2.1 DEFINING WATER SUPPLIER LOSSES

Simply stated, the problems of water and revenue losses are1

• Technical: Not all water supplied by a water utility reaches the customer.

• Financial: Not all of the water that reaches the end user is properly measured or paid for.

• Terminology: Standardized definitions of water and revenue losses are lacking.

The International Water Association (IWA) defines two major categories under which all types of supplier water loss occurrences fall:

• Real losses are the physical escape of water from the distribution system, and include leakage and overflows prior to the point of end use.

• Apparent losses are essentially paper losses and consist of customer use which is not recorded due to metering error, incorrect assumptions of unmeasured use, or unauthorized consumption.

While these two definitions are distinguished by a stark physical differentiation, a dramatic economic difference also exists, on a marginal cost basis. Real losses, which are most usually leakage, are typically valued at a marginal production cost of the water. Apparent losses, which occur at the customer destination, penalize the water supplier at the retail cost a rate usually much higher than the production cost. While the marginal costs are only short-term costs, and other long-term costs must also be assessed, the cost implications of real and apparent losses require that a careful assessment of each be undertaken to design the most appropriate water loss optimization program.