# Ofwat: greater uncertainty can shrink reported leakage

Water leakage is not measured directly. When the balance does not close, MLE allocates the gap across its components. Ofwat says greater uncertainty on distribution input can leave less of that gap assigned to leakage, affecting payments and reputation without a physical pipe being repaired.

Primary source: Ofwat's 27 August 2026 consultation, pages 16 and 41-42. The consultation closes on 9 October 2026.

Scope: incumbent wholesale water companies in England and Wales, excluding NAVs, during PR24 (2025-30). This is a feature of the method identified by Ofwat, not a finding about any company's conduct.

## Leakage is not measured directly

Companies estimate leakage through two paths. The top-down estimate starts with distribution input and subtracts consumption and other accounted uses. The bottom-up estimate uses night flows in metered areas and the other leakage components. The estimates are compared; an inevitable, ideally small water-balance gap remains.

**Input = consumption + uses + leakage + water-balance gap**

When the two estimates do not match, a water-balance gap remains.

## The gap has to be allocated

MLE, or Maximum Likelihood Estimation, adjusts the balance lines until input and outputs match. Ofwat says the allocation depends on the size of each component and the uncertainty with which it is measured.

Companies publish the post-MLE annual average in Ml/d. The PR24 commitment then measures the percentage reduction in the three-year average from the 2019-20 baseline.

## The pipe stays fixed. The ledger moves.

In many cases, Ofwat says, greater uncertainty on distribution-input meters assigns more of the gap to input and less to leakage. This is the structural effect identified by the regulator. It does not show that any company deliberately increased uncertainty.

Current safeguards matter: a balance gap above ±2% is non-compliant and must be explained; a gap beyond +5% or -5% is too wide for a valid MLE adjustment. The balance and confidence intervals require independent third-party assurance, and ODI payments must reflect real performance rather than method or data changes.

## The intervals are not small details

- Distribution input: current guidance of 2%-4%; companies report roughly ±2% to slightly worse than ±5%.
- Detailed, reliable estimates such as distribution leakage: the current definition expects 8%-12%; Ofwat observes a cross-company bottom-up leakage range of 8%-25%.
- Ofwat says reported leakage averages 19% of distribution input across the companies covered here.

Wider intervals can describe honest measurement limits. Ofwat's concern is that methods differ across companies and that the interval affects the reconciled value. The consultation does not expose the reporting year, weighting, or company values behind the 19% aggregate or 8%-25% range, so neither can be reproduced from that document alone.

## What the document does not prove

- It does not prove fraud or a company's intent.
- It does not make leakage directly observable.
- It does not say MLE should be removed. Ofwat prefers to retain reconciliation with clearer, tighter requirements.
- It does not publish complete pre- and post-MLE values for a company audit.

## The future method is still under consultation

Ofwat accepts responses until 9 October 2026. The document does not change targets or payment rates in the current regulatory period.

Tighter MLE guidance could be implemented within one year. Metering best practice could take up to two years to develop, with company adaptation in later years.

## Sources

1. [Ofwat, Leakage Reporting Methodology - Consultation](https://consult.ofwat.gov.uk/consultations/leakage-reporting-methodology-consultation/user_uploads/leakage-reporting-methodology-----consultation-3.pdf), August 2026, pages 2, 4, 9-10, 16, 41-42, 45-46 and 50.
2. [Ofwat, PR24 Leakage Performance Commitment definition, version 2.0](https://www.ofwat.gov.uk/wp-content/uploads/2023/05/Leakage-_-FD-PC-definition.pdf), pages 3-4, 23 and 25-26.
3. [Ofwat, PR24 final-determination performance commitment definitions](https://www.ofwat.gov.uk/regulated-companies/price-review/2024-price-review/pr24-final-determinations-performance-commitment-definitions/), controlling index for the 2025-30 period.

Last checked 28 August 2026. A project by [Marius Comper](https://mariuscomper.uk/en/).