The level of losses from water systems is often considered by observers from outside the industry to be unacceptable. In many countries, environmentalists and regulators have expressed concerns at the level of losses, and believe that lower levels should be achievable. However, any water company has to work within current operating budgets and seek additional finance if these are not sufficient. Leakage control can be expensive, and water companies will seek to achieve an economic balance between the costs of leakage control and the benefits that accrue. This balance between costs and benefits is common in many fields, and the idea of the economic level of operation is commonplace in many industries. The concept of an economic level of leakage (ELL) dates back several decades, and there have been many previous attempts to determine a practical definition and methodology. Previous methodologies tended to confuse the impact of the various leakage management options available. It is only over the past 15 years that we now have a better understanding of all the issues.

Looking at economic theory, there are two levels at which the economic level can be considered. Taking manufacturing as an example, production can increase by taking on more labour. Increased costs would be incurred in terms of labour costs, raw material costs, and costs of production—typically power, which are a function of the level of production. As levels of production are increased, for example, by increasing the number of shifts, production will rise until the capacity of the production plant itself becomes a limiting factor. At some point it may be more economic to extend the plant. However,

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