THE OTHER DROUGHT: DOLLARS
The water industry is a unique marketplace where services are provided in advance, customers are billed in arrears and operations are subject to a myriad of externalities, including seasonal demands, peak demands, regulated conservation and often a strong belief that water should be free. Notwithstanding, the creation of a water utility—finding the water, treating the water, delivering the water and managing individual customers’ needs—is an expensive endeavor. The National Association of Water Companies has calculated that the investment required in infrastructure and systems for water utilities is more than 3 times than that of other utility services such as telecommunications and electricity.1
In the increasingly volatile world of water supply, those costs and therefore the price of water for customers will continue to rise, despite the fact that customers are using less water. The United States Geological Survey’s (USGS) most recent report on water withdrawals states that public-supply withdrawals of water in 2010 were 42 billion gallons per day (5 percent less than in 2005), representing “the first declines in public-supply withdrawals since the 5-year reporting began in 1950.”2
This is confirmed in the American Water Works Association (AWWA) recently released 2015 State of the Water Industry report, an annual survey of the opinions of utility leaders across the country:
Forty-seven percent of utility respondents reported their utility was experiencing declining per account water sales (either a >10 year or <10 year trend) while 33 percent of respondents reported flat or little change in per account water sales. This means that 80 percent of utility respondents must address issues associated with low or declining water demand on a per account basis [emphasis added].3
This is good news for our water resources. But for water utilities that bill volumetrically, this can create price tensions as many of the costs associated with operating a water utility are fixed. Utilities are often forced to increase rates to bridge the gap as overall consumption declines, causing confusion for the customer who expects that decreasing their demand should reduce—not increase—their water bill.4
Even with rate increases, meeting the needs of aging infrastructure, increasing regulatory requirements, and increasing customer service demands in this decreasing revenue model is a significant challenge. The financial condition of our utilities may in fact be even more dire. Respondents to the State of the Water Industry report indicate that fewer than 20 percent feel that their utilities are capable of covering the full cost of providing service. For future requirements, that number drops to less than 15 percent.
Surprisingly, the report respondents identified “Responding to declining water sales” well below other financial challenges. This is odd, given that revenue for water sales are the foundation for solving the higher rated challenges in the report, like “Establishing and following a financial policy for capital reinvestment” and “Justifying R&R programs to ratepayers.”
For utilities in North America, declining commodity sales will impact the ability to fund infrastructure replacement, investments in new technology to meet increasingly stringent regulatory standards, and the ability to attract high quality talent in an age of a rapidly aging workforce.
OPENING THE FINANCIAL SPIGOT
Given that utility revenue is declining, costs and investment requirements are increasing, and there will be continued regulatory and social pressure on utilities to sell less product, it is vitally important for utilities to maximize the availability of their existing revenue streams. This means making sure that all water is accounted for, all customers are billed correctly, and bad debt and write-offs are actively managed. These activities are central to technologies related to the Smart Grid for Water. Through datacentric tools, utilities can get a better understanding of their water operations, and most importantly can drive improvements into their financial operations.
Advanced Metering Infrastructure (AMI) allows utilities, for the first time, near-real time water consumption measurement. Data of this granularity has many uses in the utility, such as improving water distribution system operations with respect to power, pressure management, burst control, and leakage. Even more importantly, when combined with a geospatial Meter Data Management (MDM) and Analytics suite, this high frequency data can immediately identify missing meters, failed meters, tampered meters, abnormal consumption, meter size issues and more that go directly to the economic viability of the utility. Connected to a smart grid compatible Customer Information System (CIS), AMI forms the basis for a new relationship with our customers, and gives our billing staff additional tools to improve cash flow management and the overall financial metrics of utility operations.
With AMI data, billing periods can be adjusted to meet the needs of the customer including billing scheduled to align with pay periods or rate structures can be aligned to the costs of the utility by utilizing time of use rates. Most importantly, AMI and financially integrated customer portals can significantly improve the both the volume and timing of revenue for the utility—advancing revenue collection to the left by offering many different payment methodologies and reducing bad-debt through active reminders and notifications for customers.
THE FATHOM DOLLAR-DROUGHT SOLVER
The FATHOM suite of services is designed specifically to manage the meter-to-cash verticals for utilities. The tools built into the platform find hidden and lost revenue, ensure that all water is measured and billed, facilitates easy payment options and provides for bad debt elimination.
FATHOM is a technology-agnostic platform that allows for the incremental adoption of AMI without any disruption to the utility’s billing services. With our geospatially-based data and analytic systems, FATHOM provides real-time, spatially relevant information instantaneously across the utility enterprise—from operations to billing to customers.
Through the FATHOM Revenue Assurance Analytics, our utility partners have found over $7.4 million of annual revenue. With FATHOM MDM, utilities are maximizing the availability of demand information and finding lost water and revenue. With FATHOM CIS and the FATHOM U2You customer portal, more water is billed, more revenue is collected, and bad debt is reduced 75 percent.
Solving the financial drought as well as the hydrologic drought for our utilities is critical if we are to move to our water utilities into the 21st century. FATHOM marks the path to that goal.
1National Association of Water Companies, “Price, Cost, Value”
2USGS, National Association of Water Companies, “Price, Cost, Value” (http://pubs.usgs.gov/circ/1405/)
32015 AWWA State of the Water Industry Report (https://www.awwa.org/Portals/0/files/resources/water%20utility%20 management/sotwi/2015-AWWA-State-of-the-Water-Industry-Report.pdf)
4FATHOM Drought Watch, Volume 1, Issue 16, PITCHFORKS AND TORCHES: THE CURIOUS RESULT OF CONSERVATION, July 24, 2015 (http://www.gwfathom.com/wp-content/uploads/2015/07/FATHOM-Drought-Watch-v1.16.pdf)