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:


 * Unbilled authorized consumption
 * Apparent losses (water theft and metering inaccuracies)
 * Real losses

In many utilities the exact breakdown of NRW 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 meters).

In most developed countries, the share of real losses is much higher than apparent losses. In many developing countries, apparent losses - in particular theft through illegal connections - are higher than real losses. Reducing apparent losses from illegal connections is often beyond what an 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 is a key tool to assess the breakdown of NRW and to develop a program for NRW reduction. However, many utilities have never conducted a water audit.

NRW is sometimes also referred to as unacccounted-for water. However, IWA recommends the use of the term NRW.

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). Nevertheless, the use of percentage figures to compare levels of NRW remains common despite its shortcomings.

Overview of NRW levels
The level of NRW can vary from less than 10 percent up to more than 90 percent, as it is the case in Lagos, Nigeria. In Germany, according to a study commissioned by the German water industry association BGW, NRW averages only 7 percent. According to the same study it was 19 percent in England and Wales, 26 percent in France and 29 percent in Italy According to the Asian Development Bank levels of NRW in 18 Asian large cities vary between less than 10% (in Japan) and 60%. 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. In the United Kingdom NRW stands at 19% or 149 liter/property/day, a level that the Environment Agency considers an economic level of leakage.

Optimal level of NRW?
There is some debate as to what is the lowest desirable level of NRW. 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), and if volumetric tariffs are low. 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. 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 marginal cost of reducing NRW exceeds the marginal benefits or water savings, an economic optimum has been achieved. There are, however, no empirical studies that have estimated the optimum level of NRW for a particular utility.

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, independent of economic or financial considerations, in order to minimize the risk of drinking water contamination in the distribution network.

Criticism of the concept
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 developped. The ILI is defined as the ratio of Current Annual Real Losses (CARL) to Unavoidable Annual Real Losses (UARL).