Transition Costs

Once an economic level of leakage has been established, then a company should move toward this ELL. However, as this is likely to be at a lower level of leakage than the current level, moving to this point will involve one-off costs. As each point on the ALC

Figure 9.3 Economic repair time. {Source: Stuart Trow.)

curve is a static situation, then there are less leaks running at any one time at lower levels of leakage. Thus, moving from one point to a lower point will mean that additional leaks are brought in for repair before the situation reaches equilibrium again. Transitional costs should generally be fairly low and they can be added, with appropriate discounting as they are a one-off investment, into the calculation of the economic level of leakage to obtain a slightly revised economic level of leakage.

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