Operating and environmental risks

ACEA Ato2 – criticalities associated non-compliant discharges

With the signing of the Management Agreement the transfer of integrated water services of ATO2 Municipalities (with the exception of protected category services) has become officially compulsory. In practice, the transfer of these services within the given time frames and in accordance with established procedures has not been completed, because of the reluctance of some municipal administrations to actually transfer the Service, as well as the impossibility for the Operator, especially since 2008, to acquire the management of water, sewerage and treatment facilities not compliant with existing law provisions, since this would expose its management to consequent criminal judicial action.

The biggest criticalities have come from the presence of discharges that have not yet been adequately treated and/or existing treatment plants that need to be restored and/or upgraded to meet new emission standards decided by the Supervisory Authority following a new assessment of the hydrological system of receptor waterways, or even the nature of the receptor (soil rather than water body) in cases in which it was believed that the discharge of some treatment plants into the ground in cases of dried-up waterways, when they were found to be dried up at the time of inspection.

The current environmental emergency has also rendered it necessary to carry out public works. In 2008 the Region signed a “Memorandum of understanding for an extraordinary plan to clean up river, lake and sea resources to deal with the discharge emergency in the ATO2 area – Central Lazio – Rome”, with the intention of allocating funding for the implementation of specific interventions to tackle the emergency.

Thanks to considerable technical and economic efforts, 151 discharges have been cleaned up. A total of 95 discharge operations are still active, 62 of which subject to intervention plans under the control of ACEA Ato2, and 33 to be cleaned up by Municipalities or by the Region using public funding.

Taking into account new IIS regulatory provisions, a Plan of Actions has recently been drafted for the period 2014-2017, with further instructions given for the period until the end of the concession (2032). This Programme includes not only intervention to clean up the 62 discharges mentioned above but also works for the complete clean-up of the ATO2 area in terms of the quality of sanitation, restoring and upgrading obsolete purification plants, which discharge on the “ground” or in “non-perennial ditches”, according to the interpretations of the body responsible for granting the authorisation or for changing the hydraulic regime.

This Plan of Actions has run into problems however, due to the long-term nature of the performance of works, which is at odds with the need to immediately comply with existing legislation. These time issues relate to both the granting of authorisations and the actual building/work performance phase.

These problems are compounded by the lack of impetus regarding investments in the sector, in view of the length of time required to implement the provisions of the Galli Law, and the consequent need to improve infrastructures in very short spaces of time compared with the time needed to get through the authorisation process provided for by existing legislation. This has led to delays in the performance of works in relation to Community directive constraints in the sphere of the environment and drinking water, resulting in infringement procedures initiated by the European Union.

These criticalities have been reported by the Company at all institutional levels (Lazio Region, Province of Rome, Area Authority ATO2, Prefecture, Municipal Administrations) in order to get all actors concerned involved in actions to speed up administrative procedures that need to be done before the work can begin.

 

ACEA Ato2 – criticalities of the sewerage and water treatment system

In terms of authorisations, criticalities remain regarding the classification of the hydraulic regime for waterways, and in general receptor water bodies, which is responsible, especially when renewing authorisations, for the application of more restrictive limits or in any case limits that differ from those for which the structure was designed, built and managed.

In some cases the Company has resorted to administrative justice to seek the removal of ordinances deemed to be at odds with law provisions.

In terms of sanctions, during the course of 2014 there was a relative decline in the number of administrative penalties inflicted for violations of rules on discharges, said rules suffering from the uncertainty surrounding the regulatory framework for the classification of receptor bodies as mentioned above.

Some water treatment activities were investigated by the Judicial Authorities in 2014, with the issue of seizure orders for two purification plants; for one of these the seizure order was removed during the year.

During the year orders were issue for the release from seizure of another three plants.

With reference to large treatment plants, seizure orders remain on the Roma Nord and Roma Est plants, in connection with which the Company, while fully defending its operations, has continued to implement the extraordinary maintenance and revamping plan, complying with the instruction from the relevant authorities.

 

ACEA Ato2 – criticalities of the drinking water system

Following the acquisition of IIS management, two criticalities have emerged:

  • the quality of drawn water;
  • water scarcity chiefly in the area to the south of Rome.

With regard to the first point, and the qualitative and quantitative crisis caused by the presence of water sources whose quality does not come up to standards for chemical parameters such as arsenic and fluoride naturally present in underground water supplies in areas of volcanic origin, with consequent problems in terms of the quantity and quality of distributed water (Municipalities in the Castelli Romani area, and more generally in the volcanic areas of the ATO having more than 170,000 inhabitants and fourteen Municipalities), the Company has worked to draw up and enact adequate recovery plans to ensure that parameters laid down in legislative decree 31/2001 are met, said plans to be included in the subsequent planning of investments in the Area Plan.

To this end, the following actions have been planned and rolled out:

ü  substitution of local water supplies deemed to be qualitatively critical with higher-quality sources;

ü  mixing of sources with water devoid of undesired elements;

ü  construction of potabilisation plants by means of filtration technology or reverse osmosis.

The above activities were completed in 2014 with the putting into service of the “Le Corti” water purifier in the Municipality of Velletri.

Today, following the completion of the above activities, it is necessary to complete already planned actions to ensure the quality of water supplied to the above-mentioned areas even under unfavourable conditions (drought, service interruptions) and to implement potabilisation plants in order to raise reliability. The Company’s efforts will then focus on building new plants to increase water supplies, particular in the summer season, in the municipalities of Oriolo Romano, Sant’Oreste, Allumiere (second) and Fiano Romano.

As regards the second criticality, namely the scarcity of water chiefly in the Colli Albani area, whose supplies depends on the aqueducts of Simbrivio, Doganella and over 140 local wells, over the years a number of interventions have been carried out to reduce the problem, such as diverting the Pertuso spring, activation of new plants, the Arcinazzo reservoir and the Ceraso “booster” plant.

Despite these actions and favourable climate trends, during the course of 2014 some criticalities again emerged in municipalities in the Colli Albani zone (Velletri, Genzano di Roma, Lanuvio and Ariccia), mainly connected with the configuration of plant and network infrastructures in the territory, for which the Company is looking into the most appropriate measures that need to be adopted.

 

Energy segment

With regard to the Energy Segment, the main operational risks linked to the activities of the subsidiaries (Acea Energia and Acea Produzione) may regard material damage (damage to assets, shortcomings of suppliers, negligence), damage due to lost output, human resources and damage deriving from external systems and events.

To mitigate these operational risks, the companies have entered into a series of insurance policies from the start of their operations, to cover Property Damage, Business Interruption and Third Party Liability with leading insurance companies. Particular attention has been devoted by the companies to the training of their employees, as well as the definition of internal organisational procedures and the drafting of specific job descriptions.

 

Networks Segment

The main risks associated with the Networks Segment can be classified as follows:

  • risks relating to the effectiveness of the investments for the replacement/renewal of grids, in terms of expected effects on the improvement of service continuity indicators;
  • risks relating to quality, reliability and duration of the works carried out;
  • risks relating to the ability to meet the terms for obtaining prescribed authorisations, regarding both the construction and start-up of plants (pursuant to Regional Law 42/90 and related regulations) and performing work (authorisations of municipalities and other similar authorisations), according to the need to develop and enhance the plants.

Risks relating to the effectiveness of investments relate primarily to the increasingly stringent rules of the electricity and gas Authority on the subject of service continuity. ACEA Distribuzione is combating this risk by enhancing instruments for the analysis of network functioning in order to better direct investments (e.g. ORBT Project), and applying new technologies (e.g. automation of MV network, smart grid, etc.)

As far as the risk linked to work quality is concerned, ACEA Distribuzione implemented operational, technical and quality control systems, including the creation of the Works Inspection Unit, which forms part of the Quality and Safety department. The results of the inspections, which are processed electronically, give rise to rankings (reputational indicators), that will be used to award contracts under a "vendor rating" system, developed in collaboration with the University of Tor Vergata (Rome). This system ranks contractors according to their reputation, scored on the basis of their ability to meet the quality and safety standards for contract work.

The system also allows the identification and application of penalties. In cases of serious default, the principal may also suspend the contractor’s activities. In 2014, 43 work sites were suspended due to safety non-compliance out of a total of 1,240 inspections conducted.

During the year, the good level in the reputation indicator was confirmed for the companies that have worked for ACEA Distribuzione.

ACEA S.p.A.’s Safety and Protection Unit is implementing a rating system for Suppliers, in which the above indicator plays a part.

A rating system is also in place regarding the services awarded to external professionals involved in the planning and execution of works.

The risk relating to the ability to meet deadlines arises from the number of organisations that have to be addressed in the authorisation procedures and from the considerable uncertainty linked to the response times of these organisations; the risk lies in the possibility of denials and/or in the technical conditions set by the above entities (such as the construction of underground rather than above-ground plants, with a subsequent increase in plant and operating costs). It should also be noted that lengthy proceedings result in higher operating costs, are difficult to deal with for operating structures (drafting and presentation of in-depth project examinations, environmental studies, etc.) and require participation in service conferences and technical meetings at the competent offices. However, the substantial risk is still essentially linked to the non-obtainment of authorisations, with the result being the inability to upgrade plants and subsequent greater risk linked to the technical performances of the service (at present there are delays in upgrading the HV network in the coastal area and the Terna procedure to construct a new Castel di Leva primary substation. It is noted that a particularly critical point is the long response times of a number of the administrations contacted.

 

Environment segment

The waste-to-energy plants, as well as, to a lesser extent, waste treatment plants, are highly complex from a technical point of view, requiring the companies to employ qualified personnel and adopt organisational structures with a high level of know-how. The need to maintain the plants’ technical performance levels and to prevent personnel with specific expertise (who are difficult to recruit) from leaving the companies, represent tangible risks.

These risks have been mitigated by implementing specific maintenance and management programmes and protocols, drawn up partly on the basis of the experience acquired in plant management.

Moreover, the plants and related activities are designed to handle certain types of waste. The failure of incoming material to meet the necessary specifications could lead to concrete operational problems, sufficient to compromise the operational continuity of the plants and give rise to risks of a legal nature.

For this reason, specific procedures have been adopted for monitoring and controlling incoming materials via spot checks and the analysis of samples pursuant to legislation in force.