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San Francisco, CA 94102
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July 5, 2022
TO: Commissioner Anson Moran, President
Commissioner Newsha Ajami, Vice President
Commissioner Sophie Maxwell
Commissioner Tim Paulson
THROUGH: Dennis J. Herrera, General Manager
FROM: Steven R. Ritchie, Assistant General Manager, Water RE: Water Enterprise and Finance Bureau Water Demand Projections This memo provides information regarding the demand projections performed by the Water Enterprise for the Urban Water Management Plan and by the Finance Bureau for rate-setting and financial projection purposes. The memo will describe the different purposes that each of these projections are used for and how by their very nature, they are different. It also includes what these projections have shown over the last several years for both Retail and Wholesale demands compared to actual demands.
For the purpose of long-term water supply planning pursuant to the Urban Water Management Planning Act, every five years we estimate the demand for water that we would experience if our service area was successful in meeting its development goals and mandates. The Act created an obligation for land use planning agencies and water agencies to coordinate to ascertain whether adequate supplies are available to support new development. It was not intended to establish the projected water demands that would be used for all operational and planning purposes. The water agency is not intended to act in a way that would frustrate or negate the objectives of the land use planning agencies or to substitute water agency judgment for that of planning agencies.
The results of the Urban Water Management Plan process are two-fold. First, it provides a set of projections to document how we would expect to fill the demand associated with development goals and mandates. However, they don’t account for droughts and changes in economic conditions such as the economic slowdowns in 2000, 2008, and 2020. Second, the projections represent an outside bound of whatever demand will occur in the next 25 years. The projections are legally required, but they are not expected to be the demands that will actually occur. These demands will likely always be greater than actual demands because not all developments materialize, or they materialize slower than projected. This is consistent with the approach we are taking in our Alternative Water Supply process of “planning for obligations but building for demands”.
By contrast, for the purpose of financial planning and for short term water system management, we estimate the demand that we are likely to experience. For budgeting and rate setting we use demand projections that are as close to actual as we can make them. These projections tend to be more conservative because if the projections are too high, we will have established rates that are too low and will have a revenue shortfall.
Similarly, we use projections that are as close to actual as possible for reservoir operations and drought restrictions and the acquisition of emergency supplies.
The two attached figures demonstrate these differences as well as other differences over time. Figure 1 displays Retail Demand Projections developed for the five Urban Water Management Plans prepared in 2000 through2020 and the 10-year Financial Plan Retail Sales Projections in 2015 and 2020, both compared to Actual Deliveries. The SFPUC did not publish 10-year Financial Plan Sales Projections before 2015.
The effects of drought and economic conditions can be seen in the demands. Similarly, the effects of changes in planning conditions for Urban Water Management Plans have changed in the most recent plans as the need for additional housing has become prominent, resulting in increasing projections of demand.
Figure 2 displays Wholesale Purchase Projections developed for the Urban Water Management Plans in 2015 and 2020 and the 10-year Financial Plan Wholesale Sales Projections in 2015 and 2020, both compared to Actual Deliveries. Again, the SFPUC did not publish 10-year Financial Plan Sales Projections before 2015.
The two figures document that the Urban Water Management Plan projections are consistently greater than the Sales Projections because of the different purposes for which they are created.
Attachments:
FIGURE 1: SFPUC Urban Water Management Plan Retail Demand Projections & 10- Year Financial Plan Retail Sales Projections
FIGURE 2: SFPUC Urban Water Management Plan Wholesale Purchase Projections & 10-Year Financial Plan Wholesale Sales Projections
FIGURE 1: SFPUC Urban Water Management Plan Retail Demand Projections & 10-Year Financial Plan Retail Sales Projections
Note: 2005 UWMP projections commenced beginning in 2000.
FIGURE 2: SFPUC Urban Water Management Plan Wholesale Purchase Projections & 10-Year Financial Plan Wholesale Sales Projections