To:Honorable Mayor and City Council

Memorandum

To:Honorable Mayor and City Council

From:Brad Corcoran, City Manager

Date:February 15, 2011

Re:Automated Meter Reading System Project Proposal

Historical Information

Automatic Meter Reading, or AMR is the technology of automatically collecting

consumption, diagnostic, and status data from a water meter and transferring that data to a

central database for billing, troubleshooting, and analyzing. This timely information coupled

with analysis, can help both utility providers and customers better control the use and

production of water consumption.

AMR was first tested approximately 48 years ago when trials were conducted by AT&T in cooperation with a group of utilities and Westinghouse. After those successful experiments, AT&T offered to provide phone system-based AMR services at $2 per meter. The price was four times more than the monthly cost of a person to read the meter - $0.50 cents. Thus, the program was considered economically unfeasible.

In 1972, Theodore George “Ted” Paraskevakos while working with Boeing in Huntsville, Alabama, developed a sensor monitoring system which used digital transmission for security, fire and medical alarm systems as well as meter reading capabilities for all utilities. This terminology was a spin-off of the automatic telephone line identification system, known as Caller ID.

In 1974, Mr. Paraskevakos was awarded a U.S. patent for this technology. In 1977, he launched Metretek, Inc., which developed and produced the first fully automated, commercially available remote meter reading and load management system.

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The modern era of AMR began in 1985, when several major full-scale projects were

implemented. Hackensack Water Company and Equitable Gas Company were the first to

commit to full-scale implementation of AMR on water and gas meters, respectively.

Advances in solid-state electronics, microprocessor components and low-cost surface-mount

technology assembly techniques have been the catalyst to produce reliable cost-effective

products capable of providing the economic and human benefits that justify use of AMR

systems on a full-scale, basis.

Today, many communities throughout the United States and the State of North Carolina have already proceeded with the acquisition and implementation of AMR Technology for their water system. A partial listing of some examples (the overwhelming majority of whom are Carolina Meter clients) include:

North Wilkesboro, N.C.Pulaski, VA.

Conover, N.C.Franklin, N.C.

Moore County, N.C.Baton Water Company, N.C.

Mount Airy, N.C.Mulberry-Fairplains, N.C.

Chicago, Ill.Pfeiffer-North Stanley Water Company, N.C.

Siler City, N.C.Graham, N.C.

Durham, N.C.Charlotte-Mecklenburg Utilities, N.C.

High Point, N.C.Spartanburg, S.C.

Forest City, N.C.Greenville Utilities Commission, N.C.

Chatham County, N.C.Cherryville, N.C.

Gastonia, N.C.Greenville Water System, S.C.

Maiden, N.C.ONWASA (Jacksonville, N.C. area)

Lincolnton, N.C.Apex, N.C.

Boiling Springs, N.C.Radford, VA.

Sanford, N.C.Cape Fear Utility, N.C.

Enfield, N.C.Richlands, VA.

Shelby, N.C.Clayton, N.C.

Bogue Banks, N.C.Wytheville, VA.

Tarboro, N.C.Selma, N.C.

Jacksonville, N.C.Seneca, S.C.

Mooresville, N.C.Joint Municipal Utility, S.C.

Cherokee, N.C.Lynchburg, VA.

Springhill, TN.Beaufort-Jasper Water Authority, S.C.

Appomattox, VA.Aiken, S.C.

Bessemer City, N.C.Conway, S.C.

Christiansburg, VA.Northeast Knox Utility District, TN.

Chatham, VA.Pittsylvania County Service Authority, VA.

Caswell Beach, N.C.Farmville, N.C.

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February 15, 2011

Background Information

The discussion concerning the purchase and utilization of Automated Meter Reading (AMR) Technology was first raised by city staff during the annual Budget/Planning Retreat on February 23, 2008. Since that point in time I’ve reported on this subject more than a dozen different times in the Weekly Report from the City Managersince April 18, 2008 in one manner or another.

On May 16, 2008, several members of staff and I met with representatives of Carolina Meter to discuss the AMR Technology and to receive a mock display on how the system works. On May 21, 2008 several members of city staff traveled to the Town of North Wilkesboro, N.C. to see the AMR Technology in action and to speak first hand with Town representatives about their experiences.

During the last part of 2008 we initiated discussions with various groups concerning possible ways to access grant funds from outside funding sources as opposed to borrowing the funds needed or using existing funds from the fund balance within the Water and Sewer Fund.

On February 9, 2009, we met with Mr. Ron Lilley, Cavanaugh Solutions (now with Carolina Meter) to discuss funding opportunities through the American Recovery And Reinvestment Act (ARRA). We were hopeful that the AMR water meter conversion project would be eligible under the “water efficiency” portion of the bill being debated by Congress.

On February 26, 2009 a funding application was submitted for North Carolina Department of Environment and Natural Resources (NC-DENR) funding assistance through its Public Water Supply Section (PWSS) of the Drinking Water Supply Revolving Fund (DWSRF). A second funding application was submitted to the Clean Water State Revolving Fund (CWSRF).

On April 2, 2009, Mr. Lilley contacted us to inform us that we had not been selected for funding from the CWSRF. He stated that a large amount of the available funds had been eliminated and the remaining funds were being restricted for more specialized water projects. At this point in time he felt we still had a good chance for funding assistance through the DWSRF.

On May 5, 2009, the PWSS released a listing that showed the Eden AMR project as “Ready To Proceed”. This designation meant that the funding application, plans and specifications and all supporting documents had been reviewed and approved by the PWSS. At the time, this was a key step since only those projects with a “Ready To Proceed” designation would be considered for actual funding by the DWSRF. During the next fifteen months we waited anxiously to see if we would ultimately be approved for funding assistance. On August 25, 2010 we were notified that DWSRF would not name Eden as a Disadvantaged Community. In essence, this meant we would not be eligible for a principal forgiveness funding award. During this same period of time we contacted Mr. Allen Hart, Area Specialist with the United States Department of Agriculture

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Rural Development to check on the possibility of funding assistance. Unfortunately, their money is restricted to communities with a population of less than 10,000.

On February 27, 2010, a power point presentation was delivered during the annual Budget/Planning Retreat by Ms. Tammie McMichael, Director of Finance and Personnel concerning the AMR system. As a result of that presentation and Council’s continued interest in considering the AMR system further a total of $207,800 has been included in the current FY 2010-11 budget that was adopted on May 18, 2010 to begin the implementation of this project if formally approved by the City Council.

On June 17, 2010, Councilman Jim Burnette and members of city staff attended an Automated Meter Reading Technology Seminar that was sponsored by Carolina Meter in Greensboro.

On June 3, 2010, staff began meeting with representatives of Brady Energy Services concerning a comprehensive performance contract proposal that could potentially include the AMR system. On June 24, 2010, Mayor Grogan and various members of city staff traveled to Greensboro and attended a kickoff meeting with Brady Energy Services. On September 9, 2010, representatives from Brady Energy Services submitted their formal Energy and Infrastructure Optimization Proposal to city staff. Included were several different energy conservation measures. One of the items that was included was the purchase and installation of the proposed AMR system at a price of $1,899,358 +/- 10% depending upon the final findings of an investment grade audit to be completed by Brady Energy Services.

On September 17, 2010, I informed each of you that we were not recommending the acceptance of a performance contract with Brady Energy Services because we felt their costs were very excessive. I advised that we had contacted Mr. Brad Bersch of Carolina Meter for an apples to apples rough estimate on the AMR System and that he had given us a preliminary price quote of $1,789,475.82 compared to the price quoted by Brady Energy Services. He noted that his estimate was likely high and Mr. Bersch thought the actual cost would be much lower if we decided to proceed with Carolina Meter. I informed the Mayor and City Council that we felt we could get a better price by bidding the project ourselves rather than working through Brady Energy Services and that we intended to move forward in an effort to get some firm prices for Council’s review and consideration.

After talking with other municipalities that have purchased and installed the AMR system Ms. Erin Gilley, City Attorney advised me that we could proceed with the purchase and installation of the system without the formal development and receipt of bids under the guidelines of North Carolina General Statutes 143-129(e)(6) which states an exemption from competitive bidding is allowed when the purpose of “standardization or compatibility is the overriding consideration.” Nearly every meter currently in use within the City of Eden is a Badger meter and the ability to

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stay with this brand and the intended retrofit in lieu of replacement of approximately 9.37%(656) of our existing active meters (6,998 as of December 2010) qualifies us for this exemption.

On September 27, 2010, Ms. Tammie McMichael, Director of Finance and Personnel and I met with Mr. Mark McMillen, Co-Owner of Carolina Meter and Vice-President of Sales and Mr. Brad Bersch, Sales Representative for Carolina Meter to get a firm price quote that could be presented to each of you for your formal consideration. We stressed the need to minimize our capital investment and were quoted a formal price of $1,552,956.74. Furthermore, we were informed that this price quote would be good thru September 2011 so staff could have a sufficient amount of time to complete its internal analysis and formally present the proposed project to the members of City Council.

During October, November and December of 2010, Ms. Tammie McMichael, Director of Finance and Personnel and I conducted an in depth analysis concerning the number of inactive meters being read each month but not producing any revenue. We looked at the length of time these accounts have been inactive and thendiscussed the likelihood of them becoming active within a reasonably short period of time. We discovered that 358 meters had been inactive for at least two years and that an additional 383 meters had been inactive for at least three years or longer. In order to reduce our initial investment and save valuable revenue we decided to reduce the number of meters we would be replacing at the outset from 7,083 meters to 6,442 meters. This reduction will allow us to save an additional $100,396.69 by only purchasing 100 meters at the outset for these inactive accounts rather than replacing every inactive meter as initially considered.

In January 2011, I received an updated quote for the AMR project that is $1,452,560.05 (copy included). This is a result of us proceeding with the replacement of 6,442meters (active accounts in December 2010 = 6,998 meters minus 656 meters to be retrofitted in lieu of replacement = 6,342 meters plus 100 additional meters to have on hand for the 741 inactive accounts as of December 2010) instead of7,083meters (6998 active accounts plus 741 inactive accounts = 7,739 meters minus 656 meters to be retrofitted in lieu of replacement = 7,083).

Clearly, this is a substantial savings ($446,797.95) when compared to the price quoted by Brady Energy Services which was $1,899,358 and even a savings of $336,915.77 when compared to the initial preliminary quote we received from Carolina Meter at the beginning of September 2010.

Current Situation

Currently, the City manually reads all of the water meters throughout the City. We have

three full-time employees who are dedicated to reading our water meters on a monthly basis. The three meter readers are reading six hours a day eight days straight and reading approximately 161 meters each day. We have two billing cycles so the three meter readers are

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currently reading 16 days out of an average 21.75 work days each month. In addition, we still have to have a back-up meter reader from the Collections and Distribution Division for emergency situations as well as various types of leave. The meter reads are being visually observed and then keyed into the handheld device manually which increases the risk of human error. There is also no possible way of early leak detection in the method that we are currently using. From 3:00 p.m. to 5:00 p.m. each day the meter readers respond to various service requests and handle work orders that total an average of 406 per month. In addition, we currently average 50 rereads per month, leave approximately 30 door hangers per month, check an average of 50 meters per month for stoppages, handle an average of 150 cutoffs/reconnects for non-payment per month as well as an average of 50 meters per month that have to be pulled or locked as a result of non-payment.

There are a large number of meters in use that have been in use for quite some time. As you are aware, the older a meter gets, the more it slows down and does not record the customer’s actual

usage. The Billing and Collections staff and meter readers have estimated that there were approximately 500 meters in the ground that were 35-40 years old and thousands more that were past their normal life expectancy of seventeen and a half years when the meter replacement program was initiated during FY 2006-07. While we have been able to replace 656 meters between April 2007 and January 2011 (these meters will be retrofitted) the overwhelming majority of our meters are still in need of being replaced. We have also been able to recognize bad meters by a “stopped meter list” report that is generated by our Billing and Collections staff. This report is generated from the billing of accounts that have no usage. The accounts are then verified as to whether or not the meter has stopped or if the property is vacant.

It’s important to remember that an inaccurate water meter not only decreases our water revenue, but the sewer revenue is affected just as much since that portion of the utility bill is based on the meter reading. It’s a double hit to the city’s revenue stream.

Project Benefits & Description

In order to increase water efficiency, the City staff proposes to proceed with the purchase and installation of the AMR system. There are many benefits associated with the implementation of this system. These include:

• Low-cost, fast and efficient data collection.
• A more accurate and precise measurement of water consumption. Consumers will be billed the amount that more closely corresponds to what they have actually consumed.

• More efficient operations and improved call resolution. Billing and Collections personnel within the Finance Department will have access to more accurate water consumption data as well as profiling capabilities for each account.

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• Less manpower and resources will be needed in meter reading and data gathering. The AMR system will actually lead to the elimination of two full-time employees

for an annual recurring savings of at least $78,616 based on current costs. It will also

reduce the cost of annual meter reading supplies and other expenses as well as the

number of vehicles on the road each day from three to one, the level of repairs

needed to maintain three vehicles and the amount of gas needed to operate the vehicles. The reduction from three full-time employees to just one full-time employee will translate into an annual recurring savings of approximately $18,959 related to operational savings. This reduction in actual spending of approximately $97,575 on a recurring basis each year will save the taxpayers nearly $1.0 million dollars every ten years and will help to assist the city in keeping our water and sewer rates competitive and hopefully below the statewide average.

• Increased revenues over time. Water meters, whether manual or automated, are mechanical devices that decrease in accuracy over time. Because many of our meters are older and less accurate, the city is losing revenue from both water service charges as well as sewer service charges.

• One of the unique features of these new meters is leak detection. The City will be able to note if water use suggests an undetected leak on the property that ends up wasting water and costing the customer money. This feature will translate into savings for our customers. The new meters will sample water consumption 24 hours a day and notify the City if water has been running continuously when we read the meter. The new meters also allow us to chart water consumption for each meter over the course of a day or week to help the homeowner identify high consumption periods and look for ways to conserve.This unique feature will assist the citizens in identifying leaks in a more timely manner thereby reducing the amount of money they are ultimately charged on their bills as a result of a leak.

• The Badger Meter ORION In-Home Display (IHD) is an optional customer service tool that will be available to all water users. It is designed to promote efficiency and conservation and provides consumers with more than just a monthly look at their water consumption. The IHD unit will allow us to offer our customers the option of monitoring their at-home water use on an easy-to-read, remote display. Once programmed to the appropriate ORION transmitter, the IHD will begin to receive and display metering information. Customers can access this display to view hourly, daily or monthly water use data numerically or in seven-day graphic intervals. A built-in magnet allows for its location on a refrigerator or other appliance. This simple, convenient display enables customers to quickly understand and reevaluate their water usage while at the same time helping utilities to reduce the number of billing inquiries and disputes. For areas that are

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