Water Meter Assessment Project Results and Recommendations

BUSINESS CONSULTANTS

DEEP TECHNOLOGISTS

The Village of Tinley Park, Illinois

Water Meter Assessment Project Results and Recommendations

© 2015 West Monroe Partners | Reproduction and distribution without West Monroe Partners prior consent is prohibited.

Assessment Overview

Data Analysis Approach

Key Findings

Phase II Recommendations for Improvement

Timeline

Communication Strategy Recommendations

Contents

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Agenda


Summary of the Statement of Work (SOW)

Meter System Assessment Activities

Assess root cause of meter degradation, inaccurate readings, andinaccurate billings via desktop analysis, using industry bestpractices, and AWWA standards as applicable

Recommend corrective actions, timeline, and estimated costs tocorrect the water meter program based on AWWA standards,situational analysis, client recommendations, and professionalinsights

Meter Asset Management & Billing Practices Review

Assess people, process and technology of the meter assetmanagement and billing process program, through interviews andshadowing

Review refund policy

Create recommendations for meter asset management and billingpractices that cut across people, process, and technology

Review stakeholder communication strategy

This project included assessment of the metering system, billing practices and utility customer communication

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Phase I Objectives

• Assess root causes, patterns, andtrends that are affecting accurate andon time utility billing

• Determine potential impact tocustomers from metering andrecommend a framework thatappropriately adjudicates any issues

• To identify next steps to addresspeople, process, and technologyissues found in meter to cashprocesses

• Identify a strategic framework forstakeholder communication that willbegin to rebuild trust betweencustomers and the utility

Assessment Overview


1. Reviewed the ME Simpson test results from the 104 non-randomly selected meters thatwere replaced due to customer concerns, suspected meter issues, and routinemaintenance

2. Performed analysis on all customer consumption data (~20K accounts) over the past 15years to identify macro trends of water consumption and customer impact for each type ofaccount

3. Analyzed the meter consumption history of 93 meters that were exchanged with Sensusmeters in Q4 2014 to see if the difference in meters resulted in dramatic change inconsumption during Q1 and Q2 2015 and compared these results to ~7700 “SmartMeters”(Severn Trent/Elster SM700 models) consumption data during the same periods

4. Analyzed 10 specific accounts that were identified as having potential billing issues

5. Reviewed 12 residential homes to assess quality and status of meter installations

6. Reviewed 15 years of documentation around meter purchases, exchanges, consumptionand rates

WMP analyzed 6 different data sets before arriving at the findings and recommendations

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Approach - Data Analysis


1. Operational SE/SM 700 (Severn Trent – Elster “SmartMeter” brand meters) appear to bemainly within the AWWA weighted flow accuracy standards as evidenced by the originalnon-random sample completed by ME Simpson and engagement testing of the siteinvestigation of installation and subsequent testing of the account meters

2. Targeted observations of the performance of “SmartMeter” brand meters indicates meterspinning has occurred when the meter is under non-active flow conditions and in each caseof observed spinning, accuracy testing indicated the meter under registered

3. Consumption across meter classes has dropped, but rates have increased driving up theaverage water bill over the past 15 years

4. When “SmartMeter” brand meters were replaced with Sensus iPerl meters, no significantconsumption changes were evident in the data analyzed

5. Meter consumption variability for residential meters has decreased (this is a good thing)over the past 15 years due to more accurate metering and tighter billing practices

6. Lack of governing policies and processes coupled with limited operational insight providedby available data has led to less than comprehensive management of the people,processes, and technologies involved with utility billing and as a byproduct in many cases,placed the burden of proof on the customer to address issues

After the extensive data analysis and interviews with key employees across the meter to cash process, there were 6 key findings

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Data Analysis - Key Findings


Based on non-random samples, the majority of the current population of “SmartMeter” brandmeters are accurate to industry weighted* standards utilizing the weighted average outlined inthe American Water works Association M6 manual

The meters have demonstrated a shorter than expected life span

Due to life cycle considerations (10 year expected life) the population of “SmartMeters” warrantreplacement

Additional considerations include an inordinate number of blank screens and the fact that themeters are unsupported by the manufacture or by warranty

Asset Management is not systematic in its approach; there is a gap in managing the life cycle ofassets to include regular testing of meters, control of assets, and root cause tracking

Based on assessed datasets, the majority of the “SmartMeter” brand meters currently in service are accurate within industry standards but are experiencing a shorter than expected life span

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Key Finding – 1. Meter Accuracy

From the AWWA M6 manual


West Monroe evaluated test results for 104 water meters performed by ME Simpson Co., Inc. in 2015

10 of the 104 were not operational resulting in estimated customer bills

Majority of meters pulled for testing were for routine meter changes (67%) due to suspected issues

Remaining meters were pulled for various other reasons (e.g. damaged, unable to read, recording without flow, etc.)

Test results were compared to AWWA M6 standards for both replacement/in-service (table 5-1 from theAmerican Water Works Association M6 manual) and new meters (table 5-3 from the M6 manual)

When compared with standards the majority of failures occurred at low flow rate, mostly due to over registration

94 of the meters were operational, with 88% meeting weighted AWWA standards and an average of accuracy of 100%.

Maximum estimated impact due to observed over registration is +$6.35 per quarter

Maximum estimated impact due to observed under registration is -$11.64 per quarter

Meters were not tested for ‘recording without flow’ conditions (i.e. ‘spinning’)

Analysis of the recent 104 ME Simpson meter tests showed that 84% of operational meters passed AWWA weighted standards with an average accuracy of 100.43% across the sample

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Key Finding – 1. Meter Accuracy

Key takeaways: i) testing of a statistically significant random sample will determine accuracy of the installed meters ii) improved meter asset management and analytics are required to more promptly identify failed meters iii) analysis shows that THESE 104 meters are not dramatically over registering

Spinning is a condition where the flow indicator (dial typical to registration displays) moves without observed flow being present.


Conditional assessments and observations of spinning Spinning was physically observed on one meter that had been

removed from service. At room temperature and no water, the meter registered flow at 4 gallons per minute (gpm); placing water in its chamber made it stop spinning

Bench testing the meter’s flow accuracy lead to a result thatdemonstrated the meter was significantly under registering flow

Three other meters were reported spinning while in service during theengagement and were bench tested then left under pressure overnight. Two of the three passed the measure of flow accuracy but one registered 5.97 gallons under pressure without flow overnight. That meter failed the accuracy test, registering only 90.95% accurate

Spinning was identified by technicians in the field as a condition whenthe meter registered flow in hundredths of gallons after isolating via gate valves

See the scroll in the upper right for an example of how unusually largebills (spinning may have occurred) were processed through the billing system

The effect of “spinning” .

In the case of observed spinning meters, all tested accurate at orbelow AWWA weighted standards

The conditional circumstances that meters have been found to bespinning include: removed from service and isolated meters on non-active accounts

Conceptually, if spinning were to be occurring during flow, theexpectation would be an ever increasing amount of consumption. Thiswas not a pattern observed in any account reviewed; see graph inbottom left

Flow testing of meter accuracy determines how much was billedcompared to used

Meter “spinning” was rarely observed and when it was observed the meter was not in a typical operational or flow measurement state

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Key Finding – 2. Meter Spinning

In reviewing customer account servicing, one customer experienced an over read in June 2009 that hit the exception list and the over read was attributed to “spinning”. The billing exception process corrected the customer consumption and billed the account on the 12 month average. The meter was removed from service yet was not tested for flow measurement accuracy.

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Illustrative Measured Consumption With and Without Spinning

Illustrative Measured Consumption

Illustrative consumption with "spinning" @ 0.1 gpm


Overall average residential consumption has reduced by an annual rate of 3% since 1998

All stratifications of residential account types show a similar downward trend

Rates have increased during this same time

Fixed rates have increased by 0.525% annually

Variable rates have increased by 10.35% annually

The overall impact of reduced consumption and increased rates have resulted in an increase of the average water bill by 8.79%between 2000 and 2015

Based on review of billing practices and customer account history, the use of estimating consumption and consumption basedexception reviews are adequate in capturing outliers

The primary root cause of higher bills is increased rates

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Key Finding – 3. High Bills

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Actual Average Consumption and Bill Amount Over Time


No discernable difference exists between the average consumption of recently converted Sensus iPerl metersand “SmartMeter” brand meters across all single family water and waster water accounts

Approximately 1% of all single family water and waster water accounts were converted to Sensus iPerl in Q42014

Chart (A) shows that a reduction in average quarterly consumption following conversion

Chart (B) shows the same reduction for “SmartMeter” brand meters not replaced during the same time period

Analysis should be revisited once more data has been collected on the Sensus IPerl

Analysis accounts that were migrated from the “SmartMeter” brand to the Sensus iPerl water meter did not vary in aggregate billed consumption

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(A) 93 Single Resident Home accounts converted to Sensus iPerl meters in Q4 2014

(B) 7,700 Single Resident Home accounts that remained with “SmartMeter” brand meters during the same time period

Key Finding – 4. Smart Meter vs. Sensus iPerl

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Two separate billing quarters are shown below to compare and contrast the two different meteringsystems (mechanical vs “SmartMeter” brand meters) used by Tinley Park

Cases below belong to the subset of single family water and waste water accounts

Current metering system shows less variability as compared to old

Current metering system shows less outliers

Statistically comparing billed water consumption data from mechanical meters to “SmartMeter” brand indicates improved variability and reduced outliers since implementing meter replacement program after 2001

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(A)

Q2 2001 Mechanical Meter Consumption (residential account type)

(B)

Q2 2015 “SmartMeter” Consumption (residential account type)

Key Finding – 5. Reduced Meter Variability

The takeaway from these two points :

improved variability and reduced outliers

from billed consumption

reflects an improved overall billing system


Late 1990’s “SmartMeter” brand are entering the water utility market

2000 – 2004 Tinley Park elects to replace its residential Rockwell mechanical meters and installs ~ 5,000 Severn Trent “SmartMeter” brand meters

2005 – 2009 Accelerate installation for 15,000 SM700* “SmartMeter” brand meters over 4 years

2009 Elster Takes over Severn Trent, assumes warranty

2010 Chicago water rates begin to climb, Tinley adds tiered water rates.

2009-2011 Higher than typical “SmartMeter” brand meter breakdown rates become evident in the 2002 and 2006 series (installed 2003, 2007 years) Severn Trent delivers on warranty, providing over 800 meters to replace some 2006** series

2013 Tinley Park accepts warranty buy-out by Elster of $185,868 for remainder of the warranty period for the ~18,000 installed base of “SmartMeter” brands meters

2013 – 2015 “SmartMeter” brand meters continue higher than typical breakdowns and are replaced by in-house crews, as identified in billing or customer complaints

2014 Tinley Park moves away from the “SmartMeter” brand meter completely and moves to Sensus Accustream meters followed by Sensus iPerl meters

2015 (13) Tribune Articles and RFP for meter program assessment is issued

2015 Tinley Park takes action: Replaces Public Works Director, hires consultant, implements billing process improvements, attends Utility Summit

* The RFP calls for SM400’s to be replaced and is presumed to be a typo as the SM400 water meter product is not available in the market

**The Eden report indicates that 2002 series were a vast majority were replaced

Tinley Park’s customer base began losing trust in the metering system at the point of significant rate increases coupled with pervasive meter replacements

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Key finding – 6. Identified Areas of Improvement


No direct correlation was found between a meter registering without flow and the customer’s billedconsumption

When adjustments were applied, they were typically for one month; it was unclear of the basis for whenmore than one month would be given or what or how adjustments were determined

Meter test information was not available to confirm the accuracy of flow measurement for metersremoved from service

Causal reasons for meters to be removed were not found to be reliable

Other general observations from interviews and reviews of information made available.

Exception list parameters not reflective of true outliers

Estimated bills are processed manually

Billing follows mostly practices with little codified tools for administrators

Lack of written policies and procedures is an operational risk

Quarterly consumption data is a an operational and financial risk

There is a lack or ineffective data analysis or dashboard review of performance by the utility

These general observations represent the greatest risks to accurate billing

Data analysis of 10 specifically chosen accounts, many of which were highlighted by the media, lead to the following observations of customer account servicing by Tinley Park

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Key Finding – 6. Identified Areas of Improvement


The graphs below depict a typical analysis of causal reasons for removal taken from a targeted data subset for illustration purposes. Assessment of the information determines blank screens and corrupt displays will result in estimated bills and further action, but not necessarily an inaccurate bill. Yet “Recording Without Flow” or “spinning” directly impacts registration and may result in an inaccurate bill without appropriate quality checks

Illustration of a robust asset management program and how it can be used to mitigate the risk of inaccurately billing customers while realizing full investment in the metering system

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Blank screen Corrupt Display

Not recording flow

Not transmitting

other Recording without flow

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Key Finding – 6. Identified Areas of Improvement

Understanding the causal reasons for equipment issues assists in decision

making

meter replacement programs will be based on causal analysis such as this illustration


Test Random sample of installed meter to determine meter accuracy for key meterpopulations

That will inform the potential replacement program and;

To provide basis for customer billing adjustments due potential over billing

Complete an engineering analysis of the meters that have been observed to spinpotentially determine a ratio of impact considering flow accuracy and “spinning”

Develop a life cycle meter replacement program that replaces meters that have reachedend of life and or may be under performing .

Establish meter read validation through advanced analytics to identify the following:

Meter Over registration due to meter failure detected after meter exchange

Meter Under registration due to meter failure

Billing Consumption exceptions: leaks, theft, visitors, pools, drought, administrative systems issue

Aggressively investigate outliers based on high registration in each customer class to flush outextreme potential meter issues.

Recommended initiatives that address the assessment’s findings

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Create a smart utility roadmap covering people, process and technology that addresses acomprehensive meter to cash process with consideration of:

Utility vision and mission statements

AMI/AMR analysis

Supply and demand side leak detection

Analytics / software

IT / security

Resource allocation/ training

Business process redesign and codification of policies and operating procedures

Institute a due process program for customers to dispute their bill

Smart utility business case including costs and benefits

Develop and implement an asset management program that enhances Tinley Park’s abilityto manage metering system equipment and tools

Movement toward monthly reads and subsequently monthly billing

Discuss the possibility of evaluating the warranty settlement

Recommended initiatives continued

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The potential timeline of the recommended initiatives

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Phase II Recommendations Timeline


INTERNAL COMMUNICATION CAMPAIGN – MISSION TRANSPARENCY AND ACCOUNTABILITY

Initiate internal stakeholder meetings to ensure a full understanding of the plan of action

Develop expectations of leadership conducting routine communication with work force

Explore possibilities and/or uses of a shared knowledge platform

Develop a common language and understanding of the people, process, and technology

Utilize cross-training techniques to develop depth in understanding how the systemfunctions across work streams

EXTERNAL COMMUNICATION CAMPAIGN – MISSION TRANSPARENCY AND TRUST BUILDING

Develop key messages well in advance of events and actions taking place that lead to abetter community understanding of what will be happening

Conduct both one on one sessions and a workshop with elected officials

Conduct an open house for the community on services provided

Leverage website for new change management styles…(customer bill of rights)

Create a focus group from the community to assist with marketing and testing of systemchanges

To begin rebuilding trust with the community and utility stakeholders, it is recommended that an aggressive communication campaign be implemented

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Phase II Recommendations for Improvement - Communications

Documents

Water Meter Assessment Project Results and Recommendations