Sales Forecasting and Rate Model
The AWE Sales Forecasting and Rate Model is a new analytical tool that can explicitly model the effects of rate structures. Typical water rate models assume that future sales are known with certainty, and do not respond to price, weather, the economy, or supply shortages — that is to say, not the world we live in. The AWE Sales Forecasting and Rate Model addresses this deficiency and enables analysis of the following:
- Customer Consumption Variability – weather, drought/shortage, or external shock
- Demand Response – Predicting future block sales (volume and revenue) with empirical price elasticities
- Drought Pricing – Contingency planning for revenue neutrality
- Probability Management – Risk theoretic simulation of revenue risks
- Fiscal Sustainability – Sales forecasting over a 5-Year Time Horizon
The Rate Design Module can answer these questions:
- What effect would increasing the top tier rate by 15% have on water demand?
- Will shifting to seasonal rates cause water use to increase or decrease?
- What block rate design could allow us to preserve our current level of revenue while reducing demand?
- How should we adjust rates to support our water demand management objectives during water shortages?
- What proportion of customer bills will increase under proposed rates when compared to current rates?
The Revenue Simulation Module can answer these questions:
- What is the likelihood we will meet one-year, three-year, five-year revenue targets?
- What is the chance our revenues will turn out more than 15% below our current projections.
- What level of confidence can we have that our sales will exceed our minimum planning estimates?
The Sales Forecasting and Rate Model is free software and comes with ABSOLUTELY NO WARRANTY. Users are advised that rate development and revenue forecasting is a multi-step process that includes:
- Determination of system revenue requirements
- Functional allocation of costs
- Attribution of functionally allocated costs to specific customer classes or individual customers
- Design of rates and charges
The Sales Forecasting and Rate Model is designed to assist utilities with the last step — design of rates and charges. It is not designed to estimate or allocate utility revenue requirements. Users unfamiliar with water utility rate design are strongly encouraged to consult rate development reference manuals from the Alliance for Water Efficiency, California Urban Water Conservation Council, or American Water Works Association prior to using this model.
Additional Rate Model Tutorial Videos
- Bill Tabulations Video