September 2018: Building Resilience and Sustainability through Smart Approaches to Water Utility Management
Clean drinking water is essential for health, social and economic development. Many water utilities, particularly in emerging and developing countries, are faced with the challenge of ensuring sustainable operating models in the face of significant capital expenditures to replace or extend infrastructure. For instance, while an estimated 37% of Africans need access to piped water, the financial capital is often not available. In 2009, the OECD estimated the cost of modernizing and expanding water and sanitation infrastructure to meet these needs at US $13.6 trillion, or US $900 million per year from 2016-2030. 1
CowaterSogema’s experience working with urban water utilities has highlighted the unique challenges they face in maintaining sustainable operating models in the face of pressures to achieve the Sustainable Development Goals on access to water. As such, operators are required to balance heightened regulatory requirements related to operating standards, water quality and customer service while also investing in, replacing or extending water distribution infrastructure, especially in the context of a changing climate. Caribbean countries, for example, are predicted to experience a five to six percent decrease in annual rain fall due to climate change (posing a threat to bulk water supplies); are vulnerable to annual cycles of increasingly frequent and severe hurricanes (threatening transmission, distribution and collection infrastructure); and 29 percent of their populations, including significant pumping and transmission infrastructure, reside within five meters of sea level. 2
In most developing and many emerging economies, however, water utilities lack the infrastructure, reliable data, information management systems, and predictable revenue bases with which to address these challenges and priorities. This paper elaborates on several of these core challenges and, building on CowaterSogema’s experience with water utilities projects, illustrates how ‘smart’ approaches to utility management – focused largely on automation and better data management – can offer transformative solutions that will strengthen water utilities’ financial sustainability, their capacity to meet capital investment and regulatory requirements, their customer service orientation, and their resiliency to external shocks.
Non-Revenue Water (NRW)
Water utilities rely on data such as water consumption characteristics, sources of non-revenue water (NRW), parts inventories, and customer information for day-to-day usiness operations and long-term planning. Many utilities lack the ability to collect data necessary to locate leaks or determine demand characteristics, which impacts productivity and financial resources.
The annual cost of NRW due to leaks or illegal connections worldwide was estimated by the World Bank at USD 14 billion per year in 2006, a third of which was attributable to the developing world.3 While NRW in high income countries is estimated to total 17 percent of total water production versus at least double that amount in low-income countries, the fact that the developed world accounts for two thirds of the total annual costs is likely attributable to much higher levels of water consumption by households in richer countries.4
In both contexts, commercial NRW issues (i.e. challenges in measuring total water distributed and consumed) are often caused by an absence of water metering or the utilization of older mechanical meters susceptible to inaccuracies and that limit the frequency and type of data collected to monitor water distribution and consumption. These commercial losses are often accompanied by physical NRW losses, which have the added impact of increasing pumping, transmission and delivery costs in addition to wasting increasingly scarce bulk water resources.
Good data management is necessary to capitalize on the vast amounts and types of data generated from water utility operations. This includes customer information, parts inventories, maintenance history, work order fulfilment results, water consumption, and financial accounts. Inadequate and time-delayed data management systems, outdated technology, and practices such as manually entered data, siloed business units, and lack of data integration can lead to errors, duplication, reduced productivity, and higher operating costs. In Africa, for example, while the overall productivity of water utilities is 8.7 staff per 1,000 connections, there exists tremendous variation between the top and bottom percentiles (1 staff versus 36 staff per 1,000 connections). This difference is attributable in part to the different degrees to which modern business tools are applied to all facets of a utility.5
Additionally, lack of data and poor data management places utilities in a position where they are constantly reacting to service failures or requests for information. There is little if any opportunity for pro-active communication with their regulator and customer based on issues related to service, water conservation measures or related programs.
In addition to revenue loss through NRW, many water utilities provide water under artificially low tariff models. While it is critical for governments to ensure access to clean water for all, artificially low tariffs prevent utilities from maintaining, planning or improving the quality and coverage of service provided. Furthermore, these tariffs often fail to reflect peak delivery costs, or provide any incentive to balance accessibility of water with water conservation. Finally, this approach to tariffs creates a dependency on operating subsidies from governments that are themselves lacking access to sufficient revenue.
Water utilities are often the single largest energy consumers within their jurisdictions,6 therefore a steady supply of efficient and affordable power is of critical importance. However, more frequent extreme weather events and threats posed by rising sea levels are requiring water utilities to adapt to increased volatility in their access to both water and the energy required to transmit it across their networks. In this regard, CowaterSogema staff members have been struck by the number of discussions with utility managers in recent years where the generation and distribution of potable water was limited primarily by access to reliable, affordable energy to power their pumps.
Improved water metering infrastructure and the information systems into which data is relayed can enable ‘real-time demand management’ (RTDM), a defining characteristic of a ‘smart’ utility. RTDM provides an immediate and tangible means through which utilities and their customers can adapt to the specific challenges discussed above by using data to drive decision-making.
As illustrated in the accompanying graphic, RTDM integrates smart meter systems, an integrated management information environment, an adaptive tariff model, and digital applications to facilitate two-way communication between a utility and its customers. This includes, among other functions, the ability for customers to monitor their consumption and submit service requests via their mobile devices.
The evolution towards becoming a smart utility characterized by using RTDM begins with ensuring all consumers are metered so they can be charged accurately for their water use. Smart meter technology allows utilities to measure data such as water produced, distributed and consumed, and periods of no flow, back-flow, or low flow. The utility can then identify and address NRW sources more quickly. This technology can result in a 7 to 12 percent reduction in water use by helping utility staff spot leaks more quickly,7 a critical function in cities such as Cape Town where water levels recently dipped to historic lows due to limited rainfall.
Smart meter systems can also accommodate automated meter reading (AMR) technology, which negates the need for manual reading of meters and can provide real time data with significantly fewer errors than achieved through traditional approaches to data collection.
Each of these measures allow utilities to increase their operational efficiency while providing an opportunity to transform their relationships with both their regulators and their customer base.
Modern Data Management Systems
Modern information management systems provide management with the tools to efficiently and sustainably operate their utility by minimizing manual data entry through automation and data integration (business units operating from a shared database). This leads to fewer errors or deliberate manipulation of data, less duplication, improved inventory management, faster fulfilment of service requests, improved customer service, a more transparent relationship with the Regulator, and better asset and maintenance management practices. For example, the automation of equipment supervision through supervising control and data acquisition (SCADA) systems significantly improve productivity and reduce errors. Predictive maintenance practices and sophisticated testing like vibration analysis provides foresight into future maintenance, parts, and financial needs.
Modern information systems also provide the capability to conduct complex analysis of supply and demand trends linked to GIS data, business productivity, and supply chains while enabling the more efficient production of customer, financial, operation and maintenance, and regulatory reports. Additionally, at the customer level, mobile apps can be used for bill payments, real-time usage updates, and service requests.
These types of customer feedback tools have been found to reduce water demand by at least five percent8 while increasing customer satisfaction and tariff collection rates.
A Sustainable Tariff Structure
As noted above, tariff setting practices in the water sector reflect a combination of historical issues. Chief among these have been the inability to reliably measure or manage the delivery of fresh water alongside the social, political and governance priorities associated with ensuring access to it. However, it is becoming increasingly possible to implement innovative, adaptive and sustainable tariff structures that promote efficient water use, generate enough revenue for a utility to cover its operating costs and capital investments, and enable universal access to safe drinking water. Water utilities in countries ranging from Uganda, to Vietnam to Burkina Faso have implemented tariff models that cover operating and maintenance costs and reach a high percentage of residents.9 The financial autonomy this creates also allows utilities to plan properly for the future and reduces the dependence of the utility on operational subsidies.
In CowaterSogema’s experience, however, it is critical that any changes to tariff structures are accompanied by tangible improvements in the quality of services delivered by the utility in question that can be independently verified by the regulator or a similar agency. The improvements in customer service and support offered through automation and better data management offer a significant source of such evidence.
Renewable Energy and Energy Efficiency Technologies
Finally, with power typically representing 30 percent of a utility’s operating costs,10 adopting solutions that enable access to reliable and low cost energy is critical to ensuring a reliable, sustainable and cost effective model for distributing fresh water across the network. As a result, CowaterSogema has begun to implement renewable energy and energy efficiency initiatives as an integral part of the broader NRW and MIS solutions discussed above. Technology such as solar pumping systems, for example, has already been found to be more cost effective than traditional energy sources in addition to being more reliable in many locations.11 Distributed renewable energy solutions such as small scale wind, solar or biomass systems at pumping stations can also help a utility maintain water supplies in the event of power outages from centrally based traditional power plants.
Based on CowaterSogema’s own experience, investment in small scale energy efficiency solutions as part of the fresh water distribution network deliver greater resiliency in the face of uncertain supplies of non-renewable energy and can generate returns within two years of installation.
Over the past 33 years CowaterSogema has implemented over 100 water supply and sanitation projects and studies in more than 30 countries around the world to improve living standards in urban, peri-urban and rural settings. Using a demand-responsive approach, we work closely with local governments, utilities and regulators and other stakeholders to build capacity and identify sustainable solutions that address challenges associated with access to affordable, clean drinking water. Through expert technical assistance and innovative solutions, CowaterSogema can provide water utilities with holistic approaches to create smart utility businesses while helping to improve water access for entire populations in low and middle-income countries.
Highlights from a recent Smart Utility Business Transformation Project
The transformation of a utility into a ‘smart’ organisation occurs when its investments in the systems and processes have been translated into new digitally-driven business processes and models that are generating increased revenues, higher customer satisfaction rates and greater operational resiliency.
The Barbados Water Authority – the sole water utility for this Caribbean island, home to nearly 300,000 people – is emerging as an example of one organisation in which this process is already well underway.
In 2015, CowaterSogema worked with the Canadian Commercial Corporation (CCC) and the Barbados Water Authority (BWA) to develop a large-scale business transformation initiative requiring a host of integrated change management, hardware and software solutions. This became known as the Barbados Water Authority (BWA) Smart Meter Business Transformation Project.
The primary focus of the project – delivered through a bundled solution combining financing, project management, procurement, information technology and change management inputs – sought to reduce NRW, improve customer service, conserve water, and improve operational efficiencies and revenues. This approach has allowed the BWA to address its priorities more quickly while managing the various components of the project in an integrated manner.12 CowaterSogema has worked in close partnership with the management of BWA to design, install, and integrate these changes and systems across the organization.
The information systems designed and rolled out to drive the achievement of key goals included a Utility Customer Information System (UCIS), a Work Order Management System (WMS) and a Financial Information System (FIS). Each system was designed to work together with the others in real time as part of an integrated solution.The figures below provides a brief overview of each system’s impact.
Acting on the important first step noted in the discussion on ‘better data,’ this initiative has been implemented in tandem with the separate installation of nearly 100,000 household and 4,000 commercial smart water meters capable of automatically transmitting water usage data to the BWA from across the island.