AMI makes good business sense for commercial and industrial water customers.
By Ed Ritchie
Announcements of advanced metering infrastructure programs (AMI) within heavily populated cities are growing, but are the large residential meter numbers distorting a key element to AMI benefits? The untold story is that many cities benefit most from using advanced metering systems with the small percentage of customers that consume the largest percentage of water—commercial and industrial (C/I) accounts. And, as in the case of one city that lost over $5 million in uncollected water bills from an industrial account, these C/I customers can represent a major source of lost revenues. Maximizing the benefits of AMI for C/I customers offer opportunities for new service paradigms, conservation, and higher energy efficiency, all to the benefit of a utility’s largest customers.
Opportunities to improve business relationships should be a key component of an AMI program, according to Greg Land, product manager, Master Meter Inc., Mansfield, TX. “So much water goes to commercial and industrial use, and it’s very important for the utility to measure accurately,” says Land. “Also, the customer has a better understanding of how they are using their water so they can be more efficient. Often, businesses don’t realize when they’re using the water, but they can use data logging to discover if their processes are water intensive.”
Data logging with flow recorders can be used as part of a pilot program for gun-shy utilities seeking a low commitment test of AMI technologies without having to replace a lot of hardware. For example, Master Meter flow recorders were designed to work with most any existing meter installation, regardless of meter makes or size.
Flow recording proved to be a valuable tool for the City of Dallas Water Utilities, in Texas. The utility provides water and wastewater services to about 2.4 million people in Dallas and 27 nearby communities.
|Photo: MASTER METER
Data logging with flow recorders can help utilities ease into AMI.
“Dallas put a pilot project in and data logged a few locations and immediately noticed that a bakery was using water overnight,” recalls Land. “You’d think that after midnight, they wouldn’t be running water, and it was a leak behind a wall that was causing all sorts of a structural damage. So you look at this from a commercial standpoint, and it’s easy to see that data logging can reveal problems.”
Sometimes the problems turn out to be the meters themselves. “A mechanical water meter is like any other mechanical device and subject to deterioration, so it loses efficiency,” explains Land. “It’s often due to water quality, rates of flow, and a buildup of materials. But if you drop in an ultrasonic meter, there are no moving parts, so even if there is buildup from chemicals, it doesn’t affect the accuracy. And one of the things you notice is that five years later your revenue stream hasn’t decreased. Also, there are opportunities for new billing methods like tiered billing, a concept that the electric utilities have used well. The utility can do a tiered structure, and the customers might want to shift their production schedules to save money, so there are amazing upsides to this automation.”
Creative billing structures can have a wide range of applications; from factories, to office buildings, and even football stadiums. In Ann Arbor, MI, the city was burdened with the challenge of supplying the University of Michigan’s high use of water at its football stadium. But this increased demand for water just a few times a year. Thanks to an AMI system, Ann Arbor has analyzed the University’s water use characteristics, along with the city’s individual commercial customers, and assigned a rate class based on their historic water use. Once assigned a rate class, a commercial customer pays the same rate for all water units used throughout the year.
The rate class calculations include a customer’s peaking factor, or the ratio of peak to average water use. Including the peaking factor allows for rates that account for the costs of providing the infrastructure necessary to support that peak usage. So customers use water consistently over time pay less than customers who use a lot of water for a few events, such as the football stadium, (which uses millions of gallons of water within just nine single-day events a year).
Ann Arbor uses an AMI system from Aclara, and according to Pamela Webster, director of Product Marketing, one the most attractive benefits of AMI/automatic meter reading (AMR) is conservation of water and something equally as costly—energy.
“Our research has shown that the number one reason of [choosing] a fixed network is the conservation issue, but there’s another concern about all the energy used to pump the water that can be related to the time of use or peak usage issues,” says Webster. “Utilities want to check the meters of their commercial and industrial accounts often because they are such high generators of income. They want to make sure they’re sized properly or else they can lose water in the system, or they are not billing for the amount of water that’s going through their system.”
Lost water revenues are a worry for the City of Columbus, OH, according to Kevin Campanella, assistant director, asset management, Columbus Department of Public Utilities (DPU). Industrial and commercial water users, with their “larger meters” is where, according to Campanella, “we can gain the most” conservation.
“A lot of the older meters are maybe, not as accurate and as they age they tend to get a little slow, so there will be some direct financial benefit to installing those automated readers that more accurately measure flow,” he goes on to explain, “but there are some social benefits as well, more accuracy and you have more equitable billing, and you can also analyze the gains.
“Real-time data allows you to address breaks and leaks in the line, and you can reduce water loss quickly, and you can benefit the customer if the break is on their service line that they owned and maintained by alerting them to a potential water loss that allows them to address it and reduce their cost of damage and usage and consumption.”
The DPU’s largest C/I customer is the Anheuser-Busch (ABInBev) brewery, and Campanella notes that the brewery’s standing as a major employer and taxpayer makes it a top priority for the utility, especially in light of the fact that water conservation is a key measurement of corporate sustainability practices. In March 2013, ABInBev announced that it achieved its three-year global environmental goals on water, energy, carbon emissions, and recycling throughout 130 breweries and soft drinks facilities across more than 20 countries. This represents an 18.6% reduction in water usage across ABInBev’s global operations against a 2009 baseline. Efforts to use water and energy more efficiently also generated an estimated global cost savings of $92 million.
Campanella estimates that ABInBev uses twice the water that’s consumed by the DPU’s second largest customer. The DPU’s other large C/I accounts include 28 suburban communities, and the headquarters of Battelle, one of the world’s largest independent research and development organizations.
The water usage of C/I customers has implications beyond local concerns, says Mary Wyatt Tiger, chief operating officer, Environmental Finance Center at the University of North Carolina. “From the financial perspective, utilities are keeping an eye on their top 10 customers because it speaks to their revenue vulnerability should an industry pick up and move,” says Tiger. “But it’s also a major criteria that credit rating agencies are looking at when they’re rating utilities. They ask who are the 10 largest customers and do a general assessment of how much revenue is coming from those customers.”
The Environmental Finance Center (EFC) is one of 10 national centers. Historically, the EFC focused on water and wastewater rates in the Southeast, but it has since broadened its focus to a national level by partnering with the Water Research Foundation on a report involving revenue resiliency for water utilities in North America.
“Another national project were engaged in is for the Environmental Protection Agency,” says Tiger. “It’s focused on small drinking water systems. There are a lot of those, and for that project, we were working with the entire environmental Finance Center Network to provide outreach to small water systems. Rate setting is a significant issue because each one of these systems is in charge of setting up their rates, so it’s a diverse topic.” Information about the past and the current rate setting systems can be found at www.efc.unc.edu.
One EFC project related to the benefits of AMI involves agricultural irrigation. The idea is to offer interruptible irrigation rates that would allow a utility to generally set lower rates for irrigation if customers agreed to limits whenever the system was reaching a peak demand.
“A signal from the AMI system would shut the irrigation meters down, and without AMI it’s not feasible as a pricing structure,” says Tiger. “So in general, we think about using AMI as a way to tailor rate structures that would allow for more efficient pricing and efficient water use.”
In Palo Alto, AMI and cloud computing is just part of the utility’s customized metering system.
Another major area of EFC research relates to AMI from a data management perspective, explains Tiger. “One of the things were looking into is the business intelligence question, and using customer billing records for more than just sending bills. So it’s using data to create metrics on customer water use that will inform pricing, decision-making, conservation programs, marketing, and communication. We accessed many North Carolina utility billing records, and we’ve been able to take those records and slice and dice them in a way that is creating different thinking about customer demand and customer characteristics, and we hope to write a guidebook on metrics and how to actually derive information from utility billing records.”
Collecting data is a significant goal for the water industry, according to Andre K. Noel, senior marketing manager—metering, Neptune Technology Group Inc., Tallassee, AL. Neptune’s Statistical Evaluation for the Enhancement of Revenue (SEER) is an analysis and statistical tool based on the testing of more than 10,000 meters on behalf of water utilities for over 15 years.
“The testing included capturing the manufacturer, size, type, age, maintenance and volume history, and performance accuracy results for these meters,” says Noel. “So, if you provide the basic information about the meter manufacturer and size, type, and age, plus annual revenue, we can determine the payback for you, and we can use that tool to predict how they will test in the field without having to go in the field. SEER has a 95% confidence interval when the meters are 15 years of age or older. It works with industrial meters and, even, residential meters.”
An analysis of C/I meters for the City of Warren, OH, showed that a project to replace the system’s older meters would pay for itself quickly, explains Noel. “What’s interesting in the case of Warren is that they have 24,000 meters, and only 1,200 of them are commercial, but that 1,200 represents about 82% of their revenue. This highlights the importance of commercial meters in maintaining them to make sure you know how they are performing.”
Warren installed 1,200 Neptune commercial meters ranging from 1 inch to 10 inches, equipped with high-resolution E-Coders. According to Bob Davis, executive director of Warren’s water department, the city’s goal is to chart and track time-of-use data for high-volume customers, as well as detect leaks, reverse flow, and tamper occurrences.
“They can improve the relationship of commercial customers with the system and provide many new services to the customer,” adds Noel. “They can provide usage profile data, offer incentives, and alert high-volume users that it’s better to draw water at certain times. Then they can benefit from a cost reduction in use in the water, and the utility won’t be pressed to deliver water at certain times. So, with a time-of-use monitoring and an hourly or daily data from the meter, they can specify certain times with a lower cost. This can also be used in the opposite way to create penalties for peak use of water very similar to electricity rates.”
On a larger scale, Cincinnati, OH, found that upgrading their metering system boosted the utility’s operations and reduced costs significantly. “In Cincinnati’s case, they have 241,000 meters, and only 3,195 are commercial,” says Noel. “That’s only about 1.3%, but that represents a considerable amount of their revenue.”
Total projected savings through 2012 for Cincinnati exceeded $1 million in overtime and equipment, plus $21.4 million in salaries. Projected increased revenue through 2012 came to $27 million from increased meter accuracy and staff reductions from 24 full-time to four part-time meter readers. The Commercial Services Division saw an additional staffing boost of 37 employees from other positions that were eliminated or reassigned.
Improvements to a utility’s labor force can include more than simple transfers, according to Mike Caranfa, vice president and general manager, Elster Solutions, Raleigh, NC. “Often, we’re finding an after-the-fact value add to the technology,” says Caranfa. “It’s easy to look at an AMI system and see the operational benefits, such as not having to send a meter reader out and more data. But one of the value-adds here that will help the commercial space, and the utility in general, is the water utilities have the same challenge from a human resource and capital perspective as electrical utilities. They have an aging workforce with a lot of people on the verge of retirement and not a lot of young employees coming up behind them. The IT [information technology] and communications component and data analysis is a way to attract and retain up-and-coming, young, technically oriented employees to fill this resource gap. So for commercial accounts, the utility can put more focus on their highest-revenue customers.”
The City of Palo Alto expects to focus on its C/I customers as it launches a pilot program with Elster. In December 2012, Elster announced two members of the California Municipal Utilities Association, City of Palo Alto Utilities (CPAU) and City of Santa Clara’s Silicon Valley Power, have selected and implemented advanced metering solutions featuring Elster’s EnergyAxis AMI solution that provides two-way communication for electricity, water, and natural gas meters.
CPAU serves nearly 29,000 customers. To start, Elster and its partner, Utilismart Corporation, a meter data management company will utilize cloud computing to provide a fully managed and customized engagement program through Web portals and mobile applications, for Palo Alto’s Residential Customer Connect Pilot. In the 2005 CPAU began an AMR program that retrofitted about 5000 meters, giving the utility one-way communication for drive-by meter reading, but as AMI technology continued to advance, CPAU postponed additional AMR system purchases. This year’s decision to run a pilot reflects the fact that costs for AMI technology are dropping, according to Shiva Swaminathan, project administrator at CPAU.
“When we started thinking about the technology and did an assessment of the AMI economies, it didn’t pan out,” recalls Swaminathan. “Our meter reading program was efficient, and also the back office integrating systems for AMI had substantial costs that were the same for 30,000 or a million meters. But today, the costs are coming down, so our city council approved nine pilot programs related to smart grid technologies. We decided to a small pilot so both the community and the utility would have experience and see the value. We picked 200 customers on a first-come, first-serve basis and another 100 based on their profiles so we can have a good cross-section of customers.”
Although those 300 customers are purely residential, eventually the city plans to merge an existing C/I program with Elster’s new services. According to Catherine Elvert, Utility Account Representative, utilities marketing services, CPAU has already implemented an advanced metering system for commercial customers and larger key accounts that lets customers use an online portal and view their history and their current consumption.
“We decided to launch a pilot using the Aquacue technology with a number of our larger commercial customers just to pilot the effectiveness of providing the data and encouraging water reduction through the detection of leaks, and knowledge of water consumption,” says Elvert. “So far the response is very good, and one of the larger shopping malls here has been using it to identify and address a major irrigation problem. They saved hundreds of thousands of gallons of water by logging onto this portal on a regular basis.”
Having access to data is the key to AMI benefits, notes Caranfa. “I think the technology is there to manage consumption and bring it back remotely, and that missing link that’s getting better and better all time is the feedback to the customer. Getting information doesn’t do you any good if you can’t analyze the information and develop at actionable intelligence and serve it up to the customer to take action. So that feedback is growing as we develop the newer technology, and we will see benefits to customers as utilities become technologically savvy. With more employees that want to integrate the technology and data, you’ll see that become more valuable to the commercial entities.”
Ultimately, the roll of AMI as a data-driven technology is critical to the economics of providing water for C/I customers, according to Doug McCall, marketing director, Sensus, Raleigh, NC. “I would categorize the commercial industrial sector as being part of the whole evolution in the water industry,” says McCall. “For so many years water has been seen more as a right rather than an actual business practice. And now, with the looming crisis around water availability and aging infrastructure alike, when a utility installs a new meter and they get 8% more water billing, they see that they’ve been providing product but not billing for it.”
The financial impact of inaccurate metering was something of shock to the City of Sunnyside, WA. When the city needed to increase revenue, officials expected that a 6-inch raise in water rates would provide additional revenue from the 1 billion gallons pumped yearly. But 12 months later, revenue was down by $120,000. Utility management reexamined its customer base of 3,500 and discovered that 1,000 large C/I meters accounted for 70% of their total revenue. The billing history of its top 10 water users revealed that charges to their largest customer—a consumer products factory—decreased from $7,000 to $1,600 per month for more than a year.
According to Jim Bridges, director of public works for the City of Sunnyside, the problem involved the company’s 6-inch commercial water meter. Moreover, Sunnyside’s financial software did not have the ability to issue an alert when meter readings plummeted. After the first month of the reduced measurement, the following months were consistently low, which kept the problem under the radar.
The utility launched a citywide testing program and changed its top ten large meters to Sensus OMNI models, which come standard with a built-in test port and test display mode that can measure down to the hundredths of a gallon. A data-logging feature allows Sunnyside to download the hourly maximum and minimum flow rate details, in addition to overall consumption for up to 31 days. Bridges notes that an aggressive schedule to test large meters once a year increased revenue and reduced non-revenue water from 10% prior to the testing program to just 1 or 2%.
“Small utilities are buying into AMI benefits,” says McCall. “Yes, large companies are buying up smaller utilities, but the community water source is still here to stay, and it’s now just a three- to six-month process of working with a consultant to help with the business case that includes benefits like district metering, pressure monitoring, and data management for C/I customers. Also, IBM has very good software for water infrastructure management and they bring in the data from our network, and it’s correlated with water user’s electricity. Pumping and treating water is expensive, and a small city needs a powerful tool to manage their energy and water costs.”
All told, the experiences of small utilities such as Sunnyside, and large utilities such as Cincinnati, reflect the many opportunities for AMI technology to improve service to C/I customers. From conservation and leak detection, to energy efficiency and data management, the technology is helping utilities stabilize their operations and save money. Moreover, AMI is can help utilities avoid huge losses in billing, such as a $5.4 million unpaid bill from a now bankrupt steel factory in Baltimore, MD. With such potential and attractive pricing, many water utilities are poised to reap the benefits of installing AMI at commercial and industrial locations.
Author’s Bio: Writer Ed Ritchie specializes in energy, transportation, and communication technologies.