Non-Revenue Water Reduction: The challenge continues to persist

Non-Revenue Water (NRW) – technical as well as commercial losses – is still perceived as a technology problem. Though asset and network rehabilitation form a substantial remedy, the approach does not take in to account the softer aspect of engaging rightly with Utility Consumers as well as its own employees.

The NRW component, we believe, can be curbed substantially, if the utility engages with the other stakeholders – customers and employees - through education and empowerment. Customer and employee engagement also brings out the tacit knowledge from the field, which acts as a feedback mechanism for the Utility. The approach also includes conducting analysis of internal customer-facing business processes, and resolving the bottlenecks hampering service delivery standards.

The table given below lists some of the interesting engagements we have shared with our clients. the rationale behind it and the methodology we adopted:

Customer perceptions tracked and studied gives strategic action items for utility plan its customer outreach programs. Customer Sensitization and talent development for Utility staff goes on to change the culture from monopolistic commodity trading to customer service provider	· Customer Opinion Preference Satisfaction (COPS) Studies offers an insight into the customer preferences and probable causes of forced behaviours · Process Level Customer Satisfaction (PL-CSat) deployed rightly screens each of the customer satisfaction over each of the processes which act as customer touch points for utility · Feet-on-Street (FOS) teams – like meter readers, bill distributors, plumbers, etc. – go a long way in identifying the tacit knowledge about the local systems · Audits of customer facing processes – Collection Centres, Call Centres, Zonal Offices, etc. – provide the much missing customer perception of utility processes · Willingness-To-Pay (WTP) studies create a sense of revenue assurance for investors and creditors alike, thereby, create baseline for financial projections of private utilities
Key issues in poor billing efficiency and collection efficiency arise due to lack of right internal processes implementation	· Process Level Audits for Meter Reading, Data Transfer Quality Monitoring and Bill Distribution bring out missing links in the billing efficiency · Localization – eg. option of bilingual bill generation – builds the customer connect
Utility engaging with focus groups plays a vital role in customer engagement and education	· Ensuring right engagement media for consumer education and engagement · Creating right social media handles to take utility marketing to next levels

For a deeper dive-in, refer to our previous blog on Efficient Billing & Collection Processes as key to driving NRW reduction.

IUKAN Session 2 Proceedings: Understanding the utility customers - helping the utilities in better roll out of operationalize

With more and more utilities struggling to engage rightly with their customers, IUKAN 2013 was torch bearer in highlighting the best practices in providing insights into the whole customer engagement process. Some of the top leaders in the utility segment presented their views on how the customers form one of the most important, yet not recognized, pillars for the success of the utility operations.

The driving philosophy behind the session was to discuss the key challenges are utilities are facing in engaging with the customers. The session also talked of the vision for the utilities to have for its customer-engagement initiatives, in light of the fast changing nature of the utility customer.

Strategic Communications - A tool towards better customer engagement and loss reduction

The high risks in the complex, unpredictable and highly political process of water sector reforms are unavoidable given the "essential goods" perception of water. However, what the utility operators need to understand is that investing time and money in "strategic communications" early in the engagement of water reforms and that it leads to a much smoother operations and success of the project. A World Bank report (2006) suggests that an understanding of public perceptions leads to better adoption of strategic communications help in improving the efficiency of the public utility.

The key challenges arising due to lack of strategic communications can be listed as:

1. Social conflict due to lack of information or misinformation or a communications vacuum that creates uncertainty
2. Power struggles leading to project delays 
3. Consumer Opposition due to (justified or unjustified) fears about tariff, service levels and affordability
4. Customer dissatisfaction when hyped expectations are not met, or are not right sized at appropriate time

The idea behind this post is to try and identify areas where communication tools can support reform 

process and mitigate risks. 

The three principles which can be applied to use communications as a strategic tool towards better utility management are discussed here:

1. Principle #1: Know-Your-Customer: Instead of making assumptions about what the customers want or how they would react, it is advisable to undertake a Communication-Based-Assessment (CBA) to gauge the support for utility reforms within the stakeholders. (See pManifold's unique COPS Case Study). The CBA uses a mixture of conventional and unconventional data collection methodologies (including socio-economic parameters, Willingness-To-Pay, opinion polls, etc.) and establish baselines for stakeholders' perceptions, interests and priorities.
2. Principle #2: Creating Awareness about the Need for Utility Reform: Once the CBA has captured the perspectives of customers and stakeholders, the Utility Management may determine what about the reforms need to be communicated, through which messenger to communicate the same and how to garner political support with other political groups and agencies. The Utility Operator should:
• create awareness regarding the "state of the utility" in terms of challenges and opportunities for reforms and what it means to the customers
• communicate the effects/challenges that lie ahead, if reforms are not implemented. At the same time, if not communicated correctly, the Utility might risk being looked upon as non-transparent
• make the stakeholders understand their rights and responsibilities in the reforms process
3. Principle #3: Building Support and System for Change: Once the reforms are enacted, the communications does not stop there. The Utility should continuously use communications as a tool to build a culture of transparency and openness

The Utility, to leverage the strength of strategic communications as a tool, should make use of the following best practices:

1. The communications strategy should integrally be linked with the organizational strategy & goals and be in line with the utility operations
2. The Operator should take sufficient effort to make the information available and accessible to all the stakeholders. Establishing web portal and maintaining it constantly is critical to promote transparency.
3. Correctly identify the most trusted messengers or champions through early use of CBA
4. The Utility Operator should right size the expectations of customers as well as other stakeholders in order to mitigate the non-financial risks. Only when the beneficiaries believe that the project has met the set expectations, the Utility Operator can claim that the project has realized its full value
5. More often that not, in our typical environment, project delays occur. And when they do occur, the Utility Operator should be taking care to communicate the reasons behind the delay. This creates an environment of openness and credibility.
6. Whatever positive results are achieved by the Operator, the results should be communicated to the customers and other beneficiaries
7. Empowering the media is one of the best methods to spread word about the good work the Utility is carrying out. The media also serves as a tool to educate the consumers.
8. Collaborate with local governmental and non-governmental agencies to drive the Information-Communications-Education (ICE) campaigns to build a positive image for itself
9. Utility should invest in creating and maintaining an in-house professional communications capacity to avoid the inefficiencies in the governmental / state agencies' communications program

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*Source: Communication for Water Sector Reform: Obstacles and Opportunities, (2012), The World Bank

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Efficient Billing and Collection - Key to reducing NRW

While exploring the various methodologies used by the water utilities to reduce Non-Revenue-Water (NRW), one of the better avenues available is achieving higher efficiency in the billing and collection processes. This blog explains the ideology behind the principle of higher billing and collection efficiency for reduced NRW.

Now, the main components of losses in the whole water distribution system and the details of the commercial losses are explained in the figure.

Categorization of losses

Billing and Collection efficiency are the customer facing processes of the utilities and are quite independent from the other internal processes. Whatever consumer meter data is read and recorded, is used for billing. Further to that, recoveries from the consumers who are billed, is to be made. And hence, we are talking of Billing & Metering efficiency as a combined package, and area of focus.

Improvements on these parameters are measurable as well as traceable to a bit higher degree than most others. Above all, these are processes which an utility can outsource to a vendor managed process. Optimum service delivery agreements and appropriate process control, guided using a Balanced Scorecard, can be designed and implemented, and therefore, do not burn a hole in the pocket of the operator to set up.

Recommended readings:

• Introduction to The Balanced Scorecard Approach
• Improving revenue cycle efficiency for high performance 
• Improving efficiency in customer service without reducing customer satisfaction

A Consumer-Oriented Approach to Water Sector Reform (WSR)

With complex institutional arrangements, aging infrastructure, and poor cost recovery practices, India’s urban Water and Sanitation Services (WSS) sector faces tremendous challenges to providing safe, affordable water in a reliable manner. Ill-suited to tackle these issues on its own, the government began turning to the private sector for solutions in the mid-1990s. While such Public Private Partnerships (PPPs) were introduced with great fanfare, they failed miserably – only 1 in 5 projects initiated during the period remain in operation. One of the most important reasons behind these failures was the unilateral focus on physical infrastructure, completely neglecting the consumer-facing component of water utilities.

India has learned much from its Water Sector Reform (WSR) experiences since then, with three quarters of PPPs henceforth involving Operations and Management (O&M) of the distribution value chain. Correspondingly, PPP failure rates have decreased substantially: 80% (1990s) à 62.5% (2000-2004) à nearly zero (2005 onwards). In this blog, we will outline India’s most critical urban WSS issues from a consumer-oriented approach – the approach that has proven successful in providing lifelines to a sector in dire need of revitalization. (Source: Trends in Private Sector Participation in the India Water Sector, World Sanitation Program 2011) 

To summarize this sector’s main challenges in one sentence (or diagram, rather), it is stuck in the following low-level equilibrium trap:

Can Customer Engagement at Utility help expedite AT&C loss reduction?

Some recent discussion on best practices at Linkedin Power Distribution Franchisee group have started discussing the role of Customers in helping reduce AT&C losses. Some key excerpts:

" .... I strongly feel that key factor for reduction of AT&C loss is very much linked with consumer care initiatives and winning consumer confidence. With the support of consumer group one can control the theft by providing new connections thr' camps etc, one can initiate and execute loss reduction schemes in fast mode, one can get information about theft at particular location etc." (Sr. utility professional with experience at one of biggest private utility) 

" .... The whole problem with Utilities & Consumers relationship whether the utility be govt controlled, pvt utilities, Joint venture or DF, is the major trust deficit. Any utility ownership change when it come to DF or complete Pvt, utilities starts its business with an approach that all consumers are stealing so should start with dent on it whereas consumers always thinks of Utilities as somebody there like a Police which is there to unnecessary harass consumers..." (Mgmt. Consultant in Utility domain) 

" ... Real work can be started somewhere after Oct and with this they will get around 5 months to get ready for next summer peak. In this 5 months, they can focus on low hanging fruits for reducing losses and enhancing recovery along with work of increasing confidence in consumers by starting customer centres, call centres etc. With this they will get almost 7 months to positive brand image before next summer peak or storm winds ( which are generally in last Feb early March) in Chambal River areas...." (Sr. utility professional with experience at one of biggest private utility) 

"In common nature, the employees of MPSEB will do the maintenance work half heartedly. It results, the failure of Distribution Transformers, Power Transformers and Breskdowns of 33, 11KV & LT lines. So the DF's Material department have to plan for procurement of materials and appointing Contractors for the above activities. Otherwise, the harassment from consumers will be faced by field officers on large scale"  (Sr. utility professional with experience at one of operating Distribution Franchisee)