Increasing water-use efficiency is an important component of prudent water management for regions of growing water demand, such as the western United States. Water efficiency can offset demand growth that would otherwise occur in expanding urban regions, and this moderated demand can reduce the need to develop or acquire new supplies. Urban water demand in the Los Angeles region, for example, has remained largely flat from 1985 to 2005, despite an increase of 5 million people (Metropolitan Water District of Southern California, 2005). The large decrease in per capita water demand resulted in part from ongoing replacement of older, water-using...

To demonstrate how an economic framework can be used to evaluate water use–efficiency benefits across the intermountain West region, we selected Denver Water, the main utility serving the Denver metropolitan region, as a case study. We used publicly available data for this demonstration. Use of data typically available to a utility, but not released publicly, would improve the accuracy of such an analysis.

This chapter begins by describing projected water demands and supplies in the Denver region through 2050. Next, it describes each of the main sources of water. It ends by describing the environmental and recreational benefits of...

This study evaluates a more comprehensive economic approach to valuing water use–efficiency program benefits than is often used by water utilities. This method explicitly estimates avoided utility costs and some of the avoided environmental and recreational impacts associated with demand reduction induced by efficiency programs. When estimated properly, these benefits are additive both on an annual basis and when discounted and summed over the planning horizon. The total value of water efficiency is the sum of the avoided costs and the environmental and recreational benefits:

Total benefit = (SR avoided costs + LR avoided costs) + (SR environmental benefits...

This report demonstrates new methods that water utilities can use to account more comprehensively for the benefits of water conservation. Utilities can compare these benefit estimates to independent estimates of the costs of various efficiency programs. Assuming no constraints on budgets, utilities may seek to maximize the net benefits of their efficiency programs by investing in measures until the point at which marginal costs equal marginal benefits. Because estimates of marginal costs and benefits are likely to be uncertain and budgets limited, utilities may choose instead to use this information to gauge by how much the benefits of proposed efficiency...

It is common practice for water planners to use simple cost-effectiveness heuristics when choosing how much investment to make in reducing water demand through water-use efficiency. Often, these simple methods consider only the cost of acquiring additional supply from existing systems. Because there are other costs borne by the utility and by society that are ignored, this method leads to undervaluation of water-use efficiency.

In this report, we presented an economic framework based largely on recent work done for the CUWCC for evaluating the marginal benefit of water-use efficiency savings to a water utility. This framework considers additional benefits over...