Taking the Next Step with Data: Achieving Financial Gain from Smart Water

dollar sign and data

“Smart water” is such a buzzword these days that the definition can get a bit skewed. What exactly constitutes smart water? Is it a piece of technology? If so, what does it do? Just how smart is it? Most importantly, does it help make your utility more efficient?

The reality is, the term “smart water” may not necessarily refer to one particular network, a piece of software, technology or equipment. Rather, it can be viewed as a concept that utilities fulfill when they apply new business processes to make better decisions about managing their water systems that results in cost savings and/or increased revenue.

For water utilities, the decision to adopt new technology or optimize existing systems is not without its risks. But it is one that is directly tied to operational decision making and financial well-being – and that’s really what it’s all about.

More and more, utilities and solutions experts are talking about this link between investing in technology in order to build a more financially sustainable water system, yet some are struggling to take the next step with their data.

“I think that the major barrier to implementing [smart water] is having really good references from other [utilities] that have done it,” says Dan Pinney, director of AMI development at Sensus. “AMI, for example, has been out for a very long time and yet everybody still wants to do a pilot because they can’t go back to someone who’s already implemented it and learn the value they got out of [the data]. A lot of people still get the data, but applying that data to action in the field to get those benefits, that part is still lagging behind the curve.”

Metering systems, for example, meet the definition of “smart” in that they collect, communicate and analyze data. So, what is the next evolution of improvement that helps utilities to actually recover revenue? According to Pinney, utility managers need to ask: What operational gain did I get out of implementing this piece of technology? How did I quantify it? And how did I change my business processes to make it more efficient? Answering those questions will be the next progression. “Right now, there’s a flood of data and that actionable detail can even finance other areas,” Pinney says.

Data to Cash

The sheer volume of data that is now available to water utilities is staggering. In the meter reading world, utilities are getting consistent billing readings along with enhanced diagnostics such as leak or flow alerts to help assess the condition of the water system. While utility concerns about non-revenue water of the real loss variety are well noted, apparent losses such as inaccurate meters and unbilled consumption are very much on the radar of utilities.

Trevor Hill, CEO of FATHOM, explains that there are systemic problems with utilities’ billing processes.
“The way utilities tend to operate their billing vertical is not a very efficient process for a variety of reasons, most of which are not the city’s fault,” says Hill, who started FATHOM as a software-as-a-service company with the goal of helping water utilities to do more their data to increase revenue.

“Because the market is massively fragmented, every utility has to be able to build its own data applications, including billing. The problem that cities face when they think about their billing vertical is that it is archaic, often inefficient, often quite expensive and often unrewarding to run because of those things.”

Hill adds that because the water market is fragmented, small cities have to bill systems on their own, which is not particularly easy to do. In general, technologies for water management struggle to make headway with public utilities because many water utilities are small, have little capital, have very little IT infrastructure, and there’s a lot of them. Billing platforms for utilities in the energy sector, in contrast, often have good billing systems but are at an advantage because they often serve millions of customers, says Hill.

“Scale really matters,” he says. “There’s no scale in the water sector, so everyone is operating at diseconomies of scale. As a function of that, the cost is very high for water utilities.”

FATHOM has its roots in the water utility space and works to help define the vertical between meters and cash. It’s business model is designed to take advantage of the savings generated from cities as a function of economies of scale and sell those savings into the tax-exempt market so that it can pay for the deployment of its smart grid for water. FATHOM’s smart grid assists utilities with meter data management, data hosting, analytics, billing, customer service, remittance management and customer presentment.

Meter Reading-Billing Disconnect

In many cases, meter reading and billing systems can be the most antiquated IT platform in a utility. They are typically large, cumbersome legacy systems, too critical to be stopped for anything but maintenance. In addition, utilities may lack the specialized skills to update and maintain these systems.

These antiquated systems can result in significant data voids. In some cases, the meters may be completely missing from the data system. Or, they may have incorrect parameter definition, such as billing multipliers, sizes, consumer class or ancillary attributions.

Without access to modern data systems like GIS and without sufficient safeguards in place to validate the data, it is not uncommon for the electronic records used for billing and the physical installations on the ground to become decoupled. The result is that some connections never make it into the billing system, which means no revenue, increased water loss and frustration for the utility manager.

Hill says that it’s one of the fundamental problems water utilities face in that that physical data, or the data that represents the meters, doesn’t often reflect the same assets that are in the billing system.
“Again, this is not to the fault of the cities, but over the years, because physical assets are managed by the public works department, the billing is handled in a finance department. “There’s often disparities between those two.”

A smart grid installation allows these discrepancies to be identified and corrected, while providing the systems, processes, checks and balances necessary.

Hill also suggests that cities, understandably, are also heavily focused on improving their real losses and may not be focusing the attention on the apparent losses.

“I like to tell people, if you think about our sector, there’s all these companies looking for leaky pipes,” says Hill. “The economics of the leaky pipe businesses aren’t always very good. Even though it feels like a big issue, there’s so much money spent on it. It sounds bad, but it often isn’t always as bad economically as you might think. If you lose water that should be going through a meter and isn’t, that can be even more lost revenue.”

So how does the smart grid actually benefit financial well-being?

Hill says the first thing utilities get is reporting on billing, but the headache of actually doing it is eliminated. Bad debt collection becomes easier to automate and the collection process becomes more streamlined. This allows the city to see the metrics of their billing and collections improve all at a fixed cost. By getting financial data and also volumetric data, the reporting structures give utilities a better insight into how their system is operating.

Risk-Averse Decision Makers

When it comes to any sort of smart water network or smart grid implementation, adoption due to cost is always a huge consideration. Hills says the value proposition for technology can be complex, which is what holds many utilities back from applying any type of new technology.

“The primary barrier to entry into our sector is that the business model that most people bring to the table irrespective of the technology has not been designed for the eyes of a risk-averse decision maker,” he says.
“Utility managers want to adopt technology but many times they are risk averse and quite financially nimble. They’re just trying to do the best thing they can for the populous. What they need is a solid economic model that has legitimate risk transfer associated with it. Big data takes costs out of the margins.

“In today’s economy, the opportunity is in optimization in the margins – things that take incrementally smaller amounts of costs outside of existing verticals for businesses.”

Andrew Farr is the associate editor of Water Finance & Management.

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