Lahti Aqua Oy has ensured that its customers will have access to high-quality water for a long time to come. A detailed overhaul program has been prepared for the Lahti region's water supply for the next 30 years. There is no great pressure to raise the water price, as the costs of the overhaul are based on realistic network values rather than estimates. As such, pricing has remained reasonable.
Approximately 80 per cent of the value of assets owned by Finnish water supply organizations is tied up in their water and sewer networks. The networks are underground and out of sight, and the owner may not be fully aware of their true condition until a pipe breaks. A large proportion of the network is beginning to age, turning 40 years old or even more.
The high standard of Finland's water supply is not to be taken for granted as the financing problems that water companies are experiencing may - in the worst-case scenario - cause delays in repairing the network, leading to dilapidation.
"The debate on the water supply revolves around investment backlog. How financing can be arranged for the debts related to repairing the network, as well as future investments, is under constant discussion", says Lahti Aqua's CEO Martti Lipponen. "When resources are limited, it is extremely important that decision-making focuses on making the right investments. That is to say that investments should be made in the right places at the right times."
Lahti Aqua uses Trimble's software solution for water utilities. When the Trimble NIS network information system — the core component of the solution — was taken into use already in 2002, information about the features, maintenance, and repair activities of the water and wastewater networks was entered into the system.
Investment decisions had previously been made by combining information about network features from manual map data with statistical data. "Of course, we had information on the location and condition of the network and we were able to use it to target overhaul work, but the foundations of such decisions were weaker and less specific", says Lipponen.
He wondered why it was not possible to use the geographic information and feature data that was on the system to prepare an overhaul program based on detailed network information. "To draft a long-term overhaul program including precise maintenance information and costs, it is necessary to know and to be able to calculate the number, age, unit price, and lifecycle of assets", says Lipponen.
Data-based decision-making
Trimble had an Asset Management application — a ready-made tool for managing network assets. Based on Martti Lipponen's thoughts, asset management reporting was planned with Trimble by piloting Lahti Aqua's network material. Now Lahti Aqua has been able to use the asset management reports to prepare a detailed overhaul program for the next 30 years.
"We know which parts of the water pipe, wastewater, and rainwater drainage networks will need to be repaired each year in each area, including the length in kilometers and the costs", says Lipponen.
In addition to the source data and technical current utility value provided by Trimble's system, the overhaul program leveraged a 17-point prioritization system that analyzes the network's location, the number of users, and the potential impact of outages, among other data. Prioritization can therefore be affected by factors such as whether the network is located near a hospital or on a street with relatively few residents. However, the most important factor in evaluating the need for an overhaul is the age of the network's components.
"Asset management is not child's play: it involves a large volume of assets and significant costs. But data provides us with the opportunity to make the right decisions and generate more reliable forecasts for the future", says Lipponen.
The state of the water supply in the Lahti region is good: there is a low level of debt related to overhauls and the amount of overhauling required is reasonable.
"The average age of our network is only about 25 years, which is approximately 30 percent younger than networks in large cities. In addition to this, the network is in good condition because it was extensively overhauled in the 1990s. The best indicator that a network is in good condition is a low rate of loss due to leakage. For our water pipe network, it is 3.9 percent, compared with an average of 20 percent for Finland as a whole. We are now better prepared for future overhauls and financing", Lipponen says.,
The problem of reasonable profit levels
Finland's water utilities have local monopolies: each municipality can have only one supplier who builds and owns the water pipe network. In total, there are approximately 1,500 bodies operating in Finland, of which fewer than ten have followed Lahti Aqua's model of operating as a limited liability company. The majority are municipally-owned public utilities and co-operatives. The Water Supply Act sets out a framework for water companies to determine their pricing: the revenue must cover the water company's investments and costs, and fees may only produce a reasonable return on capital.
The Water Supply Act obligates water companies to prepare themselves for contingencies. Furthermore, the grounds for defining fees are to be as transparent and comparable as possible. Customers and officials must be able to evaluate whether water supply fees correlate to costs and whether prices are reasonable and balanced. Water companies must also provide information on the components of their fees.
"The managers of water companies must be aware of the precise replacement price and technical current utility value of their assets to enable them to evaluate costs and to price their water correctly", Lipponen says. "This is simple. Water companies must be able to transfer their overhaul costs to the water price in a justified way. This will enable them to safeguard their operations", he says.
