Non-revenue water is water which has been prepared for customers of a utility, but does not reach those customers. This includes water subjected to desalinization to make it drinkable, along with treated water from reservoirs, groundwater deposits, lakes, rivers, and streams. This water is known as non-revenue water because it does not generate revenues for the utility, and a high percentage of non-revenue water can make a utility nonviable financially. Although many water utilities are run as a municipal service, they still need to make enough money to keep the system functioning, and running a water utility can get very costly.
There are a number of reasons for water to fail to reach the consumer, or for people to fail to be billed for the water they consume. Some people distinguish between actual and apparent losses. Actual losses involve water which is genuinely lost, and has vanished at some point between the generation facility and the end consumer. Apparent losses involve water which reaches the consumer, but is not properly billed.
Leakage and theft are two common reasons for actual losses for non-revenue water. Leakage is a persistent problem in any water system, despite the best detection devices to identify leaks early on. Theft occurs when people tap into the water system to take water without paying for it. Theft is an especially large problem in the developing world, in part because people cannot afford water fees. Unfortunately, theft can also expose a system to sources of contamination, representing a public health problem in addition to a financial loss for the utility.
Apparent losses usually occur when a meter is not working properly, or when a water bill is not calculated correctly. Meter errors can allow customers to essentially receive free water, while billing errors may result in miscalculations of the appropriate rates. This is especially common in tiered billing systems, with people being billed at the wrong tier for their water usage, and thus paying less, or sometimes more, than they should.
For a utility, identifying non-revenue water is done by looking at the total amount of water transmitted versus the amount of water billed over a set period of time. The difference between these two numbers represents the amount of water being lost. A number of tools can be used to identify the cause, ranging from inspecting meters to confirm that they are working properly to installing leak detection devices along the water lines to identify leaks as they occur.