Turin-Index of final user arrears status

The Index

Quantification and identification of final users belonging to vulnerable groups, or facing problems of affordability of tariffs of public services, is a strategic task for both private operators and welfare policy-makers.
A deep analysis of the phenomenon of arrears, the existence of different points of view about the phenomenon and the high heterogeneity between geographical areas and different services led to the idea of designing a synthetic measure of arrearage, flexible and easy to be understood and used by both specialized technical operators (utilities and experts) and local decision makers. Starting from systematic analysis of poverty and economic literature focusing on the design of indexes of persistence poverty, the Turin School of Local Regulation launched the Turin-Index, an application of the Longitudinal Poverty Index to the case of arrearage. The Index is a synthetic measure, a range between 0 and 1, that can be used by local operators to identify groups of users who face a higher risk of delaying payments. 0 and 1 identify the two extreme situations: the value “1” represents users in “chronic” arrears, that is to say with a record of fully delayed payments. The value “0” is given to those who never delayed their payments. The high number of bills in the sample paid with no delays generates average values of the Turin-Index very close to zero (normally in the second decimal place). 

The peculiarity of the Index is the possibility to offer a dynamic vision of the phenomenon of poverty, taking into consideration the user’s personal “history”, the intensity of the status of arrearage (days of delay and debt dimension), the higher relevance of the near past than the far past (“emergency effect”). 
The emergency effect was introduced because a series of delays in payments in the far past, followed by regular payments, is likely to represent a situation of vulnerability that has been overcome. 
Finally, the Index can be aggregated (through the average) to generate measures of the phenomenon of arrears for a given service or geographical area (municipality, province, etc.).

Cases studies

The Index has been applied to the following cases:
- Municipality of Torino, Electricity, in collaboration with IREN Mercato SpA: about 175.000 households served by the regulated service (Maggior Tutela), for the years 2008-2011;
- Province of Torino, Water and sanitation service, in collaboration with SMAT SpA: a sample of about 50.000 household or multi-store building users, for the years 2007-2011;
- Province of Cuneo, Natural gas, in collaboration with EGEA SpA: about 34.000 households served by the regulated service (Maggior Tutela), for the years 2009-2011.

The results were presented in the Press Conference of 20-12-2013
Download the presentation (in Italian)
Download the Executive Summary (in English)

Potentialities of the Index