Joshua Dill: Please us about your background and how you came to be in your current position.
Jonathan Cato: I am an engineer by training. I started out in the industrial sector and the mineral processing industry, and after about 10 years, I moved over to SUEZ Utility Services and our operations group, where I held a number of positions. Through my career, I have gone from project manager to business unit leader to vice president of operations. Now I manage all SUEZ’s lines of business, meaning the product offerings and service offerings we sell to municipalities throughout the United States.
Joshua Dill: Please tell us about SUEZ’s asset management program.
Jonathan Cato: There are three divisions in SUEZ North America. There’s the Utility Division, which owns and operates assets around New Jersey, New York, Delaware, and Pennsylvania. Then we have the Environmental Services Group, which does operations and management of municipalities’ water and wastewater collection systems. The group I am in is called Advanced Solutions. We provide water and wastewater services to municipalities. Advanced Solutions has over 600 employees nationwide and 20 delivery centers throughout the United States.
Joshua Dill: What services does the Advanced Solutions department provide?
Jonathan Cato: In 1964, we began offering tank maintenance services. SUEZ Advanced Solutions started out as just a tank maintenance contractor. Tank renovation typically means painting a tank and making any necessary repairs. Steel tanks can last 100 years if properly maintained, and we found that we kept painting the same tanks and doing the same renovations for the same customers every 10–15 years. Some of our customers who were forced into a low-bid approach came to us and told us that they’d prefer to contract with us for the long term instead. In response, we came up with a subscription-based maintenance program. We renovate the tank; bring it up to all necessary standards established by the Occupational Safety and Health Administration; the American Water Works Association (AWWA); and federal, state, and local ordinances; and then we maintain it regularly through a subscription-based program. As part of that program, all future renovations are covered with a lifetime warranty.
This was attractive to smaller customers for a couple of reasons. First, they didn’t have to worry about maintaining the asset. They would turn the maintenance of the asset over to us, and we would maintain it going forward. Second, they no longer had to budget for large capital expenses. With our subscription approach, it became a professional service with a flat annual fee. Moving that spending from capital expenses to operation expenses was significant. Third, the lifetime warranty meant that if the coatings failed in year 5 instead of year 15, the asset would be renovated with no argument. Fourth, the fact that we did the asset management was a relief for some smaller municipalities from a health and safety perspective. They no longer had to send people to climb the tanks or things like that. Overall, we provided peace of mind. The risk of managing an asset was turned over to SUEZ. Our contracts are typically evergreen, meaning they automatically renew every year. SUEZ can only cancel due to nonpayment, but the customers can cancel whenever they want.
We started that program in the late 1980s and now have over 6,000 tanks in our long-term asset management program. We replicated the same program with water wells and now have over 400 wells in our asset management program. With wells, we go beyond just maintaining the asset; we maintain performance and capacity as well. We’re also expanding these services to filters, filter plants, and concrete tanks, and we are looking for other parts of water and wastewater systems to include as well.
We’re starting to see some growth in our other lines of business as well, including water meters. These are all advanced metering infrastructure (AMI) meters, which provide data wirelessly via radio frequencies from a home into the cloud and then to the customer’s billing system. We’ve initiated an asset management program that covers the meters, transmitters, collectors, and the entire AMI system. We maintain that for 15 years, which is typically the lifespan of the meters and the AMI transmitters. Within that period, we handle any problems with the meters or transmitters for the customer, we handle all the software upgrades, and we maintain the cellular backhaul communications to cover the data transfer. One of the challenges with AMI systems in the early days was that smaller and medium-size municipalities would implement them but not have budgeted for the software upgrades that might be released in year 5 or 8. Our services cover that. We
launched our AMI service 4 years ago, and we may have 50,000 meters under contract by the end of this year.
All these markets were fractured. Take the tank market: There was an engineer, a coatings manufacturer, a third-party inspector, and a contractor. We combine all that and assume all the risk of project maintenance and future asset management. The same was true in the metering industry: There were metering distributors, meter companies, AMI companies like Sensus and Aclara, and installers. We took the same approach. We call it “one throat to choke.” You don’t have to chase down the vendors or the installers, you just come to us.
Joshua Dill: When a client contracts with SUEZ through this subscription model, does SUEZ maintain the asset on a regular basis, or does it only come in when there’s a problem?
Jonathan Cato: Both. We certainly come in when there’s a problem. We rate problems by severity, and we take care of the most serious problems—like a water tank hatch that is open, allowing things to get in—within 24 hours. If a meter is not providing us any data, we’ll monitor it and visit it within a month. We monitor the specific capacity of water wells at least on a yearly basis.
In any case, even if there is no repair needed, we do an annual inspection of every asset and provide a condition assessment report. For tanks, we document the condition of the tank in each of the five AWWA categories—security, sanitary, coating, structure, and site—and make sure everything’s compliant. If something is wrong, we fix it to extend the life of the asset. We do the same thing with wells. We come out and treat the well with a carbon dioxide injection to create a disruption to free up the formation to let water begin flowing freely again, do an initial and a final pump test, and then draw up a condition assessment report, which explains how it is performing compared to its design capacity and how to improve its performance. On the metering side, we also issue monthly reports attesting that all the meters are active.
Joshua Dill: Who are your asset management clients?
Jonathan Cato: Right now, our clients are probably 99 percent in the municipal space. We do have some industrial customers as well as our legacy product lines with tanks, but our maintenance programs are most popular with municipalities. Most of our clients within that space are small to medium in size—municipalities with a population of 100,000 or fewer. We have found that the smaller the customer, the better our services fit their needs. Larger agencies or utilities have their own engineering or asset management departments, but smaller agencies may not have dedicated staff to check on the assets or do capital improvement plans. We can bring economies of scale to those smaller customers of the same type that are available to the larger municipalities. For example, the City of Atlanta can get a good deal buying meters because it buys several hundred thousand of them at once. The City of Perry, Georgia, a city of 10,000 people, could not get the same deal, but when SUEZ steps in to procure materials, we can get those savings and pass them along to the customer.
Joshua Dill: Will a client contract with SUEZ just for one asset that they find particularly difficult to manage, or do they want you to manage all their assets?
Jonathan Cato: Once we start managing one asset, we typically are able to expand into other parts of the system. Customers who have a good experience with one of our services, like the tank maintenance program, and have liked the transfer of risk, the guarantee of service, and the annual condition assessment are generally open to our other services as well. When we start talking to them about their filters, wells, or meters, it is an easier sale. They already understand the subscription-based concept, and they like that they can budget a set amount for asset management and not worry about spikes in capital expenses. All our current meter customers except one are also tank maintenance customers.
As we look at new offerings, we are trying to identify municipalities’ other pain points. One is water quality compliance. We have two in-tank technology offerings. Trihalomethane Removal Services addresses trihalomethanes, which are disinfection byproducts that form when disinfectants, such as chlorine, react with organic compounds present in the water. We use active mixing as well as trihalomethane removal systems inside the tanks to help maintain compliance with water quality standards. These services can be bundled with our tank asset management program, or they can be purchased individually.
Joshua Dill: What results do clients see from SUEZ’s asset management program, and how can the program save them money?
Jonathan Cato: We can show that our approach, over the 20- to 30-year life cycle of an asset, can save a significant amount of money compared to the standard run-to-failure approach. However, even if there were no distinction in life cycle cost, there is another benefit. The typical run-to-failure approach provides no coverage between the initial renovation and the next round of renovations 10 or 20 years down the line. Our program, by contrast, provides 100 percent coverage for emergency repairs. That extra coverage is valuable to customers and provides them with peace of mind.