The Value of Water Supply Reliability in the CII Sector
Year Released: 2015
Type: White Paper
Funding Partners: Bureau of Reclamation, California State Water Resources Control Board
Total Investment: $488,598 (Cash: $250,000, In-Kind cash and service: $238,598)
Principal Investigator: Robert S. Raucher, PhD, Stratus Consulting
Water is an essential and highly valuable input to most production processes. CII establishments of all types depend on reliable water supplies—of suitable quantity and quality—to produce their goods and services. Limitations or uncertainties about the reliability of water service will significantly impede the ability of a CII business to effectively compete and remain economically viable. Communities in turn rely on CII enterprises to provide jobs, tax revenues, and other essential benefits to their regional economies. There is thus a crucial symbiotic relationship between a community’s ability to provide a reliable water supply to its CII customers, and the local CII sector’s ability to compete in regional and global markets and thereby provide economic and social benefits to the community.
Goals and Objectives
The project develops and applies a range of approaches to describe the levels and patterns of water use in key CII subsectors, and to examine the implications of water supply reliability for key CII subcategories. These insights can be applied by water agencies to better assess CII water needs, and also assess the economic value of drought-resistant water supply options such as reuse and desalination (desal).
Case studies of 5 utilities served as a primary basis for this study, which overlaid CII water use data – as discerned from utility customer billing databases. The water se data were then overlaid by economic data reflecting the employment and output 9revenue) associated with the specific water-using CII subsectors.
CII water use derived from utility billing databases to analyze water use levels and patterns among specific CII groupings and individual customers. Water utilities typically differ in how the CII sector is defined and classified, which makes the analysis very challenging.
Economic data to overlay with CII water use for various types of businesses and other CII entities and subsectors is available from several sources including the U.S. Census Bureau, and private databases such as LexisNexis. For case studies where sufficient detail was available from the utility billing data, the research team downloaded economic information from the LexisNexis database, focusing on the number of employees and total revenues for the CII subsectors that they could identify from the utility data fields.
Findings and Conclusions
Case studies were developed for five water utilities for which some form of CII classification or other information enabled the research team to draw inferences about CII-related water use and reliability needs. Each case study is somewhat unique because of the nature of the data available, and also because each location has its own set of relevant economic and water supply circumstances. Nonetheless, several findings can be drawn from similarities and consistencies observed across several of the case studies.
- Industrial facilities tend to be the largest water users on a per facility basis, which is not a surprising finding.
- Hospitals and other medical service providers (as well as nursing homes) tend to have very high water use levels per establishment. In case study locations where the research team could identify water use at hospitals and related medical and nursing home service providers, average water use per facility was often at levels nearly as high as observed for industrial facilities.
- The commercial sector is extremely diverse, heterogeneous, and very large in size in terms of the number of establishments included. Collectively, the commercial establishments tend to have the greatest total water use in the CII sector, but the average water use per establishment tends to be modest and highly variable across the various subsectors that generally are included under the commercial category.
- Institutional customers can be very large water users, including parks departments, military installations, and other government-type organizations that rely on utility-provided water. Often, these entities use much of their water for outdoor irrigation rather than the production of marketed goods and services.
- The literature on CII conservation potential, catastrophic supply disruption, and drought-imposed economic impacts sheds some light on methods and empirical relationships. In particular, studies of drought impacts in the San Francisco Bay Area provide a glimpse into how much economic impact—at an aggregate level—may be associated with water supply shortfalls. These impacts are projected to grow more than proportionally with water supply shortfalls, especially if supply deliveries are reduced by 20% or more.
- There is an acute need for greatly improving utility customer classification processes and corresponding billing database systems—especially regarding the value of applying standard classifications (i.e., NAICS codes, and assessor parcel numbers) to CII customers.
- The economic impact of water shortages and related water use curtailments appears to grow proportionally greater as the curtailment levels increase.
- Impacts on the broader regional economies are larger than the immediate (direct) impacts on specific businesses or CII subsectors. Direct economic impacts on various CII entities create what are termed “indirect” and “induced” impacts on other entities, generating a “multiplier effect” that magnifies and disperses the adverse impacts throughout a region’s economy.
Two metrics were developed to examine the economics associated with annual water use in the commercial and industrial sectors—revenues generated per thousand gallons (KGal) used annually, and employees per million gallons (MG) used annually. These metrics were estimated for three case study regions where suitable data were available.
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