Performance Assessment of a California Water Utility by Data Envelopment Analysis

This study focused on a performance assessment of individual districts of a California water utility (California Water Service Company; Cal Water) in order to provide a general understanding of the utility’s overall performance. A methodology based on two-stage data envelopment analysis (DEA) was applied. In the first stage, a bootstrap technique involving the construction of confidence intervals was implemented to overcome the deterministic nature of conventional DEA. In the second stage, a number of exogenous variables via double bootstrap truncated regression were incorporated into the model to help identify the factors affecting technical efficiency. Two different DEA models were designed to compare efficiencies from both financial and production perspectives. Results showed Cal Water’s high overall performance, although there are suboptimal districts from a production perspective. These districts are recommended for enterprise-level managerial strategies, as well as for constructing policies to address these inefficiencies.