Convergence: Bringing Together Utilities. for Customer Benefit

Sponsored by Jim Jenkins, VP, Regulatory & Public Policy, American Water.
Written by Susan Story, President & CEO, American Water. 

Susan Story

Susan Story

There was much talk in 2015 about the convergence of utility sectors, and we expect to hear even more about this emerging reality in 2016. Last year, it was the focus of NARUC’s newly convened “Consumers and Convergence Consortium.” It was also the theme of NARUC’s 2015 annual meeting in Austin, TX: Challenges Coast to Coast: Consumers, Convergence, and Change.

So what is convergence? Merriam-Webster defines convergence as “the merging of distinct technologies, industries, or devices into a unified whole.” This is possible in the utilities space largely due to two traits: shared customers and interdependent services. For example, most water customers are also electric and gas customers, and vice versa. And while we send separate bills, customers pay them out of the same pocketbook. This is why working together to save customers money on their overall utility bill just makes sense. Likewise, electricity, gas, water, and even telecommunication services are increasingly interdependent. For example, the U.S. water system is very energy intensive. In 2010, 12.6% of all U.S. primary energy consumption was for water related purposes.1 This included the energy required to extract, treat, and pump water to the public, and also the energy required to heat, cool, pressurize, and move water once it reached the public. Similarly, the U.S. energy system is very water intensive.  Thermoelectric power generation requires some 200 billion gallons of water daily, or four times as much as the public consumes. Fracking requires about 4-5 million gallons of water per oil or natural gas well.2 And, in the 21st century, advanced communications services like high-speed Internet connections and wireless sensors are being used more and more to monitor utility services and empower customers with more control over their consumption.

How can we leverage these natural nexus points to improve affordability, resiliency, and sustainability? Several examples already exist, and more can surely be found as we work to find improvements.

One good example is American Water’s deployment of ENBALA smart grid technology to yield more affordable water service and also more reliable electric service. ENBALA sends signals to our variable speed pumps, allowing them to ramp up or down in response to the needs of the grid. We started with one pump in Pennsylvania, but had such success that two additional pumping stations were added to the program – another in Pennsylvania, and one in New Jersey. The initial pilot in Pennsylvania delivered a 2-3% savings on the sites overall electric bill. With these three deployments, over 1 million of the 12 million people American Water serves now have their water delivered in conjunction with the needs of the electric grid and at a reduced cost.

Another way of harnessing convergence opportunities is by sharing intelligent infrastructure. While many energy providers have invested in smart metering systems, most water utilities are just beginning to explore this opportunity. As a result, it’s possible that water utilities may be able to share receiver infrastructure with the energy industry. Partnering in this way could limit the overall investment required for smart utility service. American Water has launched a pilot in Monterey, CA, that does just this – its water meter data is transmitted to the local electric and gas providers’ receivers for collection.

These kinds of efficiencies can also enhance sustainability and affordability programs.   For example, in California, American Water is working with local energy providers to consolidate water efficiency and energy efficiency audits for applicable customers in various districts. When possible, this means both audits can be conducted in a single visit, thus saving time and money. Likewise, in California, utilities now periodically share low income customer enrollment information. As a result, when a low-income customer qualifies for one utility’s program, they can also be enrolled in the other utilities’ programs.

Compliance with the federal Clean Power Plan (CPP) is another area in which utilities can leverage relationships to improve affordability and sustainability. The CPP specifically noted that “replacing pumps and other aging equipment and repairing leaks”3 at water and wastewater utilities can all result in efficiencies eligible for compliance. In other words, if a state needs assistance with CPP compliance, the water sector may be able to share some of the load, simply by doing some of the work it must do anyway.

Even at the most basic level, efforts of one utility can impact another. For example, American Water participates in the EPA’s Fix-a-leak week. As part of this, we encourage customers to fix leaks in their homes to not only save water but also energy. Likewise, American Water educates customers on low flow appliances for the same reason. All of these efforts impact both the water and energy sectors, and help customers save money on their bills.

So how can policymakers further convergence efforts? One way to support convergence is by exercising the power to convene. The establishment of the NARUC Consumers and Convergence Consortium is a good example of convening regulators on the issue. State regulators can also bring parties together to explore potential convergence opportunities.  Another way to encourage convergence efforts is to support infrastructure investment, as many sustainability and reliability solutions require replacing aging, antiquated assets.

However, to fully realize the benefits of convergence, policymakers will need to grapple with a number of more granular questions like: how can regulatory commissions maximize efficiency while ensuring stable revenue across the utilities space? How can regulators assure fixed cost recovery in this climate? What can be done to remove barriers to more sustainable service?

At American Water, we put the customer at the center of everything we do. And that’s why we’re so pleased to see the regulatory community exploring concerns that are important to our customers: resiliency, sustainability, and affordability. At American Water, whether it’s our innovations in energy efficiency, or our efforts to protect precious water supplies, or our work to limit customer bill impacts despite the need to invest, we are committed to serving our customers with reliable, sustainable, affordable water for life. We look forward to collaborating with our regulatory and industry partners alike to advance convergence efforts and to meet our shared challenges with shared solutions.

1 Kelly T. Sanders and Michael E. Webber, Evaluating the energy consumed for water use in the United States, 2012.

2 Tanya J. Gallegos, et al., “Hydraulic fracturing water use variability in the United States and potential environmental implications”, Water Resources Research, July 24, 2015.

3 US Environmental Protection Agency, Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units; Final Rule, 2015, page 241. (