities
B (Lower) 12 C (Lower) 10
Wessex A (Lower) 4 A (Lower) 3
Y k hi A (U ) 2 A (U ) 2
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Yorkshire A (Upper) 2 A (Upper) 2
Sourc: http://www.ofwat.gov.uk/regulating/reporting/ltr_rd0209_releffassess07-08#figure1
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Economic Regulation of Water inEngland and Wales (2)
Water only companies
Band A to E Rank 1-21
Bournemouth & W. Hampshire Water B (Upper) 6
Bristol Water C (Upper) 14Bristol Water C (Upper) 14
Cambridge Water D (Upper) 19
Dee Valey Water C (Upper) 13
Folkstone & Dover Water D (Lower) 21
Portsmouth Water A (Upper) 1
South East Water B (Lower) 11South East Water B (Lower) 11
South Staffordshire Water A (Lower) 5
Sutton & East Surrey Water B (Lower) 10
Tendring Hundred Water C (Lower) 17
Three Valeys Water D (Upper) 20
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Sourc: http://www.ofwat.gov.uk/regulating/reporting/ltr_rd0209_releffassess07-08#figure1
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Economic Regulation of Water inEngland and Wales (3)
Water e
Within 5% of benchmark
Anglian Wessex,
Yorkshireefficiency
Between 5% and 15% of benchmark
Northumbrian,
Southern,
Severn Trent
y banding
United Utilities
Between 15% and 25% of benchmark
Dwr Cymru
Thamesg
Cymru,
South West
Between 25% and 35%Between 25% and 35% of benchmark
Greater than 35 % of benchmark
Greater than Between Between Between 5% Within 5% ofGreater than 35 % of benchmark
Between 25% and 35% of benchmark
Between 15% and 25% of benchmark
Between 5% and 15% of benchmark
Within 5% of benchmark
Sewerage efficiency banding
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Sourc: http://www.ofwat.gov.uk/regulating/reporting/ltr_rd0209_releffassess07-08#figure1
Sewerage efficiency banding