Regulation - It's Not Easy

October 18th 2018

The California State Water Resources Control Board is currently inviting stakeholder and technical input on a water loss regulatory framework that will debut next year. The water loss regulatory framework must integrate with two parallel efforts - Senate Bill 555 implementation and Executive Order B-37-16 roll out.

Senate Bill 555 is the smaller of the two in scope - it requires the State Water Resources Control Board "to adopt rules requiring urban retail water suppliers to meet performance standards for the volume of water losses" by July of 2020.

Executive Order B-37-16 is more far-reaching and is proceeding along a slower time line. The order aims to transition California water managers and consumers to a mindset of permanent conservation. For urban drinking water suppliers, that will take the form of living within an overall supply budget determined by summing leakage, indoor consumption, and outdoor consumption component volumes.

Both regulatory prompts raise a common question: what is an acceptable volume of leakage for a drinking water supplier in California, considering the impacts of climate change, infrastructure aging, and population growth?

We won't pretend to have an easy answer to the question, but we can certainly articulate the reasons the question matters, as well as why it's difficult to answer quickly.

The structure and efficacy of water loss regulation hinges on the regulatory goal.

The way you regulate leakage across a group of agencies depends on the goal you want the agencies to achieve, either individually or as a group. We can think of three common possible goals that California could entertain:

  1. Reduce leakage to achieve an acceptable statewide leakage budget. An analog would be a total emissions target established for an entire region or sector. In such a case, no single agency's performance is targeted for change; instead, market mechanisms are harnessed so that the folks who have the most to lose by emitting (or leaking) are also the most incentivized to reduce their emissions (or leakage).
  2. Improve the performance of the poorest performers. An analog would be water quality regulations. A certain parts-per-million standard is set for acceptable contamination, and any water treated to the standard is good to go - no need to go even lower. To regulate leakage to address the poorest performers, the State Water Resources Control Board could establish a leakage threshold - say, the 75th percentile in annual water audit submissions, in terms of gallons per connection per day - and require that all agencies meet the threshold by a specified date.
  3. Prompt improvement by all agencies, regardless of current performance. If all agencies had to reduce leakage, the overall volume of leakage incurred would certainly go down, but some agencies might find themselves forced to over-invest in efficiency.

Water loss regulation could harness a few different approaches to encourage water loss reduction.

Generally speaking, most environmental regulation makes use of a suite of three tools:

  1. Prescription - a specific practice (e.g. annual proactive leak detection) or technology (e.g. high-frequency pressure loggers) is mandated for all utilities to employ.
  2. Standard - a specific threshold is set for acceptable performance. If you don't meet the threshold, you're penalized (for example, with a fine).
  3. Incentive - a financial incentive is offered to mitigate leakage. For example, leakage is taxed and funding is made available for water loss reduction projects.

Water loss regulation is challenging for a few key unique reasons.

Even if the goals and tools of water loss regulation are clear, the actual implementation and monitoring of regulation is hard. A few characteristics of leakage assessment and management contribute to the challenge:

  1. Each agency's estimate of its volume of water loss is subject to (consequential) uncertainty.
  2. The cost (and therefore value) of a unit of water varies widely across the state, so when the lens of cost-benefit analysis is brought to bear on regulation, the picture gets more complicated.
  3. Effective and efficient water loss management strategies are utility-specific and require local knowledge to plan and deploy. Put another way, one size does not fit all, and without rolling up your sleeves and getting to know a system's configuration, it's hard to recognize what to do.

We don't have any easy answers, but we're excited by the question of effective and equitable water loss regulation. We'll happily have a conversation with anyone who's interested! To get in touch, feel free to email us at

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