NRW reduction not appropriate for tariff adjustment

It is a good proposal to have a performance audit of water treatment plants carried out by professionals to determine the total quantity of water produced in order to ascertain the amount of Non-Revenue Water (NRW), as suggested by S. A. Ratnam in his letter "Justify that tariff increase" (NST Aug 15).

In addition to the above, it is also pertinent at this stage to establish whether there is any appropriate and active NRW reduction and control program initiated by Syabas.

NRW is caused by pipe leakage, under-recording of meters, illegal connections and legal non-metered supply. It is not just water lost due to old or leaking pipes as frequently reported in the media.

In short, NRW is that portion of the treated water put into the supply system that earns no revenue.

In Malaysia, leakage constitutes up to 70% of NRW. As such, it is important to take a closer look at what leakage reduction programs Syabas has initiated since taking over from PUAS Bhd on January 1, 2005.

At the time of taking over, it was reported that NRW was over 42% of production and at the end of last year it was reduced by 5.48% to 37.3%, a reduction exceeding the target set for Syabas to qualify for a tariff adjustment.

It is my belief that in an area where NRW is high, as in Selangor, the first 10% reduction of NRW is easy to achieve. Replacing meters of over 10 years old and plugging all major illegal connections would probably reduce NRW by over 5%.

But using NRW reduction as a key parameter for tariff adjustment is not appropriate in the present context. The current water tariff is dirt cheap compared to that of electricity supply.

Therefore I am a strong proponent of raising water tariff significantly, specially the penalty block (above 35 cubic meters per month per household) in order to encourage water conservation.

Also, the water tariff adjustment should be based on the increase in the cost of power, chemicals, salaries and the effect of inflation and not solely on the reduction of NRW.

Instead, NRW reduction should be used as one of major yardsticks to determine the overall performance of the water supply concessionaire.

Agreement on annual NRW reduction targets should have been stated in the privatization agreement. Any deficit in NRW reduction should be borne by the concessionaire who should be penalized based on the unit cost of water production.


An edited version of the above was published in NST on 18 Aug 2006. 2007