DETERMINANTS OF HIGH NON-REVENUE WATER: A CASE OF WATER UTILITIES IN MURANG A COUNTY, KENYA

Transcription

1 DETERMINANTS OF HIGH NON-REVENUE WATER: A CASE OF WATER UTILITIES IN MURANG A COUNTY, KENYA BY MUKUNDI JOSEPH MAINA ADM. NO : C153/CTY/PT/24498/2010 A RESEARCH PROJECT SUBMITTED TO THE SCHOOL OF HUMANITIES AND SOCIAL SCIENCES IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF MASTER OF PUBLIC POLICY AND ADMINISTRATION OF KENYATTA UNIVERSITY

2 DECLARATION This research project is my original work and has not been presented for a degree course in any other university. Date Mukundi Maina Joseph ADM. NO: C153/CTY/PT/24498/2010 Supervisors: This research project has been submitted for review with our approval as University supervisors Dr. George Kosimbei Department of Economics Date Mr. Gerald Atheru School of Business Date ii

3 DEDICATION I dedicate this project to my family for the sacrifice they have made for me to complete this research. Their love, concern, support, encouragement and interest inspired me to achieve this goal. Special dedications go to my parents Beatrice and the late Julius for all the efforts they put to ensure that I grew up and attended school. iii

4 ACKNOWLEDGEMENTS I take this opportunity to extend my special gratitude to my supervisors: Dr. George Kosimbei and Mr. Gerald Atheru for their guidance, encouragement and patience in reading, correcting, re-reading and refining this work. Above all I thank God for good health and for getting me this far. iv

5 TABLE OF CONTENTS DECLARATION... ii DEDICATION... iii ACKNOWLEDGEMENTS... iv LIST OF TABLES... viii LIST OF FIGURES... ix OPERATIONAL DEFINITION OF TERMS... x ABBREVIATIONS AND ACRONYMS... xi ABSTRACT... xii CHAPTER ONE... 1 INTRODUCTION Background to the Study Statement of the Problem Objectives of the study Research Questions Assumptions of the Research Study Significance of the Study Scope of the Study Limitations of the Study... 7 CHAPTER TWO... 8 LITERATURE REVIEW Introduction Assessing Non-Revenue Water Physical (Real) losses Top- down annual water balance: Bottom-up real losses assessment: Components analysis of real loss: Apparent losses Components of Apparent losses Meter Reading Errors Under-registering Meters Water Theft Billing Errors Empirical literature Summary and Research Gap v

6 2.7 Conceptual/Theoretical Framework CHAPTER THREE RESEARCH METHODOLOGY Introduction Research Design Variables Location of the study Target population Sampling Technique and Sample Size Research Instruments Data collection Techniques Reports Questionnaire administration Pilot Test Data Processing and Analysis Ethical Issues CHAPTER FOUR DATA ANALYSIS AND PRESENTATION OF THE FINDINGS Introduction Response Rate Non-revenue Water Levels Contribution of bursts and leakages to the level of Non-revenue water Accounting Errors as a Determinant of Non-Revenue Water Levels Water Theft as a Determinant of the Level of Non-Revenue Water Regression Results CHAPTER FIVE SUMMARY, CONCLUSIONS AND RECOMMENDATIONS Introduction Summary Discussion Conclusions Recommendations Recommendations for Further Studies REFERENCES vi

7 APPENDICES Appendix I: Sample Introduction Letter Appendix II: Research Questionnaire vii

8 LIST OF TABLES Table 1.1: Water supply situation in Murang a County Table 1. 2: Water losses situation in Murang'a County.. 2 Table 1. 3: Actual versus optimal revenue in Murang'a County Table 3. 1: Variables Table 3. 2: Target Population Table 3. 3: Sample Size Table 4. 1: Rating of the respondents on the level of non-revenue water in their company Table 4. 2: Extent to which the respondents think the level of NRW in their organization is acceptable Table 4. 3: Extent that various factors determine the level of the Non-revenue water in the organization Table 4. 4: Level of contribution of bursts and leakages to the overall level of nonrevenue water in the organization Table 4. 5: What the respondents consider to be the major contributors of NRW from bursts and leakages in the water company Table 4. 6: Measures taken by the company to address the problem of NRW caused by bursts and leakages Table 4. 7: Extent that accounting errors determine the overall level of non-revenue water in the organization Table 4. 8: What the respondents consider the major contributors of NRW from accounting errors in the water company Table 4. 9: Which measures are taken by the company to address the problem of NRW caused by accounting errors Table 4. 10: Extent that water theft determine the overall level of non-revenue water in the organization Table 4. 11: What the respondents consider to be the major contributors of NRW from water theft in their water company Table 4. 12: Results of multiple regression between non-revenue water and the combined effect of the selected predictors Table 4.13: Summary of One-Way ANOVA results of the regression analysis between non-revenue water and predictor variables Table 4. 14: Regression coefficients of the relationship between non-revenue water and the three predictor variables viii

9 LIST OF FIGURES Figure 1. 1: The IWA best practice standard water balance... 1 Figure 2. 1: Why percentage non-revenue water is misleading... 9 Figure 2. 2: The four components of apparent losses Figure 2. 3: Conceptual framework ix

10 OPERATIONAL DEFINITION OF TERMS Apparent Losses consist of Unauthorized Consumption and all types of metering and billing inaccuracies. Authorized Consumption is the annual volume of metered and/or non-metered water taken by registered customers, the water supplier and others who are implicitly or explicitly authorized to do so. Non-Revenue Water (NRW) is the difference between System Input Volume and Billed Authorized Consumption. NRW consists of Unbilled Authorized Consumption (usually a minor component of the Water Balance) and Water Losses. Real Losses are the water volumes lost through all types of leaks, bursts and overflows on mains, service reservoirs and service connections, up to the point of customer metering. System Input Volume is the annual volume of water input to the water supply system. Water Losses is the difference between System Input Volume and Authorized Consumption, and consists of Apparent Losses and Real Losses. The above definition of terms is according to International Water Association (IWA,2003). x

11 ABBREVIATIONS AND ACRONYMS AfDB AMR GATAMATHI GATANGA IETC IWA JICA KAWASCO MUSWASCO MUWASCO MWI NRW PPP SABESP UNEP WASREB WSB WSPs Africa Development Bank Automatic Meter Reading system Gatamathi water and sanitation company ltd Gatanga Community Water Scheme International Environmental Technology Centre International Water Association Japanese International Cooperation Association Kahuti Water and Sanitation Company Ltd Murang a South Water and Sanitation Company Ltd Murang a Water and Sanitation Company Ltd Ministry of Water and Irrigation Non-Revenue Water Public-Private Partnership Saneamento Basico do Estado de Sao Paulo water company United Nations Environment Programme Water Services Regulatory Board Water Services Board Water Services Providers xi

12 ABSTRACT Non-Revenue Water is a major challenge for water utilities especially in developing countries where water network maintenance has often been neglected for long periods of time as the loss of water produced can endanger the recovery of their expenses. Strategies to reduce water losses have been developed and are practiced worldwide. Whilst developed countries have to cope mainly with physical losses, developing countries are also facing the issue of commercial losses including water meters inaccuracies and water thefts. In spite of the establishment of a water loss control unit and various action plans launched by the ministry in-charge of water to reduce non-revenue water, the water losses in Kenya water supply system still remain high. Over the past decades, the water situation for Murang a county has changed from one of relative abundance to one of relative scarcity. This is because the population growth and rapid urbanization are imposing rapidly growing demands and pressure on the water resources. This is coupled with high levels of non-revenue water due to high leakage and inefficient maintenance of pipe network which has resulted into customer complaints and huge financial losses. The purpose of this research study was to scrutinize the non-revenue water determinants in the water utilities in Murang a county so as to assist policy makers in developing strategies to reduce and control the non-revenue water. For the purpose of this study, case study design of research was used. The study was carried out in Murang a county, Kenya. It focused on the water supply region in the areas of jurisdiction of the five water services providers in the county. For logistical and budgetary concerns the researcher studied the management staff from the five water services providers in Murang a county. The target population for this study was the 270 employees in top, middle and low level management in the companies. From the above population of 270, a sample of 30% from within each group in proportions that each group bear to the population as a whole was taken. In this research, semi-structured questionnaires were the instruments used. The tools designed by the researcher based on the research questions were pilot tested to refine the questions before they were administered to the selected sample. Quantitative analysis was used to analyze data. The study established that the level of contribution of bursts and leakages to the overall level of non-revenue water in the organization was moderate. The study deduced that accounting errors determine the overall level of nonrevenue water in the organization moderately. The study concludes that bursts and leakages contribute significantly to the overall level of non-revenue water. The study also concluded that the age of infrastructure and quality of water pipes and fittings can lead to bursts and leakages which increase the level of non-revenue water. From the findings and conclusions the study recommended that the water companies in Murang a county should regularly check their infrastructure to know its state at all times. This will eliminate the cases of bursts and leakages that go unnoticed and thereby increasing the level of nonrevenue water. xii

13 CHAPTER ONE INTRODUCTION 1.1 Background to the Study One of the major issues affecting water utilities in the developing world is the considerable difference between the amount of water put into the distribution system and the amount of water billed to consumers (also called non-revenue water [NRW]). NRW has three components: Physical (or real) losses which comprise leakage from all parts of the system and overflows at the utility s storage tanks. The losses occur as a result of poor operations and maintenance, the lack of leakage control mechanisms and poor quality of underground assets. It is any leakage downstream of a production source and upstream of the consumer revenue meter (UNEP/IETC, 1999); Commercial (apparent) losses which are caused by customer meter under-registration, meter reading errors, data-handling errors, and theft of water in various forms; and unbilled authorized consumption which include water used by the utility for operational purposes, water used for fire fighting, and water provided for free to certain consumer groups. The various components are shown in figure 1.1: Figure 1.1: The IWA best practice standard water balance Source: McIntosh (2003). 1

14 The waste of resources resulting from high NRW levels in developing countries is considerable. Statistics suggests that every year developing countries incur commercial losses (that is, water that is actually delivered to a portion of the population, but not invoiced) estimated at US$2.6 billion (Kingdom et al, 2006). In Murang a county the treated and piped water supply is inadequate to cover the whole population as shown in the table 1.1. Table 2.1: Water supply situation in Murang a County NAME OF WSP POPULATION POPULATION SERVED PERCENTAGE IN SERVICE AREA WITH TAPPED WATER SERVED GATAMATHI 113,974 42, GATANGA 39,559 16, KAWASCO 167,318 82, MUSWASCO 347,623 99, MUWASCO 59,600 36, Total 728, , Source: WASREB Performance Report of Kenya s Water Services Sector (2012:5) This data shows that only 38% of the population is being served with safe water. This unfortunately is worsened by the fact that the water utilities in the county loose large volumes of water after incurring production costs as shown in table 1.2. Table 1.3: Water losses situation in Murang a County NAME OF WSP WATER PRODUCED ('000 M3) WATER SOLD ('000 M3) NRW ('000 M3) NRW % GATAMATHI 3, , GATANGA 1, KAWASCO 3,135 1,097 2, MUSWASCO 5,214 1,564 3, MUWASCO 1, Total 14,483 5,135 9, Source: WASREB Performance Report of Kenya s Water Services Sector (2012:5) 2

15 The water losses are enormous which in monetary terms means foregone revenue by the water suppliers. The table 1.3 below shows the current revenue versus the optimal revenue realizable by water utilities in Murang a county: Table 1.4: Actual versus optimal revenue in Murang a county ACTUAL REVENUE OPTIMAL REVENUE NAME OF WSP (In millions of Ksh) (In millions of Ksh) GATAMATHI GATANGA KAWASCO MUSWASCO MUWASCO Total Source: WASREB and JICA expert team (2011:1) The optimal revenue above is the amount of revenue realizable after allowing for the internationally acceptable losses of 10%. The demand for water in the county is ever increasing due to the following factors: the new constitution makes the access to clean water a human right hence the need to serve the whole population with tapped water; the formation of counties is likely to attract investments in the county such as industries and learning institutions. Already the Murang a Technical College in Murang a town has been upgraded to a University college (The Murang a University College Order, Legal Notice No. 129 of September 2011). 1.2 Statement of the Problem There are many challenges faced in delivery of portable water services in Murang a county. Some customers go without water for days while there are cases of intermittent supply to others, the network coverage is inadequate to serve the ever increasing population but the major challenge faced by the utility providers in the county is high non- revenue water which according to available records is sometimes as high as 79% (GATAMATHI, 2012). Records show that for the last four years ( ), the water utilities have lost annual averages of 60%, 56%, 59% and 53% of the water available for distribution to customers 3

16 in Murang'a county. Although there appears to be an improvement, the current levels are not sustainable and are a major challenge. There are many cases of pipeline bursts, underground and on the service leakages which contribute to poor service delivery. According to the management of the utilities, the major cause of all this is the dilapidated infrastructure where some of the pipelines were developed by the colonial government years before the country s independence (MUWASCO, 2010). From annual reports in the five water utilities the key problem faced by all the utilities is the high water losses which subsequently results to many other problems such as loss of sales, inadequate water supply to existing customers, lack of water for expansion to new customers and damage to the environment where sub-surface leakages results in surface collapse, encroachment and damage to nearby properties (MUWASCO, 2012). The problem of water losses can be partly solved by complete overhaul of the water infrastructure but due to the massive capital investment required for the overhauling, it appears that the short run solution to the problem of high NRW would be efficient management of the existing infrastructure with the aim of reducing and controlling the water losses. Despite its apparent effect on the economy, no known study has been done to enumerate the determinants of non-revenue water in pecking order in Murang a county in particular and Kenya in general. The aim of this research study was to scrutinize the determinants of non-revenue water levels in the water utilities in Murang a county in order to recommend remedial measures to the problem of the high water losses. 1.3 Objectives of the study The study sought to attend to the following: i. To determine the level of contribution of leakages and bursts on the overall amount of non-revenue water in Murang'a county. ii. To establish the level of contribution of accounting errors on the overall amount of non-revenue water in Murang'a county. iii. To determine the level of contribution of water theft on the overall amount of nonrevenue water in Murang'a county. 4

17 1.4 Research Questions The following research questions assisted in focusing and directing the study:- i. What is the contribution of leakages and bursts to the level of non-revenue water in Murang'a county? ii. What is the contribution of accounting errors to the level of non-revenue water in Murang'a county? iii. What is the contribution of water theft to the level of non-revenue water in Murang'a county? 1.5 Assumptions of the Research Study The study tried to prove the following:- i. Leakages and bursts contribute greatly to high non-revenue water in Murang'a county ii. Accounting errors contribute significantly to the high level of non-revenue water in Murang'a county iii. Water theft contributes significantly to the level of non-revenue water in Murang'a county 1.6 Significance of the Study Significant water losses in Murang a county have persisted since the days the water services were being offered by the Ministry of Water and Irrigation before the water reforms started in Kenya. Due to the reforms that brought about change of management of the services, the losses have been reducing but they are still too high to be sustained. For example in MUWASCO, the loss is estimated at almost 1 (one) million cubic meters of treated water in a year valued conservatively at ksh.80 million (MUWASCO, 2012). This is a loss that can no longer be disregarded given that it is almost 50% of the water produced. In the other water companies in Murang a county, the losses in percentage terms are worse than this. Reducing these water losses is critical to efficient resource utilization, efficient utility management, enhanced consumer satisfaction, and financial sustainability of the companies. If active water loss reduction programs are initiated and sustained, the gains to consumers and the water companies alike will be significant. It will be much cheaper to 5

18 improve efficiency and sustainability through investment in non-revenue water reduction rather than through investments in capital projects to boost water supply capacities. The problem of NRW has a socio-economic dimension for the following reasons: lack of access to tapped water has forced most rural folks and especially women and children to waste a lot of time fetching water and deny them time to engage in economic activities; the new constitution makes it an infringement of human rights to deny citizens access to clean water; lack of safe water could lead to break out of water borne diseases. The research study endeavored to analyze the determinants of non-revenue water and therefore be invaluable to help policy makers do come up with strategies of reducing the losses to enable them adequately serve the needs of the current population and also to be able to cater for the growing population of the future; The reduction of NRW will also be beneficial to the residents of the county in that it will help to improve levels of service to consumers as well as reduction in consumer complaints; reduction in disruption of water supply, thus provide more stable supply system. The water management utilities will also benefit in that reduction of NRW will increase their revenues, reduce wastage and water production costs, reduce number of pipeline failures and supply interruptions. Other stakeholders who will benefit from the reduction of water losses include the Murang'a county Government and the Water Services Regulatory Board since their levies are based on the revenues realized by the water utilities. 1.7 Scope of the Study Even though there are numerous problems facing the water delivery system in Murang a county, the current research was limited to the area of non revenue water and its determinants. This is partly due to the limited time and resources available for the current research work. And again, the researcher is of the view that the multi-faceted problems of the water supply system in Murang a should best be tackled by addressing the issues on specific context without crumbling and bulking the entire situation together. In this way the actual problems were identified and may be dealt with more effectively. The study was limited to Murang a county, Kenya. It focused on the water supply areas in the county with the five water services providers being the centre of attention. These 6

19 providers are: Murang a Water and Sanitation Company (MUWASCO) which serves Murang a town and the immediate environment; Murang a South Water and Sanitation Company (MUSWASCO) which serves the sub-counties of Kandara, Murang a South and Kigumo; Kahuti Water and Sanitation Company (KAWASCO) serving Kangema sub-county; Gatamathi Water and Sanitation Company (GATAMATHI) serving Mathioya sub-county and Gatanga Community Water Project (GATANGA) serving Gatanga sub-county. The researcher in choosing the area of study is of the view that Murang a county has unique features from other counties in the country in that there are numerous rivers within the county but still there is scarcity of safe domestic water and the NRW levels are still very high. 1.8 Limitations of the Study The following factors posed challenges in the research study:- 1. Limited non-revenue water data; Many water utilities in Kenya including those in Murang a county are not able to produce a water balance; therefore, the split between physical and commercial losses is rarely known and can only be estimated. 2. Inaccurate data; some of the available data may be erroneous or may lack credibility where the respondents may not have provided data that portrays failure in management of the water utilities. 3. Definition of terms; some terms though generally accepted may have differing meanings by different researchers and experts. The limitations were overcome by using the available estimates from the water utilities' records over a period of years to arrive at credible averages. Meanings of terms were carefully scrutinized to ensure they were not contradicting or cause any confusion to anyone reading the research project. 7

20 CHAPTER TWO LITERATURE REVIEW 2.1 Introduction To get a better understanding of the concern of non-revenue water (NRW) in Murang a county, it is necessary to review available literature on the topic. Although the focus on the NRW management the world over has only been recently given attention, there are a number of studies and literature available due to the impact that water has on the survival of man. The review of this literature was discussed under the ensuing headings. 2.2 Assessing Non-Revenue Water The first stage of assessing NRW is to make a water balance within the system in order to know how much water is actually used and paid for but also how much water is lost and how it is lost. Water balances are widely used by the water utilities but the diversity of formats and evaluations of the losses prevented international comparisons between water utilities (Lambert, 2003). However, the most widely accepted framework for describing NRW is the International Water Association (IWA) Water Balance, which is provided in Figure 1.1A (McIntosh, 2003). The IWA defines NRW as follows: NRW = System Input Volume Billed Authorized Consumption This water balance is generally accepted to define water losses. However, according to Alan (2010), the water balance is more applicable in the developed world since most of the revenue billing for water services is collected. But in the developing countries, a substantial amount of billing is never collected and therefore may be considered as losses. He points out that there is need to have an adjusted water balance to show the true picture in the developing world and suggested the following: NRW = System Input Volume Paid For Billed Authorized Consumption. In most cases, NRW is expressed as a percentage of the system input volume expressed as: NRW% = (NRW Volume/System Input Volume) x 100 Though most utilities use this percentage for measuring performance, Alan (2010) points out that it may be misleading when used to show the actual trends and performance of the water utility over time. He points out that the percentage can only be used when the water consumption remains constant which is usually not the case. Consumption changes from 8

21 time to time due to various reasons such as when there is a tariff increase, the consumers tend to cut their consumption. When there is a drop in consumption, the water utility will reduce production (system input volume). If such a drop occurs and the water losses remain the same in absolute terms, then the NRW in percentage terms will be higher. This can be shown in a hypothetical situation as in figure 2.1. Before tariff review After tariff review Production = 100 Production = 90 Billed Billed = 60 = 50 Physical Commercial Physical Commercial Losses = 20 Losses = 20 Losses = 20 Losses = 20 NRW = 40% NRW = 44% Figure 2. 1: Why percentage non-revenue water is misleading Source: Alan S. Wyatt (2010) From the above figure, if the water consumption decreases from 60 to 50 units due to higher water tariff and the losses remain the same, the water utility will reduce the system input by the 10 units. If we compare the two scenarios, the percentage water loss will change from 40% (40/100) to 44% (40/90) despite the actual loss remaining the same at 40 units (Wyatt, 2010). If we then use the percentage NRW to appraise performance, it will mislead us to believing that the water losses have increased. 2.3 Physical (Real) losses Physical also referred to as real losses are the annual volumes lost from transmission and distribution systems through all types of leaks, bursts and overflows on mains, service reservoirs and service connections, up to the point of customer metering (IWA, 2003). The major part of these losses is due to system leakages which also stems from lack of maintenance or failure to renew and replace ageing systems (Assets Management). 9

22 Successful management of leakages has both financial and social benefits to the water utility. The successful management of system leakages leads to system's sustainability as well as foster public support by providing affordable water to consumers (Butler, 2006). Sometimes, undetected leaks can be quite large, such as those that run directly into a sewer line or a storm water drain. Therefore, a water utility that does not practice a policy of efficient and intensive active leakage control will always have a high level of leakage, except if the water network is new or in excellent condition. Assessing physical (real) losses can be carried out by any of the following three methods (IWA, 2003) Top- down annual water balance: Using the IWA best practice standard water balance, real loss is the difference of volume when the volumes of authorized consumption and apparent losses are taken from the system input volume. To cater for errors and uncertainties in the calculated values, 95% confidence limits are usually used in the calculations. This method has the limitation of not providing the components of the real losses, e.g. detectable bursts (can potentially be managed through speed and quality of repairs, and active leakage control), or real losses due to underground losses (that can only be reduced by pressure management or infrastructure management strategies (IWA, 2004). It is therefore best to conduct this method with the other two methods Bottom-up real losses assessment: In this method the real loss volume obtained from the top-down water balance is checked by bottom-up calculations of independently individual small zones of the distribution network through analysis of night flows into these zones. This approach relies on what is known as the Minimum Night Flow (MNF) which according to IWA (2004), is usually in the early mornings between around 2.00am and 4.00am in the urban set up but would vary from zone to zone. During these hours, real losses are at their maximum percentages of the total flow. The real loss value is obtained by the difference between the legitimate night consumption by customers of the zones under consideration and the minimum night flow to these areas. There is some degree of uncertainty in these estimations since the legitimate night consumptions vary from night to night. The Bottom-up real loss, according to IWA (2004), has the benefits that, it provides independent determination of the volume of real losses, which if carried out across the whole distribution net work, 10

23 enables areas of high real losses to be identified and mapped for active leakage control work and provides a cross check on the water balance calculation. According to IWA (2004), these two values should balance but are often not mainly because of the cumulative errors in each method s calculation Components analysis of real loss: Annual real losses are assessed using components analysis (IWA, 2004). It uses numbers, average flow rates and average run- times of different types of leaks and bursts (background, reported and unreported) on different parts of the distribution infrastructure (mains, service reservoirs, and different sections of the service connections) and other data such as basic infrastructure data (mains length, number of service connections, length of the privately owned service line from property boundary to the meter). This model allows the overall volume of real losses to be broken down into its constituent components for each aspect of the system s infrastructure and this in turn allows evaluative alternative options for the reduction and control of the real losses. 2.4 Apparent losses Apparent losses constitute one of the three components of Non-Revenue Water (NRW) to a water utility besides real losses and authorized unbilled consumption. According to Vermersch (2005) apparent losses occur in three types of connections, namely; unregistered, metered and unmetered connections. He explains these as follows: unregistered consumers (illegal connections/consumption); underestimation of consumption when the water meter is out of operation; under-metering when the water meter is not appropriate; frauds on metered connections; and under-billing of unmetered registered customers Components of Apparent losses Rizzo (2007) identifies four components of apparent losses as follows: Meter underregistration; Water accounting errors; Meter reading errors; and Water theft. These can be shown in the figure 2.2 and will be explained in the sections that follow. 11

24 Figure 2. 2: The four components of apparent losses Source: Rizzo (2007) Meter Reading Errors Meter reading errors refer to inaccuracies from manual reading of customer meters by the water utility s meter readers. This can occur unintentionally or intentionally. The meter reader may collude with a customer to under-read the customer s meter in exchange for a bribe. The solution to this according to Rizzo (2007) is to have a system of Automatic Meter Reading (AMR) Under-registering Meters This occurs when a consumer meter counts only a fraction of the total water amount that has passed through the consumer meter. This means that the consumer will only be billed for that portion that has been indicated on their meter. According to Rizzo (2007), the following account for meter under-registration in a water utility: meter wear and tear; incorrect installation practice; lack of maintenance or calibration; and incorrect meter sizing. According to Ranhill (2011), the solution to this problem is customer meter accuracy testing which can be performed either on-site at the customer premise or at a testing facility. 12

25 Water Theft This is also referred to as illegal connection and occurs when some consumers deliberately bypasses the water meter to get water for a period of time. Some of the causes for water theft are; water scarcity, poor management, lack of awareness, inappropriate tariff system and refusal to allow individuals to do house connection (Butler, 2006). Some of the factors that pose difficulties to water utility staff when trying to stamp out illegal connections in a water system according to Butler (2006) are; the assumption that water is a basic human need and therefore should not be charged for; and the involvement of politicians who try to win public support at the expense of sustainability of water services Billing Errors Billing error usually occurs when a water consumer is billed the wrong amount due to errors of omission and commission by the utility s billing office. As cited by Butler (2006), the following are some of the causes of billing errors in a water system; A computerized system that estimates the consumption of closed premises (inaccessible premises), meter readers recording wrong figures after obtaining monetary favours from customers; and inefficiencies and flaws in the billing systems especially in calculation and correction 2.5 Empirical literature The issue of NRW has gained substantial concern in the recent past and various studies have been carried on the topic to try and come up with ways of tackling the problem. Tackling leakages have been the subject of studies and reports since the 1980 s and the National Leakage Initiative produced in the 1990 s a report helping the water operators to understand their water losses and develope strategies to reduced them (Farley, 2003). Significant steps forward have been made in developing both technical strategies (pressure management, flow monitoring) and operational management to reduce the physical losses but developing countries are facing harder difficulties to cope with their water losses. Kingdom et al,(2006) quote poor infrastructures and equipment that have been unmaintained for long periods, high unbilled water through fraud and illegal connection or public building that are still enjoying privileges such as free water supply 13

26 as main challenges for developing countries. Many water utilities of low-income countries have attempted to reduce their water losses with balanced results and most of them are facing the same obstacles to implement NRW reduction strategies. Frauendorfer et al (2010) did a study analyzing NRW levels of 47 water utilities across Indonesia, Malaysia, Thailand, the Philippines, and Vietnam, which concluded that the levels of NRW average 30 percent of the water produced, with wide variations among individual utilities ranging from 4 percent to 65 percent. Alegre et al. (2006) stressed the significance of evaluating the reliability of the measurement made and used in the calculations, for a careful interpretation and a good use, particularly because the evaluation of essential volume of losses for the water balance can be limited to a simple appreciation. The evaluation of real losses can be more precise due to night flow analysis, but this method is quite expensive and not always applicable. Langa (2007) raised the issue of poor equipment and technologies in developing countries with the example of Maputo. The lack of flow meters or their non accuracy prevent a good knowledge of the networks and make difficult the establishment of a precise water balance and therefore action plans. The author emphasizes the fact that in his attempt to assess the water losses in Maputo most of the values were uncertain or based on estimated data that prevented them to make any reliable conclusions on volumes lost or any recommendations to tackle the losses. Furthermore, he also missed data on the network by itself: installation conditions, number of connections (particularly illegal connections). In such a situation, the only recommendation he could strongly argue for is the installation of monitoring equipments and the conduct of surveys on physical and commercial data. Bekithemba (2001) experienced the same difficulties to evaluate properly the water balance of Mutare water supply system in Maputo because of non-working bulk meters or absence of meters, especially for big consumers such as industries. But he also brought to the fore the role of political constraints that have an influence on the prioritization of objectives, selection of project and attribution of budget. He denounced the choice to start a significant and expensive engineering project to increase the volume of water supplied before even assessing the gain of the reduction of water losses within the system. But as the author stated that this project was a decision influenced by political objectives. This 14

27 case illustrates the importance of external pressure from politicians and funders and underlines the complexity of water projects and the need for a strong leadership. In contrast, Mahmoudi (2007) revealed the positive role of the Iranian government by devoting a part of the budget to combat NRW pressing the water and wastewater companies to allocate a part of their budget to this task. Because of the foregoing reason they are improving their water losses management through better operational practices (leakage detection and quicker response to detection, replacements and implementation of new monitoring equipments, following national standards whilst installing new branches and conducting pilot projects). Kingdom et al. (2006) did a study on the challenge of reducing NRW in developing countries for the World Bank and aimed at determining how the public-private partnership (PPP) can help in reducing and controlling NRW in the developing countries and the importance of performance contracting in addressing the problem. The study was conducted through case study on four water utilities as follows: State of Selangor (Malaysia), where a large-scale contract for reducing physical and commercial losses has been in place since 1998 between the (at that time state-owned) water utility serving Kuala Lumpur and its surroundings, and a consortium led by a Malaysian company, Bangkok (Thailand), where the Metropolitan Waterworks Authority (MWA) that supplies Bangkok outsourced physical loss reduction to private contractors from 2000 to 2004, São Paulo (Brazil), where SABESP, the water utility that serves the São Paulo Metropolitan Region, experimented with different contractual approaches for reducing commercial losses with the private sector and Dublin (Ireland), where the Water Division of the Dublin City Council contracted in 1997 an international private operator to implement a two-year contract for reducing physical losses The key variables that were measured in the study were the NRW levels, the cost of reducing NRW and the benefits of reducing the NRW. The study concludes that the PPP can work in a win-win situation to reduce the NRW; the public sector has limited capacity and little interest in NRW reduction while the private sector has the capacity and the incentive to carry such task. Mons (2010) conducted a study on strategies for non-revenue water management in developing countries: a case study of Kampala, Uganda. The objectives of the study were to evaluate the water loss situation in Kampala s water distribution network, to identify the existing strategies employed globally for combating NRW, to evaluate the existing 15

28 strategies for tackling NRW in Kampala, to assess the possibility of implementing new strategies: technical obstacles and motivation of local stakeholders and to propose recommendations for the implementation of strategies reducing effectively the NRW in Kampala Water Supply System. The methodology used was a case study on the water supply in Kampala. The researcher concluded that most of the water utilities in developing countries have high NRW mainly due to dilapidated networks, conflicting interests, lack of strategies and culture. Yeboah (2008) did a study on management of non-revenue water: case study of the water supply in Accra, Ghana and the research objectives were to analyze the existing NRW situation in Accra and the management strategies in place to address the problem, to determine the extent that NRW has affected the overall performance of the water utility in Accra and recommend how the existing NRW control strategies can be improved. The methodology used in the research was the case study approach. The research identified the following as determinants of NRW levels: network pressures, leakage control, meter reading inaccuracies, billing inaccuracies, meter under-registration and unbilled authorized consumption. The study recommended holistic approach to NRW management starting with analysis of the NRW components, prioritization of activities in NRW reduction and control and change of the current strategies used by the management to adopt others such as; appointment of NRW manager, close monitoring of meter readers, looking for funding sources and sensitizing of the public on the NRW situation and the measures being adopted to address the problem. Brian (2003) did a study titled reducing non-revenue water: a myriad of challenges. The research was conducted by a team comprising of staff from Tampa Water Department of Florida State of USA and experts from two consulting firms led by Brian D. Pickard. The study was done through case study approach based on the department s internal documents and the team members knowledge of the company. The study aimed at determining the causes of an eight month increase in NRW percentage occurring in the year 2003 and recommend remedial action. The following were investigated in the study: testing and calibration of master meters, analyzing available meter accuracy data, water auditing using IWA water balance methodology, accounting procedures and billing system review. After their investigations, the team came up with the following recommendations: to do comparison of the water utilities management practices with the best practices in management of NRW and come up with a NRW reduction and control 16

29 program, applying a business case approach to the implementation plan where implementation costs, savings from reduced NRW and service levels improvement are compared with a no action plan, continuous improvement of data quality to refine water balance, leakage management/assets renewal program and long-term customer meter improvement plan through automated meter reading. Ku-Mahamud et al.(2007) sort to examine the components of NRW through a study; Location and Magnitude of Non-Revenue Water: A Case Study of Felda Chuping, Perlis, Malaysia. The objectives of the study were: investigating the water distribution system, identifying the NRW levels and its components and coming up with a mathematical model for estimation of the source and magnitude of the NRW. The study result brought about a framework and work related procedure for non-revenue water with the following contributions: a conceptual model for treated water distribution system consisting of water source, storage, network and the supply area, a framework for NRW classification where all the seven components of NRW identified by IWA have been clustered into four sections thus; between water source and supply tank; at supply tank; between supply tank and customer area; and customer area, working procedure for the purpose of identifying the source and magnitude of NRW components and a mathematical model for estimation of the source and magnitude of the NRW as follows: NRW = anrw01 + bnrw02 + cnrw03 + dnrw04 + enrw05 + fnrw06 + gnrw07 Where a, b, c, d, e, f and g are constants. NRWot is the non-revenue water amount for component ot. The constant values are the ratios between the averages of NRW components and total NRW 2.6 Summary and Research Gap Perhaps the most important aspect of the whole issue is not about the quantity of freshwater resource available on earth, but rather the management and the protection of the resource is the crucial issue that needs to be considered seriously. Sometimes, the issue is not about non availability of freshwater resources but it is about the management of the available water resources in a particular place. Even though freshwater resource accounts for only 2.5% of the whole water resource on earth, this amount is quite huge enough to cater for the needs of the current population as 17

30 well as future ones. As stated earlier, it is the ability to manage and protect the resource that is needed. It is utmost important that prudent and efficient measures are taken to ensure effective and efficient use of the available freshwater resources. 2.7 Conceptual/Theoretical Framework One of the major yardsticks in measuring performance of a water utility is the level of non-revenue water. The lowest level of non-revenue water is desirable and is as a result of various inputs. This desired level is a product of an elaborate process which brings together the inputs including control of leakages and bursts, elimination of accounting errors and water theft, infrastructure rehabilitation and necessary resources. When all these input factors are brought together, their interaction will bring about a desirable end product of low non-revenue water and higher income for the water utility. The framework is depicted in figure 2.3. Leakages and Bursts Age of infrastructure Pipeline pressure Quality of water pipes and fittings. Accounting Errors Errors in meter reading Billing errors Corruption High non-revenue water Low revenues Low water supply efficiency Water theft High water tariffs Corruption Intermittent water supply Figure 2. 3: Conceptual framework Source: Author (2014) 18

31 CHAPTER THREE RESEARCH METHODOLOGY 3.1 Introduction This chapter dealt with the methods that were applied in the research study. It specifically looked at the methods under the following sections: research design, research location, research instruments, data collection techniques and data analysis methods. 3.2 Research Design For the purpose of this research, case study design of research was used. The object of study; that is, Non-Revenue Water (NRW) needed to be studied as a whole to allow an indepth investigation of the problem. This gave a better understanding and insight of the problem faced by water utilities in managing water losses and especially in developing countries like Kenya. 3.3 Variables NRW was the dependent variable while its determinants were the independent variables. The following variables were measured: Table 3. 1: Variables VARIABLE DEFINITION MEASUREMENT SOURCE NRW Water not billed (Water losses) Percentage Documents review Bursts and leakages Average number of Annual total bursts pipeline bursts in the and leakages network Documents review Water Theft Water theft cases Documents review Numbers reported Accounting errors Source: Author (2014) 3.4 Location of the study Errors on meter readings and bills to customers Average number of errors per year Documents review The study was carried out in Murang a county, Kenya. It focused on the water supply area in the areas of jurisdiction of the five water services providers in the county. 19

32 3.5 Target population For logistical and budgetary reasons the researcher administered questionnaires to the staff from the five water services providers in Murang a county. This is because the staff are the ones involved in the daily running of the water supply system and as such they are conversant with the subject matter of the study. The target population for this study was the 270 employees in top, middle and low level management in the companies. The population characteristics are summarized in table 3.2. Table 3. 2: Target Population Group Frequency Percentage Top level management Middle level management Low level management Total Source: TWSB staff records (2013) 3.6 Sampling Technique and Sample Size From the above population of 270, a sample of 30% was targeted from within each group in proportions that each group bear to the population as a whole. Purposeful sampling was used so as to ensure that key personnel who deal with the issue of NRW are part of the respondents. To cater for non-responsive respondents, the researcher assumed an additional 5% of respondents from each group. Questionnaires were therefore sent to 35% of the population as in table 3.3. Table 3. 3: Sample Size Sections Population (Frequency) Sample Ratio Sample Top level management Middle level management Low level management Total Source: Author (2014) 20

33 3.7 Research Instruments In this research, semi-structured questionnaires were the instruments used. Information was gathered through a semi-structured questionnaire with both close-ended and open questions and therefore a detailed understanding of the problem was reached. The purpose of this case study was to collect comprehensive, systematic and in-depth information about the water losses in Murang a county. However the researcher was keen not to consume too much time due to the open-ended questions and also took caution on the answers given in the close-ended questions. 3.8 Data collection Techniques The study used primary data. The methodology used for the data collection for the fieldwork at WSPs, as stated earlier was semi-structured questionnaire Reports Documents from the five water utilities in Murang'a county were reviewed during data analysis. The following documents from the five WSPs were used during the study: monthly operations reports and the organization structures Questionnaire administration The researcher and his assistant administered the semi-structured questionnaire themselves to all respondents. Care and control by the researcher was exercised to ensure all questionnaires issued to the respondents were received. To achieve this, the researcher maintained a register of questionnaires which were sent and which were received. The questionnaires were administered using a drop and pick later method to the sampled respondents. 3.9 Pilot Test The tools designed by the researcher based on the research questions were pilot tested to refine the questions before being administered to the selected sample. A pilot test was conducted to detect weakness in design and instrumentation. The pilot data was not included in the actual study. 21