Cutting water losses = growing revenue

Cutting water losses = GROWING REVENUES

A case study conducted by the Vuthela iLembe Local Economic Development (LED) Programme on the causes of technical and non-technical water losses in municipalities in KwaZulu-Natal details the concomitant loss of revenue.

This case study, as part of the Vuthela programme’s Municipal Infrastructure component, has demonstrated how iLembe District Municipality (IDM) could improve revenue generation and curtail nonphysical water losses. Non-physical water losses refer to municipal water supplies that are ‘lost’ through nonpayment and do not include water lost through leaks or burst pipes.

Sundumbili area Water metering and billing were assessed within a pilot area of Sundumbili near Mandeni. This area had exhibited high water losses within the IDM. With regard to non-revenue water (water lost through physical and non-physical losses), it was found that revenue for about 61% of the water being supplied by these municipalities was not being collected. The world average for non-revenue water is 36.6%. According to Stats SA, the Sundumbili area had 10 858 households and 32 629 residents. This represented about 5.7% of the total number of households (191 370) in the IDM.

This area was selected to conduct the pilot study to determine commercial losses, as it was typical of many areas where meter reading inaccuracy, data transfer errors and unauthorised connections had led to a loss in revenue.

The project focused on the process of meter reading, meter data management, transfer of the data to the billing system, and the billing process. The study also evaluated the actual billing and sales volumes against the volume of metered water supplied by the municipality.

It was found that Sundumbili was a formal area with good potential for metering, reading, billing and cost recovery. Most properties were metered, but meter maintenance, reading, billing and cost recovery were deficient, resulting in excessive water use and loss of income.

Findings About 25 000 prepaid meters were not read and only 50% were operational. Prepaid meters were last read in June 2016. The municipality decided to discontinue the installation of prepaid meters and revert to conventional meters. Approximately 60% of the water connections were considered illegal and often resulted in leakages.

The billed consumption was found to be 44% higher than the actual metered consumption, suggesting that the metered consumption estimated for billing purposes was inflated and customers were not billed based on their actual consumption. However, the average rate per kilolitre was in line with the average domestic rate of the municipality.

Analysis of the prepaid water purchases between January and March 2019 indicated the average user purchased R236 of water, which was about 13 kℓ/month. It was also noted that some users had spent more than R1 000 per month on prepaid water purchases.

Metering and billing had become critical political issues in the area. Consumers who did not pay were disconnected, but this was difficult to enforce.

It emerged that there were over 3 000 stands in the area that were being supplied with water but were not included in the IDM database. This area, known as Manda Farm, is an urban development but has not yet been formalised in terms of parcel registrations. The

housing standards in this area indicate that users should be able to afford payment for water services, but they are not being billed due to the informal, unmetered connections.

Meter readings A detailed investigation of the meter reading process in other parts of the municipality revealed that the water meters in the municipality were read manually and the recorded data was transferred to the electronic billing system. The transfer process was found to be accurate, with few errors.

However, an analysis of the meter reading dates revealed that most of the meters had not been read in the past six months. In these cases, the municipality billed according to estimates. But estimates would not reflect the actual water used if household demographics changed due to improved facilities or occupant numbers.

Only 46% of the meters in Sundumbili were last read in 2019, and the bulk of the Mandeni prepaid meters were last read in 2016. This presented a potential loss of significant income to the municipality. About R7 million in additional income could be generated every month if all conventional meters were read and billed on a regular basis.

The study recommended that all consumers with individual water connections be metered. Accounts should be opened for consumers who have conventional and prepaid meters. The IDM should consider alternative billing options for unmetered consumers, such as a flat rate instead of block tariffs.

There should be a routine analysis of water consumption to identify consumers with low or high consumption patterns, or where meters may have malfunctioned, to ensure the correct water volumes were recorded and billed.

Unauthorised connections and theft of water – where consumers deliberately tamper with their metered connection to reduce or eliminate flow or connect illegally to existing municipal water services – should be located with an advanced programme to detect unauthorised consumption.

Full implementation of the smart metering system was recommended to ensure up-to-date electronic data was available for billing.

It was suggested that an automatic meter reading telemetry system be installed and maintained at reservoir sites to limit lengthy daily trips to monitor the status of the bulk distribution system and to ensure accurate reporting for drafting the monthly water balance. This would allow for more effective planning as the volume of water that is available to the municipality at any given time will be known.

The municipality should allocate days for meter reading and repairs by the meter readers. Meter readers should be provided with the correct materials and tools to undertake meter maintenance. Meter readers have undergone training in performing basic plumbing, but refresher courses should be provided annually.

A proper metering strategy requires that connections are metered, that all meters are properly installed and in working condition, and that the average meter error is within economic limits and in line with legislation.

It was recommended that domestic meters should be considered for replacement before they have been in use for 10 years and bulk meters before 5 years.

Water utilities should therefore replace 8% to 12% of consumer meters every year to avoid possible meter replacement backlogs, resulting in the need to replace all meters at

VUTHELA ILEMBE LOCAL ECONOMIC DEVELOPMENT (LED) PROGRAMME

• This is a joint initiative of the State Secretariat of Economic Affairs of the Swiss Confederation, the KwaZulu-Natal Department of Economic

Development, Tourism and Environmental Affairs, iLembe District

Municipality, and KwaDukuza and Mandeni Municipalities. • It is a five-year comprehensive LED programme in the iLembe District to promote sustainable inclusive economic growth and job creation through initiatives to improve municipal finances as well as municipal infrastructure planning and delivery, support private sector development through business environment reforms and SMME development, support sector initiatives promoting inclusive growth, and drive partnerships and coordination. • The LED programme aims to improve the economic future of residents in the iLembe District through sustainable economic growth of the local economy and the creation of more inclusive employment and incomegenerating opportunities. • The efficient management of water demand and supply is central to this aim, as water is essential for survival, health and safety, economic activities, social development, social equity, environmental protection and political stability.

once. Consumer meters should be repaired, replaced and maintained on an ongoing and regular basis. Regular meter testing should be undertaken to assess meter accuracy.

All meters should be read every one to four months, depending on budget and staff availability. Customers should be allowed to submit their own readings to limit interim estimates and promote awareness of their water consumption.

The municipality’s finance department should perform a data integrity check to validate the correctness of data entered, such as meter reading dates. The meter readings should inform actual billed consumption volumes.

Recommendations The study concluded that ensuring improved metering, meter reading, record management and analysis would lead to more accurate consumer billing and water balances. Accurate records will also ensure more accurate reporting and better planning.

In the long term, it will improve the consumer’s trust in the water services provider and ensure the sustainability of water services. The study also recommended that all prepaid meter devices that were installed on to conventional meters should be removed. This initiative should be accompanied by a communication strategy to inform consumers of the change and implications of being put on the municipal billing system, so that they can receive accurate monthly water bills.

An upgrade of the information management system was also recommended. It was suggested that the asset register and prepaid meter information be consolidated to create a single database for meter reading, billing and revenue management.

The case study and its recommendations have been presented to the senior management of the IDM, who are now considering implementation plans.

The case study and its methodology can be applied to any municipality that is keen to effect water saving and generate revenue more efficiently, thus addressing two of the most urgent obstacles to efficient service delivery and local economic development.