2010 Water Research Foundation. ALL RIGHTS RESERVED.

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1 North American Residential Water Usage Trends and Applications for Utilities December 7,

2 Foundation s Contribution to the Water Community Practical applications to help utilities optimize i operations and ensure customer satisfaction Early alert and proactive solutions on future issues Direct, immediate benefits to utility subscribers 2

3 Foundation Research North American Residential Water Usage Trends Since Order # Drinking Water Research magazine, Water Use Efficiency i issue, July September 2010 Vol. 20, No. 3. Residential End Uses of Water: Order # Ongoing project 4309: Update and Expand REUWS. Commercial and Institutional End Uses of Water: Order # Project Idea , Methodology for Determining Baseline. May be funded Jan

4 Today s presentation North American Residential Water Usage Trends and Applications for Utilities Thomas D. Rockaway, Ph.D., P.E. and Josh Rivard Center for Infrastructure Research at the University of Louisville Strategic Business Implications of Water Consumption Trends in Louisville from 1975 to 2009 Greg Heitzman and Ed Chestnut, Louisville Water Company Phoenix: What is the Impact of Water Conservation on Utility Finances? Ray Quay, Arizona State University Adam Miller, Water Services Department, City of Phoenix Rockaway summary Q&A A- Maureen Hodgins, WaterRF 4

5 North American Residential Water Usage Trends and Applications for Utilities Thomas D. Rockaway, Ph.D., P.E. and Josh Rivard Center for Infrastructure Research at the University of Louisville Water Research Foundation Webinar December 7,

6 Problem Statement Many water utilities across the United States t and elsewhere are experiencing declining water sales among residential customers. Commonly, the decline is attributed to: Wet weather Changing demographics Water conserving appliances Classification anomalies Price increases 6 Source: North America Residential Water Usage Trends Since Water Research Foundation. ALL RIGHTS RESERVED.

7 Project Objectives The purpose of this research is to quantify the residential water use changes across North America observed during the past 30 years. The study seeks to learn to what extent the household water usage patterns observed throughout North America vary over time, and to begin to characterize those patterns by unique place and utility elements. 1. Quantify the residential water use changes across North America observed during the past 30 years ; 2. Understanding water usage behavior patterns and trends; 3. Providing data that can be correlated with future trends for planning purposes. 7

8 Project Methodology National trends Examine the historic water usage trend of randomly selected utilities. Water usage historical data Utility information Climate and geographic information Regional characteristics Explore the relationship btw usage and utility-specific characteristics Customer-classification practices Rate structures t Conservation practices Water-quality issues 8 Local behavior Explore usage behavior at the household level Analyzing the relationships between the household usage data and the underlying socio-economic factors Demographic information Specific household usage information

9 National Trends Overview Sample Population Comprehensive database of water utilities comprised of all respondents to the AWWA 1999 Financial/Revenue Survey Population pool of 602 Random sample of participants -605 observations Measurement Issues Unmetered consumption Lack of standardized customer classification practices No customer classification Single-family Multi-family classification Lack of historic records 9

10 Gallons per Year , , , , ,000 50,000 Regional Characteristics Source: North America Residential Water Usage Trends Since Water Research Foundation. ALL RIGHTS RESERVED Year Albany Water Department Arlington Water Utilities Barrie Public Utilities Cadillac Water Department Capital Regional District Water Department Carpinteria Valley Water District Cedarburg Light & Water Commission Cincinnati Water Works City of Alpena City of Chanute City of Crete Light, Water & Sewer City of Kalispell City of Port Huron City of Rapid City Water Department City of Redmond Department of Public Utilities City of Tyler Water Utilities City of Westminster Water Department Cloquet Municipal Water Supply (Intown) Contra Costa Water District Conway Corporation Fairfax County Water Authority Fayetteville Public Works Commission Georgetown Municipal Water & Sewer Glendale Public Service Department Golden Heart Utilities Greater Vancouver Water District Jackson Utility Division Jurupa Community Services District Knoxville Utilities Board Marietta Water Department Menomonie Water Department Mesa Consolidated Water District Midwest City Water Department Muscatine Power & Water Newport News Waterworks Perrysburg Water Department Seattle Public Utilities Tampa Water Department Town of Castle Rock Utilities Division United Water Pennsylvania Village of Brown Deer Winchester Municipal Utilities

11 National Level Regression Findings Identified Variables Weather variables (Precipitation, Temperature, Drought Index) Ownership type (Private or Public) Water Source (Ground, Purchased, or Surface) Percent Industrial Customer Number of customer Time Key Finding Over time the model estimates that residential customers have been reducing water usage by 389 gallons annually over the past three decades. While this amounts to less than a half (0.43 %) percent decline per year, when compounded over thirty years, this translated to an overall 13 percent decline in usage per customer. 11

12 Regional Characteristics To learn more about the causes and effects of declining water usage, we performed case studies for each of the eleven partner utilities. Each case study examines customer classification practices, rate structures, conservation practices, and water quality issues for each partner. The City of Calgary Greater Cincinnati Water Works Cleveland Division of Water Dallas Water Utilities Las Vegas Valley Water District Louisville ill Water Company Philadelphia Water Department Phoenix Water Service Department Saint Paul Regional Water Services Seattle Public Utilities South Central Connecticut Regional Water Authority 12

13 200,000 Gallons per Year 300, , ,000 Seattle Philadelphia Cincinnati Cleveland New Haven Phoenix Louisville Las Vegas Calgary Dallas SP St Paul Las Vegas Phoenix Dallas 100,000 New Haven Saint Paul Seattle 50, Source: North America Residential Water Usage Trends Since Water Research Foundation. ALL RIGHTS RESERVED. Year 13

14 Regional Characteristics Regression Findings Identified d Variables Weather variables (Precipitation, Temperature, Drought Index) Ownership type (Private or Public) Water Source (Ground, Purchased, or Surface) Number of customer Time Key Finding Over time the model estimates that residential customers have been reducing water usage by 381 gallons annually over the past three decades. While this amounts to less than a half (0.44 %) percent decline per year, when compounded over thirty years, this translated to an overall 13 percent decline in usage per customer 14

15 JR1 Regional Characteristics Analysis Customer classification - There is no standard customer classification policy across the water industry. Water-quality issues Changes in consumption patterns had no effect on the quality of water provided or on their ability to respond to emergencies. Demand side conservation practices A wide variety of demand side conservation practices are in effect (high efficiency washing machines, meters and sub meters, low-flow shower heads, ultra-low flow toilets) and are believed to be effective. Distribution ib ti side conservation practices Nearly all partner utilities implemented water audits, no common water audit format was used. Only PWD utilized the water audit methodology recommended by AWWA. 15

16 Slide 15 JR1 Remove the regional case study section Josh Rivard, 11/17/2010

17 Local Behavior Overview Water usage per household depends upon the number and ages of the residents, household incomes, weather, the technology of the water using appliances in the home, size of the lot, and local policies. To understand the relative importance of each factor, and to better predict evolving usage patterns, a customer-level analysis of household water is underway. 16 Customer Data Assessment Mail survey Household demographics Usage characteristics Data logging Household level daily usage Econometric Modeling

18 Local Behavior Residential Usage Profile 2010 Water Research Foundation ALL RIGHTS RESERVED 1

19 Local Behavior Survey Indoor Water Fixtures Source: North America Residential Water Usage Trends Since 1992 Source: North America Residential Water Usage Trends Since Water Research Foundation. ALL RIGHTS RESERVED. 18

20 Local Behavior Trace Flow example Source: North tha America Residential lwt Water Usage Trends Since Water Wt Research Foundation. ALL RIGHTS RESERVED. 19

21 Local Behavior Breakdown of daily usage Clothes Dish Total Toilet Washer Shower Faucet Leak Other Bath Washer Indoor Mean StDev N % CI Mdi Median Source: North America Residential Water Usage Trends Since Water Research Foundation. ALL RIGHTS RESERVED.

22 Local Behavior Reported vs Actual The table below compares the inventory of water-conserving bathroom fixture inventory provided by homeowners to the inventory of waterconserving bathroom identified through the Trace Flow analysis. The Trace Flow software identified more H.E. showerhead than reported, while identifying fewer H.E. toilets than reported. Source: North America Residential Water Usage Trends Since Water Research Foundation. ALL RIGHTS RESERVED. 21

23 Econometric model variables Demographics Age of household members (Adults,Teenagers, grade-schoolers etc.) Number of workers in the home Education level Structure variables Weather Year home built Precipitation Assessed value of home Temperature Square footage of home Palmer Drought Index Appliance inventory Number of baths Number of Showers Front or Top loading washing machines Outdoor water features Swimming pool Outdoor spa Watering outdoor landscapes

24 Local Level Analysis Findings Monthly precipitation was not an important variable to consider. The Palmer Drought Index was a better predictor of water usage. Each adult contributes about 37 gallons per day to household water demand (a grade-schooler 17, and a preschooler about 7). Teenagers in new homes use less water than teenagers in older homes. As incomes rise, household water consumption rises. Homes built after 1994 use about 13 gallons per day less than those built before Landscape watering adds 10 gallons per day. A swimming pool adds 65 gallons per day. 23

25 Key Findings Applied to Louisville Data Allotment Louisville (gallons per day) gallons PM DI People per household Educational index Average home value $120,100 $144,600 Home size (sq ft, census) 2,155 2, gallons -5 gallons gallons +3.5 gallons gallons Remaining decline of gallons attributed to penetration of conservation fixtures 24

26 Key Findings Quantified pervasive decline in household water usage throughout North America Daily household usage is driven by household demographics and penetration of conservation fixtures Water conservation fixtures have yet to saturate t the market, especially in communities that lack active conservation programs Practitioners can expect further declines in household water usage as water conserving fixture saturate markets 25

27 Strategic Business Implications of Water Consumption Trends in Louisville from 1975 to 2009 Greg Heitzman & Ed Chestnut Louisville Water Company Presentation for Water Research Foundation Webinar December 7,

28 Louisville Water Company 2009 Water Stats for Comparison: Louisville is Kentucky s largest city with 725,000 people Water source is the abundant Ohio River Annual rainfall averages 44.5 inches Louisville uses less than 0.5% of the 75 BG Ohio River supply Two Surface Water Treatment Plants, 240 MGD total capacity Average Day Demand is 124 MGD, Max Day of 205 MGD in ,000 customers serving 850,000 people in the region 4,098 miles of water main; 21,323 hydrants 2009 revenue of $135.8 Million on water sales of 35.8 BG Average residential monthly water bill is $20.87 for 6,000 gallons 27

29 What we learned from the WaterRF project Major Research Findings for Louisville: Low flow plumbing fixtures, mandated by the Energy Policy Act of 1992, have penetrated the Louisville market: High Efficiency i Clothes Washers 12% penetration Low flow toilets 17% penetration Low Flow Shower Heads 79% penetration Water consumption per customer per day has declined: 208 gallons per customer per day in 1990 (84 gallons per person) 187 gallons per customer per day in 2007 (79 gallons per person) 166 gallons per customer per day in 2009 (70 gallons per person) Number of people per household has declined from 2.92 in 1975 to 2.37 in

30 Other Louisville Trends In Addition: Louisville is shifting from a manufacturing to a service based economy. The Economic Recession of has reduced water sales demand. Variable weather patterns (wet and dry) have created water demand volatility. Rising sewer rates due to EPA regulations for CSO/SSOs are reducing water demand. Conclusion: These factors are significantly impacting Louisville water demand and revenue. LWC must perform a more in depth analysis of water consumption trends and the associated impact on water rates and business strategy. 29

31 Louisville ill Water Company Water Demand, Customers, and Consumption Trends 1975 to 2009 (35 Years) 30

32 LOUISVILLE WATER COMPANY TOTAL CONSUMPTION 1975 THROUGH 2009 Billions % Average Annual Increase

33 LOUISVILLE WATER COMPANY TOTAL ANNUAL AVERAGE CUSTOMERS 1975 THROUGH 2009 Thous sands % Average Annual Increase

34 Total Consumption per Customer TCPC (TG) l Consumption n Per Custome er (TCPC s) % Average Annual Decline Tota

35 Industrial Consumption per Customer ,000 ICPC (TG) Consumption n Per Custome er (ICPC 1000s s) 2,500 2,000 1, , , % Average Annual ldecline ,345.8 Industrial 1,

36 Commercial Consumption per Customer Commerc cial Consumptio on Per Custome er (CCPC s) CCPC (TG) % Average Annual Decline % Average Annual Increase % Average Annual Decline

37 Residential Consumption per Customer RCPC (TG) Residen tal Consumptio on Per Customer (RCPC s s) % Average Annual Decline % Average Annual Increase % Average Annual Decline

38 Conclusions and Strategic Implications for Louisville Water 37

39 Macro Level Trends Customers have grown from 206,000 to 299,000 (45% increase) Water mains have increased from 2,400 to 4,100 miles (70% increase) Over 35 years, water demand essentially flat (0.1% annual increase) 38

40 Industrial and Commercial Market Trends Industrial water consumption per customer has steadily declined 2.5% annually since 1975 (peaked in 1977). Commercial water consumption per customer increased steadily from 1975 to 1985 at 3%, then flattened from 1986 to Since 1999, it has declined 1.9% annually. During thisperiod period, 1975to 2009, Louisville transitioned from a manufacturing economy to a service based economy, using less water. 39

41 Residential Market Trends The Energy Policy Act did not have an immediate impact on residential water sales, with only a 0.2% annual decline in consumption in the 1990s. Over the last 10 years, since 1999, water conservation, low flow fixtures and fewer people per household are reducing residential consumption by 1% annually. More recently, increasing sewer rates have reduced residential water consumption. Now, the economicrecession isreducing water sales. 40

42 Conclusions Water Consumption will continue to decline due to conservation and low flow fixtures service economy shift higher waste water/sewer bills slow economicrecovery Without a reversal of these trends, utilities will not be able to sustain water rates at CPI. Declining consumption, EPA regulations and infrastructure will require annual rate increases at 2X to 5X CPI. At some point we will see demand elasticity with rising prices (i.e. > $100 per month for water and sewer bill). Water and Wastewater affordability willbecomea major issue for municipalities. 41

43 Louisville Water s Strategy to Survive these Trends 42

44 LWC Modified Business Strategy Water Rates and Fees: From 1991 to 2001, water rates rose 2 to 4% annually and tracked with annual CPI (inflation rate). From 2002 to 2007 (post 9/11), water rates increased from 1.5X 15Xto 2X CPI (inflation rate). In 2007, LWC increased fixed fee rates and charges and instituted credit/debit card transaction fee. From 2009 to 2011, recession places downward dpressure on rates. 43

45 Louisville Water Company Annual Water Rates and CPI % 6.00% l Changes Annual 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% -1.00% % Annual Water Rate Increase Annual CPI Increase 44

46 LWC Modified Business Strategy Cost Reduction Plans: Rfi Refinance Long Term Debt, Dbtreducing interest texpense Slow Capital Program to reduce depreciation expense and defer future borrowings Reduce employment through attrition Reduce Overtime Freeze management salaries and defer wage increases Reduce discretionary expenses 45

47 LWC Modified Business Strategy Enhancing Revenue (beyond rates and fees): Pursue wholesale and retail water sales growth through regionalization (Horizontal Business Growth) Pursue new lines of water related businesses (Vertical Business Growth) Private Label Bottled Water Service Line Protection Program Home Water Treatment (POU/POE) on hold 46

48 Service Line Protection ti Program RFP issued in July 2007, five qualified lf dfirms proposed. Home Services USA (Miami) was selected Nov 2007, first offering February, Customer Price Points (as of July 1, 2010): $5.49 for external water service line $9.99 for external sewer line $9.99 for internal plumbing (water and sewer) 47

49 Results through September 2009 have Exceeded Expectations Water Line Customers: February 2008 initial offering at $4.99/month December ,015 December ,937 October ,802 Sewer Line Customers: July 2010 initial offering at $9.99/month99/month Thru October ,236 48

50 Thousands Water & Sewer Contracts Water Contracts LOUISVILLE WATER COMPANY HOME SERVICE PROTECTION TOTAL ACTIVE CONTRACTS FOR WATER AND SEWER CUSTOMERS Initiate Sewer Protection August Ja 0 n- 08 Fe b- 08 Ma r- 08 Ap r- 08 Ma y- 08 Ju n- 08 J ul- 08 Au g- 08 Se p- 08 Oc t- 08 No v- 08 De c- 08 Ja n- 09 Fe b- 09 Ma r- 09 Ap r- 09 Ma y- 09 Ju n- 09 J ul- 09 Au g- 09 Se p- 09 Oc t- 09 No v- 09 De c- 09 Ja n- 10 Fe b- 10 Ma r- 10 Ap r- 10 Ma y- 10 Ju n- 10 J ul- 10 Au g- 10 Se p

51 Performance Results 50

52 Extraneous Benefits Positive testimonials ti i have been received. New Service Revenue, expect $1Min % of Service Line Protection revenue funds a Customer Payment Assistance Program. Every $ of revenue from a new service is a $ not required in the water/sewer rate base. 51

53 Breaking the Water Industry Paradigm We must break the mindset that consumption growth will return. We must realize that Federal Regulations and the Market now drive conservation. We must build rate capacity beyond gallons of water. Pursue business opportunities through to the Tap. There is value in Water Related Services. 52

54 Breaking the Water Industry Paradigm The water utility brand is high in most communities, providing rate capacity. Your water bill and brand have significant ifi value. Water Utilities have an open door through billing to every consumer. Protect It and Use It to the benefit of your customers. Transform Your Utility into a full service water provider Water Research Foundation. ALL RIGHTS RESERVED. 53

55 Phoenix: What is the Impact of Water Conservation on Utility Finances? Ray Quay Decision Center for Desert City, Arizona State University Adam Miller Water Services Department, City of Phoenix City of Phoenix 54

56 Phoenix: Stable Water Demand Despite Growth Trends in Water Account Growth and Metered Water Use ( ) 200,000, , ,000, ,000, ,000,000 TOTAL CONS (CCF) June ACCTS 405, , ,000 Water Consump ption (CCF) 120,000, ,000,000 80,000,000 60,000, , , , ,000 Customer Acco ounts 40,000,000 90,000 20,000,000 45, Fiscal Year (July - June) 0 55

57 Phoenix: History of Declining Water Use per Account Annual Mean Daily Water Use per Account ( ) Water Consumptio n per Account (GPAD D) Fiscal Year (July - June) 56

58 Recent and Future Demand Trends Systematic Fixture Replacement Conservation Consistent Behaviors DEMAND TRENDS Efficiency of New Development Higher Prices/Costs Market Forces and Preferences 57

59 Phoenix: Declining Water Use for New Homes Mean Daily Water Use (CY-08) for Homes Built from 1990 to Gallons Year of Home Construction 58

60 Phoenix: Reductions in Water Use for Homes of All Ages Year of Home Construction Average Daily Water Use Average Daily Water Use Pre Post

61 Phoenix: Integration of Low Flow Technology Penetration ti Rates of Year of Home Construction Efficient Fixtures and <1955 Appliances >2004 Low Flow Toilets (ULFT) 72.03% 59.12% 55.84% 59.01% 75.37% 95.48% % Shower Heads (ULFS) 82.31% 84.00% 86.99% 92.36% 84.95% 92.75% 98.00% Bathroom Faucets (ULFF) 55.65% 51.98% 57.98% 64.69% 52.12% 56.99% 70.38% High Efficiency Clothes Washers HighEfficiency Dish Washers 13.04% 15.28% 9.23% 27.94% 29.87% 20.69% 45.76% 18.92% 16.28% 12.24% 19.70% 22.37% 25.42% 37.70% City of Phoenix Single Family Site Visit Results ; n =

62 Phoenix: Geographic Distribution of Residential Water Use Top 20% Single Family Customers Bottom 20% Single Family Customers 61

63 Phoenix: Conservation Revenue Impact Simple View 1% per year decline 1% per year reduction in revenue Phoenix Reality Difficult to see impact History of rate increases driven by infrastructure needs 62

64 Phoenix: History of Total Revenue Increase City of Phoenix Total Metered Water Use and Inflation Adjusted Annual Revenue from Water Sales ( ; CPI 2000 = 100) $ ,000 $ Consumption 100,000 $ ,000 Million $ $ $ $50.00 $ Revenue 2000 Year Water Sales Revenue (Inf-Adj) Total Consumption (MG) ,000 40,000 20, Million Gallo ons

65 $ $ Phoenix: Stable Per Account Revenue Consumption City of Phoenix Average Daily Water Use per Account and Inflation Adjusted Annual Revenue Generation per Account ( ; CPI 2000 = 100) $ $ Dolla rs $ $ Revenue Gallon ns $ $ $ $ Year Revenue per Account (Inf-Adj) Metered Consumption per Account 64

66 Phoenix: History of Rate Increases 14.00% Annual Percent Change in Volumetric Charges ( ) 12.00% 10.00% Percent Increas se 8.00% 6.00% 4.00% 2.00% 0.00% Year 65

67 Phoenix: Impact of Lower Demand on Revenue Impact hidden by rate increases Remove rate increases to see impact 2006 Actual Water Revenue 1 $242,800, Actual Metered Water Use (MG) 2 100, Actual Revenue per Million Gallons $2, Actual Water Sales 1 $257,700, Actual Metered Water Use (MG) 2 98, Actual Revenue per Million Gallons $2,598 Hypothetical Revenue w/o Rate Increase w/ Lower Demand 3 $239,405,000 Estimated Revenue Loss from Lower Demand $3,395,000 Rate Increase Required to Offset Conservation 1.4% 1. Actual Water Revenue is the annual revenue generated from water sales. This value includes revenue generated from fixed monthly service charges resulting in an overestimation of revenue loss from lower demand. 2. Actual Metered Water Use is the volume of water metered at the point of delivery. Phoenix serves water to more than 400,000 meters. 3. Hypothetical Revenue is based on 2007 Actual Metered Water Use. This value does not account for customer response to rate increases. 66

68 Phoenix: Is Impact of Conservation this Simple? No Impact = Reduced Revenue Reduced Costs Finances Revenue Costs Costs: Water Sewer 67

69 Phoenix: History of Declining Sewer Flows 500 Average Daily Wastewater Generation per Account ( ) GPAD Gallon ns per Account per Day GPAD Fiscal Year 68

70 Phoenix: Implications of Declining Sewer Flows Wastewater Engineering Design Guidelines Land Use Unit Existing Gal/Unit/Day Proposed Gal/Unit/Day Single Family dwelling Multi Family dwelling Commercial (Retail) gal/kft 2 /day Commercial (office) gal/kft 2 /day Warehousing / Big Box gal/acre/day Industrial gal/acre/day Sh Schools student Hotel/Motel w/o Rest. Hotel w/ Restaurant bed Resort 210 Hospital (all flows) bed n/a 250 City of Phoenix Wastewater Flow Metering Program,

71 Phoenix: Variable Costs are Influenced by Demand Water and Wastewater Treatment Big Three: Electric, Chemical, Supply Solids Handling Increased Capacity Distribution and Collection Drought Response Demand Hardening Diminishing Return for Conservation 70

72 Phoenix: Reduced Water Demand Impacts Variable Costs Example: Water Productionand Distribution Cost Savings 2006 Actual Water Volume (MG produced) 1 109,425 Actual Water Variable Cost per Unit ($/MG) $337 Actual Water Total Variable Cost 2 $36,837, Actual Water Volume (MG) 1 105,996 Actual Water Variable Cost per Unit ($/MG) $378 Actual Water Total Variable Cost 2 $40,033,946 Hypothetical Cost w/ Cost Increase w/o Reduced Demand $41,329,055 Estimated Impact on Water Costs from Reduced Demand $1,295, Actual Water Volume is the volume produced and delivered to City of Phoenix Customers. Additional water is produced and delivered to other cities in the region. 2. Actual Water Total Variable Cost includes annual production expenditures for electricity, chemicals and raw water, and distribution expenditures for electricity and chemicals. 71

73 Phoenix: Reduced Sewer Flow Impacts Variable Costs Example: Wastewater Treatment and Collection Cost Savings 2006 Actual Wastewater Volume (MG) 1 45,271 Actual Wastewater Variable Cost per Unit ($/MG) $244 Actual Wastewater Total Variable Costs 2 $11,053, Actual Wastewater Volume (MG) 1 43,837 Actual Wastewater Variable Cost per Unit ($/MG) $281 Actual Wastewater Total Variable Costs 2 $12,307,732 Hypothetical Cost w/ Cost Increase w/o Flow Reduction $12,710,343 Estimated Impact on Wastewater Costs from Reduced Flow $402, Actual Wastewater Volume is the volume generated inside the City of Phoenix service area. Additional wastewater from other cities in the region is collected and treated. 2. Actual Wastewater Total Variable Cost includes annual treatment and collection expenditures for electricity and chemicals. 72

74 Phoenix: Impact = Reduced Revenue Reduced Costs Example: Estimated NET Impact on Revenue (not including capital savings from postponed infrastructure) Revenue Loss $3,395,000 Water Variable Cost Savings $1,295,109 Wastewater Variable Cost Savings $402,612 Estimated Impact on Revenue Cost Balance $1,697,261 Rate Increase Required to Offset Impact 0.7% 73

75 Phoenix: True Impact of Reductions is Net Different for every Utility Unique Demand Characteristics Unique Revenue / Cost Balance Different year by year Unique Rate / Price Changes Weather and Economic Conditions 74

76 Summary-Tom Rockaway Decline in household water usage throughout North America is attributable to changing demographics, income, weather and low-flow fixtures. While the influence of many external variables on water usage may fluctuate, the influence of water conservation appliances is anticipated to increase. Within the Louisville community, water conservation has lead to a decrease in revenue and they have worked to develop alternative revenue sources. Within the Phoenix community, water conservation has enabled them to delay capital investments due to the reduced water demand. 75

77 Q&A Dr. Rockaway & Josh Rivard, University of Louisville Greg Heitzman & Ed Chestnut, t Louisville ill Water Company Ray yq Quay, Arizona State University Adam Miller, Water Services Department, City of Phoenix Maureen Hodgins, WaterRF 76

78 Econometric model variables Demographics Age of household members (Adults,Teenagers, grade-schoolers etc.) Number of workers in the home Education level Structure variables Weather Year home built Precipitation Assessed value of home Temperature Square footage of home Palmer Drought Index Appliance inventory Number of baths Number of Showers Front or Top loading washing machines Outdoor water features Swimming pool Outdoor spa Watering outdoor landscapes