Goals of water tariffs Full cost recovery Equity Administrative feasibility and efficiency of tariff system Economic efficiency
Reform of 1994, law 36: each region is defined into optimal geographical portions (ambiti territorial ottimali – ATO). each region is defined into optimal geographical portions (ambiti territorial ottimali – ATO). ATOs are controlled by Autorità dambito territoriale ottimale. ATOs are controlled by Autorità dambito territoriale ottimale. This relationship is characterized by an information asymmetry. This relationship is characterized by an information asymmetry.
Integrate water related services in order to exploit economies of scope. To merge water utilities in order to exploit economies of scale. Overcome the monopoly in in-house supply of services of municipality Overcome the monopoly in in-house supply of services of municipality. To apply tariffs that cover both current costs and investments.To apply tariffs that cover both current costs and investments.
Household features Water demand is quiete inelastic Number of family residents Altitude Income The presence of tourists Population characteristics Weather conditions TemperatureHousehold ageHousehold age
INCOME GDP per capita POPULATION CHARACTERISTCSPOPULATION CHARACTERISTCS Population density CHARACTERISTIC OF WATERCHARACTERISTIC OF WATER Water source Water availabili -ty Water shortage UTILITY-BASED POLICIESUTILITY-BASED POLICIES Size Invest- ments Ownershi p structure
Italian water utilities have increased the tariff levied on their customers in order to realize more investments. Italian citizens usually pay higher tariffs to obtain additional and better services. The study shows a negative and strongly significant relationship between the tariff level and the average annual rainfall. In Italy, utilities that operate in drier areas (South Italy and islands) usually apply higher tarrifs to cope with the higher costs of providing water.
The study proves a significant negative relationship between the tariff level and the ownership structure. Publicly owned companies satisfy citizens water needs with lower tariffs. Private utilities apply higher tariffs to comply with the shareholders needs. Publicly utilities must respect provisions of the EUs Stability and Growth Pact, which restricts public spending. Thus the public-private partnerships are often essential. RESULTS AND COMMENTS:
The study shows the relevance of two endogenous variables (ownership structure and realized investment) and two enviromental variables (localization and average annual rainfall). Italys water reform, which began in 1994, was intended to merge water utilities in order to exploit economies of scale and to integrate water services in order to exploit economies of scope. A utility choice to pursue growth and diversification strategies does not have significant effects on the tarrif level.
Italy is one of the European countries with higher presence of water, but it has also the higher percentage of bad management. So, it needs an investment to reconstruct the water network and to restate tariffs to control water consumption.