Under the Magnifying Glass: How to Increase Revenue and Lower Operating Costs
May 23, 2022
May 23, 2022
Managing a City is no easy task. Every day can hold surprises, urgencies, and distractions that command your attention. At one time or another, you may have experienced using a magnifying glass, so you can appreciate how this simple tool can instantly enhance a picture so that it comes into focus. The same concept can be applied to your city—looking closely, you can find new ways to enhance performance and reduce costs.
Water production, distribution, and billing are a major part of their operation and budget for most cities. Unfortunately, not every bit of water we pump out is billed. Losses happen in two general categories, real and apparent losses.
Actual losses are what they sound like: water lost in distribution, with breaks and line leaks being the usual suspect. The most common way to identify these is with acoustic detection, as leaking water generates a distinct sound that can be heard with advanced equipment. Acoustic detection is usually done periodically throughout a system. Monitoring for pressure drops is also a way to catch big leaks.
More recently, cities have begun incorporating this technology into their systems to continuously monitor leaks using pressure sensors and/or acoustic detection. These capabilities are options on new, smart water meters from several manufacturers. With strategic deployment throughout the system, the water department can use this data to find leaks in real-time before they result in large losses.
Apparent losses are not water that is actually lost in the system but the water that isn’t billed. As such, it is a key component of overall non-revenue water. The two primary culprits here are meter inaccuracy and unauthorized consumption (theft).
Traditional mechanical meters tend to lose accuracy over time. For this reason, most cities have a replacement cycle of 10-15 years. The actual level of inaccuracy depends on the type and quality of the meter, total lifetime flow through the meter, and water chemistry in the system. While some older systems still show meters in the 97%+ accuracy range, it is more common to find accuracies in the low to mid 90% range, sometimes worse.
The only way to quantify this loss with any precision is by testing a statistically significant sample of the meters and extrapolating those results to the larger system. Based on this data, a City may decide to expedite its replacement cycle or implement a system-wide replacement.
When replacing meters, most Cities are now transitioning to solid-state electronic meters. Due to their lack of moving parts, the meters hold their accuracy throughout their life of 20+ years. When tied to an Advanced Metering Infrastructure (AMI) system, these meters also provide the secondary benefit of reducing unauthorized consumption. This is accomplished through alarms for dry pipe, reverse flow, and other common indicators of tampering. These alarms are transmitted back to the water department in near real-time, so issues can be addressed before significant losses occur.
The average total water loss for U.S. cities is about 16%. While it is unrealistic to expect this number to drop to zero, depending on what strategies are already implemented from the above suggestions, a city may be able to cut water loss by several percent. For example, a city running an average of 16% loss could expect improvement in the 10-13% range by adopting some of these strategies. Due to rate structures having a fixed and variable component, a city may not see a 1-for-1 correlation to increased revenue, but it may still be a few percent of the current billings.
Like most everything, energy costs have seen a sharp uptick in the last year. For example, Texas has especially seen big increases coming off the February 2021 winter storm. While your city may be locked into a fixed price agreement for a while, eventually, we should expect that electricity and natural gas prices will hit budgets to the tune of 10-30% or greater increases. To minimize the impact of these rate escalations and see savings now, we need a combination of infrastructure and operations-based strategies.
Before investing in equipment replacement, consider what can be done to reduce energy usage within your current portfolio. This may be as simple as adjusting the temperature setpoints in your facilities to a uniform standard like 74 cooling and 69 heating. The operational schedule should also be closely managed to match the actual building occupancy. Consider programming the existing thermostats or better utilize a central building automation system. Water and Wastewater treatment plants are a big source of energy consumption for cities with these functions. Consider Sequence of Operations (SOP) for all systems and engage an expert in the field (SCADA, controls, energy, etc.) to determine if there are more efficient ways to stage equipment on and off.
At some point, you can only do so much with your existing equipment, and it will make sense to evaluate investment into higher efficiency technologies. LED lighting is perhaps the best example, as it typically uses 50-70% more energy than the legacy systems it replaces. HVAC systems, building envelope, controls, and other key determinants of energy use have also seen improvements in the past 10-20 years, which means significant savings can be gained when replacing systems nearing the end of their life.
Any City with water and/or wastewater treatment plants (WWTP) should pay special attention to these systems, given their associated energy costs. WWTPs usually account for about half the energy usage of a city, with half of this amount being attributed to aeration alone. By first focusing on the biggest culprits, a city can maximize its impact. Look big, then look small.
Infrastructure improvements should be categorized based on whether they are primarily for savings or because of asset condition. LED lighting is usually taken on due to the quick payback of investment yielding net savings back to your budget from Day 1. HVAC systems are usually only done when they near the end of their useful life, but the associated benefit is reduced energy and maintenance costs.
The above strategies might sound great, but most of them will require some level of financial investment. Look closely because you may already have the money to pay for all this in the existing budget. The beauty of energy and operational improvement investments is that they can often offset their own cost with the dollars they save. Imagine an investment of $100k into LED lighting that will reduce electricity costs by $10k/yr. This is a simple payback of 10 years, so if you finance the investment over 15 or 20 years, the annual savings will be greater than the annual cost of the debt service.
Heavy capital investments made due to asset age and condition may not have the same type of net positive savings, but when combined with investments and strategies that do, you can craft a comprehensive program that will fund its overall cost through its savings.
Many states allow these types of comprehensive projects to be bundled and financed under Energy Savings Performance Contract (ESPC) legislation. Learn more about the steps to developing one of these projects.
Depending on your goals, you may decide to structure your project to be cost neutral or net positive to your current budget. If you’re looking to upgrade aging infrastructure, a cost-neutral project that reinvests savings to fund equipment replacement will be best. If you desperately need the positive cash flow now, you can take the low-hanging fruit and keep the net savings for whatever need is greatest. In either case, you’ll gain the long-term benefit of reduced exposure to rising energy prices.
A new perspective can yield innovative ways to improve infrastructure, better serve citizens, and do more with available resources. I invite you to connect with me to explore any or all of these strategies today.