Ofwat considers SELL leakage targets not

challenging enough

England & Wales Water Company performance

commitments to be compared to UARL

Ofwat’s PR19 consultation document ‘Delivering Water 2020: Consulting on our methodology for the 2019 price review’ proposes a fundamental change in approach to encourage England and Wales Water Companies to achieve stretching and ambitious performance commitments for leakage, in the interests of long-term Water Resources planning. For the last 20 years, Ofwat’s requirement for Companies to robustly calculate and achieve economic and sustainable leakage levels (ELL and SELL), to deliver benefits to customers, has driven the England and Wales Water Companies to their existing levels of leakage management.

A 2012 strategic review commissioned by Ofwat, the Environment Agency and Defra concluded that SELL ‘tends to maintain the status quo’, ‘does not incentivise efficiency or innovation’ and results in Companies being ‘risk averse’. Therefore, Ofwat has considered further options for stretching leakage performance commitments to PR19 and beyond. The preferred approach expects Companies to set ambitious commitments for leakage at regional or whole Company level. Companies should justify their proposed performance commitment levels against the following approaches, and justify why they have not adopted them:
• commit to achieving at least the forecast 2024-25 upper quartile levels of performance levels on leakage/property/day and leakage/km of mains/day
• companies should commit to achieving reductions of at least:

  • a 15% reduction (1% more than the largest commitment reduction at PR14)
  • the largest actual percentage reduction achieved by a Company since PR14

• companies should justify their performance commitments relative to the minimum level of leakage achievable (Unavoidable Annual Real Losses). The UARL is a measure defined in the EU Good Practices on Leakage Management 2015) of measuring ‘how low can you go?

Unavoidable Annual Real Losses

The concept of UARL and Infrastructure Leakage Index (the non-dimensional ratio of Current Annual Real Losses divided by UARL) was developed by the 1st IWA Water Loss Task (1995-99), to meet a perceived need for a more rational ‘level playing field’ approach to national and international assessment and comparison of technical leakage management performance. Ofwat has not previously chosen to use UARL and ILI as the measure does not take account of economics and supply: demand balance. Accordingly, only a few meaningful international comparisons of England/Wales technical leakage performance have previously been made using ILI. However, in practice, because UARL and ILI take account of so many other diverse factors, as shown in the Table below, some of the England and Wales Companies already routinely calculate UARL and ILI.

Source: Merks, Shepherd, Fantozzi, Lambert 2017: IWA Efficient 2017

The UARL formula is particularly suited to Water Resources planning, as it is based on a flexible component analysis of leakage (background, reported and unreported) in mains, communication pipes and supply pipes, with 24 auditable variables including frequency and duration of reported and unreported leaks, and flow rates varying with average pressure. Because the UARL equation includes average pressure, the basic UARL formula can predict in broad terms the benefits of reducing excess pressure on annual leak flow rate, assuming a linear pressure:leak flow relationship, with a FAVAD exponent N1 = 1.0 within the range recommended in PR19.

For the UK, where Ofwat definitions in PR19 will require UARL to be split into components of distribution losses (part of Water Delivered), and underground supply pipe losses after the point of delivery, it will be preferable to convert the original ‘litres per day’ formula in the AQUA 1999 paper into m³/year, as follows:

UARL (m³/year) = (6.57 x Lm + 0.292 x NC + 9.13 x Lsp) x Pc        (1)

where Lm = underground mains length (km), Nc = Number of Service Connections, Lsp = total length (km) of underground supply pipes and Pc = current average operating pressure (metres).

The principal authors of the 2015 EU Good Practices Report had full access to all of the assumptions in UARL from the lead author of this blog and another seven international practitioners, and published the UARL equation in a format suitable for fully metered European distribution systems. Equation (2) is equivalent to Equation (1) for an average communication pipe length of 4 metres.

UARL (m³/year) = (6.57 x Lm + 0.256 x Nc + 9.13 x Lt) x Pc        (2)

where Lm = underground mains length (km), Nc = Number of Service Connections, Lt = total length (km) of underground service connections (main to meter) and Pc = current average operating pressure (metres).

Section 9 of the CIWEM Policy Position Statement (2015) on Water Distribution System Leakage in the UK supports the conclusions of the EU Good Practices on Leakage Management relating to Fit for Purpose performance indicators for leakage. In a 2012 European data set with anonymous ILIs kindly contributed by 9 England/Wales Utilities, it is noteworthy that 8 of the 9 England & Wales Companies are within International Leakage Performance Category A.

UARL and ILI are widely and increasingly used internationally. The bar chart below shows some of the national organisations and countries using the approach, and which have ceased the misleading practice of expressing leakage as a % of System Input Volume.

Source: Merks, Shepherd, Fantozzi, Lambert 2017: IWA Efficient 2017

All of the authors commend Ofwat’s initiative in PR19 to include a European and international context in the proposed PR19 process of setting challenging leakage targets in England and Wales.

In order to resolve any misunderstandings which may still exist in the UK regarding the auditable assumptions, formats and applicability of the UARL equation, the lead author of this blog (who originated Component Analysis, and UARL concepts when Chair of the 1st IWA Water Loss Task Force) offers any UK Company, Group of Companies, Regulator, Auditor or other interested parties the opportunity to Contact Us for discussions or Workshops on UARL and ILI, during or after the consultation period for PR19.

Allan Lambert, UK, Principal author, EU Reference Document, Fellow IWA
Cor Merks, NL, Principal Consultant, EU Reference document, Member IWA
Stuart Trow, UK, Principal author, EU Reference document, Fellow IWA
David Pearson, UK, Independent Consultant, Fellow IWA

30th July 2017

Ofwat PR19 endorses UARL