<p>Water utilities provide water and sanitation services in monopolistic conditions. Hence, assessing their performance through benchmarking is crucial for proper regulation. This research addresses the limitations of self-evaluation Data Envelopment Analysis (DEA) models commonly used for benchmarking water utilities’ efficiency. Given that these models often lead to overestimated efficiency scores, our study introduces a cross-efficiency analysis framework integrating both self and peer-evaluation perspectives. This innovative approach, applied to a representative sample of Chilean water utilities, uniquely considers unplanned water supply interruptions and sewerage blockages as undesirable outputs, emphasizing service continuity. Average techno-economic efficiency scores based on self-evaluation, and peer-evaluation were 0.681 and 0.388, respectively. Hence, significant techno-economic efficiency overestimations in self-evaluation scores are evident, with implications for regulatory challenges and potential service quality compromises. The data also highlights a considerable opportunity for improvement in water and sanitation continuity in Chilean water utilities. The findings not only shine a spotlight on the inherent biases of prevalent benchmarking techniques but also highlight a substantial avenue for bolstering water and sanitation service continuity within water utilities.</p>