THE IMPACT OF NON-REVENUE WATER ON WATER UTILITIES AND THEIR CUSTOMERS: A STUDY OF NAIROBI CITY WATER AND SEWERAGE COMPANY

Abstract
The purpose of this study was to find out how Non-Revenue Water (NRW) affects water utilities and their customers, by studying the case of the Nairobi City Water and Sewerage Company (NCWSC). NRW is the water produced by a water utility that is lost and does not earn any revenue for the utility. The NCWSC is estimated to lose about 40% of the water it produces annually.
These losses affect the NCWSC by denying it a significant portion of the revenue it should earn from the sale of water. It also prevents it from adequately serving its customers’ water needs, and subsequently leading to loss of reputation and goodwill from the customers.
The losses also affect the customers. This is because water losses lead to rises in price of water as the water utility tries to recover the lost revenue by charging a premium on the paying customers. Inadequate water supply also forces customers to look for other water sources such as donkey cart vendors and water bowsers (trucks), which leads to a further increase in expenditure for their water needs. In addition, such alternative sources are not subjected to proper water quality standards, meaning that they pose a health risk.
Due to the negative effects, water utilities worldwide employ measures to ensure that water losses are minimal. The NCWSC, in its Strategic Master Plan (2015/16-2018/19), plans to invest KShs 3.2 billion to reduce NRW from 40% to 16%. This will be through improving its water networks and revenue collection mechanisms, while continuously monitoring performance to ensure that gains are being made.
This study found that by carrying out the master plan, the NCWSC would not only reduce its losses, but would also earn about KShs 2.8 billion after recovering the costs of reducing water losses. This significant increase in revenue would be beneficial to the NCWSC as it could reinvest it in programmes which improve its capacity to provide water to Nairobi residents. This would in turn reduce the problem of inadequate water supply, benefitting the NCWSC and its customers. The study therefore concluded that there is need for a sustained effort and strategy to reduce NRW.

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