DECEMBER 2015 ISSUE 4 I VOLUME 11 water asset management INTERNATIONAL

PAPERS Xylem makes case for wastewater

3 Practical application of Acoustic Propagation Velocity climate-friendly investment Measurement (APVM) for condition assessment of drinking ater technology company Xylem has According to the report, more than $25 billion water mains Wreleased a report identifying a huge poten - in net savings can be generated with the R Beuken, K Laven, P Horst, tial to cut greenhouse gas emissions associated adoption of high efficiency wastewater technolo - R Diemel and G Mesman with electricity use in wastewater treatment gies in China alone. With the addition of the by applying currently available equipment in United States and Europe, the savings become investments that are either cost-neutral or bring greater than $40 billion, it claims. 8 Commercial water losses in overall cost savings. Xylem says that two levers identified in the Bulgaria - reasons, impact, and The report, based on a study by Vivid report would accelerate adoption of such highly ways to improve the situation Economics, looked at the USA, Europe and efficient wastewater technologies: new financing Ivaylo Kastchiev China and investigated the application of 18 models that incentivize investments in low- distinct electricity-related emissions abatement carbon technologies, which would assist with the opportunities in wastewater management. initial higher capital costs that often come with 12 Do we have an adequate asset According to the study, nearly half of the electric - management policy for water ity-related emissions in wastewater management supply and sanitation can be abated at a negative or neutral cost. companies? The study found that almost half of the ‘What’s missing is the enabling Avni Dervishi and Arben Bakllamaja electricity-related emissions could be abated framework to incentivize investment with existing technologies, and that for 95% of this abatement the savings from energy and accelerate widespread adoption 16 Cost-benefit analysis of efficiency would exceed the spending on the of these advanced, sustainable systematic reduction of water abatement measures. A smaller proportion of losses in Croatia emissions could be tackled in the USA on this solutions.’ Martina Tadic and Karlo Kolovrat basis compared to Europe, because of lower Patrick Decker, electricity costs in the USA. China offers the greatest potential because of the opportunity to President and CEO, Xylem install complete new systems. The report claims that nearly 100% of the abatement opportunities these advanced technologies; and increasing examined would be at zero or negative cost, the energy efficiency standards of wastewater and it put the total abatement potential there at equipment, which would ensure broader nearly 13 million metric tons of carbon dioxide adoption. equivalents annually. The report concludes: ‘Now is the time for the Extrapolating the findings of the study globally, industry and all stakeholders in the climate the report suggests that the potential global change agenda to work together to overcome volume of negative cost abatement is nearly 44 these barriers to adopting high efficiency million metric tons of carbon dioxide equivalents wastewater treatment technologies, which will a year. result in greater productivity of wastewater The report argues that the primary barriers to operations, and a meaningful step forward in adoption are awareness of the opportunity and tackling climate change.’ willingness to adopt existing solutions that have a Xylem’s Decker added: ‘Infrastructure invest - higher initial capital cost and a lower ongoing ments today can have positive environmental operating cost. ‘What’s missing is the enabling and economic consequences for decades. framework to incentivize investment and Importantly, the pragmatic solutions identified in accelerate widespread adoption of these this report pay for themselves and, in many advanced, sustainable solutions,’ says Patrick cases, unlock new capital that can be invested Decker, President and CEO of Xylem in the in additional infrastructure improvements. As foreword to the report. we address the effects of a growing global The opportunities assessed in the study population and its accompanying strain on covered use of high efficiency pumping, variable natural resources, the public and private sectors speed pumping, variable speed blowers, high must come together to identify and implement efficiency mixing, optimised control systems, and new ways to realize the full potential of a low- improved biogas production in wastewater carbon economy.’ transport, secondary treatment, and / or sludge To download the report, Powering the treatment, use of efficient air scour blowers and wastewater renaissance: energy efficiency filter system controls in tertiary treatment, as well and emissions reduction in wastewater treat - as optimised new plant for secondary, tertiary, ment, visit: http://poweringwastewater. and aerobic and anaerobic sludge treatment. xyleminc.com/ G NEWS

water asset management INTERNATIONAL

EDITORIAL Singapore PUB awards desal Editors Dr John Bridgeman and ceramic contracts [email protected] ingapore’s water agency PUB has selected HSL Desalinated water currently meets 25% of Professor Stewart Burn SConstructor Pte Ltd as the contractor for the Singapore’s water demand. With water demand [email protected] construction of the country’s third desalination expected to increase, PUB says that it intends Mr Scott Haskins plant. The plant, sited at Tuas and to be owned to increase desalinated water capacity in order [email protected] and operated by PUB, is expected to commence to continue to meet 25% of future water demand operations in 2017 and will add another 30 million in 2060. Dr Shiv Iyer 3 [email protected] gallons (136,000m ) of water per day (MGD) to PUB also recently announced that its Choa Chu Singapore’s water supply. Kang Water Works is becoming the first in the The open tender attracted bids from eight country to use ceramic membranes thanks to Water Asset Management International is an international newsletter on asset companies. At a tender price of S$217 million ($154 upgrading works taking place in the latter part of management in water and wastewater million), HSL Constructor Pte Ltd offered the most the year. utilities. The focus of the newsletter is on the strategic aspects of this developing competitive price for the design and construction of PUB is collaborating with PWN Technologies to field, providing utilities with international the plant, according to PUB. use its CeraMac system, with membranes supplied perspectives on infrastructure planning and maintenance as they seek to deliver Currently, Singapore has two desalination plants, by Japan’s Metawater. The new CeraMac plant at cost-effective services to their customers. the 30MGD SingSpring desalination plant, and the CCKWW is due to be operational in 2018 and will 70MGD Tuaspring Desalination Plant. PUB has also have a daily capacity 40 MGD, making it one of the awarded a consultancy services tender for a fourth largest ceramic membrane plants for drinking water desalination plant, which will be built at Marina East. treatment in the world. G

PUBLISHING Publisher New French public-private model Michael Dunn

Water Asset Management International uez and the French town of Dole have announced The town owns 49% of the capital of the compa - is published four times a year (March, Sthat they have entered into a new type of public- nies, Suez 51%, while the Board is chaired by the June, April, December) by IWA Publishing. Statements made do not private model as part of the provision of water and town’s mayor and the company CEO is a Suez represent the views of the International sanitation services for the town. employee. Both parties each have three members Water Association or its Governing Board. France’s first two semi-public companies with a on the SemOp board. IWA Publishing single purpose have been created, one each for Not only are SemOp undertakings created for a Alliance House, 12, Caxton Street, water and wastewater, alongside the award of specific purpose, they are also fixed term – 13 years London SW1H 0QS, UK Euro67 million contracts to Suez for the delivery of in the case of Dole. According to Suez, these new Tel: +44 (0)20 7654 5500 water and sanitation services. arrangements open the way for a new mode of Fax: +44 (0)20 7654 5555 Email: [email protected] The two companies - Doléa Eau and Doléa shared management combining a local authority Web: www.iwapublishing.com Assainissement – are known as ‘SemOps’, based on and a private operator, selected through a tender the French Société d'Economie Mixte à Opération procedure. The set-up means the local authority is Unique. These start their activity on 1 January 2016 involved in each decision concerning the SemOp SUBSCRIPTIONS with the purpose serving the 25,000 residents of and has an equal vote with the operator on the G Water Asset Management International Dole with water and sanitation services respectively. actions to implement. is available as either a print or an online subscription.

2015 price (4 issues): £299 / €451 / $596 Inauguration of energy-efficient desal (IWA members: £228 / €342 / $434) n energy-efficient pilot desalination plant to be Solutions, with its advanced and innovative Contact Portland Customer Services Apowerd by renewable energy has been opened in ultrafiltration and reverse osmosis membrane Charles Darwin House, Abu Dhabi, following the award of a contract to Suez technologies, Adionics, with its innovative 12 Roger Street, London WC1N 2JU, UK by the Masdar Institute of Science and Technology in liquid/liquid deionisation technology. Email: [email protected] the middle of last year. In parallel, together with the Masdar Institute of The project based in Ghantoot, 90 kilometres Science and Technology and ENGIE’s Laborelec, northwest of Abu Dhabi, covers the design, engi - Suez is conducting studies on seawater desalination neering, procurement, construction, commissioning, using solar power, in order to develop seawater Design & print operation, maintenance and evaluation of the pilot desalination plants fully powered by renewable Designer: David Parry plant over a period of 18 months. energy. The main final target is to apply those Printed by Hobbs The Printers, UK Suez has reported that it had successfully passed renewable energy technologies on large scale ISSN (print): 1814-5434 water production and water quality tests, in terms of desalination plant. ISSN (online): 1814-5442 performance and compliance with Masdar’s require - ‘Suez is proud to play an active role in the Masdar © IWA Publishing 2015 ments. The plant reaches the potable water produc - Seawater Desalination Programme and to contribute tion of 100m 3 per day with an electrical energy to Masdar's ambitious initiatives for renewable consumption of less than 3.6 kWh/m 3, which Suez energy,’ said Jean-Louis Chaussade, CEO of Suez. says means it therefore offers greater energy- ‘Within this project, Suez’s objective is to identify new efficiency than the current state-of-the-art desalina - desalination technologies that will address sustain - tion systems. able access to water, both in the arid region and For the project, Suez has brought together some throughout the world. By doing so, Suez demon - of its most advanced and innovative technological strates its commitment to identify and develop global desalination partners to achieve the sustainability solutions for the sustainable management of objectives, including Dow Water and Process resources, a key issue, especially in the region.’ G

WATER ASSET MANAGEMENT INTERNATIONAL • 11.4 - DECEMBER 2015 • 2 PRACTICAL APPLICATION OF ACOUSTIC PROPAGATION VELOCITY MEASUREMENT

Practical application of Acoustic Propagation Velocity Measurement (APVM) for condition assessment of drinking water mains

The drinking water networks in the Netherlands are, with an estimated average age of R. Beuken, 45 years, relatively young. However, as the networks age over the coming decades, [email protected] water companies will face increasing demands for investment in pipeline replacement. G. Mesman To know which mains should be replaced when, information is required about the KWR Watercycle Research Institute, Nieuwegein, The Netherlands residual life of these mains. To know this, the current condition has to be assessed. Several methods are available for condition assessment and recently the Acoustic K. Lavenn Echologics Engineering, Mississauga, Propagation Velocity Measurement (APVM) method was introduced in the Ontario, Canada Netherlands. R. Beuken, K. Laven, P. Horst, R. Diemel and G. Mesman describe the P. Horst theory behind the APVM method, field tests conducted in the Netherlands, and the PWN, Velserbroek, The Netherlands results of a validation exercise on an asbestos cement main. The field tests showed that R. Diemel the method is applicable to drinking water networks in the Netherlands. The validation Brabant Water, ‘s Hertogenbosch, exercise found that the APVM method provides results similar to other assessment The Netherlands methods requiring insertion of systems into the main or samples to be removed from © IWA Publishing 2015 the main. It was also found that a prerequisite for trustworthy results is the availability of reliable data on the properties of the mains, in particular the initial wall thickness and the Young’s modulus of the pipe material.

he total length of the drinking length of mains must be replaced allows the testing to occur at low cost Twater distribution network in in the coming decades. A key compared to pipeline inspection the Netherlands is approximately question many of these water methods requiring internal access or 117,000km. The total replacement companies are facing is: which the extraction of samples.The APVM value is estimated at €20,000 to mains should be replaced when? method was introduced recently in the 30,000 million ($21,232 to $31,848 The National Research Council of Netherlands.Within the Joined million). The Netherlands has a Canada developed and patented the Research Program that KWR high standard of supply of drink - Acoustic PropagationVelocity Watercycle Research Institute (KWR) ing water. Water is supplied with - Measurement (APVM) method as part conducts for the water companies out free chlorine, water loss levels of a long-term research program into in the Netherlands, the practical are estimated at 5% (Geudens, the propagation of sound waves in application of the APVM method was 2012) and the average burst rate is water pipelines (Hunaidi, 2006). investigated with an aim of evaluating estimated at 0.053 bursts/km/ Offered under the name ePulse™ by its accuracy and total costs, as well as year (Vreeburg et al., 2013). The the company Echologics, the APVM the decision-making power of the distribution network has a wide Figure 1 method claims to measure the condi - information provided. variety of pipe materials and ages, The sequence of tion of metallic or asbestos cement including some pipelines near or inputs (green), water mains, averaged over test inter - Condition assessment with APVM: beyond the end of their design measurement vals of approximately 100 meters.The theory lives. If the water companies (orange) and measurements are conducted from The APVM method involves measur - desire to maintain the condition computations street level while the network remains ing the behaviour of sound in a of the network and these (blue), from left in normal operation.The fact that pipeline, and using this together with standards of supply, a considerable to right minimal enabling works are required the material properties and geometry

WATER ASSET MANAGEMENT INTERNATIONAL • 11.4 - DECEMBER 2015 • 3 PRACTICAL APPLICATION OF ACOUSTIC PROPAGATION VELOCITY MEASUREMENT

Figure 2 controlled by the hoop stiffness of the Results of 41 pipe.The hoop stiffness is defined as measurements with the ratio of force (as applied to the APVM. The x-axis pipe wall by water pressure) to shows the test displacement (expansion or contrac - interval number, tion in the hoop direction). A very with each test stiff pipe will resist this flexing, causing interval represent - the sound waves inside the pipe to ing approximately propagate close to the speed of sound 100m of pipe in an open body of water. A less stiff length. The y-axis pipe will flex more easily, slowing represents wall down the speed at which these sound thickness, with the waves propagate. original nominal In certain pipe materials (asbestos wall thickness cement, cast iron, ductile iron, and indicated with steel) there is a known and consistent hollow boxes and relationship between the pipe’s hoop the APVM measured stiffness and the wall thickness. By wall thickness measuring the hoop stiffness using the indicated with filled APVM method, the wall thickness can boxes. The X’s thus be calculated. Laboratory testing indicate that no during the development of the APVM valid measurement method showed that the hoop stiffness was obtained of a degraded main is controlled primarily by the wall thickness at the thinnest point around the circumfer - ence of the main (Hunaidi, 2006).The intuitive basis for this is that the circumference will expand primarily at the weakest (thinnest) point.Thus the results of testing with the APVM method will reflect the thickness at the thinnest point around the circumfer - ence of the main.The thinnest point around the circumference is also the likely failure point of the main, making these results appropriate for estimation of future main break rates. The basic acoustic mechanism behind the APVM method was developed jointly by the National Research Council of Canada and Echologics Engineering (Hunaidi, 2006). Initial field tests of the method were conducted between 2005 and of the pipeline to calculate the current propagation becomes more complex as 2008. During these tests, several average wall thickness.The measure - interaction with the pipe wall occurs. additional parameters were discovered ments are taken without inserting The pipe wall reflects the sound waves to be factors in the equation* relating sensors into the pipeline or excavating back into the water, and also vibrates in the velocity of sound in the mains to the pipeline for direct physical testing several different ways (axially, radially, the wall thickness. Primary among of the pipe wall. and longitudinally). these parameters was theYoung’s Measurements are taken of the One particular type of vibration Modulus of elasticity of the pipe average wall thickness over test inter - known as the water hammer mode material itself.While standard values of vals, with each comprising a 50m to allows assessment of the pipe wall.This theYoung’s Modulus were available for 200m length of continuous main. is the water-borne pressure wave, common pipe materials such as cast Acoustic sensors are attached to the which causes the pipe to expand and iron, ductile iron, steel, and asbestos outside of the main at either end of the contract symmetrically in the hoop cement, there proved to be substantial test interval. Once the sensors are direction.The sound volumes used by variation between pipes of the same attached, sound is introduced into the the APVM method correspond to material.While standard accepted main from a point outside the test pressure variations of less than 0.001 values of theYoung’s Modulus were interval, and it is measured by the Bar, so this movement of the pipe wall available for most pipeline materials, acoustic sensors. occurs at a microscopic level. At one testing samples of the pipe material The sound waves used for the particular frequency of sound, the using the method specified by ASTM APVM method travel through the natural vibration rate (the ring fre - C2015 yielded different values. It was water, however their propagation quency) of the pipe will match the found that theYoung’s Modulus of velocity is affected by the pipe wall. In frequency of the sound in the water, samples of cast iron from water mains an open body of water, sound propa - resulting in a combined vibration could be reliably predicted by its gates away from its source in spherical mode that loses very little energy as it installation date. Samples of asbestos pressure waves, which propagate at propagates down the main.The speed cement taken from water mains were approximately 1450m/s.When sound at which this particular frequency found to have aYoung’s Modulus that is introduced into a pipeline, the propagates through the water body is varied from the design specifications,

WATER ASSET MANAGEMENT INTERNATIONAL • 11.4 - DECEMBER 2015 • 4 PRACTICAL APPLICATION OF ACOUSTIC PROPAGATION VELOCITY MEASUREMENT

the material are used to calculate the current wall thickness of the pipe. Calibration factors obtained empirical - ly from previous tests are applied at this stage to account for bell-and-spigot joints and the presence of internal linings.This calculated current wall thickness is given as an average value over each test interval.This can, in turn, be compared to the original wall thickness (either as indicated in pipe catalogues or from direct measure - ments if available) to compute the percentage of loss of wall thickness. Results of testing are a table comparing original wall thickness to current wall thickness, and showing the percentage of loss.

Field trials with APVM in the Netherlands In 2012 several water companies in the although the values obtained from Figure 3 points along the pipeline, generally Netherlands performed field tests of these field tests were fairly consistent Results of measure - about 100m apart, but with distances the APVM method.The results from throughout all samples taken from ments of the between 50m and 200m technically five asbestos cement mains and two North America. effective wall feasible. cast iron mains are presented in Figure The current wall thickness measure - thickness in When possible, existing fittings such 2. Based on these tests the following ment provided by APVM represents Middenmeer, South as valves or fire hydrants are used for observations are made: only the portion of the pipe wall that side. The x-axis connection points, with sensors placed • Water companies consider the contributes strength to the pipe and shows the distance in contact with the outside of the measurements with the APVM allows it to resist flexing under internal in meters from the fittings.Where no existing fittings are method as easy to execute. Good pressure.This is referred to as the starting point of the available, small excavations can be results were obtained when sound ‘effective wall thickness’. For asbestos testing. The y-axis made to reach the top of the main to was induced in the pipe by tapping cement pipes, this represents the shows the original allow testing.While vacuum excavated on the pipe with a rod. portion of the pipe wall unaffected by wall thickness and holes of 100mm to 300mm diameter • Of the measurements attempted, calcium leaching and still providing the measurements have most often been used, a new 88% were successful in obtaining a structural strength. For cast and ductile obtained by the technique has recently been developed wall thickness measurement. In iron pipes, this represents the portion three test methods which allows even smaller holes (25 to Figure 2, in five cases no value for of the pipe wall unaffected by corro - indicated 50mm diameter) to be used. A core is the measured wall thickness was sion.The results tend to match up best first drilled out of the roadway or obtained (this is indicated with an with the thinnest point around the concrete (if required), and then a water X).These appeared to be caused by a circumference of the pipe, averaged drill is used to bore a hole to the top of PVC repair pipe several metres long. over the test interval. the main. A steel rod is then pushed • In 12 of 41 cases (seven at asbestos It should be noted that the APVM down to the top of the main and used cement mains and five at cast iron method provides only the average wall to conduct sound from the main to the mains) the calculated wall thickness thickness over each test interval.The surface. Sensors are placed on the top was greater than the nominal method cannot locate individual of the steel rods.This new approach has original wall thickness. Several defects within the test areas. It is substantially reduced the cost associat - explanations are possible: therefore usable as a decision-making ed with preparing access points for • Variations of theYoung’s Modulus tool for selecting and prioritizing APVM testing where no fittings are of the material. For asbestos mains for replacement or rehabilita - available. cement it is plausible that the tion, and as a pre-screening tool to Sound is introduced into the main material used in pipe manufacture select mains for further investigation, from a third access point outside the was not perfectly homogeneous, but cannot be used to identify the test interval.This can be done by and that as long as all pipes locations of individual corrosion pits flowing water out of a fire hydrant or exceeded the design requirement for repair.The method does, however, by gently tapping on the fitting.The a certain amount of variation was involve a leak detection test during the sound is measured as it passes by each accepted.TheYoung’s modulus as field measurements, so through-wall sensor location, and a comparison of published in the catalogue defects that are losing water are the signals is made.The sequence of (Eternit, 1980) is 25GPa. detected. measurement and computation is as Echologics has conducted several shown in Figure 1.There are a number lab tests to measure theYoung’s Condition assessment with APVM: of inputs required to perform the modulus of older asbestos cement measurements calculation of the wall thickness. mains and obtained results of One feature of APVM testing is the Acoustic signals, water properties, and approximately 38GPa.Two non-disruptive nature of the field pipe length are all measured in the field recently tested asbestos cement measurements.The method examines during testing.The pipe diameter and mains from the Netherlands the propagation of sound in the main, the wave velocity (adjusted for the resulted in aYoung’ s Modulus of which can be both induced and water properties) must be known in 32GPa. measured from the outside. Acoustic order to complete the pipe hoop • Variations in the original wall sensors (accelerometers, hydrophones, stiffness calculation.The pipe’s hoop thickness.The wall thickness or geophones) are placed at two access stiffness and theYoung’s Modulus of specified in the catalogue is a

WATER ASSET MANAGEMENT INTERNATIONAL • 11.4 - DECEMBER 2015 • 5 PRACTICAL APPLICATION OF ACOUSTIC PROPAGATION VELOCITY MEASUREMENT

minimum required value. In thickness measurements yielded Business case for the application of practice the wall thickness can be values from 22.9 to 23.5mm (the the APVM method higher and pipe size tolerances to orange lines).The second measure - Application of condition assessment is 2mm are common. ment has an aberrant result of cost-effective if the financial benefits • Random measurement error.The 17.6mm. Based on the lab tests from improved decision-making based accuracy of APVM testing is mentioned previously, aYoung’s on the information provided exceed advertised as +/- 10%, so a result modulus of 32GPa was applied for the costs of the inspections. In of 5% above the original nominal the calculation of the effective wall Appendix 1 an example of a business wall thickness on a pipe that is in thickness. case is given.The current costs of close to pristine condition is • The in-line georadar measurement application of APVM are approximate - within the margin of error. requires access to the main’s interior. ly €15/m ($16/m). It is expected that • Incorrect parameters used in the For this purpose, at the centre after further commercialisation in calculation. In the case of the first (length = 260m) a pipe was taken Europe, this price will decrease to dataset illustrated in Figure 2, out. A successful inspection was approximately €8/m ($8.5/m). Based excavation of the main in 2014 done between 260 and 500m. on the expected price of €8/m and revealed that the original wall Measuring towards the other side the example presented in Appendix 1, thickness was in fact 15mm, not resulted in problems, as the main the application of APVM is cost- the 12mm indicated in the seemed to be too narrow (length = effective. records.The current wall thick - 165m).This turned out to be a non- nesses reported APVM measure - registered PVC repair pipe, which APVM related to other methods for ments were in fact less than the also explains the aberrant result of condition assessment original wall thickness on these 17.6mm with APVM. In order to be To assess the condition of drinking seven measurements. able to measure the entire main, a water mains a number of methods are • A daily productivity rate of second access point was created at available. For an extensive overview of approximately one kilometre of the beginning of the line (length = condition assessment techniques, see main was achieved. 0m).The measurement with radar Liu et al. (2012).The listing below consists of three longitudinal mea - shows the methods that have been Validation of APVM at PWN surements (clock position: 10, 12 and employed to date by water companies To test the reliability of the APVM 2) every 20mm. In Figure 3, the in the Netherlands: measurements a validation was carried average value of the three measure - • Expert judgment, based on local out by PWN. At the Middenmeer - ments is displayed (the green dashed experiences of fitters and engineers. South side location (see Figure 2), line).The measurements show an Important considerations are the additional measurements were per - effective wall thickness ranging from objectivity of the provided informa - formed in December 2012. In-line 20.8mm to 23.5mm.The average tion and documentation.The radar inspection was carried out by MJ wall thickness equals 22.4mm. information is typically general and Oomen Radartechnologie, and two • Both phenolphthalein tests indicate non-specific for the network as a phenolphthalein tests were performed an effective wall thickness of 23mm. whole and often biased on some, by PWN. For more information on • Apart from the part with the non- mostly the most problematic, mains. radar inspection, see Slaats et al. (2004) registered PVC repair pipe, the Total costs are typically below €1/m and Smolders et al. (2009).The results results from measurements with ($1.06/m). are shown in Figure 3. APVM show comparable values for • Analysis of mains failures. Eight According to the catalogue, the the effective wall thickness with water companies in the Netherlands original nominal wall thickness of the radar and phenolphthalein. provide data to the national burst main was 23mm. Samples of the pipe registration database (USTORE). wall were extracted for phenol- A second but less extensive validation Information is obtained on which phthalein tests at two locations.The of APVM has been performed at mains materials, diameters, vintages full wall thickness was measured at the BrabantWater water company. and soil types have the most nega - these sites to be 24.9mm at location This validation also showed that the tive impact on the performance of 1 (length = 180m) and 25.4mm at APVM measurements matched the supply. For more information, see location 2 (length = 255m). Based results of phenolphthalein dye testing Figure 4 Kwakkel et al. (2013) andVreeburg on these measurements, it is assumed to within the claimed +/- 10% margin Different methods et al, (2013).Total costs are typically that the actual original wall of error for APVM measurements. for condition below €1/m ($1.06/m). thickness was 25mm. For more information, see Beuken assessment of • APVM as discussed here, providing • Four of the five APVM wall et al. (2014). mains a general indication of the condition of metal and asbestos cement mains. Total costs are in the order of €10/m ($10.6/m). • In-line inspection, providing a detailed picture of the condition of the main. Several techniques are available for the inspection of metal and asbestos cement mains larger than 200mm.Total costs are on the order of €50/m ($53.1/m). Other relevant aspects are the interruption of supply and the possible impact on the water quality. • Destructive testing, providing a reliable result, however only of a limited part of the main (that is, the sample).These tests are referred to as

WATER ASSET MANAGEMENT INTERNATIONAL • 11.4 - DECEMBER 2015 • 6 PRACTICAL APPLICATION OF ACOUSTIC PROPAGATION VELOCITY MEASUREMENT

Appendix 1 - Business Case: inspection of a 100mm asbestos cement main

destructive since pipe material is Assumptions : removed. For this purpose, the most • Replacement costs in urban area: € 150/m ($159.2/m) common tests in the Netherlands • If the inspection has a positive result (good condition), postponement of replacement for 20 years are for PVC (microscopic analyses, • Inspection costs: € 8/m ($8.5/m) gelation and resistance towards slow • Estimated inspection results (to be checked afterwards): crack growth), for asbestos cement • Positive: probability of 45% of a positive inspection result and a main in good condition. (phenolphthalein) and cast iron • False positive: probability of 5% of a positive inspection result and a main in bad condition. (sandblasting to remove corrosion • False negative: probability of 5% of a negative inspection result and a main in good condition. and testing of tensile strength). • Negative: probability of 45% of a negative inspection result and a main in bad condition. Proactive destructive testing costs in the order of €1000/test Applying a net interest of 3%, the discounted costs of replacement in 20 years are 83/m ($88.1/m). In case of a ($1061/test). Destructive inspection € false positive result it is assumed that the main will be replaced in10 years, with discounted costs of € 112/m is also applied on pipe material, ($119/m), although an additional penalty of 50/m ($53/m) is given. especially on asbestos cement and € cast iron, which becomes available at Business case inspection APVM, costs are discounted. repair or replacement.These assess - Please note that 41 is calculated as: 45% * (8 + 0 + 83) ments, in the Netherlands referred to as exit assessments, are a lower Inspection Condition Probability Costs of Costs current Costs future Result cost source of information on the inspection replacement replacement condition of specific mains. Positive Good 45% 8/m 83/m 41/m • Figure 4 illustrates a concept for € € € Positive Bad 5% € 8/m € 162/m € 9/m using these different methods Negative Good 5% 8/m 150/m 8/m together to make replacement € € € Negative Bad 45% € 8/m € 150/m € 71/m decisions.The categories of methods 100% 129/m for condition assessment are ordered € by increasing costs and detail of In this example the total calculated costs equal €129/m. This is lower than the current cost of replacement assessment. A first definition of ( 150/m). In this example, performing inspection with APVM is cost-effective. cohorts of pipe is made based on € pipe information systems and the It is noted that the values applied in these assumptions should be checked by evaluating inspection results in the combined experience of experts. field. In this calculation the financial effect of avoided bursts due to the installation of new mains is not taken into Next, a coarse assessment of the account. In general in the Netherlands these costs are very low. expected condition of pipe from each cohort can be made based on ments are accurate to within +/- 10% Kwakkel, M,Vloerbergh, I, vanThienen, P, the burst frequency (through for asbestos cement mains. A prerequi - Beuken, R,Wols, B and van Daal, K (2013), tracking burst events) and the site for reliable results is the availability Uniform failure registration: from data to deterioration (by tracking the of reliable data on the properties of the knowledge. Proceeding IWA-LESAM Sydney. observed condition of any pipe mains (especially on the original wall Vreeburg, JHG,Vloerbergh, IN, vanThienen, P extracted from the ground, known thickness and theYoung’s modulus) and and de Bont, R (2013), Shared failure data for as exit assessments). A further on the presence of repair pipes. Field strategic asset management.Water Science & assessment of the decreased wall tests have shown that the actual origi - Technology:Water Supply13.4, pp1154–1160. thickness of asbestos cement and nal wall thickness of asbestos cement Available at: http://www.iwaponline.com/ cast iron mains is possible with mains is often greater than indicated in ws/01304/1154/013041154.pdf. APVM. In many cases this will be the GIS and pipe design documents. Eternit, (1980, estimate). Catalogue asbestce - sufficient to underpin replacement Deployment of the APVM method ment water mains, Goor, the Netherlands (in decisions. If more specific informa - seems cost effective, especially if further Dutch). tion is required, for example for market introduction results in reduced MJ Oomen Radartechnologie trunk mains or mains in high risk costs of inspection. G http://www.mjoomen.nl/. areas, a more detailed assessment can Liu, Z, Kleiner,Y, Rajani, B,Wang, L and be performed applying (preferably) Condit,W (2012), Condition assessment in-line inspection or if no other References technologies for water transmission and distribu - solution is viable by applying Beuken, R, Horst, P, Diemel, R and Mesman, G tion systems. EPA EP-C-05-057, Cincinnati. destructive testing. (2014), Mains condition assessment by Available at: http://nepis.epa.gov/Adobe/ Echopulse, a validation of results.WDSA 2014, PDF/P100E3Y5.pdf. Conclusion Procedia Engineering 89, 1437-1444 Available Slaats, PGG, Mesman, GAM, Rosenthal, LPM If water companies want to maintain at: http://ac.els-cdn.com/ and Brink, H (2004),Tools to monitor corrosion the actual performance of a continuity S1877705814025855/1-s2.0- of cement-containing water mains.Water Science of supply of drinking water, they will S1877705814025855-main.pdf?_tid= &Technology 49.2, pp33–39. Available at: face increasing investments in the dbca6c3a-e75d-11e4-ae84-00000 http://www.iwaponline.com/wst/04902/0033 coming decades. More, and more aacb35f&acdnat=1429535283_908e791bcdb /049020033.pdf. detailed, information about the 5c9e2008f3d04905afb4a. Smolders, S,Verhoest, L, De Gueldre, G andVan condition of mains is a requirement for Geudens, PJJG 2012, Dutch DrinkingWater De Steene, B (2009), Inspection of deteriorating answering the question: which mains Statistics 2012.Vewin, Rijswijk.Available at: asbestos cement force mains with georadar should be replaced when? Research at http://www.vewin.nl/SiteCollectionDocuments technique.Water Science &Technology 60.4, KWR conducted for water companies /Publicaties/English%20_publications/Vewin_ pp995-1001. Available at: in the Netherlands has shown that the Dutch_Drinking_water_statistics_2012.pdf. http://www.iwaponline.com/wst/06004/0995 recently introduced APVM method is Hunaidi, O (2006), Condition assessment of /060040995.pdf. a good complement to existing water pipes. National Research Council, Institute methods for condition assessment. for Research in Construction, Ottawa Footnote Field tests show that the method is Canada,NRCC-50306.Available at: * As this relationship is regarded by applicable to water mains, and a http://www.researchgate.net/publication/44092 Echologics as a trade secret, it cannot validation indicates that the measure - 571_Condition_assessment_of_water_pipes. be published.

WATER ASSET MANAGEMENT INTERNATIONAL • 11.4 - DECEMBER 2015 • 7 COMMERCIAL WATER LOSSES IN BULGARIA

Commercial water losses in Bulgaria – reasons, impact, and ways to improve the situation

Bulgaria faces major challenges in identifying and rectifying issues with commercial Ivaylo Kastchiev water losses. Ivaylo Kastchiev looks at the key factors contributing to the country’s Is a PhD graduate with a thesis about significant water loss issues. improvement of the effectiveness and quality of water and sanitation services in Bulgaria. He has more than 12 years of professional experience in the water and sanitation sector of Bulgaria, ten of which were with the country’s biggest water and sanitation utility, Sofiyska Voda, and two in the water regulator as department manager ‘Prices and business plans – Water and sanitation services’. Email: [email protected]

© IWA Publishing 2015

ccording to the International balance.The methodology is presented Inaccurate meters usually tend to AWater Association (IWA) ‘best in Figure 1. under-register water consumption, practice’ standard water balance More detailed information about leading to reduced sales and therefore (Lambert, 2003), the system input apparent (commercial) losses was reduced revenue.The focus should be volume includes authorised presented by Farley &Trow (2003), placed on installing meters in accor - consumption (billed and unbilled who stated that these losses include dance with the manufacturer’s specifi - consumption) and water losses water that is consumed but not paid for cations; monitoring poor water quality (apparent and real losses). by the user due to inaccurate record - that leads to sediments being deposited Apparent losses include unautho - ing. Commercial losses are not visible, in the internal parts of meters; moni - rised consumption and customer which leads to the fact that many toring intermittent water supplies, metering inaccuracies. utilities overlook them and concentrate which lead to air registration and A practical approach towards on leaks and reservoir overflows. damage to meter components; sizing apparent water loss control was Commercial losses can amount to a meters properly, focusing on maximum suggested by IWA (Rizzo et al., 2004), larger volume of water than physical and minimum flows; conducting suggesting that the four drivers to losses and often have a greater value, customer surveys to understand the manage apparent losses include since reducing commercial losses nature of each customer’s water unauthorised consumption, meter increases revenue, whereas physical demand; using the appropriate class accuracy errors, data transfer errors losses reduce production costs. and type of meter, depending on the between meter and billing system, According to that article, commercial cases and types of customers; maintain - and data analysis between archived losses can be broken down into the ing and replacing meters properly, and data and data used for billing/water following four fundamental elements: addressing meter tampering by using high quality meters, conducting customer surveys and comparing Figure 1 expected and actual water use. IWA apparent losses management Unauthorized consumption including finding and reducing illegal connections, establishing customer awareness programs; tackling meter bypassing by undertaking customer surveys and leakage step tests; prevent - ing illegal use of fire hydrants through appropriate flow measurements at DMA meters; actively checking the customer billing system by conducting complete customer surveys within each DMA; and avoiding corrupt meter readers by rotating them to different routes on a regular basis.

Meter reading errors due to negli - gence, aging meters or corruption during meter reading and customer

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billing. Systems and procedures should be established, including greater Table 1 - Aggregated large utility data based on IBNET information. supervision of meter readers, imple - mentation of rotating reading routes, Country Year 6.1 - Non Revenue 7.1 - Metering level (%) 8.1 - Water sold that is and frequent spot checks. Water (%) metered (%) Aggregated data Data handling and accounting errors due to the complex process of England and Wales 2003 16.65% 27.82% 40.12% meter reading and billing, including Australia 2013 7.13% 100.00% 100.00% much paperwork, generating the Czech Republic 2013 15.50% 99.29% 99.47% potential for a number of mistakes that Poland 2010 18.14% 99.52% 99.50% can occur at different stages of the Hungary 2007 27.41% 99.59% 99.91% process.The utility should focus on Romania 2010 44.16% 92.95% 95.71% creating a robust billing database, Serbia 2012 30.23% 87.39% 87.21% training meter readers, and the Macedonia, FYR 2008 62.72% 93.04% 94.31% introduction of electronic meter- Armenia 2010 81.14% 81.94% 83.65% reading devices. international practices for water By having this information, we can try Size and effect network management (Evins et al., to calculate the actual consumption Analyzing IBNET data for big utilities 1989), including the establishment of volumes in order to assess the level of in several countries reveals the aggre - rules and criteria for decision taking commercial losses, but this data is very gated data shown inTable 1. (prioritization); the establishment of old and we need to take into account The results show that it is difficult to district metering areas (DMAs); the the potential effect of price increases find any correlation between the level determination of DMAs for survey due over the years. of non-revenue water (NRW) in to problems with water quality compli - Water has very low price elasticity, so percentage terms and the level of ance, hydraulic or structural issues; a really significant price increase is metering. In countries with a low level determination of a strategic rehabilita - required to achieve an actual impact on of metering we can see a low level of tion plan based on top priority DMAs. consumption (Inman & Jeffrey, 2006); non-revenue water, but the opposite is Only a few utilities have undertaken it is calculated between -0.1 to -0.25, also true. At the moment there isn’t activities to establish DMAs, perma - so a 10% price increase would lead to a reliable information to calculate nently measure flow and pressure at 1% to 2.5% consumption reduction metering indicators in Bulgaria.The zone inlets, create electronic data (Herrington, 2006). According to the levels of reported NRW for 2009- records and embark on analysis.Thus regulator`s data, the overall price 2013 show that it is staying above 61%, the operators cannot calculate the increase for water during 2007 to 2015 Assessing the size of commercial potential levels of real and commercial has been 38%, which can’t be consid - and real losses inside NRW is difficult. losses, prioritize areas and apply ered a significant increase.The billed In the IWA standard water balance corrective measures. volumes in the whole sector didn’t (Lambert, 2003), apparent losses were Information for actual customer show a constant trend in any direction calculated of less than 2% from system consumption is also not available. during 2009 to 2013. Only in the last input, and 12% from NRW (13% total Comparing billed volumes against two years have most of the utilities losses). Some information is presented official population data can’t answer reported decreasing billed volumes, inTable 2 (Yepes & Dianderas, 1996) this question – usually meters are due mostly to population reduction showing that apparent losses vary manually read over certain periods (of and very rainy summers. between 52% - 65% from total losses. between one and three months), the So if we use aggregated values from More recent information has been information for actual population in real consumption data from 2005 to provided from Nairobi, Kenya (Agence villages/properties is incorrect, and estimate the actual level of commercial France and Development, 2012), additionally the level of commercial losses in Bulgaria, based on 2013 data where total losses of 41% have been losses is not included. Data for billed for the overall population of 7246 calculated for 2012, almost half of volumes in 2013 provide an average million people (73% of whom live in which (48%) are due to commercial value of 118 l/p/d (a maximum of 222, cities), and total billed volumes of losses. and a minimum of 58). 350M.m 3 (38.6% of system input), According to the current Bulgarian An actual consumption survey in actual consumption is calculated to be legislation, if there is insufficient compliance with best international 422M.m 3, or a difference of 72M.m 3 information and observations for the practices – including a survey of each from the billed volumes. volume of commercial losses, they are building’s internal network and resi - Assuming that we still have com - assumed to be no more than 10% from dents; replacement of meter connec - mercial losses (10% from a system input water input.With an average NRW tions if needed, installation of data of 908M.m 3) due to lack of proper of 60% across the country (61.4% loggers and recording of volume data – metering, thefts and data losses inside for 2013), and if it is assumed that has only been done in Sofia city in the utilities, then the total consumption commercial losses are 10% from system 2003-2005. Data from 2005 gave the plus commercial losses would be input, then their share of NRW would following results (SofiyskaVoda, 2005): 513M.m 3 (or 56% from system input). be 16.7% (10/60).We can see from the • An average consumption in Having actual billed volumes of information above that these assump - residential buildings supplied with a 350M.m 3 means that the commercial tions are quite underestimated. central heating system of 186 lpd, losses should be 163M.m 3 or 18% from The largest utility in the country and in buildings with a local heating system input, and 32% from total losses. estimated a level of commercial losses system of 133 lpd; The water sector has reported total of 26.6% from the total losses for the • An average consumption in family revenues from regulated services of base year of the business plan for 2009- houses during summer that varied around BGN600 million ($327.4 2013 (SofiyskaVoda, 2008). between 188-234 lpd (depending on million) in 2013.The level of calculated Currently the water sector in consumption for irrigation), and in commercial losses would result in lost Bulgaria lacks implementation of best winter between 107-110 lpd. revenues of BGN275 million ($150.1

WATER ASSET MANAGEMENT INTERNATIONAL • 11.4 - DECEMBER 2015 • 9 COMMERCIAL WATER LOSSES IN BULGARIA

The usual practice is to replace the Table 1 - Example apparent losses (Yepes & Dianderas, 1996) existing meter with the same type and diameter, leading to under or General data Total losses Apparent losses oversizing. share inside In order to solve these issues, utilities State / City Year Real Apparent Total Total losses need to establish a proper meter database and prioritize the need for Singapore 1989 4711 63.64% (7/11) surveying, testing and/or replacing Spain, Barcelona 1988 11 12 23 52.17% (12/23) meters, starting with the biggest Colombia, Bogota 1991 14 26 40 65% (26/40) consumers. It is very important to Costa Rica, San Jose 1990 21 25 46 54.35% (21/25) conduct consumption profile surveys for all big customers in order to million) (46%), based on averaged metering, but also hampers debt understand their individual profiles, prices for different regulated services, collection when customers appeal bills and of average types of buildings, for and assuming 100% debt collection. in court. general consumption profiles, and to Even though such an estimation is In addition, the water network in establish norms and standards for very general, its results are in compli - Bulgaria suffers from high rates of meter sizing. Different types of meters ance with the sources shown above, bursts (1.06 busts/km/year for 2013, can be used for certain groups of and it supports the conclusion that compared with levels of 0.2-0.5 for customers – types B, C, even D, commercial losses have significant more developed countries) leading to combined meters, separate connec - potential for size, and therefore for an increased amount of repair works, tions for normal and fire uses, installa - optimization.This is crucial in the with water shut-offs impacting nega - tion of unmeasured flow reducers, context of decreasing population (and tively on the meters. etcetera. Meter downsizing should be therefore consumption), and the Meters not properly sized: according done after careful investigation, with increased need for investment in to a household water consumption respect to network pressure, the future. So in the next section a quick survey carried out in Spain and South condition of internal building net - overview is made of the factors Africa in 2006, apartment blocks had works and other issues. generating commercial losses, and the an average consumption of 500l/h, and Meters not properly situated: the potential to response from utilities. houses with gardens an average con - length of the house connection inside sumption of 1200 l/h. Based on that private properties in Bulgaria is Factors generating commercial survey, a weighted error for a meter of restricted to 2 or 5m from the property losses (-9.4%) has been calculated, based on boundary line (depending on whether Inaccurate metering different types of meter error percent - the revenue meter is located outside in Old and damaged meters: according to ages for different flow rates (l/h), and in a shaft, or inside the building). current Bulgarian legislation, all accordance with the percentage Often meters are located much revenue meters with Q3 (Qn) less than household usage for the different flow further inside the property, which or equal to 15m 3/h should be tested rates (Arregui et al., 2006). increases the length of the connection every five years, and those with more Currently the lack of information and the chance of hidden bypass than 15m 3/h every two years.These that Bulgarian utilities have about connections before the meter.Water requirements are not implemented, as actual water consumption leads to the utilities, however, find it difficult to utilities report annually between 7 to installation and/or replacement of Example of a understand what the proper meter 8% tested meters from the total stock. meters that don’t correspond with the connection to position should be on site, as often the This results not only in less accurate customer consumption characteristics. bypass a meter. property fence doesn’t agree with the boundary line. Often the meter shaft is not properly constructed, which hampers meter installation and replacement. Meter shafts are the customer’s responsibility, but the legislation doesn’t provide effective ways for how to proceed if the customer is not cooperative. This issue should be addressed by the utilities with the establishment of GIS systems and proper site surveys, but the problem can be solved with legislative changes and actual support from local municipalities. Access to meter readers: customers should allow meter readers into their property at least once a year. Meters should be read at different intervals depending on the type of customer – usually every month or every three months. Often customers don’t allow access for longer periods, and the utilities find it difficult to impact and solve the problem.Water bills should be generated every month, and when the meter is not actually read, the bill is based on estimated quantities. Improving the quality of billing

WATER ASSET MANAGEMENT INTERNATIONAL • 11.4 - DECEMBER 2015 • 10 COMMERCIAL WATER LOSSES IN BULGARIA

of lower or readings or not reading Unauthorized consumption meters in certain properties. Unregistered consumers: usually such Regardless of whether these mistakes properties are in the process of connec - are intentional or not, the negative tion to the network, or are sited in results impact on the whole utility, as gipsy ghettos. Nevertheless, the lack of sometimes when the mistakes are a GIS system or differing information exposed, it is too late to undertake between billing and GIS systems (when certain activities. they exist) allows the possibility for Utilities need to increase control regular properties to use water for a over meter readers’ work through more long time without a customer account. check-ups, random inspections, Properties with illegal (bypass) customer surveys and so on. Rotation connections: practice in Bulgaria shows of meter readers should be planned that most of the properties in villages carefully however, especially when no and small cities usually have such adequate information is available in the connections, most of them constructed corporate databases, and specific a long time ago (these networks were knowledge will be lost. One good usually constructed by the population solution would be the introduction of themselves during the Communist mobile devices for meter readers, as it regime). Such connections are difficult provides a number of control options – to locate, neighbors don’t like to report specific software, camera photos, GPS them, and the solution is network tracking and many others. replacement, and/or installation of A number of issues need to be solved meters outside the properties (which in order to introduce remote metering obviously requires increased levels of systems as a permanent solution in investment). Bulgaria – not only because it requires These issues could be addressed by heavy capex funds to cover all cus - the utilities through introducing tomers, but also due to technical DMAs, integration between SCADA problems – different types of meters, /telemetry and billing system data, some of them without a pulse option, regular water balance analysis and on- systems, providing options for meter Example of a flooded meter shafts, problems in signal site inspections. Such consumption will readings during weekends and better connection to coverage, with repeaters and concen - be visible after most of the inaccurate customer service by the utilities can bypass a meter. trators required, among others. metering issues and data errors are solve this problem. solved.The only permanent solution to Common consumption in blocks of Data handling and accounting errors water theft, however, is water-mains flats: in Bulgaria each individual These mistakes cover the overall replacement, combined with installing apartment is a separate customer, the process from meter readers to debt meter shafts outside properties based opposite to most European countries, collection, including loss of data for on top-priority areas. where the whole building is a single meter reading and meter parameters customer.The utility is supposed to (including number, seal, and other Debt collection read individual meters in order to information) between meter readers Commercial losses don’t end with distribute the consumption that passed and the billing system, correction of correct metering, reading and billing through the revenue meter. If there billed volumes after customer objec - of the customers, as bills need to be is a difference between the revenue tions, bills that are sent to the wrong collected from the utilities.The regula - meter and the sum of all individual address, and so on. tor’s report from 2014 showed that the consumptions, it is distributed across The size of such mistakes depends average debt collection ratio of the all customers in the building according on the level of data automation and utilities is 84%.The prescribed period to their individual consumption. integration (which is generally low); for periodic payments is three years, The volume of this difference the level of internal control – including and water utilities cannot collect older depends on many factors – including process description, standards and debt in court.The utilities have very internal leaks, unmetered consumers, procedures (again very low, allowing big issues with debt collection, due to a the difference between the quality of mistakes and hampering any optimiza - lack of focus, strategy and program; a the revenue and individual meters, tion efforts); use of manual work and lack of integrated process and controls, apartments being billed on base paper forms for meter readings; use of adequate systems and experts; a lack of consumption, apartments that do not old billing systems with low capacity use of external resources, outsourcing allow access and are billed on calculat - for data integration, control options and other issues. ed volumes, and other problems.This and others; and lack of analysis and All of these can be improved by additional consumption generates comparison between read and billed increasing their capacity and efficiency, objections among the customers – volumes. introducing proper systems and according to the regulator, 25% of all In some cases utilities are intention - routines or using external specialist customer complaints for 2014 were ally not billing certain consumptions, companies. Nevertheless, the existing about this issue. In many cases, water which may be objected to in court, court system in Bulgaria is relatively utilities simply don’t install revenue and will be difficult to collect due to slow and not so effective, and addition - meters to avoid this source of customer the need of payingVAT tax to state ally is blocking this process. complaints. budget.The regulator has already suggested to the state to introduce Conclusions Meter reading errors VAT cash accountancy for water Several key activities need to be These mistakes occur as both ordinary utilities (VAT is paid not when issuing implemented by the Bulgarian utilities mistakes during work, related to dirty the bill, but when the bill is paid by in order to properly address the meter glass, poor visibility and other the customer), but it is not likely to commercial water loss problem: issues, as well as intentional recording be accepted. • A full and updated database of

WATER ASSET MANAGEMENT INTERNATIONAL • 11.4 - DECEMBER 2015 • 11 COMMERCIAL WATER LOSSES IN BULGARIA

customers, meters and consumption Herrington, P. 2006, Critical Review of water and its components: practical approach. • A program for meter investigation, Relevant Research Concerning the Effects of Water 21, IWAWater LossTask Force. installation and replacement, based Charging and Collection Methods onWater Rizzo A., Pearson D. and Stephenson M. on clear priorities and site surveys Demand, Different Customer Groups and Debt. Apparent water losses control: a Practical • A program for customer surveys, UKWIR, London. Approach,Water 21 – seventh article, IWA including updating of information IB-NET: http://database.ib- Water LossTask Force on properties, connections, meters, net.org/Default (accessed between February and SofiyskaVoda 2005Water consumption consumption and others August 2015). management:Water Consumption Monitoring, • A program for full surveys of urban Inaccuracies,Water Practice &TechnologyVol Procedure 6 of concession contract. areas/DMAs – comparison of actual 1 No 4. IWA Publishing 2006 doi: SofiyskaVoda, 2008, 2009-2013 Business field results with the information in 10.2166/WPT.2006093. plan,Table 3.1.1.:WS‘Sofia’ balance for 2007 the databases, based on top priority Inman, D. and Jeffrey, P. 2006 A review of – updated values. DMAs residential water conservation tool performance Yepes, G. and Dianderas, A. 1996Water and • Strict control of the meter reading and influences of implementation effectiveness. Wastewater Utilities, Indicators 2nd Edition. process, including digital devices, UrbanWater Journal 3(3), 127-143 TheWorld Bank,Water and Sanitation remote meter readings for priority Lambert A. 2003, Assessing non-revenue Division. customers, and other actions • Constant analysis of the read and billed volumes, together with DMA volumes • Strict control and monitoring of debt ASSET MANAGEMENT POLICY

In most of the cases, commercial losses arise with the support of the utility – both from unintended activities (low levels of control and coordination), Do we have an adequate asset and intentional activities (construction of illegal connections, improper meter management policy for water readings, bill corrections and others). Commercial losses are also related to a number of factors outside the utility – supply and sanitation companies? social policies, politics, law enforce - ment and the court system – and if no International experience suggests that all public companies providing public services effective support is provided to the utilities, then the results can’t be have to establish asset management policies. This becomes more important for capital- optimal. intensive industries such as water and sewerage companies. The goal of asset It is obvious that fighting commer - cial losses is not as easy as some people management policy is to meet a required level of service in the most cost-effective way think.The utility needs to achieve through the creation, acquisition, operation and maintenance, renewal and disposal of internal integration and coordination between different types of departments assets to provide for present and future customers and communities. A better service, – operations, customer service, finance in conjunction with a better asset, is a key indication of successful asset management. and others; and to overcome internal resistance, lack of process description Avni Dervishi and Dr Arben Bakllamaja provide some thoughts on why water utilities and proper software and databases. need to have an asset management policy and the key steps in using this to make What is usually seen is that the utility is focusing only on certain operational and implementable policy . areas, and is not controlling the overall process.Thus a long-term systematic approach should be introduced, ater companies are capital covering all related aspects of the Avni Dervishi, Wintensive, and therefore process, because the decreasing Chairman of Albania’s WRA their assets have an important population is leading to reduced weight in the success of their billed volumes and cash flow for the Associate Professor Dr Arben Bakllamaja, business. Managing capital- utilities. G Dean of Applied Science and Economics intensive businesses is a challenge faculty at University of Marin Barleti for water utilities’ management, References which involves a high scale of Agence France and Development 2012 Nairobi investment in infrastructure assets combats physical and commercial water losses. that should result in improved Arregui, F.J., Cabrera, E., Cobacho, R. and service delivery with greater García-Serra, J. 2006 Reducing Apparent © IWA Publishing 2015 efficiency. Losses Caused By Meters It is important for the water Evins, C., Stephenson, G.,Warren, I.C. and regulator, who is in charge of setting Williams, S.M. 1989 Planning the rehabilita - standards for investment programmes tion of water distribution systems.WRc and asset sales from the licensees in the Swindon,Wiltshire, UK water supply and sewage sector, to Farley, M. andTrow, S., 2003, Losses in monitor and assist the water service Water Distribution Networks: A Practitioners providers to match investments with Guide to Assessment, Monitoring and Control, the service required and with cost First printed in 2003, Reprinted 2007, ISBN efficiency. Equally important is the role 1-90022-211-6, IWA Publishing, UK of the regulator in ensuring that water

WATER ASSET MANAGEMENT INTERNATIONAL • 11.4 - DECEMBER 2015 • 12 ASSET MANAGEMENT POLICY FOR WATER SUPPLY AND SANITATION COMPANIES

companies are managing their assets Skanderbeg Square ment organisations. In Albania, the • How assets are valued properly in conjunction with the tariffs in Tirana (Credit: Directorate ofWater and Sewerage and • How often assets need to be revalued they charge to customers. milosk50 / SolidWaste Policies of the Ministry of (based on condition) The central government organisa - Shutterstock.com) Transport and Infrastructure (MIT) is • Financing of infrastructure tion needs to develop an inherent asset in charge of designing the asset man - management policy to provide princi - agement policy of the water and Key roles for managing the asset manage - ples and guidance for properly manag - sanitation sector.The Ministry of ment policy ing water and sewerage companies’ Finance is also responsible for setting The sector asset management policy assets in conjunction with the quality the standard for accounting, deprecia - should identify key roles for imple - of service provision and efficiency tion methods and norms, and so on. mentation of the policy. of their operations.The guidelines of The goal of the water sector’s asset International experience indicates the Ministry of Finance on the management policy is to meet the three levels of roles and responsibilities: Management of assets of public sector required level of service standard in the • The Council’s role as owners of the organizations stipulates the responsibil - most cost effective way through the assets for approving, amending or ities of public organizations to ensure creation, acquisition, operation and cancelling the operational policy at effective management of their assets, maintenance, renewal and disposal of city level and places a key role on the Strategic assets to provide for present and future • The executive management’s role in ManagementTeam to minimise risk customers/communities. A better the public utility is integrating the and improve the structure of the assets. service, in conjunction with a better policy into the business plan and Equally important is the role of the asset, is a key indication of successful ensuring its inherent alignment with National Accounting Council, which asset management from the public other parts of the company’s business has established national accounting companies that provide water and plan standards that include the valuation sanitation services. • The role of the staff of the utility is and depreciation methods for assets This policy specifies the objectives of to properly implement the policy. as an important element of asset asset management in the water sector, management. such as full operational cost recovery, The guidelines of the Ministry of This article aims to provide a 24-hour supply, 100% coverage, safe Finance on the Management of assets of framework for an asset management drinking water, and affordable tariffs. public sector organizations stipulates the policy, the approaches for developing The policy should address: responsibilities of the public organisa - and adopting such a policy, steps on • Ownership of assets tions to ensure effective management how the policy objectives will be • Key roles and responsibilities of their assets, and places a key role of achieved, and the responsibilities for (maintenance, replacement, renewal, the strategic management team to managing policy implementation. rehabilitation, disposal) minimise the risk and improve the • Main categories of the assets for structure of the assets, but not for the A framework for an adequate sector accounting purposes policy of asset management. asset management policy • Depreciation methods for assets These guidelines define three levels Policies at the sector level are the • How the different assets categories of responsibilities for asset management: responsibility of the central govern - are depreciated • The authority of the public

WATER ASSET MANAGEMENT INTERNATIONAL• 11.4 - DECEMBER 2015 • 13 ASSET MANAGEMENT POLICY FOR WATER SUPPLY AND SANITATION COMPANIES

organisation, that is, governing on international experience, and in in the financial statement and the bodies for approving specific rules order to fulfil its role mentioned above, tariff estimates and procedures for safeguarding, an asset management plan should be • Network assessment is often protection and decommission of consulted on as well with the regulator. neglected because these assets are assets Once asset management plans have buried underground. A utility may • The responsibilities of authorised been developed, the organisation’s have thousands of kilometres of employees for preparing and moni - action plan should be adjusted for the buried pipes that were installed over toring the systems for safeguarding asset management to be implemented decades. Many companies have no and protection of the assets and effectively.The action plan includes records of the pipes’ age, material, documentation data collection, rehabilitation priorities, and condition. Moreover, the • The responsibilities of other deterioration forecasts, resourcing importance of any specific pipe or a managerial levels and employees, for requirements to reflect greater mainte - sset on overall service performance safeguarding and protecting the nance, and monitoring performance is only vaguely assumed assets and documentation against indicators. • Lack of maps and of proper losses, theft, misuse and unauthorised equipment makes it difficult to use. The approaches to developing the guide the rehabilitation of their vast sector asset management policy pipeline networks and other assets, How does the asset management According to international experience, which results in rapid deterioration policy go through implementation? there are various approaches to devel - of the leakage in the system and International experience suggests that oping and adopting an asset manage - service quality to achieve its objectives, the asset ment policy: • Asset classification is not properly management policy objectives should • Identify the key issues of asset done - this provides the basis for be incorporated in the management management, then explore, develop implementing the valuation strategy, which should be followed by and evaluate alternative policies that methods necessary for their efficient an asset management plan and action can be used to better address the use plan. asset management issues, and achieve • The depreciation method does not The policy should define the role of acceptable or desired solutions follow international standards, that theWater Regulatory Authority • Develop an asset management is, based on the grouping of assets, (WRA), such as collaborating with policy to adapt and use the example- which is necessary for planning other central organisations to develop specific corporate asset management timely funds for rehabilitation and sector investment programmes aiming policy renewal and or replacement of those to link investments with the service • Include asset management assets that have achieved their required and with cost efficiency. principles (or portions of policy economic lifespan It should also monitor the imple - principles or guidelines) into other • Lack of an adequate register of mentation of the asset management corporate policies, such as budget or company assets affects the proper strategy and plans, and their on-going financial plans, and so on; that is, do registration of these assets in the review by water service providers, and not have a standalone asset manage - fixed asset database on behalf of the monitor water companies on manage - ment policy owners, which is necessary for asset ment of their assets in connection with transfers, sales and insurance. the tariffs they charge to customers It is suggested that in the context of the • Lack of a detailed fixed asset register After an asset management policy is water sector in Albania, a better affects calculation of the deprecia - adopted, it should be followed by the approach for the central government tion charge, which inhibits identifi - development of an asset management organisations is to design and adopt an cation of the separate components strategy.The asset management strategy asset management policy that should and their useful lives should examine and document the address the main issues and problems of • The practice of accounting and status of asset management in the asset management that many utilities financial reporting of many compa - organisation, and identify a future are facing. nies when conducting sector asset vision and the key objectives for the Some of the key issues in Albania’s management varies organisation water sector that need to be looked at • Valuation of assets is carried out in After an asset management strategy closely and analysed to come up with a compliance with the accounting law has been adopted, an asset management good policy are given below: of the country. However, the prac - plan needs to be prepared.The Asset • Low quality and poorly constructed tice of companies in re-evaluating Management Plan (AMP) should be infrastructure old assets that are still operating based on current inventories and • A disproportionate share of the needs to be seen in light of interna - condition (acquired or derived), investment in the sector has gone to tional experience, in order to projected performance and remaining water supply investment, thus properly adjust the depreciation service life and consequences of losses leaving behind the need for sewerage charge.The life-cycle approach is (such as vulnerability assessments, and wastewater treatment plant central to accounting for the total emergency management, and critical investment. cost of an asset throughout its life infrastructure assessments). • Network rehabilitation and renewal The AMP should also consider levels has been relatively deferred for lack Operationalising the asset manage - of service, demand forecasts, asset of funding sources. Deferred asset ment policy by LGUs through the portfolios, and asset management renewal and maintenance in the asset management strategy and activities (including operations, main - water sector inevitably has an impact plans tenance, renewal/replacement, and on the utility’s service and will According to international experience, disposals). Additionally, the AMP necessitate even larger and more local government bodies and public should include long-term financial expensive capital programmes in companies that own utilities opera - forecasts and consider alternative future tionalise asset management policies scenarios and risks. It is recommended • New capital investments are not designed by central government that that the public be consulted during the properly recorded in company books address aspects of asset management development of the plans as well, based which affects the depreciation costs (that is, acquisition, operation and

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maintenance, renewal and disposal of assets) in the context of the business Figure 1 Asset management policy through implementation operations of the company.This is manifested in the asset management Adopt an asset Develop an asset Develop an asset Develop an asset strategy and plans, where clear opera - management management management management tional tasks for asset management are policy strategy plan action plan well articulated, and well aligned with the business plan. Following this, the starting point for MIT develops an Based on the Based on the The asset the local government units is to make asset manage - asset manage - respective management an assessment of the main issues ment policy with ment policy from LGU/UK asset plans need identified in the asset management the objective MIT, the LGUs/UKs management concrete action plan in their specific context that that the assets develop their strategy is plans to should aim to: meet perfor - asset manage - developed, UKs implement the • Ensure accurate recording of asset mance levels, ment strategy need to develop asset manage - information, and of asset movements are used to asset manage - ment plan. • Exercise strict physical control over deliver the ment plans. all assets (security, safekeeping) desired service • Comply with the insurance policy in the long to adequately insure all assets term and are • Comply with Accounting Law managed for requirements for asset evaluation present and and recording, depreciation, and future users residual value of assets • Properly maintain and repair infra structure assets at defined levels • Monitor standards and service levels to ensure that they meet community are critical to the company and tions ask for when they consider expectations and the goals and which ones are not investing in a water company. Investor’s objectives as per the company • More efficient operation always ask:‘Why are you requesting business plan • Better communication investment in this pipe replacement • Develop and maintain asset with customers and not that one?’ Having an AMP inventories of all their • A tariff based on good operational answers this question exactly. Having infrastructures information about the true costs asset management systems in place • Establish infrastructure replacement required for asset maintenance allows assets that are poorly perform - strategies through the use of full life • Increased acceptability of the tariff ing, in poor condition and critical to cycle costing principles submission from the regulator and water companies' operations to be • Plan financially for the appropriate the community identified.Therefore, this process links level of maintenance of assets to • Identification of capital improvement directly to the ability of the water deliver service levels and extend the projects that meet the true needs of companies to justify and receive useful life of assets the company and are, therefore, adequate financial support from • Plan for and provide stable long more attractive to potential donors potential investors. G term funding to replace and/or renew and/or decommission Water companies may have to rely on References infrastructure assets less government funding in future, and Law no 8102, date 28 March 1996 on the • Incorporate the asset management eventually less external donor support Regulatory Framework of theWater Supply and plan in the company business plan for capital projects.This will require an Wastewater Disposal andTreatment Sector, increasing reliance on tariffs raised Article 14, as amended by Law No 9352, date The prepared plan and its realisation from the communities that the compa - 03 March 2005; Law No 9584, 17 July 2006 should be delivered to the regulator nies serve. Asset management planning (as amended by Law No 9845, 17 December with the tariff application to ensure is a way to demonstrate to the regulator 2007); Law No 9915, 12 May 2008. that water companies are properly and the community that the assets are Instructions of the Ministry of Finance, No. managing their assets in line with the properly managed and that the tariff 30 Date 27.12.2011, For the management of efficiency of their operations and the charged will cover the cost of main - assets in the public sector enterprises. tariffs they charge to customers taining those assets and provides a solid Decision of the Council of Ministers, National justification for the tariff. Water Supply and Sewerage Services Sector Conclusions From the other side, by analysing the Strategy 2011-2017, September 2011. There are many positive benefits to business plan and the tariff submission Environmental Finance Centre New Mexico asset management strategy and action to the regulator associated with an asset Tech, Asset management: a guide for water and plans.Water companies that fully management plan, the regulator can wastewater systems, 2006 edition. embrace asset management principles ensure that, notwithstanding affordabil - Transpower New Zealand Limited, Asset may achieve many or all of these ity issues, a tariff is set that reflects the Management Strategy, 2013. benefits just by starting asset manage - true cost of maintaining the asset base Transpower New Zealand Limited, Asset ment.The benefits include, but are not to provide the required levels of service Management Framework. limited to, the following: in the most cost-effective manner, in a Local GovernmentVictoria, Department for • Better operational decisions transparent and accountable way. Victorian Communities, Asset Management • Greater ability to plan and pay for Furthermore, as noted above, having Policy, Strategy and Plan Guidelines for future repairs and replacements an Asset Management Plan (AMP) – Developing an Asset Management Policy, August • Increased knowledge of the location the output of the asset management 2004. of assets process – can provide the justification Tasmanian Local Government Asset • Increased knowledge of what assets that donors and other financial institu - Management Policy, February 2012.

WATER ASSET MANAGEMENT INTERNATIONAL• 11.4 - DECEMBER 2015 • 15 COST-BENEFIT ANALYSIS OF WATER LOSSES REDUCTION

Cost-benefit analysis of systematic reduction of water losses in Croatia

The process of reducing water losses is gaining ground in Croatia, but is still not at a M. Tadic, satisfactory level. In Croatia there are water supply systems where water losses have Hidroprojekt-ing projektiranje d.o.o., been reduced to a satisfactory level and are maintained as such, but there are also Zagreb, Croatia. Email: [email protected] distributors who still need to make great efforts to achieve a satisfactory level of losses. Karlo Kolovrat, Municipal service companies in Croatia have become aware that dealing with the issue Email: [email protected] of water losses is essential for efficient management of the water supply system. In line with that, a programme has been launched for systematic reduction of water losses together with the preparation of a feasibility study for many water supply zones in © IWA Publishing 2015 Croatia. Martina Tadic and Karlo Kolovrat look at the programme’s integral cost-benefit analysis.

ater losses in a water supply Strategy (Official Gazette 91/08), water losses is also addressed within Wsystem have been a topical the price of water shall not contain studies used as the basis for applying issue in Croatia over the last uneconomical utility activities such as for EU co-financing. A feasibility several years, since it is well known heavy water losses in the system, with study needs to present in what way that a water management system the Strategy requiring that the water and to what extent the problem of is not sustainable in the long run if losses be reduced to an acceptable level losses in a particular water supply the issue of water losses is not of 15 to 20%, following the example of system will be addressed, which can addressed, and that losses need to European countries. only be done through systematic be promptly reduced to an accept - The reduction of water losses is analysis of the water supply system and able level. one of the objectives defined by cost-effective project implementation. The need to reduce losses stems the Operational Programme In addition, another incentive to from national strategic documents. Competitiveness and Cohesion address the issue of water losses is the According to theWater Management (OPCC) 2014 to 2020.The issue of significant financial savings for the utility company managing the water Figure 1 supply system. Concept of systematic Water losses in Croatia reduction of losses Water losses in water supply systems in Croatia are a big problem, but they are still officially presented as a difference or a share between abstracted and billed water. Many distributors are aware that such way of presenting the water losses doesn’t give a real picture of the status of the system, and they unofficially use the indicators from the methodology used by the InternationalWater Association (IWA).Table 1 presents the official data obtained from an Audit Report titled Economically justified differences in public water supply tariffs for the year 2012 across Croatian counties. It is estimated that on average around 50% of abstracted water volume is lost, which exceeds the criteria applied in contemporary practice by several orders of magnitude.This is the consequence of poor legislation (the basis for calculating the water use fee is the volume of water consumed, due to which the consumption charging system doesn’t encourage rational water consumption); the old age of the system; distributors not knowing their systems (lost design documents; non- existent design documents; unknown locations of connections and valves,

WATER ASSET MANAGEMENT INTERNATIONAL • 11.4 - DECEMBER 2015 • 16 COST-BENEFIT ANALYSIS OF WATER LOSSES REDUCTION

etc; inadequate system maintenance; Figure 2 material of poor quality; and non- Distribution area of registered water consumption. Vinkova ki vodovod Active efforts are under way in i kanalizcacija doo Croatia to eliminate all of the causes mentioned above, for which one of the indicators is the initiation of a pro - gramme for the systematic reduction of water losses in many distribution areas.The loss reduction programme, with a cost-benefit analysis (CBA), will provide the most detailed analysis of water supply systems ever prepared in Croatia. From a technical point of view, all the elements in the water supply system will be pinpointed, the water supply system will be analysed in the best possible way (depending on the quality of inputs available to the utility company), and problems in the water supply system will be defined. The programme will identify the real status of water losses in the system, which will then serve as a starting point for their reduction.The analysis of losses in the water supply system using the IWA methodology and mathematical models will propose several solutions to monitor and reduce water losses.The most suitable and utility company’s operations and water measurement obtained from the optimum solution will be selected tariff. SCADA system based on the results of the CBA. Based on this analysis utility compa - • Additional flow and pressure mea An advantage of this approach is the nies can apply for co-financing from surement with an analysis of prelimi - fact that, in addition to a technical the Cohesion Fund. nary District Metered Areas component, it also includes a financial (DMAs)/Pressure Management and economic component, facilitating Programme for systematic reduction Areas (PMAs) the selection of the most suitable of water losses • Mathematical modelling of the solution for the reduction of water The programme for systematic water supply system losses.The CBA provides insight into reduction of water losses covers a • Calibration of the mathematical the cost-effectiveness of a project, since comprehensive analysis of the water model of the current status of the in addition to analysing alternative supply system.The comprehensive water supply system based on options, an option‘without the project’ analysis of the water supply system SCADA measurements and needs to be analysed as well. Using aimed at reducing water losses includes additional measurements such an approach one can prove the following: • Analysis of the current system status whether the selected option is cost- • Implementation of GIS • Planning and establishing effective, what the benefits of imple - (advanced management of all data DMAs/PMAs in accordance with menting the project are, and how and information) planning documents project implementation will affect the • Analysis of flow and pressure • Cost-benefit analysis for the foreseen

WATER ASSET MANAGEMENT INTERNATIONAL • 11.4 - DECEMBER 2015 • 17 COST-BENEFIT ANALYSIS OF WATER LOSSES REDUCTION

Figure 3 equipment as planned, analysing the Existing division of status in the system according to IWA water supply methodology, and taking every system Vinkovci measure necessary to reduce water into DMAs/PMAs losses and keep them at a satisfactory level. It is important to realise that systematic reduction of losses is not a project that ends on a specific date, that is, with the programme analysing the water losses, but that it is a process that lasts as long as the system itself (Fig 1). The programme for systematic reduction of losses must not depend only on the efforts of experts in the water supply system. Consumers also play an important role in the water supply system. It is necessary to raise the awareness of all consumers about the sustainability of the water manage - ment system, indicate their role in the water supply system, and encourage them to get involved in the fight against system water losses. An active loss reduction policy will be presented through the media and other sources of public information. Consumers need to become aware that the vol - umes of drinking water are limited and system zoning and the system The purpose of this programme is to that resources have to be managed development concept raise the awareness of the staff in the rationally and protected whenever and • Mathematical modelling of the utility companies of the importance of wherever possible. planned development of the water addressing the initial losses, so that the supply system with the established water losses reduction programme Cost-benefit analysis DMAs/PMAs doesn’t end after the comprehensive This project programme foresees an • Design and development of analysis of the water supply system and analysis of at least two technically measuring and measuring/ the establishment of DMAs/PMAs, feasible options for water supply control points and that it is necessary that active work system development, their comparison, • Training the staff of the utility on the system continues. and – as the end result – a proposal for companies and establishing a perma - A trained maintenance team will the optimum option by comparing the nent team to be exclusively in charge continue to monitor pressures and financial/economic parameters. of addressing the issue of water losses flows in the DMAs/PMAs, measuring in the water supply system the flows and pressures using mobile Financial analysis The purpose of the financial analysis is to assess whether the cashflow of the future project generates suitable return rates, as measured by the financial internal rate of return (FRR) on investment (FRR/C) and their own capital (FRR/K), and the correspond - ing financial net present value (FNPV). Most of the project data on costs and benefits is provided by financial analysis.This analysis provides essential information on inputs and outputs, their prices and the overall timing structure of revenues and expenditures. The financial analysis is made up of a series of tables that collect the financial flows of the investment, broken down by total investment, operating costs and revenue, sources of financing and cash flow analysis for financial sustainability. The financial model is used as a tool to predict financial performance and the formation of prices for the water service in a project area.The model deals with all the main investments and their impacts on, for example, prices or the adequacy of cash to sustain the business activity.The projections obtained by the model reflect the

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Table 1 Ratio between undelivered and abstracted volume in particular counties in 2012 (Source: Audit Report Economically justified differences in public water supply tariffs (2012)) project’s operating and financial objectives and are used for price County Abstracted Delivered Undelivered Undeliv./Abstr. scenarios.The selected project period m3 m3 m3 % is 30 years, which is deemed appropri - Bjelovar-Bilogora 5.248.617 3.147.713 2.100.904 40% ate for an economically useful project Slavonski Brod-Posavina 8.788.853 5.157.469 3.631.384 41% lifetime. Dubrovnik-Neretva 21.884.252 12.455.076 9.429.176 43% The proposed investment should be City of Zagreb 120.000.000 61.200.000 58.800.000 49% considered in the context of the Krapina-Zagorje 9.085.420 4.503.129 4.582.291 50% existing infrastructure, that is, the water Osijek-Baranja 20.235.948 12.465.344 7.770.604 38% supply and wastewater assets currently Požega-Slavonia 4.931.506 2.884.731 2.046.775 45% managed by the utility company. For Primorje-Gorski Kotar 3.407.845 2.354.821 1.053.024 31% that reason, the Guide to Cost Benefit Sisak-Moslavina 14.197.146 7.712.313 6.484.833 46% Analysis of Investment Projects pro - Šibenik-Knin 22.809.091 9.815.874 12.993.217 57% poses an incremental approach that Virovitica-Podravina 4.735.300 2.899.528 1.835.772 37% compares the cash flows in the‘with Vukovar-Srijem 12.745.389 8.708.606 4.036.783 32% the project scenario’ with the cash Zadar 37.752.924 12.694.932 25.057.992 66% flows in the‘without the project’ scenario. The incremental approach is applied • Financial net present value internal rate of return (FIRR) of as follows: (FNPV/C, FNPV/K) project investment, regardless of its • Cash flow projections for the utility • Financial internal rate of return financing sources. company are developed in the (FIRR/C, FIRR/K) ‘without the project’ scenario • Benefit-cost ratio (BCR) Economic analysis • Cash flow projections for the utility The economic analysis is made to show company are developed in the‘with The financial analysis results in a profit that the project has a positive contribu - the project’ scenario and loss account without the project tion to society as a whole and that it is • An incremental cash flow projection and with the project, an investment therefore worthy of the EU’s financial is developed considering the differ - return (the capacity for operating net support. ence between the‘with the project’ revenues to sustain the investment costs The project has various indirect and‘without the project’ scenarios regardless of the way in which they are economic, social and environmental from year to year. financed), and calculation of the return impacts. Such investments can only be on equity capital. properly evaluated when these impacts The basis for the calculation of the The outflows comprise the equity of are considered, as these impacts can additional drinking water price is full the private investor (when it is paid up) often be identified as decisive in cost recovery, which includes opera - and the country contribution at two relation to the development.The cost tion and maintenance (O&M) costs levels (local and national). Other element includes investment, operation and depreciation of assets.The model outgoings are also calculated, such as and maintenance costs as well as generates a number of financial operating costs, as well as sales revenues financial costs; the economic benefits indicators presented in association with as project inflows. For the calculation element includes financial incomes, the the corresponding output tables.The of financial sustainability, an EU project’s residual value and external standard financial indicators obtained grant is not initially considered.The economic benefits. by the model are the following: calculation results in the financial The economic analysis appraises the project’s contribution to the economic welfare of the region or country.The scope of the project should be seen in a broader perspective, that is, its benefi - cial impacts on society as a whole instead of just the owner of the infra - structure as in the financial analysis. The financial analysis cashflows are taken as the starting point for the economic analysis. In determining the economic performance indicators, some adjustments need to be made. These are: • Fiscal corrections: indirect taxes (such asVAT), subsidies and pure transfer payments (such as social security payments) must be deduct - ed. However, prices should be gross of direct taxes. Also, if specific indirect taxes/subsidies are intended to correct for externalities, then these should be included. • Corrections for externalities: some impacts may be generated that spill over from the project to other economic agents without any compensation.These effects can either be negative (a new road increasing pollution levels) or

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positive (a new railway reducing Markusica (Figure 2).There are 93,404 option. In this phase of project prepa - traffic congestion on an alternative people living in the distribution area, ration, guidelines will be provided for road link). As, by definition, external - with 90% of them connected to the the future development of the water ities occur without monetary public water supply system. supply system, the optimal operation compensation, these are not present The water supply system is based on of the system will be defined with in the financial analysis and therefore a regional water abstraction site and a regard to network pressures, and an need to be estimated and valued. number of local water abstraction sites operating algorithm of energy- • From market to accounting that belong to individual separate water consuming devices (pumping stations) (shadow) prices: besides fiscal supply systems.The quality of water at will be created. Optimal flow of water distortions and externalities, other the local water abstraction sites mostly in the system will be ensured (water factors can drive prices away from a doesn’t satisfy the sanitary quality retention in the peripheral parts of competitive market (that is, an criteria and development plans foresee the areas will be prevented), water efficient) equilibrium: monopoly the connection of the local water loss reduction will be estimated, regimes, trade barriers, labour supply systems to the regional system. priority measures and projects will regulation, incomplete information, The system includes 844km of be put forward, and their phased and so on. In all such cases, the pipelines made of various materials implemented. observed market (that is, the financial (ductile iron, cast iron, PEHD, PVC, Finally, the outcome of the project market) prices are misleading; iron and asbestos cement). programme will give a conceptual accounting (shadow) prices need to Based on the existing design docu - solution for the DMAs/PMAs and the be used instead, reflecting the inputs’ ments covering the system, the site visit SCADA system.This solution will opportunity costs and consumers’ and continuous communication exactly define the locations, hydraulic willingness to pay for outputs. between the staff of the utility compa - parameters and technical requirements Accounting prices are computed by ny and the authors preparing the water for the design and construction of applying conversion factors to the loss reduction programme, the database measuring and measuring/control financial prices. on the current status of the water shafts. supply system was updated. A cadastre The water loss reduction pro - Once the table for the economic of pipelines was prepared, the existing gramme prepared in this way is a solid analysis is ready, discounting is made measuring points were defined, as well basis for the feasibility study and the by the selection of a correct social as the connection and coverage rates in EU co-financing application proce - discount rate for the calculation of the distribution area. A mathematical dure. Since the reduction of water the internal economic rate of return model of the current status was losses is one of the objectives defined (EIRR) of the investment. prepared and locations defined at by the OPCC 2014-2020, proper Just as in any important business which flows and pressures were calculation of the reduction of losses activity, water supply services are measured (Figure 3), which were later requires the implementation of a subject to a number of impacts that used to calibrate the mathematical programme that will identify the status may affect the performance and the model on the current status and of the system and, based on detailed project. However, many of these definition of DMAs/PMAs. An analyses, assess the reduction of losses impacts are interdependent, and may extended system balance and system and the efficiency and cost-effective - as such lead to an increased number analysis was prepared following the ness of establishing the DMAs/PMAs. of errors in defining sensitivity if all IWA methodology. of them are used. For that reason, a The project programme analysed the Conclusion simplified and summarised approach is current trends in water consumption This article considers the water loss used in which the sensitivity of four by consumers of all categories in order situation in Croatia. It identifies that output indicators is assessed against five to assess future water demand.The much more effort is required from all input/output indicators based on the methodology applied to the prepara - the utility companies to achieve an variation of the input variable by 1% tion of a detailed water demand analysis acceptable level of water losses, that is, a (both up and down). for a 30-year period was based on the satisfactory Infrastructure Leakage Guide to cost benefit analysis of Indicator (ILI). It defines the concept Case study investment projects (July 2008), the of systematic reduction of water losses Recognising the importance of the applicable Croatian regulations, EU and emphasises the benefits that such systematic approach to the reduction of directives, projections of future popula - an approach can bring. Reducing water losses, the utility company tion, projections of future economic water losses with CBA provides Vinkovacki vodovod i kanalizacije doo and industrial development, projections better enactment of technical solutions started introducing this in late 2014. of specific consumption in the future, and calculates anticipated financial The programme is in its preparation the experience of design engineers, and benefits. phase, and the end result will be a the universally acknowledged guide - The necessity of controlling the product of cooperation of experts in lines from technical literature. water supply system stems from the the fields of hydraulic engineering, The mathematical model of the wish to preserve natural resources, and mechanical engineering, electrical current status was upgraded with all the achieve financial savings and more engineering and the economy. planned pipelines and facilities and the efficient management of the water Water supply in the territory of expected peak consumption that will supply system. Such an approach to the Vinkovci and its surrounding areas is occur in the future 30-year period. reduction of losses is also required as under the responsibility ofVinkovacki The functionality of the established the basis for the preparation of feasibil - vodovod i kanalizacija doo.The distrib - DMAs/PMAs was tested on this ity studies and planning documents for ution area spreads over 1405km 2, and model. water supply systems. G covers the towns ofVinkovci and Otok, Two equivalent and comparable and the municipalities of Andrijasevci, options will be analysed, and the most References Babina Greda, Cerna, Ivankovo, favourable option will be selected Izvjesca o obavljenoj reviziji - Ekonomska Nijemci, Nustar, Privlaka, Stari based on the CBA. A detailed analysis opravdanost razlika u cijeni javne vodoopskrbe Jankovci, Stari Mikanovci,Torodinci, of the future status of the water supply (za zupanije), Republika Hrvatska Drzavni Tovarnik,Vodinci,Vrbanja, Jarmina and system will be made for the selected zavod za Reviziju, 2013.

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