5 Reasons You Need to Care about Non-Revenue Water

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Everybody likes paying for services and products they don’t receive, right? We all know that’s not true. If a drinking water utility serves you, well, you pay for water that you don’t consume and that never even makes it onto your side of the water meter. It’s called non-revenue water.

What is Non-Revenue Water?

Non-revenue water is a term coined by the International Water Association to describe that water for which the utility receives no revenue. Water utilities worldwide lose an estimated US$14 Billion in non-revenue water every year. It’s not just a developing world issue – over half of that amount (US$8.76 Billion is lost annually in the United States alone). That’s water we pay for but never consume. Non-revenue water consists of three categories:

  •  Unbilled Authorized Consumption – This category consists of water consumption that public policy exempts from paying rates. Think water used for fire-fighting or water used to flush mains.
  •  Apparent Losses – Sometimes called commercial losses, this category accounts for water theft, data errors, and metering inaccuracies. Think slow meters, misread meters, and unreported, unauthorized usage from hydrants.
  •  Real Losses – Also called physical losses, real losses comprise the leaks in the system, everywhere from storage tanks, to transmission and distribution mains to pre-meter leaks in service connections.

Every utility has some level of non-revenue water. If we paid rates that covered the cost of a perfectly constructed, leak-proof system, revolution might ensue judging by some of the rate cases in which I’ve been involved. Even if a perfectly constructed system existed, there are still main breaks that leak water, fires that need to be put out and mains that need to be flushed.


How You Pay for Non-Revenue Water

You pay for non-revenue water even though you don’t use it. Why? Utilities set rates based on their costs. Hidden in those costs is non-revenue water. Imagine a water utility that has non-revenue water of 1 million gallons per year, a hypothetical figure. The utility needs to treat , expend energy to pump, and maybe even pay for that non-revenue water (through payments for water rights, a wholesale agreement or otherwise). These factors have costs associated with them, but the utility fails to directly collect money to recover those costs from end users. The water escapes the system and returns to the groundwater without cost recovery by the utility. Accordingly, the utility recovers those costs by charging rates to all of its customers set to recover all of the utility’s costs, including costs associated with non-revenue water. That is how you pay for non-revenue water. It’s a hidden component of your utility bill.


Why You Need to Care About Non-Revenue Water

Here are 5 reasons you need to care about the level of non-revenue water in the water utility serving you.

1.      Utility Management Metric. Your utility’s non-revenue water percentage provides a window into your water utility’s management. The lower the percentage of non-revenue water, the better your water utility’s management likely performs. Utilities with lower non-revenue water probably maintain robust main replacement and meter replacement programs, proactively seek out leaks and aggressively defend against water theft.

2.      Better Roads and Public Infrastructure. When water leaks from pipes, it can erode the subsurface underneath roads and other public infrastructure. When the erosion reaches a critical point, the road collapses or the building foundation fails. The better your water utility performs in non-revenue water reduction, the less likely your community will need to replace its public infrastructure, especially its roads, often.

3.      Downward Pressure on Utility Bills. The less non-revenue water your water utility produces, the lower its total costs will be, all other things being equal. This will put downward pressure on rates. In this age of infrastructure investment needs, it would be irresponsible to intimate that rates will actually decrease.

4.      Delay Spending on Future Infrastructure. If a water utility fails to minimize its non-revenue water, it will need additional sources of supply and treatment plants earlier than if non-revenue water were minimized. These facilities represent huge capital investments on the part of the utility that the customer base will eventually pay for. The longer these investments can be delayed, the better off you, the ratepayer, will be.

5.      Avoiding Public Health Risks. With leaky pipes come the risk of contaminated groundwater (including sewage leaking from sewer pipes) entering the drinking water pipes through the leaks during low pressure events and other supply interruptions. Contaminated drinking water spreads disease, which isn’t good for anyone. For an interesting take on these public health risks, check out the chapter on India in Charles Fishman’s excellent book, The Big Thirst. (Note - this is not an affiliate link).


Go Find Your Water Utility’s Non-Revenue Water Calculation

A water utility that knows its customers are informed and educated is more likely to be responsive to customer demands. Asking about non-revenue water will demonstrate a level of understanding of water utility issues that does not exist in many areas. Find out if your water utility has a plan for reducing its non-revenue water. Ask your utility to publish it on its website and also publish its non-revenue water calculation on its website. Do it now. Otherwise, you’ll continue to pay for water more water than you should.

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