Water utilities who confront sudden changes in their cost structure have naturally turned
to the question of how they can reduce the incidence of future costs. The question of how
to avoid future cost lies at the heart of avoided cost analysis. By analyzing the direct costs
that utilities can avoid via demand reduction, water utilities define the benefits produced
by conservation programs.
This paper explains the methodological background required to implement an
analysis of utility avoided costs. The step-by-step method is set forth in the full report and
embeds the above three goals. Many avoided cost analyses focus solely on quantifying
the value, in avoided costs, of overall reductions in demand (average system load.) This
type of simplistic approach can lead to incorrect conclusions about the desirability of
different kinds of conservation programs. The method proposed in the full report permits
utilities to consider differences in average avoided costs that pertain to peak demand
reduction and/or spatial cost differences. This paper is divided into several distinct sections that include:
basic terms used in cost analysis; definition of avoided costs
and 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 a
water utility setting to quantify the avoided costs. These
methods focus on quantifying the avoided cost of reductions in average demand load. The
full report builds on these approaches to provide an integrated method that incorporates
differences in seasonal demand reduction and spatial cost differences. Includes tables.
| Edition : | Vol. - No. |
| File Size : | 1
file
, 1 MB |
| Note : | This product is unavailable in Ukraine, Russia, Belarus |
| Number of Pages : | 17 |
| Published : | 06/17/2005 |
