Responding to Market/Demand Erosion – Tacoma’s Approach
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Transcript of Responding to Market/Demand Erosion – Tacoma’s Approach
Responding to Market/Demand Erosion – Tacoma’s Approach
CASCADE WATER ALLIANCE 15TH ANNIVERSARY CELEBRATION
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Sean SenescallTacoma Water
Rates & Financial Planning Manager
May 15, 2014
Understanding Market/Demand Erosion:Forecasted and Actual Demands (1954-2060)
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1954 1964 1974 1984 1994 2004 2014 2024 2034 2044 2054
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Actual Historical Demand with Losses 1985 Water Demand Forecast (EES) 1991 Water Demand Forecast (TPU)
1993 Water Demand Forecast (EES) 1995 Water Demand Forecast (EES and CH2MHill) - HIGH 1995 Water Demand Forecast (EES and CH2MHill) - LOW
1999 Water Demand Forecast (October 1999) (RW Beck) HIGH 1999 Water Demand Forecast (October 1999) (RW Beck) LOW 2003 Demand Forecast Draft Report (August 2003) (IUG) EXPECTED
2009 Demand Forecast (Fiske) EXPECTED 2012 Demand Forecast (Fiske) MEDIUM 2012 Demand Forecast (Fiske) LOW
Understanding Market/Demand Erosion:Demands by Customer Class (1989-2013)
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Private Fire ProtectionWholesaleSimpson Tacoma KraftParks and Irrigation
Commercial (Large Volume)Commercial (General)Residential
Understanding Market/Demand Erosion:Single Family Residential Population and Per Capita Demand (2000-2013)
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SF Residential Population SF Residential Per Capita Water Demand (gpd)
SF Residential Per Capita Water Demand (Inside City, gpd) SF Residential Per Capita Water Demand (Outside City, gpd)
Responding to Market/Demand Erosion:Rate Design – Fixed vs. Variable Recovery
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% of Rate Revenue from Base/Fixed Rate Response Average
Stronger Conservation
Message
More Revenue Stability
Responding to Market/Demand Erosion:Understanding the Market
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2005 AGREEMENT ENVISIONED FUTURE REGIONAL DEMAND INCREASES
AGREEMENT INCLUDED “TAKE OR PAY” PROVISION
REGIONAL WATER SUPPLY SITUATION SHIFTED
RESTRUCTURED AND FIXED PAYMENT STREAM
ENABLED CASCADE TO TRANSFER ITS CAPACITY PURCHASES TO CONNECTED CUSTOMERS (10 MGD, ADD)
ACKNOWLEDGED THAT ACTUAL WATER PURCHASES WERE UNLIKELY IN THE MEDIUM-TERM
Responding to Market/Demand Erosion:Renegotiation with Cascade Water Alliance
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WHOLESALE CAPACITY IS UNDERUTILIZED
INEFFICIENT REGIONAL INVESTMENT PLANS• New water resource and water right
development
• Infrastructure (treatment, transmission, supply)
COST STRUCTURE CAN BE AN OPPORTUNITY
PRICING FLEXIBILITY MAY BE NECESSARY
EVERY SYSTEM IS UNIQUE (BUYERS AND SELLERS)
Responding to Market/Demand Erosion:Wholesale Market Pricing Approach
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MARKET DEVELOPMENT• Less emphasis on provincial autonomy and
control
• Focus on efficient options, cooperation, flexibility
ECONOMIC DEVELOPMENT
PRICING FLEXIBILITY
CALCULATED RISK-TAKING = FINANCIAL OPPORTUNITY
Looking to the Future
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