Looking at various aspects of leakage calculations

Transcription

1 Review of SELL Calculations Looking at various aspects of leakage calculations Stuart Trow

2 Estimating, reporting and forecasting leakage Specific objectives identified for the SELL review were to: Take account of known changes to companies approach to leakage since 2009 Identify improvements to estimating and forecasting leakage within the context of water resource management plans Make recommendations to improve leakage management assumptions and conclusions drawn by the companies Developing new guidance is beyond the scope of the project

3 Changes since 2009 Estimation of Background Leakage Estimation of Trunk Main and Service Reservoir Leakage Estimation of Supply Pipe Leakage Shape of the Active Leakage Control (ALC) cost curves Importance of Pressure and pressure management Treatment of Repair Costs The companies approach to Risk in the SELL process Assumptions about the benefits of Asset renewal The impact of Customer Metering Assessing the True value of water Leakage estimation generally The General Approach to SELL

4 Cost ( /yr) Short run ELL B D A D C C B A Leakage (Ml/d) Cost of survey Cost of water lost Total Cost Policy Minimum

5 Background leakage Background leakage estimated to be 51% of total leakage for E&W If policy minimum is used in the SELL calculation instead of an estimate of true background leakage, the result assumes that the current policy is economic Background leakage is the single most important component of the current estimates of SELL, and it must be given greater consideration for future plans Future SELL assessments should consider Minimum Achievable Levels of Leakage (MAbL) rather than, or as well as, historic minimum achieved values

6 Min. achieved vs. Min. achievable

7 Background/ Min Achievable Economic Policy Minimum Cost Economic Policy Min. Min Achieved / Policy Min. BL/MAbL PM/MAL Leakage Level

8 Trunk Main and Service Reservoir Leakage Difficult to estimate TM&SR leakage Default values in Managing Leakage 2011 are the same as Report 26 (1980) The economics of managing leakage outside of DMAs is a significant deficiency in current SELL Encourage companies to provide specific values for TM&SR losses, based on specific field tests in each water resource zone. Do more to estimate and control service reservoir leakage and losses due to overflows The report avoids raising expectations about what can be done to quantify and reduce trunk main leakage

9 Supply pipe leakage The 2009/10 Ofwat Service and Delivery report, shows supply pipe leakage as 787 Ml/d out of a total of 3281 Ml/d i.e. 24% June Returns show a wide variation in estimates of supply pipe leakage for both measured and unmeasured households. Minimum l/prop/day Maximum l/prop/day Median l/prop/day (not property weighted) Unmeasured households Externally metered households Other metered households Figure 5.1 Supply Pipe Leakage 2010/11

10 Supply pipe leakage For SELL it is important to understand and take account of the: measures designed to reduce supply pipe leakage impact of customer metering policy on fitting meters internally or at the property boundary economics of AMR and smart metering, and reading frequency Consider developing separate SELL models for supply pipe leakage, as distinct from mains and communication pipes The effect on SELL of a change of ownership of supply pipes from customer to company should also be considered

11 ALC cost curves UKWIR report Best Practice for Derivation of Leakage Cost Curves Several approaches to assessing the shape of the ALC curve Some companies use theoretical models; others use curves which fit through current cost and current leakage level The ALC curve is primarily a function of the run time of unreported bursts. In practice, the relationship is far more complex. Inefficient ALC operations produce a higher SELL Insufficient account taken of changes to the ALC curve due to efficiencies and new technology No incentive to promote efficiency and innovation?

12 ALC cost curves As SELL reduces, the shape of the ALC curve becomes more significant. Companies should adopt specific processes to determine the shape of the curve for each zone There should be a specific incentive in the SELL mechanism which encourages efficient operations and investment Companies should seek to improve their available data on costs and benefits of all leakage management operations when estimating the SELL Further research is required to determine the actual impact on reported and detected repairs from changes in leakage level.

13 Pressure The degree to which pressure is taken into account in the SELL process varies between companies The coverage of pressure management varies considerably between companies (from 17% to 73%) There are three relationships, which are relevant to SELL: between pressure and leakage flow rate between pressure and burst frequency between pressure management and ALC. The lack of published data on pressure limits understanding of the extent to which pressure management has been used to achieve leakage targets

14 Pressure There is a need to review the methodologies for assessing AZP, AZNP and hour to day factors (HDF). An industry standard methodology is needed, with a requirement for companies to follow best practice guidelines. SELL should be assessed against the assumptions made in the last round of WRMPs, to ensure consistency with reductions achieved through pressure management since Future cost benefit studies for pressure management should take an holistic view of the costs and benefits over the planning horizon

15 Treatment of repair costs Accepted wisdom: repair costs should not be taken into account in calculating ELL This may apply to short run ELL (SR-ELL) but it does not apply in cases where the ELL may change over time due to investments or changes in costs Repair costs should form part of the SELL assessment, especially those due to the transition from one steady state to another Future plans should require companies to explain their assumptions regarding the current and future burst frequency and the associated costs

16 Risks and uncertainty in the SELL process Headroom risk of failing to safeguard sufficient water resource Seasonal factors such as drought, and winter peak leakage Reducing target pressures may increase the risk to customer service ALC cost curves will change with resource levels and techniques Benefits risk in undertaking asset replacement works Cost risk of Reducing repair times Business risk due to the target setting approach based on estimates of projected future costs and future benefits

17 The approach to risk More attention should be given to the implied level of risk Assumptions and policies should be documented in the plan Wide statistical range in SELL due to the inherent uncertainly in the parameters used in the SELL calculation. A pragmatic approach is needed for regulation of SELL, rather than a statistical one

18 Asset renewal Renewing all mains in a DMA is a pessimistic approach Common practice is to renew mains without renewing any part of the service, although a large proportion of leakage occurs on the service pipe Current approaches tend to give high costs for each unit of leakage saved, which eliminate potentially cost effective schemes from the least cost plan Companies need to demonstrate the chosen approach is optimal Companies should take a targeted approach to economic asset renewal to reduce background leakage and/or the new burst frequency

19 Assessing the true value of water Resource Value of Water Volumetric abstraction charging Catchment based valuation Future Abstraction Charging ongoing Defra study Valuing Water UKWIR project Restoring Sustainable Abstraction EA and water companies Abstraction Incentive Mechanism Ofwat review A consistent calculation of the true value of water is best carried out by a single body; Environment Agency is the ideal candidate EA should establish more information on the environmental value of water. This might start with a national to sub-regional level overview, but catchment specific evidence will be needed eventually

20 Operating costs typically 50 to 60/Ml

21 Leakage estimation generally Leakage cannot be measured directly; it has to be estimated There are significant variations of approach between companies Report 4 of ML2011 makes several recommendations for standard methodologies and sharing of data There is a need to ensure that the SELL and the Water Balance are based on consistent approaches and assumptions within each company, and ideally between companies Increased customer metering may necessitate a review of the standard water balance to account for apparent losses.

22 The general approach to SELL current approaches do not take sufficient account of all options for reducing leakage within the least cost plan Leakage options may be rejected because they do not match the required step change in the supply-demand balance, or because they are not required in unconstrained zones A transparent strategic optioneering approach should be used which considers the net costs and benefits of making reductions in leakage from current levels by significant stepped amounts e.g. 5% to 25% This top down approach could be combined with the current bottom up estimate of SELL to provide an iterative routine which arrives at the SELL by considering various key drivers A range of leakage values should be assessed along with associated costs in order that the materiality of operating at levels within the range can be reviewed

23 Thank you