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Leveraging AMI Data for Better Consumer Engagement

The $1.7 billion acquisition of Aquarion by Eversource provides an opportunity to consider the history and future of AMI and our customer engagement efforts

Some electric utility personnel will tell you they are convinced their industry is more technologically advanced than the water utility industry, even though AMI provides notable exceptions. For example, did you know that the first advanced metering infrastructure was installed in the 1980s at a water utility, not an electric utility? 

The poet TS Eliot said you can see things more clearly after you come around full circle, so let’s start by looking through the lens of customer engagement across water and electric service generally, then look at a recent big electric utility acquisition of a water utility, before we return to take a look back at AMI’s early history.

An AMI Advantage Water Utilities Have over Electric Utilities?

There are water utility customer service personnel who currently utilize real-time AMI to delight their customers. These utility customer service personnel make contact with customers to prevent leaks from damaging their homes or businesses.  In some cases, based on arrangements made in advance with customers, the AMI data can be used to remotely shut off water service, preventing damage even when the customer is away from the location (e.g. preventing damage from frozen pipes in the winter at an empty vacation home).

In these interactions utilizing water utility AMI data, the customers typically welcome this sort of “utility intrusion” into their privacy. And even when no property damage is involved, these customers also welcome help from their water utility to lower water bills by receiving alerts about slow water leaks.

In contrast, for some electric utility customers, it may tend to feel more like “Big Brother is watching me” if they had their electric utility contact them, suggesting their HVAC seems overloaded and suggesting they should check for open doors or windows. Yet in theory at least, and in practice in some near-term or current cases, more and more electric utilities could find themselves in the position of being able to provide this type of service, based on analysis of real-time electric meter data and home energy network data.

Electric utility leverage points for broader utilization of AMI data

When it comes to the performance of aging, overloaded, or faulty appliances, and/or electrical faults, electric utilities are theoretically in as good a position as water utilities, or even better, to use real-time AMI data to help save customers big dollar damages to home and property.  For one thing, electric bills are often a lot higher than water bills, so the benefits from sharing information to reduce waste are greater.  But a key question is whether the regulatory and market and business mechanisms are going to be in place, along with an all-important culture of trust between the utility and its customers, to foster deeper engagement for various programs along these lines.

Our industry as a whole, across single- or multi- service utility territories, has a lot of untapped value to deliver, based upon the potential synergies associated with better “cross-service” utilization of AMI data for such predictions involving electricity, gas, and/or water.

Whether a homeowner’s electrical appliances end with a proverbial “bang or a whimper” (to borrow from the poet TS Eliot again) electric utility service providers are in a position to utilize AMI data to provide customers with predictions that could help them avoid potential, major damage or long-term higher bills every month. At a minimum, they could help customers avoid the inconvenience of replacing failed appliances on an emergency basis when its upcoming demise could have been predicted. Such predictive capabilities can apply to appliances like water heaters, dryers, and stoves, whether they are served by electricity or by gas.

AMI-based home damage prevention service scenarios?

Consider electric appliances utilizing a water hose, such as a washing machine or dishwasher, or outdoor irrigation system, along with appliances that can spring a leak and cause significant damage, such as a water heater. Consider a scenario where real-time electric utility AMI data could show that none those appliances are not in use at a particular time, yet at that very same time, the water utility’s AMI data shows a sudden increase in water use.

In this scenario, coordination between water and electric utility data could enable systems to deduce that there is a major leak in the home and immediately shut off water service (perhaps even remotely actuate a valve) and contact the homeowner.

Farfetched? Not of enough economic value?  Not according to a study from the Institute for Business and Home Safety.  It turns out that failure rates in appliances such as washing machines, which utilize water hoses, increased dramatically in hoses over five years old; the average age of failed hoses was 8.7 years. More than half of failures occurred before eight years, and nearly 80 percent failed before 10 years. (Source: Insurance Journal, March 2013.)  The same article found that in commercial properties, damage from failed water heaters can run to half a million dollars or more, depending on the location of the water heater, the type of property and the extent of resulting damage, and that residential water heater malfunctions have an average cost of $4,400 per incident and are one of the leading causes of water damage claims in residential properties.

Eversource Energy’s acquisition of Aquarion Water

Eversource Energy’s acquisition of Aquarion Water Company will affect nearly four million utility customers in Connecticut, Massachusetts and New Hampshire.  The $1.675 billion deal involves $880 million in cash and $795 million of assumed Aquarion debt.

An article this week in the Hartford Business Journal answers its headline question well: “Why did New England’s largest electric utility diversify into water?”  In her interviews of financial analysts regarding the Eversource acquisition of Aquarion, Hartford Business Journal writer Karen Ali uncovered some valuable explanations, and put in context the fact that water/electric utility deals of this type are rare.

According to the experts interviewed, the deal stands to benefit to customers and shareholders by leveraging with synergies between the two companies, along with opportunities for revenue growth and/or diversification.

One of the experts, however, took a contrarian view:  Neil Kalton, managing director of utilities equity research at Wells Fargo Securities, suggested that Eversource “needed to replace revenues from assets it is planning to sell in New Hampshire." Kalton said Eversource "has to sell a coal power plant in New Hampshire, which was producing $30 million a year in earnings; buying Aquarion will replace those lost revenues.”

In June, Jim Judge, CEO of Eversource, stated that “this transaction combines two companies that are leaders in providing the critical infrastructure New England residents and businesses need to grow and thrive, both companies’ dedicated employees work relentlessly to put customers first, and that commitment to reliability and customer service will remain paramount.”

Aquarion is highly respected in the industry, with top customer favorability ratings and an impressive team of more than 300 employees operating the region’s best water system. Eversource’s committed 8,000 employees work tirelessly every day to provide sustainable energy solutions and power the region’s economy, serving 3.7 million electric and natural gas customers in Connecticut, Massachusetts and New Hampshire. Aquarion serves nearly 230,000 customers in the same states.

“Eversource has such strong local ties to New England, and a commitment to operational excellence, customer service, and support for the communities we serve,” said Chuck Firlotte, Aquarion president and chief executive officer. “These are qualities we share and will serve us well as we join with Eversource’s incredible team of employees.”

Judge noted the transaction underscores Eversource’s commitment to be a catalyst for helping New England meet its environmental and sustainability goals. “Welcoming Aquarion to our team provides an exciting opportunity to add a new, highly complementary business line that delivers high quality water at affordable rates,” added Judge. “For Aquarion, becoming a part of Eversource ensures local ownership that is committed to providing the resources needed to make investments in the business to drive long-term success.”

The acquisition requires approval from the Connecticut Public Utilities Regulatory Authority, the Massachusetts Department of Public Utilities and the New Hampshire Public Utilities Commission. It also requires U.S. Justice Department review under the Hart-Scott-Rodino Act.  The transaction is expected to close by December 31, 2017.

Perhaps all the experts have contributed to a correct understanding, but I think additional benefits will be an outgrowth of deeper customer engagement opportunities, and I think these types of customer engagement improvements can be informative for all electric utilities, whether they serve water customers or not.

AMI History

I owe the following understanding of the early history of AMI to my colleague Ron Chebra. Dispute this claim at your peril because Ron has been involved in a lot of key electric utility developments in advanced metering--he went on from positions back in the late 1980s and early 1990s with Base10, Bell Atlantic and AT&T, to Comverge, Schneider Electric, DNV GL, and then Verizon Enterprise Solutions, and he is now vice president, Grid Modernization at Enernex.

The utility where Ron Chebra was involved in the first precurser to AMI was the United Water Resources water utility in Hackensack, New Jersey, now part of the Suez family of forms. One of the key business drivers for their wanting to install the system was not what you would expect.

In the 1980s, prior to the installation of the system, the utility was billing its water customers every 90 days. It discovered that some of their customers with swimming pools knew when the meter reading date was, from information provided by the utility. Leveraging this knowledge they would intentionally wait until the first day of a new 90-day billing period to fill their pools.  Each of these hundred-dollar water bills that came from filling their pool was effectively a loan as far as the utility was concerned, with the customers in the meantime enjoying the “float,” if you will. In contrast, the utility reasoned, if they could bill the customer for filling their pool up to 89 days earlier, they’d be earning the interest on those funds, instead of the customer doing so.

The system that was installed ran over copper land line phone lines and allowed two-way communication with the meter in the middle of night without actually ringing the phone. This was accomplished with a special access arrangement with the phone company (New Jersey Bell) and a very aggressive tariff (less than 5 cents reading).  It paid for itself quickly.

Granted, it was a “primitive” remote meter data system.  While subsequent developments in the 1990s involving AMR and “real” AMI were also key milestones on our path, I agree with Ron Chebra’s suggestion that a water utility deserves the first credit.

And I think utilities involved in different service areas have a lot to learn from one another.

 

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