CE2 Model User Manual - Sustainability Standards 101
Contents
1. Oa a NI A MM WESim_1 0 Compatibility Mode Microsoft Excel gt Home Home Insert Page Layout Formulas Data Review View Developer ox amp Calibri 11 aR K 1 3 Insert Ju EE S J DA nl sl bezils a iis SE A pj It tS SS Ge lt 0 00 F SS g EES Pein Dee EE Clipboard nt E Number E i Styles Cells Jl Editing e Security Warning Some active content has been disabled bDisplayFlow Qa f FALSE EI aa AB AC AD AE AF AG Al AJ AK 14 4 3 General Information 4 3 1 General Information Worksheet All of the data file management tasks are located on the General Information worksheet Figure 2 To begin you must create an Access database file Create a new empty file by selecting Create a New File Specify a file name and location and click Save The default location is the same folder where the CE Model Excel file is saved However you are free to save this file anywhere on your computer or local network including mapped network drives or a UNC path Be careful not to move or delete this file while using the model The program will set this new file as the current working database Each time you navigate from one sheet to another your responses will be saved automatically in the Access database file To continue working with a previously created file click Open an Existing File and navigate to the appropriate Access data2. You can enter the amount received from an outside source in the field labeled Outside funding sources 29 iD 4 4 5 Variable Costs Worksheet Program expenses that depend on the number of units offered should be entered on the Variable Costs worksheet Figure 8 On this worksheet you will enter costs borne by the customer and those borne by the utility These inputs must be entered for each conservation measure under consideration and are described in greater detail below Program Type You should select the type of program under consideration Three program types are available to choose from a rebate direct install or a giveaway program Rebate programs are those where the utility provides the customer with a rebate or some other incentive such as a credit on their water bill to cover a portion of the cost With direct install programs the utility purchases and installs the device The utility may bear the entire cost of the device and installation or may seek compensation through a single or monthly payment on the customer s water bill With a giveaway program the utility bears the cost of the device while the customer bears the installation cost Number of Units Each Year In this field specify the number of units that are provided to customers each year With a faucet aerator giveaway program for example you should specify the number of aerators that will be given away each year For a multi year program you can enter th
3. be longer than the program duration User Manual FIGURE 7 Fixed Costs Worksheet Home inser Page Layout Forman Dra WO view if amp C anal SIN gt 43 Cosy Pate i TE J Format Pater upfront_cost f 2000 TA o m 1 2 Fixed Costs High Efficiency Toilet 5 dupt ront Costs Annual Fixed Costs 7 Admexstration H Staff hours to adnursster tha program hours week Workload 250 bee year 9 Stall rochy rate including overhead per Dour 19 Wok weeks 0 woeks year 1 Anmsal Salary Expense 13 750 por year 12 13 Outside Consulting Senices 5 peryo 4 1S Publicity 5000 00 S per year 16 17 Elton and Followup FS per year 18 19 Outside ker sources Y per year 2 Fa Total Agency Costs 18 150 per year 22 23 24 26 nt r Feed Costs T Annual Fixed Costs Annual fixed costs are those costs that occur every year and are independent of the number of units that are installed or distributed The cost of radio ads to publicize a toilet rebate program for example is independent of the number of rebates you provide Annual fixed costs can include administrative publicity evaluation and follow up costs as well as fees paid to an outside consultant Variable costs by contrast depend on the number of rebates provided and should be included on the Variable Cost worksheet Some of the fixed costs may be defrayed by an outside source such as by a grant or contribution from an energy or wastewater utility
4. can be accessed by clicking the blue hyperlink at the top of the page 4 5 3 Cash Flow Diagram Worksheet A cash flow diagram represents the transactions that take place over the planning horizon of a project Transactions can include the initial investment maintenance costs projected earnings and savings and the salvage or resale value at the end of the planning horizon Expenses are negative cash flows while income or benefits are positive cash flows A positive cash flow may result from savings that occur due to the practice Cash flow diagrams are available for each conservation measure from the utility customer and combined perspectives 4 5 4 Exporting Your Results You can export your results by clicking the Export button on any of the output worksheets Export formats include 1 a new Excel workbook xls or xlsx 2 a Word document doc or docx 3 a PowerPoint presentation ppt or pptx or 4 a web page html 4 6 Sensitivity Analysis The results of a financial analysis depend on your choice of parameters For example a conservation measure may look favorable when you choose an interest rate of 7 but unfavorable with an interest rate of 3 You can perform a simple sensitivity analysis to see how the model output responds to variations in input parameters In this example we analyze the sensitivity of the output to the annual discount rate First enter all of the information about a given conservation measu
5. can be used by agencies that exclusively provide water services as well as agencies that also provide wastewater and or energy services Additionally it may be of use to consultants non governmental organizations and others interested in water conservation and efficiency and sustainable management of water resources 2 Model Background The CE Model does not provide the answer as to whether a particular measure or suite of measures makes economic sense Rather it provides a set of financial metrics that can inform the decision making process It is important to remember that each metric provides a different view on a body of financial data and has distinct advantages and disadvantages We recommend evaluating multiple metrics to help determine a particular course of action Furthermore it is important to note that economic analyses can be conducted from different perspectives including the utility customer and community society perspectives The perspective determines what costs and benefits are included in the analysis As shown in Table 1 the utility perspective is based on costs and benefits to the water utility The customer perspective is based on costs and benefits to the customer and can include energy savings as well as savings from reduced landscape chemical and fertilizer application less landscape maintenance and reduced detergent application for dishwashers and washing machines Gleick et al 2003 The society
6. rate on borrowed funds or the rate of return that is possible from other investments If IRR is higher than the agency s rate of return then the investment is deemed to be worthwhile While the IRR is useful for determining whether a single project is worth investing in it cannot be used to compare projects 1 Note that the model calculates the IRR based on the undiscounted net cash flows Therefore the resulting rate of return should be compared to the agency s undiscounted rate of return User Manual The IRR can only be used under certain conditions With a complex series of cash flows that changes sign more than once there is more than one mathematically feasible solution In other words there are multiple interest rates that satisfy the conditions given and the results are not meaningful In order to overcome this we have also included the modified IRR MIRR algorithm as described in Excel s documentation The advantage of the MIRR is that it is more likely to converge on a solution Both the IRR and MIRR can be used to rank alternatives of the same size They should not be used to compare projects with very different water savings Levelized Cost MG The levelized cost method is used to compare alternatives and is particularly useful if there are multiple ways of achieving the same outcome or if it is difficult to put a monetary value on that outcome For each alternative a ratio of net costs costs minus benefits to the o
7. to include these avoided costs then enter 0 in the avoided cost for electricity and natural gas 1 The CUWCC Avoided Cost Model can be accessed from the CUWCC website at www cuwcc org 25 Ga Ka ex Sa ssal 26 Environmental Benefits Ecosystems provide a variety of goods and services including flood protection water purification wildlife habitat and recreational opportunities While there are rarely any direct market values for these services there is a growing recognition that these services have an economic value and should be included in decision making processes The CE Model allows you to integrate environmental benefits into the economic analysis of water conservation and efficiency measures You have the option of including environmental benefits in the agency or combined perspective Your response to the question Environmental benefits accrue to agency will affect whether the agency receives a monetary credit for environmental improvement Choosing Yes will mean that environmental benefits will be included as a positive cash flow to the water agency This will affect the financial metrics in the Agency Perspective report making programs more favorable If you choose No environmental benefits are included only in the Combined Perspective report There is no single accepted methodology for estimating ecosystem values The available methods can be grouped into three categories direct
8. 8 4 4 4 Fixed Costs Worksheet The Fixed Costs worksheet contains fixed costs that occur at start up or that are independent of the number of devices offered Figure 7 These inputs must be entered for each conservation measure under consideration and are described in greater detail below Note that the model has an Import feature that allows you to import values from previously entered conservation measures Up front Costs Up front costs are those costs that are incurred before the program begins These start up expenses may include program planning and design fees to consultants or other outside planning assistance or any other costs that occur once Up front costs do not include money spent to purchase capital or any sort of durable goods They also do not include costs to implement the project such as advertising costs Program Duration Program duration is the length of time that the conservation program will be funded and implemented by the agency For example a toilet rebate program may last for five years with a planned number of rebates provided each year Note that the program duration is different from the device lifetime which is how long the toilet is expected to function and the planning horizon which is the time period over which the model will evaluate costs and benefits In order to capture all of the costs and benefits that occur over the course of the program the planning horizon on the Parameters worksheet should
9. About the Model EE 10 3 1 Accessing the OT 10 3 2 Minimum System Requirements E 10 3 3 Protected VWWGPKS GSTS oc ssisiieicanaudstidevndadicnsaiinandennpidiansiduaxbamdidiouaidaiuteanpioraeubsd 10 3 4 Saving Your Wotk sesers ea e latota unten ETE ES EE EEEE ESS 10 3 5 Sharing Your Information with Other Usersis ss cisaciseaeaosannsntandstansansanconsaanans 11 4 Getting Started EN 11 4 1 CE Model OvervieW ccccccccccccccssccesecesssceseecssecesesesescssecesesesseseseseseeensesesees 11 4 2 EE 12 4 2 1 Enabling Macros in Excel 2000 2003 including Office XP 13 4 2 2 Enabling Macros in Microsoft Excel 2007 and 2010 13 4 3 General Information xa cctestedastestnkeadecdator beset intiedatustenantantnistonuamantetennaaents 14 4 3 1 General Information Worksheet cccccccccccccesccessecesscessecesseeeeeesseeees 14 cS Mode lInpu cc eae tne eee te ene RE ane ONCE atte Se eee ane rn anne ere 16 4 4 1 Conservation Measures Worksbheet 16 4 4 2 Customer Rates Worksheet sasiinassdsaacisarcoasaienencasaternivarenaivarnanvavins 18 4 4 3 Parameters Worksheet ac siavianssacicanididcouaniieiadsviasidandidaasaehiduaunepneraiengnas 23 AAA Fixed Costs Mterkeebeek eet getaeegre geet 28 4 4 5 Variable Costs Worksheet cccccccsssdscaiseasssaisaddscadsoassnerssarssatvessseatvedivvalies 30 AAG Benefits Welten EE EECH 32 GE ET 35 4 5 1 Summary Report EEN 35 e E E a oa a a aaa a 39 4 5 3 Cash Flow Diagram Worksheet sacccsastessastavcnnannabenn
10. Agency Costs 14 Amount of rebate S 75 00 per unit 1 16 Labor 17 Laber hours hours per urst 18 Hourly rate including overhaad per hour 19 Totat perdevce 20 21 Other Agency Costs 2 Cost 3 per unt lt 0 Variable Costs J Customer Costs CR ERR m 2 Dr A ars buet Deier Format i fing amp e D hen Zeie imn DER J K t M a 4 gt A Customer costs include the capital installation and maintenance cost of an efficient and standard device Based on information input by the user the model calculates the incremental capital installation and maintenance costs associated with the efficient device that is the cost is compared to a conventional non conserving alternative Operation and maintenance costs can 31 Sis ER include detergent costs in the case of clothes washers and dishwashers or mowing and chemical costs for landscapes Note that savings from reductions in wastewater and energy savings are included in the Benefits worksheet and should not be included here Units Installed All of the conservation devices distributed to customers may not actually be installed The default value for this parameter is 100 meaning that 100 of the devices are installed For a direct install program this may be accurate For giveaway programs the percent of units actually installed may be lower Ideally follow up monitoring would be conducted to estimate this parameter The percent of units installed ultim
11. D Ret Gener roe a imaay hets Ceh Sma We e de Net gt 1 4 Osta File Pace matze Programa ner sod Sunaina CE Model 2 User Data mad D gt Name kat al zegin 1 8 Data file management tips 9 Last Modihed UN DFR AM CresteaNewFie Der Oatubave eat a 10 pa Sms eg Before you hogin using the CG pe aed parma alg ng database where responses stored as you work Wie refer Name of Scenario oppona ss s sSsSsSsSCSCSs to a scenario as all of your mputs for a mode ran pirtys 12 Parameters customer data aer 17 Description of scenano OpensaEdsting Voewrfolder Opes enter on the following worksheet 14 optional File Windows Spiorer Ee z Create a New File creates a new empty file Specify a file name and Ee This new De is your current working d K Co Chick Open an Existing File working wih a previously Compact an 10 continue a s G Datebase tile crealed scenano Dee Sere 0 ooe you have savedthe Access Ze database mdb file and cick Open From time to time wish 10 make a backup of your current Stee Pw esche Gei GE yf te Current File wil aka a 7 ge Copy o active change its extension from 73 check ali that wiel to bak If you wish to work wth this file again change the fie name so 7 srr Generatinfo 3 PU Wi Agency Type On the General Information worksheet the CE Model prompts you to identify whether the agency provides water wastewater and or energy services Your response will determine whic
12. EN 2 PACIFIC rw ZN S I U T E Pacific Institute Heather Cooley and Matthew Heberger April 2012 User Manual for the Pacific Institute Cost Effectiveness of Water Conservation and Efficiency CE Model April 2012 Copyright 2012 Pacific Institute All Rights Reserved Pacific Institute 654 13th Street Preservation Park Oakland California 94612 www pacinst org 510 251 1600 Authors Heather Cooley Matthew Heberger Editor Nancy Ross Designer DENER store 2ra FIC OR INSTITUTE Acknowledgements Comments on the model and user manual were provided by in alphabetical order Jennifer Burke Al Dietemann Kristina Donnelly Sanjay Gaur David Koller Jeannine Larabee Val Little Stefanie Olson Dave Requa and Gary Wolff We are grateful for their contributions The project was supported by the California Department of Water Resources through a grant program funded through Proposition 50 All errors and omissions are of course our own About the Pacific Institute The Pacific Institute is one of the world s leading nonprofit research and policy organizations working to create a healthier planet and sustainable communities Based in Oakland California we conduct interdisciplinary research and partner with stakeholders to produce solutions that advance environmental protection economic development and social equity in California nationally and internationally We work to change policy and find re
13. GURE A 1 ra i KE SE Pes Ente nzu J Pormat Panter Cipeoard e Excel Options Screenshot i Help keep your documents safe and your computer secure and healthy Protecting your privacy Microsoft Cares about your pracy For more information about how Mactosott Excel Mein to protect your prrvacy please see the perwary statements TAN f H Otte com pracy ttatement GE Ai Security amp more Leam mote about protecting your privacy and security from Office com Microsoft Windows Secunty Contes secure We recommend that you do net change these settings D trust Center Settings ara 2 ow Autasum ar Pites teung 45 46 FIGURE A 2 Macro Settings Screenshot WE mmm e E D Da riasiu A 8 ew s a aT A Peti 77 at n 2 wre twas tom wtp op Se Setect Ciptosid lt Macro Setings Duable ap mono without nottiaton abie wi macros with rat O Onadie at maces except agitaiy signed macros O Unable at macros inot recommended potentially gangerout cose can rund Devrioper Macro Settings D mung access to the YB projert onject modet mem User Manual
14. The discount rate has a large effect on the analysis While no defaults are provided economists typically use a discount rate that ranges from 0 to 10 Note that today s rates are significantly lower than those offered during the 1990s and future rates are uncertain You are encouraged to experiment with different discount rates within a reasonable range to understand the sensitivity of the analysis to this important parameter User Manual Like the escalation rate the discount rate can be either real or nominal The real discount rate is the rate without inflation The nominal discount rate by contrast is the real discount rate plus inflation The CE Model allows you to enter whichever value you choose It is important that you choose either the real adjusted for inflation or nominal not adjusted for inflation rates for both the escalation rates and for the discount rate described below not a mix of the two Avoided Costs Avoided costs are the savings associated with not having to produce a unit of water Avoided costs have both fixed costs associated with adding capacity and a variable component associated with operations and maintenance O amp M By conserving water a utility reduces its O amp M cost especially its chemical and energy use for extraction conveyance treatment distribution and wastewater treatment The economic value of these reductions is typically referred to as avoided marginal operation and maintenance cost o
15. al world solutions to problems like water shortages habitat destruction global warming and environmental injustice Since our founding in 1987 the Pacific Institute has become a locus for independent innovative thinking that cuts across traditional areas of study helping us make connections and bring opposing groups together The result is effective actionable solutions addressing issues in the fields of freshwater resources climate change environmental justice and globalization More information about the Institute and our staff directors funders and programs can be found at www pacinst org User Manual About the Authors Heather Cooley Heather Cooley is co director of the Water Program at the Pacific Institute Her research addresses the connections between water and energy sustainable water use and management and the hydrologic impacts of climate change Ms Cooley holds a B S in Molecular Environmental Biology and an M S in Energy and Resources from the University of California at Berkeley Matthew G Heberger Matthew Heberger is a research associate at the Pacific Institute He is a licensed Professional Engineer registered as an Environmental Engineer in the Commonwealth of Massachusetts Mr Heberger holds a B S in Agricultural and Biological Engineering from Cornell University and an M S in Water Resources Engineering from Tufts University in Boston Contents te e EE 7 2 Model Background EE 8 3
16. ary considerably among water and wastewater utilities Contact the financial department at your local water and wastewater service provider to estimate escalation rates appropriate for your service area Similarly electricity and natural gas escalation prices may be available from the energy utility or from either the U S Energy Information Administration or the California Energy Commission Note that the inclusion of escalation rates is optional However if you have been using nominal values for the escalation and discount rates throughout the model your avoided cost escalation rate must account for inflation TABLE 2 Typical External Environmental Benefits of Conservation Rivers Lakes Coastal Estuarine Groundwater Fish populations including their Maintenance of freshwater and nutrient Fewer low water tables migration routes and spawning areas inflows Red ced land subsidence Riparian vegetation and wildlife Marshland vegetation eelgrass Red ced contamin ti ndrom salt water Marshlands mangroves intrusion Wildlife and birds Fish populations Reduced salt water intrusion Baseflow to rivers and streams Recreational benefits of maintaining instream flows Dilution of pollutants Avoidance of regulatory actions Maintenance of downstream water rights Source Adapted from Pekelney et al 1996 3 See for example the Energy Escalation Rate Calculator at http www 1 eere energy gov femp information download_blcc html eerc 2
17. asinsderteuateasinvasuans 40 4 5 4 Exporting Your Results geegent 40 4 6 Sensitivity Analysis ege EE 40 Eeer egene eege 42 BEE 43 Appendix Enabling D 44 kd 2 ef 3 e A gw wi n MV PEs E GN P we i A E wt User Manual 1 Introduction Over the past 25 years water conservation and efficiency improvements have provided real water savings allowing many agencies to maintain or reduce water use while meeting the needs of a growing population and economy Recent studies indicate that despite the improvements that have already been achieved significant water conservation potential remains See Gleick et al 2003 DWR 2005 DWR 2010 Indeed legislation passed in 2009 requires California s urban water agencies to reduce per capita water use by 20 by the year 2020 The economics of water conservation and efficiency are key issues for capturing the water conservation and efficiency potential In response a number of groups have developed models to assist agencies in evaluating the cost effectiveness of various water conservation measures see for example California Urban Water Conservation Council 2005 American Water Works Association undated and the Alliance for Water Efficiency 2011 The Pacific Institute has developed the Cost Effectiveness of Water Conservation and Efficiency CET Model to help evaluate the economic desirability of water conservation and efficiency measures and explore how costs and benefits can be s
18. ately affects the economic desirability of a water conservation measure because the water utility pays the incentive cost but does not capture the benefit Free Riders A free rider is defined as a customer that takes advantage of a water conservation and efficiency program but that would have installed the conserving device anyway without additional financial assistance The default value for this parameter is 0 although you may adjust this value as needed Free riders affect the economic desirability of a water conservation program While an agency that spends money on a free rider incurs the cost of the incentive it does not get credit for the water savings because they would have occurred without the incentive While not everyone agrees on the importance or significance of this concept we include it here for those that wish to use it 4 4 6 Benefits Worksheet The Benefits worksheet contains inputs that must be entered for each conservation measure under consideration Figure 9 Additional information on each input is provided below Target Customer Class For each conservation measure you must specify the target customer class General categories are provided although you can create custom customer classes The custom classes must first be created on the Customer Rates worksheet Once created User Manual and saved they will appear in the dropdown box on the Benefits worksheet If you want to enter a conservation measure for many cus
19. ating the benefit cost ratio may suggest that Program A is more desirable However if the objective is to maximize water savings then Program B may be more desirable Payback The payback period is a straightforward metric that is easy for most people to understand It is the time required to recoup the cost of an investment The CE Model reports payback for both the agency and customer perspective The model takes into account the stream of costs and benefits incurred from each perspective Its calculation is somewhat more accurate than the simple payback method which only takes into account the first year benefit While the payback method is relatively easy to calculate it does not account for the life of the device Device A for example may have an incremental capital cost of 100 annual water and energy savings of 50 and a lifetime of three years Device B in comparison may have the same incremental capital cost and annual water and energy savings but have a lifetime of 20 years Thus while both devices may have a simple payback of two years Device B will provide benefits for 17 years beyond that of Device A Internal Rate of Return and Modified Internal Rate of Return The internal rate of return or IRR provides an indication of the efficiency of an investment It is defined as the effective annual interest rate at which an investment accrues income The IRR for a water conservation measure can be compared to the interest
20. base mdb file The General Information worksheet contains other features that may be useful Each feature is described below From time to time you may wish to make a backup of your current data file to return to a particular set of inputs at a later time Click Backup a Copy of the Current File to make a copy of your active database file and change its extension from mdb to bak If you wish to work with this file again you must first change the file name so that the extension is mdb and then click Open an Existing File To verify that the database file shown is valid click Check Database Connection To view the file location in Windows Explorer click View Folder If you ve been using the same database for a long time its file size can increase Clicking Compact Database from time to time will keep the file size down 3 Using a network folder which has been mapped to a drive letter Z is preferable to using a UNC path server23 office files User Manual FIGURE 2 General Information Worksheet ome invert Page Layout fomos Dez Remew view CR ER r A Cut leg e A Ze EN A ane H A wt we S oz ER 2g Coor Re eg orf rr zs Fra d A A ES SS i e one eg eis e nd m x S Format Painter ZP Ss gt a n SS a 7 a F e g en D s gra d Gow end E ER amt 8 at _ Fort us Agence CD t sene C Mate WW h dir taero ail name st E a ik Ce E E E E E EC ES 7 D n DD B D D
21. conservation measure under consideration If a water saving device results in changes in energy use you should enter that here too For the energy savings enter the amount of gas saved by a household with a gas water heater AND the amount of energy saved by a household with an electric water heater The model will allocate the energy savings based on the percent of each customer class using gas versus electric on the Customer Rates sheet In some cases a water saving device may increase electricity use e g hot water recirculating systems in homes with gas water heaters In this case enter a negative number For example entering 100 kWh year means the device consumes 100 kWh per year more than its conventional alternative Defaults are not provided for water and energy savings You can obtain this information from a variety of sources including research reports product manufacturers U S EPA EnergyStar or WaterSense analyses and agency sponsored studies Additionally the Pacific Institute s WECalc model available online at www wecalc org may be a useful tool for estimating the energy savings of water conservation and efficiency measures for a single household Outdoor Water Savings You are prompted to identify whether the conservation measure reduces indoor or outdoor water use Water used outdoors typically evaporates or is discharged to a storm drain Therefore reducing outdoor water use does not reduce wastewater treatment c
22. ctive of all customers as a group after the utility has been kept financially solvent through rate adjustments should be the primary approach to guide decision making Additional information on each output is provided below Volume of Water and Wastewater Conserved Estimates of the volume of water and wastewater conserved are based on information entered by the user and are a function of the device water savings and the number of devices installed Savings are reported after the program has finished In other words for a three year program that distributes 1 000 toilets a year the savings are reported after all 3 000 toilets have been distributed 35 FIGURE 10 Summary Reports Worksheet e Heme bung Pogelmeut Permui Osta Review View Qc n Aca e bg e i Mi Sie TEEN Tastee A arial 10 A gt C D HSH Ri 7 ta copr gt fi La a j LR Fru zA A gr Busu gt A EBB RE lues Ceci EEEE F IES d fama Cet moet Orte Pomat Zoe Sp e BER oi tatis Mme e e e ke C otaug gt font Adr Hader Z nter Com titro Son Ascending Summary Reports be 2 Aari AT Tassie 3 Scanario Name Computed by Planning Horizon 39 years 4 Sample Run Matthew 5 Discount Rate 50 H i Pers Lewhred Levelzed Cost Mod od Annual Annual Cost or Het Presem rualured Annuakted Sancos Payback D wer Wiater Wastewster Benefit Benefit of Lenz Cost Benett Rate of ae Siyer Rates years Return Rate of Savings Savings Conser
23. e same number of units for each year by choosing Same each year from the drop down menu To vary the number of units available each year choose Varies by year from the drop down menu This is useful for example if you plan to ramp up a program over time Next click on the now active Edit Number of Units to bring up a new worksheet that asks you to specify how many units will be given out each year Click Save to return to the Variable Costs worksheet Agency Costs Utility costs include cost of the device and any installation and maintenance costs If it is a typical rebate program then the utility s variable costs would include the amount of the rebate Direct install programs would include the cost of the device plus any installation and maintenance costs 30 User Manual Figure 8 Variable Costs Worksheet iie none imen Prae Layout Forman Oste Fener view Qn A out Au si Ev See F 4 f lt a Cow a A Ezgi e J Eoman Peete 4s P iR iag Chpbears E rom ngrmert nne duration LS A 8 p O z F G Variable Costs High Efficiency Tollet 2 j Program Type Rebate Save Cance TEJ Ovation ee roam heen import W2 you offer the same number of unts G each year or will 8 vary Wf you angwered Same each yonr what is the member of units offered per year if you answered Varies by year please enter the number cf ursts cfered each 10 year on this worksheet 1 12 17
24. e the conservation measure s and enter the name of the measure s you would like to evaluate see Section 4 4 1 for instructions 1 Note however that the CE model was not designed to be used by more than one user at a time 11 D 12 6 Enter basic information about the target customer class including water and wastewater rates on the Customer Rates worksheet see Section 4 4 2 for instructions Add new customer classes as needed 7 Enter information about the planning horizon discount rate and avoided costs on the Parameters worksheet see Section 4 4 3 for instructions 8 For each conservation measure enter the measure s fixed costs on the Fixed Costs worksheet see Section 4 4 4 for instructions 9 For each conservation measure enter the measure s variable costs on the Variable Costs worksheet see Section 4 4 5 for instructions 10 For each conservation measure enter the measure s benefits on the Benefits worksheet see Section 4 4 6 for instructions 11 After you have entered all of the required information the Input Completed cell on the Conservation Measures worksheet will read 100 Then click the Calculate button at the top of the screen and review the model output see Section 4 5 for instructions 4 2 Enabling Macros This workbook contains custom Visual Basic for Applications VBA macros Many Excel users however have default security settings that do not allow macros In o
25. ee and can be downloaded from the Pacific Institute website at www pacinst org 3 2 Minimum System Requirements The CE Model is an Excel spreadsheet with a number of macros to facilitate data entry calculation and the display of results The model can be run in Microsoft Excel 97 or later versions in Windows only You must also have Microsoft Access installed as you work your information will be stored in an Access database file 3 3 Protected Worksheets The CE Model is protected to help avoid data entry errors You can enter data in blue cells Cells with a gray background are automatically calculated and should not be changed If you would like to view hidden worksheets or formulas you may switch to Developer Mode at any time by typing Ctrl Shift R To re enable User Mode type Ctrl Shift U Note that some cells have a small red triangle in the upper right hand corner If you move your mouse over this cell a text box will appear that contains additional information about that cell 3 4 Saving Your Work There is no need to save the CE workbook As you move from worksheet to worksheet within the model all of the information that you have entered is automatically saved in a separate Access database file User Manual 3 5 Sharing Your Information with Other Users All of the information you enter into the CE model can be shared with other users If you would like others to view or use the model with your in
26. er you are assuming that the real price that the customer pays for water wastewater and energy will remain constant over time which is unlikely given recent trends If you are using nominal discount rates throughout the model then you must use the nominal escalation rate So even if the real rate is not increasing the nominal rate would include some estimate of inflation User Manual 4 4 3 Parameters Worksheet The Parameters worksheet Figure 6 contains inputs that apply to all of the conservation measures under consideration Each input is described in greater detail on the following pages FIGURE 6 Parameters Worksheet ee Hame iser Page Layout Farmstay Data Beview Aew 2 fi seu es Anal 0 Ai SS e ZS S n Ce E ke i B Za Copy fis s D rm d A e e e P P e e i F r D grad J Format Painter BJU p a ESS H SW sen te Table tes Sa weg 2 Gear dee Qperri a fort Sp grirernt UR TT Styles Cems Eating Planning Horizon gt i Ai 30 i i A A 5 LR D TEI F 6 ES EH ES ISS K i a N p D 2 Parameters Applies to all practices Ze JL el H Annual Discount Rate 509 D V Water Sewer h Wastewater e 10 Avoided costs Avoided costs n Marga Capital Cost per kgal Marginal Capital Cost per kgal 12 Operation amp Maintenance per kgal Operation amp Mantenance per kam n Annual escalation rate Annual escalation rate u Total Ee Total EE 15 Today HE per kal Today LG 50 per kga 16 I end of planni
27. h benefits of conserving water accrue to the agency and are included in the cost benefit analysis from the agency perspective For example implementing a high efficiency toilet retrofit program reduces water demand and wastewater flow The program can calculate 15 3 16 avoided costs of wastewater treatment associated with reduced wastewater flows This benefit will accrue to your agency only if you indicated that it provides wastewater service Otherwise it will be included as a benefit in the Combined Perspective 4 4 Model Inputs To conduct a financial analysis of a water saving measure you will need to enter a number of values and parameters into the CE Model Many of these inputs will be specific to your agency or your region such as labor costs or water rates paid by your customers The model includes default values for some inputs to help you get started these are not necessarily typical or representative We encourage you to use your own data or data from other reputable sources Once you have enabled macros and established a working database proceed to the Conservation Measures worksheet to enter information about the conservation measures you would like to evaluate From this worksheet you can then link to five worksheets that contain additional user inputs Information on two of the worksheets applies to all conservation measures under consideration 1 Customer Rates and 2 Parameters which include discount rates and avo
28. hared among customers water utilities and other entities The model helps document the costs of starting and running a conservation program and estimate the associated water energy and financial savings The cost effectiveness of a particular conservation measure varies regionally and according to the level of analysis e g local or state For example an irrigation controller giveaway program may be cost effective in regions where large lawns are common and outdoor use is high However it may be less cost effective in a cooler region with low outdoor water use In addition some measures may be cost effective from a statewide perspective but not locally The CE Model is sufficiently general and flexible to address these issues because the model outputs are based on conditions defined by the user The CE Model can also help water conservation practitioners share information across departments and with other water wastewater and energy utilities The model quickly and easily calculates financial metrics that are meaningful and readily understood by planners and managers It also provides a common platform through which to discuss the costs and benefits of water conservation and efficiency This in turn allows utilities to exchange cost experiences and data and learn from one another more easily The primary audience for the CE Model is water utility staff The model is appropriate for wholesale and retail utilities of all sizes and
29. he utility perspective However it may be highly cost effective from the customer perspective as a result of energy savings and reductions in wastewater costs As a result the water agency may consider lowering the rebate level and or partnering with an energy provider to offset some of the cost to the water agency Evaluating measures from multiple perspectives allows the water agency to determine appropriate rebate levels and provides an indication of whether cost sharing is appropriate TABLE 1 Overview of the Costs and Benefits Included in the Customer Utility and Combined Perspectives Combined Utility Customer Customer Utility Customer Program Costs l D D vV v device installation time etc eeh Agency Program Costs l SA v v administration labor surveys etc Financial Incentives External Costs other utilities and their customers e g water wastewater electricity Reduced Energy Bills v v Financial Incentives External Benefits other utilities and their customers d e g water wastewater electricity Environmental Benefits v v System Reliability Note The CE Model allows the user to include environmental benefits in the utility perspective by checking the box on the Parameters worksheet Source Adapted from Pekelney Chesnutt and Hanemann 1996 10 3 About the Model 3 1 Accessing the Model The CE Model is fr
30. ided supply costs For each water conservation measure you must enter information on the 3 Fixed Costs for implementing the measure 4 Variable Costs for implementing the measure and 5 information on the water and energy Benefits of the measure A description of these terms and the input variables are provided in the following section 4 4 1 Conservation Measures Worksheet The Conservation Measures worksheet Figure 3 is the central worksheet within the model All input worksheets can be accessed from here Follow the procedure below to get started 1 Activate the conservation measure by clicking the Turn On Off button A checkmark will appear in the box and the input buttons associated with that measure will turn from gray to blue 2 Enter the name of the conservation measure you wish to evaluate 3 To enter input data click on each of the blue boxes e g Fixed Costs and Variable Costs This will take you to another worksheet where you will be prompted to enter input data Once you have finished entering the required User Manual information on each of the input worksheets select Save to return to the Conservation Measures worksheet A checkbox will appear in the box to indicate that the input worksheet is complete 4 Repeat steps 1 through 4 for each conservation measure you would like to evaluate Once you have entered all of the required information return to the Conservation Measures worksheet The Input Com
31. indirect and proxy Each of these methods has strengths and weaknesses each fails to fully capture the value of ecosystems The unacceptable alternative however is to assign an economic value of 0 clearly acknowledged to be wrong To put it simply We don t protect what we don t value Myers and Reichert 1997 Users in California may wish to use the CUWCC Environmental Benefits Model to develop this estimate Other users are encouraged to explore this model as well as other data sources Table 2 lists typical environmental benefits associated with water conservation and efficiency Avoided Cost Escalation Rate Here we allow you to enter annual escalation rates for O amp M and capacity costs for water wastewater electricity and natural gas The cost of operating maintaining and building new infrastructure changes over time in response to a variety of factors including changes in the price of the raw materials needed to maintain and build these facilities This change is captured in the escalation rate Note that the escalation rate can be positive or negative depending on whether the utility avoided costs are increasing or decreasing respectively Be consistent throughout in using either real adjusted for inflation or nominal not adjusted for inflation escalation rates 2 The Environmental Benefits Model can be accessed from the CUWCC website at www cuwcc org User Manual Escalation rates for water and wastewater v
32. ng borizon 9 8 ee kga At end of planning honzon 50 91 pe ko Note about energy related avoided costs below You may vesh to enter energy related avowed costs for ee gas ind ee These parameters yell affect the resuts d any of your planned conservation measures result in energy savings if your agency sells energy in addition to water energy Sangs by your customers may represent an mt mg change in cash flow to the agency im teems of reduced Git tevenuefrom energy sales However d can also reprusent At end of planning bonzon 377 per kga an important savings from the avoided cost of having to prs EE 8 N ISRA NN aens hat SET e ran 23 amp 24 Planning Horizon The planning horizon is the time period over which the model will evaluate the conservation measure s costs and benefits You can enter a value ranging from 1 to 99 years for the planning horizon A horizon of 30 years is typical for planning capital projects and is a good choice if you are trying to compare a conservation program on an equal footing with infrastructure projects You may also try a planning horizon equal to the expected lifetime of a water saving device if you want to evaluate the savings that will occur over the course of its use This becomes more complicated however when comparing alternatives with different lifetimes In order to capture all of the costs and benefits that occur over the course of the program however the planning hori
33. osts Conserving water that is used indoors however saves on wastewater treatment costs This information is needed to determine whether avoided wastewater costs and reduction in customer wastewater bills should be included in the economic analysis User Manual 4 5 Model Outputs You are now ready to do the analysis Click Calculate next on the Conservation Measures worksheet to run the model The outputs from the CE Model include a series of summary reports charts and cash flow diagrams Click on the icons at the top of the page to view the various outputs 4 5 1 Summary Report Worksheet The Summary Report worksheet contains an estimate of the volume of water and wastewater conserved as well as a variety of financial metrics to help decide which conservation and efficiency measures are feasible and financially desirable These financial metrics are evaluated from the utility customer and combined perspectives You can view the summary reports for each of the perspectives by clicking on the blue hyperlinks at the top of the page Figure 10 The customer perspective gives you the perspective of an individual customer rather than being representative of the entire customer base collectively While it is common practice to evaluate programs exclusively from the utility perspective we recommend that the utility consider all three perspectives The utility exists to serve its customers and has no independent value to society Thus the perspe
34. perspective is based on costs and benefits to the water utility and its customers and includes all of the factors described above The society perspective also includes recreational benefits that may accrue to upstream or downstream communities Vickers 2001 The CE Model evaluates the economic efficiency of the water conservation measures from the utility customer and the combined utility customer perspectives The User Manual combined perspective which evaluates the costs and benefits for the utility and its customers is narrower than the society perspective in that it does NOT include benefits that may accrue to those outside the utility boundaries e g recreational benefits that may accrue to downstream users from leaving more water in rivers and streams While it is common practice to evaluate programs exclusively from the utility perspective we recommend that the utility consider all three perspectives The utility exists to serve its customers and has no independent value to society Thus the perspective of all customers as a group after the utility has been kept whole through rate adjustments should be the primary approach to guide decision making Evaluating measures from multiple perspectives can also provide important information for designing and implementing conservation and efficiency programs For example a rebate program that provides 150 for a high efficiency clothes washer may not be cost effective from t
35. pleted cell will read 100 Click the Calculate button at the top of the screen to review the model outputs FIGURE 3 Conservation Measures Worksheet file mens ineert Page Layout Fornutet Data Beate view EI fal og amp P A zu E Ta hx 5 WT ff A 43 Copy ef aru Paste pd j SS OR gt Insert Delete Format feo e J famat Porter e e e 2 Chem Setect mb eu list_start bd J High Efficiency Toilet Sg 8 aK 0 P a R S RW Si Outputs D D o Sat Gawa bet vg wt gt Back Io Colentate Next 1 Conservation Measures lt E 2 S ges TE 2 S re Required Inputs EX ei g cy Todal f el ei EI Custorner Rates ei Conservation Measure 2 gE N m Parameters i 3 Conservation Measure 3 i Consonation tansia E Conservation Measure 5 input Compieted 15 Conservation Measure 6 Gi i CH 7 D Conservation Measure 7 EI IH HS 19 EI Conservation Measure 8 EE oe Mart Inputs e 21 Conservation Measure 9 TIET D x H vu t input me rf 18 4 4 2 Customer Rates Worksheet The Customer Rates worksheet Figure 4 contains inputs that apply to every conservation measure under consideration Here you enter the rates customers pay for water wastewater electricity and natural gas These inputs are especially important for evaluating the water conservation measure from the customer perspective Customer Classes Each conservation measure can be designed to targe
36. puts you will need to provide them with the CE Model Excel file and the Access database The Access database contains your input data You can e mail these files to colleagues or place them on a shared server Some email systems however do not allow users to receive Access files mdb or accdb In this case we recommend compressing the file into an archive file such as zip that can then be sent via e mail To create a zip file in Windows right click the file and choose Send to compressed zipped archive Other free programs for creating zip files can be found online You can also share the results of your model run see Section 4 5 4 for instructions on exporting your model results 4 Getting Started 4 1 CE Model Overview Below we provide a general overview of the steps required to use the model For additional information on each step please refer to the sections indicated 1 Download the CE Model from the Pacific Institute website www pacinst org and save it to your computer or network 2 Ifneeded adjust the security settings on Excel to allow macros see Appendix for instructions You only need to adjust the security settings one time 3 Open the CE Model and enable macros see Section 4 2 for instructions Establish a working database file on the General Information worksheet see Section 4 3 1 for instructions All of the information you enter will be automatically saved in the database file you create 5 Activat
37. r short run marginal cost Conserving water can also reduce defer or eliminate new water wastewater and energy infrastructure investments The economic value of these savings is typically referred to as avoided marginal capacity cost The long run marginal cost is equal to the short run marginal cost plus the marginal capacity cost You can specify values for avoided marginal capital cost and operation and maintenance costs for water wastewater natural gas and electricity These values are unique to the agency and can usually be obtained from the utility financing department Other potential sources for information on water and wastewater costs include the California Urban Water Conservation Council CUWCC Avoided Cost Model CUWCC 2006 You may also wish to enter energy related avoided costs for natural gas and electricity These parameters will affect the results if any of your planned conservation measures result in energy savings If your agency sells energy in addition to water energy savings by your customers can also represent an important savings from the avoided cost of having to build new infrastructure to meet growing or future energy demands If your agency does not sell gas or electricity these parameters will affect the results that are reported from the combined perspective Although the costs or savings do not accrue to your agency they will affect other utilities which are included in the combined perspective If you do not wish
38. rder to use the CE Model you must change Excel s security settings to give you the option to enable macros when you open the workbook Detailed instructions for changing the security settings can be found in the Appendix You will only need to change the security settings once Once you have changed Excel s security settings you can enable the macros by following the procedure on the following page Note that the procedure is different for users of Microsoft Excel 2007 2010 and for Excel 2000 2003 Note that you can allow all macros to run without warning but this could expose you to malicious code and is not recommended for most users User Manual 4 2 1 Enabling Macros in Microsoft Excel 2000 2003 including Office XP Download the CE Model to your computer Open the CE Model Excel file A pop up dialog box will appear 3 Click the button to enable macros You will need to repeat this step every time you open the CE Model 4 2 2 Enabling Macros in Microsoft Excel 2007 and 2010 1 Download the CE Model to your computer Open the CE Excel file 2 A message bar will appear near the top of the Excel window titled Security Warning Click the Options button which is indicated by the red circle in Figure 1 3 In the Microsoft Office Security Options window choose Enable this content and click OK You will need to do this step every time you open the CE Model FIGURE 1 Security Warning Panel
39. re on each of the worksheets On the Parameters worksheet enter an annual discount rate of 1 Click Save and then Calculate On the Summary Report sheet make a note of the NPV from the agency perspective Then go back to the Parameters worksheet and enter an annual discount rate of 2 Recalculate and make a note of the NPV from the agency perspective Repeat this for discount rates from 1 to 8 Table 3 shows example NPV outputs for various annual discount rates In this example the program is financially favorable when interest rates are below 5 Note that your results might differ from these depending on all of the other inputs that you entered e g water savings water prices etc 40 User Manual TABLE 3 Sample Sensitivity Analysis Output Annual Discount Rate Net Present Value 1 155 000 98 000 In this example we evaluated the sensitivity of one output net present value to the variance in a single input the annual discount rate Sensitivity analyses are useful for parameters that are likely to vary or are difficult to predict such as inter est rates or purchase costs for commodities Other parameters however may not be as volatile e g labor costs which are subject to long term contracts You might also use this approach to explore how different rebate or incentive levels change the economics of a particular measure For example a 300 rebate for a high efficiency clothes washer mighty no
40. s Amherst Massachusetts Wenzel T P J G Koomey G J Rosenquist M Sanchez and J W Hanford 1997 Energy Data Sourcebook for the U S Residential Sector Lawrence Berkeley National Laboratory University of California Berkeley 43 44 Appendix Enabling Macros This workbook contains custom Visual Basic for Applications VBA macros that must be enabled when opened In order to enable macros you must first change the security settings on Excel You will only need to do this once To change the security settings follow the procedure outlined below for the version of Excel that you are using Excel 2000 2003 including Office XP 1 In Excel choose Tools gt Macro gt Security 2 In the Security window choose Medium and click OK You have now changed the security settings of Excel You will only need to perform these steps once Excel 2007 2010 1 Click the round Office Button or File tab at the upper left of the screen and then click Excel Options which is located at the bottom of the window 2 Within the Excel Options window select the Trust Center tab on the left Click Trust Center Settings Figure A1 3 Under the Macro Settings tab select Disable all macros with notification and click OK Figure A2 Click OK again to save your Excel options You have now changed the security settings of Excel You will only need to perform these steps once User Manual FI
41. sta eer View e onn cut I sA A any m0 A 4 mm se 5 gt F p a A zl cewe ay A gm 7 Poite u Ezz i a j bot Deisis Format Pit J tama Panter S Chear Seleut pras units D fe WEE me x a pgm 5 E r EE r RE 1 2 Tiered Rates Save Cancel Residential Single Famy 4 Customer class 5 6 e 9 10 1t Thers zess Average Ate s Margrai Rate 12 0 50 B 5045 i 040 te 035 7 Rate DCH 0 30 18 025 B 30 20 zu 90 15 4 D S 22 50 10 for 05 n Rates for an average customer 6 a Use the average rate 0 12 SHCF 0 10 2 30 40 40 25 CH Leier ECH A ar f d were Trad Rates EA va LA 22 Escalation Rates Water and energy rates in many areas are currently increasing faster than the rate of inflation As prices rise the investment in water conservation and efficiency becomes more financially favorable Here you can enter annual escalation rates for water wastewater electricity and natural gas i e the annual percent change in the price that the customer pays for these services The escalation rate can be positive or negative depending on whether rates are increasing or decreasing respectively The escalation rates entered here affect the financial analysis from the customer perspective only Annual escalation rates for water and wastewater may be available from your financial department For energy related escalation rates consider using estimates generated b
42. t a particular customer class In the Customer Rates table you can enter information for up to six customer classes We have provided defaults such as Residential Single Family and Commercial You can however create any type of customer class For instance you may want to create a broad category called Residential that covers both single family and multi family customers You also might want to create specific customer classes in order to be able to calculate the effect of targeted programs on for example Elementary Schools or Laundromats Utility Rates Enter the rates paid for water wastewater etc for each customer class under consideration The rates entered should reflect what the customer pays for each additional unit of water i e the marginal rate In other words it should exclude fixed costs such as connection fees etc If customers pay only a fixed fee for water or wastewater e g a flat rate rather than a volumetric rate then the customer s bill will not change as a result of changes in water use Thus the marginal rate and the rate that should be entered in the rate column is 0 You will be prompted to enter the percentage of people with gas and electric water heaters This information is used to calculate the savings from energy reductions associated with water conservation and efficiency measures and factors into the customer and combined perspective financial metrics A 1997 study estimates
43. t be cost effective from the utility perspective while a 200 rebate might be more appropriate 42 5 Conclusion The CE Model provides a set of financial metrics to assist in evaluating water conservation and efficiency measures It does not provide the answer as to whether a particular measure or suite of measures makes economic sense Rather it allows you to quickly compare a range of conservation measures and compute common financial metrics It also allows you to explore the many ways that costs and benefits can be shared among customers water agencies and other entities Additionally we hope that the CE Model promotes information sharing as it allows water conservation managers to communicate with managers in other departments using common terminology about the costs and benefits of conservation It can also facilitate the exchange of information and experiences between agencies by providing a common platform by which to discuss the costs and benefits of water conservation and efficiency This in turn allows utilities to exchange cost experiences and data and learn from one another more easily User Manual References Alliance for Water Efficiency 2011 Water Conservation Tracking Tool Report and Microsoft Excel worksheet Chicago Illinois American Water Works Association Research Foundation undated AwwaRF Water Conservation Benefit Cost Model Microsoft Excel spreadsheet Denver Colorado California Urban Wa
44. te that the NPV is highly sensitive to the discount rate Annualized Cost and Annualized Benefit The annualized cost is the equivalent uniform annual cost of the conservation measure over the planning horizon It is equivalent to the sum of all practice costs spread out over the planning horizon and converted to an annual value by using the concept of discounting or the time value of money Likewise the annualized benefit is the equivalent uniform annual value of all the practice s financial benefits Benefit Cost Ratio A cost benefit analysis CBA or benefit cost analysis BCA is a technique used to compare the costs and benefits associated with an investment Unlike a cost effectiveness analysis a cost benefit analysis requires that a monetary value be placed on all costs and benefits including the outcome in this case the conserved water The costs and benefits are expressed in their present values and compared according to a benefit cost ratio Measures for which the benefits outweigh the costs have a benefit cost ratio greater than one and are considered economically desirable 37 38 Although widely used the benefit cost ratio is of little value if there are multiple ways of achieving the same outcome or if it is difficult to put a monetary value on that outcome Program A for example has a benefit cost ratio of 1 5 and saves only 1 MGD Program B in comparison has a benefit cost ratio of 1 1 and saves 10 MGD Simply evalu
45. ter Conservation Council 2005 BMP Cost Effectiveness Spreadsheets Sacramento California http www cuwcc org ce_spreadsheets lasso California Urban Water Conservation Council 2006 Water Utility Direct Avoided Costs from Water Use Efficiency Report and Microsoft Excel spreadsheet file Sacramento California http www cuwcc com technical action lasso database cuwcc_catalog amp layout CDML amp response detailed_results htm1 amp recordID 34196 amp search Department of Water Resources DWR 2010 20x2020 Water Conservation Plan Sacramento California Department of Water Resources DWR 2005 The California Water Plan Update Bulletin 160 05 Sacramento California Gleick P H D Haasz C Henges Jeck V Srinivasan G Wolff K K Cushing and A Mann 2003 Waste Not Want Not The Potential for Urban Water Conservation in California Pacific Institute Oakland California 164 pages plus electronic appendices Myers J P and J S Reichert 1997 Perspectives on Nature s Services In G C Daily Nature s Services Societal Dependence on Natural Ecosysems Island Press Washington D C Pekelney D M T W Chesnutt and W M Hanemann 1996 Guidelines to Conduct Cost Effectiveness Analysis of Best Management Practices for Urban Water Conservation Prepared for the California Urban Water Conservation Council Sacramento California Vickers A 2001 Handbook of Water Use and Conservation Waterplow Pres
46. that the national market share for water heater fuel types is approximately 54 natural gas 38 electric 5 oil and 3 liquefied petroleum gas LPG Wenzel 1997 While the information is somewhat dated it may be useful in the absence of more detailed information for your region User Manual FIGURE 4 Customer Rates Worksheet E e eet eimo pomu Doa fen View DEE p rg keng Jw A Wes S Song Tra Zonen SS Ej 7 E a zeien or PA Copy fa STE nid a Cote ac I ron Cer men roma fing amp P reng Porter ER BA EEE PP Hunin D aa Geen as Tabie ine at Shear A Select __Chobaart GH Ga i TREK d d H ER Zu Note It ege charge a flat fee for senice 9 customers are not metered and pay a monthly charge for senice ther the marginal rate is zero and you should enter a rate of 0 00 Escalation tates are equivalent to an annual rate increase Care should be exerosed m picking an appropnate rate especially when conmdenng long planning horizons as rates can increase exponentiiity and dominate the analyses H hee mr Bee NS Ka 20 Tiered Rates Increasingly agencies are adopting tiered or block rates Because the marginal cost of water or wastewater or energy will vary depending on the tier that the customer is in the potential economic savings to the customer will also vary If by reducing water use however the customer shifts to the lower tier then the marginal cost of
47. tomer classes you will need to enter the information for each class as a separate conservation measure here the import data function will be particularly helpful FIGURE 9 Benefits Worksheet fie Home Insert Poze oyot Formasi Osta Review View S 2 72 H ee e S e 7 5 e SCH B peat 1 N I 5 x 7 E gt a m K A aa Copy Paste mes i bnet Delete Format fed amp e J Format Panter e e e e 2 Clee et Seee Oipboare gt Font Alegre rit Iunie Rye eft Elara Sustomer_class k Ek Residential Single Family A Eune DL F S H i d K Benefits High Efficiency Toilet 2 HP Ki e IB 3 TE Select Customer Class 5 6 Lifetime of device oF practice 7 8 Annual Water Savings 10 Electrical energy savings 12 Natural Gas savings M nems Water Savings infermation atthe CUWCC web dte 14 Saves outdoor water r 34 Lifetime of Device The device lifetime is the length of time that the efficient device is expected to remain functional A clothes washer for example has an average lifetime of 12 years and a toilet has a lifetime of 25 years Note that the device lifetime is distinct from the program duration or the planning horizon For the purposes of this model we assume that devices are replaced with the same device when they wear out and the cost of replacement is borne by the customer Water and Energy Savings These fields are where you enter the estimated water savings associated with the
48. utcome achieved in physical terms is determined The term levelized is another word for annualized and refers to the conversion of the stream of costs and benefits into an equivalent uniform annual value From the perspective of a water agency the output is a unit of water savings thus the typical unit for levelized cost of water is dollars per million gallons MG Conservation is cost effective if its levelized cost is less than the marginal cost of new supply You can get information on the marginal cost of new supply from your finance department In some cases the estimated levelized cost of conserved water can be negative and is thus a net benefit This means that water could be free and customers would still save money by implementing the conservation option How is this possible For some options non water benefits are sufficient by themselves to pay for the water conservation investment This is especially true when conserving hot water where customers also save energy but other co benefits can include savings in labor fertilizer or pesticide use or reductions in wastewater treatment costs 4 5 2 Charts Worksheet Information from the Summary Report worksheet is presented in graphical form on the Chart worksheet You can view each of the financial metrics by moving the scrollbar at the top of the page Remember that the financial metrics are available for each of the three perspectives utility customer and combined and
49. ved Wastewater D D DH D a Bgum GD GD Water A e R Se e DACH gt Al 1 490 000 27 900 125 000 449 121 7 10 9 0 0959 0 0969 3853 52 980 0 t vi M4 Report We sii 36 User Manual Financial Metrics The model produces a variety of financial metrics to help you evaluate the overall economic desirability of conservation measures Metrics are available for each of the three perspectives utility customer and combined and can be viewed by clicking the blue hyperlink at the top of the page No single metric is perfect rather each has strengths and weaknesses and some combination of these indicators can be useful for financial planning Below we include a brief summary of each of the available outputs Net Present Value NPV Net Present Value NPV is among the most common financial metrics used in capital budgeting It sums all of the costs and benefits of a project and reports their equivalent value at the beginning of the project A positive NPV indicates that the project is financially desirable A negative NPV means that the project loses money compared to investing capital at the prevailing interest rate For both the agency and combined perspectives the CE model calculates NPV using all program costs and benefits over the planning horizon For the customer perspective the model calculates the NPV of a conservation measure using all the costs and benefits to a single customer over the lifetime of the device No
50. water may vary For example let s say that a customer is in the third tier and is paying 5 per thousand gallons of water The customer installs a high efficiency clothes washer and reduces household water use such that the customer is now in the second tier where the marginal cost of water is 3 per thousand gallons of water In this example there are two marginal costs 3 and 5 per thousand gallons of water Thus with tiered rates determining the correct marginal rate can be quite complicated To simplify this analysis the CE Model calculates the marginal rate for the typical customer and the average of all marginal rates and allows you to choose among the two options The average marginal rate is the more conservative choice and will ultimately make the conservation investment look less favorable from the customer s perspective The Tiered Rates worksheet is provided only as an expedient way to calculate an average and or marginal rate for each customer class If the water conservation measure is targeted toward those in high tiers however you may choose to enter the marginal rate for customers in that tier To calculate these rates use the Tiered Rates worksheet Figure 5 which you can access by clicking Enter Block or Tiered Rates on the Customer Rates worksheet Once there follow the procedure below 1 Choose the customer class from the drop down list This list will contain the customer classes entered on the Customer Rates
51. worksheet If the target customer class is not visible check that the information was correctly entered on the Customer Rates worksheet 2 Next enter the commodity for which you are entering the tiered rate information i e water wastewater electricity or natural gas Select the appropriate units for the commodity 3 Enter the average use for the target customer 4 Enter the tiered rates The left column is the lower threshold for the tier or the lower bound at which the rate begins The first lower bound is zero and cannot be changed Enter the rate for consumption at that tier on the right The chart at right will help you visualize the tiers and ensure that values are entered correctly User Manual 5 Based on this information the model calculates the average and marginal rates These are displayed at the bottom Choose which you would prefer to use in this analysis Take a moment to verify that this result is reasonable and the units are correct 6 Click Save The rate will automatically be entered on the Customer Rates worksheet under the appropriate customer class 7 Repeat steps 1 7 for each customer class you wish to include in your analysis 8 Once you have entered information for all of the customer classes of interest and you have returned to the Customer Rates worksheet click Save to return to the Conservation Measures worksheet FIGURE 5 Tiered Rates Worksheet tae Mome imit Page Layout Pomas O
52. y a reputable source such as your energy provider the U S Energy Information Administration or the California Energy Commission The escalation rates will be applied over the planning horizon you enter on the Parameters worksheet see Section 4 4 3 for information on the planning horizon Remember that these escalation rates are associated with the price that the customer pays for water wastewater and energy Separate escalation rates are included for water and energy utility avoided costs on the Parameters worksheet An escalation rate can be either real or nominal The real escalation rate is the rate without inflation The nominal escalation rate by contrast is the real escalation rate plus inflation For example let s say we expect water rates to rise by 1 5 per year due to a major capital improvement program and higher operation and maintenance costs Additionally inflation is occurring at about 1 per year Here the real escalation rate is 1 5 and the nominal escalation rate is 2 5 The CE Model allows you to enter whichever value you choose It is important that you choose either the real adjusted for inflation or nominal not adjusted for inflation rates for both the escalation rates and for the discount rate described below not a mix of the two Note that the inclusion of escalation rates is optional if you do not wish to include rising commodity prices enter 0 as the real escalation rate By entering 0 howev
53. zon on the Parameters worksheet must be longer than the program duration The planning horizon will have a major effect on the financial metrics output by the model You are encouraged to try changing the planning horizon and re running to model to compare the results A more detailed discussion of this is provided in the FAQs which are available online at www pacinst org Note that the planning horizon is different than the device lifetime or the program duration The device lifetime is the length time that the efficient device is expected to remain functional A clothes washer for example has an average lifetime of 12 years and a toilet has a lifetime of 25 years The program duration is the number of years that a conservation program will be offered A utility may offer 2 000 rebates for clothes washers for each of 5 years for a total of 10 000 rebates In this example the program duration is 5 years You should specify the device lifetime on the Benefits worksheet and program duration on the Variable Costs worksheet Annual Discount Rate Water conservation and efficiency measures typically require an initial cost while the benefits accrue in the future over the lifetime of the device Because a dollar today has a different value than it will in five years from now future costs and benefits are discounted or converted into their present value This conversion is based on the discount rate which is also referred to as the cost of capital
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