20070508Reconsideration or clarification petition.pdf

McDevitt & Miller LLP
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420 W. Bannock Street
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Chas. F. McDevitt
Dean J. (Joe) Miller
May 8, 2007
Via Hand Delivery
Jean Jewell, Secretary
Idaho Public Utilities Commission
472 W. Washington St.
Boise, Idaho 83720
Re: Case No. UWI-06-
Dear Ms. Jewell:
Enclosed for filing in the above matter please find the original and seven (7) copies of United
Water Idaho Inc s Petition for Reconsideration or Clarification.
An additional copy of the document and this letter is included for return to me with your file
stamp thereon.
Very Truly Yours
\"\evitt &LLP
~ler
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Attach.
ORIGINAL
Dean J. Miller (ISB No. 1968)
McDEVITT & MILLER LLP
420 West Bannock Street
O. BOX 2564-83701
Boise, Idaho 83702
Tel: [phone]
Fax: [phone]
i oe(ii2mcdevitt-miller .com
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
UNITED WATER IDAHO INC., FORAPPROVAL OF ITS WATER
CONSERVATION PLAN AND FOR
APPROVAL OF A WATER CONSERVATION
SURCHARGE AND REQUEST FOR MODIFIED PROCEDURE
CASE NO. UWI-O6-
PETITION FOR
RECONSIDERATION OR
CLARIFICATION
COMES NOW United Water Idaho Inc.
, ("
United Water ), pursuant to Idaho Code 61-
626 and IPUCRP 325 and 331 et. seq. and petitions the Commission for an Order granting
Reconsideration or Clarification of Final Order No. 30305 issued herein and in support thereof
respectfully shows as follows, to wit:
Introduction and Course of Proceedings
On December 1 , 2006, United Water, as required by prior Commission order, filed its
Application for approval of its updated Water Conservation Plan. On January 24 2007, the
Commission issued its Notice of Application and Notice of Modified Procedure. The
Commission Staff filed comments on February 23 2007, and United Water filed reply comments
on March 28 2007. On April 18, 2007, the Commission issued its Final Order No. 30305 which
granted in part and denied in part the Application.
PETITION FOR RECONSIDERATION OR CLARIFICATION- 1
Question Presented
United Water appreciates the Commission s careful review of the updated Conservation
Plan and does not in this Petition dispute most ofthe Commission s findings and conclusions.
In this Petition, United Water requests that the Commission reconsider or clarify a single
issue-the nature and quantity of evidence that must be presented by United Water in a
subsequent rate proceeding in order to obtain amortization in rates of deferred expenses
associated with implementation of the conservation programs authorized by Order No. 30305.
The relevant portion of Order No. 30305 is:
The Commission does not believe further evaluation of the specific program is
necessary at this point, as efficiency of implementation and prudency of the program will
be evaluated to establish the recovery level and amortization period when the Company
seeks recovery of the new conservation costs. A cost/benefit analysis for each program
should be provided to show the ongoing benefits to customers.
Discussion
In its Comments, Staff criticized the Plan for not containing an adequate evaluation
component for the proposed conservation programs. (Staff Comments pgs. 3-6). Staff
however, acknowledged that evaluation of water conservation programs is both imprecise and
expensIve:
Estimating savings from a conservation program is a difficult and imprecise process
under the best of conditions but especially so for educational and public information
programs. It is difficult to determine the number of real customers exposed to the
information, the number of customers that actually implement a particular conservation
measure, and the amounts of water actually saved..." (Emphasis added). (Staff
Comments, Pg.7).
Staff went on to say:
The most reliable estimates of educational programs are based on surveys of customers
who receive promotional materials and a control group to estimate the percentage of
participants that actually take the actions being promoted. Significant concerns about
these estimates include the accuracy of the survey responses, and the persistence of the
savings from measures that rely upon customer actions rather than hardware. In most
PETITION FOR RECONSIDERATION OR CLARIFICATION- 2
cases, the cost of such an evaluation significantly exceeds the amount spent for the
program...(Emphasis added). (Staff Comments, Pg.7).
In its Reply Comments United Water observed that, as proposed, the programs do not
include a budget for evaluation and it would be unwise to undertake evaluation programs when
their cost would likely exceed the cost of implementation. (Reply Comments, Pg. 5). United
Water further recommended that, in order to clarify the proof required in subsequent rate
proceedings the following language be included in the Commission s final order:
In the ordinary course of events, in a subsequent rate case United Water may expect to
receive approval for amortization of deferred conservation expense upon a demonstration
that:
a).The program measures identified in the Plan were implemented consistent with
the Plan and
The expenses of implementation were recorded on the Company s books so as to
permit audit and verification.
b).
Order No. 30305, quoted above, appears to agree that evaluation is not required, but
apparently rejecting United Water s suggested order language, included the requirement that in
future rate proceedings
, "
A cost/benefit analysis for each program should be provided to show
ongoing benefits to customers.
The requirement of a "cost/benefit analysis" is a source of uncertainty for United Water
in two respects.
First, it is unclear how the required cost benefit analysis differs from an "evaluation
which the Commission did not require.
Second, as United Water understands it, the phrase "cost benefit analysis" is a term of art
in the water utility industry. It refers to the type of analysis already performed in preparation of
the Plan and is a prospective evaluation of potential water savings compared to the cost of
PETITION FOR RECONSIDERATION OR CLARIFICATION- 3
achieving the savings over a multi-year period 1 . The phrase, as it is commonly used in the
industry, does not refer to a retrospective analysis of program effectiveness, as apparently
required by Order No. 30305.
There is probably good reason the phase is not used to describe a retrospective analysis.
As Staff acknowledged, it is difficult, if not impossible, to quantify water savings in a short-term
retrospective analysis. In any given year, or small number of years, it is impossible to know if
changes in water consumption are due to successful conservation efforts, difference in weather
from year to year, customer response to price signals or a variety of other factors. It is thus
unlikely that a short term retrospective analysis that attempted to compare savings to program
costs would produce meaningful information.
Accordingly, at a minimum, United Water respectfully requests that the Commission
clarify the nature of the requested analysis that is encompassed within the phrase "cost benefit
analysis" as it is used in Order No. 30305.
More fundamentally, the Commission should reconsider its underlying premise and
expectation that "efficiency of implementation and prudency of the program will be evaluated to
establish the recovery level and amortization period when the Company seeks recovery of the
new conservation costs." (Order No. 30305 , pg 4). Instead, the Commission should consider
adopting the order language originally suggested by United Water, set forth above, which
establishes a bright-line test of what must be shown to permit amortization of deferred costs.
This recommendation is sensible for two reasons. First, as discussed above, there do not
yet exist retrospective short-term evaluation tools capable of quantifying water savings in a
I Attached, for ease of reference is Chapter 6 of the Plan demonstrating the cost benefit analysis that has already
been performed. Also attached are excerpts from the A WW A manual that generally describe the cost effectiveness
methodology that is standard in the industry.
PETITION FOR RECONSIDERATION OR CLARIFICATION- 4
rigorous, reliable way. The best that can be accomplished is the type of prospective cost benefit
analysis already contained in the plan.
Second, phases such as "efficiency of implementation and prudency of the program" and
cost benefit analysis" are susceptible to widely different interpretations. These phrases do not
provide any meaningful guidance to United Water as to the quantity and quality of evidence that
must be presented to obtain approval of amortization. They invite litigation because Staff and
other parties could adopt different interpretations. For example, United Water is under the
impression that by approving the four program measures for implementation the Commission has
determined them to be prudent. As written, however, the Order implies that prudency may be re-
litigated, under some undefined standard, in a subsequent proceeding. Similarly, the phrase
efficiency of implementation" does not in any meaningful way alert United Water as to the
nature and quantity of evidence expected by the Commission.
United Water s suggested order language establishing bright-line tests for entitlement to
amortization is supported by Commission precedent. In a series of cases , the Commission has
provided to Idaho Power Company an assurance of future rate recovery upon a showing by the
company that the amount expended on construction of generation facilities was less than a pre-
determined commitment cap. See Case No. IPC-90-, Order No. 23520 (Swan Falls); Case
No. IPC-92-, Order No. 23529 (Milner); Case No. IPC-91-, Order No. 25021 (Twin
Falls); Case No. IPC-03-, Order No. 29422 (Bennett Mountain).
Similarly, in this case the Commission can determine now, based on the cost/benefit
analysis contained in the Plan, the implementation of the identified conservation measures is
prudent. The only issues for review in a subsequent proceeding would be a showing that the
PETITION FOR RECONSIDERATION OR CLARIFICATION- 5
programs were implemented and that program costs were recorded in a way that could be
verified and audited.
Conclusion
Based on the reasons and authorities citied herein, United Water believes that portion of
Order No. 30305 discussed herein is unreasonable and erroneous. United Water respectfully
requests that the Commission issue its order granting reconsideration or clarification. United
Water does not believe additional evidence or argument is required and the matter may be
considered based on this Petition.
DATED this day of May, 2007
UNITED WATER IDAHO INc.
~UJ~ ~Dean J. Miller
Attorney for United Water Idaho Inc.
PETITION FOR RECONSIDERATION OR CLARIFICATION- 6
CERTIFICATE OF SERVICE
I hereby certify that on the day of May, 2007, I caused to be served, via the
methodes) indicated below, true and correct copies of the foregoing document, upon:
Jean Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
O. Box 83720
Boise, ID 83720-0074
i i ewell(Q),puc.state.id. us
Weldon B. Stutzman
Idaho Public Utilities Commission
472 West Washington Street
O. Box 83720
Boise, ID 83720-0074
Kevin L. Lewis
Conservation Director
Idaho Rivers United
O. Box 633
Boise, ID 83701
Kevin~idahorivers.org
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PETITION FOR RECONSIDERATION OR CLARIFICATION- 7
Water Conservation Plan - Section 6
SECTION 6: Evaluation of Long Term Water
Conservation Measures
This section presents an overview of the conservation evaluation process which has been
completed for the United Water Idaho service area. The 17 measures selected for analysis
were screened from a total of 91 measures based on ranking and rating of the following four
criteria: technology/market maturity, service area match, customer acceptance/equity, and
legal authority existing or possible.
Once selected for analysis, the conservation measures were analyzed using the Least Cost
Planning Water Demand Management Decision Support System (DSS) Model. These
conservation measures were then organized into four programs showing future activity levels
and associated cost for UWID. The intent of this memorandum is to present an unbiased
assessment of the conservation potential and its relative cost-effectiveness for UWID'
consideration. No recommendations were made at this stage. After review and comments
by UWID a recommended plan and funding mechanism was developed and is presented in
Section 7.
1 Overview of Evaluation Methodology (DSS Model)
During the evaluation process , water savings were estimated and costs for the measures
were developed. Benefits and costs were compared in a formal present value analysis and
conclusions were drawn about which measures produce cost-effective water savings. This
process can be thought of as an economic screening process , shown in Figure 6-
Packaging the best measures into alternative programs is how we are helping you to
consider what level of conservation is appropriate for UWID.
Figure 6-1 Evaluation Process
I I I I
Best Programs
. Low
. Moderate
. High
Benefit-cost analysis has been used by many water agencies to evaluate and help select
water conservation measures best suited to local conditions. This analysis requires a locale-
specific set of data , such as historical water consumption patterns by customer class
population projections , age of housing stock, and prior conservation efforts.
United Water Idaho - November 2006
Water Conservation Plan - Section 6
The following eight steps were used to implement the methodology:
1. Develop baseline water use projections with and without the national plumbing code.
Projections cover each key customer category and are broken down into indoor end
uses and outdoor end uses. Note the plumbing code refers to savings from the 1992
Energy Act. The baseline water use projections (demand projections) for this project
were matched to the 2006 UWID Water Master Plan forecasts created by John
Church , Idaho Economics, found in the report Chapter 4 Page 4-13. The projections
used in the DSS Model are shown in Section 5.
2. Estimate the affected population (or number of accounts) for each conservation
measure by dividing the measure s projected population (or accounts) that implements
the measure by the total service area population (accounts). This factor is called the
market penetration or installation rate.
3. Estimate total annual average and peak day water savings. The water savings are
computed by multiplying unit water savings , per measure, by the market penetration or
installation rate , and then multiplying by the number of units in a particular service area
(such as dwelling units) targeted by a particular measure.
4. Identify benefits to United Water Idaho including potential reduced water costs (capital
improvements and variable water production costs).
5. Quantify total benefits for each year in the planning period by multiplying average
annual water savings by the computed value of the benefits.
6. Determine initial and annual costs to implement the measures based upon pilot
projects, local experience , and the costs of goods, services , and labor in the
community. This is multiplied by the number of units participating each year and then
added to overall administration and promotion costs to arrive at a total measure cost,
which may be spread over a number of years.
7. Compare benefits and costs of measures by computing the present value of costs and
benefits over the planning period.
8. Compile and compare alternative packages containing appropriate measures (for
example, benefit-cost ratios greater than 1.0 and significant water savings).
2 Estimated Water Savings
Data necessary to forecast water savings of measures include specific data on water use
demographics, market penetration , and unit water savings. Savings normally develop at a
measured and predetermined pace, reaching full maturity after full market penetration is
achieved. This may occur three to ten years after the start of implementation , for example
depending upon the implementation schedule.
United Water Idaho - November 2006
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Water Conservation Plan - Section 6
3 Value of Saved Water and Cost of Measures
Perspectives on Benefits and Costs
The determination of the economic feasibility of water conservation programs depends oncomparing the costs of the programs to the benefits provided. The analysis was performedusing the DSS model. The DSS model calculates savings at the end-use level; for example
the model determines the amount of water a toilet rebate program saves in daily toilet use for
each single family account. For this evaluation benefits are based on the average "systemwide" variable operation cost of $103.80 per million gallons plus the reduced (present value)
cost due to a delay in building of capacity related capital improvement projects. The following
list is a sample of the capital improvement projects included in the model spread over the
period 2007 to 2025:
. 7 New Wells
. 5 New ASRs
. 6 New Membrane Skids for Columbia WTP
Marden WTP Expansion
UWID provided the exact trigger points for added capacity and these were input into the
model along with the costs of the capacity increment. The model was allowed to adjust thetiming of when these would be needed in order to satisfy peak demands. The total capitalimprovement projects expenditures amount to over $36 million. If water conservation is
successful in reducing demand then there can be some delay in portions of the currentcapital improvement project schedule. This is a conservation benefit.
Present value analysis is used to discount costs and benefits to the base year. From thisanalysis benefit-cost ratios of each measure are computed. When measures are put together
in programs the interactions are accounted for by multiplying water use reduction factorstogether at the end use level. A water use reduction factor is 1.0 minus the water savingsexpressed as a decimal. This avoids double counting when more than one measure acts to
reduce the same end use of water.
Benefit-cost analysis can be performed from several different perspectives, based on who is
affected. For planning water conservation programs for utilities, the perspectives mostcommonly used for benefit-cost analyses include the utility and the community. The "utility
benefit-cost analysis is based on the benefits and costs to the water provider. Thecommunity" benefit-cost analysis includes the utility benefits and costs together with account
owner/customer benefits and costs. These include customer energy benefits and costs of
implementing the measure, beyond what the utility pays.
The utility perspective offers two advantages for this analysis. First, it considers only theprogram costs that will be directly borne by the utility. This enables the utility to fairlycompare potential investments for saving and supplying water. Second, because revenueshifts are treated as transfer payments, the analysis is not complicated with uncertainties
associated with long-term rate projections and retail rate design assumptions. Because it is
United Water Idaho - November 2006
Water Conservation Plan - Section 6
the water provider s role in developing a conservation plan that is paramount in this study, the
utility perspective was primarily used to evaluate elements of the plan.
No evaluation perspectives are without shortcomings. The principal weakness of the utility
perspective is that it does not count the benefits accrued or costs incurred outside of the
utility. Therefore another perspective is also used - the community perspective. The
community perspective is defined to include the utility costs and benefits and the customer
costs and benefits. Costs incurred by customers striving to save water while participating in
conservation programs are considered, and are the benefits received in terms of reduced
energy bills (from water heating costs). Other factors external to the utility, such as
environmental effects , are not included in the benefit-cost analysis. Because these external
factors are often difficult to quantify, they are frequently excluded from economic analyses
including this one.
Although quantifying these benefits is beyond the scope of the present study, it goes without
saying that reducing water diversions from the Boise River and the groundwater aquifer
(because water conservation programs are implemented) has downstream benefits that
increase in proportion to the amount of water savings.
Present Value Parameters
The time value of money is explicitly considered. The value of all future costs and benefits is
discounted to 2005 (the base year) at the real interest rate of 3.5%. The DSS model
calculates this real interest rate , adjusting the current nominal interest rate (assumed to be
approximately 6.6%) by the assumed rate of inflation (3%). Cash flows discounted in this
manner are herein referred to as "Present Value" sums.
Assumptions about Costs
Costs were determined for each of the measures based on industry knowledge and past
experience and data provided by UWID. Costs may include incentive costs , usually
determined on a per-participant basis; fixed costs , such as marketing; variable costs, such as
the costs to staff the measures and to obtain and maintain equipment; and a one-time set-up
cost. The set-up cost is for measure design by staff or consultants, any required pilot testing,
and preparation of materials that will be used in marketing the measure. Measure costs were
estimated for each year between 2007 and 2030. Costs were spread over the time period
depending on the length of the implementation period for the measure.
Lost revenue due to reduced water sales is not included as a cost because the conservation
measures evaluated herein generally take effect over a span of time that is sufficient to
enable timely rate adjustments, if necessary, to meet fixed cost obligations.
United Water Idaho - November 2006
Water Conservation Plan - Section 6
4 Comparison of Conservation Measures
Table 6-1 provides a short description of the 17 measures evaluated in the DSS Model. The
savings from the components of each measure are additive.
Table 6-1 Description of Measures Evaluated in the DSS Model
Measure Target
Number Measure Customer Short Description
Category
Develop additional demonstration garden(s)
Additional Existing displaying living examples of low water-using
Xeriscape Customers gardens and landscaping. United Water Idaho
demonstration RSF would create and manage the gardens and
gardens provide signs and brochures to educate those
people visitinq the garden(s).
Existing Continue and expand the Water Efficient
Continue &Customers Landscaping (WELs) program to greatly increase
Expand WELs RSF the number of participants. Incentives could
include landscape and drip system vouchers.
Residential United Water Idaho would sponsor school
school Existing conservation programs with workbooks and
education Customers presentations; teaching materials and other
RSF educational tools to teach the students theprogramsimportance of conservinq water.
Rain-sensor
(shut off device)Existing United Water Idaho pays for a rain sensor
retrofit on Customers giveaway or voucher, and homeowner pays for
irrigation RSF the optional installation ($35).
controllers
Modeled after California BMP 1 , possibly
Residential Existing redesign former United Water Idaho Program
water surveys Customers and reinitiate to offer free irrigation system
RSF evaluations to high water use customers.
Simplify audit procedure to hold costs down.
Use the latest state of the art irrigation controllers
for single family homes. These controllers have
Smart Irrigation Existing on-site temperature sensors or rely on a signal
Controller Customers from a central weather station that modifies
Rebates RSF irrigation times at least weekly (preferably daily)
as the weather changes. United Water Idaho
would provide a rebate for the controller.
Use the latest state of the art irrigation controllers
Smart Irrigation Existing for multifamily and commercial customers.
Controller Customers These controllers have on-site temperature
Rebates RMF, COM sensors or rely on a signal from a central
weather station that modifies irriqation times at
United Water Idaho - November 2006
Water Conservation Plan - Section 6
Measure Target
Number Measure Customer Short Description
Category
least weekly (preferably daily) as the weather
changes. United Water Idaho would provide a
rebate for the controller.
United Water Idaho would offer a voucher or
Trigger shut-off otherwise provide to the customer at no cost
valves and hose SF Existing hose timers and shut-off valves. This would
timers enable homeowners to use water outdoors more
efficiently.
Provide annual awards to developers that are
New home New SF Green Builders" and offer homes/condominiums
efficiency award for sale and/or apartments for rent that meetNew MFprograms certain criteria. This could be combined with
enerQY efficient homes.
Modeled after Arizona RCM , Las Vegas and
other programs , UWID would provide a rebate of
Landscape SF Existing $ 0.25 to $1.00 per square-foot of existing
rebate program irrigated turf removed and replaced with hard
cape or approved low water use plant material
irriQated by new efficient irriQation system.
Rebates for 6/3 Provide a rebate or voucher for the retrofit of adual flush or 4-6/3 dual flush , 4-liter or equivalent very low waterliter toilets (also SF Existing use toilet. Rebate amounts would reflect theknown as high incremental purchase cost and would be in theefficiency toilet
HET)range of $50 to $100 per toilet replaced.
Award program United Water Idaho would sponsor an annual
for water Existing CII
awards program for businesses that significantly
savings by reduce water use. They would receive a plaque,
businesses presented at a lunch with the mayor.
Modeled after California BMP 9 and Arizona
Commercial RCM , businesses with high water use toilets
toilet Existing CII (restaurants, grpcery stores , etc.) would be
replacement offered a rebate for a ULF or high efficiency toilet
(HET)
Rebates for Selectively provide rebates to businesses to
replacing high convert to efficient urinals only where urinals areuse commercial Existing CII subject to high use, such as restaurants
urinals with 0.
Qal/flush urinals
theaters, stadiums etc.
Replace Provide a rebate for a standard list of water
efficient equipment. Included would beinefficient water
using Existing CII icemakers, efficient dishwashers , cooling towers
equipment to replace once through cooling, irrigation
controllers , and certain process eauipment.
United Water Idaho - November 2006
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Water Conservation Plan - Section 6
Measure Target
Number Measure Customer Short Description
Category
Restaurant low Provide free installation of 1.6 gpm spray nozzlesflow spray rinse Existing CII for the rinse and clean operation in restaurants
nozzles and other commercial kitchens.
Modeled after California BMP 5 and Arizona
RCM all dedicated irrigation meters would be
Landscape provided a water budget for their existing
water budgets Existing CII landscape showing the expected volume of water
required for every month of the season. Renew
every ten years. Target larger sites so water
savinQs are two times averaQe.
Financial
incentives Provide rebates for selected types of irrigation
rebates for Existing CII equipment upgrade. Model after EBMUD orirrigationContra Costa Water District, California programs.upgrades
Notes:RSF = Residential Single FamilyRMF = Residential Multi FamilyCOM = CommercialCII = Commercial/lndustrial/lnstitutionalNew SF = New Single FamilyBMP = Best Management PracticeULF = Ultra Low FlowRCM = Reasonable Conservation MeasureEBMUD= East Bay Municipal Water District
For a detailed description of California BMPs see httD://WWW,Cuwcc,orq/memorandum.lassoFor an overview of Arizona Reasonable Conservation Measures see Phoenix Conservation Plan
http://phoenix.govIWATERlwaterpln,html
Table 6-2 and 6-3 present results of conservation measure evaluation going forward from
2006. This table presents how much water the measures would save, how much they would
cost and what the benefit-co~t ratios are if the measures were run on stand-alone basis, i.without interaction or overlap from other measures that might address the same end users).Water savings shown are averaged over the 25-year analysis period and may be higher or
lower in a particular year. Other key statistics are the cost of water saved in dollars permillion gallons ($/MG), and the benefit-cost ratios. Benefits Cfnd costs are defined below:
Utility benefits and costs: those benefits and costs that the utility would receive orspend.
Community benefits and costs: community benefits equal utility benefits pluscustomer energy (cost to heat water) benefits. Community costs include utility andcustomer costs to implement measures.
Water Benefits: based on the 2005 average annual variable operating cost of water
and a deferral of the planned capital improvement projects through 2025. Thepresent value of this deferral in capital is the major benefit from water conservationprograms.
United Water Idaho - November 2006
Water Conservation Plan - Section 6
Costs for the utility: include measure set-up, annual administration , and payment of
rebates or purchase of devices or services as specified in the measure design.
Customer costs: include costs of implementing the measure and maintaining its
effectiveness over the life of the measure.
3D-year average water savings: this is the sum of all individual annual water savings
divided by the 30 year analysis period. This provides the average water savings for
the 30 years. It is useful in comparing the relative water savings of the various
measures.
First 5-year utility cost is the total money needed by UWID to sponsor the program
for the first years. Included would be the cost of incentives, contracts, materials
and utility staff. Annual costs may be approximated by dividing the numbers by five.
Table 6-2 Residential Conservation Measure Costs and Savings
Individual Measure Analysis
Water Total 30-
Utility Communi year Cost of
Conservation Measure Benefit-Average Savings per First 5-Year
Cost Benefit-Water Unit Volume Utility Cost*
Ratio Cost Savings ($/MG)
($)
Ratio (MGD)
Additional Xeriscape
demonstration ardens
Continue/Ex and WELs
Residential school education
ro rams
Rain-sensor (shut off device)
retrofit on irrigation
controllers
Residential water surve s
Smart Irrigation Controller6a Rebates
Sin Ie Famil
Smart Irrigation Controller6b Rebates
Multi Famil , Commercial
Trigger shut-off valves and
hose timers
New home efficiency award
ro rams
Landsca e rebate ro ram
Rebates for 6/3 dual flush or
liter toilets
First five years is normally 2008-2012 except for measure 6 assumed to begin in 2010 and measure 10
assumed to begin in 2009
United Water Idaho - November 2006
1.46
0.42
0.40
0801
1448
0246
1286
0639
1177
1197
0238
0721
1283
2889
$115.
$105.
$424.
$213.
016.
240.45
$600.
$233.
$819.
572.
223.
$87 000
$56 203
$33 722
$178 120
$209 850
$699 556
$368 271
$34,490
$173,786
713,319
626 514
Water Conservation Plan - Section 6
Table 6-3 Commercial Conservation Measure Costs and Savings
Individual Measure Analysis
Water Total 30-
Utility Communi year Cost of First 5-Year
Conservation Measure Benefit-Average Savings per Utility Cost
Cost Benefit-Water Unit Volume
($)
Ratio Cost Savings ($/MG)
Ratio (MGD)
Award program for water
0165 $113.697savin s b businesses
Commercial toilet
1449 116.292 815re lacement
Rebates for replacing high
use commercial urinals with 0133 824.$169,499ai/flush urinals
Replace inefficient water 0.49 0084 897.$111 512usinui ment
Restaurant low flow spray 49.1191 $127.$204 514rinse nozzles
Landsca e water bud ets 0714 $498.$118 374Financial incentives, rebates
0681 $598.$284,496for irri ation up rades
From Table 6-, Table 6-3 the following observations can be made:
. The most cost-effective and highest water savings measure is to continue toexpand the WELs program.
Replacing inefficient commercial equipment has the lowest benefit-cost ratio which
is less than one, indicating it is not cost-effective.
NOTE: Individual measure water savings are not additive due to measure overlap. Savingsare aggregated at the program level (see below).
United Water Idaho - November 2006
Water Conservation Plan - Section 6
5 Results of Conservation Program Analysis
Comparison of Measures
Table 6-4 provides a summary of which measures make up each of the options packages,
programs A, B, C and D, which are the four packages designed to illustrate an increasing
level of water savings for UWID.
These programs are not intended to be rigid programs but rather to demonstrate the range in
saving that could be generated if selected measures were run together. In this step we
account for the overlap in water savings (and benefits) and estimate combined savings and
benefits from programs or packages of measures.
Selection criteria for the measures in each option package included the following, by
program: Measure with B/C less than 10 were not placed in any program because although
the measure could save significant water, the cost of the saved water was excessive (more
than 500/MG). Thus measures 9, 10 , 13, and 14 were not used in any program. Four
alternative programs that save progressively more water are defined below.
Program A
Program A includes a modest step up from current efforts. It includes measures that expand
on your current program to a total of 4 measures. Each individual measure has a benefit cost
ratio of more than 1.0 (i.e., benefits exceed costs).
Program B
Program B was designed to be the middle ground and consists of measures with individual
measure benefit-cost ratio of more than 0.40, and is able to save more water than Program
A. Program B includes Program A measures, plus additional measures for a total of
measures.
Program C
Program C includes a few additional conservation measures to those in Program B (individual
measures all have benefit-cost ratios more than 25). It includes Program A measures
Program B measures, plus additional measures for a total of 10 measures.
Program D
Program D includes, in our opinion, a maximum practical limit of measures for conservation
program managers to handle at one time (a total of 14 measures) It includes Program A
measures, Program B measures, Program C plus a few additional measures that are less
cost-effective (individual measure benefit-cost ratio more than 10).
Figure 6-2 shows annual water savings for each of these programs for the year 2005 to 2030.
United Water Idaho - November 2006
Water Conservation Plan - Section 6
Figure 6-2 Program A, B, C, D Conservation Measure Programs
Annual Water Conservation Savings
1.80 -.- Program A ---Program B ---Program C -+-Program D
1.40
III
~ 1,
~ 1,
::0.~ 0,
f! 0.
:;.
oc(0.40
### ##~~~~~~~~ ~~#~###### ###~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
Year
United Water Idaho - November 2006
Water Conservation Plan - Section 6
Table 6-4 Conservation Measure Selected for Programs
Corresponding Program Program Program ProgramDescription of Conservation Activity Measure
Number
Additional Xeriscape
demonstration gardens
Continue/Expand WELs
Residential school education
programs
Rain-sensor (shut off device)
retrofit on irrigation controllers
Residential water surveys
Smart Irrigation Controller Rebates
Single Family
Smart Irrigation Controller Rebates
Multi Family and Commercial
Trigger shut-off valves and hose
timers
New home efficiency award
programs
Landscape rebate program
Rebates for 6/3 dual flush or 4-liter
toilets
Award program for water savings
by businesses
Commercial toilet replacement
Rebates for replacing high use
commercial urinals with
gal/flush urinals
Replace inefficient water using
equipment
Restaurant low flow spray rinse
nozzles
Landscape water budgets
Financial incentives, rebates for
irrigation upgrades
TOTAL NUMBER OF MEASURES
United Water Idaho - November 2006
Water Conservation Plan - Section 6
Table 6-5 presents key evaluation statistics compiled from the DSS model. Assuming allmeasures are successfully implemented , projected water savings for 2015 and 2030 in
million gallons per day (MGD) are shown , as are the costs of achieving this reduction.
These savings are in addition to water savings from continuing the current conservation
program and the futures savings form the plumbing/appliance codes.
The costs are expressed three ways. Total present value over the 30-year period , the money
UWID would need to budget in the first five years to get the program underway, and the cost
of water saved.
The water savings are expressed as a percentage of the projected 2030 demand. The last
column indicates the percentage of the new water demand for 2030 that each program could
fill.
Figure 6-3 is a figure showing how marginal returns change as more money is spent to
achieve water savings. For example , if the cost versus saving curve is starting to decline
after Program B , this means that the added cost of going to Program C from B and then to
Program D will save less water per unit expenditure. In other words there are diminishingreturns when the curve starts to flatten out. It is clear that the point of diminishing marginal
returns is met at the point represented by Program B. This is confirmed by the benefit-cost
ratios of Programs C and D which are less than 1.
Section 7 presents the criteria and selection process UWID used to evaluate the four
programs from their perspective and the resulting recommended water conservation plan.
United Water Idaho - November 2006
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Water Conservation Plan - Section 6
Relative Cost-Effectiveness of Programs
UWID's service area has a moderate per capita residential water use. Because of the use of
alternate irrigation systems, and the effects of the national plumbing and appliance codes
there are low potential residential water savings in both the indoor and the outdoor sectors.
UWID's service area is not a heavy manufacturing sector so the conservation potential in the
commercial sector is also relatively low. Nevertheless there are water conservation programs
that can be constructed that are cost-effective. Overall conclusions are:
. The value of water saved to UWID is relatively modest so aggressive conservation
programs are not-cost-effective.
Total savings from Program A would be 0.37 MGD or about 0.6 percent in 2030. In
other words implementation of conservation programs will reduce water production in
2030 by 0.6 percent. This is in addition to the plumbinq code savinQs of 5 percent in
2030 demands Continuing the current conservation program is assumed in all
programs. The five year cost for Program A from 2008 to 2012 is about $176 000.
For Program A, about 96 percent the conservation potential in 2030 is in reducing
outdoor use, the rest is indoor use reduction potential.
Total savings from Program B would be 0.71 MGD or about 1.1 percent in 2030. In
other words implementation of conservation programs will reduce water production in
2030 by 1.1 percent. This is in addition to the plumbinq code savinQs of 5 percent in
2030 demands.The five year cost for Program B from 2008 to 2012 is about $600,000
Because of the projected relatively high growth rate in new accounts , Program B could
make up about 3.3 percent of the total future additional water needed by 2030, with
benefit-cost ratio of 1 .10 to 1.
The more aggressive Programs C and D are not cost-effective because the benefit
cost ratio of 0.61 and 0.30 respectively is less than 1.0. These programs , if
implemented, would provide 5.0 and 7.percent respectively of the new water
needed.
The following figures provide additional details on Program B by visually displaying the
savings and costs for each measure in Program B.
The first two graphs in Figure 6-4 show the total annual water savings per year for each
measure that has been placed in Program B. We elected to show this type of graph Program
B only because the overall program saves the most water while still being cost-effective. The
first graph shows the residential programs, the second graph show the commercial programs
that are included in Program B.
United Water Idaho - November 2006
Water Conservation Plan - Section 6
Figure 6-4 Water Savings from Conservation Measures
RESIDENTIAL CONSERVATION WATER SAVINGS ESTIMATES - PROGRAM B
70 ,..
.. -", I " ru l- 'T- .
--- ------".-
g 0,,
III
g' 0,
I/J
'iii~ 0,
.ct
(:. 0.20
2005 2006 20072008 2009 2010 2011 20122013 2014 2015 201620172018 2019 2020 2021 2022 2023 2024 2025 2026 202720282029 2030
. Add~ional Xeriscape demonstration gardens
. Residential school education programs0 Trigger shut-off valves and hose timers
. Continue/Expand WELS
. Rain.sensor (shut off device) retrofit on irrigation controllers
COMMERCIAL CONSERVATION WATER SAVINGS ESTIMATES - PROGRAM B
- 0.
~ 0,
'II
g' 0,
8J 0,
'iii~ 0,
.ct
I- 0,
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20162017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
. Award program for water savings by businesses. Restaurant low flow spray rinse nozzles
These next two graphs in Figure 6-5 show the total annual costs per year for each measurethat has been placed in Program B. The first graph shows the residential programs , thesecond graph show the commercial programs that are included in Program B. The variancein cost is because programs are run at different levels for each specific year based on howeach measure was designed. The time stream of costs can be certainly smoothed out in the
implementation phase.
United Water Idaho - November 2006
Figure 6-5 Costs from Conservation Measures
Water Conservation Plan - Section 6
$140,000,
$120 000,
$100 000.
$80 000,
iii $60,000.
oC(
$40 000,
$20,000,
$50,000,
$45 000.
$40,000,
$35 000,
$30,000,
$25,000,iii
$20,000,
oC(
$15,000,
$10,000,
$5,000,
RESIDENTIAL CONSERVATION COST ESTIMATES - PROGRAM B
COMMERCIAL CONSERVATION COST ESTIMATES - PROGRAM B
"--"----------'-' --
r---
,--------~-~---' -~ -,---------- ----------------
200520062007200820092010 2011 2012 2013 2014 2015 2016 2017 201820192020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
. Award program for water savin9s by businesses ,. Restaurant low flow spray rinse nozzles
United Water Idaho - November 2006
WATER CONSERVATION PROGRAMS-A PLANNING MANUAL
PREPARE LIST OF POTENTIAL CONSERVATION MEASURES
As part of the evaluation of appropriate measures, a list of potential measures thatmay be appropriate for the area should be compiled. This process generally yields
over 100 potential conservation measures in the typical customer categories of
Residential
Commercial
Industrial
Public
Irrigation
Sources of information on conservation measures include the Handbook of Water
Use and Conservation: Homes, Landscapes, Businesses, Industries, Farms CaliforniaUrban Water Conservation Council's Memorandum of Understanding that contains alist of Best Management Practices9 (see chapter 2), the Arizona Department of Water
Resources list of Reasonable Conservation Measures 10, and various other states thathave conservation guidelines.
SCREENING OF CONSERVATION MEASURES
The first step in any screening is the development of a menu of measures. A typicallist of potential measures is provided in the matrix shown in Table 3-6. This tableshould include all measures being considered. Many of the measures overlap in water
savings, i.e., they target the same areas for water conservation. This potentialoverlap can be accounted for, where necessary, during the combination of measuresinto alternative programs.
Screening Process
The following terms are used in the screening process:
Device. A physical item of hardware, such as a new toilet, or specific action byindividuals, such as commercial audits, that would save water if the recommenda-tions are implemented or carried out by the water utility or some other group.
Measure. A device(s). plus a distribution method and possibly an incentivesuch as a rebate, targeted ata particular type of end user that, when implementedwill save water.
Program. A set of one or more measures targeted at one or more customerclasses that would be managed by the Water Utility as a separate project.
Plan. A set of one or more programs together with an estimated budgetschedule, and staffing plan.
Screening Criteria
Cost-effectiveness. In some states or regions, a list of which measures areconsidered cost-effective for most utilities may already be compiled.LEor the purposesof a first screen of measures, only those that are more than ten times the cost of
utility's alternative next source of supply should be eliminatecWAs a general guidethe measures other utilities believe are cost-effective should be used, or the list inTable 3-6 can be used. Chapter 4 covers evaluation of detailed costs and benefits. Ifinformation is available on what the next least costly source of alternative watersupply is for the utility, this should be used to avoid spending a lot of time on
measures ten times or 'more costly.
";'
~f .
:1-
~ '
Table 3-
ANALYSIS OF WATER USE AND WATER SAVINGS . 57
Example of potential conselVation measures
Device or Program
Distribution
Method &
Incentive
Measure
Description
Require low-
consumption toilets
to be installed at the
time of sale
Rebates for 6/3 dual-
flush or 4-liter toilets
Rebates for high-
efficiency clothes
washers
Low-income home
leak detection and
repair
Distribute retrofit
kits wllow-flow
showerheads
Increase school
education programs
Incentives for out-
door use reductions
-new homes
Require high-
efficiency clothes
washing machines
Single Family Residential-Existing Accounts
Water
Provider
requirement at
time of sale
Water
Provider
rebate
Water
Provider
rebate
Water
Provider
promotes
Water
Provider
requirement
Water
Provider
promotes
City County-
requirement
Work with the real estate industry to require a certificate of
compliance be submitted to the Water Provider that verifies that a
plumber has inspected the property and efficient fixtures were
either already there or were installed at the time of sale, before
close of escrow. (Model after City of Los Angeles and San Diego.
Provide a rebate or voucher for the retrofit of a 6/3 dual flush
liter or equivalent very low water use toilet. Rebate amounts
would reflect the incremental purchase cost and would be in the
range of $50 to $100 per toilet replaced.
Together with local energy companies, if possible, offer rebates for
purchase of water-efficient machines. Rebates would be scaled to
water efficiency as rated by the Consortium for Energy Efficiency
Inc.
Use leak detection equipment to determine whether and where
leaks are occurring on the premises. The Water Provider would
then provide a plumber to the customer to repair leaks for free to
qualifying households (low income).
During an audit or through direct mail solicitation, a free retrofit
kit would be provided to existing older single-family residential
homes. The kit could contain a low-flow showerhead; toilet leak-
detection dye tablets, displacement device, or early closure device;
a faucet aerator, faucet washers to fix leaky faucets; and a
pamphlet on how to conserve water.
The Water Provider would provide school conservation programs
with workbooks, presentations, and teaching materials and other
educational tools to teach the students the importance of
conserving water.
Irrigation system upgrades, soaker hoses, mulch and soil amend-
ments, new plant materials, landscape design, turf reduction,
water allocation for landscapes
The Water Provider would educate its customers through bill
collection brochures, displays at points of purchase, the media, on
the latest clothes washer water conserving technology. Building
departments would be, responsible to ensure that an efficient
washer was installed before new home occupancy.
Tabk contimted next page,
WATER CONSERVATION PROGRAMS-A PLANNING MANUAL
Table 3-Example of potential conservation measures--continued
Measure
Device or Program
Insulate hot water
piping
Distribution
Method &
Incentive Description
Change building codes as necessary to require installation of hot
water pipe insulation on new residences.
City County-
requirement
Rebates for 6/3 dual
flush or 4-liter toilets
Water Provider offers a coupon or rebate to replace an existing
toilet with a 6/3 dual flush toilet.
Water
Provider
rebate
City County-
requirement
Building departments would be responsible to ensure that a 6/3
dual flush or 4-liter toilet was installed before new home
occupancy.
Require 6/3 dual
flush or 4-liter toilets
in new homes
Landscape wat-er use
improvements
Incentives and regulations
Technology/market maturity. This screening criterion indicates whether
the necessary technology is available commercially and supported by the local service
industry. For example, a device may be screened out if it is not yet commercially
available in the region.
Service area match. This screening criterion seeks to distinguish the tech-
nology that is appropriate for the area s climate, building stock, or lifestyle. For
example, low water-use landscape measures for commercial sites may not
appropriate where water use analysis indicates there is little outdoor irrigation.
Customer-acceptance/equity. Customers must be willing to implement
measures or else the market penetration rates (and thus the water savings) would be
too low to be significant. Customer acceptance may be based on
Convenience
Economics
Perceived fairness
Aesthetics
Environmental values
Measures should also be equitable in the sense that one category of customers
should not benefit while another pays the costs without receiving benefits.
Better measure available. If a choice must be made between two or more
measures of equal effectiveness for the same targeted end use, where one is obviously
more appropriate (i., ease of implementation or unit cost), the more appropriate
measure will pass the screening. Measures obviously not cost-effective can be
screened out.
The criteria can be scored on a scale of 1 to 5, with 5 being the most acceptable.
Measures with low scores can be eliminated from further consideration, while those
with high scores pass into the next phase-water savings analysis.
Screening process. The measures can be rated in the table such as shown in
Table 3-7 and Figure 3~5. As shown in the table, each measure has been scored on a
A."IALYSIS OF WATER USE AND WATER SAVINGS,
Table 3-Example of screening potential conservation m~asures and results of screening
Measure Criteria Pass
Device Distribution Technology Service Customer Better Score
Method &Market Area Acceptancel Measure Yes or
Program Incentive Maturity Match Equity Available
Single Family Residential-Indoor
Existing Accounts
Require 1.6 gal/flush Water Retailers
toilet to be installed requirement at Yes
at the time of sale time of sale
Rebates for 6/3 dual-Water Retailers rebate
flush or 4-liter toilets
Rebates for high-Water Retailers rebate
efficiency clothes Yes
washers
Low-income home leak Water Retailers
detection and repair promote
Distribute retrofit Water Retailers
kits w/low-flow requirement Yes
showerheads
Increase school Water Retailers
education programs sponsor Yes
New Homes
Require high Water Retailers
efficiency clothes City/County
washing machines requirement
Insulate hot water Water Retailers
piping City Coun~y
requirement
Rebates for 6/3 dual-Water Retailers rebate
flush or 4-liter toilets
Require 6/3 dual-flush Water Retailers
or 4-liter toilets for City County
new homes requirement
scale of 1 to 5, with 5 being a high rating. Generally measures were eliminated that
scored mostly l's and 2's with a few 5's. The screening is qualitative and subjective
and can be done by a group that is likely to interpret and score measures differently.
The goal was to reduce the lisLto about 20 to 30 measures that pass the screen, i.
have relatively high scores. In general, a measure has to have 17 or more total
ratings or points in order to pass this screen.
- ", ,~ '~ '
EVALUATION OF BENEFITS AND COSTS ~ 73
Water Saver Home Web Site, www.h2ouse.org developed by the California
Urban Water Conservation Council and funded by the US Environmental
Protection Agency and US Bureau of Reclamation.
Full program savings assessments and pilot test results that are published
in AWWA Journals and Annual and AWWA Water Sources Conference
Proceedings.
Data from other nearby water utilities or the state agency tasked with
overseeing urban water demand (e., California Department of Water
Resources).
Data from USGS Water Use Survey, (http:/water/usgs.gov/pubs/circ/2004/
circ12681). ,
Evaluating Urban Water Conservation Programs: A Procedures Manual
AWWA, 1993.
HOW TO DETERMINE THE BENEFITS OF EFFICIENCY MEASURES
Savings to the utility result from avoided costs (the benefits from implementing
efficiency measures that achieve water savings). The following section describes the
three principal ways that avoided costs accrue: (1) reduced water purchases (if the
utility is a wholesale customer of another water purveyor); (2) lowered O&M
expenses; and (3) delayed, downsized, or eliminated (:apital facilities.
Cost Savings From the Reduced Purchase of Water
A straightforward calculation results in the average annual unit cost of purchased
water from a wholesaler using the following expression:
A WC UPW UCPW (4-
Where:
AWC
UPW
UCPW
annual water cost
units purchased annually
unit cost of purchased water
The planner can calculate the amount of cost savings by multiplying the unit
cost of purchased water by the units of water savings estimated from efficiency
measures. An added level of detail can be used if a higher cost is charged in peak-use
period (e., high irrigation season). Then, the average cost during this period
(typically a few months time) is divided by the units of purchased water over the
same time span. This unit cost of peak-period purchased water is multiplied by the
water savings from efficiency measures targeting water reductions during that period
(commonly outdoor irrigation efficiency measures).
Cost Savings From Reduced Operation and Maintenance
(0
&...
M) Expenses
Because lowering demand results in less water produced, efficiency measures can
reduce expenses dependent on amount of water produced or variable cost-s for utility
operations, such as energy and chemical costs. In addition, some fixed costs may be
associated with these variable costs of energy and chemical usage and may be
WATER CONSERVATION PROGRAMS-A PLANNING MANUAL
included, if warranted. Only the variable costs that are attributed to water efficiency
activities are included in the calculation of avoided costs shown here.
To estimate the variable cost of energy ($/unit of water), use the following
formula:
VUCE (AEC - (12 x MFEC) (ECNP)) UWU (4- 7)
Where:
VUCE
AEC
MFEC
ECNP
variable unit cost of energy
annual energy bill (cost)
monthly fixed charges for energy
energy costs not. related to water production are those costs
independent of actual water production, such as building heating,
cooling; lighting, and process equipment use. These costs should
be included unless the water production is lowered to the extent
that facilities (e., certain buildings or pieces of equipment) are
not used, which would rarely be the case.
annual units of water usedUWU
Cost savings are calculated by multiplying the variable unit cost of energy
the units of water saved per year as a result of an efficiency measure.
In most cases, costs associated with chemicals are variable because the
chemicals are added based on flow with very few fixed costs. To calculate the variable
cost of chemicals ($/unit of water), use the following formula:
VUCC (ACC - CCNP) I UWU (4-
Where:
VUCC
ACC
CCNP
= '
variable unit cost of chemicals
annual chemical bill (cost)
chemical costs not related to productions (e., delivery charges
unless reduced)
annual units of water useduwu
Cost savings are calculated by multiplying the unit cost of chemicals by the
units of water saved per year as a result of a conservation measure. The benefits
derived from wastewater operations for energy and chemical savings can be
calculated in a similar manner.
Cost Savings From Delayed, Downsized, or
Eliminated Capital Facilities
Water efficiency can affect both the requirements for current operations, expansion of
existing facilities, and planned new facilities. Most capital facilities are designed to
meet peak demands in some future year. Typical design horizons are 10 to 20 years.
Although indoor conservation measures will reduce average day and peak ' day
demands, savings in landscape, cooling water, and other summer uses will have
greater effects on reducing the peak. In cities with hot or arid climates, peak to
average day ratios of to are common. In humid or colder climates, peak day
ratios of 1.2 to 1.7 are common. The peak-day ratio can be determined by comparing,
utility water production records using the following formula:
;;;;:1
, ~
- ":'.- '
EVALUATION OF BENEFITS AND COSTS
Peak-day ratio = highest day production / average day production (4-
The timing of capital facilities depends on the rate of growth in peak demand
and the capacity of existing facilities. If the planned facilities are dependent on the
growth of water demand, reduction in future water use can affect the timing of
construction of these facilitates. Figure 4-2 illustrates an example of how water
conservation could affect the timing of capital facilities. In this case, a water
treatment facility needed in 2020 could be delayed about 7 years. In the example
shown, demand reduction would reduce peak-day demands by about 20 percent. The
resultant dollar savings to the utility are the difference in the present value of the
costs associated with building the facility in 2027 instead of 2020.
A utility's efficiency program would reduce peak-day water use by 15 percent.
Cost savings to the utility are the difference between building the plant at two
different points in time (less debt service), plus the elimination of operating expenses
for the years of delayed construction.
If demand is leveling off as growth slows down, reducing demand may reduce
the need for the last expansion. In this case, the last expansion can be downsized.
The capital cost savings associated with a smaller facility can be converted to present
worth and added to other conservation benefits.
Information on the timing and sizing of capital facilities can often be found in
the utility's capital facility plan, water supply plan, and/or water master plan.
Unfortunately, sometimes the capital facilities are only identified a few years in
advance, and projections of needed facilities must be made using demand projections
and the design criteria.
To evaluate the impacts of efficiency, both peak-day and average-day water use
must be considered. Peak-day water use usually occurs on or near the warmest day
of the year for the community when outdoor irrigation has the highest demand of the
season.
, "-- !''...- ,~,',- ;
25 r - - - - - - - - - - - - - - - - - - - - - - - - - - -
Required Capacity Before Conservation
20 DOWNSIZING
:g;
I J------------.s I I
....... !
=5 15 I DELAY
....... ....... .......
Existing Capacity
".,.:g
I .
----:;: ,...
~ 1 0 I
",. ,...
0) j
---
Baseline ~
,... ---
t ~
,...
(L 5 ,
I --
1_- - -
----- ----- - -- - -- -.- - - - __
2000 2010 2020 2030 2040
Year
-- "",..
Demand After
Conservation
Figure 4-Example of delaying and/or downsizing a capital facility
WATER CONSERVATION PROGRAMS-A PLANNING MANUAL
Water System Design Criteria
New water facilities present an opportunity to downsize or postpone expansions. This
can occur if the design of the facility is dependent on water flows. Table 4-1 shows
typical design criteria for water facilities that may be affected by reduced
consumption. Reduction in average day demand affects how much water must be
developed, or imported and stored, prior to treatment and use. Reduction in peak day
demand affects the sizing and timing of water treatment plnnt expansions and
treated water storage. Water pipelines and pumping stations are affected by peak
hour pumping. Peak hour is dependent on customer peak hour demands plus
required fire flows. The latter is based on the type of land use to be protected.
Wastewater System Design Criteria
Table 4-2 shows the impacts of conservation (wastewater flow reduction) on design of
new facilities. Design criteria for land disposal systems are volume dependent. Most
facilities are based on peak wet weather flow, which can benefit from infiltration!
inflow (III) control programs but are little affected by conservation programs, which
save much less water than III contributes.
Table 4- t Water system elements affected by conservation
Design Criteria Based On
System Element
Source Water Acquisition
Raw Water Storage
Water Pipelines
Water Treatment Plants
Pumping Stations
Treated Water Storage
Average Day
--j
--J
Peak Day Peak Hour Fire Flow
-.J*-.J -.J
-.J
-.J -.J
-.J -.J
"Source and transmission pipelines
Source: O. Maddaus Estimating the Benefits for Water Conservation AWWA Conserv
Conference Proceedings, 1999
Table 4-Wastewater system elements affected by conservation
Design Criteria Based On
System Elements
Collection Systems
Interceptors
Treatment Plants
Average Dry
Weather Flow
Solids
Loading
Peak Wet
Weather Flow
-.J
-.J
--J -.J
Disposal to Receiving Water
Land Disposal
..j..j
Source: O, Maddaus, Estimating the Benefits for Water Conservation, AWWA Conserv
Conference Proceedings, 1999
. ~
EVALUATION OF BENEFITS AND COSTS , 77
Other Benefits
Other benefits that sometimes are significant and possibly can be quantified:
Lower withdrawals from supply sources (more water remains in rivers and
aquifers)
Lower discharges of treated wastewater to receiving waters
Lessened construction environmental impacts
Creation of water conservation jobs
Customer savings in utility bills
In-depth descriptions of the methodology for calculating the economic benefits
that the utility will realize from the delay, downsizing, or elimination of capital
facilities is available in the American Water Works Association Research Foundation
(AwwaRF) publication Economic Impacts from Water Demand Reductions (AwwaRF
1996).
How to Calculate Avoided Costs From Downsizing,
Delaying, or Eliminating a Water Supply Capital Project
The basic methodology below illustrates the economic benefit from the following
simplified formulas:
If the project is downsized:
Co,
Cost savings = (Cost at original size) - (Cost at reduced size)(4-10)
Cost in the above equation includes both capital and life-cycle operations and
maintenance costs.
If the project is delayed:
- (Cost in original year) (Cost in delayed year)OSS S-
(i l)m (i 1)n
(4-11)
Where:
number of years until the original project is built
number of years until the delayed project is built
discount rate used in present value calculation
Note: n-m is the delay in years.
Cost in the above equation includes both capital and life-cycle operations and
maintenance costs.
If the proj ect is eliminated:
Cost savings = capital cost (in net present value (today's) dollars)(4-12)
WATER CONSERVATION PROGRAMS-A PLANNING MANUAL
HOW TO DETERMINE THE COSTS OF
CONSERVATION MEASURES
This section describes the following two principal types of costs to the utility forundertaking efficiency programs: (1) direct utility costs for implementation, such asin-house staff costs and any contracted costs (where a private contractor performs
some of the work); and (2) cost of decreased water revenues.
Direct Utility Costs are the sum of in-house staff costs and contracted costs (if
work is contracted out) and can be calculated as:
Direct utility costs = In-Hol'!--Se costs + contract costs (4-13)
Where:
In-House costs = Administrative costs + (field labor hours x hourly rate (including
overhead)) + tunit costs x number of efficiency measures or
devices) + publicity costs + evaluation (or follow-up costs)
Contract costs = Administrative costs + (number of events (or sites) x unit cost perevent (including program unit costs)) + publicity costs +
evaluation (or follow-up costs)
Administrative costs include the staff time required to oversee field staff,contractors, consultants, or contracted field labor. Administrative costs will be higherwhen launching a new program or with large consultant contracts. Administrative
costs are typically 5 to 15 percent of total program costs.
Field labor costs include staff time to conduct efficiency program work in thefield, such as water audits/surveys, leak repair, and fixture installation, follow-up sitevisits, and door-':door canvasing.
Unit costs are based on cost per device or measure basis or as a cost perparticipant. Examples include retrofit kits, water audit programs, and rebateprograms. Small programs typically have higher unit costs than larger programsbecause of bulk purchase discounts and a smaller number of participants.
Publicity costs are the costs of a public outreach to educate customers through
local media, including radio and television spots, local newspaper advertisements,
flyers, bill inserts, billboard and bus advertising, theater slides, customer workshops
and seminars, and special demonstrations (booths at community events). Largerutilities often employ public relations professionals to handle this aspect of theirefficiency program for maximum effect, but this is not necessary for smallerprograms. Costs will be roughly proportional to the number of customers contacted.
Evaluation and follow-up cost includes two types of follow-up: (1) the utility
must keep records of the impact of the conservation measure(s) is having (to quantify
the water savings from these activities); and (2) monitoring how well the measures
are performing through follow-up contact with participants to assess if program goals
are being achieved. Costs from these follow-up activities may include staff timeconducting public surveys assess customer participation and satisfaction (includingchanges from a baseline survey on attitudes and also market penetration studies
(more common among larger utilities) to assess future means for better targeting
implementation of the measure).
The best sources of information are from the experience of other utilities thathave conducted similro: programs. Costs can be expressed on a unit basis (for
example, $ per dwelling unit, or $ per survey/audit) and then transferred to another
if, ,
-0'
EVALUATION OF BENEFITS AND COSTS
utility's service area, accounting for economies of scale (e., any bulk purchase
discount or larger number of participants that would drive costs down) for different
size programs.
Costs of Decreased Water Revenues
Less revenue is a primary concern of utility decision makers and should be assessed
carefully and explained fully. Decreased water revenues can mean less funding for
new capital facilities operation and maintenance, but these costs are often offset by a
reduced need to build, operate, and maintain future facilities.
There is a direct correlation between lower water use and less revenue. The cost
of decreased water revenue is the cost per unit of water multiplied by the units of
water conserved. Generally, this revenue reduction is small and occurs over a long
period of time, allowing for the utility to incorporate these changes into budget
forecasts and redesign rate structures. Typically, cost-effective (benefit-cost ratio
above 1.0) efficiency programs save 1/2 to 2 percent of annual water use, and by the
same accord, reductions in water revenues per year are the same over the life of the
program. This amount has historically been less than inflation in other utility costs.
The short-term savings from efficiency measures that reduce production costs
(energy, chemical, and treatment costs) help to offset revenue decreases. Periodic rate
adjustments can recover the inflation in utility costs in addition to recovering any
less revenue, thus the actual economic impact is insignificant. The primary concern
of utility decision makers over reduced revenue can frequently be avoided by
incorporating estimated conservation program savings into future demand forecasts
and rates prior to program implementation.
HOW TO PERFORM A BENEFIT-COST ANALYSIS
Up to this point, the planner has gathered information on how to calculate benefits
and costs. The goal now is to combine this information into a formal benefit-cost
analysis from the perspective of the water utility. For guidance, Tables 4-3 through 4-
provide an actual example of how to perform a benefit-cost analysis for a residential
water survey efficiency measure.
Benefit-cost analysis will tell the planner, decision makers, and the public
whether the proposed measures are economically efficient, or if the benefits are
greater than the costs. The larger the water savings and the smaller the costs of the
measures, the more economically attractive the measures are to the water utility.
Later in this chapter, immediately following determination of benefit-to-cost ratio
from a utility perspective, is a more detailed discussion of other perspectives and
considerations.
Benefit-cost analysis requires careful attention to detail and is a central
responsibility of plapners at medium-sized and large utilities. Planners perform
benefit cost analysis to justify significant budgets or as part of an effective water
supply planning process. Smaller utilities may elect to calculate the cost of water
saved, as described below, and select measures based on only costs.
A positive benefit cost ratio will not always be the final deciding factor. Some
measures are implemented independent of an economic evaluation. A good example
is public education programs, which are often thought of as the "glue" that holds the
efficiency program together. When performing a financial assessment, public
education is difficult to quantify in terms of direct water savings and as a result
rarely has a positive benefit-cost ratio. However, public information and education
programs are critical to assist with the success of all measures by building the
conservation ethic in customers. In general, most utilities will ramp up their efficiency
WATER CONSERVATION PROGRAMS-A PLANNING MANUAL
program over time and package education costs with other cost effective measures so
that the total combined conservation program has a positive benefit to cost ratio.
How to Determine the Benefit-to-Cost Ratio
This is a standard means of analyzing different alternatives, and numerous
economics textbooks present several methods for estimating the costs and benefits of
a potential alternative, in this case an efficiency measure. One resource is the Cost
Effectiveness Guidelines for Evaluation Urban Water Conservation Best Management
Practices (California Urban Water Conservation Council, 1998).
As an overview, the method calculates the ratio of the present value (today's
dollars) of benefits to the present value of costs. Present value of a future cost or
benefit (payment) is the amount of money needed today to make that payment in a
future year, given that today s money will earn interest between today and when the
payment must be made. It is a similar concept to buying a US Savings bond today at
a discounted amount that will mature to the face value in some specified future year.
If the ratio is greater than 1., the benefits outweigh the costs and the measure
is considered feasible (or economically efficient). The following formula shows the
basis for benefit to cost ratio:
Benefit-cost ratio
sum of benefits ($) in year (t)
(l+i)t
sum of costs ($) in year (t)
(1 + i)t
(4-14)
Where:
-=
.selected discount rate, as a decimal (5% -= 0.05)
year in evaluation period
Simplified Approach-Estimating the Cost of Water Saved
The cost of water saved is a useful number that is relatively easy to calculate. It is
commonly expressed as dollars per million gallons, cents per 1 000 gallons, or dollars
per acre-feet. These are common denominations of new water supply, and it is
simple comparison to see if efficiency measures are less expensive than new sources
of supply. Although somewhat simple, the reader is cautioned that the lifetime of
each conservation measure and the lifetime of a water supply project are usually
different, and thus these should be normalized prior to comparison. This can often be
done by renewing the shorter lifetime measure until it approximately equals the
lifetime of the longer one. There is no standardized formula for calculating the unit
cost of water saved, but the following is suggested:
Unit cost of water saved ($/unit of water) = TCIV (4-15)
Where:
present value of the total efficiency program costs over planning
period (dollars)
total volume of water saved (units) over the planning period (e.
acre-ft or 1 000 gal)
WATER CONSERVATION PROGRAMS-A PLANNING MANUAL
TYPICAL BENEFITS AND COSTS
The following section summarizes the major types of benefits and costs from water
efficiency to the water utility, whose perspective is the focus of this manual. However
some utilities may also wish to consider customer and society benefit-cost discussed
later in the section
, "
Other Perspectives on Benefits and Costs." If the measure has a
positive (greater than 1.0) benefit-cost ratio for the customer, the customer may be
more likely, to implement the measure. In addition, benefits accrue from reduced
wastewater flows (e.g" lower cost of treatment and delayed facility construction).
While these impacts need not be included in the benefit-cost analysis for the water
utility, they can be counted for utilities that provide both water and wastewater
services. Many water conservation measures also save energy and/or have other
benefits. All benefits should be recognized and discussed during the public review
phase of efficiency planning. Partnering with wastewater and energy agencies may
assist with funding efficiency.programs.
Important factors to consider besides a formal benefit-cost analysis are other
noneconomic impacts (e., water quality improvements caused by less runoff from
irrigated landscapes that carry pesticides and fertilizers through stormwater
systems, which discharge these contaminants directly to streams and rivers).
Quantifying social and environmental benefits so they can be included, in the
quantitative benefit-cost analysis has long been problematical. They should be
considered at least qualitatively. Reduced water production will allow the utility to
save costs from
reduced water purchases from wholesale water agencies;
reduced O&M costs (energy from pumping (production, treatment, and
distribution) and lower chemical use);
reduced or deferred treatment plant capital expansion costs;
reduced water storage costs; and
reduced wastewater processing costs,
Water utility cost savings can be significant. The cost of water depends on
source and necessary treatment, however costs commonly range between $1.00 to
$4.50 per 1 000 gallons. These benefits (cost savings) are based on combined short-
term and long-term water savings.
Short-term savings are those that are not related to capital facilities and tend to
result immediately from efficiency activities. These include the reduced costs of
treatment chemicals, energy, and labor and materials required to handle reduced
water production.
Long-term savings are those associated with capital facilities (i.e., deferred,
downsized, or avoided water and wastewater facilities because of reduced demand) or
reduced water purchases. These facilities savings include not only the obvious new
sources of supply, but also distribution improvements needed for increments of that
new supply (e., replacement requirements to increase size of distribution system
pipelines).
Cost of efficiency programs fall into three broad categories:
Implementation costs (paid by the utility) such as staff time, hardware
costs, and public and school education materials, and the cost of any
monetary incentives that may be offered.