Real loss is physical: water that entered the system and left it through a hole. Background leakage too small to surface, reported breaks, unreported breaks running until someone notices, storage tank overflows.
How to value it
At variable production cost — chemicals, power, purchased water — not at the retail rate. Stopping a leak does not create an invoice; it stops you paying to treat and pump water nobody receives. On most systems the variable cost is a quarter to a fifth of the retail rate, which is why the valuation choice changes a headline figure by a factor of four.
The exception is a system at its supply limit, where avoided real loss defers a capital project or a purchased-water contract. There the right price is the marginal cost of the next increment of supply, and it can exceed the retail rate. That is a case to argue explicitly, per system, not a default.
Why the reported number is soft
Most filed real-loss figures are residuals: system input minus everything else the utility could account for. Anything mis-stated elsewhere in the balance lands here. That makes real loss simultaneously the largest number in many audits and the least independently verified one.
It is also why a balance that does not close matters. If the components do not sum to the reported system input, the unexplained volume is sitting in a category the audit does not name — and the real-loss line, being the residual, is where a reader will wrongly assume it went.
Finding it
Night-flow analysis by district metered area, acoustic survey, pressure-transient work, and district-level mass balance over long windows. All of it presupposes that the zone boundaries in the GIS match the valves in the ground, which on most systems is an assumption nobody has tested.