Page 187 - Water Loss Control

Contr olling Appar ent Losses—Capturing Missing Revenue and Data Integrity 161

over 5% of a utility’s annual billing for water and wastewater service rendered to indi-
vidual customers. Many water utilities are confronted with increasing financial pres-
sures from a variety of forces and stand to gain from the revenue recovery potential of
apparent losses. Since apparent losses are quantified by the amount of water improp-
erly recorded at the customer’s delivery point, this water is valued at the retail cost that
is charged to the customer. Water rates frequently also include a waste water charge
that is also based upon the volume of consumption. The cost impact of apparent losses
is frequently higher than the impact of real losses, which are typically valued at the
variable production costs to treat and deliver the water. When water resources are
greatly limited, real losses can also be valued at the retail rate based upon the theory
that any water saved by real loss reduction can be sold to customers. Since the retail
rates usually include fixed and administrative costs, infrastructure improvement, and
debt repayment, this cost is typically much greater than the variable production costs
that water utilities incur to treat and deliver water. Therefore apparent losses can have
a dramatic financial impact to the water utility’s revenue stream.
Apparent losses also create a problem of payment inequity for the community.
Apparent losses occur when the actual amount of water delivered is understated.
Hence, a portion of the customer population obtains discounted or free water service.
This means that the paying customer population effectively subsidizes those customers
who are underpaying or not paying. This situation is particularly troubling as water
utilities encounter pressure to raise water rates, with the paying customers shouldering
an even greater financial burden for the entire water-using community. Reducing appar-
ent losses and recovering missed revenue can reduce the frequency of, or defer the need
for, water rate increases by identifying underpaying and nonpaying customers and
adding them to the active billing roles.
Apparent loss recovery can create a direct financial improvement to the water util-
ity, and many apparent loss occurrences can be recovered with relatively little cost. This
is important in terms of seeking early success and payback to the water loss control
program. Funds recovered early in the program in this manner can serve to seed further
activities in the long-term water loss control effort.
In summary, water utility managers can obtain a more realistic quantification of the
actual customer demand by identifying apparent losses. Controlling apparent losses
can result in the capture of significant missing revenue for the water utility. Hence, the
assessment of apparent losses has bearing on all quantitative aspects of accountability
and the water loss control program.

11.7 The Economic Approach to Apparent Loss Control
Figure 11.3 is a graph that represents a conceptual approach to water loss control, in this
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case applied to apparent losses. The center boxes represent three levels of apparent
losses, as defined below:
• The outer box represents the current volume of apparent losses that a water
utility can quantify using the water audit process.
• The middle box represents the utility-specific target level for apparent losses.
Conceptually, this is the economic level of apparent losses (ELAL), or the level
at which the cost of the apparent loss control efforts equal the savings garnered
from the apparent loss recovery.