David Liles, LWPWA General Manager, on Effective Risk Assessment for Water Utilities
When most people think about property risk and insurance, they focus on external forces such as tornadoes, hail, fires, or theft. These are genuine risk factors to consider and offset. However, they are by no means the only risk factors utilities face in day-to-day operations.
The controlled movement of water and wastewater is possible through the use of electricity and electric pumps. As anyone in the water treatment industry knows, electric motors can be very finicky and fail for many reasons. When the motor fails unexpectedly, it can cause anything from temporary internal delays to massive interruptions in getting water to the local end-user. David Liles, general manager for Lonoke White Public Water Authority, faced a recent near-catastrophe due to an electric motor failing.
“It was a normal day until we had a pump quit for no apparent reason,” Liles explains. “This was a 700 HP Flowserve pump with a German-made motor. It was only six years old, and the lifespan was a lot shorter than it should have been. Now, this was a raw water pump. Its main function was to supply the treatment plant. Without this pump, we would not be able to treat the water, and we would not be able to get water to our customers.”
Getting the pump fixed was a top priority. Repairing the pump in question was not a cheap fix. However, no company can adequately budget to replace a pump that was only six years old. Liles contacted LWPWA’s insurance agent, Michael Banks, and was relieved to discover that his predecessor, Woody Bryant, had already planned for just this sort of incident.
“Due to the shortened lifespan of the pump, the cause of failure was covered by our insurance,” Liles said. “This helped offset the loss our company faced. I’m relieved that our agent, Michael Banks, was knowledgeable enough to steer us in the right direction. I was also grateful that Woody had the foresight to get good insurance on those pumps.”
The National Rural Water Association reports that 50 percent of the industry’s workforce will be eligible for retirement over the next 10 years. In Arkansas, that’s an estimated 1100 operators taking decades of knowledge with them. It is important that the next generation understands the decisions made today can mitigate risk and address real costs that may arise in the future.
Utility companies and their decision-makers often overlook the value of practical risk assessment. By focusing only on external disasters, they neglect to consider risk transfer tools and insurance coverages that can significantly help address other unexpected failures. In the case of Lonoke White Public Water Authority’s raw water pump failure, equipment breakdown coverage had already been purchased and effectively transferred their risk.
Risk assessment goes beyond preparing for obvious disasters and asks essential questions: What’s the worst that can happen? What can we do today to address that worst-case-scenario in the future? Answering these questions means going beyond the transaction of purchasing insurance. ARWA member companies need to work with a specialist who recognizes the unique risks faced by their industry. This is what Woody Bryant did during this time with the Lonoke White Public Water Authority. His wise foresight helped his company successfully navigate a crisis even after he had left the company.
“At Lonoke White Public Water Authority, our priority is to provide safe, clean, potable water to our local end-users,” said Liles. “If we didn’t have the right insurance coverage, we would have faced additional obstacles in fulfilling our mission after that raw water pump failed. Working with Michael and EMC Insurance was a good experience. They acted in a timely manner and we are working toward getting the pump fixed as quickly as possible.”