Four Considerations Before Investing in Advanced Metering Infrastructure

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Keondra Jenkins was a fellow in the 2019 Leaders in Environment and Finance (LEAF) program. As part of the LEAF Fellowship, Keondra worked with Orange Water and Sewer Authority (OWASA) over the summer of 2019. Keondra graduated in December 2019 from UNC with a degree in Environmental Studies.

What is AMI?

Advanced metering infrastructure (AMI) is a technology that allows for automated, two-way communication between a water meter and your utility company. AMI provides real-time data about water consumption daily or upon request, using a fixed communication network to send and receive signals from meters remotely. Implementing AMI can improve a utility’s ability to detect leaks, bill more accurately, and engage with customers. When undertaking an AMI project, there are many factors to consider. Here we will discuss strategies to pay for the project, select a vendor, implement the new infrastructure, and consider data management options.

Why Advanced Metering Infrastructure?


1. Paying for the Project

Grants

Grants can support the costs of converting your system from manual to automated meter reading and have the benefit that these funds typically don’t need to be paid back. ­­A noteworthy opportunity is the Bureau of Reclamation’s WaterSMART Grant Program. The grants support projects that strive to conserve and use water more efficiently. They accept proposals annually, and applications for FY 2021 will close on September 20, 2020. Another place to look for grant funding opportunities is within the intended use plan for your respective state’s Drinking Water State Revolving Fund. Different states have funding priorities, and your AMI project might fit within those priorities.

Rate Increases

Rate increases are the most common approach that utilities use to recover the costs of meter system conversion. The goal of increasing rates is to generate revenue to support the system and better serve customers. Incremental increases over several years are a common strategy to make the increase less of a shock to customers. Planning for rate increases in advance can ensure adequate funding and familiarize customers with potential changes. When possible, utilities should choose a method that is easiest on customers and presents well to a governing body. The EFC’s Water And Wastewater Residential Rates Affordability Assessment Tool can assist in assessing how residential rate increases will impact affordability for customers.

Reserve Capital

Ideally, utilities can set aside some funding for long-term capital investment projects or anticipated future expenses. With enough planning ahead, reserve capital can be used to fund a portion or the entire project. If you are unsure where to start, check out Plan to Pay: Scenarios to Fund Your Capital Improvement Plan. This EFC tool will help you generate scenarios to develop strategies to fund your AMI project.

Revenue Bonds

Local governments can issue revenue bonds to fund the investment of income-producing projects. These bonds are secured by identifying in advance the revenue sources that will enable repayment, such as the revenue captured by improved billing in AMI systems. These bonds can be issued to any agency that operates like a business, generating revenue and incurring operational expenses. Revenue bonds require repayment of the principal and the interest accrued, much like a loan, and in this sense should be obtained with care.

User Fees

User fees are charges or taxes imposed on users of a service to help cover the costs of providing and maintaining the service. These fees can be used to generate funds to support your AMI project. This fee could be included on customers’ water bills with a notation of what the fee is used for.

2. Selecting a Vendor

The vendor selection process is an extremely important aspect of converting to AMI. As the technology grows, there are more and more vendors who offer meters with AMI capabilities. When comparing vendors, it is important to consider the following:

Price

Undertaking an AMI project can be costly. Assessing the costs of prospective vendors is an important consideration. Most likely your goal is to receive the maximum quality of service for the lowest cost. Be wary of vendors who submit estimates far lower than others. Low prices up-front may come with long-term costs; you may receive less than acceptable services, or encounter hidden fees that were excluded from the quote. Communicate the full extent of your needs to prospective vendors so you can receive an accurate quote. Require that each vendor detail every line-item cost, including potential added expenses, fees, and surcharges. This effort will help ensure you receive the most accurate and complete cost of services possible.

 Questions to Ask About a Vendor’s Range of Products and Services

  • Do their products allow room for upgrades?
  • If software updates are needed, how are they managed?
  • Are their products proprietary, or can they be integrated with another company’s technology?
  • Beyond water use, what variables do their products measure, if any?

Customer Service

Consider the level of customer service that is offered by prospective vendors. Are they accessible to troubleshoot problems? Will you have a main point of contact, or a generic email or phone number? What are the conditions of their warranty? These are all important questions to ask when vetting a vendor for your AMI technology.

 References / Customer Testimonials

How a vendor presents themselves when trying to attract your utility may not be an accurate picture of how they operate on a day-to-day basis. It is a good idea to ask for feedback from other utilities that have worked with your prospective vendors. Here are some examples of questions to ask:

  • Did the vendor match the quality of service that they claim to offer?
  • What, if any, problems did they encounter with the vendor during implementation and operation of the system?
  • How did the vendor respond to problems?
  • How would they rate the vendor overall?
  • Having received their service, would they choose them again?

3. Implementation

Deciding whether to retrofit or replace standard meters depends on the age of the meters and the size of your system. If the meters in your system are newer at the time you decide to convert to AMI, it may make more sense to retrofit them. This involves adding AMI hardware onto the existing meters. However, if a significant portion of your system is composed of older meters, it is better to replace them. This is because over time they will begin to fail and must be replaced regardless.

4. Data Management

The data collected through AMI is stored either by your utility or a vendor. If the volume of data is substantial and your utility wants to keep several years’ worth for analysis, then a vendor is probably needed. One important factor that your utility should evaluate is who has ownership over the data. Some vendors maintain proprietary ownership of the data, but other vendors allow utilities to own their own data. Who has ownership of the data can impact how the data is able to be used. For example, a utility may not be able to release the data to a third-party consultant for analysis if the vendor owns the data.

Data can be used to evaluate many aspects of consumptive use and operational trends. Looking at your utility’s goals often helps in identifying what the best use of the data is and how much data is required to make appropriate assessments to meet goals.

AMI conversion can seem like a daunting undertaking, but the technology’s benefits make it a worthwhile consideration to invest in your system. The points outlined here, along with tools offered by the EFC and other resources, can aid in this process.

More Resources

Interested in a past EFC blog post on AMI? Check out Smart Meters, Smart Rates.

Still have questions about financing your AMI project? The Environmental Finance Center has many tools in resource to assist your decision-making process: https://efc.sog.unc.edu/project/utility-financial-tools

More information of the Bureau of Reclamation’s WaterSMART Grant Program can be found here: https://www.usbr.gov/watersmart/weeg/index.html

1 Comment

  1. The article failed to take in consideration costs for maintenance, repair, and replacement.

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