the challenge for water utilities of aligning financial and … · 2014-09-26 · the challenge for...
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www.efc.unc.edu
The Challenge for Water Utilities
of Aligning Financial and Demand
Reduction Goals
Mary Wyatt Tiger, Chief Operating Officer
Environmental Finance Center at UNC-Chapel Hill
North Carolina Water Resources Research Institute
2013 Annual Conference
March 20, 2013
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www.efc.unc.edu 2
Dedicated to enhancing the ability of governments and
organizations to provide environmental programs and
services in fair, effective and financially sustainable ways
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Long-term benefits &
Short-term deficits
Figure from Water Research Foundation’s “ Meeting Future Financing Needs of Water Utilities (1993)
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Household water use in North
America
When controlling for weather and other variables…..
A household in the 2008 billing year used 11,678 gallons less annually than an
identical household did in 1978.
Rockaway, T.D., P.A. Coomes, J.Rivard & B. Kornstein. (2011) Residential water use trends in North America. Journal AWWA. February 2011, 76-89.
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Why?
Parameter 1990 2007 Allotment – gpd
Household use – gpd
208 187 -21
PMDI 0.29 0.75 -2.6
People per household
2.52 2.38 -5
Educational index 2.45 2.81 +1.3
Average home value
$120,100 $144,600 +3.5
Home size 2,155 sq. ft. 2,281 sq. ft. +0.6
Total =18.8
18.8 GPD attributed to increased installation of low-flow appliances
Breakdown of Louisville (KY) Water Company residential water decline between 1990 and 2007
Rockaway, T.D., P.A. Coomes, J.Rivard & B. Kornstein. (2011) Residential water use trends in North America. Journal AWWA. February 2011, 76-89.
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Water Sales Declines
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Challenge: Uncertain Revenue Changes in water use have had:
Source: Water Research Foundation/Environmental Finance Center, Water Revenues Forum (#4405)
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Revenue tied to Consumption WaterOne (Johnson County), KS (FY2011)
Total Revenues:
$93,928,438 Total Operating
Revenues:
$93,280,648
Water Sales to
Customers:
$92,024,666
98
% Commodity Charges:
$71,719,095
76%
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Variable Revenue in the Research
Triangle Area
Data analyzed by the Environmental Finance Center at the University of North Carolina. Data source: Each utility’s customer billing records, project funded by NC Urban Water Consortium
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Base Charge as Percent of Total Monthly Bill
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Fixed vs. Variable Revenues and
Expenses
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The conservation conundrum
• Water utilities face a dilemma in
encouraging water conservation
– By selling less water, utilities have to increase
rates to cover their costs
– Customers are essentially being asked to pay
more for less water
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Water Use and Revenue
“Water demand is recalibrating according to
new economic realities and public policy
directives. Ignoring declining demand does
make it go away – or rather, come back. The
intractable manager will remain cash-flow
frustrated. The enlightened manager will be
better positioned for cost recovery in
accordance with a fluid equilibrium.”
Beecher, Janice A. 2010. The Conservation Conundrum: How declining demand
affects water utilities. Journal AWWA, February 2010, 78-80.
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Strategies to Align Financial and
Demand Reduction Goals
• Getting Your Water Efficiency House in Order
Will Jernigan, Cavanaugh & Associates
• Interruptible Irrigation Rates
David Tucker, Environmental Finance Center
• Financing Green Infrastructure
Jeff Hughes, Environmental Finance Center
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19
Defining A Resilient Business
Model For Water Utilities
• Water Research Foundation Project #4366
• To define new financial approaches and paradigms for
water utilities in addressing current and future fiscal
challenges
• To explore new methods of identifying and reducing the
risks associated with revenue variability
• On-going research discussion at www.efc.web.unc.edu
• Final research will be at www.waterrf.org
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www.efc.unc.edu
Questions? Slides will be posted on: www.efc.unc.edu