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

Valentina MOISO
HERMES

This paper analyses the ongoing reform of the Italian water sector, with particular attention to the industry cost efficiency and to the assessment of scale economies at ATO level, by estimating a stochastic cost frontier. The ATOs should be local optimum size areas defined by regional bodies, where the management of water and sewerage services is unified. Our study highlights the impact on costs of this integrated management of water service introduced by the reform. We analysed 18 ATOs through their operational and strategic planning which provides the management guidelines for the next 20 years (at least). In particular, we estimated a trans-logarithmic cost frontier to assess the behaviour of returns to scale, the inefficiency score and the impact of network characteristics. The results show - on average -inefficiency scores about 28%, partially explained by network characteristics. On the other hand, the presence of relevant scale economies suggests that the situation could be improved by a reduced fragmentation at local level.