Non-revenue water

Non revenue water (NRW) is water that has been produced and is “lost” before it reaches the customer. Losses can be real losses (through leaks, sometimes also referred to as physical losses) or apparent losses (for example through theft or metering inaccuracies). High levels of NRW are detrimental to the financial viability of water utilities, as well to the quality of water itself. NRW is typically measured as the volume of water "lost" as a share of net water produced. However, it is sometimes also expressed as the volume of water “lost” per km of water distribution network per day.

Breakdown of NRW into its components

The International Water Association (IWA) has developed a detailed methodology to assess the various components of NRW. Accordingly NRW has the following components:^[1]

• Unbilled authorized consumption
• Apparent losses (water theft and metering inaccuracies)
• Real losses (from transmission mains, storage facilities, distribution mains or service connections)

In many utilities the exact breakdown of NRW components and sub-components is simply not known, making it difficult to decide about the best course of action to reduce NRW. Metering of water use at the level of production (wells, bulk water supply), at key points in the distribution network and for consumers is essential to estimate levels of NRW (see Water metering).

In most developed countries, there are no or very limited apparent losses. For developing countries the World Bank has estimated that, on average, apparent losses - in particular theft through illegal connections - account for about 40% of NRW.^[2] In some cities, apparent losses can be higher than real losses. Reducing apparent losses from illegal connections is often beyond what a utility can achieve by itself, because it requires a high level of political support. Illegal connections are often in slums, which means that their regularization in some cases particularly affects the poor. A water audit^[3] is a key tool to assess the breakdown of NRW and to develop a program for NRW reduction. Often a distinction is made between unvalidated and validated water audits. Unvalidated water audits are desktop studies that include many estimates and their results can have an error range for real losses of +/- 50% or more. Its main value is to identify where it is necessary to reduce the uncertainty of the water audit through validation. Validating water audits is a complex process that involves testing of production water meters, testing of a representative random sample of customer meters, eliminating systematic errors created through the billing process and validating the number of illegal connections through aerial mapping, field surveys or cross-references between various existing databases.^[4] In developing countries it is rare to find utilities that have undertaken validated water audits, and even in developed countries they are not systematically used.

NRW is sometimes also referred to as unaccounted-for water (UFW). While the two terms are similar, they are not identical, since non-revenue water includes authorized unbilled consumption (e.g. for firefighting or, in some countries, for use by religious institutions) while unaccounted-for water excludes it.^[5]

Indicators for NRW benchmarking

The most commonly used indicator to benchmark NRW is the percentage of NRW as a share of water produced. While this indicator is easy to understand and indeed has been widely used, it has increasingly been recognized that it is not an appropriate indicator to benchmark NRW levels between utilities or even to monitor changes over time. When absolute losses are constant the percentage of NRW varies greatly with total water use. This problem can be eliminated by measuring NRW not as a share, but in terms of absolute losses per connection per day, as recommended by the International Water Association (IWA).^[6] Nevertheless, the use of percentage figures to compare levels of NRW remains common despite its shortcomings. The International Benchmarking Network for Water and Sanitation recommends to use different indicators (percentage, losses per connection or losses per km of network) together.^[5]

Overview of NRW levels

The World Bank has estimated the total cost of NRW to utilities worldwide at US$14 billion per year. Reducing by half the current levels of losses in developing countries, where relative losses are highest, could generate an estimated US$ 2.9 billion in cash and serve an additional 90 million people.^[7] Most available data on NRW levels are expressed in percentage terms, ranging from 7% in Germany to more than 90% in Lagos, Nigeria.^[8]

There are considerably less data on NRW levels in cubic meter per km of network per day, although this measure provides a more appropriate basis for comparisons than percentage figures. Here are some examples:

• UK 5
• Russia 20
• Ireland 29 ^[9]
• Brazil 42
• China 52^[10]
• Bucharest 350 in 2000 and 176 in 2007 ^[11]

Please note that these levels are given per km of network and not per connection.

Europe

According to a report by the European Environment Agency NRW in Denmark it has consistently been less than 10%.^[12] In Germany, according to a study commissioned by the German water industry association BGW, NRW averages only 7%. According to the same study it was 19% in England and Wales, 26% in France and 29% in Italy^[13]

Asia

According to the Asian Development Bank levels of NRW in 18 Asian large cities vary between less than 10% (in Japan) and 60%.^[14]

According to a report by the European Environment Agency NRW in Yerevan, Armenia, was almost 80% in 2003.^[12]

Benefits of NRW reduction

Benefits of NRW reduction, in particular of leakage reduction, include

• financial gains from increased water sales or reduced water production, including possibly the delay of costly capacity expansion;
• increased knowledge about the distribution system;
• increased firefighting capability due to increased pressure;
• reduced property damage; and
• reduced risk of contamination.^[15]

Leakage reduction may also be an opportunity to improve relations with the public and employees. A leak detection program may be highly visible, encouraging people to think about water conservation.^[16] The reduction of commercial losses, while politically and socially challenging, can also improve relations with the public, since some consumers may be reluctant to pay their water bills knowing that many others use services without being billed or being underbilled.

In the specific context of the United States NRW reduction can also mean reduced legal liability and reduced insurance payments.^[15]

Programs to reduce NRW and their pitfalls

Reducing and controlling NRW is complex. Many programs to reduce NRW have failed in the long run. Often they focus on real losses, without sufficient attention being paid to apparent losses. If programs achieve an initial reduction in NRW levels, they often increase again over the years to the same or even higher levels than before the program. Both apparent and real losses have a natural tendency to increase if nothing is done: more leakage will occur, there will be more defective meters, and information on customers and networks will become more outdated. In order to sustain NRW at low levels, investments in fixing leaks and replacing meters are insufficient in the best case and ineffective in the worst case. To achieve permanent results, management procedures related to a utility's organization, precedures and human resources have to be changed.^[17] Additionally the implementation of an Intelligent Pressure management system is an efficient approach to reduce the total real losses in the long term. It is one of the most basic and lucrative forms of optimizing a system and generally provides fast investment paybacks.^[18]

According to a study by the World Bank some of the reasons why NRW levels in developing countries have not been reduced significantly are the following.^[19]

Physical loss reduction is an ongoing, meticulous activity with few supporters among the following:

• Politicians: there is no “ribbon cutting” involved.
• Engineers: it is more “fun” to design treatment plants than to fix pipes buried under the

road.

• Technicians and field staff: detection is done primarily at night, and pipe repairs often

require working in hazardous traffic conditions.

• Managers: it needs time, constant dedication, staff, and up-front funding.

Nor is the reduction of commercial losses very popular among the following:

• Politicians: unpopular decisions might have to be made (disconnection of illegal consumers

or customers who don’t pay).

• Meter readers: fraudulent practices might generate a substantial additional income.
• Field staff: working on detecting illegal connections or on suspending service for those

who don’t pay their bills is unpopular and can even be dangerous.

• Managers: it is easier to close any revenue gap by just spending less on asset rehabilitation

(letting the system slowly deteriorate) or asking the government for more money.

— World Bank, The Challenge of Reducing Non-Revenue Water in Developing Countries

Another source quotes the seven most frequent reasons for failure of NRW reduction programs as follows:

• Poor design
• Diagnoses based on preconceptions rather than experimentation
• Partial implementation
• Failure to mobilize the necessary human and financial resources
• Lack of coordination between the components of the program
• Underestimation of the difficulties
• Underestimation of the time factor ^[17]

Successful examples of NRW reduction

In the following cities high levels of non-revenue water have been susbtantially reduced:

• Dolphin Coast (iLembe), South Africa, 30% in 1999 to 16% in 2003 by the private utility Siza Water Company;^[20]
• Istanbul, Turkey, from more than 50% prior to 1994 to 34% in 2000 by the public utility ISKI;^[21]
• Jamshedpur, India, from an estimated 36% in 2005 to 10% in 2009 by the private utility Jamshedpur Utilities and Services Company;^[22]
• East Manila, Philippines, from 63% in 1997 to 16% in 2009 by the private utility Manila Water;^[23]
• Ouagadougou and other cities in Burkina Faso, by the public utility Office National de l’Eau et de l’Assainissement (ONEA) which achieved a level of 16% in 2008;^[24]
• Paranaguá, Brazil, from 58% in 2000 to 38% in 2006 by a private utility;^[20]
• Phnom Penh, Cambodia, from 72% in 1993 to 6% in 2008 by the public utility Phnom Penh Water Supply Authority (PPWSA) (see Water supply in Phnom Penh for more details);^[25]
• Five municipalities in Rio de Janeiro State (Prolagos), Brazil, from 60% in 2000 to 36% in 2006 by a private utility;^[20]
• Rabat, Morocco, from 32% in 2002 to 19% in 2008 by the private utility REDAL;^[26]
• Cities in Senegal, from 32% in 1996 to 20% in 2006 by the private utility Senegalaise des Eaux; ^[27]
• Tangiers, Morocco from 41% in 2002 to 21% in 2008 by the private utility Amendis.^[26]

These successes were achieved by both public and private utilities, in every continent, in emerging countries as well as very poor countries, in large cities and smaller towns. All required a long-term commitment by utility management and the government - local or national - over a period of at least four years.

Optimal level of NRW?

There is some debate as to what is an economically optimal level of leakage.^[28] From a financial point of view, there are fewer incentives to reduce NRW if water production is cheap, if there is no or little metering (and revenues thus are independent of actual consumption), or if volumetric tariffs are low in metered areas. From an economic point of view, NRW reduction usually makes more sense than from a financial point of view, because the economic benefit from water use normally exceeds the financial revenues to the utility, since households typically derive a higher benefit from water than what they pay for it. However, even from an economic point of view it is not appropriate to try to reduce NRW to the lowest possible level, because the marginal cost of reducing NRW increases once the cheaper options have been exploited. Once the marginal cost of reducing NRW exceeds the marginal benefits or water savings, an economic optimum has been achieved.^[29]

In the United Kingdom the assessment of economic levels of leakage has a long history. The first national study on the topic was published in 1980 setting down a methodology for the assessment of economic leakage levels. This led to the implementation of sectors (District Metered Areas) in most water companies in the UK. The findings were reported in a major national research program in 1994. As a result of a drought in 1995/96 a number of companies initiated major leakage management programmes based on economic assessments. The situation in other parts of the world is quite different from the UK. Particularly in developing countries sectorisation is very rare and proactive leakage control limited. The benefits of pressure management are not widely appreciated and there is generally no assessment of the economic level of leakage.^[30]

From a public health and drinking water quality point of view it is being argued that the level of real water losses should be as low as possible, independently of economic or financial considerations, in order to minimize the risk of drinking water contamination in the distribution network.

The World Bank recommends that NRW should be "less than 25%", while the Chilean water regulator SISS has determined a NRW level of 15% as optimal in its model of an efficient water company that it uses to benchmark service providers.^[31] In England and Wales NRW stands at 19% or 149 liter/property/day.^[32]

In the United States the American Water Works Association's (AWWA) Water Loss Control Committee recommended in 2009 that water utilities conduct annual water audits as a standard business practice. AWWA recommends that water utilities should track volumes of apparent and real losses and the annual cost impacts of these losses. Utilities should then seek to control excessive losses to levels that are economic for the water utility.^[33] In 1999 the California Urban Water Conservation Council identified a 10 percent benchmark for unaccounted-for water.^[34]

Criticism of the indicator

The concept of NRW as an indicator to compare real losses of water utilities has been criticized as flawed, particularly because real losses depend to some extent on factors largely outside the control of the utility, such as topography, age of network, length of network per connection and water use per capita. As an alternative indicator for the benchmarking and control of real losses an Infrastructure Leakage Index (ILI) has been developed. The ILI is defined as the ratio of Current Annual Real Losses (CARL) to Unavoidable Annual Real Losses (UARL).^[35]

Sources

• Johnson, Paul V.: Unaccounted-for water puzzle: More than just leakage. Florida Water Resources Journal, February 1996

References

1. ^ International Water Association:Assessing NRW and its components - a practical approach, August 2003, accessed on November 29, 2009
2. ^ World Bank, December 2006: The Challenge of Reducing Non-Revenue Water in Developing Countries, p. 3
3. ^ American Waterworks Association:Water Wiser:Water Audits and Loss Control, accessed on November 8, 2009
4. ^ Paul Fanner:Driving down water loss:validating water audits for accurate NRW management, in:Water 21, Magazine of the International Water Association, December 2009, p. 53-54
5. ^ ^{a b} International Benchmarking Network for Water and Sanitation(IB-NET): Non-Revenue Water at the International Benchmarking Network for Water and Sanitation Utilities (IB-NET)
6. ^ Water 21, Journal of the IWA, April 2006, p. 30
7. ^ World Bank, December 2006: The Challenge of Reducing Non-Revenue Water in Developing Countries, p. v
8. ^ Whichwaynigeria.net:Regulating to revive water supply in urban Nigeria, August 22, 2009 by JOACHIM EZEJI, accessed on November 29, 2009. The author quotes a 2003 World Bank report saying that: "Lagos State Water Corporation holds the dubious distinction of having the highest recorded level of unaccounted-for-water in the world. Only 4 percent of its water production capacity goes towards the creation of revenue."
9. ^ National Water Study, WS Atkins Ireland p. 7
10. ^ World Bank:Stepping Up, p. 12
11. ^ World Bank:Water in Bucharest:A Utility's Efficiency Gains under a Concession, February 2011, Viewpoint Note No. 326, by David Earhardt, Melissa Rekas and Martina Tonizz
12. ^ ^{a b} European Environment Agency:Unaccounted-for water in Eastern Europe, Caucasus and Central Asia countries (1994-2004), accessed on November 29, 2009
13. ^ Metropolitan Consulting Group: VEWA - Vergleich europaeischer Wasser- und Abwasserpreise, p. 4 of the executive summary [1] The study states that its methodology allows for an accurate comparison, including water used to flush pipes and for firefighting.
14. ^ Asian Development Bank, by Arthur C. McIntosh:[http://www.adb.org/Documents/Books/Asian_Water_Supplies/chapter09.pdf Asian Water Supplies: Reaching the Urban Poor], Chapter 9:Non-Revenue Water, 2003, accessed on November 8, 2009
15. ^ ^{a b} Lahlou, Zacharia M.: Leak Detection and Water Loss Control, National Drinkingwater Clearinghouse at West Virginia University, 2001, p. 2
16. ^ Lahlou, Zacharia M.: Leak Detection and Water Loss Control, National Drinkingwater Clearinghouse at West Virginia University, 2001, p. 1
17. ^ ^{a b} Michel Vermersch and Alex Rizzo: Designing an action plan to control non-revenue water, in: Water 21, Magazine of the International Water Association, April 2008, p. 39-41
18. ^ J. Thornton, R. Sturm and G. Kunkel: Controlling Real Losses - Pressure Management, in Water Loss Control, 2008, McGraw-Hill, p. 301-343
19. ^ World Bank, December 2006: The Challenge of Reducing Non-Revenue Water in Developing Countries, p. 7-8
20. ^ ^{a b c} Philippe Marin, Public-Private Partnerships for Urban Water Utilities Experiences in Developing Countries, World Bank, 2009, p. 76-88
21. ^ Dogan Altinbilek:Water Management in Istanbul, International Journal of Water Resources Development, Vol. 22, No. 2, 241-253, June 2006
22. ^ Asian Development Bank:Every Drop Counts. Learning from good practices in eight Asian cities, 2010, accessed on September 26, 2010
23. ^ Manila Water:Operational Performance, retrieved on February 27, 2011
24. ^ World Bank:Burkina Faso - Urban Water Sector Project, Project Appraisal Document, Annex 1:Country and Sector Background, 30 April 2009, accessed on August 10, 2010
25. ^ WASH Names in the News:Phnom Penh Water Supply Authority Wins Stockholm Industry Water Award 2010, June 11, 2010
26. ^ ^{a b} Global Water Intelligence:Debtors impact Veolia Maroc's cashflow, February 2010, p.8
27. ^ World Bank: IDA at Work:98 Percent of the Population has access to safe water in Senegal
28. ^ D. Pearson and S.W. Trow Calculating Economic Levels of Leakage, Leakage 2005 - Conference Proceedings, accessed on November 8, 2009
29. ^ Wyatt, Alan S.:Non-Revenue Water: Financial Model for Optimal Management in Developing Countries, RTI Press, June 2010.
30. ^ D. Pearson and S.W. Trow Calculating Economic Levels of Leakage, Leakage 2005 - Conference Proceedings, p. 12-13, accessed on November 8, 2009
31. ^ SISS Water supply and sanitation in Chile#Efficiency(water losses)
32. ^ OFWAT. 2008. Water industry facts and figures
33. ^ American Water Works Association, M36 Publication, 3rd Edition, Water Audits and Loss Control Programs, 2009
34. ^ Richard G. Sykes, Andrew K. Enos and Ronald L. Bianchetti, East Bay Municipal Utility District, Oakland, California, USA:Monitoring and Managing Unaccounted for Water, Proceedings of the International Symposium on Efficient Water Use in Urban Areas - Innovative Ways of Finding Water for Cities, 8 to 10 June 1999, quoted on the website of UNEP's International Environmental Technology Centre (IETC)
35. ^ A.O. Lambert and Dr R.D. McKenzie:Practical Experience in using the Infrastructure Leakage Index, International Water Association Conference ‘Leakage Management: A Practical Approach’, Lemesos, Cyprus, November 2002, accessed on November 8, 2009

See also

• Water supply
• Water meter
• Utility