Water Regulation

The following paragraphs illustrate the main developments that took place during 2019, both with regard to the regulatory framework of reference and, more in detail, with regard to sector regulations.

Sector regulations  

During the period of reference the main focus of regulatory developments was the issue of water infrastructure, with the enactment of various measures aimed at promoting and supporting investments in order to overcome the sector's infrastructure gap.

In February 2019, the Italian Prime Ministerial Decree of 28 November 2018 "Allocation of the resources of the Fund for Infrastructure Investment and Development of the Country, referred to in article 1, paragraph 1072, of Italian Law no. 205 of 27 December 2017" was published in the Official Gazette (General Series no. 28 of 2/2/2019). The measure provides for the distribution of the Fund for financing the country's development of investments and infrastructure among the state's central administrations, as specified in the list attached to it. With regard to the integrated water service, the resources envisaged are reported in letter "c) infrastructure, including the water network and sewerage and purification works", with the relevant Central Administrations, the Ministry of Agricultural Policies and the Ministry of Infrastructure and Transport; the overall total for the period 2018-2033 amounts to over € 790 million. For the purposes of assessing the progress of the programmes financed and the main critical points encountered in the implementation of the interventions, by September 15 of each year each Ministry must send a special report to the Presidency of the Council of Ministers, the Ministry of Economy and Finance and the relevant parliamentary committees.

In the following month, on the other hand, the adoption of the Extraordinary Plan for the implementation of projects in the water sector was published in Official Gazette no. 67 of 20 March 2019, by interministerial decree no. 526 of 6 December 2018 of the Ministry of Infrastructure and Transport in agreement with the Ministry of Agricultural Policies, referring to the MIT homepage for the text of the measure. The Extraordinary Plan adopted pending the definition of the National Plan for projects in the water sector (Italian Law 205/2017 art. 1, paragraph 23) includes 30 projects in the final and executive planning stage (for a total value of about € 250 million) concerning multi-objective reservoirs and water saving in agricultural and civil uses.

With regard to the National Plan for projects in the water sector, as per art. 1, paragraph 516 of Italian Law no. 205/2017, the decree of the Italian Prime Minister of 17 April 2019 "Adoption of the first excerpt of the National Plan for projects in the water sector - reservoir section" was published in Official Gazette no. 148 of 26 June 2019. The National Plan, which was to be adopted within 120 days of the date of entry into force of Italian Law 205/2017, may also be approved by means of one or more decrees of the President of the Council of Ministers and is to be updated, as per regulation, every two years, taking into account the state of progress of the projects carried out, existing plans and new necessary and urgent projects. ARERA had issued a favourable opinion on the draft measure with comments (Opinion 160/2019). There are a total of 57 projects included in the adopted excerpt, divided into two groups based on the type of public resources allocated: 30 works for an overall total of € 200 million financed with resources referred to in article 1, paragraph 1072 of Italian Law 205/2017, while the remaining 27 works for an overall total of € 60 million draw on resources referred to in article 1, paragraph 155 of Italian Law 145/2018. These include the design and construction of important water interconnections, the completion or adaptation of dams and major works to make aqueducts safe, with those carrying out the projects including both operators regulated by ARERA and entities of a different nature (Regions, Basin Authorities, Land Reclamation Consortia). In particular, it is important to note the inclusion in the projects listed in Annex 1 of the work "Safety measures for the Peschiera - Marcio aqueduct systems. 1st lot of water collection works", for an amount of € 5 million, whose project status is specified as preliminary. The Italian Prime Ministerial Decree also sets out the procedures for the implementation of the projects through special agreements between the parties involved and the General Management for Dams and Water and Electricity Infrastructure pertaining to the MIT; monitoring will be carried out through the public works monitoring system of the Public Administration Database, pursuant to Italian Legislative Decree 229/2011. Finally, it is specified that for technical-administrative support, the design and execution of the projects and for related monitoring the party carrying out the project may make use of public bodies and in-house State companies with specific technical expertise pursuant to article 1, paragraphs 523 and 523-bis of Italian Law no. 205/2017. With regard to the reservoirs section, subsequent Italian Ministerial Decree 345/2019 of the MIT (notice of publication in the Official Gazette 247 of 21 October 2019) adopted the indicators for the assessment of projects and the criteria for the allocation of resources between District Basin Authorities; these allocation criteria are subject to verification and revision when the national plan is approved and may also be subject to revision when the plan is updated.

With regard to the aqueducts section of the National Plan, the Prime Minister's Decree "Adoption of the first excerpt of the National Plan for projects in the water sector - aqueducts section" was published in Official Gazette no. 226 of 26 September 2019, which confirms the 26 projects identified by ARERA in its Report no. 252/2019/I/IDR (for a total value of € 80 million for the two-year period 2019-2020) and gives the Authority the task of establishing its own measures to regulate the conditions, terms and methods of disbursement of resources for the implementation of the projects. With resolution 425/19 of 25 October 2019, ARERA subsequently approved these regulations. The works will be financed with the appropriation envisaged in art. 1, paragraph 155, of Italian Law no. 145/2018 (€ 100 million per year for the years from 2019 to 2028, of which € 60 million per year for the "reservoirs" section), and their monitoring will be carried out, pursuant to art. 1, paragraph 524, of Italian Law no. 205/2017, also through the public works monitoring system of the Public Administration Database.

On 13 November 2019, the Cassa per i Servizi Energetici e Ambientali (CSEA) published Circular no. 37/2019/IDR concerning the requirements for the payment of the first instalment on account for the implementation of the first part, and with resolution no. 512/2019 of 3 December 2019 ARERA authorised CSEA to pay the advance payment for the projects found to be eligible based on the outcome of assessments of the needed requirements.

It should also be noted that the expected Prime Minister's Decree on the Water Works Guarantee Fund, a measure envisaged by the Environmental Annex (Italian Law 221/2015) to the Italian 2016 Stability Law, has finally been published. Prime Minister Decree 30/05/2019 (published in Official Gazette no. 168 of 19 July 2019) identifies the priority projects and the criteria for the use of the Guarantee Fund, which will support the financeability of the investments in compliance with the management methods defined by ARERA through the granting of guarantees directly to the operators of the integrated water service and concessionary operators of large or small dams or, alternatively, through the granting of direct repayment guarantees for the debt owed to lenders or investors by operators. The guarantees will be allocated – with priority for drinking water use – to the implementation of the projects envisaged in the National Water Plan, projects not yet financed and started that qualify as necessary for the adaptation of water infrastructure to technical quality parameters, and projects concerning small dams not included in the National Plan. The Fund must be financed by the specific UI4 tariff component introduced by resolution ARERA 8/2020 "Definition of the management methods of the water works guarantee fund" as of 1 January 2020 and equal to 0.4 cent/€ per cubic metre, which must be specified separately in the bill. In December, the Decree of the Ministry of the Economy of 19 November 2019 "Criteria, conditions and methods of the State guarantee assisting the projects of the Guarantee Fund pursuant to article 58, paragraph 1, of Italian Law no. 221 of 28 December 2015" (OG no. 293 of 14 December 2019) was published. The measure, envisaged under article 6 of Prime Ministerial Decree 30/05/2019, governs the procedures for requesting the enforcement and payment of the State's guarantee of last resort, which operates in the event of default by the Guarantee Fund for water works up to the amount owed by the Fund for the guarantee granted. The methods for monitoring potential impacts on the State's guarantee of last resort are also defined. In particular, the CSEA will report annually to the MEF on the economic and financial equilibrium of the Fund and its sustainability. If economic and financial imbalances emerge that could compromise the Fund's sustainability, the MEF may propose to the CSEA and the MIT the adoption of measures aimed at limiting the potential impacts on the State guarantee of last resort and on public finance. If these measures are not appropriate, the operation of the State guarantee may be suspended until the imbalances are overcome.

A further measure related to the issue of infrastructure and specifically with regard to the IWS of dams is the DM-MIT 430/2019, in force since 21 November 2019, relating to the creation of the national computer archive of public works (AINOP) as established by Italian Law 130/2018 (so-called Genoa Decree). The ministerial decree defines the timing and phases with which the sharing of data and information is to begin, creating a census of Public Works with the aim of ensuring constant monitoring of the state and the degree of efficiency, as well as facilitating the process of planning and financing upgrading and maintenance projects. Moreover, a permanent technical roundtable was established at MIT to coordinate the process and the way in which the AINOP is updated. Its members must be appointed within 60 days of the decree coming into force. The organisation and operation of the roundtable will be defined within 30 days of its establishment by a specific provision.

Finally, again on the subject of infrastructure, it should be noted that the Ministry of Infrastructure and Transport announced through a bulletin that it established a technical-political roundtable with the Regions, ANCI and UPI, coordinated by the Honourable Daga, which met for the first time in February. The roundtable aims to make the best use of funds to mitigate droughts and to create greater synergy between the projects involving large reservoirs and related adduction and derivation works and those relating to aqueducts. In particular, its purpose is to carry out a survey of the resources available for interventions on reservoirs and aqueducts and discuss with local and regional authorities the criteria for the allocation of funds and the monitoring of the guarantee fund for water works. 

With specific regard to the sewer-purification sector and in particular the problems related to compliance with EU regulations, with Italian Law no. 55 of 14 June 2019, published in the Official Gazette of the General Series no. 140 of 17 June 2019, the so-called Re-Open the Building Sites Decree was converted (Decree Law no. 32 of 18 April 2019 "Urgent provisions for the relaunch of the public contracts sector, for the acceleration of infrastructural projects, urban regeneration and reconstruction following seismic events"). In addition to establishing the partial suspension of the Procurement Code until 31 December 2020 and the postponement of the obligation to tender for concessions, the measure introduced new rules on End of Waste, and, with specific reference to the integrated water service, envisaged the extension of the powers of the single extraordinary commissioner for purification, established by article 2, paragraph 1, of Decree Law no. 243/2016, which are extended to all infringement procedures related to the violation of the relevant Community provisions and in particular to procedures no. 2014/2059 and 2017/2181. The measure also ordered the termination – within 60 days of the date of entry into force of the converted Decree Law – of the extraordinary commissioners appointed in accordance with article 7, paragraph 7 of Italian Decree Law no. 133/2014 and the taking over by the Single Commissioner in all legal relations; a decree of the Italian President of the Council of Ministers – on the proposal of the MATTM – is also expected to be issued, which will identify the projects for which the Single Commissioner will assume the task of implementing entity, as well as the financial resources necessary to ensure compliance with the judgements of the European Union Court of Justice in cases C-565/10 and C-85/13. Under the same Prime Ministerial Decree, the powers of the Single Commissioner may also be extended to further agglomerations subject to infringement proceedings. It should also be noted that Italian Law no. 117/2019 "Delegation to the Government for the transposition of European directives and the implementation of other acts of the European Union - European Delegation Law 2018" (published in Official Gazette no. 245 of 18 October 2019), in implementation of EU Directive 2018/850, calls for the revision of the criteria for the acceptance of waste in landfills and the adoption of new organic regulations on the use of sludge, also amending the provisions of Italian Legislative Decree no. 9/1992 in order to ensure the achievement of the landfill objectives set by European legislation. Among the aims, the adaptation of the regulations to new technical-scientific knowledge on pollutants, the promotion of innovation, with a focus on the recovery of nutrients and in particular phosphorus, the guarantee of the management and use of sludge in conditions safe for man and the environment. Specific regional sewerage sludge management plans will be drawn up as part of the regional special waste management plans, aimed at closing the sludge cycle in accordance with the principles of proximity and self-sufficiency.

With regard to the protection of users and in particular fragile users, a number of significant provisions were issued by the so-called fiscal decree and the 2020 Budget Law.

In December 2019, with Italian Law no. 157/2019 (so called Fiscal Decree) "Urgent provisions on tax matters and for non-deferrable needs", published in Official Gazette no. 301 of 24 December 2019, important new provisions were issued in relation to the social water bonus, extending it to the beneficiaries of universal basic income and pensions and the application also to charges relating to sewerage and purification services. The ARERA measure regulating the matter was issued at the beginning of 2020. Moreover, from 1 January 2021 the automatic recognition of the social water bonus is envisaged for all persons with ISEE within the established limits.

Finally, the 2020 Budget Law (Italian Law 160/2019 in Ordinary Supplement no. 45/L to Official Gazette of 30 December 2019) contains some significant measures for the IWS, in paragraphs 291, 292, 293 and 295 of article 1. In fact, a notice (to be sent by registered letter with return receipt) of not less than 40 days is envisaged for communications contesting any non-payment and communicating the suspension of service in the event of failure to pay; a penalty is also introduced equal to 10% of the amount contested and not due and in any case not less than € 100 in the case of debit invoices for which the relevant authority has ascertained or duly documented the illegality of the operator's conduct. Finally, paragraph 5.1 of Italian Law no. 207/2017 was repealed, which envisaged the non-applicability of the two-year limitation period in the event of failure or erroneous collection of consumption data resulting from ascertained liability of the user. Assessments are currently under way regarding the impact of the introduction of these measures, as well as the interaction with the regulatory framework currently in force for the water sector. Developments are also expected related to the conversion of Italian Legislative Decree 162/2019 "Urgent provisions regarding the extension of legislative deadlines, the organisation of public administrations and technological innovation" (so-called 1000 Postponements), during the debate of which several amendments were presented on the subject.

On the other hand, with regard to the legislation in progress, the most important measure is the bill "Provisions on public and participatory management of the integrated water cycle" (Daga bill - AC 52), discussed together with the bill "Principles for the protection, governance and public management of water" (Braga bill - AC 773). The text is currently being examined by the parliament's Environment Committee. A technical report has been expected by the government since March 2019. During the examination by the committee, hearings were held with the various stakeholders, including several companies in the sector (including Acea and Utilitalia, the federation that brings together companies operating in the public water, environment, electricity and gas services) as well as ARERA, which had an opportunity to express their views on the matter. In particular, at the hearing of 9 January 2019, ARERA presented a brief (1/2019/I/IDR of 8 January 2019) in which it shared, first of all, the explicit recognition of the right to quality drinking water. With regard to the financing of investments, it had a positive opinion of the use of public resources for the financing of strategic infrastructure for the territory, in cases where the tariff is objectively inadequate to guarantee coverage. With regard to the measure, it noted that it was important to prepare an effective strategy for widespread improvement of the measure that takes into account the other needs in the sector. ARERA also pointed out the need for a further strengthening of the protections for the end user and placed particular emphasis on the following issues: users in a documented state of economic distress, reform of fees to end users, introduction of measures to strengthen accountability. In terms of governance, the Authority considered it a top priority that the regulatory functions be neutral and independent with respect to the conflicting interests of the sector, to gradually give extremely different geographical realities a common denominator.