Invite to TWDB Webinar on Model or Questions

• Jennifer J. Walker, P.E., D.WRE, CFMo President, Watearth, Inc.o jwalker@watearth.como 832.444.0663o www.watearth.com

Project Team• Texas Water Development Board

o John Sutton

• Watearth, Inc. – Primeo Jennifer J. Walker, P.E., D.WRE, CFM

• NewGen Strategies & Solutions, LLC (Formerly J. Stowe & Co.)o Chris Ekrut

• RPS Espeyo Michael Pinckney, P.E.

Research Project

• Determining Cost Benefit and Demand Savings of Municipal Water Conservation Efforts

Model Assumptions

TWDB Water ConservationBMPs Modeling Tool

• Water Conservation Benefits of BMP Implementation by Customer Class

• 32 BMPs in Model

• Analyze 1 or Multiple BMPs

• Cost-Benefit Analysis

• Avoided Costs for Water/Wastewater Facilities

TWDB Water ConservationBMPs Modeling Tool

• Indoor Fixtures – SF, MF

• Surveys – SF, MF, and ICI

• Outdoor BMPs o Irrigation Nozzles and Controllerso Irrigation Efficiency Evaluationso Landscape Water Budgetso Water Efficient Landscape Design

Economic Calculations• Economic calculations are optional and not

essential to overall model function

• Examples presented herein are samples based on placeholder data and are not reflective of a particular program or experience

• The model’s quantitative results are useful for decision-making, but other non-economic qualitative factors may direct ultimate course of action

Economic Calculations

• Model produces two key metricso Benefit-Cost Ratio (“BCR”)

― Designed to quantify economic efficiency of BMPs

― Assists decision makers in program implementation to achieve the

“biggest bang for your buck”

o Lost Water and Wastewater Revenue― Reduced water use = less revenue

Benefit-Cost Ratio (BCR)• Compares cost of implementation with

benefits of programBCR > 1 = Benefits outweigh cost (Economically Viable Alternative)

BCR < 1 = Costs outweigh benefits (Not Economically Viable)

• BCR value can assist in ranking and making decisions based on economic efficiency

However qualitative benefits may override quantitative results

• Calculated in Real Dollars and Present Value

Benefits Considered

• Avoided Variable Costs― Wholesale Water Supply

(Variable Portion)

― Groundwater Production Fees

― Variable Water Operations and Maintenance (“O&M”)

― Wholesale Wastewater Treatment (Variable Portion)

― Variable Wastewater O&M

• Costs adjusted annually for inflationary impact

Benefits Considered

• Delayed Capital Investment and O&M― Model allows for input of future water supply projects

including cost and capacity

― Using inputs as a baseline, model calculates annual capital and O&M costs with and without Conservation impact

― Calculations are then compared and variances due to delayed investment are considered a benefit of the program

• Model currently only considers benefits in delayed water investment – future updates could consider wastewater investment

Costs Considered

• Cost of BMP Implementation― Direct Labor and Materials

― Indirect Administration and Overhead – Includes Program Marketing and Outreach

― Cost of Customer Rebates

Sample BCR ResultBMP not economically viable, Costs outweigh Benefits

BMP is economically viable, Benefits outweigh Costs

Higher BCR indicates greater economic viability

Lost Revenue Calculations

• Model calculates reduction in water and wastewater volumes

• Annual reductions are then multiplied by the current effective rate for water and wastewater service to determine lost revenueo No adjustment made at this time for future rate increases

• Does not reflect fixed or variable cost reductions at this timeo As cost reductions occur, needed revenue will decrease

o Future updates could consider revenue loss on a net basis

Sample Lost Revenue Calculation

• Program will result in estimated lost revenue of over $37,000

• Utility’s variable costs will be decreased by approximately $12,000

• Rates will need to be increased/fixed costs decreased by $25,000 to account for the utility’s remaining, unrecovered fixed cost

Decision Support / Impact Planning• Primary benefit of economic quantification

is decision support and assessment of program impact

Overall Program is economically viable

Assuming no reduction in current Fixed Costs, revenue impact of conservation is significant

“It’s tough to tell the consumer that ‘Yeah, well, you guys did a great job out there conserving water, but lo and behold, we got hurt financially, so we’ve got to raise your rates,’”

– Jim Dockery, Asst. CM, Wichita Falls – Texas Tribune; February 10, 2014