Leakage targets and socio-economic efficiency

During the last few years, the introduction of mandatory leakage targets fo r UK water companies has had the positive effect of reducing levels of leak age, while requiring the companies to operate at an economic level of leaka ge. Unfortunately, the determination of company-specific economic levels of leakage have been a source of disagreement between the water companies and the Government, with the Government view that water companies are not usin g the true long-term marginal costs of water abstraction, and therefore are not safeguarding the environment. This paper (a) reviews the model which was used to define the economic leve l of leakage, (b) argues the case for resource management based on the impa ct of water abstractions on the socio-environmental quality of a resource r ather than the myopic focus on leakage reductions, (c) presents the concept s of effectiveness and efficiency in relation to socio-environmental qualit y, and (d) proposes a new methodology which allows the determination of wat er abstraction rates while maintaining a desired level of socio-environment al quality.