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A report on annual survey results of managers in the Water Utility Industry
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Sept
embe
r 4,
201
4
REGFORM2014 MISSOURI WATER SEMINAR
BLACK & VEATCH STRATEGIC DIRECTIONS:U.S. WATER INDUSTRY REPORT
TOM RATZKI, P.E.VICE PRESIDENT, BLACK & VEATCH
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INDUSTRY RESPONDENTS BY TYPES OF SYSTEMS AND / OR PLANTS
Survey included a diverse group of utility managers
58.4%
19.3%
22.0%
0.3%
Water and wastewater Water only Wastewater only Industrial facilities
9 June 2014Strategic Directions Report for Water Utility Industry |
2
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FIGURE RB-2: INDUSTRY RESPONDENTS BY SERVICE REGION
Focus on utilities between the coasts
9 June 2014Strategic Directions Report for Water Utility Industry |
3
SERVICES PROVIDED
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RESPONDENTS BY TYPE OF ORGANIZATION
Municipal department
Municipal utility
Special district
County
Utility district
Water district
Investor owned utility
State
Other
36.7%
23.4%
14.9%
7.9%
5.7%
5.7%
2.4%
0.5%
2.7%
Wastewater
Drinking water
Stormwater
Solid waste
Electricity
Natural Gas
78.8%
77.7%
32.6%
14.1%
10.9%
4.6%
9 June 2014Strategic Directions Report for Water Utility Industry |
4
RESPONDENTS BY JOB FUNCTION
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RESPONDENTS BY SIZE OF POPULATION SERVED
Management / Supervisor
Executive
Engineer
Other
47.0%
34.2%
14.4%
4.3%
22.3%
48.1%
29.6%
Small (Under 100K)Medium (100K-1M)Large (>1M)
9 June 2014Strategic Directions Report for Water Utility Industry |
5
WHAT WE FOUND?
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TO
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FIN
DIN
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Utilities must educate their stakeholders on the value of water and cost of providing safe and reliable services
TOP 5 INDUSTRY ISSUES HIGHLIGHT FINANCIAL GAP
7
Aging water and sewer infra-structure
Ability to fund capital programs
Managing capital costs
Justifying capital improvement programs/rate requirements
Managing operational costs
4.60
4.48
4.44
4.41
4.38
9 June 2014Strategic Directions Report for Water Utility Industry |
TOP 5 INDUSTRY ISSUES – MIDWEST REGION
9 June 2014
8
Strategic Directions Report for Water Utility Industry |
Participants were asked to rate the importance of a variety of issues using a scale of 1 to 5, where 1 indicates, “Very Unimportant” and 5 indicates “Very Important.” This chart provides the five industry issues that received the highest rating based on the mean value for each item among all survey participants representing the Midwest region.
Aging water and sewer infra-structure
Managing operational costs
Managing capital costs
Ability to fund capital programs
Justifying capital improvement programs/rate requirements
4.61
4.50
4.46
4.44
4.41
1
5
3
2
4
National Rank
TOP ITEMS THAT HAVE NEGATIVELY IMPACTED REVENUES DURING THE PAST 5 YEARS – BY SIZE OF POPULATION SERVED
9 June 2014
9
Strategic Directions Report for Water Utility Industry |
Respondents were asked to select all items that have negatively impacted their utility’s revenue stream during the last five years.
Negative Revenue Impact in Past 5 Years Total
BY POPULATION SERVEDSmall
(Under 100K)Medium
(100K-1M)Large
(More than 1M)Slow growth in new customers / residential building 57.9% 65.9% 64.4% 41.3%
Change in water use behaviors – non-fixture conservation measures by customers
44.6% 45.1% 42.4% 47.7%
Impact of improved efficiency in fixtures and appliances 35.1% 30.5% 36.7% 35.8%
Loss of industrial or commercial demand 30.2% 28.0% 31.1% 30.3%Drought - water conservation results in decrease in demand 25.5% 18.3% 23.2% 34.9%
Wet weather - decrease in demand for irrigation purposes 25.3% 31.7% 24.9% 21.1%
Population erosion, declining customer base 17.4% 14.6% 16.4% 21.1%
Increase in delinquent accounts 12.0% 12.2% 9.0% 16.5%Other 9.0% 8.5% 9.6% 8.3%
/ Statistically higher / lower than Total at the 95% confidence level.
WATER/WASTEWATERREDUCE, REUSE, RECOVER
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Negative revenue impacts experienced by many utilities during last five years as a result of conservation and lost customer base.
REDUCED WATER CONSUMPTIONCONSERVATION AND UTILITY REVENUES AT ODDS
11
Slow growth in new customers/residential building
Change in water use behaviors - non-fixture conservation measures by customers
Impact of improved efficiency in fixtures and appliances
Loss of industrial or commercial demand
Drought - water conservation results in decrease in demand
57.9%
44.6%
35.1%
30.2%
25.5%
9 June 2014Strategic Directions Report for Water Utility Industry |
EM
RG
ING
TR
EN
D –
RE
US
E?
Reusing water can be source of revenue for Wastewater utilities
REUSING WASTEWATER IS AN AREA OF OPPORTUNITY
12
Surface water
Groundwater
Recycling/Reuse - non-potable for landscaping/industrial use
Purchase water from another utility, wholesale or other water supplier
Recycling/Reuse - potable reuse for drinking water supplies
Desalination of brackish or ocean supplies
Stormwater
82.9%
51.9%
32.4%
28.9%
7.7%
7.3%
4.5%
9 June 2014Strategic Directions Report for Water Utility Industry |
Lessons learned from Singapore and Australia has US industry looking at effluent as water source
CUSTOMER ACCEPTANCE CRITICAL FOR SUCCESSFUL WASTEWATER REUSE PROGRAMSTOP 3 ITEMS CONSIDERED WHEN COMPARING ALTERNATIVE WATER SUPPLIES
13
Cost
Reliability
Water quality
Technical feasibility
Environmental impacts/permitting
Social considerations
81.9%
61.3%
56.8%
40.8%
36.6%
11.1%
9 June 2014Strategic Directions Report for Water Utility Industry |
Energy recovery from wastewater treatment and/or in-line hydro is an area of opportunity, although economies of size do apply.
WWTP OR RESOURCE RECOVERY FACILITY?
14
Reduce losses or other efficiency improvements to reduce water processing/handling requirements
Using distribution modeling tools to better size/optimize pumps/pipes
Implement software and/or data analytics programs
Renewable energy programs
Restructure wholesale electric supply contracts
Waste-to-energy programs
Recover energy through in-line hydro
Not focused on energy efficiency measures or costs
45.9%
44.3%
43.8%
39.1%
30.7%
28.0%
21.7%
6.5%
9 June 2014Strategic Directions Report for Water Utility Industry |
Wastewater treatment plants are becoming Resource Recovery Facilities
• Biological Nutrient Removal• Enables utilities to recover
phosphorus – potential new revenue source
• Enables utilities to recover energy – reduce costs or sell renewable energy
• Recover nutrients using natural processes – not chemicals
• Need to recover nutrients• EPA has mandates on
nutrient levels in effluent• Phosphorus must be
removed from waste streams
• Phosphorus is finite material – 90% of minable supply in 1 country
RECOVER NUTRIENTS FROM WASTEWATER
15
9 June 2014Strategic Directions Report for Water Utility Industry |
MID
WE
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MOST SIGNIFICANT ISSUES – BY SERVICE REGION
Most Significant Issues Total
BY SERVICE REGION
Midwest Southeast Southwest Northwest Northeast Rocky MT
Maintaining or expanding asset life 58.7% 58.5% 55.6% 55.7% 63.3% 67.9% 59.3%
Long-term financial viability 39.1% 36.8% 41.4% 33.0% 56.7% 50.0% 33.3%
Customer water rates 34.2% 28.3% 37.4% 37.5% 30.0% 39.3% 37.0%Maintaining levels of service with declining budgets 30.4% 27.4% 27.3% 31.8% 43.3% 14.3% 44.4%
Water supply / scarcity 28.3% 12.3% 26.3% 50.0% 26.7% 3.6% 44.4%
Energy efficiency 26.4% 38.7% 20.2% 19.3% 23.3% 42.9% 33.3%Reducing sanitary sewer overflows and/or combined occurrences within system
25.8% 42.5% 28.3% 13.6% 16.7% 21.4% 3.7%
Water conservation 14.1% 7.5% 13.1% 26.1% 3.3% - 14.8%
Energy recovery / generation 12.2% 12.3% 8.1% 10.2% 10.0% 25.0% 3.7%
Backup plan - interconnections 8.2% 5.7% 13.1% 5.7% 10.0% 7.1% 3.7%
Distribution system water loss 8.2% 16.0% 10.1% 4.5% - 17.9% 7.4%
Chemical use 7.1% 6.6% 11.1% 6.8% 6.7% 7.1% 7.4%
/ Statistically higher / lower than Total at the 95% confidence level.
9 June 2014Strategic Directions Report for Water Utility Industry |
16Top 5 issues for Midwest demonstrate challenges with aging infrastructure and capital programs
TOOL: ASSET MANAGEMENT
17
AS
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O I
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• Asset Management will lead to:• Improving Current service levels • Reducing Risks to the businesses and customers • Capital spending focused on the most critical needs
• Programs focus on replacing the right assets in the right way and at the right time• Supports need to justify expenses through risk analysis, actual
condition and deterioration forecasts• Uses data from AMI to reduce consequence of failure, and
demonstrate lower cost to extend asset life vs replacement
TOP INDUSTRY CHALLENGES ADDRESSED THROUGH ASSET MANAGEMENT
18
9 June 2014Strategic Directions Report for Water Utility Industry |
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CURRENT USE OF TOOLS / SYSTEMS THAT SUPPORT ASSET MANAGEMENT
9 June 2014
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Strategic Directions Report for Water Utility Industry |
GIS system
CIP prioritization
Hydraulic models
Computer maintenance mgmt systems
Condition assessment and inspections
Paperless work order mgmt system
Enterprise mgmt software
Dashboards
Mobile applications
Deterioration models
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
53.3%
50.5%
46.5%
36.4%
34.2%
25.8%
17.7%
17.7%
16.3%
5.4%
35.3%
36.4%
34.0%
36.7%
46.2%
36.1%
30.7%
27.7%
36.4%
10.1%
3.3%
6.8%
4.6%
11.7%
10.1%
19.3%
14.7%
24.7%
22.3%
15.8%
8.2%
6.3%
14.9%
15.2%
9.5%
18.8%
37.0%
29.9%
25.0%
68.8%
Currently in use;Supports all needs
Currently in use;Plan to improve within 2 years
Not in use;Plan to implement within 2 years
Not in use;No plans to implement;I don't know
Respondents were asked to select their utility’s current usage plan for each of the listed tools / systems that support asset management within their utility.
CHALLENGE:
RATES THAT MATCH VALUE OF SERVICE
20
Two-thirds of utilities do not have a revenue or rate structure that covers all components needed for a financially sound business operation.
All O&M, debt service, R&R, capital im-provement and reserve funding
All O&M, debt service, R&R and capital improvement funding
All O&M, debt service and renewal and replacement (R&R)
All O&M plus debt service expenses
All necessary O&M expenses
33.4%
26.6%
7.3%
19.0%
4.9%
GAPS IN RATES CHARGED VERSUS FUNDING/BUDGET NEEDSCURRENT UTILITY REVENUES/RATES COVER:
21
9 June 2014Strategic Directions Report for Water Utility Industry |
BRIDGING INDUSTRY GAPS• Major gaps in water industry include:
• Gaps in financing investments, utility revenues• Gaps in available water supply • Gaps in customer engagement
• Asset management and technology can help bridge industry gaps• Smart grid/AMI programs aid in reducing operational
costs and support customer conservation efforts• Asset management frameworks provide the foundation
for justifying capital programs based on risk
Customer education and engagement critical link to overcoming industry challenges
9 June 2014Strategic Directions Report for Water Utility Industry |
TOP ITEMS THAT HAVE IMPACTED REVENUES DURING THE PAST 5 YEARS – MIDWEST
Slow growth in new customers/residential building
Loss of industrial or commercial demand
Impact of improved efficiency in fixtures and appliances
Population erosion, declining customer base
Change in water use behaviors - non-fixture conservation measures by customers
57.5%
48.1%
39.6%
34.9%
34.0%
9 June 2014Strategic Directions Report for Water Utility Industry |
23Customer conservation/water efficiency efforts have impacted nearly 40% of utilities’ revenues in the Midwest
ANNUAL RATE INCREASES NEEDED DURING THE NEXT 10 YEARS
24
Less than 5%
5% to less than 10%
10% to less than 15%
15% to less than 20%
20% or more
21.7%
40.2%
12.0%
4.3%
7.1%
23.4% of all utilities need double-digit rate
increases every year for the next 10 years to fully
cover necessary costs and investments.
9 June 2014Strategic Directions Report for Water Utility Industry |
25
26http://bv.com/docs/default-source/reports-studies/signup.html
YOU CAN DOWNLOAD THE REPORT AT BV.COM
9 June 2014Strategic Directions Report for Water Utility Industry |
AMI can help utilities reduce costs, conserve water and better engage/educate customers
WATER UTILITIES BELIEVE IN BENEFITS OF A WATER SMART GRIDPRIMARY DRIVERS FOR CONSIDERING ADVANCED METERING SYSTEMS
16 March 2011
28
Direct meter reading cost reductions
Leak detection
Infrastructure/asset management
Water resource management
Cash flow improvement via more frequent billing, billing timeliness
Theft detection
Distribution Automation
Advanced rate designs such as pre-payment or time-of-use rates
Improve response to EPA and other government mandates
73.5%
48.4%
36.9%
36.2%
34.5%
23.7%
19.2%
16.4%
5.6%
AMI reduces metering costs, can enhance customer service and support asset management
Considering or have implemented AMI
Not considering AMI Utility does not meter I don't know
63.8%
27.1%
2.1%7.0%
MORE THAN 60% OF ALL UTILITIES ARE CONSIDERING OR HAVE AMI IN PLACE
29
Less than half of all utilities are considering web-based portals that use AMI data so that customers can better manager their water use
CONSIDERED FEATURES FOR UTILITY AMI PROGRAMS
30
Web-based customer portal to monitor usage and account
Customer premise leak detection
Theft detection
Remote disconnect capability
Water restriction monitoring
Time of use rates
Advanced functionality
43.6%
42.9%
23.3%
22.0%
16.7%
15.7%
15.0%
Asset management frameworks use data derived from AMI and other sources to develop proactive, risk-based investment plans.
UTILITIES UNAWARE OF AVAILABLE ASSET MANAGEMENT FRAMEWORKS
16 March 2011
31
EPA - Asset Management
WERF-SIMPLE
ISO 55001
PAS 55
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
13.3%
4.3%
2.2%
1.9%
19.3%
9.5%
8.4%
4.1%
16.3%
15.5%
18.2%
13.3%
51.1%
70.7%
71.2%
80.7%
Using ConsideringAware; not using or considering Not aware