Great. Again thank you all for being here today. And just as a reminder, we’d like to focus this as much as possible questions that you have about asset management in your system, so feel free to type in questions as we go along in the chat box and we’ll get to as many as we can.
But just to kick things off today, I wanted to have Ross to focus a bit on some things he’s been contemplating about the Flint Michigan crisis. We know, kind of the human side of Flint Michigan, but there’s an asset management side to that situation.
So we’re going to start off today just by talking about level of service, cost, and risk as they relate to a situation like Flint and how an asset management program can help a utility that has to face those kinds of decisions.
Thank you, Heather. And this diagram (Figure 1) that you’re looking at here came from some work we were doing in New Zealand about three years ago. We’re still working our way through this.
So we call it, these three axes if you like, levels of service, cost, and risk. And the thing that struck me when looking at Flint, of course, is that risk was hidden.
Normally we think about changing the dollars and/or the level of service. And if you, for argument sake, put up a new treatment process and you have to spend some dollars to do that improves your levels of service cause your water might be higher. That sort of thing or different maintenance program or some pipe replacement or things like that.
And so when I started thinking about Flint, because I think it is going to affect a lot of utilities, not just here in the US. I think there might be across western world some impacts from that – is what they started doing is they had this problem that they needed to save some money, that they were perceived.
So they changed what they were doing in levels of service to save themselves some money (See Figure 2). And that risk from asset management point of view, that was hidden, the problems that we now know about in Flint started increasing.
But nobody could see it – because the risk was hidden and it’s about, I guess the thinking we’re doing in New Zealand, and sort of a bit wider than that – about this – is what/how we communicate that hidden risk and how can we actually quantify it to the point that, in the case of Flint an administrator could make some good decisions around that.
So what happens, what happened there, this threshold line which I’m calling the safety and trust threshold is that risk crossed the safety and trust threshold. And all of a sudden it is visible to everybody. And so all the health problems that are known. (See Figure 3)
And of course the cost that’s going to be for Flint multiples more than the cost of not having done what they’re doing. It could be hundreds of millions of dollars before that problem’s finished to be sorted out.
And that can happen in any supply, I mean they have particularly bad problems there. So the levels of service are down below the safety and trust threshold, the dollars appeared to be down but in fact they aren’t. The risk becomes apparent, the problems there, lots of dollars, lots of inquiries and things like that.
If you’re in a dictatorship, what would have happened in that sort of circumstances, they’d probably arrest people or shoot them or whatever they do! In a Western society, what happens is this final diagram here, so we spend a whole lot of money to fix the problem that pushes the service levels back up again. The risk comes down below the safety threshold. (See Figure 4)
So now we’ve got the safety, but we’ve lost trust and we never get it back again for a very very long time. And so that impact across our industries then is legislation and regulations, the cost of alternative action. There’ll be litigation or class action. The overall societal cost as well.
And of course, we end up with a whole heap of inspections and investigations mandated out of that. And that’s simply, these sort of things come from not understanding what’s happening with that hidden risk.