Local public services, energy and infrastructure. The challenges for the new government.
I am preparing to write these notes shortly after Napolitano's reappointment as President of the Republic and Enrico Letta's appointment to form a new government of broad understandings or, better still, the President. As happens in these circumstances, the question arises about the possible priorities for the new government on the topics of our interest bearing in mind that, in the event, the reports of the so-called Sages appointed by Napolitano, even if generic in many respects, should constitute a relevant point of reference for the government programme. This, if only for the fact that the political sensitivities that led to the re-election of the President and the launch of the Letta government were found in this report.
The relevance of public services in the new context of restrictions: reducing tariffs. The issue of public services and infrastructure remains a relevant priority even in the new context of hardship (indeed, by now no longer brand new) for a number of reasons. First of all, in vast areas of the country the quality levels of supply are below the minimum acceptable standards; secondly, for the resolution of problems, but also for ordinary management, the financial resources available have decreased in recent years (think of local transport) and will continue to decrease in the years to come. In addition, in a historical phase in which citizens' disposable incomes tend to contract, it becomes an absolute priority to reduce tariffs whose upward trend (except for some very recent exceptions) has been constant and, in many respects, unjustified. With the exception of where they are even excessively low (as in water). Not to mention the country's competitiveness and attractiveness, which greatly depends on public services. The theme should naturally be divided into the main strands - namely energy, waste and transport - where the problems and solutions are also widely differentiated.
The growth of efficiency. First of all, it seems to us that, in general and for what has just been said, a significant increase in efficiency and the consequent reduction in supply costs must be induced (or rather imposed) in the system. In particular, the extensive use of standard costs should be an objective to be achieved with great determination and in a short time, well aware of the possible oppositions and interested resistances that accompany any attempt in this direction.
Maximum transparency. It is also very important to impose maximum transparency on costs, quality of service, efficiency and cost-effectiveness, issues on which we have been fighting for some time. Here too the resistance is strong since true transparency would highlight the elements of mismanagement, parasitic rents and excess profits deriving from substantially monopolistic positions. Suffice it to say that a significant part of the water sector is today totally opaque (between 20% and 30%) and this is one of the main problems that the Authority for Electricity and Gas is facing in its appreciable and challenging commitment to introduce a serious water regulation. And also in the local transport sector there is an evident disparity of situations in the various parts of the country, brought about by lax policies and patronage logics; here too, the new government will have to continue the path traced with regard to the Transport Authority, the appointment of members of which was blocked by Monti apparently due to the inadequacy of the candidates advanced by the political system.
An industrial policy for public services. A general theme pertains to the development of an industrial policy of the sectors of interest, which must necessarily be accompanied by a concentration of companies to create players of adequate size, not only in gas & power. The often excessive focus on the service delivery phase, relevant on a political level to collect votes, makes us forget that upstream there are production activities including plant engineering of high social and economic importance. In addition, a strong demand for the services in question is developing globally, which is accompanied by the trend of urbanization; the development of a greater industrial supply capacity by the country system could lead to significant impacts. And in this sense it seems to us that the new government should also operate decisively.
Towards a consolidated text on local public services. Another theme of a general nature for local services concerns the legislative framework which is confused, superimposed at various levels (European, national, regional and even local). Here the undersecretary prof. Claudio de Vincenti has carried out a significant work of analysis which could lead to a reorganization of the entire subject with a single text. Ambitious goal but today probably possible. Here too the new government could (and should) continue in this direction which would certainly help relaunch the entire system where a clear and understandable (as well as stable and fair) legislative framework could attract new forces and, above all, direct commitments towards clear and shared.
Water: solving the issue of the return on capital. Still with regard to water, an unresolved issue relates to the return on invested capital, repealed by the 2011 referendum. Our worried opinion on the subject is well known, further strengthened by the negative impacts on investments in the sector which we have verified to be substantially blocked in the last two years. Among other things, the conflict with the principle, sanctioned by the European Union, which provides for the full cost recovery in the provision of public services, and therefore also the remuneration of invested capital whatever its origin (equity or debt); it should also be noted that not making the consumer pay the full cost of the service introduces distortions which lead to an inevitable waste of resources; this obviously excluding the problem of the protection of the weakest groups which in any case must be addressed. In any case, a solution must also be found in the face of the flight of national and international investors as well as the now certain European sanctions whose dimensions could be very substantial.
Electricity and gas: managing the transition. In the electricity and gas sector, the issues to be addressed are well known and can be traced back to the now evident transition towards new models that the sector is experiencing. Among the main topics we mention: the reduction of energy costs, the management of the transition of the electricity system towards a model suitable for the development of renewables; the construction of the new paradigm (smart cities) based on distributed energy which, however, does not increase costs, rather reduces them; coping with the crisis of energy producers with combined cycles; the development of the electricity and gas network; the further development of renewables connected, however, to the growth of a national industry where feasible; selective support to R&D activity in promising segments.
Focus on efficiency and energy saving. This policy, well explained in the SEN (even if some points are questionable), must take into account a tendency to reduce consumption due to various structural factors (among them: the economic crisis, the trend towards the development of a less energy intensive economy, the flight of energy intensive producers). Added to this is the priority, precisely set by the SEN, of the development of efficiency and energy saving. The new government will certainly have to continue in this direction, also favoring research and the diffusion of technologies, rewarding those who work in this direction and introducing punitive mechanisms for those who instead show inertia.
Waste: overcoming the local perspective and ATOs. In waste, it appears necessary to continue stimulating separate collection and recycling, knowing full well that the country is divided in two on these points: the North where the levels are already quite high and the South where there is still a lot to do, without prejudice the growing and qualified exceptions. A logic that goes beyond the principle of local waste management appears very justifiable considering that, for example, disposal plants often require insisting on large or very large populations (even over a million inhabitants for waste-to-energy plants). The logic of overcoming the ATOs (Optimum Territorial Areas) is therefore welcome, which has never really taken off, also to aim for international development of the sector. The possibility of creating a sector Authority should also be carefully evaluated.
Local Public Transport: development and strong rationalisation. In local public transport, the public finance crisis has brought to light already known and evident distortions and inefficiencies. Emilia Romagna and Lombardy, for example, have a system that has ensured a substantial balance even after the cuts, achieved through careful rationalisations; other regions, even in the North, find themselves in growing difficulty if not in a situation that forces a more or less radical cut in services. The road towards the taxation of cost coverage pursued in recent years seemed virtuous, while the logic of centralization promoted by the Monti government appears, without a doubt, and for many reasons, deleterious. In this sector, as in the others, the application of standard costs appears unavoidable if we want to proceed in virtuous directions.
Infrastructures: a selective and rational relaunch. On the theme of infrastructure, I think the policies to be pursued are very clear, which also emerge from the numerous and authoritative contributions reported in this issue of the Review: setting the real priorities towards which to direct the few resources; develop an intersectoral vision avoiding that some sectors take the lion's share to the detriment of others; optimize the achievements both in terms of intrinsic costs (for example, limitation of overdesign) and with regard to authorization procedures; eliminate legislative changes in progress; aim at the de-infrastructure in certain cases (such as airports) and at a more intelligent use of what already exists. More could be said; in this regard see the contribution recently prepared by the councilorship for infrastructures and mobility of the Lombardy Region (www.Agici.it/eventi/04_03_13.php) where the points of view of a large number of operators are summarized.
In conclusion, it seems to us that the path traced by the Monti government is overall valid and that we must continue with determination, thanks also to the hoped-for greater solidity of the new Letta government, in implementing what has been started.
