Performance-Based Contracting Tools for Non-Revenue Water Reduction

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What is Non-Revenue Water (NRW)?
When water is processed and distributed to customers, not all of it is paid for. We call this non-revenue water—or NRW. Technically, it is the difference between the volume of water that is treated and distributed and the volume billed to consumers. NRW is an expensive problem—globally, about $14 billion is lost in annual revenue, which hurts both utility cash flow and indirectly, customers.
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Despite the benefits, however, many utilities struggle to achieve significant reductions because they lack the necessary capital, equipment, and expertise. Performance-based contracts (or PBCs) are one way to tackle NRW, especially when resources are tight, when capacity is not available or when the utility has a significant backlog that it needs an extra hand with. Analysis shows that NRW-PBCs are about 70 percent more effective in achieving NRW reduction than utility-led NRW reduction programs. PBCs are not PPPs, they are an incentivized form of service contract. Under a PBC, a public utility partners only shifts the responsibility for reducing NRW to a private company. However, PBCs are not an appropriate in every case. If the PBC is to be successful and cost effective, the underlying reasons for the NRW, the costs and benefits of reduction, and the contractual specifics must all be clearly specified.Benefits of Reducing NRW
Key Sources of NRW
Reducing NRW through Performance-Based Contracts
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Updated: June 30, 2022