Full Description

Water utilities who confront sudden changes in their cost structure have naturally turnedto the question of how they can reduce the incidence of future costs. The question of howto avoid future cost lies at the heart of avoided cost analysis. By analyzing the direct coststhat utilities can avoid via demand reduction, water utilities define the benefits producedby conservation programs.This paper explains the methodological background required to implement ananalysis of utility avoided costs. The step-by-step method is set forth in the full report andembeds the above three goals. Many avoided cost analyses focus solely on quantifyingthe value, in avoided costs, of overall reductions in demand (average system load.) Thistype of simplistic approach can lead to incorrect conclusions about the desirability ofdifferent kinds of conservation programs. The method proposed in the full report permitsutilities to consider differences in average avoided costs that pertain to peak demandreduction and/or spatial cost differences. This paper is divided into several distinct sections that include:basic terms used in cost analysis; definition of avoided costsand a brief explanation of its applications in utility cost analysis;separation of avoided costs by time, short run avoided costs and long run avoided costs; and, methodologies that have been used in awater utility setting to quantify the avoided costs. Thesemethods focus on quantifying the avoided cost of reductions in average demand load. Thefull report builds on these approaches to provide an integrated method that incorporatesdifferences in seasonal demand reduction and spatial cost differences. Includes tables.

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Edition: Vol. - No. Published: 06/17/2005 Number of Pages: 17File Size: 1 file , 1 MB