Project #4742

Probability Management for Water Finance and Resource Managers

$347,904
Completed
Principal Investigator
Thomas
Chesnutt
Research Manager
Ms. Maureen Hodgins
Contractor
A & N Technical Services, Inc.
Water Demand & Forecasting
Big Data
Risk Assessment

Abstract

Decisions involving uncertainty and risk are standard occurrences in water resource management. Demand/sales models need information about future population, economic cycles, rates, passive conservation, and weather, all of which can be uncertain. Decisions about the timing and size of capital investments, built on inaccurate estimates of future levels of demand and supply, can therefore be flawed. Similarly, uncertainty about future sales confounds financial planning. Because information about uncertainty and risk is seldom expressed in concrete terms, ambiguity abounds. Meanwhile, the effect of uncertainty on decisions tends to be downplayed. Accordingly, an adequate accounting for uncertainty and risk requires not only new analytic approaches, but advances in both the way analysts communicate with policy makers and in the way policy makers communicate with each other. This project presents the principles and methods of the new discipline of probability management to address these issues, providing a primer for probability management and case studies applied to water resources and finance. Tailored Collaboration Partners: Eastern Municipal Water District, Inland Empire Utilities Agency, Irvine Ranch Water District, Metropolitan Water District of Southern California, and Tacoma Water. Published in 2020.