Environmental regulation

ARERA activity: environment segment

With Resolutions 82/2018/R/rif, 225/2018/R/rif and 226/2018/R/rif three proceedings were initiated for the adoption of measures, respectively:

• provision of a system of safeguards for the management of complaints and disputes of users;
• tariff regulation;
• quality of service regulation.

These initial documents were followed by resolutions containing the Integrated Text:

• Resolution 443/2019/R/rif - MTR - Integrated waste management service tariff method
• Resolution 444/2019/R/rif - TITR - Transparency in the waste management service for the regulatory period (1 April 2020 - 31 December 2023).

The Integrated Waste Management Service Tariff Method, Resolution 443/2019/R/rif - MTR establishes the limits of the tariffs and prepares four different schemes that can be adopted by local authorities and operators with respect to the objectives of improving service to the public.

The services regulated by the new tariff method are (i) street sweeping and washing; (ii) collection and transport of municipal waste; (iii) treatment and recovery of municipal waste; (iv) treatment and disposal of municipal waste; and (v) management of tariffs and user relations.

The formulas indicated in the RDF confirm that the total tariff revenue of reference (TARI 2020-2021) is the sum of revenue to cover fixed and variable costs recognised by the Authority in continuity with Italian Presidential Decree no. 158/99 and determined according to criteria of efficiency, transparency and uniformity, reclassifying the charges attributable to the individual activities of the integrated cycle.

For the purpose of assessing the costs recognised to the operator, the main new development lies in the fact that the Method refers to costs incurred that are reliable and certain, as resulting from obligatory accounting sources, compared to the methodology adopted in the sector up to that moment. This change is significant since the tariff method pursuant to Italian Presidential Decree no. 158/99 envisaged the recognition of costs on the basis of their inclusion in the economic and financial plan, and therefore with reference to planned and/or estimated costs.

The criteria established by the Authority will be applied in the first tariff period indicated as the years 2020-2021, both with regard to the monitoring and the valuation of efficient costs for 2018 and 2019 (with the possible quantification of any adjustments).

However, the regulation the sector is subject to is gradual and asymmetrical in that it takes account of the different territorial starting conditions. In fact, as ARERA itself states, this is a first implementation phase characterised by strong lack of uniformity in governance at a local level, and for which the Authority envisages that it will be the local government – or other territorially competent entities like the Region or other bodies designated by the Region, even at a supra-municipal or provincial level – that carry out the validation that the regulator deems necessary in order to ensure complete, consistent and adequate information starting from the data submitted by the operators.

This first implementation phase will be followed by a second phase in which the Authority will put in place (as clearly indicated in Resolution 443/2019/R/rif) tariff regulation criteria for access to treatment plants, indicating that specific tariff parameters will be defined for each type of plant where the treatment (recovery and disposal) of waste can be distinguished. The adoption of the first consultation document on access charges for municipal waste treatment plants will be prepared as early as the first half of 2020. In fact, at the moment the topic of plant engineering is only dealt with in terms of the ARERA 2019-2021 Strategic Plan, in which under point "OS. 13 Promotion of adequate infrastructure for the management of the waste cycle" ARERA specifies the

Main lines of action:

• Adoption of (asymmetric) tariff regulation for the different treatment and disposal services and concurrent definition of criteria for access to the plants; development of mechanisms to promote treatment investments, also by assessing ways of allocating capacity over several years and promoting the most relevant ones in terms of benefits for the system;
• Introduction – taking into account the investment needs – of mechanisms to promote social acceptance of the investment needed in strategic treatment plants for the rebalancing of physical waste flows and the closing of the cycle.

One of the regulatory elements included in the tariff method scheme for the integrated waste system is the waste sector WACC, equal to 6.3% for the period 2020-2021. Although the Authority recognises strong differences in the financial and ownership structure, it does not introduce significant new elements or differentiation with respect to traditional regulated sectors, referring to the electricity and gas integrated text, TIWACC – resolution 583/2015/R/com and following. The current design recognises the same returns for investments in collection and transport activities (asset light with a prevalence of personnel-related operating costs) and for investments in treatment (asset intensive).