Communicating With the Customer

Public trust in government and municipal services is a critical, though fragile, construct. Tax and usage fee-paying customers expect that their funds are being used to create and operate reliable, safe and secure water systems. Across much of the 2016 Strategic Directions: Water Industry Report, a common trend is that high-profile events impacting water supply and distribution networks have dramatically raised awareness of operational challenges but also demonstrate an opportunity to change decades-long funding trends.

For example, ongoing drought conditions in the Western and Southwestern United States continue to affect residential and business customers. Flood control challenges also remain a concern for traditional and inland coastal communities. Headline-grabbing water safety issues are driving customers to question service providers’ procedures and their regulatory agents, thus changing and increasing consumer interactions with water utility providers.

Public engagement with water utility service providers can ebb and flow with local events such as water main breaks and treatment issues serving as catalysts for community interest. However, the water crisis in Flint, Michigan, appears to represent an inflection point in what has historically been the limited geographic reach of service performance issues.

To sum up the view of many water utility leaders, their goal is to be recognized as safe and reliable yet relatively lowprofile. In light of the Flint situation, many are concerned that their utility may be the next to be examined by investigative journalists and national news interests. In addition, an uptick in consumer inquiries of their current service providers is being accompanied by a similar uptick in inquiries from the authorities that are overseeing utilities, such as regulatory boards, organizational leadership, elected officials and other stakeholders.

As a result, nearly half of respondents indicated they are currently taking steps to communicate measures under way to ensure the safety of the water supply. An additional 19 percent are considering launching similar consumer education programs. This proactive approach to engaging the community and increasing its knowledge base on the security of the water supply and the challenges that need to be addressed bodes well for utilities that need to make long-term investments as their sources and delivery systems change and age.

Between active program respondents and those considering outreach plans, nearly 90 percent identified website information as the primary vehicle for increasing customer awareness. Direct mail (54 percent) and advertisements in local/regional media (32 percent)followed at a distance, while public hearings represented a surprisingly low figure at just 13.6 percent. This could be tied to traditionally low levels of attendance and viewership at public hearings.

Overall, the volume of activity put forth to raise consumer awareness results in an exceptionally high response rate. This is likely because many of these programs are being launched in response to the Flint crisis or as consumer confidence drops because of increasing concern about lead and copper, especially in our schools, as well as toxic algal byproducts and low levels of pharmaceutical and health care products. With heightened awareness, unusual taste, odor or discolored water instances are referenced with current affairs and create headlines and prompt discussion within and across communities.

With lead being such a major focus of customer and public health concern, it is in some ways reassuring that a high percentage (54 percent) of drinking water service providers indicate an absence of lead service lines (LSLs) in their distribution systems. However, this doesn’t mean that those systems are completely lead free. Inside customer homes and businesses, lead can be present – in some cases, through plumbing fixtures and fittings – making optimized corrosion control programs an important issue for all providers. For water utilities with LSLs, the legal issue of responsibility beyond the customer meter is also an issue. Of the 23 percent of respondents with LSLs, 60 percent will be looking to either fully or partially replace that piping. Approximately 40 percent of those with LSLs will rely on optimized corrosion control alone or will need to add capital improvement plan funding to address replacement.

For several years, the Black & Veatch Strategic Directions: Water Industry report has found that the success of the water utility industry in providing reliable service through underground/non-visible infrastructure has hampered its ability to adequately finance operations and capital planning. In many communities, lobbying for rate increases has proven to be more challenging than dealing with the political costs associated with aging systems. Lacking tangible evidence of consumer risk, arguments focused on fear – of service disruptions or the high costs associated with deferred maintenance – have been trumped by pressure to minimize impact on ratepayers. The current environment indicates that the political will to raise rates to fund investment in water infrastructure is the strongest it has been in decades.

The emerging political view appears to be that if water utilities don’t raise rates, the consequences could be damaging. If these consequences should become more litigious or viewed as the result of criminal negligence, government officials see infrastructure investment as a means of minimizing their risk. This issue is important because addressing lead issues, whether in customers’ homes or in systems containing lead, will likely require millions of dollars in remediation costs. Addressing system lead will also require significant municipal coordination as it would likely require closing off streets, disrupting traffic and other possible disturbances to communities.

This rising outlook is critical because aging distribution and treatment systems remain a significant component of, and challenge for, capital planning purposes. In fact, only 23 percent of respondents are working to address their deferred maintenance backlogs by assessing a user fee. More than 21 percent indicate they won’t raise rates or user fees. Though shorter term capital costs are minimized when operators do not reinvest in their systems, at some point they will have to borrow (access the debt market) to fund projects. Even in the current low interest rate environment, the outright replacement of failed systems typically costs more than regular upkeep.

Rising public awareness of the components that make up the water supply system presents an opportunity to better engage the community in support of a vital public asset. A strong case can be made for increased consumer education on water systems to encourage investment in water infrastructure. Focusing on how investments should be made to ensure a safe and reliable water supply for the future will likely be well-received.

These investments also can leverage efficiency and performance gains made possible through deployment of the latest, most efficient systems designed to optimize energy, chemical and labor costs, thus making the best use of resources. There are also opportunities to deploy technology in the form of sensors and data analytics platforms to create value across the entire life cycle of the utility system while improving overall business operations and safety of water utility providers. In short, now appears to be the time to start a transparent and frank conversation with consumers that focuses on how investments in water systems are needed, are beneficial to all involved and can provide a smart, sustainable and resilient water supply for generations to come.

About Black & Veatch
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