Water Regulation

Resolution 1/2022 – DSID of 18 March 2022: definition of the procedures for the collection of technical and tariff data as well as the standard forms for the report accompanying the works programme and the tariff provision update for the two-year period 2022-2023, pursuant to resolutions 917/2017/R/idr, 580/2019/R/idr and 639/2021/R/idr

With determination 1/2022 – DSID, the expiration of 30 April 2022 was re-established for AGBs to send the Authority the tariff data for the 2020-2023 period, also defining the associated forms (or the technical and tariff data collection file - RDT2022 - which also includes the project programme, strategic works plan and economic/financial plan, and the basic schedules for the accompanying reports respectively for the tariff data and quality objectives for 2022-2023, with the update of the project programme/strategic works plan).

Resolution 229/2022/R/idr of 24 May 2022: conclusion of the proceeding to review a number of criteria for the biennial update of the tariff arrangements for the integrated water service, in compliance with the orders of the Regional administrative court (TAR) for Lombardy, section one, nos. 373/2022, 383/2022, 384/2022, 385/2022 and 386/20

Following the aforesaid proceeding, launched with resolution 139/2022/R/idr of 30 March 2022 and continued with consultation 2022 184/2022/R/idr of 26 April 2022, the related urgent measures are introduced, intended to ensure the certainty of the system and the various interested parties. Specifically, and without prejudice to the provisions for the 2022-2023 tariff update set out by resolution 639/2021/R/idr, for the year 2022 provisions were made for the possibility to formulate a reasoned request for the activation of forms of financial advances to meet part of the expenses incurred for the purchase of electricity. The claim, formulated by the AGB by the deadline of 30 June 2022 at the request of the relevant operator faced with substantiated financial problems, is subject to a series of conditions, including having made recourse to the possibility of exploiting, for the year 2022, the additional forecast component set out by paragraph 20.3 of the MTI-3 and the assumption of the commitment to request from its suppliers instalment arrangements of the amounts due for the energy consumption relating to the months of May and June 2022, according to the provisions of Law Decree 21/2022. The value of the advance cannot exceed 35% of the cost component recognised for the electricity quantified for the purposes of updating the tariff arrangement for 2022. After verification of the conditions and correctness of the documentation submitted, the CSEA will pay the amounts by 31 July 2022, which the beneficiary operator must pay back by 31 December 2024. Furthermore, in the event of an effective cost for the purchase of electricity referring to 2021 that is higher than the one recognised in application of the rules set out by article 20 and paragraph 27.1 of the MTI-3, the EGA is given the power, at the request of the operator and for the purposes of maintaining the economic and financial balance of the management, to submitted a reasoned request for the recognition of additional costs in the context of the adjustment component relating to systemic changes and exceptional events (paragraph 27.1, letter f), MTI-3) referring to 2023; the request must be accompanied by an action plan to limit the cost of energy. With the subsequent Resolution 495/2022/R/idr of 13 October 2022 a second window was established (1 November - 30 November 2022) for presentation of requests to CSEA. Annually, starting in 2023, the Authority will publish the annual cost of the electricity supply sector, on the basis of specific investigations, in order to strengthen monitoring of the system.

Resolution 459/2022/R/idr of 27 September 2022: launch of proceeding for ex officio determination of the integrated water service tariffs, pursuant to authority resolution 580/2019/R/idr as updated by resolution 639/2021/R/idr, as well as the acquisition of additional fact-finding relative to cases of exclusion from the tariff update

This launches a proceeding to ex officio determine the tariff multiplier, for the years 2022 and 2023, for management involving the cases specified from under paragraph 5.8 of resolution 580/2019/R/idr (incomplete or lack of transmission to ARERA of information and data associated with tariff determination and obligatory accounting sources).

During the reference period for this report, the Authority also resolved to appeal certain Regional Administrative Court rulings that had ordered partial annulment of Authority resolution 643/2013/R/idr.

Resolution 112/2022/C/idr of 22 March 2022: appeal of rulings no. 460 and no. 461 of 24 February 2022 of the Regional administrative court of Lombardy, Milan, second section, on partial annulment of authority resolution 643/2013/R/idr

With this measure, ARERA resolves to file an appeal against the unfavourable terms of the aforesaid rulings of the Regional Administrative Court of Lombardy, which ordered the partial annulment of resolution 643/2013/R/idr (Approval of the water tariff method and completion provisions – MTI). The points in question regard the definition of the adjustment components (use of the inflation rate rather than the financial charges effectively incurred), the methods of calculating the costs for electricity and the lack of consideration of the income from “Other water activities” in the formation of the invested capital.

Resolution 308/2022/C/idr of 12 July 2022: appeal of Lombardy, Milan Regional Administrative Court, second section rulings no. 892, 893, 904 and 933 of 2022 partially annulling Authority resolution 643/2013/R/idr

The resolution calls for submitting an appeal against the unfavourable portions of the rulings indicated in the title, which called for the partial annulment of resolution 643/2013/R/idr, approving the water tariff method (MTI), holding that these rulings can be rejected as they are based on an erroneous interpretation of the relevant facts and laws. The rulings were respectively issued with reference to appeals by Acea Ato2 SpA, Umbria Acque SpA, GORI and Acquedotto del Fiora SpA in relation to various elements of the MTI. The Milan Regional Administrative Court partially granted the appeals, limiting itself to acknowledging the claims relative to article 29 of Resolution 643/2013/R/idr in relation to definition of the adjustment component of the GRC.

Resolution 183/2022/R/idr of 26 April 2022: application of the incentive mechanism for regulation of the technical quality of the integrated water service (RQTI) for 2018-2019. Final results

The procedure, based on what is set out in the Methodological Note attached to Resolution 98/2022/R/idr of 8 March 2022, provides for the first-time application of the incentive mechanism for regulation of the technical quality of the integrated water system (RQTI) for the years 2018-2019. As announced by the press release published by the Authority on its website on 29 April 2022, the analysis of the data made it possible to codify the results achieved by 203 operators, which serve a total of 84% of the national population. The total amount of the bonuses for all stages was approximately 63.2 million euros for the year 2018 and 72.2 million euros for the year 2019, while the penalties (which, as envisaged by resolution 917/2017/R/idr, must be set aside and used for the achievement of the established objectives) amounted to approximately 3.9 million and 5.8 million respectively for 2018 and 2019. The 66 most important positions (the first 3 classified – for each indicator and as a whole – in 2018 and 2019, for the advanced and excellence assessment levels) were held by a total of 26 operators.

Note, in particular, the result achieved by Acea Ato2, which achieved the biggest improvement in terms of the M1-Water losses macro-indicator, achieving first place in Stage IV of the assessment (advanced assessment level for improvement objectives) for both years and the achievement of all the objectives envisaged for the remaining macro-indicators.

The total of the bonuses was the absolute highest overall, reaching approximately € 23.6 million for the two-year period in question.

The results were illustrated as part of a conference held in Milan on 15 June 2022, organised by the Water Systems Department of ARERA. The data were made available in the annexes to the aforementioned resolution 183/2022/R/idr, as well as through interactive journalism info data tools (interactive maps, illustrations and integrated text) provided on the Authority’s website, which make it possible to visualise the technical quality performance of the individual Italian water operators.

As regards the data relating to 2021, ARERA opened with communication dated 1 February 2022 the data collection envisaged pursuant to article 77 of the regulation of the contractual quality of the integrated water service (RQSII – Annex A to resolution 655/2015/R/idr). The data requested also include those relating to the provision of the automatic indemnities envisaged as part of the regulation on arrears (REMSI – Annex A to resolution 311/2019/R/idr). The deadline for integrated water service operators to submit the data in the digital collection system was 15 March 2022, while for the subsequent verification by the area governing bodies (AGBs), the deadline was 26 April 2022, once operators had sent the final data.

On the other hand, in relation to the technical quality, with communication published on 17 March 2022, the Authority announced the upcoming opening of the “collection of technical quality data (RQTI) – monitoring” (RQTI 2022), as part of the collection “Tariffs and Technical Quality of Water Services”, in the context of the proceedings initiated with resolution 107/2022/R/idr and aimed at carrying out the quantitative assessments envisaged by the technical quality incentive mechanism set out by resolution 917/2017/R/idr. The mandatory deadline for sending the data was set for 30 April 2022. The effective opening of the collection was then acknowledged with the communication published on 5 April 2022.

Resolution 231/2022/R/com of 31 May 2022: updating of the methods for checking commercial quality data for the distribution, measurement and sale of electricity and natural gas and for the contractual quality of the integrated water service

The measure concludes the procedure to update the verifications of the commercial and contractual quality data (opened with Resolution 571/2021/R/com and DCO consultation 572/2021/R/com), ordering the application of the “statistical method” also in execution of the “additional control” and even extending it to the TIQV.

Resolution 107/2022/R/idr of 5 March 2022 launch of the procedure for the quantitative assessments, for years 2020-2021, envisaged by the incentive mechanism for the technical quality of the integrated water service referred to in Title 7 of Annex A to Authority Resolution 917/2017/R/idr (RQTI)”.

Similar to that established for contractual quality with resolution 69/2022/R/idr, a procedure was launched for quantitative assessments, for years 2020-2021, envisaged by the incentive mechanism for the technical quality of the integrated water service (Title VII of Annex A to resolution 917/2017/R/idr - RQTI). Similar to that already established in the context of resolution 69/2022/R/idr, the process will involved two phases:

• identification of the management set for which there is a complete set of information for the definition of the Stage III, IV and V rankings, as well as attribution of bonuses and penalties in all Stages. In the context of this group of operators, cases for exclusion from the incentive mechanism will be defined (non-validation of data sent by the EGA and transmission of 2019 data after 31 December 2020), as well as exclusion from bonuses (non-transmission of tariff establishment documents, non-payment of the UI2 equalisation component to the CSEA, information that is incomplete, inconsistent or lacking in the documents sent, specifying that, if the issues affect only the base year, exclusion from the bonuses refers solely to assessment stages I, II and IV);
• assignment of penalties associated with stages I, II, III and IV for all management entities that did not send technical quality data for 2020-2021 by the due date established (subsequently identified as 30 April 2022 in a Communication dated 17 March 2022), also assessing them pursuant to Article 2, paragraph 20, letter c) of Law 481/95. Entities for which the convergence regulatory scheme has been adopted are excluded from application of penalties. During this phase, ARERA reserves the right, in cases of long-term inertia in complying with the requirements established in the regulation, to propose the suspension or termination of what was entrusted to an entity, if this does not compromise users’ ability to use the service, pursuant to Article 3, paragraph 1, letter a) of the Prime Ministerial Decree of 20 July 2012.

The deadline for completion of the proceeding is 31 March 2023. Determination of the revenue portion of the UI2 component destined for bonuses is postponed for a subsequent provision, associated with the technical quality incentive mechanism for 2020 and 2021, also taking into account application of the similar contractual quality incentive mechanism.

Resolution 734/2022/R/idr of 27 December 2022: approval of the methodological note following the preliminary investigation results in the context of the proceeding for quantitative assessment called for by the integrated water service contractual quality incentive mechanism (RQSII) launched with Authority resolution 69/2022/R/idr

The proceeding approved the methodological note following the preliminary investigation results, involving:

• verification that the presuppositions exist for application of penalties applied in cases in which the data necessary for assessing contractual quality objectives is not sent;
• assessment of eligibility for the incentive mechanism in terms of compliance with the data transmission requirements to identify the starting levels, as well as the presence of any specific derogation requests;
• assessment of eligibility for bonuses with reference to the presence of a proposed MTI-3 regulatory scheme, validation activities for the AGBs and compliance equalisation component payment requirements;
• checks with regards to the consistency and congruence of the data supplied.

In particular, in correspondence to the types of issues identified, the consequent effects are indicated in terms of application of the incentive mechanism. The regulatory result may involve one or more macro-indicators, as well as one or more of the assessment stages; on the other hand, the penalties established for cases of non-transmission of the data required for assessment and for serious incompleteness of documentation, are applied with reference to all stages in the context of which, for each macro-indicator, the management entity involved is assessed. The checks carried out led to the identification of cases of missing documents, and incomplete or inconsistent data, requests for derogation of the incentive mechanism and the result of checks with reference to compliance with the conditions established for access to bonuses.

Resolution 64/2023/R/idr of 21 February 2023: launch of proceeding to define the water tariff method for the fourth regulatory period (MTI-4)

With this provision, ARERA launched the proceeding to define, for the fourth regulatory period, the MTI-4 tariff method to determine the integrated water service tariff for each of the individual services that comprise it, in compliance with the main EU and domestic regulatory sources.

Based on that noted by ARERA, the final provision will maintain stability in the general framework but, based on new evidence, additional mechanisms will be determined to:

• promote management efficiency (also in terms of energy consumption),
• strengthen measures to guide investment choices towards innovative and resilient solutions with lower environmental impact,
• extend the incentive measures already established in MTI-3 and further promote a reduction in the amount of sewage sludge disposed of in landfills,
• update the forecast system based on ex officio tariff determinations and exclusion from tariff updates,
• preserve the effectiveness of spending on water infrastructure investments, maintaining an integrated vision of the multiple funding sources available and strengthening measures intended to promote the effective implementation of planned investments,
• in general, ensure efficient financial sustainability of management, in an environment of close attention to the social sustainability of the tariffs paid by end users,
• update the basic schedules of the economic financial plans and schedules for projects, so that these are prepared consistently, taking minimum levels, indicators and standards of quality as established by the regulation into account, as well as determining methods for implementation of projects financed under the NRRP investment lines,
• take into account the regulation for the minimum content of calls for tender, to be defined following the proceeding launched with resolution 51/2023/R/idr.

With the provision, ARERA deemed it necessary to mitigate the effects of the extraordinary increase in costs to purchase electricity seen in 2022, by extending also to 2022 EE costs the possibility of making a justified request for recognition of additional costs to be added to the adjustment component “costs due to the occurrence of exceptional events” and measurement of the average cost for the 2022 electricity supply sector, equal to: € 0.2855/kWh.

Resolution 106/2022/R/com of 15 March 2022: simplified regulation for the recognition and payment of the social water bonus for 2021 and amendments to authority resolution 63/2021/R/com on communicating the outcome of the proceedings

The measure approves the simplified regulation for the recognition of the social water bonus for 2021, the first year to be paid to those entitled to it using the automatic recognition method, and makes amendments to resolution 63/2021/R/com on communicating the final outcome of the proceedings.

In the initial implementation of the automatic recognition system of the social bonuses for economic hardship, the start times were differentiated for the various sectors, due to the diversity and various degree of complexity of the processes envisaged for recognition of the subsidy; in particular, the process for the recognition of the social water bonus required further investigations and fulfilments, especially related to compliance with privacy regulations.

The social water bonus pertaining to 2021 will be granted to all households that already benefited in the same year from the social electricity bonus for economic hardship. Acquirente Unico, the operator of the Integrated Information System (IIS), will send at least once a month to the water operators responsible for that area communications containing information about all the ISEE households that received the social electricity bonus for 2021. These communications will be sent starting from June 2022; transmission must take place following approval from the Authority of the related risk impact assessment.

Verification of compliance with the limitation of one social water bonus for 2021 is considered automatically fulfilled by the IIS operator when the information about the households to be subsidised is sent to the concerned territorial water managers; in the event that the ISEE household cannot be associated with a water supply, the concerned territorial water manager will assume that the aforesaid household is served by a shared apartment complex water supply.

The bonus may be calculated based on the standard household number that can be subsidised (standard domestic resident user with three members) if the water manager does not yet hold all the information and data required to identify the number of family members, or if the activities required to identify the number of family members and the quantification of the bonus according to this criterion do not allow for disbursement within the time frames envisaged (first day of the fourth month after the month of receipt of the information about the beneficiaries to be subsidised).

The payment will take place as a once-off contribution with a non-transferable bank draft to the declarant party of the DSU (single substitutive declaration), or other methods provided they guarantee the traceability and identification of the beneficiary; alternatively, for direct users, the social water bonus pertaining to 2021 can be paid by splitting the amount accrued into equal portions over several bills or in the first invoice thereafter, in any case in accordance with the envisaged deadline.

In relation to the data communication obligations, the water managers must send to ARERA and their area governing body (EGA) the data and information related to the social water bonus paid pertaining to 2021 by 31 March 2023, or in any case as part of the first report provided pursuant to paragraph 12.1 of the TIBSI, according to the operating methods defined by that Authority to ensure it is indicated separately.

Resolution 651/2022/R/com of 6 December 2022: simplified regulation for the recognition and payment of the social water bonus for 2021 and 2022 and amendments to Annex A to Authority resolution 554/2022/R/com

The resolution introduces a simplified regulation also for recognition of the water social bonus for the year 2022, to make the process of recognising the water subsidy for those with the right to the same less burdensome and faster. Additionally, the simplified regulation also applies to management of 2021 bonus requests, for all integrated water service managers for which, as of the date the provision was published, the Authority, in compliance with the regulations on personal data protection in effect, had not yet provided indications on sending the informational flows functional to recognition of the social water bonus for the years 2021 and 2022. Application of the ordinary regulations is planned as of 2023.

Resolution 2/2022/A of 13 January 2022: 2022-2025 strategic framework of the regulatory authority for energy, networks and environment

Following consultation 465/2021/A of 29 October 2021, in January ARERA approved its 2022-2025 Strategic Framework; the document establishes the objectives that will guide the development of the regulation, in the sectors within the Authority’s remit, for the next four years.

As mentioned previously in the document, the strategic vision of the current Tenure is inspired by the need to guarantee all citizens have accessible energy and environmental services, including in economic terms, that are efficient and provided with increasing and convergent levels of quality, in the different areas of the country. At the same time, these services must be environmentally sustainable, integrated at European level, aligned with the principles of circular economy and contribute to the competitiveness of the national system.

In order to guide its strategic regulation towards social, economic and environmental sustainability objectives and increase its accountability towards stakeholders in this regard, the Authority then established that it would associate the objectives of the Strategic Framework with one or more Sustainable Development Goals of the Agenda 2030.

The Strategic Framework structure and contents – the latter subdivided into themes cutting across all segments with in-depth studies on individual sectors – are arranged on two levels: the strategic objectives and the intervention lines. The objectives embody the overall strategy based on the current and medium-term scenario, with reference to both the aspects cutting across all sectors (centrality of the consumer, system innovation, simplification, transparency and enforcement of the regulatory framework), and in the specific aspects of the Environment and Energy segment and comply with national and international legislation. The intervention lines outline the Authority’s planned main measures and actions to achieve each strategic objective.

Resolution 203/2022/A of 10 May 2022: reporting of the activities carried out between 1 January and 31 December 2021 of the strategic framework of the regulatory authority for energy, networks and environment for the 2019-2021 three-year period

The document contains a report on the activities carried out by the Authority during 2021, in implementation of the objectives defined by the 2021 Strategic Framework. More specifically, it outlines the different measures characterising the 23 strategic objectives, breaking down the relevant interventions, grouped according to the three strategic areas (Transversal themes, Environment Segment and Energy Segment), each of which is broken down further into 3 strategic lines. Rules

With specific reference to the IIS, the report addresses various important aspects, such as the integration and updating of the rules for the management of relations between operators and users, the efficient development of infrastructure, the promotion of a clear and reliable governance framework.

Brief 82/2022/I/com of 4 March 2022: brief by the regulatory authority for energy, networks and environment on the draft law “annual law for the market and competition 2021” (as 2469) for the industry, commerce and tourism commission of the Italian Senate

The draft law containing the “Annual law for the market and competition 2021” (so-called Draft Competition Law), which at the time of approval of this brief was under initial review by the Industry, Commerce and Tourism Commission of the Italian Senate, contains a number of relevant provisions for the activity of the Authority, on which the document presents observations and proposals. In particular, in terms of the integrated water service, the comments by ARERA focused on art. 6 which delegated powers to the Government to reorganise the local public services.

As regards the aspects associated with governance of the system, ARERA reported that the current approach of the Draft Law could cause critical issues such as harming the stability, clarity and certainty of an already consolidated sector regulation. The current regulatory approach of the water sector has indeed allowed for a significant increase in investments, which nearly quadrupled between 2012 and 2020, and an improvement in the quality of the service, against substantial stability of the tariffs for users; even the rate of execution of interventions increased from 50% for the period pre-regulation to over 90% at present. Therefore, there is no requirement for an overall reform, while it appears fundamental to consolidate the regulatory framework, including for the purposes of the effective implementation of the support tools envisaged for Italy’s relaunch (NRRP). The Authority also believes that measures to overcome various issues which, located upstream of the regulation, generate critical issues in relation to the programming and management decisions of the integrated water service are a priority; in this context, new reorganisation measures could ensure technical support, in terms of organisation and specific know-how, for the territorial parties for which ongoing violations have been detected, from a publicly controlled company with experience in assistance projects for public administrations.

As regards the critical issues relating to management structures, a review of the current regulation could work in synergy with the measures already put into place by the Authority, to promote the aggregation of activities and the management of services, and to support the reorganisation of governance in the sector. In this sense, action is required to strengthen the governance, aimed at overcoming the critical issues found in a number of areas of the country (ongoing situations of no awarding of the service, shortcomings in the drafting and updating of the necessary deeds to adopt programming and management decisions, etc.); the proposal is to revisit the awarding regulation with a view to simplifying procedures, by introducing a mandatory deadline by which to conclude the processes of awarding contracts for the integrated water service and, in the event of inaction, require that the management be carried out temporarily, for a period potentially overlapping that of the implementation of the NRRP, by a company under entirely public control.

Report 39/2022/I/idr of 1 February 2022: fourteenth report pursuant to article 172, paragraph 3-bis of Legislative Decree no. 152 of 3 April 2006 on “environmental regulations”

The usual six-monthly monitoring of the local structures of the integrated water service showed a context of substantial stability, with the final completion of the process of local authorities joining the relevant area governing bodies (AGBs) in all territorial areas of the country and consolidation in the process of rationalising the number of OTAs, currently at 62; with reference to the second half of 2021, it showed a number of Regions (Lombardy, Campania) moving towards a structure of the territorial organisation of the integrated water service that was potentially smaller than the provincial area. At present, the priorities identified by the Authority are the completion of the processes initiated towards the full operation of the area governing bodies (AGBs), especially in some regional contexts, and the awarding of contracts for the integrated water service in all situations with no clearly outlined management worthy of protection based on current legislation, or with no single area operators identified.

The studies carried out by the Authority brought to light the permanence of potentially critical contexts, which impact upon the proper drafting and updating of the programming and management deeds of the integrated water service. In particular, they highlighted a water service divide, with situations, mainly in the South and Islands, with continuing inefficiencies and disruptions. However, the ongoing situations of inaction relating to the awarding procedures of the service may represent serious critical issues, especially in the contexts characterised by infrastructural shortcomings, which view the possible use of funds provided as part of the NRRP as an opportunity to improve the quality of the services provided.

The difficulties encountered in some contexts suggest evaluating the opportunity to simplify the awarding procedures (to strengthen the guarantee of the time frames and quality of the programmes), and to outline additional solutions to the external administration model (to strengthen the guarantee of the adoption of a structural and overall solution).

Opinion 273/2022/I/idr of 21 June 2022: opinion sent to the ministry of sustainable infrastructure and mobility on the draft ministerial decree implementing reform 4.1 of the national resilience and recovery plan (NRRP), regarding “legislative simplification and governance strengthening for investments in water supply infrastructure”

The Authority hereby issues a favourable opinion, with comments, on the draft decree sent by the MIMS pursuant to art. 1, paragraph 516-bis of Law 205/17 (as amended by Law Decree 121/21), intended to define the methods and criteria for drafting and updating the National Plan for Infrastructure Interventions and Safety in the Water Sector, and for its implementation in subsequent passages. The draft measure requires, in particular, that interventions aimed at mitigating the damage associated with the phenomenon of drought be considered a priority for inclusion in the plan, as well as the development and upgrading of water infrastructure, including in order to increase the resilience of the water systems to climate change and to reduce the dispersion of water resources. The MIMS must publish a yearly presentation of the proposals, with indication of their order of priority, compliance with the overarching planning, any use of co-financing or need for financing of the planning phases subsequent to transmission. These elements would constitute elements used to assess the interventions and formulate the proposed plan.

Of the observations formulated by ARERA, note in particular the request, with reference to the proposals of the regulated parties, to include among the elements to be acquired for the purpose of updating the plan and as assessment factors, the compliance of the operator’s qualification to provide the service in accordance with current legislation, compliance with the obligations envisaged for the adoption and approval of the specific draft regulation and the absence of company crises that could compromise the continuation of the activity for which the financing is required.

Memo 348/2022/I/idr of 19 July 2022: ARERA memo on examination of resolutions on urgent initiatives to fight the water crisis (7-00848 on. Daga, on. Federico, 7-00861 on. Foti 7-00853, 7-00858 on. Pellicani and 7-00865 on. Spena)

The memo is intended to provide assistance to the Combined Environment and Agriculture Commissions of the Chamber of Deputies, while examining resolutions on urgent initiatives to fight the water crisis, focussing, in particular with regards to the integrated water service, on the following aspects:

• regulation of the technical quality of the integrated water service: ARERA emphasised the positive impact seen in the first year of application to the SII, in terms of finalisation of investments and improvement at the level of macro-indicators, in particular focussing on aspects relative to water loss, highlighting that the progress achieved contributes to reducing the overall need for the resource. Therefore, it hopes that similar incentive mechanisms will be adopted to promote efficiency and improve quality also in various civil uses, such as irrigation and manufacturing;
• investment and governance; regulatory actions in the last decade have led to a significant increase in investment spending in the water sector, with a significant improvement in completion rates, supporting improvements in service quality combined with substantial stability in the tariffs paid by users. Nonetheless, persistent problems in various areas, suggests an urgent need, first of all, for reform that, in line with the reform 4.2 in Mission M2 C4 of the NRRP, intended to “guarantee full management capacity for integrated water services”, is intended to overcome any continuing situations of inertia relative to procedures to assign the service. To that end, the Authority, with the aim of rapidly establishing management situations with the needed organisational and implementation capacities, proposes the introduction of simplifications to the assignment procedures and additional solutions with respect to the external administration model;
• additional support measures for water sector investments: the Authority’s commitment to ensuring effective use of available public resources is referenced, together with the need to support the utmost simplification. Additionally, the potential of the Water Works Guarantee Fund is noted, as a synergistic tool complementary to the financing allocated under the National Recovery and Resilience Plan (NRRP);
• measures to support the efficient use of water resources, promoting development of reuse potential, in particular by strengthening reuse of waste water, both for agricultural and industrial purposes.

Regarding changes to consumer protection made in 2022, note the publication of Brief 48/2022/I/com of 8 February 2022, relating to the ARERA hearing at the newly founded parliamentary commission of inquiry on consumer and user protection. During the hearing, the Authority illustrated the activities carried out in the respective sectors, in accordance with the mandate received from the Legislator, regarding the “promotion of the protection of the interests of users and consumers, taking account of related community legislation and the general policy guidelines formulated by the Government” (art. 1.1 of Law no. 481/1995); it also drew attention to the contingent situation characterised by the sharp rise in energy prices.

On 15 September 2022, the newly established parliamentary commission on inquiry on consumer and user protection approved the Report on its activities. The Commission met for the first time on 9 December 2021 and had a total of 32 meetings in plenary sessions, with the objective of analysing the phenomenon of consumer and user protection from various perspectives and with a multidisciplinary approach. During the meetings, various opinions were heard, from independent authorities, institutional entities and representatives of consumer associations. A presentation from the chairman of Acquirente Unico (A.U.) was also scheduled, on the subject of the current issue of price increases in electricity (+55) and gas (over 40%) bills, caused by the increased costs of raw materials and the pandemic; as this did not occur due to the early dissolution of the Chambers, the Commission was still able to acquire the speech prepared by A.U. for its files, a detailed illustration of how the electric, gas and water social bonuses function. The Commission ends by specifying that the battle for consumer rights should continue to be fought, without giving in to the temptation to implement a massive, and at times contradictory, combination of laws that risk being evaded from the start, as well as that of implementing invasive public projects that are later found to be ineffective and damaging to competitive and market dynamics. On the other hand, users need to be offered an increasingly vast toolkit of knowledge, education and information, including technological and legal tools (such as settlements) that are effective and accessible, to allow their rights to be enforced and recognised in reasonable timeframes.

For completeness of information, with resolution 58/2022/A of 15 February 2022, ARERA appointed the members of the Regulatory Commission and the members of the Conciliation Commission; in particular, as regards the appointment criteria of the Conciliation Commission, the draft agreement contained in resolution 464/2021/A established that the commission be formed of: a) a person external to the Authority appointed by the Board, with extensive and recognised experience and independence in the sector of labour law or in any case in the legal sector, with the role of Chair; b) the Director responsible for the management of the human resources department or another executive appointed by the Board; c) a trade union leader of a legitimately constituted trade union within the Authority or by another trusted person to assist the employee.

Also note the conclusion, positively for Acea Ato2, of the issue which arose in 2015, relative to a presumed violation of the Consumer Code by the entity. In 2015, the Antitrust Authority (AGCM) had issued a fine against Acea Ato2 of € 1.5 million. With judgement 5500 of 2022, published on 6 May 2022, the Lazio Regional Administrative Court cancelled this fine, partially accepting the appeal presented by Acea Ato2; in particular, according to the Regional Administrative Court, the behaviour carried out by the entity is in compliance with the professional due diligence required by ARERA, does not significantly impact consumer choices and, therefore, cannot be classified as improper commercial practices.

Finally, below is the data relative to the Annual Report on ARERA Conciliation Service activities, for the first half of 2022 (data updated to 14 October 2022). The Report shows that in the first half of 2022, 12,323 conciliation requests were submitted. Of these, 1,794 were related to the water sector, 6,155 to the electricity sector, 2,979 to the gas sector, 25 to the district heating sector with the remainder relating to Dual-Fuel and Prosumer customers. As regards the topics covered by the questions in the water sector, 71.7% concerned billing, 5.1% contracts, 4.6% metering, 3.8\% connections and work, 3.6% arrears and suspension, 1.6% technical quality and 1.4% contractual quality. The Regions with the highest number of applications are Sardinia, Abruzzo, Lazio, Campania and Basilicata, followed by Liguria, Calabria and Molise. At the end of the conciliation procedure (relating to all regulated sectors and not only the water sector), 4,332 customers were asked to take part in a satisfaction questionnaire; 96% of them said they were satisfied with the service received.

With reference to the main operator of the Acea Group in the Water Sector, note that at the 30 November 2022 meeting of the Conference of Mayors of OTA2 Central Lazio - Rome, with Resolution 13-22 the regulatory scheme was adopted on updating the tariffs established for 2022-2023, based on ARERA resolutions ARERA 639/2021/R/idr and 229/2022/R/idr. Pending approval by the Authority, pursuant to paragraph 7.2 of ARERA resolution 580/2019/R/idr, the 2020-2023 tariff is applied, as approved by the Authority with resolution 197/2021/R/idr.

The tariff proposal adopted by the Conference of Mayors, the result of a joint process between Acea Ato2 and the Technical Operational Secretariat of the Conference of Mayors was approved in January 2023 by the Authority with resolution 11/2022/R/idr “Approval of the update to tariff provisions for the integrated water service for 2022 and 2023”; the main aspects follow:

• Confirmation of the placement of Scheme V within the regulatory scheme matrix pursuant to article 5 of Annex A to resolution 580/2019/R/idr (high investments with respect to the value of existing infrastructure and average per capita GRC higher than the average national value determined by ARERA), already approved with ARERA resolution 197/2021/R/idr;
• Works Programme for 2022-2023 of over € 805 million, equal to around € 110 per year per capita, up by around € 90 million with respect to that approved for 2020-2023; for the subsequent 2024-2032 period, an additional amount of around € 4,200 million is planned (€ 890 million more than that approved for 2020-2023);
• Confirmation of the theta tariff multiplier (to be applied to the tariff in force at 31/12/2019) of 1.139 for 2022 and of 1.202 for 2023, in line with that already approved in ARERA resolution 197/2021/R/idr;
• Confirmation of the value of the ψ parameter of 0.45 (the maximum value provided for in Resolution 580/209/R/idr is 0.8) for the purposes of determining the component for the financing in advance of new investments (FNInew);
• Use of the amount of the integrated water bonus for all of 2021 not utilised to reduce tariff adjustments for 2020 and 2021, specifically around € 6 million.

Additionally, at its meeting on 30 November 2022, the Conference of Mayors approved the implementation Regulation for the 2023 integrated water bonus (Resolution 11-22). As in previous years, the amount of the bonus is calculated as an expense (based on the tariffs in effect in the reference year) corresponding to the fixed and variable fees for aqueduct, sewer and purification for a consumer up to:

• 40 m³ per year for every member of the household, for direct and indirect users with ISEE up to € 8,265;
• 20 m³ per year for every member of the household, for direct and indirect users with:

1. ISEE indicator up to € 13,939.11 and household of up to 3 members;
2. ISEE indicator up to € 15,989.46 and household with 4 members;
3. ISEE indicator up to € 18,120.63 and household with 5 or more members.

Other events worthy of note in relation to Conference of Mayors resolutions are the update of the Services Charter (resolution 10-22 of 29 September 2022) and the User Regulations (resolution 12-22 of 30 November 2022), adjusted to current regulations.

Other significant events during the period include, following that established in the previously cited Law 152/2021 and the consequent regional laws, the significant push given to transfer integrated water services to the single manager for municipalities which, as of the first half of 2022, were still operating the service without a legal title in compliance with the current pro tempore regulations.

In 2013, Acea Ato2 filed an appeal against Resolution 585/2012 (MTT) and subsequent resolutions that amended and supplemented the contents (Resolutions 88/2013, 73/2013 and 459/2013). The appeal was partially upheld by the Regional Administrative Court of Lombardy 2528/2014, against which both Acea Ato2 and ARERA have appealed.

A partially favourable judgement, no. 8079/2020 16 December 2020:

• accepted OTA2’s appeal related to non-recognition of the CCN in relation to other water activities, the only ground for the appeal that the Company had decided not to waive;
• rejected the Authority’s appeal related to financial expenses on adjustments, with reference to which already the Lombardy Regional Administrative Court (RAC) had found in favour of OTA2;
• accepted the said Authority’s appeal concerning the ground on non-enforceable receivables.

Still pending are the other appeals filed by Acea Ato2 with the Lombardy Regional Administrative Court against Resolution no. 643/2013/R//Idr(MTI), Resolution no. 664/2015/R/Idr(MTI-2) and Resolution no. 580/2019/R//Idr.

Relative to Resolution 643/2013, note that on 8 May 2014 the additional reasons for annulment of ARERA decisions 2 and 3 of 2014 were presented.

The ruling of the regional administrative court of Lombardy no. 892 of 20 April 2022 confirmed the guidelines already expressed by the Council of State in the cases on resolution 585/2012/R/idr relating:

• to the so-called “white water” for which the appealed resolution “does not impact in a broad sense on the ongoing management agreements”;
• to mixed sewerage, stating that “in these cases, since it is not possible to quantify the volumes of water that flow into the sewerage networks from the various points of input, and therefore to break down the relative costs, it responds to economic rationality fees so that the tariffs also cover the costs deriving from the collection and treatment of white water”;
• to the financial expenses on adjustments, for which it is confirmed that since the operator incurs an objective cost deriving from the fact that the level of the tariffs initially set by the area governing body is insufficient to cover the costs of the service, the recognition of this financial cost cannot be renounced. Due to this, the Authority must then provide, during determination of the adjustment, for a correction to cover the financial expense on adjustments. The regional administrative court rejected the reason concerning the provision of a cap on adjustments.

On 11 October 2022, appeals relative to resolution 643/13 were discussed, with the exception of that of Acea Ato2 as the individual to which it had been assigned was not available.

Relative to Ato2, with judgement 736 of 23 February 2023, the Council of State accepted ARERA’s appeal with regards to the judgement of the Lombardy Regional Administrative Court Second Section, no. 892/2022, which had partially annulled the acts approving the Water Tariff Method (MTI) for the years 2014 and 2015, agreeing with the regulator with regards to non-payment of financial charges relative to adjustments. The second-level judge agreed with ARERA’s arguments, as in the similar rulings already issued for the Authority’s appeals against, among others, Acquedotto del Fiora, Umbra Acque, GORI and Publiacqua, deeming the regulator’s decision to base adjustments on “effective data and certificates relative to sales volumes” reasonable, while “the riskiness of the IWS’s management activities is already considered in the “beta” tariff value, which was deemed reasonable by a verification body as part of the pursuit of the “full cost recovery” principle Additionally, the judgement establishes that “recognising financial charges also for adjustments (operating costs) would mean, in terms of profitability, attributing this component substantially the same treatment as investments (capital costs) which pursue a different purpose of improving the quality of the public service”. Finally, the Council of State agreed with ARERA on the fact that the adjustments are already adjusted exclusively in relation to inflation, as already occurs in the other regulated sectors.

The Council of State also rejected the appellant’s claims relative to the illegitimacy of the cap established for the theta multiplier with reference to the component of adjustments, in that the regulation already calls for the same to be exceed solely under certain conditions and based on a justified request presented by the Governing Body.

With regard to Resolution no. 664/2015, it should be noted that in February 2018 Acea Ato2 extended the appeal originally proposed, submitting additional grounds of appeal against ARERA Resolution no. 918/2017/R/idr (Biennial update of the tariff arrangements for the integrated water service) and against Annex A of Resolution no. 664/2015, as amended by the aforementioned Resolution no. 918/2017. As of today we are waiting for the hearing on the merits to be scheduled.

In February 2020, Acea Ato2 also challenged Resolution 580/2019/R/idr which approved the Tariff Method of the integrated water service for the third regulatory period (MTI-3), reiterating many of the reasons for previous appeals in tariff matters and introducing new ones related to specific aspects introduced for the first time with the new tariff methodology. Other subsidiaries and/or investees of the Acea Group that have challenged MTI-3 are Acea Ato5, Acea Molise and Gesesa (which had not previously challenged the resolutions relating to the TTM, MTI and MTI-2). Resolution 235/2020/R/idr for the adoption of urgent measures in the integrated water service, in the light of the COVID-19 emergency was also appealed. We are awaiting the scheduling of the hearing.

In February 2022, Acea Ato2 filed an appeal against resolution 639/2021/R/idr relating to the two-year tariff update for 2022 and 2023. The challenge of the provision, also carried out by the subsidiaries and/or investee companies of the Acea Group such as Acea Ato5, Acea Molise, Publiacqua, Acquedotto del Fiora, GORI, Gesesa, Umbra Acque and SII Terni, confirms many of the reasons already advanced against the previous tariff resolutions, adding new ones linked to the new regulation enunciated by ARERA. In relation to the reasons pertaining to the new provisions, note both the mechanism for recognition of the cost of energy, deemed inefficient to intercept the real contingent situation, as well as the provisions with which ARERA declared that it wishes to comply with the law of the Council of State on financial expenses on adjustments, treatment of the New Investments Fund and redefinition of the quota subject to reimbursement to users pursuant to Resolution no. 273/2013.