Headline Cases Bring Opportunities to Partner with Customers for Safer Water Systems

High-profile events impacting water supply and distribution networks in the U.S. have dramatically raised the awareness of operational challenges. At the same time, these events demonstrate an opportunity to change decades-long funding trends that have left many water systems struggling to adequately finance upgrades and repairs.

Drought conditions in the Western and Southwestern U.S. continue to affect residential and business customers, while flood control remains a concern for various inland coastal communities. 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.

“For many water utility leaders, their goal is to be recognized as safe and reliable, yet they desire to maintain a relatively low profile,” said Clint Robinson, Associate Vice President for Black & Veatch’s government affair team. “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.”

Many utility executives report an uptick in consumer inquiries about their service, and similarly, the utilities are receiving more inquiries from regulatory boards, elected officials and other stakeholders. As a result, nearly half of respondents to the 2016 Black & Veatch Strategic Directions: U.S. Water Industry report indicate they are taking steps to communicate measures under way to ensure the safety of the water supply. An additional 19 percent are considering launching consumer education programs.

“This proactive approach to engaging the community and increasing its knowledge on the security of the water supply, as well as the challenges that need to be addressed, bodes well for utilities that need to make long-term investments as their delivery systems age,” Robinson said.

Reacting to Water Safety Issues

With heightened awareness of potential issues, instances of unusual taste, odor or discolored water are now referenced with current affairs and create headlines 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, for water utilities with LSLs, the legal issue of responsibility beyond the customer meter is 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.

The Political Will to Raise Rates

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, according to Bob Hulsey, Associate Vice President in Black & Veatch’s water business.

“The emerging view appears to be that if water utilities don’t raise rates, the consequences could be damaging,” Hulsey said. “If these consequences are seen from a litigious point of view, municipal officials may see infrastructure investment as a means of minimizing their risk.”

This matter is important because addressing lead issues – whether in customers’ homes or in systems containing lead – will likely require millions of dollars in remediation costs.

“This rising outlook is critical because aging distribution and treatment systems remain a significant component of, and challenge for, capital planning purposes,” Hulsey said. 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 – that is, access the debt market – to fund projects,” he noted.

An Opportunity to Gain Public Support

Rising public awareness of the components that make up the water supply chain presents an opportunity to better engage the community in support of a vital public asset, Robinson noted. He said 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,” Robinson said. “These investments also can leverage the most efficient systems in order to optimize energy and reduce chemical and labor costs, thus making the best use of resources. Utilities can deploy technology in the form of sensors and data analytics platforms to create value across the entire life cycle while improving overall business operations and safety.”

Hulsey agreed that this is an opportune time for utilities to engage more with customers.

“Now appears to be the time for utilities to start a transparent and frank conversation with consumers that focuses on how investments in water systems are needed, and how they can provide a smart, sustainable and resilient water supply for generations to come,” Hulsey said.