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

mwtiger@sog.unc.edu

North Carolina Water Resources Research Institute

2013 Annual Conference

March 20, 2013

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

Long-term benefits &

Short-term deficits

Figure from Water Research Foundation’s “ Meeting Future Financing Needs of Water Utilities (1993)

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.

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.

Water Sales Declines

Challenge: Uncertain Revenue Changes in water use have had:

Source: Water Research Foundation/Environmental Finance Center, Water Revenues Forum (#4405)

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%

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

Base Charge as Percent of Total Monthly Bill

Fixed vs. Variable Revenues and

Expenses

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

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.

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

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

www.efc.unc.edu

Questions? Slides will be posted on: www.efc.unc.edu