INDUSTRY SECTOR

WATER

Economics is central to the regulation of water and sewerage companies. Economic analysis is used to identify efficient levels of operating and capital expenditure, to set an allowed cost of capital, to design incentive arrangements and to determine the structure of charges. Economics can also play a role in assessing the scope for competition, the costs and benefits of drinking quality standards and environmental programmes, and the optimal level of leakage.

Europe Economics can offer consultancy services covering a range of economic issues, including price controls, quality regulation and incentives. The firm has the econometric skills required to conduct comparative efficiency studies.

Europe Economics is familiar with the issues raised by new corporate and financing structures in the water sector, and can provide consulting services on cost of capital and financing issues. Furthermore, the firm has expertise analysing the value of comparators, which is a crucial issue for potential mergers between water companies.

Europe Economics has advised Ofwat on a range of issues including comparative efficiency, the cost of capital, the impact of a merger, future demand for water meters and the treatment of pension costs. Staff have also advised companies in the water sector on efficiency measurement, and the principles of incentive regulation.