Giovanni FRAQUELLI
Università del Piemonte Orientale “A. Avogadro”, HERMES

Valentina MOISO
Ceris-CNR,  HERMES

This paper analyses the reform of the Italian water sector, with particular attention to the assessment of scale economies at the ATO level. The ATOs are local areas defined by regional bodies, where the management of water services is unified. Even if this unification process already started in 1994 (Galli Law), it is still in progress and thus the analysis cannot be totally exhaustive at the moment. However, our study is based on the local plans (“Piani d'Ambito”, in the Italian definition, from now PA). The PA is an operational and strategic planning including economical and financial data, qualitative and quantitative elements, which provides the guidelines for the next 20 year (at least) of water service management. We have analysed 18 ATOs from different standpoints: direct analysis of the PA, cluster analysis of the ATOs, econometric analysis of the long run efficiency. In particular we estimated a trans-logarithmic cost frontier to assess the behaviour of returns to scale, the score of inefficiency and the impact of network characteristics. The results show that the average score of inefficiency is about 5%. On the other hand, the presence of relevant scale economies suggest that a reduction of local fragmentation could improve the situation.