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Letters to Regulatory Directors
RD 41/03 18 December 2003 Dear Regulatory Director FURTHER WORK ON THE POTENTIAL SCOPE FOR FUTURE EFFICIENCY Earlier this year we published work carried out for us by Europe Economics on their estimate of the scope for future efficiency in our industry. Since then we have commissioned further work and are now able to publish two further studies. The first, by London Economics with Black and Veatch Consultants, supported by Professor M Shutler, is a comprehensive new work on the possible scope for future efficiency. They have undertaken both top down and component based analysis of future prospects, noting the arguments made by companies in draft business plans into account. The study concludes that the scope for future efficiency is somewhat lower than indicated in the spring by Europe Economics. The second report is a further study by Europe Economics. They have considered the measurement issues that are common to all studies of efficiency. They have used their earlier work to illustrate their conclusions. We have no plans to commission further work. Our process of including the industry and customer representatives as partners with the London Economics study, and of focusing on the areas where there might be obvious challenges, will give you all the confidence and external information you need to include robust efficiency assumptions in your final business plan. While these are not consultation papers, we would be interested in your views, please send these to me on mark.hann@ofwat.gsi.gov.uk. Finally, you will be interested to know that the work we asked Stone and Webster to carry out on industry structure - 'Investigation into evidence for economies of scale in the water and sewerage industry in England and Wales' is now complete. We will publish this on 15 January 2004. Yours sincerely MARK HANN Comparative Efficiency Team Leader  |
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