The Honolulu Board of Water Supply (BWS), which serves about 1 million people on the Island of Oahu through about 150,000 metered connections, began a system-wide installation of mobile-radio AMR in January. The utility's justification for this system is based on process improvements in customer service as well as the elimination of manual meter reading.

BWS now reads and bills most customers accounts bimonthly. In recent years, BWS leaders became concerned about meter-reader productivity and customer-service levels. A read-and-go-home provision for meter readers initiated in the 1970s had been inadequately managed through the years, leading to poor meter-reading productivity in terms of number of meters read per day.

Though meters are in pits, BWS experienced high incidences of skipped reads and estimates. Follow-up meter-reading staff and sometimes distribution operations personnel were handling about 25,000 get-read service requests per year.

To improve meter reading accuracy and increase billing frequency, BWS commissioned a study of AMR in 1997, which included a cost-benefit analysis and financial model. The model compared total capital, operating and maintenance costs with total savings in labor and other areas to provide an indication of the relative value of the investment.

BWS managers reviewed technologies and timelines, then selected a mobile-radio AMR system developed by Uniontown, Pa.-based Sensus Technologies Inc. to be installed in three years.

Adjustments Allow BWS to Stay Within Budget

Most of BWS's meters are two inches or smaller, and a sizable portion of these are easily retrofittable with AMR-capable registers. To economize, BWS initially decided to retrofit all meters less than 10 years old-about 50,000 meters. To keep the project within budget, about 73,000 meters ultimately were selected for retrofit.

BWS managers also decided to exclude about 1,200 non-retrofittable large meters from the initial AMR project. Managers will consider large meters-which are expensive to replace-on an individual basis to determine whether they need to be resized or read more frequently than monthly.

Based on the contracted prices, the total cost of retrofit meter registers is about $3 million. The total cost of replacement meters two inches and smaller is about $6.7 million. Because the telemetry interface unit (TIU) the Board selected has two ports, BWS is able to save money and reduce the chances that TIU transmissions would interfere with each other by having two meters share a TIU in areas where meters are no more than four feet apart (see Figure 1). The cost of TIUs for all meters is about $15 million.

The cost to install the system is about $5.5 million. BWS should receive a salvage credit of about $100,000 for scrapped brass meters.

Utility employees will use two mobile interrogators and several hand-held interrogators for system operation and maintenance. Total cost of this equipment, including software and programming, should be about $140,000. Internal project-management costs should be about $700,000 through the three-year installation.

BWS managers anticipate roughly 2,000 field visits per year for system malfunctions, and estimate system operation and maintenance will cost about $270,000 per year. At some point during the life of the system, BWS will need to change the batteries in all TIUs, which should cost about $3 million in materials and labor.

Modifying Practices Will Yield Large Savings

The major benefits of AMR include more than just automating existing functions. Redesigning customer-service processes, and redefining and redistributing staff skills and responsibilities will enable significant productivity increases (see Table 1). Without changes in thinking and business practices, the full benefits of the system would be difficult to conceive and impossible to achieve.

Table 1. Process improvements enabled through AMR

Function	Before AMR	With AMR
On-cycle reading	About 20 meter readers read most meters bimonthly.	One meter reader reads all small meters monthly.
Skipped reads	Follow-up meter readers or distribution operations staff conduct rereads after receiving get-read service request forms.	Largely eliminated. Remaining skipped reads can be estimated based on monthly consumption data.
Final reads	Any finals not obtained within ten days of customers' calls are estimated. BWS closes curb-stop if premises are to be vacant for more than a few days.	Most reads will be scheduled for off-cycle reading routes In many cases, reliable estimates enable instant final bill transaction processing in many cases while customer is on phone.
Initial reads	Initial read is prorated from normal meter reading date (meter is read even if service is not active).	Initial reads more easily scheduled for off-cycle reading.
Customer high bill inquiries	Field Investigator usually dispatched in response to customer complaint.	Monthly consumption data enables BWS to notify customers of atypical consumption before bill is received. Customer-service representative can review monthly consumption history on the telephone. High bills resulting from an actual read after an estimate will be reduced.
Delinquencies and collections	Some customers with high bills are slow to pay; many customers dispute consumption.	Monthly meter readings and proactive high consumption notifications will alleviate some disputes.
Internally generated high bill investigations	Follow-up meter reader dispatched to confirm meter reading.	The reading is probably correct; most bills can just be sent. Customers will call if there is a problem.
Internally generated low bill investigations	Follow-up meter reader dispatched to confirm meter reading.	Meter service crew dispatched to inspect or change meter.
Small meter maintenance	Small meters are changed every 20 years; large meters have more frequent testing and maintenance programs. Small meter population consists of at least 20 age groups and 5 makes of meters, resulting in numerous age-make classes.	Annual statistical sampling of age-make classes results in fewer tests, with sampling based on consumption or age. BWS can allow age-make classes to age until samples fail. Three year installation and 2 makes of meters result in fewer age-make classes.

The new AMR system will allow BWS to restructure several customer-service functions related to meter reading such as on-cycle meter reads, initial and final reads, customer inquiries and complaints, low and high consumption investigations, and meter management and maintenance. BWS will use the system to read meters monthly, though most customers still will receive bimonthly bills.

Utility managers also plan to use the system to notify customers of atypical consumption, which could eliminate some high-bill problems even before they occur. And a database of reliable monthly readings will allow customer-service representatives to effectively handle bill complaints and pre-bill exceptions as well as make reliable estimates for initial and final reads.

Regarding labor, BWS has about 170 employees - from meter readers to customer service clerks to pipefitters - who are involved with meter reading, meter maintenance and customer service functions. AMR adoption will displace about 40 positions and could affect up to 60 additional positions (see Table 2). Total annual labor savings after full deployment should be about $2 million.

The utility also will reduce vehicle costs. BWS now has 40 vehicles that meter readers, meter-maintenance staff, field-collections staff and field investigators use for day-to-day business. Once AMR is installed, this fleet can be reduced by more than half. These savings, plus decreases in postage, telephone calls, equipment, supplies, overhead and a reduction in bad debt write-offs, should total about $650,000 per year.

Increased Registration Bring Additional Revenue

BWS collects about $95 million per year in consumption and account charges. Utility managers conducted accuracy tests for samples of meters in service, and projected that replacing old meters will result in an increase in registration of about 5 percent-bringing additional revenue of about $1 million per year.

Analysis Indicates Positive Cash Flow

Financial projections developed during the AMR study included a multiyear analysis to determine how the AMR system would affect cash flow during a 20-year planning horizon. The plan accounts for replacing AMR electronics after 15 years and meters after 20 years. Any costs involving labor-such as staff savings and meter-installation costs-were projected to inflate at 3 percent per year.

Project installation is expected to begin somewhat slowly, pick up speed in the middle and slow again as installers tackle the final difficult installations. Savings in labor, vehicles and other operating costs are expected to lag behind the installations, with benefits becoming visible as BWS adjusts staffing and procedures.

The estimated cash outlays for the system, cash returns from savings and under-registration recovery, and remaining value of meters and electronics at the end of the planning horizon yield a return on investment of about 8.5 percent per year
(see Figure 2).

Figure 2. AMR savings and project costs during 20-year planning period.

Long-Term Financial Models Often Change

Managers who develop long-term financial models like BWS's must understand that changes in technologies and utility operations could prompt significant changes through the years. The BWS model does not include customers' willingness to pay for the convenience and benefits of the system or the net benefits from increasing billing frequency from bimonthly to monthly (though capital and operating costs of monthly reading already are included is the model).

The analysis also does not take into account important intangibles such as keeping customers satisfied in an increasingly competitive environment; operational benefits including improved forecasting, distribution-system modeling, and analysis of unaccounted-for water and wastewater inflow/infiltration; and human effects related to with major changes in practices. Though important, these items are difficult to quantify.

BWS Works to Understand the Impact of AMR

To understand and manage the impact AMR will have organization and operations at BWS, utility staff undertook a three-part program:

• Analysis and redesign of customer-service activities. Teams of employees reviewed critical customer-service business processes, then identified tasks that could be reduced or eliminated, tasks that would be created, and the number of employees in specific positions needed in the redesigned department.
  
• Assessment of overall human-resource needs. This study covered the extent to which displaced employees could migrate to other areas of BWS and the additional resources-including retraining programs, outplacement services and early-retirement packages-that would be necessary.
  
• Services and programs for BWS customers. New temporary or permanent customer services such as extended hours or conservation programs could increase customer satisfaction and provide opportunities to employees displaced by the AMR project.

BWS leaders have incorporated these elements into the utility's ongoing organization-wide competitiveness program.

Table 2. Estimated staff reductions after full deployment of AMR.

Area	Before AMR	With AMR (1997 Est.)
Meter Reading	3 Supervisors 20 Meter readers	1 Supervisor 3 Meter Readers
Billing	1 Supervisor 6 Pre-audit Clerks 2 Accountants	1 Supervisor 2 Pre-audit Clerks 2 Accountants
Customer Service Investigations	3 Supervisors 15 Investigators	1 Supervisor 9 Investigators
Customer Service	3 Supervisors 7 CSRs 3 Clerks	2 Supervisors 5 CSRs 1 Clerk
Collections	2 Supervisors 2 Accountants 6 Collectors 4 Collections CSRs	2 Supervisors 2 Accountants 5 Collectors 4 Collections CSRs
Meter Services	2 Supervisors 14 Meter Mechanics	2 Supervisors 11 Meter Mechanics
Distribution maintenance	77 Pipefitters	76 Pipefitters