Guest Column | July 25, 2017

What Is A World-Class Utility, And How Does Yours Become One?

By Ann Bui, Black & Veatch

Water utilities are tasked with ensuring a sustainable and safe supply in addition to achieving business and service excellence goals. These goals are typically based on criteria that measure operational performance, meeting bond covenants, and customer satisfaction. For example, the Effective Utility Management (EUM) framework is widely used to evaluate performance against prescribed attributes of top-performing utilities and focus areas for continuous improvement. However, today’s utilities are evolving and leaders are expanding the EUM approach to accelerate their evolution into a more customer-centric business model.

In our recent survey of water utilities, challenges such as aging infrastructure, loss of talented workforce, and financial constraints continue to have the biggest influence on business decisions and, ultimately, utility performance. In an environment of continuing challenges and limited resources, how does a utility create its path to business excellence to become world-class?

Better Connect With The Customer

Today’s technology is changing how utilities interact with their customers. From telecommunication services to electric providers, mobile apps, websites, and other channels are making access to billing information and usage easily accessible. Though these advancements often come with an associated investment, they open the door to new avenues for enhancing the customer experience. 

One utility in California illustrated the importance of not only frequent, real-time communication, but also utilization of a variety of media channels when it transitioned from its historical rate structure. Building on lessons learned from a rate change effort that was previously blocked, the utility embarked on an extensive outreach and consumer education program.

During the initial months of adopting the new structure, variance requests overloaded call centers. The utility engaged with ratepayers via its website and other platforms to handle customer inquiries and successfully reduced incoming call center traffic. Through ongoing communication efforts, the utility is successfully managing its water demand and conservation efforts, and customers have adapted to the modified structure.

Similar to how internet and mobile network operators issue customer alerts when users near their data plan limits, water utilities can enhance customer service by providing timely notifications on various aspects such as high usage, potential leaks, water conservation tips, water quality alerts, and payment due dates. Receiving these notifications and obtaining actionable information will not only foster a positive customer experience, but also help support the utility’s conservation efforts by educating customers on best practices and increasing their awareness of the value of water.

With news headlines about water service incidents increasing in recent years, proactive customer engagement should be a critical principle of the modern water utility’s strategic plan. Empowering customers with this smart data helps build goodwill, trust, and transparency, as well as manage demand and non-revenue water.

Let Data Guide Your System Resiliency Efforts

Although water utilities are beginning to utilize data analytics for operations and asset management, smart integration and optimization of data for real-time analytics and enhanced efficiencies could be implemented much further.

In our poll, only 7 percent of water utilities are currently benefiting from full-scale deployment of these smart technologies. Through comprehensive analysis and dissemination, data can — and should — drive business decisions, master planning, and capital investments that support greater resilience for water providers. Further, 93 percent indicated that system resilience was one of the most important challenges to the water industry, making its correlation with asset management critical.

A proactive utility collects data from any given asset on a daily, or even more granular, basis to optimize operation and ultimately extend its life through an integrated maintenance program. Software platforms can consolidate this data so that operators can determine which assets are most at risk of failure. Data-based program information allows utilities to prioritize their capital investments for more intelligent enterprise asset management.

Changing Public Perceptions

When it comes to building financial capacity, the industry standard is, at a minimum, to achieve the required bond covenants while balancing customer affordability requirements and adequately meeting operation and capital budgets. Utilities that aim to build long-term sustainability, however, exercise a deliberate and holistic focus on key factors including best practices that are based on asset management, service delivery excellence, customer convenience and low-income assistance, enhanced financial performance metrics, and consistent stakeholder engagement.

With that in mind, a world-class utility should ask itself two questions:

  • To get to that ultimate level of performance, what resources and strategies do I need to apply? And,
  • Where can I incrementally add or reduce costs to deliver the best value to stakeholders?

A consistent focus on providing value in all facets of service delivery while communicating the alignment between the costs of water and the value of water could help garner political and public support for timely rate adjustments.

For example, an agency in Maryland held a series of public meetings to discuss proposed water rate increases directly with their citizens. The community was given an open platform to voice their concerns, while utility leadership was able to communicate details on exactly what ratepayers would get for their dollar. Consultants and utility staff presented together, establishing a clear execution plan for the capital improvement plan. After holding more than 15 town hall-style events, the local water utility was able to get five years of rate increases approved and significantly improve their financial health.

Such instances of deliberate focus on customer value may add incremental costs to the utility’s bottom line, but can be effective in mitigating customer burden and enhancing customer convenience to support long-term revenue growth.

Work Together To Be “Smarter”

The water sector captures information that affects the community on many levels — water quality, infrastructure maintenance, and urbanization projects, raising the importance of water utilities’ role in the “smart city.” As these initiatives continue to progress, water providers must take a more active role in collaborating with cities, municipalities, and other utility providers to meet smart city sustainability goals.

Smart city master planning is evolving to integrate more stakeholders, which enables all parties to align smart city efforts with their respective strategic goals, such as increased customer engagement and positive public visibility. At a time when rates must increase to support integrated infrastructure investments, aligning with more attractive smart initiatives could be an additional way to garner customer buy-in for overdue upgrades and projects.

To become world-class, today’s water providers must focus on closing the gap between the utility and the customer. Having a customer-centric business model can truly transform how operations enhance the customer experience and can lead to valuable byproducts such as asset management efficiencies through data analytics, financial resilience, and closer community collaboration through increased engagement.

Ann Bui is Managing Director for water services in Black & Veatch management consulting. She has over 25 years of experience working with utilities on more than 300 engagements and has provided financial and business services across the U.S. for public and investor-owned utilities of various sizes, ranging from those with only 5,000 service connections to those that serve populations over 3 million. Bui is based in Los Angeles, CA.