Regulation, Organisation and Efficiency: Benchmarking of Publicly and Privately Owned Utility Companies

Abstract. The main purpose of this article is to analyze the efficiency of water supply and district heating in Denmark. Secondly, the purpose is to explain the variation in efficiency – both within each sector and across sectors. I find that the implications of very complex intransparent cost-recovery regulation regimes in the water supply and district heating sectors are widespread inefficiency in the production of both water supply and district heating. The variation in efficiency cannot be explained by ownership, as the property rights theory would state, and only partly by asset specificity as the transaction cost economics would argue. Instead the variation in efficiency is somewhat congruent with the intensity of the interests of constituents as political transaction cost theory suggests. 1