The Issues and Challenges of Reducing Non-Revenue Water. Rudolf Frauendorfer

      

       The Issues and Challenges of Reducing Non-Revenue Water

      Rudolf Frauendorfer

      Roland Liemberger

       Asian Development Bank

      © 2010 Asian Development Bank

      All rights reserved. Published 2010.

      Printed in the Philippines.

      ISBN 978-92-9092-398-5

      Publication Stock No. RPT102319

      Cataloging-In-Publication Data

      Frauendorfer, R. and R. Liemberger.

      The issues and challenges of reducing non-revenue water.

      Mandaluyong City, Philippines: Asian Development Bank, 2010.

      1. Non-revenue water. I. Asian Development Bank.

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      Foreword

      Chronic water losses have been the hallmark of urban Asia’s water management over the decades. This may not have mattered much during an era of assumed plenty. But the rapid growth of Asia’s towns and cities, coupled with increased volumes of water for irrigated agriculture, energy, and industry, has meant that there is much less water to go around in the urban centers. The loss of an estimated 29 billion cubic meters of treated water every year, valued conservatively at $9 billion, is no longer something that Asia’s urban water managers can ignore.

      Reducing these water losses is critical to efficient resource utilization, efficient utility management, enhanced consumer satisfaction, and postponement of capital-intensive additions to capacity. Wherever active water loss reduction programs have been initiated and sustained, the gains to consumers and utilities alike have been significant. In fact, as Frauendorfer and Liemberger point out, the costs of improved service delivery are much lower when undertaken through investments in non-revenue water reduction rather than through investments in capital projects to augment supply capacities.

      This report has arrived not a moment too early. At a time of blistering economic growth in Asia and rising competition for scarce freshwater resources, Frauendorfer and Liemberger remind us of the enormity of the urban water challenge in Asia, the critical role of non-revenue water management, its constituent elements, and measures to address it. This is a “must read” for urban water practitioners, policy makers, owners of water companies, investors, and those of us in the development business who can, hopefully, induce changes in Asia’s urban water management, armed with the new insights that this paper provides.

      Acknowledgment

      This report on The Issues and Challenges of Reducing Non-Revenue Water benefited from discussions with and review by members of ADB’s Water Committee, in particular the Urban Water Stream. Special thanks go to Joanna Masic in ADB’s East Asia Department for her detailed comments.

      Introduction

      Facing ever-increasing urban populations and expanding service areas, many water utilities in Asia and the Pacific continue to struggle with providing clean drinking water to their consumers. Common water supply problems in Asian cities are related to the sources and use of raw water, intermittent supply, and the quality of tap water at the consumer’s end.

      One of the major challenges facing water utilities is the large proportion of water loss in distribution networks

      One of the major challenges facing water utilities is the high level of water loss in distribution networks. If a large proportion of water that is supplied is lost, meeting consumer demands is much more difficult. Since this water yields no revenue, heavy losses also make it harder to keep water tariffs at a reasonable and affordable level. This situation is common in many Asian cities. “Non-Revenue Water” (NRW)—defined as the difference between the amount of water put into the distribution system and the amount of water billed to consumers—averages 35% in the region’s cities and can reach much higher levels.

      NRW is a good indicator for water utility performance; high levels of NRW typically indicate a poorly managed water utility. In addition, published NRW data are often problematic, suspicious, inaccurate, or provide only partial information. Some utilities invent “creative” definitions of NRW, use wrong or misleading performance indicators, and fail to quote important information, such as average pressure and supply time.

      Conversely, successful utilities actively address NRW by controlling physical losses, ensuring customer meter accuracy and making all efforts to keep the number of illegal connections within limits. Taking these measures can boost revenue by increasing the amount of water that can be billed while reducing wastage of the product. This increases profitability and improves the return on investment. With larger profits, the utility can then reinvest retained earnings and improve its productivity.

      While the benefits of reducing NRW are well known, decades of effort have not delivered much improvement in the developing world. While there are many explanations and excuses, much of the failure is due to underestimating the technical difficulties and complexity of NRW management, along with the potential benefits of taking action.

      As long as utility owners are not sufficiently aware they are “sitting on a goldmine,” they will continually fail to incentivize or oblige their chief executive officers to take action (for example, by paying or withholding subsidies). On the other hand, if utility leaders are not sufficiently informed about the level, causes and cost of NRW, along with the potential for improvement, they will not be able to convince their owners to provide funding for NRW management activities and investments. Further, lack of support for comprehensive NRW management by utility owners and chief executive officers makes it difficult to motivate utility staff and provide them with the means (funding, training, and technology) to successfully and sustainably reduce NRW.

      As a consequence, billions of cubic meters of treated water will continue to be lost, and water utilities will continue to lose a substantial amount of revenues. To meet growing demand, new resources will be developed, more water will be pumped into the leaking networks, and the vicious cycle will continue.