Water Utility

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.

Valor Water Analytics Acquired by Water Giant Xylem

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We are excited to announce that Valor Water Analytics (Valor) was recently acquired by industry leader Xylem Inc (NYSE: XYL). Xylem is a $13B water technology company that services utility and commercial clients across 150 countries.

Dr. Christine Boyle founded Valor in 2013 with a mission to bring big data solutions to water utilities in order to improve their financial and water resource sustainability. To accomplish this, Valor created a suite of world-class software products. Valor’s products are now deployed in ten states across the USA, including notable utilities such as American Water and Suez. Its “Hidden Revenue Locator” product is widely recognized as a best-in-class technology for automated loss detection. The company remains committed to integrating its technology with all meters across the US and beyond. Valor will now execute on this ambitious vision under the Xylem umbrella.

The alignment of Valor and Xylem in product and vision made this acquisition the right strategy for Valor’s next stage of growth. Under Xylem, Team Valor continues and will spearhead Xylem’s Silicon Valley branch and lead Xylem’s advanced data science initiatives. Valor’s product lines will join Xylem’s existing suite of advanced analytics products. This exit demonstrates the value of building an innovative water technology that brings measurable value to the water sector.

Valor had previously raised $2.8M from investors such as the Urban Innovation Fund, Y Combinator, 500 Startups, Apsara, Hydro Venture Partners, Shore Ventures, Syzygy, and Matadero Ventures. These investors supported this exit and are excited for the next chapter of Valor.

Valor is looking forward to solving the world’s water issues as part of Xylem’s world-class team of dedicated water professionals.

How Dashboards Helps Decision-Makers at Water Utilities

How Dashboards Helps Decision-Makers at Water Utilities

By Renee Jutras, Full Stack Developer

Data has become part of the way we tell stories today. Online articles use maps and graphs to add a splash to their stories because, as they say, “a picture is worth a thousand words”. And it’s true - a well thought out data visualization can convey much more information than just a description, and let the viewer draw their own conclusions about the information. The difference between a clear positive trend and a potentially coincidental trend is instantly recognizable on a graph.
Dashboards take graphs even further by adding organization and interactivity. The best dashboard helps you continuously monitor whatever your pain points are while giving you the power to explore your data visually as freely as possible.

In order to take water utilities further into the future, better technology is needed. Valor Water Analytics’ dashboards put vital information at the fingertips of the decision-makers at utilities, so that they can start to make actionable decisions based on their data.

Mind The Data Gap

There is a lot of talk about Big Data these days, and if you are anywhere near Silicon Valley, it is more like a deafening roar. As important and difficult as Big Data is, we are also working to solve challenges of a different sort that gets relatively little attention: what we call Diverse Data. The key distinction between Big Data and Diverse Data is how structurally similar one piece of data is to another.

How Can Utilities Cope With Mounting Financial Challenges?

Water utility financial practices are constantly evolving. According to Dr. Christine E Boyle, the optimal strategy for each utility to meet challenges successfully is to minimize risks associated with external changes and to increase internal financial resilience.

Rate changes are often used by utilities as a way to cope with financial problems. Budget-based rates, also known as individualized rates, have emerged as a way to meet efficiency, cost-recovery, and social equity goals (Mayer et al, 2008). Valor Water Rate Simulator helps utilities understand revenue profiles and plan strategy and visualize the impact of new rate structures like budget-based rates, peak set rates and customer select rates, and has been successfully leveraged by utilities in California and South-East USA.

In addition to rate adjustment, efficient water use can also be important in minimizing risk and building financial resilience.

The cycle of the conservation - revenue resilience is presented below:

  1. Conserving water allows utilities to cut operation and maintenance costs and defer expensive supply expansion projects.
  2. As conservation policies go into effect, the seasonal fluctuation of water use decreases, resulting in more stable customers use and associated customer sales.
  3. Reducing seasonal use eases the pressure to supply water during peak seasons and also helps achieve revenue stability.
  4. Minimizing costs and stabilizing revenue are help utilities strengthen their financial and credit standing with rating agencies. This is a major shift from previous views in which conservation was evaluated as a credit weakness that would result in decreased revenue.

To read the full article on Adapting to change: Water utility financial practices in the early twenty-first century, click here. 

We welcome your comment and questions. Feel free to contact us at [email protected]

Using Big Data to Improve Water Utility Revenues with Valor Water President Christine Boyle

Dig deeper into Valor Water through The Water Values Podcast!

During this episode, you will learn more about:

  • How Christine started Valor Water
  • The University of North Carolina’s water program
  • The four platforms Valor Water has commercialized for utility revenue
  • Using software to find anomalies in the water distribution system
  • “Real losses” from the water distribution system
  • Using software to identify customers with potential payment problems
  • How Valor Water identifies and segments customer classes for messaging about bill payment and cut-offs
  • Using software to assist utilities with rate optimization and climate change planning
  • “Stress testing” utilities for climate change scenarios
  • Using software for conservation planning
  • Meter fleet management applications
  • The different data points and types that Valor Water uses
  • How Valor Water helps utilities “unleash the power of their data”

When Big Customers Make Big Changes

Valor Water Analytics recently built Non Residential Customer Sales Dashboards for four utilities in North Carolina. Read about the project’s Plateau Analysis and how these utilities are putting findings into action on project partner University of North Carolina’s Environmental Finance Center blog, here: When Big Customers Make Big Changes.