If the PR24 consultation schedule was not enough of a driver for water companies, the challenges presented by the summer of 2022 only underscored the need to focus on asset health and resilience. . Drought conditions and corresponding watering bans have led to a renewed and entirely appropriate focus on climate change and greenhouse gas emissions. The scarcity of this valuable resource this year has also drawn attention to leakage reduction programs. And then when it rained, the storm overflows brought pollution and environmental impact into focus with a public and political demand for the government, regulator and water companies to do better.
But how can better asset health management advance efforts to meet regulatory requirements, while maximizing infrastructure investment in a meaningful way that will meet public demand for action?
An integrated system and life cycle costs
Asset health, when applied in an integrated manner across our water and wastewater system, is based on the life cycle of our infrastructure. Integration is essential because all the individual elements of our water system do not exist in isolation and safeguarding our assets cannot be achieved without a holistic view.
A key partner in resilience, asset health is defined as the ability to achieve and withstand impacts on a required level of service. Fundamentally, delivering this level of service in a sustainable way doesn’t rely on a single decision or business function – it encompasses the entire asset lifecycle across multiple time horizons. Building resilience requires understanding the short, medium, and long-term health of the integrated system.
This means for water companies (or any asset-intensive industry) that proactive asset health management must be an integrated series of proactive decisions based on service level risk. We’ve been thinking about totex (capex and opex) for some time – making sure we consider life cycle costs when investing, but now water companies need to consider balancing cost, risk and performance against strategic changes to their service level requirements.
Asset failure and service impact
The most practical way to understand asset health in practice is to look at the decisions that affect it throughout their life cycle. Long-term asset health management requires integrated thinking which, when considering an end-to-end treatment process comprised of a series of systems, requires us to first consider the level of service or outcomes that it is necessary to achieve.
Once understood, we need to look at the organizational processes, business systems and resources to deliver the service in a sustainable way. These include a common way to assess system cost, risk and performance, planning and scheduling capability, and having the right skills and competencies to operate and maintain the system.
With these foundations in place, an organization can gain the necessary knowledge about its asset base, such as identifying critical processing process systems. For system assets, what static and dynamic data should be captured in order to make operational and investment decisions to create a risk-based maintenance program, or define requirements to proactively monitor condition and performance actives.
Now we can enable optimal asset management by putting in place the right operational resource, mobilizing engineering and support services at lower cost and carbon through the supply chain and setting up points of monitoring of the critical assets.
Finally, to complete the operating model, one must operate and maintain the assets as integrated systems. Which, with respect to asset health, means creating proactive maintenance delivery models, planning for reactive response, and optimizing operational processes to meet service level requirements.
Asset Management Maturity
Ofwat’s PR24 guidance recognizes the shift of budget and investment planning from the price review timeline to an asset management timeline – from the regulatory five-year period to a timeframe more representative of the lifecycle of assets , generally considered to be about 25 years old. She indicates that apart from the price review, she has undertaken an assessment of the maturity of asset management. This, he points out, has created a common understanding of the maturity range of asset management in the industry, including monitoring and managing asset health and operational resilience.
The exercise led to a proposed PR24 results plan with key asset health performance commitments, such as network repairs, unplanned outages and sewer collapses. Ofwat adds the following advice: “Financial incentives on performance commitments will encourage companies to improve service levels and asset health.” The message is clear, water companies will focus on asset health under the guidance of Ofwat, with the regulator placing a clear emphasis on long-term expenditure modelling.
In its Operational Resilience Working Paper 2021-22, Ofwat lists Stage One (2022-23) Asset Resilience Measures as Asset Health Performance Commitments PR24 (Sewer Collapses , unscheduled outages and network repairs), condition of assets, unscheduled maintenance, equipment failures on network sewers, reactive network repairs and sewer blockages. During this period, measures of system resilience include drought resilience and flooding of sewers during a storm. These metrics, including service performance, are further developed in stages two (2022-25) and three (from 2026).
It should be noted that many utilities are already in the process of sustainably improving asset health by maturing the components described. The sea change for PR24 and beyond is to bring them together in an integrated way across the asset lifecycle, which by design then requires more strategic thinking which is now actively encouraged by Ofwat. Additionally, Ofwat has recently encouraged voluntary data requests to inform the expansion of common KPIs that will dynamically monitor asset health in a consistent manner, again targeting more strategic decision making and insight sharing. information in the water services sector.