AMI’s ROI

AMI's ROIWater lost is lost money.

Imagine what would happen if 10 to 20 percent of all new cars for sale at a dealership or diamond rings at a jewelry store suddenly went missing. Where other businesses would cringe, water utilities were always a little different. Losing hundreds of millions in revenue and billions of gallons of water can no longer continue. As a result, utilities are quickly changing their perspective and their practices.

As water supply continues to tighten in many regions of the country, the cost to treat and distribute water to utility customers continues to rise.

Utilities get it.

Conservation and water asset management is now a top priority with both regulatory agencies and utilities. In parts of the Western and Southern United States it?s becoming mandatory. Utilities understand that they must improve the bottom line, preserve revenue and in many cases, actually increase revenue. But here?s where it gets difficult. They must typically accomplish these goals without treading into the political minefield of raising rates for customers?again. In another twist, a robust, effective conservation program can often result in a loss of revenue for a utility, further squeezing already tight operating and capital improvement budgets.

Scientia Potentia est. ?Knowledge is Power? is a Latin aphorism popularized in the late 1500s, and it applies to the water utility more than ever before. Streamlining business processes with meter automation systems, or Automated Meter Infrastructure (AMI), provides this potential knowledge and actionable, potentially profitable data. A pile of data that just sits there is ?dumb? data and basically becomes a pile of useless information. Only when data is fully exploited, leveraged and the results are measured and monetized over time can it be deemed intelligent or ?smart? data. Consider the 10-plus year AMI product lifecycle. A utility with 10,000 service connections and no AMI system collects a total of 1.2 million ?dumb? monthly meter reads over 10 years. With an AMI system, ?smart? hourly reads would increase to a whopping 867 million ? all right at their fingertips, delivered with the promise to streamline business processes, preserve and increase revenue, as well as provide better service to consumers.

Converting this intelligence into a benefit (save time, save money, make time, make money) is the key to realizing the ultimate Return on Intelligence and the actual Return on Investment.

Many advantages come with AMI (also referred to as Advanced Metering Infrastructure), including implementing and policing conservation programs, and the ability to ?right-size? the meter to fit the job which means less maintenance and the realization of additional revenue. Other similar benefits reach almost every department and virtually every business process including finance, customer service, maintenance, management and even the municipalities? Board or City Council.

The benefits of converting to an AMI system, however, cannot be fully realized until a utility sees the value in their newfound data. To truly experience a return on investment and a return on intelligence requires the ability, desire and discipline to continually measure the data and take action against that data. Not just for a month, or for the first year after the system is installed, but for the full 10-year plus life of the product.

Utilities are aware that Meter Data Management (MDM) systems software provides the ability to improve processes. For example, AMI-provided meter reads can be used to remotely detect leaks or get a move-in/move-out read without having to send a truck across town. Policy changes can be implemented and can drastically reduce billing errors or nearly eliminate write-off ?forgiveness? for customers with high consumption anomalies that can cost a single large utility millions of dollars each year.

But as these benefits are gained, today?s MDM systems do not have ?built-in? features and functions to monetize these benefits at an individual utility. They simply tell utilities that a leak has happened or that truck roll-out across town is no longer necessary to get a move-in read. Today?s MDM systems cannot tell a utility exactly how many real dollars were gained or preserved or what the value of time saved or gained is actually worth to the utility, or tell the utility customers actually funding these systems if they are getting their money?s worth (absent state or federal grant monies).

Accountability

It?s safe to say that all utilities will perform a detailed cost and benefit analysis to justify and secure funds for an AMI project based upon detailed, with largely hypothetical service gains and hypothetical returns on investment. Yet, how many utilities actually track and measure the real AMI gains actualized month-by-month, year-over-year for the entire life of the system?

How many have developed, maintained and made publically available a detailed matrix reflecting the number of occurrences from areas where business processes have been streamlined? And there are some 15 to 18 unique areas for process improvements relative to AMI depending on the system used and the scope of the project that can be measured and monetized. How many utilities combine a real-world, up-to-date breakdown of each individual cost benefit realized by each improved process day after day after day?

For example, fuel costs are fluctuating wildly these days, and the savings relative to rolling out a truck rises and falls as fuel costs seesaw monthly by as much as 20 percent. The same is true for annual insurance premiums, fleet maintenance and labor costs as normal attrition changes the actual payroll. Does the utility routinely update these moving, changing costs to their utility or just use the convenient ?industry average? or data from last year?

With tens of thousands of truck rolls per year, the measured benefits to a utility where AMI changed how they roll trucks to do move-in/move-out reads, re-reads for billing disputes, investigation of theft and tamper, or just taking a simple meter read dramatically and constantly redefines the return on intelligence. Thirty thousand truck rolls a year with a $2 variable comes to $60,000 per year ? or a $600,000 variable over the 10-year AMI product life cycle. If the investment to automate a 10,000 connection city is $3 million dollars, the variable in the return on investment can move by 20 percent in just this category alone.

Billing disputes is another area with wild potential fluctuations. Does a $300 write-off given to a customer reflect a different value for the utility buying water at $700 per-acre-ft or water that costs $1,500 per-acre-ft because a new price tier was hit? Sure it does.

It?s easy to become lackadaisical relative to staying on top of these details. Priorities change daily. The fire-drill-of-the-day makes for a convenient distraction from keeping a laser-like focus on the daily commitment required to track, measure and monetize the process of turning millions of ?dumb? data points into intelligence and ultimately benefits.

But, if utilities lose focus, if they stop measuring, if they live and work in the hypothetical, they will never learn to maximize or realize the full investment or full potential of AMI.

Process Champions

What?s described here is a big job ? much too big, much too daunting for one person. Return on intelligence or extended return on investment requires a team effort. One person focused on 15 to 18 unique, streamlined business processes scattered among five or six departments (as diverse as finance, customer service, distribution, maintenance, IT and management) will never match the effectiveness, efficiency and constant spotlight of a team of ?Process Champions? focused and dedicated to tracking and measuring the monthly benefits in their department.

Committees and teams were likely assembled to develop the initial cost benefit analysis used to justify the initial investment for AMI. This same group was likely used to develop the bid specifications and was probably the same experts charged with the evaluation and selection from among the bids and presentations submitted by multiple AMI vendors. Once a vendor is selected, and the system is installed and integrated, these teams are usually disbanded, and great expertise quietly returns to their daily tasks, to new priorities and on to the next fire-drill-of-the-day.

Why not keeps these teams in place after the installation? They are the internal experts on the considerable moving parts, on the dynamic and ever-changing costs and benefits. Why settle for perceived, hypothetical gains? Why not require a monthly or quarterly analysis, an ongoing white hot light on the actual benefits gained for the utility ? the money saved, the time saved, the money made and the value of time gained?
This team could even look to the chosen AMI vendor or manufacturer to provide thorough training or even case studies for how other similar utilities have benefited and realized their own return on intelligence. AMI vendors have a vested interest in customer satisfaction, and the knowledge and passion to ensure new AMI programs are successful.

For utilities looking to AMI to improve the bottom line, preserve revenue, and in many cases, actually increase revenue ? without raising rates ? never stop measuring and monetizing the real return on intelligence.

Michael Gordon is sales manager for Ferguson Waterworks? Meter and Automation efforts in California and the Midwest.

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