Price- -cap cap regulation regulation in port in port pricing pricing: : Price a DEA approach approach a DEA M. Basta – – C. Ferrari C. Ferrari M. Basta University of Genoa Genoa University of DiEM – – Transport Division Transport Division DiEM IX Riunione Riunione Scientifica Scientifica della Società Italiana degli Economisti dei della Società Italiana degli Economisti dei IX Trasporti Trasporti Napoli Napoli 3- - 5 Ottobre 2007 5 Ottobre 2007 3
Agenda Agenda � Aims � Aims � Concessions in Italy � Concessions in Italy � The price � The price- -cap regulation cap regulation � Case study on Genoa container terminals (VTE � Case study on Genoa container terminals (VTE and SECH): application of DEA and SECH): application of DEA � Conclusions � Conclusions �������������� ��������������������� �
Aims Aims � growth of port authority’s income, assuring a higher level � growth of port authority’s income, assuring a higher level of financial independence through: of financial independence through: � growth of concession revenue; growth of concession revenue; � � rise in fiscal income consequent on incremental traffic; rise in fiscal income consequent on incremental traffic; � � define efficient and incentive concession tariffs; � define efficient and incentive concession tariffs; � open port market to the “competition for the market”; � open port market to the “competition for the market”; � drive to efficient management of port terminal; � drive to efficient management of port terminal; � oppose the loss in competitiveness of Italian ports thanks � oppose the loss in competitiveness of Italian ports thanks to an increase in port throughput; to an increase in port throughput; � increase the economic value of port areas (scarce � increase the economic value of port areas (scarce resource). resource). �������������� ��������������������� �
Economic scenario scenario Economic � globalization and computerization of port � globalization and computerization of port operations, and consequent overlapping of operations, and consequent overlapping of market areas; market areas; � decreasing trend of cost of maritime transport and � decreasing trend of cost of maritime transport and contextual increase in importance of the non- - contextual increase in importance of the non monetary components of transport cost; monetary components of transport cost; � rise in global production, which influences the � rise in global production, which influences the maritime transport; maritime transport; � re � re- -organization of the logistic system of the organization of the logistic system of the industrial company; industrial company; � intensification of external force of competition. � intensification of external force of competition. �������������� ��������������������� �
Port models models Port Infrastructure Sovrastructure Service Public port public public public Tool port public public private Landlord port public private private Private port private private private Clear-cut division between infrastructure’s owner and operator: � difficulty in determining the criteria of efficient pricing; � absence of problems linked to antitrust policies (in theory). �������������� ��������������������� �
Landlord port authority’s objectives Landlord port authority’s objectives Generally (De Monie Monie, 2005) , 2005) Generally (De � � fully recover all port- -related costs made to provide the users with services at the related costs made to provide the users with services at the fully recover all port level of quality required; level of quality required; � � attract external investments; attract external investments; � � boost innovation; boost innovation; � � generate internal cash flows to replace and expand existing facilities that have lities that have generate internal cash flows to replace and expand existing faci to be provided by the Port Authority; to be provided by the Port Authority; � � increase market share by competing according to market rules; increase market share by competing according to market rules; � � avoid dissipation of the port authority’s asset base; avoid dissipation of the port authority’s asset base; � � maintain and increase the port’s total value. maintain and increase the port’s total value. In Italy (L. 84/1994): In Italy (L. 84/1994): � � policy, coordination, promotion, planning and control of port operations and erations and policy, coordination, promotion, planning and control of port op other commercial port activities, with power also on labour labour safety and hygiene; safety and hygiene; other commercial port activities, with power also on � � supplying, for a valuable consideration, of some activities, not linked to port supplying, for a valuable consideration, of some activities, not linked to port operations, of common good of port’s users. operations, of common good of port’s users. �������������� ��������������������� �
Port infrastructure infrastructure and and concessions concessions in in Port Italy Italy � it’s a “state good” granted – through a contract – by the port authorities to the terminal operators; � quays and storage areas are “scarce resources” and they would must give rise to a positive revenue higher than zero �� ����� �� ����� ��������� ��������� �������������� � different methods to define the concession’s starting value, for instance: � Genoa: area component +/- 5% Investments; � Venice: two-part tariff, one fixed and one variable depending on good’s typology; � Naples: % of the turnover; � generally tariff is updated on the basis of Istat’s CPI; �������������� ��������������������� �
The price price- -cap cap regulation regulation ( (Littlechild Littlechild, 1984) , 1984) The p t+1 = p t + p t (CPI - X) � any cost reductions exceeding the agreed target are earned by the company; � it provides incentives to efficiency and innovation; � it � it limits the limits the average average rate rate � a too low cap can cause operator’s of growth growth of of regulated regulated of bankruptcy, whereas a too high one allows prices to to the rate of the rate of prices extraprofits; growth of CPI of CPI less less X% X%; ; growth � terminal operators can adopt strategic behaviours to avoid penalization during the � regulatory � regulatory leg leg is is fixed fixed; ; following period; � it � it can be applied to: can be applied to: � CPI isn’t necessarily a good aproximation of inflation in port terminals; � all services; all services; � � product changes are not considered � a set of a set of services services; ; � � only only one service. one service. � �������������� ��������������������� �
The price price- -cap cap regulation regulation in in Italy Italy The Independent Authorities for the regulation of �� ��������� energy and gas sector and telecommunication �(%��� �������� one �012������'���( general guidelines for the regulation of ����!��������� public services � ��!����" � ��!���� "��!�����#��� ��!��$����%���&'�����(������) �(�����#!�(*��!������ ��!�����#��� ��!��$����%���&'�����(������) �(�����#!�(*��!������ �(��(��(%'��������������)�� ��� �& �#��+���!�)��,��(���%�������(��'��&�� ��'��&�� �(��(��(%'��������������)�� ��� �& �#��+���!�)��,��(���%�������( ��#!������(,�������#'�������#!�(�����������$$����(���(%�����#!��-�����-����.� -�����-����.� ��#!������(,�������#'�������#!�(�����������$$����(���(%�����#!�� /'����*� /'����*� Motorways Railways Telecommunication Motorways Railways Telecommunication �������������� ��������������������� �
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