How Apparent Losses Occur

Apparent losses occur due to inefficiencies in the measurement, recording, archiving, and accounting operations used to track water volumes in a water utility. These inefficiencies result from inaccurate or oversized customer meters, poor meter-reading, billing and accounting practices, weak policies, or ineffective management. Apparent losses also occur from unauthorized consumption, which is caused by individual customers or others tampering with their metering or meter-reading devices or otherwise maliciously obtaining water without appropriately paying for the service. For any type of apparent loss, it is incumbent upon utility mangers and operators to realistically assess metering and billing operations for inconsistencies, and then develop internal policies and procedures to economically minimize these inefficiencies. It is also important to clearly communicate to customers, utility executives, elected officials, financing agencies, and the media the problems of apparent losses and the need to control them.

The specific ways in which apparent losses occur are many and varied and, particularly with unauthorized consumption, always changing. Those taking water in unauthorized fashion do so for varied reasons. Some sincerely believe that water should be free and it is their right to obtain water without paying for it. Others feel that they do not have the financial resources to pay for the service. More often, however, such users take water maliciously, always thinking of new ways to "beat the system."

The water utility must therefore be vigilant in its effort to manage its product (water) via effective meter management and rational billing, auditing, collection, and enforcement policies in order to realize projected levels of revenue and maintain accurate measures of the water that it supplies.

A note regarding collections: As water utility financial managers know, not all of their customers pay their water bill as required, or pay their bill on time. The collection rate is a financial performance indicator that reflects the rate at which customers pay their water bills. The collected payments are measured as a percentage of the money billed each month for the utility's services. Collection rates at the 30-day, 60-day and 90-day milestones are typically tracked in order to provide a representative picture of the customer population's payment record. While the collection rate is a highly important measure that represents the pace at which revenue is gained by the water utility, collections are not included in the water audit methodology detailed in this publication because the collection rate measures payments based upon billed consumption, whether or not all water has passed through customer meters, or was accurately measured. The water audit methodology has as its terminal boundary the customer meter which generates the consumption data that is the basis for the customer billing. This publication provides utilities guidance in maximizing the efficiency of their water billing process, while collections focus on payment efficiency, which is beyond the scope of this textbook. The reader should consult publications on water rates and finance to obtain guidance on tracking their collection rate and instituting policies that maximize collections.

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