Water Loss Audits for California Water Utilities: A Complete Guide to AWWA M36 Compliance

Water loss is one of the most significant, and most overlooked, challenges facing California water utilities today. Every gallon of treated water lost to leaks, meter inaccuracies, theft, or system inefficiencies represents not only a waste of a precious natural resource but also a direct financial drain on utility budgets and ratepayers.

The California State Water Resources Control Board (SWRCB) and the Division of Drinking Water (DDW) have made water loss mitigation a regulatory priority. With Senate Bill 555 (SB 555) requiring validated annual water loss audits from urban retail water suppliers, standardized water loss accounting is now part of routine compliance.

At Exodus Water Services, we help utilities navigate these complex requirements with comprehensive water loss audit services grounded in the American Water Works Association (AWWA) M36 methodology. This guide provides a complete overview of what California water systems need to know about water loss auditing, compliance, and conservation planning (for the planning side, see our guide to navigating urban water management plans).

What Is a Water Loss Audit?

A water loss audit is a systematic, data-driven assessment of a water utility’s water balance. It quantifies the volume of water entering a distribution system and accounts for all authorized consumption, before identifying the volume lost to leaks, metering errors, unauthorized use, and other factors. The AWWA M36 manual, “Water Audits and Loss Control Programs”, provides the industry-standard methodology for conducting these audits.

The audit breaks water loss into two primary categories:

• Real Losses (Physical Losses): Water lost from the system through leaks, breaks, and overflows on transmission mains, distribution lines, service connections, and reservoir storage. These are the visible and invisible leaks that drive up production costs and waste treated water.
• Apparent Losses (Non-Physical Losses): Water that is consumed but not properly measured or billed due to customer meter inaccuracies, unauthorized consumption (theft), billing system errors, and data handling mistakes. While not physically lost, apparent losses directly reduce revenue.

Together, real and apparent losses comprise Non-Revenue Water (NRW), the difference between the total volume of water put into the system and the volume that is billed to customers. High NRW percentages signal systemic inefficiencies that demand attention. The free Water Loss Calculator turns a supplied volume and loss estimate into gallons lost per year.

A comprehensive water loss audit generates critical data on system performance, real vs. apparent losses, and infrastructure leakage indices. For how that data feeds day-to-day decisions, see using water loss audits to improve water system operations management.

California Regulatory Requirements: SB 555

California has been a national leader in water loss regulation. Key legislative requirements include:

• Senate Bill 555 (2015): Requires urban retail water suppliers serving 3,000 or more connections or supplying 3,000 acre-feet or more annually to submit a validated water loss audit to the California Department of Water Resources (DWR) by January 1 each year. The audit follows the AWWA M36 methodology, and state rules require that the validator did not take part in compiling the audit.
• Water Conservation Act of 2009 (SB X7-7): Set a target of a 20% reduction in urban per capita water use by 2020. Water loss reduction is a key strategy for meeting these conservation targets.

An audit that has not been validated does not meet the filing requirement, so validation needs to be scheduled well before January 1.

The AWWA M36 Water Audit Methodology

The AWWA M36 methodology provides a standardized framework for conducting valid water loss audits. The process involves seven key steps:

• Quantify water volume: Measure total system input volume (treated water entering the distribution system) and authorized consumption.
• Calculate water losses: Subtract authorized consumption from system input to derive total water losses.
• Separate real and apparent losses: Use component analysis to quantify physical leaks vs. metering and data errors.
• Calculate performance indicators: Compute key metrics like the Infrastructure Leakage Index (ILI), gallons per connection per day (gpcd), and percentage NRW.
• Validate data quality: Assess accuracy and reliability of input data using the AWWA data validity scoring system.
• Develop loss control strategies: Identify cost-effective interventions for reducing real and apparent losses.
• Track performance over time: Monitor trends to measure the effectiveness of loss control programs.

How Exodus helps

Exodus compiles AWWA M36 water loss audits for California utilities, from the water balance and data validity grading through independent validation and DWR submittal, and can validate audits compiled by others. Exodus also supports Urban Water Management Plans. Explore all Exodus services or contact our team.