Water: new tariff method 2016/2019 approved for infrastructure development and quality services

Milan, December 29, 2015

Italian version

The 2016/2019 water tariff method enters into force on 1 January 2016, consisting in a new framework of rules approved by the Authority on water tariffs being increasingly likely to encourage the necessary investments in the sector, at the same time ensuring the sustainability of the charges applied to the user, by promoting the enhancement of the service quality, the rationalization of management and efficiently recognizing costs only for the works actually carried out.
With resolution 664/2015/R/idr, achieved at the end of a broad consultation with all the stakeholders, the Authority, with regard to the second regulatory period of the integrated water system (SII) during four years, intends to continue the started development path of the sector through a stable and certain regulation, raising the service standards and the social and environmental sustainability of supply while respecting cost-effectiveness, efficiency and economic and financial balance in management[1]. To ensure continuity, the 'Water Tariff Method 2' is based on two main  principles of the previous method valid for the 2014/2015, with particular attention  to the selectivity and empowerment, to be implemented through an asymmetric regulation able to adapt to the different needs of a sector which is highly differentiated at local level and in the governance.
The tariff regulation applicable in the second regulatory period is therefore attributable to an array of regulatory frameworks (compared to the previous tariff method, there is a wider range of different types of tariff schemes, six as compared to previous four) within which each jurisdiction subject will identify the most effective solution to suit their needs.

In detail, the choice can be made on the basis of several factors: as a result of the need for  investment in relation to the value of existing infrastructure, the presence of any changes in the objectives or in the activities of the operator (mainly tied to aggregation processes or to significant improvements in the quality of the provided services), the magnitude of the operating costs per inhabitant served by each management compared to the sector average. A virtual regulatory scheme is also provided in cases in which the relevant local government authority, in the aggregation phase of management, does not have an information set for more than half of the population served by the new relevant operator. This scheme allows you to adopt specific assumptions in the evaluation of the initial cost components. There are then provided specific regulation conditions,  on an  individual basis, which may be declined only in cases of receiving requests for access to the equalization scheme to maintain economic-financial balance of operations. The Authority has also provided a biennial update of the balance components and of the RAB, as well as the possibility of an infra period revision of the tariff arrangement, upon reasoned request, if extraordinary and exceptional circumstances occur such as to undermine the economic financial balance.
For the second regulatory period it is confirmed the presence of the tariff multiplier to be applied to the fixed and variable quotas of the tariff structure adopted by each management in the base year 2015, as well as the provision of a limit to the annual growth of the tariff multiplier. It is also confirmed he forecast of a 10 % reduction of tariffs being applied in cases of failure to send the acts, the data and information necessary to determine the tariffs, while the case studies, upon the occurrence of which there is the exclusion from the tariff update, are expanded.[2].
The new MTI-2 tariff method also provides incentive mechanisms for the improvement of the contractual and technical quality of the service, by introducing a mechanism of awards/penalties, supplied by a specific tariff component, mandatory for all operators, to be allocated to a specific fund for the quality that, during the first activation, promotes, rewarding the best practices, the growth of the contractual quality levels with respect to the parameters defined by the resolution on the contractual quality (655/2015/R/idr).

The new rules of contractual quality

Particular attention was also dedicated to the regulation of the contractual quality in the water sector. The Authority, starting from the acknowledgement of the main critical points identified, has introduced rules on different aspects that are unambiguous and valid for the entire country, overcoming the differences between the qualitative standards currently provided in Service Charters adopted by different operators. In particular, with the resolution 655/2015/R/idr, which has just been approved, the Authority has proposed rules to strengthen the protection of  users with the introduction of minimal contractual quality standards, which are homogeneous throughout the national territory, with the related automatic compensation equal to 30 euros that the operator should pay to the user in the event of failure to comply with the  standards. The main news introduced include the minimum invoicing obligations which provide, in the frame of the user protection, for the operator to issue a six-monthly bill for the average annual consumption up to 100 m3, every four months for those between 101 and 1,000 m3, quarterly for those between 1.001 m3 and 3,000, bimonthly over 3,000 m3; bills exceeding 100% of the average annual consumption may be paid in instalments and the relative request can be carried out also in the ten days following the expiry. This will also include: maximum times to perform services related to the activation of the contract (eg. 10 days for a connection, five days to activate the supply or to change ownership); standards for handling complaints, responses to information and telephone services to users. The quality standards defined by the Authority must be guaranteed starting from 1 July 2016, becoming fully effective from 1 January 2017. Most important for a uniform regulation of the standard agreement, being also just approved by Resolution 656/2015/R/idr, to regulate relations between the awarding bodies and operators, is of primary importance for the completion of the regulation.
All the resolutions and the related fact sheets are available on the website www.autorita.energia.it

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[1] The regulation and control of water services have been attributed to the Authority for Energy by DL 201/11 and by the DPCM of 20 July 2012

[2] In addition to the failure to adopt the Charter of Services, for billing households with a minimum contracted consumption, for the non-delivery of the installations to the relevant operator, the possession of a title to run the service declared invalid or, on which, a jurisdictional dispute is pending, measures will include the invariance of the charges applied to users even in the following cases: for operators other than the sector operators, ceased ex lege, which run the service in the absence of a legal title in conformity with the pro tempore discipline in force; for the manipulations that are not equipped with the implementation tools necessary to meet the obligations of quality verification of the water intended for human consumption; for managements that do not provide the payment to the cash desk for energy and environmental services of specifically imposed tariff components, including the UI1 component.