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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: [email protected]; *[email protected]; **[email protected];
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