The aim of every operator of public water supply is to reduce water losses or non-revenue water to an adequate level. Until now, this level in Slovenia has been defined as the proportion of non-revenue water with regard to the extracted amount of it. However, the targeted values have been defined by guidelines on the national and on the level of the European Union, wherein not enough attention has been paid to dealing with the process of reducing water losses from the economic standpoint. As a concept, water losses are inadequately defined in technical literature. The Master’s thesis deals with the actual losses that are expressed as leakages due to defects on the public water supply, although it is necessary to aim at reducing the total amount of non-revenue water. The economic level of leakage is achieved by balancing the costs that occur when reducing leakage and the savings from directing the realisation of this process (reducing the amount of drinking water leakage). Fundamentally, costs are divided into the Short Run ELL and the Long Run ELL. To determine the SRELL, costs of active leakage control and water costs are included in the calculation, while to determine the LRELL, costs of pipe replacements and investment maintenance, as well as water costs are taken into account. To determine the Short Run and the Long Run Economic Level of Leakage, mainly the method of total costs and the method of marginal costs are used. The aim of the thesis is to combine economic standpoints with the practice of management of water supply systems and then determine the economic level of leakage with a practical example. The purpose is to detect potential problems with the calculation and on the basis of the obtained ELL value determine the guidelines on how to actually achieve the economic level of leakage or of the whole amount of non-revenue water.