How to Transform Utility Management Through Smart Consolidation
- JD Solomon
- 8 hours ago
- 3 min read
If you’ve followed my work, you know I focus on helping utilities make practical, sustainable business decisions. Consolidation often gets delayed because daily operations and limited resources leave little room for long‑range planning. The challenge is that waiting until a system is under real strain limits the options available. Addressing consolidation earlier, with a structured process and a clear view of risks and benefits, gives utilities more control and better outcomes for the communities they serve.
In 2019, I sat down with a group of leaders in San Francisco, convened by the US Water Alliance, to change that narrative. We spent three days developing a framework that moves consolidation from an act of desperation to an act of leadership. The result was the Guiding Principles for Utility Consolidation.
The bottom line is that consolidation is about gaining capacity, not about giving up control.
The "One Water" Reality
The document we produced isn't just another academic briefing. It’s a framework for the One Water approach. It acknowledges that our water systems are aging, our workforces are retiring, and our regulatory requirements are getting stricter. Most small-to-medium-sized utilities simply cannot "go it alone" and remain resilient.
We identified several "Core Principles" that must guide any successful interlocal agreement or asset transfer. If you’re a Town Manager or a Utility Director in North Carolina, South Carolina, or Wisconsin, these should be on your desk right now.
1. Consolidation is a Spectrum, Not a Binary
One of the biggest misconceptions is that consolidation means "selling out" to a larger city. The guidance outlines a spectrum from informal collaboration (sharing a backhoe) and contractual arrangements (purchasing water) to joint authorities and full physical mergers. You don't always need to transfer every asset to reap the benefits of scale.
2. It Must Be Locally Led
Top-down mandates from legislative bodies often end in the courthouse, not the treatment plant. For consolidation to work, the "why" must be understood by the local board and the ratepayers. It has to solve a local problem, whether that’s debt relief, water quality, or economic development.
3. Solve for the Six Aspects
In my own practice, I frequently discuss the six pillars of regionalization. Our San Francisco group reinforced that you cannot value a utility solely on its pipes and pumps. You must address:
Infrastructure: What is the actual condition? (No more guessing).
Financial: How is the debt being assumed?
Legal: What does the Interlocal Agreement (ILA) look like?
Human Resources: What happens to the operators who know where the valves are buried?
Organizational: Who makes the decisions on Day 1?
Political: How do we maintain the trust of the community and political leaders?
The Valuation Trap
One of the most contentious parts of any Interlocal Agreement (ILA) is always the "value." Should it be Net Book Value? Replacement Cost? Or Debt Assumption?
The Consolidation Guidance makes it clear: the value of a utility is its ability to provide safe, reliable service into the future. If a system has $10 million in assets but needs $15 million in repairs to meet EPA standards, the "book value" is irrelevant. The real value is the liability relief provided to the selling entity and the reliability gained by the buyer.
Be Proactive with Utility Consolidations
The Wake County, NC, utility mergers of the 2000s show us that the most successful deals happen when leaders are proactive. Don't wait for a "Distressed" designation from the state. Use the US Water Alliance principles to start a conversation with your neighbors while you still have the leverage to negotiate.
Knowing How (and When) to Start Consolidations
Taking a business case approach, where options ranging from “status quo” to “do everything (merge), is the best approach. Focus early on higher-level evaluations of financials, infrastructure, human resources, and information technology systems. Make sure to include off-ramps at key points in the schedule to avoid wasting people’s time if it’s clear a deal can’t be reached.
Like many business endeavors, utility consolidations are based on trust. I have been part of mergers where the financials were bad, but the trust was high, and the agreements worked. I have also been part of mergers where the financials were “no-brainers,” but the sides had limited trust and the agreements failed.
Need help getting started? JD Solomon has performed regionalization and consolidation assessments across the eastern United States throughout his 30-year career. JD Solomon Inc. has standard assessment and implementation tools to guide utilities through the process.
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