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Tag Archive | accounting for water

Accounting for water usage

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Image from wikipedia

In recent years,  I have become interested in the broader role and use of accounting in society. In particular, accounting for water has caught my eye and in Ireland it’s been great fun in the past two years or so.

As you may know, one of the things we need in accounting is measurement. In business accounting, it’s relatively easy, as the unit of measurement is rather simple – it’s the unit of currency normally. Currencies are broken into various units – euro and cent for example – and we can use the decimal system easily communicate and measure larger numbers.

In accounting for water, the measurement unit is normally cubic metres, or 1000 litres. To measure  (or account) for our water usage, we need a measurement device – a meter. Once a meter is in place, we can see how much water we use and take measures to reduce it if necessary – as water is a precious resource.

In Ireland, there has been much debate about billing for water. A recent (December 2016) expert commission report on domestic water billing has within its remit to explore if metering should occur. This, in my view, was/is a completely daft request. The report itself is full of statistics on water usage – none of which are possible with a meter. For example, it suggests usage on average of 111 litres per person per day or 20.8 cubic metres per person per year. In my own house, we have used on average 11 cubic metres per month for 4 people. Annually this is 33 cubic meters, so we are quite above average. And like any management accounting scenario, now that I have some information (on water usage) I can now take corrective action, or pay extra for my somewhat excessive usage. The latter is the subject of much debate in Ireland of course.

 

 

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Accounting for water

Image from wikipedia

Image from wikipedia

I have recently been involved in a research project on the newly formed Irish Water – a state-owned utility responsible for water supply in Ireland. The main objective of the new utility is to provide a unified approach to water supply – as opposed to the 30 odd previous authorities.  While the utility has caused much media attention, this post draws your attention to the use of accounting principles in the provision of water supply.

Let’s think about water as a resource,  which it is. Now think about the utility. It needs to account for the water it processes, distributes to customers and looses through leaks etc. To do this it needs various measuring devices such as meters. So, in a similar way to a ledger account, we could think as water coming into a system as a debit, water out a credit, the measurement is in litres (not money) and we should be able to account for the difference i.e. the balance on the account.

Now think about the end consumer of water. Similarly water comes in and out – the latter being usage. With meter installed, we can account for our usage, possibly trying to reduce usage. Or we can seek an alternative (partial) source of water by harvesting water from the roof of our house. By accounting for our usage, ultimately we can make decisions to reduce usage if we have to pay for the water resource. Without the ability to account for our usage (through a meter), we cannot make such decisions. This is of course more like management accounting – using our information on water usage to make decisions – but it is still accounting.

 

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