Challenges and innovations: Current and Future States of Water Affordability: Part 3.

Note:

This is the third in a series of Valor Water Analytics blog posts exploring water affordability, customer nonpayment, and potential solutions that enable utilities to deliver water more equitably and sustainably to all customers. You can read posts one and two here.

Where We Can Go Tomorrow: Exploring Novel Interventions for Nonpayment Reduction

By Maryana Pinchuk, Stacey Isaac Berahzer, and Christine Boyle, PhD

In our two previous blog posts in this series, we explored the definitions and metrics used to assess affordability, discussed the role of customer assistance programs (CAPs) in addressing affordability, and considered some major challenges that utilities face when setting up CAPs. In this post, we will briefly discuss rate structures and policy changes that influence affordability, as well as cover additional novel interventions that may reduce utility customer nonpayment in the water sector and related sectors.

Rates and policies shape affordability

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As a recent study on affordability in New Jersey points out, before even considering a CAP, it is important for a utility to examine how its basic rate structure affects low-income customers’ bills. The study points out that “rate structures that rely heavily on fixed charges, as opposed to volumetric charges, will tend to disadvantage low-income customers, as they tend to use less water than higher-income customers.” This lower volume of use also makes declining block rate structure less equitable for low-income customers. The study concludes that “reforming a utility’s basic rate structure can go a long way to reducing burdens on low-income customers, reducing the need for additional, income-based assistance.”

Policy changes also have the potential to make a big difference. At the state level, New Jersey is being encouraged to adopt language for water similar to the 1999 state law known as the Electric Discount and Energy Competition Act.  That act declared that it was the policy of the state to ensure “universal access to affordable and reliable electric power and natural gas service.”

If such legislative changes were to occur, water affordability would jump to an even higher priority for utilities, and we could see a lot more activity in this area. Among other things, utilities could be mandated to “report on key metrics related to rates, customer bills, and low-income affordability.” However, as we previously discussed, many utilities currently lack the underlying data to track these metrics.

Customer communication to drive behavioral change

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While there have been discussions on using CAPs, rate structures, and policy to influence customer nonpayment, an area yet to be explored in depth is how changes to customer communication might increase the willingness of some customers to pay. From conversations with multiple utilities about affordability and nonpayment, it is clear that customers have different reasons for not paying their utility bills. While some do lack the financial means to afford their bills, nonpayment can also result from sticker shock, knowledge gaps, and other factors that impact the customer’s decision to pay. These factors may seem daunting to understand and address, but some tools and techniques may offer a path forward for utilities interested in changing customer nonpayment behavior.

Behavioral nudges are lightweight, targeted interventions that aim to implicitly and positively influence consumer behavior. There are many examples of nudges that have proved successful in influencing consumer behavior in the realm of conservation. Some examples include:

  • Providing information to consumers about how their consumption compares to their neighbors’, in order to conserve resources. This intervention was successfully leveraged by Opower to reduce energy consumption. Customers who received the comparative energy reports reduced their household energy consumption both immediately after receiving the notifications and in the longer term.

  • Creating data visualizations that build consumer awareness. In Cape Town, South Africa, a publicly accessible map of neighborhood water consumption was used to demonstrate to individuals that a large number of households are abiding by conservation guidelines, in order to normalize conservation targets. This intervention was deployed during a major drought and may have helped avert the “Day Zero” water crisis.

  • Sending targeted notifications to consumers to encourage positive behaviors. Researchers found that conservation-oriented bill inserts successfully helped consumers reduce their water use in South Africa, and that notifications emphasizing the social recognition and public good of conservation – as opposed to notifications that offered conservation tips or emphasized the financial cost of wasting water – were most successful at encouraging conservation behavior during the Cape Town “Day Zero” drought (you can read more about the research here).

Innovative communication techniques to reduce nonpayment

What lessons can utilities struggling with nonpayment learn from these successful conservation-focused nudges?

As we mentioned in our last post, water utilities have traditionally only communicated with their customers through a monthly, bimonthly or quarterly water bill. Many of the interventions above show that by prioritizing timely, targeted customer communication, utilities have the opportunity to positively change customer behavior. These interventions also relied on a deep understanding of the region-specific underlying factors that influenced consumers’ behavior – for example, understanding that social recognition was a more important factor in conservation for water consumers in Cape Town than lack of knowledge about the cost of water or tips on how to conserve.

We believe that the techniques that have worked for conservation may also work for nonpayment. By using predictive analytics, a utility’s customer base can be segmented into water customers at risk of nonpayment, based on the root cause of each’s customer’s failing to pay bills. Valor has found that sending targeted messages to these specific customer segments can motivate non-paying and late-paying customers to pay on time. In a pilot at a mid-sized utility in Georgia, we were able to reduce the amount of outstanding customer payments by 50% and decrease the total number of service shutoffs by 50%, year-over-year.

Targeted marketing to ease chronic nonpayment

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Of course, nudges alone will not fully solve the affordability problem. Identifying different segments within nonpaying customers also means separating customers who for various reasons won’t pay their bill despite having the financial means, from those who can’t pay at all. For these customers who chronically struggle to afford water, CAPs and other affordability programs are a good solution. Using predictive analysis on customer data, utilities can identify which customers fall into this segment – instead of guessing or using outdated or inaccurate historical data – and tailor their CAP marketing efforts specifically to this group to increase CAP enrollment.

The future of affordability

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When thinking about how utility affordability will look in in the next five to ten years, CAPs, policy, and rate structures play an important role. But it is also important to consider the tools that other industries – e.g., credit card companies, cellular data providers – have instituted to solve customer nonpayment. This includes more flexible payment options, such as installment plans, pay-as-you-go, pre-pay, and more. These alternative payment systems only increase the need for predictive analytics (to understand which customers need what type of assistance) and customer notifications (to communicate effectively about progress to payment). No matter the payment system that a utility offers, we believe the key to reducing the vicious cycle of nonpayment, late fees, and service shutoffs is ensuring that utilities a) know and understand their customers, and b) communicate early and often with them to get ahead of nonpayment.

Accelerating tomorrow now: Key insights from the Utility Analytics Institute’s 2019 annual summit

By Maryana Pinchuk

From May 6 to 8, staff from US and international energy utilities gathered in Charlotte, North Carolina for the Utility Analytics Institute’s annual summit. The theme of the summit was “Accelerate Now,” and throughout the sessions, speakers highlighted how advanced analytics could be used to achieve a variety of goals for utilities, from making smarter business decisions to optimizing the productivity of operations staff and increasing customer benefits. Overall, the summit served as a rallying cry for companies like Xylem to develop more tools to help utilities overcome the obstacles of today and prepare to meet the challenges and opportunities of tomorrow.

Smart decision-making in the age of big data

Sensus Data Scientist Vincent Toups delivering a lightning talk on the history of data science at Sensus – with bingo cards!

Sensus Data Scientist Vincent Toups delivering a lightning talk on the history of data science at Sensus – with bingo cards!

Whether it’s coming from sensors, loggers, or smart assets, the amount of data available on each meter, customer, and square mile of utility distribution network continues to grow each year. For savvy utilities, this wealth of information presents an opportunity to make smarter business decisions. As one example, Mohamad Hussin, Senior Engineer at Dubai Electricity and Water Authority (DEWA), discussed building a machine learning model to understand the actual expected life of a transformer. When DEWA analyzed the data in their service area, they found that transformers were lasting an average of only 15 years in the field before replacement, even though the expected lifespan according to traditional industry guidance was 30-40 years. Through predictive modeling, DEWA was able to more accurately identify which transformers were truly likely to fail, versus ones that were functioning correctly but were likely to get taken out of service for other reasons, e.g., because of a lack of demand in that part of the grid. This knowledge allowed DEWA to prioritize testing and replacing the right assets, saving money on unnecessary field service.

This type of data-driven asset condition assessment is the approach advocated for by Xylem and demonstrated in solutions like Valor’s Hidden Revenue Locator for customer metering and data handling inaccuracies. When utilities use analytics to facilitate smarter asset management, they lower the cost of O&M and drive greater revenue recovery.

Test-and-learn mindset to get the most of out of operations

Discussing customer needs at the Sensus booth

Discussing customer needs at the Sensus booth

Brian Savoy of Duke Energy touched on the importance of implementing a data-driven operational process for increasing worker productivity. Brian, Senior Vice President of Business Transformation and Technology at Duke, discussed the recent evolution of Duke’s internal tool and process development practices from classic waterfall – i.e., a years-long R&D phase before any new product or process was built and operationalized – to a nimble agile process, where an idea could be formulated, developed, and tested in a matter of weeks. This new data-driven approach to operations allowed Duke to pilot radically transformative processes and see returns right away. An example Brian shared was developing an iPhone application to assist with field operations. The app doubled the productivity of Duke’s field crews when it replaced the clunky and expensive legacy tools Duke had been using to track personnel and materials during field maintenance.

Brian’s story provides a valuable lesson in how applying data-driven thinking and technology to basic utility operations practices can increase efficiency. Valor’s proven method of program delivery follows these principles, relying on a two-stage diagnosis and drill-down approach that allows utilities to optimize their deployment of personnel and realize efficiency gains.

Transforming customer service through data and technology

Together, advanced analytics and a data-driven mindset can also dramatically transform the relationship of the utility to its customers. In a panel Q&A discussion, representatives from Exelon, Evergy, and Duke discussed how they’ve implemented predictive customer analytics and chatbots to assist customers with frequently asked questions. Combined, these innovations have freed up their customer service staff to take on more complex customer communications that they previously would not have had time to engage in. Patty Durand, President and CEO of the Smart Energy Consumer Collaborative (SECC) presented findings from SECC consumer surveys that indicated an even greater desire from utility customers to get more meaningful, actionable communications from their utilities about their consumption, as well as ways to save money on their bills.

Xylem recognizes that the future of utility customer engagement – whether for customer leaks or nonpayment – relies on targeted, just-in-time, proactive communication strategies. Valor’s solutions suite includes tools for proactively identifying water leaks and anomalous gas usage behind the customer’s meter in order to facilitate notifications to customers. To tackle the tremendous and growing affordability challenge that utilities and their customers are facing, Valor also provides a predictive nonpayment management solution that can help utilities avert the vicious cycle of nonpayment and service shutoffs with proactive communication and intervention strategies.

Challenges to implementing data-driven solutions

In addition to the many success stories, speakers also discussed the obstacles they have faced when adopting advanced analytics. Their challenges included talent acquisition and retention; data quality and quantity; and siloed data – i.e., only being able to see insights from their own service area. While EPRI, the Electric Power Research Institute, has aggregated data from multiple energy utilities in order to help provide deeper insights on common issues and trends, many utilities are still limited to the data they have, which may be insufficient for building and training robust machine learning models.

Sensus and Valor team picture

Sensus and Valor team picture

Key takeaways for the water sector

Coming from a company that focuses primarily on water, the tools and practices shared by energy-focused utilities, vendors, and nonprofits at the UAI summit were excitingly cutting-edge. The water sector has many lessons to learn from its energy counterparts in advanced analytics and data adoption. But my key takeaway is that companies like Xylem that offer cross-cutting, hardware-agnostic solutions have a huge opportunity to help water utilities – which in the US tend to be smaller and more fragmented than electric and gas utilities – overcome their data quality and quantity challenges. With every program that we deploy, we build a database of best practices and rich insights into customer meters and behavior that can help the next utility we work with make smarter business decisions, optimize operations, and improve customer service. Together, we can help the utilities of today transform their data into insights that will guide them through the challenges and opportunities of the future.


Team Spotlight: Introducing Global Product Manager Heidi Smith

Q&A Session by Sabrina Strauss, Office Manager

In this feature, we interview team members to learn more about their passions and their interest in water.

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Heidi, a 17-year software product veteran, has worked in the clean-tech space since 2007 in a range of capacities including product development, process management, team management, and software engineering. Recently she served as Director of Engineering at Geli, which optimizes and controls energy storage systems. Prior to Geli, she was the first employee, then CTO and Head of Product of Carbonflow, a carbon credit software company. Heidi graduated summa cum laude from Vanderbilt University where she double majored in Mathematics and German.

Q: What is your professional background?

A: I’ve been working in software companies for over 15 years. I started out as a Programmer/Software Engineer and worked in a variety of industries: e-commerce, HR software and financial software. About 10 years ago, I made a conscious decision to focus more on environmental software. At that time, I joined a company called Carbonflow, and I was their first employee, and later CTO. I was with the company for about 6 years, and they created carbon credits-related software, following the UN’s Kyoto Protocol. I did a bit of everything: software engineering, and team & product management. We also had mainly international clients, and I enjoyed working with them. After Carbonflow, I did some consulting for a variety of smaller environmental service companies and other companies. Directly before Valor, I worked on  energy storage software at Geli. At Geli, I started in software engineering, but became an Engineering Manager later.

Q: Why did you decide to transition full time into Product Management?

A: Product Management is something I did in all the different companies I have worked at, but in a more limited respect. Even while on the software side, I was always interested in how a user is going to use the software: is this a good experience for the user, and what is it that they are trying to solve. Therefore, I always ended up interfacing between what the customers wanted and what the engineers were building. Since I was doing it part-time anyway, it seemed like a natural thing to transition into the PM profession.

Q: Why did you decide to apply at Valor Water Analytics?

A: I was trying to figure out what I was going to do next in my professional life. I had known Janani for about 6 years at that point, and she introduced me to Christine about one year before I joined. I talked to Christine about Valor, and I really loved her vision and her no-nonsense, very decisive approach to running a company. And I found a lot of her ideas very refreshing. So I kept in touch with both Christine and Janani over the course of last year, and at some point Janani approached me about the Product Management position opening. I had been wavering between Engineering and Product Management positions. When Janani talked to me about what Xylem was doing and the opportunity of integration of all these different software companies focused on water solutions, I wanted to be part of it. I really liked the idea of doing Product Management in a period where Valor is still trying to work out how they are going to work together with the other companies and what their products are going to look like.


Valor & Watermark - Because Every Drop Counts

By Kristine Gali, P.E., Technical Program Manager

Valor has been excited to become more involved with Watermark as we kicked off our volunteer engagement last year with the October Global Month of Service. Events included awareness of our local water system through trivia, supporting local organizations through beach clean ups, and facing off with our sister offices through a water pump challenge. This year, Valor is looking forward to getting even more involved with local organizations and educational outreach with local schools. Upcoming 2019 events include habitat restoration, tree planting, and water monitoring throughout the Bay Area.

Learn more about our past events below:

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Surfrider Foundation Beach Cleanup: Valor volunteered with the local San Francisco Surfrider Foundation Chapter in a beach clean up event near San Francisco Bay Bridge. Not only does a cleaner location make it more pleasant to spend time at the beach but it helps prevent fish, zooplankton, and invertebrates from ingesting harmful trash and plastic.

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A California Water Pump Challenge - Who can pump the fastest? (Not Valor): AIA offices in San Diego and San Francisco got first hand experience on using Xylem's Essence of Life stepping pump which was designed with rural farmers' needs in mind. California teams faced off in a pumping competition and realized it's not as easy (or leak free) as it looks!

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In 2019, Watermark continues to be in full swing at Valor, with the start of the Mark Your Mark 30-Day Challenge. The event runs from World Water Day on March 22 to Earth Day on April 22. The Valor Water team participated in the following events in April:

April 6: Fort Funston Nursery, where the volunteers supported the nursery which grows plants for a variety of Bay Area park sites. Habitats ranging from coastal bluffs to grasslands have been rehabilitated with the plants grown here.

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April 18: Lands End Trail Maintenance and Water Monitoring, to help revitalize and restore the native habitat of Lands End.

More events and updates on them will be posted throughout the upcoming months on the Valor Water Analytics blog.

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Challenges and Innovations: Current and Future States of Water Affordability: Part 2

Note:

This is the second in a series of Valor Water Analytics blog posts exploring water affordability, customer nonpayment, and potential solutions that enable utilities to deliver water more equitably and sustainably to all customers. You can read the first post here.

Where We Are Today: Identifying and Reaching Vulnerable Customers

By Stacey Isaac Berahzer; Christine Boyle, PhD; editing by Maryana Pinchuk

In our last blog post, we discussed affordability topics that have been relatively well-covered in the water industry and academic research: the definition and measurement of affordability in the context of water service delivery, and an overview of customer assistance program (CAP) creation and funding. Though not necessarily solved, these issues have been discussed in many publications and conference proceedings. In this post, we will discuss a topic that has received less coverage: how a lack of customer information and contact data makes it difficult for utilities to increase CAP enrollment.

Customer data: the Cap on CAPs

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As detailed in our last post, a well-designed CAP can provide much-needed assistance for customers who chronically struggle to pay their water bills. In the last 10 years, CAPs have evolved to become more creative and sophisticated. Programming ranges from income-based rates programs such as the City of Philadelphia to home efficiency plumbing assistance for low-income customers, such as the Water Efficiency Program in Portland, Oregon. Participants in the Water Efficiency Program can have eligible fees reversed, including reminder fees and a range of eligible shutoff fees.   

While programs demonstrate innovative approaches, a common challenge is reaching eligible customers and getting them to enroll in programs. No utility wants to go through the administrative and financial hurdles of creating a CAP, only to find that a large number of eligible customers are not taking advantage of the assistance. But without a strategy for marketing a CAP to the right audience in the right way, this is a serious risk.

Utilities face a variety of barriers to communicating with customers about CAPs, including language and cultural barriers, trust issues, and more. However, there are two fundamental barriers that we will explore in more detail below: 1) lack of accurate, up-to-date data on who utility customers are and ways to reach them, and 2) inability to communicate with renters and other customers who pay their water bills to a third party and not directly to the utility.

Customer data: Knowing your customers

In order to market CAPs to the right customers, a utility must know which customers are struggling to afford their water bills and be able to contact them.

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Unfortunately, this is not as simple as it may sound. Some utilities lack even basic data on the identity of their customers. A utility facing this dilemma head-on is the City of Detroit Water. In recent years Detroit has invested in communication technologies (interactive voice response systems and smartphone-enabled applications) and bill payment systems (local payment points) to make it easier for customers to access information and pay their bills. Even with these improvements, however, the basic problem of customer information tracking has led service shutoffs in Detroit to increase. As Joel Kurth reported in 2017, “Detroit officials acknowledge they don’t know the identity of two-thirds of their customers because most bills are sent to “occupant,” and they don’t know if homes that are shut off are occupied.”

For utilities that do have more detailed information on their customers than just premise address, it may still be difficult to identify customers who are eligible for a CAP. Utilities do not typically track factors that could make it difficult for some customers to pay their water bills, such as whether customers are low-income or fixed-income seniors. Relying on historical data on past shutoffs/nonpayment may be tempting, but this may not provide much insight into which customers are struggling with affordability now or will struggle with this in the future – for example, if the service area is experiencing a large demographic shift, or if water rates will be higher during upcoming summer or drought periods. Lastly, many utilities do not collect customer contact data beyond physical addresses, but paper notices delivered in the mail may not be sufficient for reaching prospective CAP customers – especially those who change addresses frequently, such as students and short-term renters.

Hard-To-Reach: Broadening the definition of “customers”

To make matters even more difficult for utilities interested in marketing CAPs, many of their most vulnerable customers fall through the cracks because they pay their water bills to a landlord or as part of a home maintenance fee, not to the utility directly. Though it may not seem like they are the utility’s “customers,” these water users are no different from any other customer when it comes to needing safe water and not wanting their service to be terminated.

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These customers make up an estimated 40% of low-income households in the US, making them a good target demographic for a CAP. But, because these “hard-to-reach” customers are usually not tracked in the utility’s billing system, the utility often has no way to identify or contact them. This population of customers demonstrates that outreach mechanisms must be tailored to specific customer types. Renters tend to be more transitory than other types of residential customers, making a land-line or an address unreliable contact channels. Instead, mobile phones may be a better way to reach these customers.

While the majority of water utilities are still wondering how (or even if) to design CAPs that help multifamily tenants who pay for their water service indirectly through rent, utilities such as Seattle Public Utilities (SPU) have made the leap. Seattle’s Utility Discount Program (UDP) provides a bill discount of 50 percent of the SPU bill for customers with an income at or below 70 percent of the state median income. This bill discount is even provided to hard-to-reach customers. SPU is able to do this by working with Seattle City Light to provide combined utility credits on hard-to-reach customers’ electricity bills. However, this is still the exception to the rule. Indeed, a key finding of a Water Research Foundation project to study the “hard-to-reach” customer issue is that “utilities typically do not have channels in place to effectively communicate and engage with the hard to reach.”

A path forward: changing the customer-utility relationship

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Traditionally, the only way that a utility engages with its customers is through the water bill. But many other businesses today – from online marketplaces to banks and cellular data providers – make use of multiple communication channels to engage with their customers before, during, and after a transaction. As a recent J.D. Power survey indicates, this is the level of service that all customers expect from their service providers, including utilities.

We believe that tackling customer engagement challenges, including ones related to affordability, starts with adopting this mindset. The next step is developing customer data management practices that can enable utilities to understand and communicate with all of their customers, including those who struggle with affordability. This opens the door to advanced solutions and novel interventions to address affordability, which will be the topic of the next post in this series.

Team Spotlight: Introducing Lead Data Scientist, Dr. Bahman Roostaei

Q&A Session by Sabrina Strauss, Office Manager

In this feature, we interview team members to learn more about their passions and their interest in water.

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Bahman Roostaei comes from 17 years of theoretical Physics research in statistical patterns of random and quantum systems. Besides a PhD in Physics he has also an MSc degree in Data Science with focus on machine learning and advanced statistics. His main focus has been on developing software for analysis of sequential data such as water, energy consumption or RNA sequences. Bahman is passionate about environment and curious to how to monitor environmental elements using complex data. He also enjoys hiking, Persian Calligraphy and cooking in his spare time.

Q: How did you get into Data Science?

A: My background is in science, I am a Physicist. The tools and methods of prediction based on observation are the basics of what I used to do in Physics. Data Science is not much different. It just uses different types of algorithms and laws, but it is still the same for observations and predictions.

At some point I decided to change from academic research to Data Science, to come to the Bay Area and to pursue work in the private sector. At the point I made the transition, I learned about huge developments in Data Science. There used to be very little interesting activity in data science. From the time that Amazon Web Services came up and the cloud technology started to develop, big data started to become a big deal.Methods and algorithms were already out there, but they weren’t used much,  the technology for it was not advanced yet.

When I learned about AWS and learned how it is now easy and possible to use data science, I became interested I pursuing this field for my career. This was about 5 years ago.

Q: Why did you decide to apply for the Data Science position at Valor Water Analytics?

A: My first job in the Bay Area was a company that worked with meter technology and meter data, mainly electronic meter data. They measured house electricity consumption and focused on conservation of energy. I also have a personal interest in environmental data, including weather, energy, and pollution problems. I was looking for an environmental related job, but then I realized that there is also water meter technology that uses data science. That is why I applied at Valor Water Analytics.

New Feature Alert: Performance Gains Tracker Launched in the Hidden Revenue Locator

By Heidi Smith, Global Product Manager

Valor recently launched a dashboard page, named Performance Gains, in order to enhance our core product, Hidden Revenue Locator (HRL). The Performance Gains page is accessed via the HRL portal and provides a summary of client utilities’ meter asset health including performance assessments in key areas, such as % of meters currently under registering. 

The Performance Gains page allows utility operations teams to:

  • Quickly view meter asset health across all meters to decide where to focus work efforts.

  • View under-registration data to decide which meters to replace and when.

  • Create budgets for your meter assessment management program based on meter fleet performance.

Additionally, the utility management teams will always have the latest metrics at hand to share with board members or other stakeholders to:

  • Enable budgeting decisions on your meter program

  • Demonstrate your progression / management efficiency

  • Showcase the value gained from our Valor solution and make a case for continued subscription

We encourage you to fully explore the new view. My favorite feature, suggested by one of our utility clients, is to hover over the bar graph lines on the meter under-registration analysis to see percentages of meters that are under-registering for a specific slice.  In our demo example, 2.2% of the 10-year-old meters are under-registering.

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Check out a sample Performance Gains of our demo utility, which is gaining tremendous value from the program through significant investigations of their flags!

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This new view is brought to you thanks to the vision of Janani Mohanakrishnan and Christine Boyle; valuable user feedback from Valor’s Client User Group; the hard work of software design and implementation of Renee Jutras; and quality checks by Glen Semino and Kristine Gali.

Challenges and Innovations: Current and Future States of Water Affordability

Note:

This is the first in a series of Valor Water Analytics blog posts exploring water affordability, customer nonpayment, and technology that can enable utilities to deliver water more equitably and sustainably to all customers. 

Where We Are: Assessment of Water Affordability Today

By Stacey Isaac Berahzer, Christine Boyle, PhD, editing by Maryana Pinchuk

Given the looming affordability crisis, new interventions are needed to help communities pay their water bills, while also helping utilities collect the water and wastewater fees needed to fund much-needed infrastructure upgrades. To date, a large volume of work on how to measure affordability has been undertaken, but what is sorely needed are programmatic strategies to help both households and utilities cope with the mounting costs of clean water provision.

This post (the first in a series on affordability) explores three foundational topics: defining affordability, measuring affordability, and funding customer assistance programs (CAPs). These are important topics for beginning to understand the current state of the conversation on water affordability, and they are relatively well-covered in scholarly and industry publications. In future posts, we will explore topics that have received less coverage but are also critical to tackling the growing affordability crisis: customer data, utility-customer communications, and novel interventions that may help utilities recover more revenue while assisting their most economically vulnerable customers.

Defining Affordability: What is “Affordable” Water?

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The United Nations (UN) recognizes the basic human right to water and sanitation. In its Comment No. 15, the UN defines this right to water as the right “of everyone to sufficient, safe, acceptable and physically accessible and affordable water for personal and domestic uses.”

But what does it mean to say that water must be “affordable?” How to define affordability in the context of water service delivery is an ongoing discussion. There is some consensus emerging that affordability is not a universal term and should be defined at the local rather than the national level. In the latest version of its “Principles of Water Rates, Fees and Charges” (or M1) publication, the American Water Works Association (AWWA) includes a few updated chapters, including the “Low-Income Affordability Programs” chapter. The authors state: Given variations in local economic conditions, compositions of the customer base, and community values, defining affordability must be done at the local level.” In another article, “Is Our Water Affordable?,” authors Jon Davis and Joe Crea corroborate this idea: Any one-size-fits-all guidance on what constitutes affordable water service is going to be inappropriate when applied to most local considerations.”

In this view, affordability is not a top-down mandate with clear, universal success metrics to be achieved, but rather an ongoing conversation that takes into account the specifics of each water utility service area and its customers.

Measuring affordability: Which Metrics Work Best?

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Inherent in any definition of water affordability – at the local or national levels – are metrics for benchmarking it. The UN offers some guidance on how water affordability should be measured. In 2002, the UN stated that to be affordable, water costs should not exceed 3% of household income, with the combined cost of water and sanitation not exceeding 5%.  But, there are many older guidelines for measuring and benchmarking water affordability within the United States. The most common way of measuring water affordability, and indeed the most maligned method, involves Median Household Income (MHI). In what may have been a series of unfortunate events, “4.5% of MHI” evolved into an infamous benchmark for affordability, where 2% is used on the wastewater side and the other 2.5% is attributed to water. This guidance is derived, in part, from the 1997 EPA report “Combined Sewer Overflows—Guidance for Financial Capability Assessment and Schedule Development.” The metric, known as the Residential Indicator, was developed only for wastewater systems’ ability to comply with federal regulation, but it somehow mistakenly became a poor proxy for an affordability benchmark. The 2.5% MHI benchmark on the water side is similarly arbitrary and its origins shrouded in mystery.

Critics of using MHI to measure affordability point to the fact that even people below the “middle” income point in any community also need water. Therefore, measuring affordability at the median level hides the problems that customers in the lower income brackets, such as the lowest 20% income-earners in a community, face. Since these lower-income earners have less disposable income, it is more relevant to benchmark water affordability against their incomes. Alternatives to MHI that reflect this belief include the Affordability Ratio (AR) and Hours’ Labor at Minimum Wage (HM). The AR considers the cost of water and wastewater compared to essential household expenses such as taxes, housing, food, medicine, health care, and home energy. Jason Mumm and Julius Ciaccia offer another alternative to the Residential Indicator (RI) called the Weighted Average Residential Index, or WARi.™” It is a calculation of the weighted average financial burdens across all income levels, in all census tracts in a given utility’s service area. Less crude examples than the “4.5% of MHI” metric look at a spectrum of incomes in a community and the relative percentage of those incomes that customers are spending on water. The UNC Environmental Finance Center’s free Affordability Assessment Tool is a good example of putting this metric into practice.

Acting on Affordability: How to Transform Definitions and Measurement into Action?

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Communities that have crossed the initial hurdles of locally defining and setting a threshold for affordability may be displeased with the (growing) number of their customers who cross this threshold. A natural response is to develop a customer assistance program (CAP) to help customers that fall below the accepted affordability threshold. But, funding a CAP may be challenging. A 2017 report, “Navigating Legal Pathways to Rate-Funded Customer Assistance Programs,” found that deciding if a utility’s primary revenue source – rates – can be used to fund a CAP is not a simple exercise. Most states have fuzzy language when it comes to whether a utility’s rate revenues can be used for a program like a CAP. Money from volunteer bill round up programs, lease money from cell companies, and royalties from insurance on service lines all have a bright green light for CAP funding. Unfortunately, these methods tend to generate relatively small amounts of money. To develop a robust and effective CAP, a utility needs to access its rates revenues. There is mounting evidence, and publications, that paying for a CAP through rates revenue ultimately helps a utility’s bottom line. States like Indiana have recently revised their statutory language to make it clear that utilities can include CAP development in the rate setting process. 

Conclusions

These three affordability topics – defining affordability, measuring affordability, and funding CAPs – have been the focus of much research and publication up to this point. While there is still room for more work in all of these areas, there are additional areas ripe for exploration, especially when it comes to how a utility can take advantage of new technologies around communicating with customers. Stay tuned – we will explore this in subsequent installments of this blog series.

Smoke on the Water: Valor Staff Tours California’s State Water Project

By: Maryana Pinchuk

Smoke and fire may have been in the air (literally) in California these past few weeks, but water is never far behind as a subject of concern for residents of the state. Earlier this month, while fires raged from Los Angeles to Sacramento, my colleague Renee and I accompanied staff from the Municipal Water District of Southern California, as well as other water utility staff and interested citizens from Southern California, on an inspection trip to learn more about the California State Water Project.

As Municipal Water District of Southern California Director Larry McKenney pointed out at the start of our trip, the state of California has the 5th largest economy globally (just ahead of Britain), and its productivity depends largely on the mostly water-scarce state’s ability to move water. The State Water Project is a system of dams, pumping stations, reservoirs, and aqueducts that conveys water from a small water-rich area in the northernmost part of the state to the dry but highly populous communities in the middle and south. The project is the largest provider of water and power in the state, and one of the largest in the world.

Sunset over the San Luis Reservoir, the fifth largest reservoir in the state.

Sunset over the San Luis Reservoir, the fifth largest reservoir in the state.

This sophisticated system of water conveyance begins in the Feather River near Sacramento. Water from the river collects in Lake Oroville and passes through Oroville Dam before proceeding on to the Sacramento–San Joaquin River Delta. The water then travels down the California Aqueduct to the San Luis Reservoir, where it is pumped further south to meet the water needs of Southern California communities, including Los Angeles and Santa Barbara to the west (via the Castaic and Pyramid Lake reservoirs), and San Diego and Orange County to the east.

Pyramid Lake Reservoir, completed in 1973, is the deepest lake in the state. Here, water is held and conveyed to Castaic Lake Reservoir and from there supplies northwestern Los Angeles County.

Pyramid Lake Reservoir, completed in 1973, is the deepest lake in the state. Here, water is held and conveyed to Castaic Lake Reservoir and from there supplies northwestern Los Angeles County.

The State Water Project may not exactly be the most well-known tourist attraction in the state, but it is the secret engine that powers some of the most iconic features of California, from the glitzy pools of Hollywood to the more modest groves of California almond trees – a crop that, like asparagus, melon, cotton, and other local cash crops, thrives in the dry and temperate Mediterranean-like climate of the Sacramento–San Joaquin River Delta.

Cotton growing in the Delta. We learned that California cotton is sold and prized worldwide for its high quality and even ends up in some products marketed as “Egyptian cotton”!

Cotton growing in the Delta. We learned that California cotton is sold and prized worldwide for its high quality and even ends up in some products marketed as “Egyptian cotton”!

Joe Del Bosque discusses almond cultivation and shows us his trees

Joe Del Bosque discusses almond cultivation and shows us his trees

Almonds, we learned from longtime Delta resident and farmer Joe Del Bosque of Del Bosque Farms, are a cousin of the peach tree, and farmers have learned to graft almond saplings to the hardier peach roots, which are less susceptible to rotting in heavily irrigated soil. But the ingenuity of the Delta farming community is meeting its match in the precarious ecology of the Delta, where a system of levees built in the 1800s to turn marshland into farmland is beginning to show its age, and where soil erosion and earthquakes threaten the $50-billion-a-year agricultural business.

Over breakfast in the state capital, with the lingering smell of smoke providing an uncomfortable reminder of the increasing danger posed by climate change and extreme weather, we were shown a presentation about the challenges facing the Delta in the next 50 years. We watched a model simulation of the probable effects of a major earthquake – long overdue in the area – on water quality in the Delta. We all winced as the model showed the levees disintegrating and a cloud of salt water from the San Francisco Bay pumping steadily eastward hour by hour. According to the simulation, by the end of a week after the initial quake, all of Southern California’s water supply would be rendered non-potable.

Suisun Marsh , one of the few preserved tidal marshes that showcase how the Delta looked before it was transformed by agriculture.

Suisun Marsh, one of the few preserved tidal marshes that showcase how the Delta looked before it was transformed by agriculture.

To address the very real possibility that gradual (through levee erosion) or sudden (through a major quake) salinization may one day cripple the Delta leg of the State Water Project, the Municipal Water District of Southern California is proposing to create a set of tunnels through the area. This would ensure that fresh water could continue to be channeled through the Delta to consumers in the south, even if the Delta were flooded with brackish water. The proposal, called the Water Fix, has raised objections from some conservation groups that argue against diverting flow from the rivers in the area. However, others contend that what the wildlife that already struggle to thrive in the agriculturally-dominated waterscape of the Delta need is not higher throughput in the rivers, but other conservation practices – e.g., fish weirs and controlled flooding of fallow farmland to allow fish fry to mature in a predator-free environment before returning to the river system – that are not incompatible with the Water Fix.

A fish weir near Sacramento – during a major rain event, fish and water will be directed into this fallow field to mitigate flooding and provide a safe environment for fish fry to grow in.

A fish weir near Sacramento – during a major rain event, fish and water will be directed into this fallow field to mitigate flooding and provide a safe environment for fish fry to grow in.

We wrapped up our trip with a visit to the Jensen Water Treatment Plant, the last stage that State Water Project water passes through before being delivered to SoCal customers. In the hills to the north of the plant, the Los Angeles Aqueduct (not part of the State Water Project) delivers an additional supply of water from Mono Lake to the city of Los Angeles. As evidenced by the heated history of that water infrastructure project, culminating in the legendary California “Water Wars” depicted in the 1974 noir film Chinatown, controversies around water are far from new in this state. And yet, through over a century of conflict over water rights and allocation – as well as the additional issues posed more recently by increased water scarcity – California’s water infrastructure has continued to rise to the occasion and meet the ever-growing needs of the state and its residents. California’s water supply may seem precarious, but water utilities and their staff are certainly used to facing and overcoming challenges, and the successes of the past point to hope for the future.

Maryana and Renee from Valor at the Jensen Water Treatment Plant, with the Los Angeles Aqueduct in the background.

Maryana and Renee from Valor at the Jensen Water Treatment Plant, with the Los Angeles Aqueduct in the background.

Watermark Month of Service

The Valor Water Analytics team participated with several events during Xylem Watermark’s Global Month of Service, during which Xylem employees around the world came together to participate in volunteer events in service for their respective communities.

Beach Cleanup 10.28.18

The Valor Water Analytics team in San Francisco participated in their very first Watermark volunteer event, a beach clean up organized by the Surfrider Foundation SF Chapter. The organization’s mission is to protect oceans and beaches through a powerful activist network. They organize clean-up events on a regular basis and raise community awareness around reducing pollution in beach habitats. The Surfrider Foundation operates in several cities in California, as well as in other coastal areas across the United States, with 81 chapters in 10 regions.

It was wonderful to see a huge turnout at the cleanup event by Xylem employees, local school groups, and others in the community. There were more people than buckets for the collection of garbage and we noticed a variety of volunteers of all age groups, from toddlers to elderly people. The Valor Team was very successful in their search for trash and collected items including several cigarette butts, Styrofoam, beer bottle caps, and even a fork and spoon ended up in one of the buckets! It was a great experience and a huge inspiration for the team to participate more regularly in such events.

You can find more information about the Surfrider Foundation and their mission on their website: https://www.surfrider.org/

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Watermark 101 10.29.18

The Valor team is geared up and ready to give back! We held a Watermark 101 lunch and learn as part of the October MOS events to kick off Valor’s involvement with Watermark. The team learned more about the Watermark vision, how to get involved, and brainstormed events for the upcoming year. We wrapped up with a competitive game of Watermark Trivia! Topics included our local water system, Xylem and Watermark, state of our water infrastructure, and the national water investment gap. Not surprising, our winners were Valor founder Christine Boyle and Valor veteran Renee Jutras. The rest of the team will be studying hard for round two in the future!

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Halloween 10.31.18

This years Halloween theme was water. It was time to put on our thinking caps and get creative. Here’s how the Valor team did!

We had a rain cloud, a sea monkey, Dory, a dead meter, The Great Pacific Garbage Patch, a mermaid, and Leonardo from Teenage Mutant Ninja Turtles.

And the winners...

Most On Xylem Message: TGPGP

Most "One of Those Days" Feeling: Rain Cloud

Most "Sharkey Kids Favorite": Dory

Most "Best Sea Friends Experience": Mermaid + Sea Monkey

Most "Can I Borrow That Costume": Leonardo

Overall Winner: Anomalous Zombie Meter

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