(Re)Designing (Water) Systems

Effective Utility Management

“Lack of money, scarcity, and so on — they’re all excuses. The problem (with water utilities) everywhere is bad management.”

Those are the harsh words of Asit Biswas, a water expert at the Lee Kuan Yew School of Public Policy in Singapore. Whether those words are true or not, everyone agrees that the water utility industry could upgrade its operations even as infrastructure decays and regulations ramp up. Most water utilities fall under the public works departments in cities and some of those cities still use floppy disks and Fortran (yes, Fortran) to run their operations. Even as they lack updated technology, they possess gobs of desire to do great work. They lack the tools and access to all the information required to make good management decisions quickly. Tools to capture, analyze and present disparate information sets in a simple dashboard. The reliance on archaic approaches to managing the critical resource won’t work in a world where you can capture real-time information on the water distribution system and address those issues in real or near real-time. Taking things a few steps forward, effective water utility management will require the ability to confidently predict where the next water quality issue or leakage might occur. Managing the water utility effectively will require the ability to tie an issue on the distribution system to the cost/loss of revenue and, consequently, what the actual rate for the water should be. If only the water utility had the technology to enable them to that? The utility needs to function as a system loop.

Systems and Loops

Systems are continuous loops. Unintended consequences are just scenarios we did not consider during our development of the system and a lot of the quality issues that water utilities deal with are as a result of inadequate information to holistically consider the state of the system. Human actions are part of the continuous loop of systems. These human actions are a critical input in the assessment of the possible outputs in our water systems, the complex system that is it. Due to the continuous action of humans, our water system is struggling to maintain balance. But our actions continue to make that balancing act difficult. The aquifer levels dropped in San Antonio just a few days before my writing this article. The actions of people contribute to that aquifer level drop. Say what you will about what we need to do about water usage, the real constraint in that system is the amount of water that we can get from the sources of water that we rely on and climate change.

Since people are inputs into the eventual behavior of the water system, and we know that the actions of people impact the water levels, we have to get people to use water differently or less. We’ve already designed some things into our home water systems that ensure we will go down a certain path. One of these design interventions that isn’t helping us conserve water is that in most homes (across the world), even after the water utility has cleaned and filtered the water that comes out of our taps, we use the same clean water to flush our toilets as we drink from our kitchens. A building design intervention, which I’m certain is based on avoiding a complicated plumbing system, has led to us wasting good clean water. To change these types of designs, the utility will have to communicate the message differently to consumers (You and I). Some of that communication will have to focus on branding.

Branding Water

Sydney Water Branded Bottles. Image Courtesy Anand Raghunathan

One of the biggest complaints that water utilities across the US (and for the most part across the world) have is that they cannot dare charge people as anything remotely close to how much private companies charge consumers for bottled water. One utility decided to take matters, and messaging, into its own hands. As recounted to me by Anand Raghunathan, Sydney water made the hard work utilities do — capturing, filtering and distributing water- tangible by spending money on a tap water branding campaign.

What was the point of this utility spending $1.5M on a marketing campaign towards getting people to drink more tap water in a country where bars, restaurants etc are mandated to serve tap water? It was to change customer perceptions and get customers to pay the true cost of the water that Sydney residents, and frankly, we all take for granted. Change the messaging (and marketing), change the behavior.

True Cost of Water

$0.004 a gallon. That’s the average price cost of water in the US. Less than 1/300 the cost of bottled water. There is this crazy thing about water; it falls from the sky so we think it is free. But the cost of water is the cost of making it available when we need it at the quality we desire. The true cost is all the work that the utility has to do and all the infrastructure that is owned by the utility and required to get it from source to tap. The true cost is the cost of the capital that is required to get it to your tap. Because of the immediacy of the need, you turn your tap and it flows out, there is a need for redundancy in the system. Redundancy in the water (and wastewater) system is a feature, not a bug.

As cities grow, and systems age, the need for redundancies in the system will increase and, as we discover new contaminants and suffer from the accumulation of the effects of old contaminants, we will start to see increases in the cost of the water. But we have not started to do the work of preparing consumers for these rate increases. These are inevitable as we need to upgrade the systems. The financial part of designing systems should consider the benefits that will be derived, and the consequences, of funding investments in a new system. Where these design interventions fail financially is where the infrastructure benefits take second place to the budgetary considerations of the entity building the infrastructure. Chicago’s privatization of toll roads and parking systems was more about the budget and less about the benefits. That is a failure in design and not the kind we want. We want a system that nudges consumers towards the recognition that the benefits they derive from this most critical of resources will require that they use less and pay more for the water that flows freely (for now) from their taps.

Consumer Behavior Change Through User-centered Design.

One of the key considerations to be able to charge your customer a fair/right/profitable price for a product or service is their perception of the value that the product provides them. In the case of water, convincing the customers of the value becomes tough, because we all believe water should be free. There are no (or very few) other products/services that suffer from this complication. 

Another key consideration in setting the price for your product/service is that you should mostly avoid getting into comparative pricing situations as it drives the price of the product down (price wards). In the case of the water utility, comparative pricing is actually going to be the saving grace. When your competitor charges 300X for the same product. Yes, you probably don’t remember that Coca Cola was found out for bottling tap water and selling it as Dasani. The justification for that 300X price differential? Branding. But this branding can not just be slapped on top of poorly run operations. You can’t slap lipstick on a pig. 

The utility will have to improve its operations from the ground up and one place to start is in how it communicates with customers. The mechanism through which most utilities let their customers know what is going on with quality is the EPA mandated Consumer Confidence Report (CCR). Unfortunately, in our user research, the CCR does not give anyone any confidence. Not one of the customers we put the old CCR in front of expressed confidence or even clarity about what the CCR was supposed to be communicating to them. So we set about fixing by creating an interactive and user-centric iCCR. that because when water utilities can communicate the true value of their product and the work they do, they will be able to convince customers (and consequently the water boards or commission that approves rates) of the need to increase the price that everyone pays for water. We did this before in the electricity space (communicate the true value to customers) and are finding this approach works in the water space. When customers know better, the utility does better in terms of more revenue.

(Re)Designing (Water) Systems.

More revenue means more money for the water utility to acquire the assets required to ensure that access to good quality water is maintained or developed. This will come from practicing effective utility management so that the utility brand truly reflects the hard work the utility employees are doing. To be able to brand a product, water, and charge the right price for that product, the water utility will have to acquire soft assets that improve operations and change the perception of the water utility from one stuck in the floppy disc era, to one utilizing cutting edge tools to ensure safe drinking water. Because this is really all about perception. Perception is why we pay so much for bottled water but fail to pay what we should to keep our water system functioning properly. It’s time to start calculating the future costs of our current decisions. We’ll either pay now or pay (dearly) later.

Originally published on the Varuna Blog. Varuna is an enterprise management platform for water utilities. We provide operational tools and consumer communication tools to enable effective utility management. Contact us to update your systems and CCR.