Abstract
The provision of water services in Italy has recorded a number of different phases, all sharing the difficult balance between local and national interests. In this chapter, we focus primarily on the most recent developments, with the national Regulator—ARERA, the Italian Independent Regulatory Authority for Energy, Networks, and the Environment—addressing the two main issues relating to the Italian water sector. The first issue is the huge heterogeneity in the local technical elements and management of the water services provision. The second issue is the large need for new investments in order to pursue economic efficiency, environmental goals/sustainability, and quality in the water services provision. On these grounds, an asymmetric revenue-cap regulation has been set, and recently, incentives to “contractual” and “technical” quality have been included in the reformed regulation.
The views expressed in this chapter are those of the author and do not necessarily represent those of ARERA.
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Notes
- 1.
- 2.
The sectoral Italian Regulator has changed its name since the institution in 1995: first, it was set to regulate the electricity and gas sectors and named “AEEG”; then, since December 2011, it included the regulation of the water sector and changed its name to “AEEGSI”; and recently, in January 2018, having also collected competences to regulate the waste sector, it became “ARERA”.
- 3.
In the Blue Book 2005, 2007, 2008, 2011 are presented data on the needed investments as recorded in a sample of “Piani d’Ambito” (the official plan which should be set at local level, according to the Galli Law); in the Blue Book 2014 and 2017 are presented data on realised investments according to the ARERA Decision 347/2012 and on the planned investments according to ARERA Decision 643/2013, referring to different regulatory periods.
- 4.
- 5.
Between 1891 and 1901, the largest Italian towns faced an incredible fast growth in their population: Roma increased by 54%, Milano by 43%, Torino by 32%, Palermo by 27%, and Napoli by 14% (Bardelli and Muraro 2003, p. 380).
- 6.
In particular, this Directive defines rules for (1) the collection and treatment of wastewater in all agglomeration larger 2000 population equivalent; (2) the secondary treatments of all discharges from agglomeration of larger 2000 population equivalent and more advanced treatment; and (3) the monitoring and the performance of the water’s treatment plants, the treated water re-use, and the sewage sludge disposal.
- 7.
Specifically, the “Normalised Method” defines the cost components and determines the reference tariffs to be adopted.
- 8.
In these 38 ATOs, operators were appointed to manage and operate the local water integrated service; in terms of governance, these operators were mainly mixed joint-stock companies (in 25 ATOs) and fully public joint-stock companies (in 12 ATOs); only in one case a concession contract was chosen (Conviri Report 2005).
- 9.
The coordination between the Authorities of the Optimal Territorial Areas (AATO), on the one hand, and the Conviri (i.e., the sectoral committee), on the other hand, was often very difficult, because such Authorities had the ambiguous role of an independent local Regulator, often affected by local political interests. Moreover, the regulatory failure of this model could also be referred to the large relevance in the Conviri’s action of ex ante regulation and the lack of (1) attention to ex post monitoring and (2) tools to address ex post renegotiation.
- 10.
Specifically, the referendum posed to vote Yes or No on the following two questions: (1) the abolition of the obligation to use the call for tenders as ordinary procedure to contract out the local public services included in the so-called Ronchi Decree and (2) the abolition of the 7% profit rate in the tariff of the water service. The referendum’s result was in favour to abolish both.
- 11.
The AEEG was established by the Law 481/1995 as an Italian independent sectoral authority, ruled by a board of five members appointed by the national government and confirmed by the Parliament. The legal mandate of this Regulator for the electricity and gas sectors was: (1) to balance the protection of the consumers’ interest with the guarantee of industry viability; (2) to operate in an accountable and open manner, also in order to inform the public debate and ensure public participation during the regulation process. In its operational activity, such sectoral authority had wide autonomy. With the Italian Law Decree 201/2011 and the change of AEEG in AEEGSI with the Italian Law Decree 145/2013, all these regulatory activities were also referred to the regulation of the water service. Recently, the Law 205/2017 allocated the Authority regulatory and control functions over the waste cycle, including sorted, urban, and related waste, and the Authority’s name was changed to Italian Regulatory Authority for Energy, Networks, and the Environment (Autorità di Regolazione per Energia Reti e Ambiente, ARERA).
- 12.
Note that this relevant institutional change from a national committee for the water sector (Conviri) to an independent sectoral regulatory authority (in the first period AEEG, then AEEGSI, and finally ARERA) was also in line with the 2012 OECD’s recommendations on the reform of the Italian water sector (see OECD 2012a, b).
- 13.
The Italian Law 133/2014 (so-called “Sblocca Italia”) includes mandatory rules for the setting of EGAs and for their role in the awarding of the water service in the optimal territorial area.
- 14.
Note that, as recalled by the Italian Law 133/2014, the EGAs should only have one operator providing the water service in the optimal territorial area. The aim was to exploit economies of scale and scope which are relevant to foster new investments in the sector. However, the same Law also defines a transitional period during which more than one operator could be active in the optimal territorial area. Accordingly, in some optimal territorial area, we still temporarily find a few operators providing the water service.
- 15.
Specifically, the EGA should choose the governance of the water service among three options: a joint-stock company to which the service is awarded by a competitive tender; a mixed joint-stock company in which the private firm is chosen by a competitive tender; and a fully public company, that is, the so-called in-house option.
- 16.
Note that each EGA is monitored and authorised by the Regulator in different steps of the application of the reformed regulatory design; and each EGA should transmit to the Regulator the requested and updated information on the optimal territorial area (including those collected by the water operator).
- 17.
See AEEGSI (2013) consultation document 339/2013. The evaluations of the Regulator were subsequently shared also by operators, even comparing data collected for other countries, namely, France and Germany (see http://www.festivalacqua.org/cartella-stampa-edizione-2015/).
- 18.
See Box 3.2.
- 19.
AEEGSI (2012), Decision 585/2012/R/IDR.
- 20.
- 21.
In the same period, the Regulator concluded a procedure to reimburse consumers with the difference between the allowed return on capital included in the tariff (charged by water service operators under pre-referendum regulation) and the reference fiscal and financing costs.
- 22.
AEEGSI (2013), Decision 643/2013/R/IDR.
- 23.
AEEGSI (2015). Decision 664/2015/R/IDR.
- 24.
Note that it is very difficult to have efficiency comparisons, since the operating situation may vary in relevant terms. The underlying idea was to set thresholds only for sharing purposes, distinguishing situations with higher costs from the others.
- 25.
Accordingly, the value of the Italian water sector infrastructures is going to increase: the AEEGSI Report (2017a) estimates an increase of 17% from 2016 to 2019 (i.e., from 15.7 billion Euros in 2016 to 18.4 billion Euros in 2019).
- 26.
For a study about Italian water bills, regional heterogeneity, and distributional effect, see Miniaci et al. (2008).
- 27.
AEEGSI (2015), “Regolazione della qualità contrattuale del servizio idrico integrato ovvero di ciascuno dei singoli servizi che lo compongono”, Decision 655/2015/R/IDR.
- 28.
In the AEEGSI’s report (2017a, b), a first evaluation about the “contractual quality” on data collected by the national Regulator is included.
- 29.
Such a setting will esplicitate the link among contractual and technical regulation, on one side, and accounting unbundling, on the other. In particular, a properly developed performance-based mechanism (based on the monitoring through macro-indicators will be connected with accounting unbundling, thus enabling decision-makers to evaluate the direct costs related to the improvement of an indicator.
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Bardelli, L., Valbonesi, P. (2019). Italy. In: Porcher, S., Saussier, S. (eds) Facing the Challenges of Water Governance. Palgrave Studies in Water Governance: Policy and Practice. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-98515-2_3
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