PART 1: Huge AMR system takes Philadelphia Water Utility's performance to a higher level

The Philadelphia Water Department is serving its customers more effectively while reducing costs and improving operational efficiency thanks to a new automatic meter reading program that monitors and measures the performance of the entire water distribution network.

By Michael Hogan, Deputy Water Commissioner, Philadelphia Water Department

Table of Contents
The core objective was to serve customers well
Estimated readings created numerous problems
Other factors adding value to the meter reading function
An AMR-based solution was the way to go
Full-service contract covers 20 years
Implementation phase completed ahead of schedule

What did the water utility customer want? In Philadelphia, PA the answer to this question was clear. The managers of the city's water department knew their customers wanted timely, accurate billing for services—billing based on actual consumption—not estimated meter reads. By undertaking a project in partnership with a Spokane, WA-based firm that specializes in automatic meter reading (AMR), the Philadelphia Water Department is serving its customers more effectively, and simultaneously reducing costs and improving operational efficiency.

In June of 1997, after a yearlong review and evaluation of a list of AMR vendors, the City of Philadelphia selected Itron Inc. to provide the Philadelphia Water Department and Water Revenue Bureau with territory-wide AMR services for a period of 20 years. Having installed the new facilities in less than two years, as the accompanying project timeline chart shows, Philadelphia now is home to the largest AMR system in the world that monitors and measures the performance of a water distribution network.

The core objective was to serve customers well
The Philadelphia Water Department and Water Revenue Bureau (PWD) is a municipal public utility that provides water, wastewater and storm water services to more than 2 million people in the City of Philadelphia and surrounding area. In fact, the Department has served the residents and businesses of the Philadelphia for more than two centuries, establishing a tradition of service excellence that dates back to colonial times.

At the center of the PWD's decision to deploy territory-wide AMR capability was concern for the customer. Mike Nadol, the department's former deputy water commissioner, spearheaded the effort to bring AMR technology to the city and oversaw its implementation. He and his staff had come to the conclusion that the delivery of timely and accurate billing for all customers had proven itself all but impossible with the department's existing manual meter reading operation. With virtually its entire population of over 400,000 water meters located indoors in customers' basements, PWD meter readers faced many obstacles in accessing the meters with any regularity. In today's world of double-income families and busy schedules, the meter readers couldn't get to the meters. In fact, up until the AMR implementation they were successful in accessing customer premises on only one of every three attempts. (Back to Table of Contents)

Estimated readings created numerous problems
These chronic meter access difficulties, coupled with a quarterly reading schedule designed to limit high manual meter reading costs, meant that nine out of 10 of the department's monthly bills were based on estimates. More than 100,000 customers out of a total customer base of less than a half million had not had their meter read for more than a year. With such a high percentage of estimated bills, there was constant customer frustration, numerous complaints, a continuous need for billing adjustments, and other kinds of service problems.

While the practice of estimating reads did little to curry favor with customers, it also caused serious problems for the PWD's customer service center and revenue cycle service operations. For instance, during fiscal year 1997, the department received 175,000 customer calls related to billing and enforcement issues. As Mike Nadol pointed out, "Because estimated reads generated so many customer complaints and calls seeking billing adjustments, we required a larger phone center and customer service staff than we would have otherwise needed. In terms of staffing needs, estimated reads created a much larger back office to make the necessary billing adjustments." (Back to Table of Contents)

Other factors adding value to the meter reading function
Managing for a new reality: Safe, high quality drinking water no longer is a cheap, abundant resource. Today, competitive pressure, cost increases, accountability to the ratepayer, increasingly tight water quality standards, and conservation requirements are forcing water utilities everywhere to manage their resources and operations more efficiently than ever before. This requires access to timely and accurate data, which is what the new technology installed by the PWD delivers.

As Bernard Brunwasser, who succeeded Nadol as deputy commissioner when the latter took a position in the private sector, explained, "There's much greater accountability now for water utilities, and much more pressure to get at the facts behind increasing costs. By getting actual reads from all customers the Department will have a truer picture of lost or unaccounted-for water, which will help us achieve much lower losses." The new technology's ability to accomplish early detection of leaks easily and quickly is a key factor in this aspect of performance improvement.

Improved revenue assurance: The lack of actual, timely meter reads also pinched the department's cash flow by contributing to higher rates of delinquency, prolongation of the payment cycle, and increased costs for enforcement and collection activities. There was no question that the absence of an accurate or actual meter read was often cited by our customers as the basis for billing disputes, and as the reason for withholding payment until those disputes could be resolved.

Theft deterrence: Like any utility serving large numbers of people, the Philadelphia Water Department also sought to minimize meter tampering, theft of services and resulting revenue loss. This required a solution that would enable the department to detect meter tampering and potential theft of services automatically and quickly manner. In particular, the Department had experienced problems with customers who would restore service illegally after it had been shut off following non-payment for services. A system that would provide the functionality and data needed for the department to implement a much more aggressive revenue protection program was clearly a priority.

Customer security and satisfaction: Other problems associated with manual meter reading operations had to be resolved. In the years before AMR implementation began, citizens in the Philadelphia area found themselves targets of several scams in which con artists presented themselves as utility workers to gain entry to homes. By eliminating the need for meter readers to access the home and property, AMR technology makes it much more difficult for a scam artist to use the utility's name for any unlawful or fraudulent purpose, thereby increasing customer security and satisfaction while reducing potential liabilities. (Back to Table of Contents)

An AMR-based solution was the way to go
After investigating how each of these customer objectives could be met cost-effectively, the PWD staff concluded that Itron's proven Mobile AMR technology provided the most attractive combination of functionality and price for the set of circumstances in Philadelphia. The company's DataCommand Unit is a radio frequency (RF)-based automatic meter reading system that uses a van-based radio receiver and computer console to collect data automatically from nearby water meters. The system also can be used to read electric and natural gas meters when equipped with Itron ERT meter modules.

The collection of meter data is as easy as driving down the street. A single meter reader walking a route and entering data into a handheld computer can read perhaps 300 meters during an eight-hour shift, assuming he or she encounters no meter access difficulties. By comparison, a single person, driving a DataCommand Unit, is capable of reading up to 20,000 meters a day. And once collected, the data is automatically downloaded to the PWD's customer information system for billing, customer service and system engineering applications.

Five key factors led the city to select and contract with Itron for AMR services:

• The firm's proven radio frequency technology
• The reliability of the technology in collecting meter reads (over 99%)
• The low intrusiveness of the system
• The firm's experience in accomplishing large-scale, accelerated installation projects
• A very competitive price (Back to Table of Contents)

Full-service contract covers 20 years
In structuring an AMR services contract, the PWD's management set two key objectives. First, the Department wanted to achieve the financial and customer service benefits of AMR technology as quickly as possible, which called for the system to be installed on a very aggressive schedule. Second, the Department sought to minimize its exposure to any financial and technological risks associated with a large, capital-intensive project.

To achieve these objectives, the PWD chose to fully outsource installation, operation and maintenance of the AMR system to Itron. That means the Department pays the contractor to install the system, and operate it and provide meter-reading services for a period of 20 years. The contract also included substantial non-performance protection with regard to installation, system performance and results. As Mike Nadol explained, this company's technology has been well established and proven among energy utilities, but the staff of the PWD had no experience with it. He added, "We wanted to make sure that with this kind of investment, the vendor was willing to stand behind the product for its full useful life. This sort of full partnership was important to us." (Back to Table of Contents)

Implementation phase completed ahead of schedule
What followed the signing of the contract in July 1997 was a remarkably successful implementation phase that achieved an optimal balance of speed, quality assurance and customer care, resulting in a virtually problem-free installation and an ahead-of-schedule, under-budget completion.

In addition to implementing AMR technology, the project also included a complete change-out of Philadelphia's approximately 450,000 existing water meters. They were replaced with new meters supplied by the Badger Meter Company of Brown Deer, WI. (Back to Table of Contents)

Part II of this article will appear on Water Online in the near future. It will describe how the installation phase of the new system progressed, discuss the benefits that are being achieved, and take a look at what may lie ahead for the PWD in particular and the drinking water industry in general.

About the author: Michael Hogan is deputy water commissioner at the Philadelphia Water Department and was heavily involved in the undertaking described in this article as AMR project manager. (top)

Edited by Ian Lisk
Editor Emeritus, Water Online