Utility executives have never been under more pressure. A growing number of factors are making life more difficult for most water suppliers. Challenges such as unpredictable weather patterns, water quality crises, long term droughts, huge capital investment requirements, population growth and urbanization are all having impacts – right now – beyond anything their predecessors dealt with or imagined.
In times of difficulty, the ability to effectively prioritize delivers outsize returns. So it is worth taking a moment to focus on the critical imperatives that drive success or failure for a modern water utility. In our book, it doesn’t count as prioritization if the list has 27 items, so we have boiled it down to the three basics.
- Quality of Service
Traditionally, “Job Number One” for utility managers was to maintain Quality of Service. They pursued this to the exclusion of all else, and spent their effort on maintaining operations with adequate margins to accommodate the specifics of their particular demographics, topography, and hydrology. This is still a major characteristic of the water utility landscape, but it has become more challenging of late as infrastructure has aged beyond its designed service life and supply variability has taken a toll. In the short term, individual heroics can cover that gap, but over time operational resiliency won’t come from a singular focus on service quality.
- Financial Stability
In the long term, water utilities must fund operations and capital improvement programs, as well as pay down any existing debt. Without a viable economic model and strong financial control, excellent quality of service is impossible to maintain. Many utilities today are facing a perfect storm: inadequate revenues to sustain their current and future obligations; steeper future needs due to urban development and remediation of aging infrastructure; and increasing regulatory requirements. This becomes especially problematic when revenues are dominated by volatile volumetric fees, which conflict with the (mainly fixed) cost structure of a utility. Of course, restructuring revenues is not done in a vacuum, and this has a bearing on the final piece of the equation.
- Stakeholder Engagement
Because water utilities have a very special trait – they are natural monopolies providing a resource that is critical to life – they operate in regulated markets. Therefore, their long-term ability to operate effectively persistently depends on the goodwill of many stakeholders, notably customers, regulators and legislators. However, this requirement clashes with the traditional utility culture of a silent service provider. While this view of service may have been the watchword for generations (for honest and noble reasons) those days are past. Consumers expect a highly responsive and transparent relationship with all of their providers of goods and services. Regulators expect data-rich and compelling briefings from those under their supervision. Legislators advocate loudly on behalf of citizens, if they perceive utilities as exacerbating problems facing their communities such as environmental problems or economic stagnation. The net result is that no utility rate case, capital improvement plan, or grant application is approved without strong support from all stakeholders around the utility.
This short list of interlocking priorities is what drives success or failure for water utilities in the 21st century. The passage is stormy and there is no silver bullet, but the good news is that each of these challenges is being tackled via advances in digital science, to complement the physical science approaches that have served us well in the past. Consequently, a number of firms have sprung up in recent years to address these issues in novel ways. Here at WaterSmart, we are just one of those, but we are pleased to be partnering with dozens of industry-leading utilities to help them to chart their own courses to success.
The ability to effectively engage stakeholders to drive critical investments needed to maintain service quality is at the crux of how these interdependent challenges are ultimately met. Without support from customers, regulators and politicians, it’s impossible to raise rates to meet infrastructure replacement needs and create long-term financial stability. This is where multi-channel, digital communication technologies come into play. But new technology approaches must be accompanied by a shift in perspective on the relationship between utilities and their stakeholders. We are working hard to help drive this change for the benefit of the utility, the customer, and the communities in which we all live. We hope you will join us on this journey and embrace the change we can no longer afford to avoid.