water technology

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.

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.

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.

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.

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.

Valor Water Analytics Intern Blog: Alex Pan

Valor Water Analytics Intern Blog: Alex Pan

Hi, I'm Alex!

Hi, I’m Alex! I’m going into my third year at UC Berkeley, where I study computer science. I’m originally from Novi, Michigan, where I was born and raised until I moved out for college. I’m currently working full time as a software engineering intern for Valor, which is about a 45 minute commute from my apartment from Berkeley. I’m super excited about working hard, seeing the city, and enjoying the weather.