Assessing the Performance of a California Water Utility Using Two-Stage Data Envelopment Analysis

Abstract

Two-stage data envelopment analysis (DEA) methodology was applied in this study to assess the performance of individual districts of a California water utility for calendar year 214 (CY214). A bootstrap technique involving the construction of confidence intervals was implemented to overcome the deterministic nature of conventional DEA, and exogenous variables, such as the number of connections and the total annual precipitation in each district, were incorporated into the model to help identify key factors affecting technical efficiency. Two different DEA models were developed to compare the financial and production performance efficiencies of the districts. Although several districts performed weakly from a production perspective, overall the results indicated the strength and high performance of the utility. The findings of this study are expected to provide a useful way to identify the strengths and weaknesses of individual districts and guide subsequent managerial improvement initiatives.