The American Water Works Association Annual Conference and Exhibition was held last week (June 20 – 22, 2016) in Chicago, Illinois. With over 10,000 attendees, 500+ exhibitors and 80+ sessions this conference presented an unparalleled opportunity to check the pulse of the water industry. Members of the West Monroe Water Utility consulting and technology practice were at the conference, and are eager to share some of the key themes and learnings that we took away as well as share our perspective. This first summary highlights the topics of non-revenue water and sustainability:
Non-Revenue Water: Manage Your Water and Your Knowledge
During an engaging panel discussion on non-revenue water, utility and industry representatives discussed different approaches water utilities can take to manage distribution water loss. As utilities across the country are grappling with this issue, the traditional approach has been to determine the economic value of non-revenue water, that is, the amount of water loss a utility can maintain such that the incremental costs of the investments in reducing the water loss are more than the economic value of the water. While the panelists generally agreed with this methodology (especially the CFOs!) they noted that this logical approach can break down in two key instances:
- When water is scarce the economic methodology can still be used but the economic value needs to incorporate this scarcity. Typically this is done by valuing the water not at the utility costs to produce the water, but at the retail rates. While this seems counterintuitive, the rationale is rather simple; when water is scarce, every drop saved today is an increase to the scarce supply that could ultimately be sold at some point in the future.
- When a utility identifies a leak but does nothing to fix it, the knowledge of the leak may become a liability risk. If that leak were to lead to property damage or human harm, a utility may be held liable. A plausible approach to addressing this concern is for the utility to develop leak profiles and the diminishing returns involved in responding to all leaks. With the potential for diminishing returns on costly repairs of small or inconsequential leaks, utilities can prioritize leak detection and repair programs to the areas with the biggest potential impact, while maintaining best practice preventative and reactive repairs. This approach would take into account the “triple bottom line” pf various types of leaks similar to asset management programs that prioritize capital improvement project investments.
We are seeing other industries watch these trends, and not just those that depend heavily on water within their supply chain and production processes. In particular, the Property & Casualty Insurance industry is watching both the scarcity as well as the leak issue to help protect themselves from claims from lost business as well as water damage to property.
Sustainability: The Water Industry Gets It
Over 25% of the session topics in this three day conference covered water sustainability issues. From water quality, to system reliance, climate change adaptation, and watershed management, the water industry is at the forefront of incorporating sustainability principles and objectives. With a direct dependency on a key ecosystem service (clean water!), infrastructure planned to be utilized for a long time (often over 50 years), and a community service model (majority municipally-owned), a focus on sustainability makes sense. Sustainability is about ensuring that we have the resources to meet our needs today, tomorrow, next year, and the next fifty years. Our water utilities are embracing this challenge through a number of innovative approaches, including:
- Being industry leaders for adopting Envision, a sustainable infrastructure rating system;
- Incorporating climate change into their long-term water source planning; and
- Proactively bringing customers into the water conservation planning efforts
- Developing solutions that address the relationship between water and energy use as well as water and energy production
In our discussion with Water Utility executives as well as executives from other industries, sustainability is becoming more of a “triple bottom-line” issue (financial, environmental and social). Many companies are looking to address this issue just not to save current and future dollars, but also because their customers and shareholders are requiring it.
Stay tuned for our next report that focuses on utility workforces and infrastructure.
We would appreciate any insights or comments related to this and other topics.