INTRODUCTION

Potential economic savings from tackling operational

inefficiencies in water supply services

D. Alves*, G. Robalo**, M. Caneira***

*Strategic Projects Department, The Water and Waste Services Regulation

Authority ;Centro Empresarial Torres de Lisboa,

Rua Tomás da Fonseca, Torre G – 8.º 1600-209 Lisboa, PORTUGAL

(E-mail: geral@ersar.pt; *david.alves@ersar.pt; **gisela.robalo@gmail.com;

***mario.caneira@ersar.pt)

Inefficiencies of water services are one of the top priorities under constant improvement by stakeholders in the sector due to the impacts they have in the management of the service: increased

costs; operational management difficulties; systems less sustainable and less resilient. Ultimately, these inefficiencies can entail the burden of higher tariffs to end-users if there is no regulatory

intervention to induce their progressive reduction.

The Water and Waste Services Regulation Authority (ERSAR), as regulator of these services, aims to address the protection of users’ interests (accessibility of the service, quality of service and

pricing), and has also an important role in safeguarding the economic sustainability of the operators and the service. ERSAR has, therefore, performed a preliminary assessment of some of the main

inefficiencies that impact on the water services provision by quantifying its costs, enabling the decision makers to define the best strategies to induce greater efficiency.

METHODS DISCUSSION

CONCLUSIONS

inspiring change

References: [1] ERSAR, LNEC (2012), Guia de Avaliação da qualidade dos serviços de águas e resíduos prestados utilizadores – 2ª geração do sistema de avaliação. Entidade Reguladora dos Serviços de Águas e resíduos

(ERSAR). Lisboa, Portugal

RESULTS

www.iwahq.org

Components of water balance (the impact of real losses)

The analysis is based on data collected within the quality of service assessment performed by

ERSAR with all operators of water services in mainland Portugal. This data is collected on an

yearly basis and is audited and validated by ERSAR.

The indicators used to reflect the inefficiencies were “non-revenue water” and “connection to

the service”, focused on retail systems (services provided to end-users).

These typologies of inefficiencies focus

on two different aspects:

• the economical sustainability and,

• the environmental/social

sustainability.

It is, thereby, possible to evaluate the

costs associated to the water

abstracted, treated and distributed for

which there is no corresponding

revenue, as well as the potential loss in

with revenue associated the fact that

some users to whom the service is

available are not willing to connect to

the service.

Regarding non-revenue water, ERSAR

considers that an efficient level (good

quality of service) is achieved when its

value is below 20%, which is the target

level considered for the purpose of this

analysis.

Non-revenue water has several

impacts that go beyond the

environmental impacts of

exploring a resource which is not

properly used (and which is lost

in the process of treatment,

storage or distribution). These

include the substantial increase in

costs resulting from the process

of making drinking water

available at the distribution

systems and not having a

corresponding revenue from

providing it to the end-users.

These additional costs may

compromise the economic

sustainability of the service and

may, ultimately, result in higher

tariffs to end-users.

The average percentage of non-revenue water in

drinking water supply retail system is nearly

31%. About 60% of these is estimated to

correspond to real water losses. According to the

analysis, if the amount of the non-revenue water

was reduced to 20% in every system, the

estimated savings in operational costs may

amount to nearly 75 million euro. This amount

represents savings of around 9% in the total

costs of drinking water supply service for retail

systems. The potential savings are estimated to

be higher in the services provided under a direct

management model.

Connection to the service (average levels of connection to the service per

governance model)

The level of connection to the

service contributes greatly to the

sustainability of the revenues

because it reflects the effective

use of the existing infrastructures

at its full capacity. If a given end-

user does not connect to the

infrastructure available at his

premises, there is inefficiency

because an investment was

made by the operator to bring the

service to that location, but no

economic revenue is obtained

from that investment.

Non-revenue water (average levels of non-revenue water per governance

model)

Connection to the service Weighted revenue loss in percentage of

total revenue

Non-revenue water Potential savings as a percentage of total

cost to reach the threshold of non-

revenue water efficiency (20%)

Non-revenue water potential value of savings per m3