The regulated UK market

In late 2009 OFWAT, the UK regulator, published a final determination for water prices for the next period.  On average, OFWAT decided that the water companies must keep customer bills flat while embarking on massive capital investment plans.  That produced the usual chest-beating from the regulated utilities who promised that the end of civilisation was at hand.  The Daily Telegraph, for example, reported in mid-January that “United Utilities is expected to embark on a’"major’ cost-cutting drive that could see it shed 10pc-20pc of its workforce, as it prepares this week to accept harsh restrictions on pricing set by the regulator.”

A longer story in the Financial Times later that month reported Professor Martin Cave, an expert in utility regulation at Warwick University, saying the he suspects that the industry has been “crying wolf”.  “It’s difficult to reconcile the cries of outrage with the fact that they’ve accepted the judgment,” Prof Cave said.

In the preceding five years bills had been allowed to rise more quickly than inflation. Profits were higher than expected as the companies were able to borrow at lower rates than had been assumed by OFWAT. Many investors, the FT suggested, had grown used to equity-like returns for risk levels more akin to fixed income securities.

Then, at the beginning of February, the price of shares in Northumbrian Water soared when it was believed that a Canadian-based Teachers’ Pension Fund was buying the shares – possibly even mounting a takeover.  Then on February 18 the Fund announced it was ruling out any such plans.  The stock price fell back.

Higher water bills

The North Carolina Charlotte-Mecklenburg Utilities said faulty electronic transmitters could be causing some unusually high water bills, but the department believes the vast majority of bill spikes are due to people using more water than they realize.  Faced with an increase in customer complaints about high bills, the Charlotte City Council asked Monday night whether the water billing software is billing correctly, and what they should tell constituents.

Last fall, residents of the Peninsula neighborhood in Cornelius complained of unusually high bills produced by the water billing software -- in some cases, more than $500 a month -- or abnormal spikes. Media coverage spurred more complaints citywide, and CMUD said it's struggling to investigate all of them.  Denise Foreman of CMUD said the department believes most spikes were due either to leaks or to people using more water than they realized. Another factor: CMUD raised rates in 2008, with the biggest increases being levied on the heaviest users.  But Foreman also said CMUD has investigated some complaints and has been unable to find a cause.  "One-time spikes can be a huge question," Foreman said. "We'd like to know why."

Bob Watson of Cornelius said the water bill at his business, a self-storage facility, jumped one month from the usual $30 or $40 bill to more than $500. "Something fishy is going on here," said Watson, who's part of a group trying to investigate the bills.  Council member Edwin Peacock, a Republican elected citywide, said he has received calls from residents who have years of water bills showing consistent usage -- then a one-time spike. After that, bills return to normal.  "How do we respond? How many people are we dealing with?" Peacock said.

Foreman said CMUD is confident its meters are accurate. She said they are mechanical devices, and the technology hasn't changed in 40 years.  A relatively new factor is that electronic transmitters now send meter readings to billing. Those were first installed in 2002, and Foreman said they can malfunction if moisture corrodes electronics or batteries wear down. The transmitters save the department about $1.6 million annually.  "We feel like we can trust our meters," Foreman said. "You can't program the meter electronically. They are mechanical devices. But the transmitters can mess up."

Saving water and electricity costs

Here are a couple of tips for water and electricity usage savings for 2010:

Replace your existing showerhead with a new low-flow showerhead. The water-efficient showerhead, coupled with only a 10-minute shower, will save 5 gallons of water over a typical bath and up to $145 each year on electricity used to heat the water.

To save hot water and the $24 to $40 in fuel to heat that water each year, wash your clothes in cold water. Choose a laundry detergent that's formulated for use in cold temperatures.

Getting the right rate

Yarmouth, in Canada’s Nova Scotia province, commissioned consultants to work out what the new water rates should be.  The rates were approved by Council.  The Yarmouth Water Utility was all set to entre the new rates into their water billing software.  And then … it emerged that the consultants had used the wrong base figures altogether.  The increase was to be a large one: 60 per cent in the first year, 22 per cent in the second year and 2 per cent in the third year.  However there was a problem with the way the rates were calculated. It turns out that the consultants who prepared the report didn’t use Yarmouth’s water billing base rates in calculating the new rates but rather those of another municipality.  The actual increase would “only” be 24.9 per cent in the first year, 21.9 per cent in the second year and 1.7 per cent in the third year.

The mistake comes from using a lower-than-actual base rate to calculate the percentage increase. All increases must first be approved by the province’s Utility Review Board. A hearing on the matter is expected to take place sometime in January or February.  A member of town staff detected the error during a review of the consultants’ report.  Have they been paid?  Why?

Getting the bills right

In  North Carolina residents in one community want officials to figure out what's causing their water bills to spike, sometimes by hundreds of dollars.  Multiple media outlets reported Friday that customers of Charlotte Mecklenburg Utilities packed a town hall meeting in Cornelius this week.  One woman said her water and sewer bill leapt from about $25 to more than nine times that amount.  Residents say the spikes are so high they can't be explained by annual rate increases. Some have called in experts, who found no leaks in their systems or meter problems.  Utility director Doug Bean says he's committed to figuring out what's causing the high bills. Workers say equipment is working correctly at all but one of the 32 homes they visited.

And in Texas the Duncan City Council’s recent meeting focussed on an amendment to the code of ordinances relating to interference with water meters, inaccurate meter readings, prescribing penalties and prescribing procedures for adjustment due to leaks.  Historically, the city has allowed for adjustments to utility bills if a customer provided evidence that they had a leak and it was repaired. Even though the city has been allowing the adjustments, there is nothing written in the city code that says the adjustments are allowed. The city wants to amend the ordinance to allow for these adjustments and set up guidelines for the possible adjustments.
The proposed ordinance would be closely modelled after a similar one in the city of Lawton that contains specific language related to the basis of calculating adjustments with those in excess of $500 having to be submitted to the City Council for final disposition. The method and procedure outlined in this ordinance would provide a consistent and fair basis for protecting both the customer and the Public Utilities department.  Workflow in the city’s utility billing software will be needed to manage the process.

In the UK electromagnetic flow meters from ABB are playing a key role in cutting water leakage for the Ministry of Defence (MoD), with reductions of 60% achieved at some sites.   Leakage has already dropped by about 528 million (US) gallons per year across more than 1,500 MoD sites where C2C Services manages water and waste utility assets.  C2C Services is a consortium of Severn Trent Services and Costain. C2C provides water services to MoD sites in the North, East and Southeast of England, known as ‘Package C’.  The 25-year £1 billion ($1.66 billion US) contract is part of Project Aquatrine, which transferred responsibility for MoD’s water services to three different contractors.

Stealing water

From opposite sides of the world come stories this week about stealing water.  There are multiple ways of doing this – getting water at a discounted price, by-passing the meter, or simply tapping the supply illegally are three of the most common.

In Mumbai commercial establishments have been found illegally tapping water meant for residential pockets in the city.  An audit on supply and distribution of water in the city has brought to light cases where commercial establishments are illegally consuming water meant for residential consumption.  The report, tabled before the standing committee of the Brihanmumbai Municipal Corporation (BMC) recently, cites 407 cases. It was compiled by the office of the chief accountant (water supply and sewerage department) of the BMC. Instead of applying for a commercial connection, these establishments have been tapping water from domestic lines.

The BMC has differential charges for domestic and commercial connections. It charges between Rs25 and Rs38 per kilolitre of water for a commercial connection. In contrast, the rates for domestic users range from Rs2.25 to Rs3.50. The report says commercial establishments have been masking their identity to avail of domestic water connections.  Of the 407 cases, 221 are in the western suburbs, 95 in the island city, and 91 are in the eastern suburbs. The illegal connections have brought to nought the BMC's efforts to combat water shortage by restricting new commercial connections. The corporation is denying connection for projects where the daily water demand is over two lakh litres.  Interestingly, instead of taking action and discontinuing water supply to the violators, the BMC has regularised their connections after penalising them. Many of these connections receive 24 hours water supply while several residential colonies go without water. The audit report has also identified 100-odd cases where water bills were not being regularly sent.

In Monterey County, California, American Water says it is keeping a sharp lookout for thieves making off with one of the Peninsula's most precious commodities — water.   Cal Am announced Friday that it is making a concerted effort to deter the theft of water from its system — most typically by tapping fire hydrants without required permits and meters.  "We have asked all our employees to be on the lookout in the past couple of months," said Cal Am spokeswoman Catherine Bowie. The utility, which serves most of the Peninsula, is under standing state orders to reduce pumping from the Carmel River, conserve water and to reduce losses from its system.

Bowie said losses to the water supply have run as high as 13percent, but the utility has reduced that to about 10percent in recent months. The primary causes are leaks in the system, malfunctioning meters and theft, she said.  The utility can't estimate what share of the losses is attributable to thefts, but given the tight restrictions on Peninsula water use, Bowie said, "Even if it's 1percent — that's too much."  Most thefts are probably committed by builders who tap into fire hydrants to provide water on construction sites, Bowie said. The utility has found about 10 instances of theft in recent months, including a couple of places where someone hooked into Cal Am's system by "reverse plumbing."

New water bills in Nova Scotia

The Nova Scotia Utility and Review Board has approved Annapolis County council’s request to amalgamate three county water utilities and to introduce new water rates, a municipal spokeperson said in a media release. The combined utility has been renamed The Annapolis County Water Utility. In 2008, the municipality engaged consultants to study the water structures in the water utilities. The objectives of the study was to:

1. consider the feasibility of combining the three utilities – Margaretsville, Granville Ferry and Cornwallis Park - into a single entity, with common rules, regulations and rate structures
2. to develop the documentation necessary to apply to the Nova Scotia Utility and Review Board for new rate structure(s) designed to make water works operations sustainable.

“We were operating each utility as a separate accounting entity; much like separate corporations,” said Annapolis County Warden Peter Newton. “Under the Nova Scotia Utility Act, we are required to maintain separate sets of records for each Utility and to have separate financial audits of each utility carried out on an annual basis. We are also required to submit separate annual reports for each utility to the NS Utility and Review Board. Combining the utilities into a single entity reduces the administrative workload and the audit cost.”

Laurie Emms further explained the benefits of this amalgamation by saying the rate structure for each utility is supposed to reflect the cost of providing service and reflected in the consumers’ water bills. This is often difficult to predict the annual cost of operating a smaller utility, and can more accurately predict the annual cost of a larger unit. For example, if a smaller utility is required to address three water main breaks per year (average), the budget is established to repair three breaks a year. If the utility experiences five breaks in a fiscal year, operating compliance becomes a problem. If the Utility is large enough to warrant a 10 water main break per year budget, an additional two, unpredicted breaks has a lesser affect on the budget. The overall goal of the municipality is to have a self-sustainable and cost-effective utility.  The combined utility will look to consolidate their water billing software.