Abstract
Increasing private-sector participation to improve the efficiency of infrastructure services was a growing trend in Europe in the 1990s. Dissatisfaction with state solutions, ever-tightening government budgets and technical innovation favored therefore the privatization of the utilities sector and even water utilities. The privatization of water services was generally regarded as the supreme failure of the (welfare) State that turned water into a commodity. The paper presents a critical review of the privatization process of water services in Italy and provides a theoretical insight into critical issues related both to the regulatory framework and pricing mechanism and to make-or-buy decisions. The aim of the paper is to show how the State (i.e., the institution-of-institutions) and the Market can be conceived of not as opposing entities but in a complementarity perspective, according to which the State expresses in the broadest terms society’s organization and historical course and intervenes to correct market failures.
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Notes
- 1.
In management contracts, there is limited transfer of responsibility to private operators; in affermage contracts, the private contractor is responsible at its own risk for provision of the service, including operating and maintaining the infrastructure; in concessions, the private contractor is responsible for both operation and new investments.
- 2.
Under the full-divestiture scheme, all assets are privately owned and the private company is responsible for providing the service and achieving quality standards specified by law; whereas, direct public management consists of hierarchical control of the public sector over operating companies.
- 3.
Many empirical studies conducted worldwide investigated the determinants of water- utilities performance with respect to their size and diversification and the existence of economies of scale, scope and density (Fraquelli et al. 2004; Farsi et al. 2008; Bortolotti et al. 2011; Pollit and Steer 2011; Ferreira da Cruz et al. 2013; Guarini and Romano 2014). In order to benefit from efficiency gains generated by scope and scale economies, some utilities responded to market liberalization by transforming themselves into multi-utilities (horizontal integration) that provide traditionally distinct services (e.g., gas, electricity, and urban waste collection and management). Nonetheless, the effects of horizontal integration are controversial: on the one hand, the emergence of multi-utilities can improve access and quality of utility services, but on the other hand, if not subject to closer control, it may paradoxically generate less competition, greater regulatory complexity and concentrate more political power in the utilities.
- 4.
See Teckal case C-107/98, EU:C:1999:562.
- 5.
BOT contracts are build, operate and transfer arrangements where the private entity designs, builds and operates facilities according to the concession-contract requirements.
- 6.
The Galli Law defined a new pricing mechanism, i.e., the “Metodo Tariffario Normalizzato”.
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D’Alpaos, C. (2018). The Privatization of Water Services in Italy: Make or Buy, Capability and Efficiency Issues. In: Mondini, G., Fattinnanzi, E., Oppio, A., Bottero, M., Stanghellini, S. (eds) Integrated Evaluation for the Management of Contemporary Cities. SIEV 2016. Green Energy and Technology. Springer, Cham. https://doi.org/10.1007/978-3-319-78271-3_18
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