Drinking water supply | KPMG | GLOBAL

Drinking water supply

Drinking water supply

Access to safe drinking water may be a recognized human right, but that doesn’t make it easy or cost efficient for cities to deliver.

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Water coming out of tap

Access to safe drinking water may be a recognized human right, but that doesn’t make it easy or cost efficient to deliver. It is a capital intensive sector with many parts of the world finding it costly to get water from the source to end users. At the same time, quality standards and expectations are rising. Urbanization and development are creating new demand. And, all the while, assets are aging. The need for efficiency has never been stronger.

Defining the service

Drinking water supply services encompass the design, construction, maintenance, repair and operation of water treatment and water distribution systems, regardless of the source — lake, river, well or salt water. This may also include customer billing, internal support services and management costs.

Topline findings

  • A cubic meter of water costs the average city US$0.97to treat and deliver.
  • Cities report spending anywhere from US$0.05 to US$5.97per cubic meter of water.
  • The average city loses between 10 to 13 percent of water to leakage and other non-revenue sources.

Benchmarking analysis

Efficiency

Operating and capital cost per cubic meter of water supplied. This measure combines the total drinking water supply operating costs with the total capital costs and divides the sum by the number of reported cubic meters of water supplied.

Points to consider:

  • Most cities spend the bulk of their operating budgets on the energy required for transmission and distribution, which indirectly influenced by the size, density and topography of the service area.
  • With a range of US$0.08–$5.97/cubic meter to supply water, such a range begs further clarification. When we review this range with the adjusted mean of US$1.14 we might speculate that the high cost could have been influenced by a city that spent a considerable amount upgrading their water treatment plant or their distribution infrastructure. On the low side, it is difficult to imagine a city that only spends $0.08/cubic meter, particularly when this includes operating and capital expenditures.
  • One of the factors that clearly contributes to the cost of water supply is the source of water. There are various sources that cities use including lake based, river based, ocean/sea based and well/aquifer based supply. Each of these different sources requires different treatment techniques where ocean/sea based water supply requires desalination plants that are extremely expensive to operate. Clearly subsequent studies should consider the source of water supply as an important consideration in cost.
  • An additional factor that can influence cost might include the terrain of a city. A city with an undulating landscape will have to pump water over the hills to its customers. Given that energy costs are the single most expensive ingredient to water supply, then a city that has to pump water over its uphill terrain will experience higher costs.
  • Drinking water meets one of our basic physiological needs. Fortunately today the cost and price of drinking water are still reasonable but the future demand for water may change this equation — something that cities need to watch closely.

Operating and capital cost per cubic meter water supplied (US$)

Effectiveness

Water leakage as a percent of water supplied. This measure calculates the difference between the amount of drinking water treated and the amount supplied to identify how much water is being lost during transmission.

Points to consider:

  • One of the more profound discoveries occurred when we collected the percent of water loss through leakage. While the majority of cities lose less than 15 percent of their water, one city loses 65 percent of its water through either a combination of leakage or theft. Not too far behind this city is another city that loses 45 percent. Finally one northern city loses 38 percent. Clearly the focus of these three cities must be how to stop the leakage/theft.
  • Reasons for water loss may vary from simple explanation of not enough investment in aging infrastructure to severe weather causing water main breaks, to the struggling poor population who can’t afford to purchase water. In discussions with one Indian city (not a participant in this study) they identified “non-revenue water loss” as a key focus for their attention. As water becomes more and more scarce, water theft will increase. Not providing affordable water supply is definitely not an option.
  • Tariff prices also influence consumption and behavior (for instance, it is easier to waste water when it is more abundant at low cost).
  • Sitting back and examining cities with high water loss is easy. For cities facing this challenge, how do they get funding for a service that is invisible because its buried in the ground? This is true for a number of infrastructure services. How do we convince elected officials to make the investment when councilors are more inclined to pay attention to ratepayer complaints than systemic issues in basic services?

Water leakage as a percent of water supplied

Combined efficiency and effectiveness analysis

Points to consider:

  • Combining efficiency and effectiveness in one graph provides an altogether new and exciting perspective to performance measures for the drinking water supply service. In this graph, the desired quadrant is the lower left quadrant where water leakage is at a minimum and so are costs. An ideal position is illustrated by Cities 30, 17, 2 and 8.
  • City 3 is clearly having serious problems with water leakage but not enough money is being spent to address water leakage even though it has a fairly high cost per cubic meter. We expect that its higher costs than most can be attributed to dealing with water loss and the damage this may cause. Leakage may be caused by the city growing faster than the capacity of the transmission and distribution system, by watermain breaks in an aging system and/or by water theft. Regardless of the cause, more capital expenditures are required to reduce leakage. In the longer term this may reduce the cost but not before costs will increase to overcome the water loss failures.
  • A cluster of cities are found in a sweet spot that can be described as relatively low leakage rates for reasonable cost per cubic meter of water supplied (approximately US$5–15 per cubic meter). They are lower than another cluster that spends US$20–30 per cubic meter, leading us to believe they may not be spending the right amount of money on sustainable lifecycle management.
  • No city can achieve 0 percent water leakage; it’s practically impossible. Achieving next to 0 percent water leakage also comes with a price that few cities are prepared to pay.

Drinking water supply - combined efficiency and effectiveness

Persistent problems

  • Managing peak demand
  • Maintaining aging pipes and infrastructure
  • Meeting treatment standards and environmental regulation
  • Reducing leakage and water loss
  • Ensuring universal access.

Common cost factors

  • Source location, type and quality (river, lake or ocean)
  • Energy for transmission and distribution
  • Maintenance and repairs of underground Assets Capital investment and renewal requirements
  • Topography and rainfall trends
     

Innovative ideas

  • In Kazan, authorities have undertaken a major plant reconstruction and implemented new electrolytic sodium hypochlorite production facilities, thereby enabling elimination of liquid chlorine improving overall organoleptic characteristics.
  • Philadelphia’s Water Department has just started a new project to fully replace customer-owned lead service lines that still exist between the main and the property’s water meter.
  • New automated and connected water meters are being rolled out in cities around the world, including in Toronto where authorities are engaged in a program to replace all outdated water meters and install new meters where flat rates had existed before.
  • Following a five-year capital investment program co-financed by the EU, the City of Warsaw has seen significant improvements in the quality of water and the reliability of the overall system.

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