• Novice
  • Aware
  • Competent

Demand Analysis

Utilities provide services that customers demand. Adequate service provision is directly relates to appropriate levels of sustained infrastructure investment (capital and O&M). If an organization does not understand the demand for asset-driven services by its key customers and stakeholders, then its assets may either over-provide for the demand or under-provide.

The following graphic illustrates the cycle of Demand Management:

demand1.gif

Historic Records

Historic records give insight into trends in demand:

  • Which elements have driven demand over time
  • The magnitude and dynamics of those elements
  • How and the rate at which the demand is currently changing.

Best Appropriate Practice includes:

An understanding of the history and trends of all key performance indicators.

Element Break-up

To understand the overall picture of demand, knowledge about the elements that make up the demand should be systematically assessed.

Examples include:

  • Rainfall/drought patterns
  • Temperature variations
  • Unit demand variations
  • Key customer groups
  • Population changes
  • Trade waste discharge variations.

Best Appropriate Practice includes:

Understanding demand provides insight into how our assets may fail (recall that "failure" of an asset occurs when an asset can not accomplish what its users require). Understanding its core demand elements will allow the organization to more clearly identify and predict the four primary failure modes of its systems and assets, including:

  • Capacity
  • Renewal / reliability
  • Change in levels of service -
    • Regulated (water quality discharge standards, new occupational health & safety instructions, etc.)
    • Internal or customer driven (odor complaints, visual image, response time, etc.)
  • Cost reduction opportunities / business efficiency.

Customer and Stakeholder Surveys

One of the most basic tools for assessing demand is the customer survey. Surveys have been used for decades to forecast demand and to pinpoint changes in trends.

Surveys can be:

  • Formal instruments administered on a rigorously scientific basis
  • More informal "mail-outs" and phone polls of customer groups
  • Structured "customer focus groups", which are especially effective where a specific user group such as industrial users is substantially influencing investment decisions.

It is equally vital that trends in regulation be systematically and periodically assessed, paying particular attention to trends in enforcement as well as changes in "black letter law".

It should be noted that the single most poignant "customer survey" information available to a utility is customer complaints.

Best Appropriate Practice includes:

An assessment of future expectations for levels of service from customers and regulators.

Levels of Service Charters / Contracts

Documentation of the levels of service for each of the quality or quantity elements should include:

  • System reliability figures
  • Maximum number of customer impacted by asset failure each year
  • Time to attend complaints / service failures
  • Time to restore service to standard.

These are examples of the types of performance indicators for infrastructure service delivery.

By undertaking a systematic review, the organization can look at the way in which it:

  • Has linked these performance indicators to its own customer expectations
  • Develops these indicators
  • Monitors the indicators
  • Includes those service level standards that are external to the organization through regulatory frameworks and other legislative or court-ordered direction.

Trend Predictions

Trends involve:

  • Direction, ie, where a trend is leading
  • Magnitude, ie the force and speed at which it is getting there.

It is important to understand both.

Best Appropriate Practice includes:

The linkage between the demand trends and their likely key impacts is clearly understood. There is an assessment of the likelihood of these scenarios, so that the organization clearly understands the probability of service delivery failures and future service level implications.

An understanding of the history and trends of all key performance indicators. These will have a direct relationship to the business drivers of the organization and cover all factors relating to the decision-making processes in their service delivery.

An assessment of future expectations of levels of service from customers and regulators, and the organization's internal standards.

 

Case Studies Australia

Replacement – First Check Whether the Demand for Your Services has Changed

Re-evaluating which services were really needed in the replacement of a large maternity hospital resulted in a reduction of capital cost from $25m to $5m.

The results showed that, compared with the mid 1960s when the original hospital had been designed and built, a number of factors had reduced total demands on the system:

  • Birth-rates had fallen by about half
  • The population in the hospital’s catchment area had aged, so that a smaller proportion was now in the child bearing age range
  • There were new trends in delivery practices, including increasing home births
  • Improvements in road transport allowed people in the catchment area to reach the major state hospital in considerably reduced time.

The reduction in required capacity, combined with new, more efficient design, resulted in a five-fold reduction in cost.

Using Demand Management # 1 “User Pays”

Price is a powerful demand management tool. The best-known example of the use of price to manage demand in Australia is that of the Hunter Water Corporation in 1987.

Faced with the need for major augmentation of its current system to satisfy increasing demands but lacking the funds for a $100m new dam or the $50m of works on trunk mains and reticulation, the Corporation turned to demand management.

A user-pays pricing system and the reduction of wastage through public education decreased demand by over 30% and deferred the trunk works for a decade.

Using Demand Management # 2 “Educating our Customer Base”

Education and promotion can be an effective demand management tool when pricing solutions are either not possible or ineffective. In 1983 in Streaky Bay, a small town in South Australia served by bore water, the residents were using more water than was being naturally recharged. Consumption levels had to be reduced from 300ML to under 200ML to prevent the water table rising and turning the water supply saline.

Using educational surveys, radio and press advertising, competition for water-saving techniques and information on water-saving gardens, consumption was reduced to safe levels and ten years later stood at 160ML.

In this case the pricing solution was questionable as most of the really large users had their water bills paid by head office as part of an inducement to locate in a remote area.

It was discovered that the bulk of the population did not know where their water came from and over 90% of the population, when questioned, considered that they were average or ‘less than average’ water users.

Using Demand Management # 3 Creating Alternatives to Demand

Waste treatment capacity was limiting the ability of the Brisbane City Council to expand industrial growth.

The council saved up to $30m in capital costs and up to $1m a year in operating and maintenance costs through:

  • A creative and inexpensive approach to the re-use of waste materials
  • Regulation
  • Pricing control
  • Cheaper on-site treatment methods.

Scientifically trained officers advise firms about waste minimization measures and co-operate with industry on waste-recycling and pre-treatment to reduce the load on the City’s municipal treatment plants. Sewer losses of specific raw materials and products are quantified, allowing individual traders to assist industry to improve its ”loss management” procedures. This approach, together with pricing and regulation, minimizes waste treatment services and limits unnecessary expenditure on treatment equipment.

Co-operative waste minimization has resulted in a reduction in trade waste equivalent to a domestic sewerage load of 100,000 persons. To achieve the same result with a capital works program alone would have required additional capital expenditure of at least $30m. In addition, generation rates of the more difficult hazardous wastes have been reduced from 3.5ML to 0.9ML over 5 years. The translates to an annual cost saving to the affected industries of $0.8m on waste treatment and disposal fees – and much more in savings on expensive chemicals.

Using Demand Management # 4 User pays sewer tariffs

By swinging to a dual-priced tariff system where 50% of the sanitation charge is costed by the properties’ water use, many agencies in Australia and New Zealand have reduced sewer flows significantly.

Using Demand Management # 5 Water Efficient Rating on all Water-using Appliances

Australia has implemented a ”Water Efficiency Rating system” for all water-consuming devices such as dishwashers, washing machines, showers heads & dual-flush toilets and urinals. This was done after the full economic costs of existing assets were known. When the major utilities fully understood the marginal economic cost of the next increase in water and wastewater system capacity and communicated this clearly to their customers and stakeholders, it became apparent that reducing demand was far more cost effective than the life cycle cost of providing for the original demand. With triple bottom line costing allowing for the social and environmental impacts of larger sewers and treatment plants expansions, customers accepted the higher cost of these commodities.


previous home next
Life Cycle Practices and Processes   Knowledge of Assets