Water conservation and demand-side management are important strategies employed by many utilities to manage water supply in the arid states in the Mountain and Southwest regions. However, since utilities generate the majority of their revenues from volumetric sales, water conservation poses a challenge to the financial health of the utility.
Since 2013, the EFC has worked with Ceres and the Walton Family Foundation to assist utilities in this region in addressing the topic of revenue resiliency while promoting water conservation. Specifically, the EFC and Ceres have partnered to:
- Conduct applied research on revenue risk of fluctuating demands for utilities in the region and on assessing revenue risk for market analysts
- Research the use of connection charges as a tool to encourage water-efficient growth in communities
- Study the design of alternative price models that increase revenue stability while promoting (peak) water use reduction, including discussing these alternatives with key decision-makers responsible for setting rates at the utilities
- Participate in a convening of utilities' Finance Directors and managers at CFO Connects (along with the Alliance for Water Efficiency) to present on and discuss various topics related to water demand management, revenue resiliency, forecasting, benchmarking, and decision-making
- Provide guidance to utilities on comparing and benchmarking rates, financial performance, conservation pricing, and other comparative metrics
- Investigate innovative financial mechanisms, such as hedging against weather risks
The goal is to help transform the water sector by changing business-as-usual practices, by supporting new business models, educating investors on revenue risk assessment, and sharing knowledge and data among and between decision-makers and key utility personnel in the region.