Last year in Singapore, approximately 100 water leaders around the world convened at the Singapore International Water Week (SIWW) to discuss and share insights on how to develop more sustainable water utilities.
Cindy Wallis-Lage, President of Black & Veatch’s water business, chaired the dialogue session, “Breaking Boundaries: Developing a Better Water Utility”, co-organised by SIWW and Black & Veatch. Participants looked into ways that utilities could explore greater innovation, undertake more extensive stakeholder engagement, and develop longer-term financial sustainability. They also considered how the cross-cutting nature of good governance and leadership interacts with these three aspects.
The highlights of the session have been summarized below. They are also included together with the rest of the findings from SIWW 2014 in the recently published SIWW Blue Paper 2014 as part of the Water Leaders Dialogue, entitled “Breaking Boundaries: Developing a Better Water Utility.”
For the full report, please download the SIWW 2014 Blue Paper.
Innovation Is a “Must-Have”
Though it is often associated with technology, innovation is equally vital in other aspects of a water utility’s work, such as planning, finance, operational management and communication. Chew Men Leong, then-Chief Executive of Singapore’s national water agency PUB, started discussions by noting the risk-averse nature of the water sector.
According to Mr Chew, the tendency of utilities to focus on short-term operational challenges instead of investing in innovation for longer-term benefits is understandable because any impact to operations would directly affect customers and drinking water quality.
However, the industry must evolve from the business-as-usual mindset because, according to Dr. Abdullah Al-Alshaikh, President of the International Desalination Association, investment by government and the private sector in innovation can generate more sustainable and cost-effective water solutions.
Singapore’s PUB serves as a model. Continuous investment in R&D has driven the development of solutions, and nurtured a culture of innovation where both public and private organisations can put their new solutions through the rigour of treating actual water inflows in controlled environments through test-bedding at PUB’s plants and water infrastructure. Test-bedding is one way in which utilities can help establish extensive safeguards to minimise risk for consumers. This offers the chance for innovators to conduct trials under real operating conditions and understand how technologies work, before bringing them into actual operations which would affect delivery of outcomes to their consumers.
In developed countries where water is readily available 24 hours, seven days a week, it is hard to overcome conventional thinking and the status quo to bring about change. In the Netherlands, Martien den Blanken, Chief Executive Officer (CEO) of PWN, says leadership plays a vital role in differentiating risk, gaining political buy-in and fostering a culture of innovation.
Reinforcing this view, Mike Marcus, General Manager of the Orange Water County District (OWCD) in California, reminded participants that it was open communication and engagement with political leaders and the local communities that helped obtain consensus for OWCD’s use of advanced water reuse technologies in groundwater management and water reclamation.
On the other hand, developing nations face a different set of challenges. As the General Director of the Phnom Penh Water Supply Authority (PPWSA) in the 1990s, Ek Sonn Chan, now Secretary of State of Cambodia’s Ministry of Industry and Handicraft, had spearheaded the transformation of PPWSA from a symbol of failure to one of success. To sustain the utility’s operations, water tariffs had to be increased, but there was no political will to do so. Some key ingredients in PPWSA’s eventually successful drive to reform itself included extensive community education on the need to pay one’s water bills.
Build Reservoirs of Trust
Public support is critical in making utility improvements and encouraging greater conservation. Knowing when to engage customers and other stakeholders underpins efforts to enable utility innovation and creates a reservoir of trust. Typically, utilities interact most with customers during the least favourable times, for example, during outages or service disruptions, rate increases, and generation of monthly bills. Utilities need to engage more with customers during good times, according to Steve Edwards, Chairman and CEO, Black & Veatch. It was stressed that besides good governance and leadership, effective communication is another key success factor for other areas of a utility’s work.
Is the value of water being effectively communicated? George Hawkins, General Manager of the District of Columbia Water and Sewer Authority, believes in a sustained and widespread promotion of water to the public as the “best product.” Initiatives like “tapwater versus bottled water taste test” challenges have been organised around Washington D.C.
In the aftermath of Hurricane Sandy in 2012, millions of people were left with disruptions in water, sewage and electricity services across the east coast of the U.S. The event’s discussion highlighted that many people understood the importance of continuous water and electricity during this difficult period, which is otherwise generally taken for granted. That negative event became an opportunity to reinforce the benefits of water, sewerage and electricity to customers.
The utilities that communicated with their customers and kept them informed of the challenges at every step were able to cultivate trust and engagement with customers even as they restored the services. Others who struggled with their communication, or delivering on the promises made in the aftermath of the storm, suffered in their relationship with their clients.
Social media plays a big role, and its ubiquity is holding utilities more accountable, calling for greater levels of transparency and customer engagement. It also plays a critical role in engaging younger generations. This is especially important if utilities wish to attract young professionals into the water industry to generate fresh thinking and develop the workforce, according to Sue Murphy, CEO of Water Corporation in Australia.
Better Governance Means Better Money
Better engagement of the financial communities emerged as another key focus area for utilities. Today’s current financing pattern will not solve water infrastructure needs, according to Dr Bindu Lohani, Vice-President for Knowledge Management and Sustainable Development of the Asian Development Bank.
On examining the current financing needs of infrastructure in the Asia-Pacific region, it was noted that about 20 percent of finance comes from private sector and 10 percent from overseas development assistance (ODA). The bulk of the remaining 70 percent, though, comes from the governments.
In order to attract higher ODA and private sector investment, the entire water sector needs to improve its “bankability.” One key means to achieve this is having a sustainable water-pricing policy that takes into account full-cost recovery.
Tariff-setting, especially the conflict between politicians and operators over tariff-setting, is the biggest hurdle to be crossed in developing countries. The dialogue underlined that the important message that the costs of not providing a water service are far greater than the cost of the service itself, has to be marketed vigorously to political leaders and people. Given that water infrastructure has a long lifespan, the consequences of underinvestment may not be seen during one politician’s term. Thus, it is very important for utility leaders to come forward to help build political commitment and shape water policies.
To enhance their bankability, water utilities must demonstrate credibility so as to win trust and investment from the private sector, said Usha Rao-Monari, CEO of Global Water Development Partners and Blackstone Portfolio Company. Though financiers naturally look for returns, they may also seek long-term partnerships that will benefit the water sector.
Moreover, governments should explore ways of using taxes and transfers to finance large capex investments. This would make the sector more financially viable, since tariffs can only create part of the sustainability. This was echoed by James Mitchell, Chief Financial Officer of Sydney Water, who noted that appropriate regulatory regimes, tax structures and public support were other significant ways of drawing in more private-sector financing.
Finally, on water utilities’ journey to financial sustainability, Eleanor Allen, Arcadis’ Global Business Line Director for Water, advocated holistic asset management to enable utilities to make sound financial decisions, but also to encourage a culture of self-sufficiency in their provision of services.
Published originally on Black & Veatch Solutions.
