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Measuring & Mitigating Water Revenue Variability: Understanding How Pricing Can Advance Conservation Without Undermining Utilities’ Revenue Goals

As water utilities across North America undertake capital campaigns to finance the replacement and expansion of their systems, the need for confident revenue projections grows.

As water utilities across North America undertake capital campaigns to finance the replacement and expansion of their systems, the need for confident revenue projections grows. Yet many water utilities are subject to factors that can affect revenue variability, including volatile weather patterns and a growing imperative to conserve scarce water resources. As a result, it is more important than ever to anticipate how changing water use patterns and rates drive revenue risk.

Despite being essential service providers, water utilities experience unavoidable variability in their revenue stream. This revenue variability is driven by many factors: changing population, varying customer demands, unpredictable weather patterns, and even rate structures. While it is unrealistic to expect utilities to eradicate revenue variability, utilities can understand its root causes and incorporate it into their overall resource and finance planning.

This report examines real financial and water use data from three North American water utilities to demonstrate how rate structures can mitigate or intensify revenue variability. It also introduces alternative financial and pricing strategies that can assist water utilities in stabilizing revenue without compromising the commitment to water conservation.

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