Public water companies lost Sh15.9 billion on water not billed to customers last year, revealing the burden the service providers face due to the use of outdated equipment and illegal connections.
A new audit shows that during the year to June 2024, 76 water firms did not bill customers more than 204 billion litres of water, at a time when nearly half of the service providers use outdated tariffs that have cost them huge revenue losses.
The unbilled stocks, known as non-revenue water in the sector, are a problem that has faced most of the 87 water service providers (WSPs) operating across the country, mainly due to issues such as illegal connections, billing customers based on non-metered/flat rates, leakages from ageing infrastructure, and inaccurate water meters.
Auditor-General Nancy Gathungu notes that during the year, 76 water firms produced 440.39 billion litres of water, but only billed customers for 235.98 billion litres.
“This reflects a loss of 204,405,773 cubic metres, equivalent to 46 percent of total production, significantly exceeding the regulatory benchmark of 25 percent. The revenue loss translates to approximately Sh15,994,840,319,” said Ms Gathungu.
The Auditor-General said only three of the 76 water firms that maintained water production and billing records adhered to regulations regarding non-revenue water.
Ms Gathungu also raises concerns over a huge number of water companies that continue to use outdated water tariffs to bill customers, which has caused revenue losses even as they struggle financially.
At least 38 out of the 87 water companies applied outdated tariffs during the year under review due to administrative and regulatory delays, said Ms Gathungu.
“Continued reliance on outdated tariffs poses a significant risk to the financial viability of these utilities, as it impairs their ability to fully recover operational costs and undermines long-term service delivery sustainability.”
During the year, water firms generated Sh28.16 billion in revenues from selling water to residents, marking a 5 percent growth from Sh26.87 billion the previous year.
The audit, however, flags cases of unaccounted revenue amounting to Sh1.08 billion, with major water firms fingered being Kilifi Mariakani Water and Sewerage Company, with an unaccounted for revenue of Sh597.3 million, Nairobi City Water and Sewerage Company Ltd (Sh194.35 million), and Kisumu’s Gulf Water Services Company Limited (Sh154 million).
“The audit revealed that five water companies had revenue collection shortfalls amounting to Sh548,173,016. The exceptions included unbilled customers and instances of undercharging for services,” said Ms Gathungu.
The companies included Nairobi City Water and Sewerage Company, with shortfalls of Sh344.49 million resulting from unpaid revenue from billed customers and unbilled customers, and the Othaya Mukurweini Water and Sanitation, which did not bill 2,142 customers, some Sh177.77 million.
Water Services Regulatory Board (Wasreb) data varies marginally with figures in the audit, showing that water companies supplied water to 21.5 million Kenyans directly during the year, billing 258 billion litres to earn Sh28.85 billion.
Households accounted for 63.2 percent of the billed water, with the Wasreb noting that while billed water increased marginally by volume (0.01 percent), the domestic billed volume declined by 1.7 percent.
The regulator has called on water companies to undertake infrastructure repairs to cut leakages, which have been one of the main causes of non-revenue water.
Wasreb regulations require water firms to operate non-revenue water levels of at most 25 percent of total production, but only three companies operated within the requirement.
The regulator said non-water revenue for different water firms varied from 28 to 75 percent of total production, with Nyeri County reporting the lowest level, while Marsabit County recorded the highest.
The companies are reported to be operating on unacceptable levels of water coverage, drinking water quality, non-revenue water, and costs of their operations.
“High levels of NRW significantly impact the financial health of water service providers and the overall efficiency of water services,” Wasreb says.
The regulator prescribes that companies adopt smart meters, which improve billing accuracy and minimise water losses, implement systems to regulate water pressure to minimise leaks and bursts, and modernize pipelines and treatment facilities to reduce physical losses.
It also advises them to adopt advanced leak detection technologies to promptly identify and repair leaks and build staff capacity to manage and maintain water systems.
“Control of illegal connections. Nairobi, Kilifi, and Nakuru have formed teams to identify and eliminate illegal connections. These initiatives have decreased commercial losses and improved network integrity,” Wasreb adds.
