Reforming the wastewater treatment sector in Italy: Implications of plant size, structure, and scale economies

Abstract

[1] In the context of the restructuring of the water industry, this work examines the treatment processes of urban wastewaters in Italy, with reference to costs, size, and technology. The operating cost function of 103 plants confirms scope economies from vertical integration and strong economies of scale for the smaller structure, confirming the benefits coming from the aggregation of the existing little firms. A minimum efficient size at about 100,000 inhabitants, however, inhibits the creation of large monopolies at a local level and enables the maintenance of indirect competition. Among the explanatory variables of running costs, the pollution load of the input wastewater takes on a high statistical significance and suggests environmental prevention, while the strong impact of sludge concentration means it should be considered in the new tariff systems. The recent introduction of advanced treatments is expensive, but the costs are balanced by a notable improvement in the pureness of the effluent waters. As for general environmental policies, it is necessary to find a good compromise between the need to improve the effectiveness of the existing plants and the investments in areas where the water treatment service is still inexistent.INDEX TERMS: 6344 Policy Sciences: System operation and management; 6324 Policy Sciences: Legislation and regulations; 6334 Policy Sciences: Regional planning; 6339 Policy Sciences: System design; KEYWORDS: wastewater, pollution-treatment, operating costs, scale economies Citation: Fraquelli, G., and R. Giandrone, Reforming the wastewater treatment sector in Italy: Implications of plant size, structure, and scale economies, Water Resour.

The Effects of Operational and Environmental Variables on Efficiency of Danish Water and Wastewater Utilities

“…This evidence is in line with the literature, which demonstrates the presence of economies of scope, and specifically with Fraquelli and Giandrone [73], which demonstrates that significant cost savings are associated with vertically integrated structures of water supply and wastewater collection and treatment.…”

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“…However, Torres and Morrison Paul (2006) observed economies of scale for small utilities but diseconomies of scale for the largest utilities. Similar results were obtained for other countries, including Italy (Fabbri and Fraquelli, 2000;Fraquelli and Giandrone, 2003;and Fraquelli and Moiso, 2005), France (Garcia and Thomas, 2001), Japan (Mizutani and Urakami, 2001), South Korea (Kim and Lee, 1998) and South Africa (Tsegai et al, 2009). Recently, Nauges and van den Berg (2008) found economies of scale in Colombia, Moldova and Vietnam for small and medium utilities but not in Brazil.…”

“…The literature reports a wide range of a maximum number of connections where economies of scale were not exhausted. For example, Fraquelli and Giandrone (2003) found values of 100,000 in Italy, while Mizutani and Urakami (2001) found 766,000 (in Japan) and Fraquelli and Moiso (2005) estimated the leveling off point at one million for Italy. There is less divergence of views in relation to wastewater activities, in part because these activities have been subject to less research or have been examined in the context of businesses undertaking both water supply and wastewater activities (e.g.…”

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