Discussion Room

  • By reducing non-revenue water, water utility companies decrease their production costs and increase their billing revenue without necessarily having a big jump in raising rates.
  • From an environmental sustainability perspective, reducing non-revenue water is essential. Some areas in many states in Malaysia are already facing water scarcity.
  • When there are compelling reasons for reducing levels of non-revenue water, we wonder why it has not been further reduced in some states in Malaysia.
  • Non-revenue water reduction activities can quickly be profitable where they are due to apparent losses. However, reducing real losses such as physical leakages can require significant capital investments. Capital investments are critical for the operational efficiency of water utility companies, but can be delayed to the detriment of the non-revenue water ratio.
  • Water losses are major issues due to the difficulty in locating leaks and the expense of replacement or repair. Technological improvements assist in the location of non-revenue water losses through real time tracking systems. These technologies are currently expensive. However, because they are continually being improved, in the future, they will make reduction of non-revenue water easier.
  • Eliminating non-revenue water is not economically sustainable, but it is useful to reduce non-revenue water until the economic optimum has been reached. This is achieved when the marginal cost of reducing non-revenue water exceeds the marginal benefits of reducing water losses.
  • When the economic optimum is reached with high non-revenue water, for example when water production is cheap, water utility companies have fewer financial incentives to reduce non-revenue water. This can be an issue knowing that old infrastructure with high non-revenue water increases the likelihood of producing low quality water and encountering system interruptions.
  • It seems clear that the challenge in reducing non-revenue water is both a technical and a financial issue. This is where the private sector could be of assistance, and a wide range of options are available from Public-Private Partnerships (such as service concession arrangements) to service contracts which limit subcontracting of specific activities.
  • Last, but not least, regulations and incentives could lead water utility companies to carry out an effective non-revenue water reduction program.
  • In Malaysia, SPAN determine the water tariff charged to customers through regulated water utility companies, require those companies to report their non-revenue water, analyze the reasons for the water losses and implement a loss control program. However, there appears limited successes in reducing the NRW.


Consequences : The issues related to high NRW rates are (i) consumers paying for inefficiencies of water utilities, (ii) a precious and scarce resource being wasted, and (iii) unnecessary investments in production. Another important consideration is that high NRW rates equate to poor governance, which results in low utility staff morale. From the consumers’ point of view, those who have illegal connections or have estimated actual consumption below real consumption are cheating those who pay for water. Poor governance is at the root of the problem.

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