Water Demand Forecasting Approach

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Water Demand ForecastingApproach Presented to
the Water Demand ForecastAdvisory Committee
Central Puget Sound Water Suppliers Forum
March 1, 2007
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• Objective
• Develop a water demand forecasting model that
  predicts water demand based on known drivers and
  appropriate water demand factors, with the
  understanding that this is a regional forecast
  and not a utility forecast

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Terminology
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Different Water Demand Forecasts

• Regional Forecast
• Used to assess demands at a regional and
  sub-regional levels
• Represents a consistent forecast approach, rather
  than adding individual utility forecasts together
• Presents water demands at a 30,000-foot level

• Utility Forecast
• Used to size and time facilities, and identify
  utility-level water supply needs
• Based on specific utility conditions, drivers,
  and factors
• Demand forecast is more detailed, both
  geographically and in terms of precision

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Criteria for Selecting Best Water Demand
Forecasting Approach

• Goals Objectives
• What information is needed by planners and
  decision-makers?
• What type of models are needed to provide this
  information?
• Data Availability
• What is available?
• What is the quality?
• What models will the data support?
• Budget
• What are financial constraints?

Goals
Data
Budget
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Water Demand Forecast Approaches
PerCapita
Cost Complexity
Low
High
TrendExtrapolation
UnitUse
Econometric
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Trend Extrapolation
Approach
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Per Capita

• Approach
• Divide historical total demand by population to
  get per capita use
• Multiply per capita use by projected population
  to get future demand

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Unit Use

• Approach
• Get sector demands (e.g., single-family,
  multifamily, non-residential)
• Divide each sector demands by appropriate drivers
  (e.g., housing or employment) to get unit use

Example Single-family demand 150
MGD Single-family homes 500,000 Unit use
150,000,000 gal/day 500,000 homes
300 gallons/home/day
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Econometric

• Approach
• Statistically correlates sector water demands
  with factors that influence those demands

Qs a I ß1 H ß2 L ß3 T ß4 R ß5 P ß6
WhereQs Sector water demand I median
household income H average household size
(persons) L average housing density (units
per acre) T maximum temperature R
rainfall P marginal price of water a
equation constant ß1 elasticities of water use
factors
Elasticity Defined A statistical rate of change
that describes how a water use factor influences
demand. A price elasticity of -0.10 means that a
ten percent increase in real price will result in
a one percent decrease in water demand
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Modified Unit Use

• Approach
• Starts with unit use approach
• Then applies elasticities from other studies for
  appropriate water use factors

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Modified Unit Use
Formula
Unit UseWater Demand c
X
WhereWF Water use factor (e.g., price,
income, weather) f Future year c
Current year ß elasticity for water use
factor
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Modified Unit Use

• Example
• How does single-family unit use demand change
  over time as a result in changes in the real
  price of water?Assume
• Price elasticity is -0.20
• Current marginal price is 2.13/ccf
• 2010 marginal price is 2.51/ccf (in real terms)
• 2020 marginal price is 2.74/ccf (in real terms)

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Example Elasticities
The following are elasticities estimated for
water use factors from almost 200 statistical
water demand equations in the United States
Water Use Factor Winter Season
Summer Season
Marginal Price -0.050 to -0.250 -0.150 to
-0.350 Income 0.200 to 0.500 0.300 to
0.600 Household Size 0.400 to 0.600 0.200
to 0.500 Housing Density -0.200 to
-0.500 -0.400 to -0.800 Precipitation -0.010
to -0.150 -0.050 to -0.200 Temperature 0.30
0 to 0.600 0.800 to 1.500
(Paredes, 1996).
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Selecting Water Use Factors

• Data availability
• Information on elasticities that are applicable
  to the Central Puget Sound region
• Benefit in explaining water demand

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Water Use Factors Already Identified for this
Approach

• Weather
• Maximum daily temperature
• Rainfall
• Price (real marginal price)
• Income (real personal or household income)

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Water Use Factors Already Identified for this
Approach

• Weather
• Maximum daily temperature
• Rainfall
• Price (real marginal price)
• Income (real personal or household income)
• Other water use factors will be explored to see
  if they add value and can be incorporated in a
  cost-effective manner

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Benefits of this Approach

• For those water use factors in which data are
  limited or a relationship has not been
  established, we can do sensitivity to describe
  the potential impact
• If subsequent demand studies in the region result
  in established relationships between other water
  use factors and demands, they can be easily
  incorporated into this approach in future Outlooks