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Water conservation, “lost” water and their impact on revenues

Water conservation is a topic about which all municipal utilities should be concerned. Not only are drought and flood cycles unpredictable, but there is also the question of unaccounted for water which represents lost revenue to the utility. According to a 2016 IFA Study, over 50 million gallons of water is lost each year at a cost of over $54 million.

Unaccounted for water occurs in various ways, including leakage, evaporation, flushing and fire department use. Municipalities should consider implementing the following approaches to keep track of water loss:

  • Annual self-audits using standardized AWWA methodology
  • Evaluating loss mitigation techniques and weighing their value on the basis of a cost/benefit analysis

Earlier this year, the state legislature passed two bills (Senate Enrolled Act 4 and House Enrolled Act 1406) that address the importance of this issue. Both these Acts recognize that while conservation measures may result in reduced revenue, lost water definitely will result in lost revenue.

Among other things, the Senate Act requires an annual audit of distribution systems. Municipalities must participate if they wish to apply for DWSRF funds. Provisions of the House Act include requiring municipalities to have an asset management program in place in order to receive loans or grants from Indiana’s $20 million Water Infrastructure Assistance Fund.

For municipalities, being proactive is key. Plan for conservation and actively implement policies designed to encourage efficient use, such as implementing different rate structures for residential, commercial and industrial customers as well as incorporating seasonal and increasing block rates in the plan.

Updating or creating your municipality’s water conservation plan is the best place to start. 

Baker Tilly can help with all aspects of your plan. Please contact us to help get your municipality on the right track. 

Scott A. Miller
Partner, CPA
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