Managing Long-term Capacity in the Age of Conservation and Urban Densification

Authors:

  • Frank Qiao - Hazen and Sawyer

This paper is to illustrate the long-term capacity planning challenge for water utilities in the age of conservation and urban densification. Our approach is to use actual detailed operating data from three mid-sized, residentially dominated, sampling utilities in southeastern US from 1970’s to 2010, whose customer base has been continuously growing at the annual rate of 3%. The torrid pace of growth placed significant pressure on local water resources and infrastructure. Consequently, the quantity based conservation measures were gradually introduced to mitigate demand growth and the pricing increase to help finance system expansion in support of this anticipated growth. Financial leverage was frequently incurred to alleviate the burden of excessive short-term rate increase. More recent densely populated development were witnessed in some urban centers, with higher densities and lower per-capita water consumption rate.

In many instances, a constant per capita water demand was presumed in the long-term capacity and financial planning for those utilities. This practice implicitly assumes the incremental impact on customers’ consuming behavior in response to water conservation and dense urbanization policy, can only be used to prevent further increase of per capita water demand without ever appreciably decreasing it. In the past decade, the operating experiences from many similar utilities proved to be just the opposite.

Our data set include water billing, water pricing and recent conservation policy imposed as a result of drought management from 2003 to 2008. The induced behavioral change from conservation is of permanent nature and the unit consumption is found to be in long-term descent. The ever-declining per capita consumption alters many commonly acknowledged norms for utilities, in particular for fast growing ones that may have taken on additional financial leverage to support previously anticipated growth. If not managed properly, the full cost recovery may force those utilities into an unsustainable future of ever-decreasing total demand and -increasing cash flow shortfall.

This in turn may call for a paradigm change in pricing and capacity planning for utilities. Our investigation is focused on the long term impact on customers’ behavior. Of interest is also the effect of the recent historical drought and possible introduction of a fixed charge to partially account for infrastructure cost.

For more information, please contact the author at fqiao@hazenandsawyer.com.

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