WATER SERVICES: REPORT ON LAW IN LOMBARDY
PRESS RELEASE
PRESS RELEASE
WATER SERVICES: ANTITRUST AUTHORITY ADVISES GOVERNMENT LOMBARDY'S REGIONAL LAW DUPLICATES MONOPOLY AND PENALIZES CONSUMERS
Report sent to Prime Minister's Office, to the Ministers of the Economy and Finance, to the Ministers of Economic Development, Environment and Regional Affairs, to the Standing National-Regional Conference and to Governor Formigoni. Restrictive rules on bidding companies favour Lombard businesses and so are deemed anti-competitive.
Lombardy's Regional Law 23/2006 on water services stipulates the separation of management of the distribution infrastructure from the provision of the service, thus duplicating the monopolies and penalizing consumers.
This is the message in a report sent by the Italian Competition Authority to the Prime Minister's Office, to the Ministers of the Economy and Finance, to the Ministers of Economic Development, Environment and Regional Affairs, to the Standing National-Regional Conference and to Governor Formigoni.
The Authority recalls that national regulations, in order to overcome the fragmentary nature of the previous arrangements and generate economies of scope and scale, merged services for water distribution, sewerage and waste water management and introduced the system of Ambiti Territoriali Ottimali (ATO or Optimised Territorial Zones). Regione Lombardia's law, instead, stipulates the splitting of water services into management of the network infrastructure and provision of the service, with an autonomous charging method for regulating and determining tariffs for the integrated water service.
The Authority, on the other hand, reiterates the beneficial effects for competition deriving from the existence of a homogeneous system of common rules for the integrated water service that allow the offerings of various suppliers to be compared, especially in view of the tendering process that must take place from 2010 for the assigning of the service. In this context, Lombardy's model not only does not permit comparisons but since it means that not only the infrastructure but also the provision of water is managed on an exclusive basis, it would seem to be a recipe for the duplication of monopoly positions. Thus there is no way that the consumer can benefit from any efficiency gains due to the vertical integration of the service.
The Authority also contests the qualification and assignment criteria for tenders for local public services contained in the same law; amongst these is the requirement for a regional excellence certificate issued by the Regioneitself “after having consulted the Services Guarantor”. In the Authority's view, this provision risks unjustifiably limiting competition amongst all potential bidders for the services by reserving a significant competitive advantage for businesses that have already operated in Lombardy.
Rome, 26 March 2009