Change Leader Full Interview: Utility Providers Increasingly Turn to Third-Party Private Contractors

Keith Oldewurtel leads Veolia North America’s (VNA’s) municipal water and energy business.

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V1 Media: Please provide a brief background of your education and career before Veolia.

Oldewurtel: I have 42 years of experience in water, wastewater, energy, utility, management and operations. I joined Veolia about 12 years ago as general manager of a district energy system in Michigan. Prior to that, I spent 20-plus years working for a large engineering, construction and environmental firm, in their water and wastewater contract operations business. For about eight years prior to that, I was working in the municipal sector, running water and wastewater treatment plants. So I have a pretty diverse background, both on the public and private side of wastewater and energy systems. I have a degree from Bay College in Michigan. I’m a certified water and wastewater operator in Michigan, which is where I began my early career, and I’ve maintained that for years.

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V1 Media: Can you briefly describe your current role at Veolia and what you do on a day-to-day basis?

Oldewurtel: I’m executive vice president and chief operating officer for our municipal water

and commercial energy/water business lines. I’m responsible for all aspects of those businesses. We operate over 160 water and wastewater treatment plants, 12 energy plants and 2 energy-as-a-service businesses. I have approximately 2,400 employees spread out over the United States and Canada. So all aspects of running the business: growth, customer satisfaction, operational performance, compliance, safety, financial results.

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V1 Media: Veolia is considered a third-party contractor or third-party operator. Can you tell me what that is and how third-party contractors work with utilities and municipalities?

Oldewurtel: Under my responsibility we’ve got a couple of business lines. The first is our municipal water and wastewater operation and maintenance business. We’re considered a contract operator, and under those contracts, we typically sign long-term contracts between five and 20 years long. We provide all the staffing, pay all the bills. The contracts are typically

structured as a lump-sum agreement, and we’re responsible for operating and maintaining those plants. Often, the distribution systems for drinking water, and the collection systems on the wastewater side are included. On the commercial energy/water side of the business, there are a couple of different things we do. First of all, similar to the municipal water business we operate and maintain energy and industrial water and wastewater plants for large malls, university campuses, and facilities that have their own energy-production and/or water and wastewater treatment facilities. In addition we have two businesses: Enovity and Source One. In these businesses, we’re providing energy-management services helping customers manage their building energy needs, billing tenants, negotiating power purchase contracts and controlling costs. We also provide energy service contracts where we go in and do lighting changes or other energy-efficiency measures and basically get paid out of the savings being generated. Commissioning of data centers is a big part of our business, and we do the operation and maintenance of systems within large commercial buildings. In downtown San Francisco, for example, we provide staff who operate and maintain the energy systems within those buildings. We also have a digital offering that we call “Hub Grade” in which we offer digital solutions including remote monitoring that allows us to dispatch operators to address equipment issues, issue maintenance work orders, track and perform analytics on usage identifying anomalies that really drives optimization and cost reduction.

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V1 Media: Why do some utilities and municipalities turn to third parties for management and why don’t others?

Oldewurtel: I’ll start with the reasons why they do. Often, we see customers having environmental-compliance issues. Many of these facilities have permits and have requirements for quality of water. For a variety of reasons, they’re struggling to meet those permit conditions and environmental compliance. Sometimes that’s a result of their inability to attract experienced and qualified staff. One of the things our industry has been hit with is an aging workforce, and all these plants typically require staff that have been certified by state agencies. You have to have so much experience, so much education and continuing education, so the pool of people available to fill these positions are continuing to dwindle. That’s one of the things that drives a customer to contract their services. I can give people advancement opportunities. I’ve got a larger business, more opportunities available to individuals than an individual municipality may have.

Cost savings is often a driver. Customers are looking at how they can reduce their operating costs, how they can extend the life of aging structure. We all hear about the issues with the need for infrastructure investment. So how do we get even more life out of what exists, and how do we effectively deploy new capital when an investment is made in improving that infrastructure.

Then it’s a little bit of risk sharing. If I’m responsible for a treatment facility, and I lose my management through a retirement or whatever, and I don’t have the ability to bring someone up from within, that’s a risk I have: what do I do in the interim? How do I stay on top of all the changing regulatory requirements? These are all things that we’re able to bring as a contract operator. We’ve got over 160 plants, and we’re always on top of the changing regulatory requirements. What are the best practices? My bulk purchasing power allows me to get some pretty good pricing on chemicals and commodities and things like that, which allows me then to pass that on to customers through lower operating costs.

On the energy-as-a-service side, it’s driven by how we can improve cost efficiency. How do we make sure the building’s HVAC system is operating at the optimum level? How do we, by using data and analytics, identify there’s an issue with a fan that’s mounted in an air handler on a roof? If you don’t have the data and analytics, maybe it won’t get caught for a month. And during that time, it’s not operating efficiently. If I can have it tied to my hub-grade system, I can spot that as an issue, dispatch maintenance, and resolve that right away. Those are the types of things we can do that lower the cost of operation for our customer.

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V1 Media: What might be some reasons or common characteristics of utilities that choose not to use third-party and to try and keep it inhouse?

Oldewurtel: Typically it’s because they feel they’ve got strong staff, strong capabilities, and they’ve benchmarked cost effectively against other operations. They’re not having a compliance issue. They’re not having issues with funding and financing. These are the reasons that drive customers to us. It’s really the opposite, where the customer feels they have that all under control.

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V1 Media: Is there a pattern on third-party use between large municipalities, small municipalities, certain geographic areas; anything along those lines you’ve noticed?

Oldewurtel: There continues to be fairly steady growth, but it’s really more of a mid-market. You don’t see the top 10 largest cities in the United States going out for contract services. The industry is really in that mid-market niche along with many smaller customers. Often if we have a large presence in a particular geography, we can go and support smaller communities in a hub-and-spoke methodology.

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V1 Media: How did Veolia help solve problems for water municipalities before the pandemic? Then I’d like to hear about some of the ways you changed your services since the pandemic started.

Oldewurtel: We’re considered an essential service across the business lines, because we’re generating electricity and providing water and wastewater treatment services. We showed up and did the same thing we were doing before COVID hit, and we still have to show up and operate and maintain utilities, to provide drinking water, treat wastewater and generate electricity during COVID. Everything we needed to do–increased vigilance on hygiene, using face coverings, social distancing, using PPE–were already part of our safety culture. Hygiene and PPE are standard in our business. We routinely use face coverings at certain facilities where we have dusty environments or are doing certain maintenance tasks. Our staff was ready, willing and able to use face coverings when face coverings were being mandated. I would say we’re doing the same thing we were doing before, except with an increased vigilance, and heightened awareness. Some of the other things that changed, or we did differently, is moving to remote communications and meetings. And we actually increased the frequency of connection with all our locations. We got very granular in communications. So really we had heightened intensity with operating communications. We were tracking daily absenteeism to look at trends. We had a very rigid procedure for anyone who had a potential exposure; and a process we followed that included our HR teams, health and safety teams, and local management. We tracked those, not just in my business, but at a Veolia North America level, to look at trends, to look out for hotspots. By tracking daily absenteeism and potential exposures, we’re able to keep an eye on, and be ready with, contingency planning if we felt we were at a situation at any one of our facilities where we might have an issue with staffing levels or being able to keep facilities operating. We tracked PPE inventories and centralized distribution and there was a higher level of intensity on safety practices, communication with the plants, and, probably most importantly, on sourcing the supplies. We didn’t end up with PPE issues, because we got on that early, managed it centrally. We were able to move supplies around within our network and by sourcing centrally, we found it was easier to buy a 55-gallon drum of sanitizer than it was to buy a case of 24 seven-ounce bottles. We learned that early. We did some centralization so we could easily have access to PPE and other supplies.

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V1 Media: Could you describe one of your favorite projects or partnerships, and your role in them?

Oldewurtel: The City of Milwaukee is one of our largest customers on the water and wastewater side: two large treatment facilities, sophisticated treatment plants, very high expectations and standards. We developed a good relationship between our team and the district’s team and have brought some good capabilities and expertise to complement the district’s strong team. It was one of those cases where both parties were bringing real strength to the table and working together to achieve the desired outcome.

Early in my career, I led the development of one of the first design-build-finance operations. I think it may have been the first municipal water plant delivered that way. That was an exciting time.

I’ve had the opportunity to work on the corporate staff. I was given an opportunity to set up and transform a purchasing function. We had great people in a fragmented, geographically dispersed organization. I had the opportunity to work with that group for a couple of years setting up the foundation which allowed it to be a significant contributor to our business. For us to be able to provide cost savings to customers, we have to be very good at purchasing at the right price, consolidating volumes, becoming a valuable customer to our suppliers so we can, in turn, pass those benefits to our customers.

I’ve realized the most satisfaction where I’ve been able to either turn around a business that had some significant challenges or when I’ve been involved in acquisitions and of businesses.

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V1 Media: To give our readers something to learn from, I’m hoping you could provide some bits of advice for how to run and manage municipal and water utilities.

Oldewurtel: The key thing I’ve found is a need to listen–really listen to people, ask

questions, get information. One of the keys is: know your numbers, and get your facts. No matter where you work, understanding the financial performance is critical. And by listening and asking questions, you’re really seeking and getting input, you’re getting ideas, you’re getting information, you’re getting engagement – it takes a team to be successful. I’ve always been able to develop strong relationships with folks who have been in the industry. Sometimes they’ve been peers; sometimes they’ve been the people I reported to. Have someone to brainstorm with. You need to be a sponge and take that experience. I think that’s where you learn. How you become valuable is experience and exposure to a variety of things. There’s not one answer to everything, but if you could take pieces from your experiences and put them together, it can probably get you to a pretty good conclusion and solution in a pretty short time.

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V1 Media: For someone who hasn’t worked with a third-party contractor, is there some advice you’d give about how it works or maybe how to best utilize a third-party contractor?

Oldewurtel: For anyone considering using a third-party contractor, first of all, go in with an open mind. Oftentimes people have a preconceived notion or a certain perspective that may or may not be correct, may not be accurate. One thing that’s important for anyone looking at third-party services: talk to others who have done it. There are a lot of partnerships out there. I know our customers are open to speaking with others who are thinking about contract operation services, and are thinking about using us for energy-efficiency services. Talk to people who are customers of third-party providers. There are a number of associations out there that have guidance to sub-contracting–avail yourself to those pieces of information. There may not be one that’s perfect, but if you read through three of them, you’ll pick certain things out that you’ll find beneficial, and they will help you as you’re talking to a provider–or a customer of a provider–to be able to ask the questions that will help in the decision-making process. Being open, having those discussions, asking the tough questions and then really looking at all those pieces to make the decision.

It’s not a commodity. It’s not a low-cost service. That’s not the way to be buying. It really is what value you’re getting. What are the resources and capabilities? How does the company conduct business? What’s the relationship going to be like? What access do you have to the information about your facilities and services?

In my experience, when there are issues with a contract, it’s typically not technical issues; it’s because there are issues with transparency, communication and the relationship. These are long-term contracts that require those three things to be successful. We’re a people business. We’re a service business. We don’t make a product we sell from a shelf. How do people and companies become successful? It’s the relationships.